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Government confirms pension-freedom age hike to 57 in 2028

Including Financial Independence and Retiring Early (FIRE)
StepOne
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Re: Government confirms pension-freedom age hike to 57 in 2028

#338678

Postby StepOne » September 7th, 2020, 8:41 am

Itsallaguess wrote:I'm a similar age too, and I was getting very concerned that any required COVID-related tax-raising options might have included moving these goalposts closer again and potentially spoiling what are surprisingly near-term aspirations nowadays, so seeing the Government legislate for a 2028 changeover date would be something I'd hopefully benefit from too..


Just wanted to pick up this point. Surely if it wanted to increase tax take the gov would move this change further away, not closer. Or even cancel it altogether, since delaying people taking their pensions means they have longer to save into them (tax free) and delays the point that they start paying income tax on their withdrawals?

NeilW
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Re: Government confirms pension-freedom age hike to 57 in 2028

#338726

Postby NeilW » September 7th, 2020, 12:20 pm

What's particularly amusing of course is that the entire Covid debacle has shown that we can provision the entire country with barely a third of the population actually doing any work. And the circulation can be kept going with "furlough pay" - aka temporary retirement.

Which means that when the government is shouting about getting people to return to wasting their life on trains and the like just to keep coffee shops in the city centres going, they would be better off announcing that they are dropping the retirement age to 50 and replacing the coffee shops with machines.

The notion that the "dependency ratio" is getting worse is a complete lie, and we need to have a conversation about exactly who is gaining the benefit of these ever expanding retirement ages (clue: why have 25 year mortgages become 35 year mortgages? Expectations of retirement age...).

NeilW
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Re: Government confirms pension-freedom age hike to 57 in 2028

#338728

Postby NeilW » September 7th, 2020, 12:23 pm

StepOne wrote: Surely if it wanted to increase tax take


Government struggles to increase the total tax take, since that is a function of how much the non-government sector wants to borrow and save and little else. If you look at the numbers you'll find that government gets back about 90% of what it spends in normal times no matter what it does - the rest is increase in private savings (largely a result of net pension savings - here and abroad). All government can really do is alter the distribution around - if you pay more tax, then the people you would otherwise have spent your money with pay less.

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Re: Government confirms pension-freedom age hike to 57 in 2028

#338735

Postby Quint » September 7th, 2020, 12:53 pm

Adamski wrote:This has been on the cards for a while as we're all living longer. It makes total sense as the state pension gone from 65 to 67, so personal pensions shift by 2 years as well, 10 years earlier.

Let's remember it was George Osbourne that gave us the pension freedoms in 2015, increased the personal allowance and allowed personal pensions to be passed to loved ones either tax free or at marginal rates. Although he gets a bad press he did extremely good things for us here, completely anathema to labour.

Indeed, George gave me and my wife a future we could have only dreamed of if we would have been forced to buy an annuity.

dealtn
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Re: Government confirms pension-freedom age hike to 57 in 2028

#338745

Postby dealtn » September 7th, 2020, 1:27 pm

NeilW wrote:What's particularly amusing of course is that the entire Covid debacle has shown that we can provision the entire country with barely a third of the population actually doing any work. And the circulation can be kept going with "furlough pay" - aka temporary retirement.



Maybe I am misunderstanding you, but what do you mean by provision?

If you mean provide all the goods and services the country needs then this has clearly proved to be not true. There have been large areas where items of goods are unavailable, and of services unable to be provided (and the "working" population never fell by 2/3rds).

If you mean the country had been able to finance and pay furlough to all these people then yes that has been true, but at the large cost of a worsening financial position, so much so that we are now having to come off that as it is proving to be unsustainable. I'm assuming its the last part of that statement you are disagreeing with?

