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Savers planning to dip into their private pensions at age 55 will be forced to wait an additional two years from 2028, the Government has confirmed.
Anyone aged 47 and under must now wait until 57 before being allowed to access their pensions without incurring significant and prohibitive tax charges.
As it stands, savers can withdraw money from their pension pot at 55 in any which way they like, including taking 25pc of their savings tax free.
However, the age restriction has been linked to be 10 years behind the state pension age – currently 65 but rising to 66 this October and to 67 between 2026 and 2028. The transition could mean anyone under the age of 49 may also be affected and forced to delay retirement.
Age limits apply as the Government provides tax relief on money saved via a pension on the basis it is not used before retirement. Savings can be withdrawn pre-55 but tax relief must be paid back.
The Government confirmed the new timeline in an answer to a written Parliamentary question from Labour MP Stephen Timms.
Treasury minister John Glen replied saying the shift to 57 would reflect rising life expectancy, in line with the state pension age.
"[It will encourage] individuals to remains in work while also helping ensure pension savings provide for later life," he said. "[This change has been made] well in advance to enable people to make financial plans."
However, not all were convinced. Sir Steve Webb, a former Liberal Democrat pensions minister, said he expected the Government to u-turn on the decision because of the impact on tax receipts.
Sir Steve said: “This is no guarantee it will happen. By raising the minimum pension age the Treasury would lose out on tax receipts and it is an unpopular move.”
The Treasury has received a tax boost since it allowed savers complete freedom to spend their pensions as they wished in 2015. Pushing this back to 57 would force a delay in revenue for the tax office.
Sir Steve said 55 had become the magic number for early retirement and many savers would get a "nasty shock" if they were not made aware of the change.
Steven Cameron, of pension provider Aegon, said the change could impact those who are due to reach 55 birthday just after the cut off in 2028. The Government should indicate how it will solve this cliff edge, he said.
“We can’t afford a repeat of the Government’s communication gaps which left many women to find out too late that their state pension age was increasing from 60 to 65," he said.
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