StepOne
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Re: Government confirms pension-freedom age hike to 57 in 2028

#338763

Postby StepOne » September 7th, 2020, 3:04 pm

NeilW wrote:
StepOne wrote: Surely if it wanted to increase tax take


Government struggles to increase the total tax take, since that is a function of how much the non-government sector wants to borrow and save and little else. If you look at the numbers you'll find that government gets back about 90% of what it spends in normal times no matter what it does - the rest is increase in private savings (largely a result of net pension savings - here and abroad). All government can really do is alter the distribution around - if you pay more tax, then the people you would otherwise have spent your money with pay less.


Hi Neil,

It was ItsAllAGuess who said that moving the pension freedom age out was a tax-raising plan. I was just questioning the logic behind that.

StepOne

Itsallaguess
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Re: Government confirms pension-freedom age hike to 57 in 2028

#338765

Postby Itsallaguess » September 7th, 2020, 3:12 pm

StepOne wrote:
Itsallaguess wrote:
I'm a similar age too, and I was getting very concerned that any required COVID-related tax-raising options might have included moving these goalposts closer again and potentially spoiling what are surprisingly near-term aspirations nowadays, so seeing the Government legislate for a 2028 changeover date would be something I'd hopefully benefit from too..


Just wanted to pick up this point. Surely if it wanted to increase tax take the gov would move this change further away, not closer. Or even cancel it altogether, since delaying people taking their pensions means they have longer to save into them (tax free) and delays the point that they start paying income tax on their withdrawals?


If people working longer raises an improved level of tax, then the sooner the Government legislates for people only being able to access their pensions once they are 57, rather than the current 55, then that 'bakes in' some level of improved tax returns using that legislation.

That's what I meant when I thought they might have legislated for that 57 access to be brought in earlier than 2028, due to the COVID-related hit to the public finances that have occurred since that 2028 date was first mooted...

Cheers,

Itsallaguess

OLTB
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Re: Government confirms pension-freedom age hike to 57 in 2028

#338768

Postby OLTB » September 7th, 2020, 3:22 pm

I have heard that a fair proportion of pension tax-free cash is spent in the UK economy (camper vans being fairly popular) so I’m not too sure why the Govt would want to potentially delay this spending. I’m not intending on spending mine though...

Cheers, OLTB.

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Re: Government confirms pension-freedom age hike to 57 in 2028

#338790

Postby ursaminortaur » September 7th, 2020, 4:37 pm

Quint wrote:
Adamski wrote:This has been on the cards for a while as we're all living longer. It makes total sense as the state pension gone from 65 to 67, so personal pensions shift by 2 years as well, 10 years earlier.

Let's remember it was George Osbourne that gave us the pension freedoms in 2015, increased the personal allowance and allowed personal pensions to be passed to loved ones either tax free or at marginal rates. Although he gets a bad press he did extremely good things for us here, completely anathema to labour.

Indeed, George gave me and my wife a future we could have only dreamed of if we would have been forced to buy an annuity.


The requirement to convert your pension into an annuity by age 75* was removed in 2006 under Gordon Brown's A-day pension reforms but there were limits on how much you could drawdown with stricter limits after age 75. It was these limits rather the requirement to buy an annuity that George Osborne removed with his pension freedoms.

https://en.wikipedia.org/wiki/Income_drawdown#2006_and_2011_pension_reforms

Pension reforms in 2006 extended the option for drawdown beyond age 75, but with greater restrictions. At that time income drawdown was given the alternative name of an unsecured pension (USP) prior to age 75 and an alternatively secured pension (ASP) after age 75. Neither provided a secured status. Income limits were capped at 100% of the relevant GAD rate for USPs and 70% in respect of ASPs.
.
.
.
After April 2011, drawdown has been reintroduced as the common term and those under 75 can withdraw up to 150% (120% prior to March 2014) of the GAD rate. Once again review dates occur every three years for those under 75 and annually thereafter.
.
.
.
In the March 2014 Budget, George Osborne announced that from 6 April 2015, there would no longer be any restrictions for those wishing to access their pensions. This permits unlimited withdrawals from the pension fund from the age of 55.


* The ability to use drawdown rather than purchasing an annuity before age 75 was introduced in 1995

https://en.wikipedia.org/wiki/Income_drawdown#Introduction_in_1921_and_early_development

From 1995, in response to falling annuity rates, income drawdown was introduced as an alternative way of drawing an income and, under the original rules, purchasing an annuity no later than the 75th birthday.

The limits for withdrawal, set by the Inland Revenue, using annuity rates calculated by the Government Actuary's Department (GAD), set limits to the withdrawals based on the age of the individual and the existing gilt yield. Originally the minimum and maximum withdrawal rate was set at 35% and 100% of an amount that broadly reflected the annuity that could have been bought based on a single life basis with no annual increases.

To prevent the erosion of capital a review was conducted every third anniversary, with new limits being set based on the individual's age, the Gilt rate and fund size at the time. The requirement for a minimum income withdrawal was later removed.

NeilW
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Re: Government confirms pension-freedom age hike to 57 in 2028

#338804

Postby NeilW » September 7th, 2020, 5:44 pm

dealtn wrote:If you mean provide all the goods and services the country needs then this has clearly proved to be not true. There have been large areas where items of goods are unavailable, and of services unable to be provided (and the "working" population never fell by 2/3rds).


There haven't been large areas at all. We maintain the country operating with a set of key workers and it worked fine for months. Goods have been supplied sufficiently, and very few other services were required to open things up operationally.

Key workers were 26% of the population. https://www.ifs.org.uk/publications/14763

If you mean the country had been able to finance and pay furlough to all these people then yes that has been true, but at the large cost of a worsening financial position, so much so that we are now having to come off that as it is proving to be unsustainable. I'm assuming its the last part of that statement you are disagreeing with?


There is no worsening financial position. It all just goes around in a circle. Draw up the central bank balance sheet and you'll see how.

Itsallaguess
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Re: Government confirms pension-freedom age hike to 57 in 2028

#338807

Postby Itsallaguess » September 7th, 2020, 6:04 pm

Can I please ask that we don't get too off-topic on this thread?

There's other boards better positioned for some of the economic and political debate brewing up at the moment, and I think it would be a shame if we got too far away from the main topic of the pension-freedom age change being discussed...

Cheers,

Itsallaguess

Quint
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Re: Government confirms pension-freedom age hike to 57 in 2028

#339064

Postby Quint » September 8th, 2020, 6:52 pm

ursaminortaur wrote:
Quint wrote:
Adamski wrote:This has been on the cards for a while as we're all living longer. It makes total sense as the state pension gone from 65 to 67, so personal pensions shift by 2 years as well, 10 years earlier.

Let's remember it was George Osbourne that gave us the pension freedoms in 2015, increased the personal allowance and allowed personal pensions to be passed to loved ones either tax free or at marginal rates. Although he gets a bad press he did extremely good things for us here, completely anathema to labour.

Indeed, George gave me and my wife a future we could have only dreamed of if we would have been forced to buy an annuity.


The requirement to convert your pension into an annuity by age 75* was removed in 2006 under Gordon Brown's A-day pension reforms but there were limits on how much you could drawdown with stricter limits after age 75. It was these limits rather the requirement to buy an annuity that George Osborne removed with his pension freedoms.

https://en.wikipedia.org/wiki/Income_drawdown#2006_and_2011_pension_reforms

Pension reforms in 2006 extended the option for drawdown beyond age 75, but with greater restrictions. At that time income drawdown was given the alternative name of an unsecured pension (USP) prior to age 75 and an alternatively secured pension (ASP) after age 75. Neither provided a secured status. Income limits were capped at 100% of the relevant GAD rate for USPs and 70% in respect of ASPs.
.
.
.
After April 2011, drawdown has been reintroduced as the common term and those under 75 can withdraw up to 150% (120% prior to March 2014) of the GAD rate. Once again review dates occur every three years for those under 75 and annually thereafter.
.
.
.
In the March 2014 Budget, George Osborne announced that from 6 April 2015, there would no longer be any restrictions for those wishing to access their pensions. This permits unlimited withdrawals from the pension fund from the age of 55.


* The ability to use drawdown rather than purchasing an annuity before age 75 was introduced in 1995

https://en.wikipedia.org/wiki/Income_drawdown#Introduction_in_1921_and_early_development

From 1995, in response to falling annuity rates, income drawdown was introduced as an alternative way of drawing an income and, under the original rules, purchasing an annuity no later than the 75th birthday.

The limits for withdrawal, set by the Inland Revenue, using annuity rates calculated by the Government Actuary's Department (GAD), set limits to the withdrawals based on the age of the individual and the existing gilt yield. Originally the minimum and maximum withdrawal rate was set at 35% and 100% of an amount that broadly reflected the annuity that could have been bought based on a single life basis with no annual increases.

To prevent the erosion of capital a review was conducted every third anniversary, with new limits being set based on the individual's age, the Gilt rate and fund size at the time. The requirement for a minimum income withdrawal was later removed.


Yes, you are right about the annuity bit, but George's final changes did the trick for us.

moorfield
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Re: Government confirms pension-freedom age hike to 57 in 2028

#396278

Postby moorfield » March 16th, 2021, 8:09 pm

Might be of interest here, from Steve Webb former Pensions Minister.

https://www.dailymail.co.uk/money/pensi ... ct-me.html

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Re: Government confirms pension-freedom age hike to 57 in 2028

#429354

Postby Snakey » July 21st, 2021, 3:45 pm

https://www.gov.uk/government/publicati ... nsions-tax

New draft legislation etc.

"This clause introduces an increase in the normal minimum pension age to 57 from 6 April 2028. It protects members of registered pension schemes who before or on 5 April 2023 have a right to take their entitlement to benefit under those schemes at or before the existing normal minimum pension age. It exempts members of certain uniformed service pension schemes from the increase. It also introduces new block and individual transfer rules specific to the new protection framework to reduce the restrictions on retaining a protected pension age following a transfer."

"There may be some transitional issues. For example, an individual who does not have a protected pension age and at 5 April 2028 will have reached age 55 and has started but not completed the process of taking pension savings before the change in normal minimum pension age. The government will provide further advice on the proposed transitional arrangements and provisions in due course."

pje16
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Re: Government confirms pension-freedom age hike to 57 in 2028

#535281

Postby pje16 » October 6th, 2022, 12:50 pm

With government debt at record levels, Prime Minister Liz Truss is under pressure to find cost savings. And the state pension, costing over £100 billion every year could be in her sights.

At the Tory party conference this week, Truss was asked if she would raise the state pension age beyond 67. Her answer was evasive, saying: "You're asking me to speculate [on] all kinds of decisions that haven't yet been made,” suggesting that a change could be coming.

Raising the state pension age could save the government an estimated £5 billion and Truss has limited other options. The much-publicised Triple Lock guarantees the state pension will rise in line with the highest of inflation, earnings and 2.5%. This, combined with an aging population, means the total state pension bill grows ever bigger.
Current rules

The current state pension age is 66, but that’s due to rise to 67 between 2026 and 2028, and to 68 between 2044 and 2046.
State pension age: why changes could leave a hole in your pension
That means if you’re 43 or under, you will have to wait until you’re 68 years old to receive the state pension, and if you’re 60 you’ll only get the state pension when you turn 67. If you’re currently just over 43 or 60, you will need to check the state pension website as your state pension age will depend on your birthday.

Source https://www.ii.co.uk/secure/my-news-fee ... d-ii525549
(login required)

BTW back in 2015 I heard a pension's expert say that the age of 65 was set in 1948 when over half the population didn't make 65
According to life expectancy it should now be 78 (SEVENTY EIGHT)

UK Gov are piddling around with it

EthicsGradient
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Re: Government confirms pension-freedom age hike to 57 in 2028

#535354

Postby EthicsGradient » October 6th, 2022, 4:22 pm

pje16 wrote:BTW back in 2015 I heard a pension's expert say that the age of 65 was set in 1948 when over half the population didn't make 65
According to life expectancy it should now be 78 (SEVENTY EIGHT)

UK Gov are piddling around with it

"Life expectancy" there means "life expectancy at birth, if the hypothetical man (you're using male life expectancy, if you say over half didn't make 65) stood as much chance of dying each year as someone aged that this year does".

Which isn't really of much use for retirement. What might be more use is calculating the expected rest of life at the point of retirement. We'll do it just for men. In 1948, men aged 65 had a further life expectancy of about 11.5 years. Average age you started paying NI was lower then; say it was from 17 to 65 - 48 years. Say you now start at average 20. If you retired at 73, you'd pay for 53 years - a bit over 10% more. And your life expectancy would be about 13 years - again, about 10% more.

The problem with a universal retirement age is that a higher one may be fine for those doing clerical jobs, but for those doing manual labour, 73 is still pretty old. We've got better at stopping people dropping dead early, but that doesn't translate to a longer span of being able to do heavy work.

pje16
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Re: Government confirms pension-freedom age hike to 57 in 2028

#535362

Postby pje16 » October 6th, 2022, 4:39 pm

To have the current retirement age only 1 year older than it was in 1948 is way off the mark
2 of my grandparents died before they were my age
Life expectancy is much longer today than 74 years ago

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Re: Government confirms pension-freedom age hike to 57 in 2028

#535488

Postby Kantwebefriends » October 6th, 2022, 11:47 pm

"reflecting trends in longevity": whether the trend in longevity will be upwards in 2028 is an interesting question.

I assume that at the moment the trend is decidedly downwards.

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Re: Government confirms pension-freedom age hike to 57 in 2028

#537234

Postby gryffron » October 14th, 2022, 11:22 am

Kantwebefriends wrote:"reflecting trends in longevity": whether the trend in longevity will be upwards in 2028 is an interesting question.
I assume that at the moment the trend is decidedly downwards.

Is covid a trend or a spike?

Big drop in 2020. Over a year!
https://ukhsa.blog.gov.uk/2021/03/31/li ... d-in-2020/

I can't find the actual figures for 2021 yet, only projections which ignore covid deaths, which is strange cos that 2020 report was produced in March-21. But covid deaths for 2021 were similar to 2020, so likely remaining depressed. Covid deaths way down this year so expect it to spike back up.

However, as already pointed out in this thread, the retirement age is SO far behind the curve at the moment that it's unlikely to catch up.

Gryff

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Re: Government confirms pension-freedom age hike to 57 in 2028

#537309

Postby EthicsGradient » October 14th, 2022, 1:51 pm

gryffron wrote:
Kantwebefriends wrote:"reflecting trends in longevity": whether the trend in longevity will be upwards in 2028 is an interesting question.
I assume that at the moment the trend is decidedly downwards.

Is covid a trend or a spike?

Big drop in 2020. Over a year!
https://ukhsa.blog.gov.uk/2021/03/31/li ... d-in-2020/

I can't find the actual figures for 2021 yet, only projections which ignore covid deaths, which is strange cos that 2020 report was produced in March-21. But covid deaths for 2021 were similar to 2020, so likely remaining depressed. Covid deaths way down this year so expect it to spike back up.

However, as already pointed out in this thread, the retirement age is SO far behind the curve at the moment that it's unlikely to catch up.

Gryff

Public Health England published those figures in 2021, but was then disbanded. Provisional 2021 figures were published in March - see eg https://www.kingsfund.org.uk/publicatio ... cy-england - you can get them here: https://analytics.phe.gov.uk/apps/chime/ (still "phe.gov.uk", but now titled "Office for Health Improvement and Disparities" ), under 'Data'. Roughly the same as 2020 - an increase of a month or two. Final updates to the provisional figures came in November, last year.


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