Pension savers who wish to use their retirement pots sooner rather than later will need to act quickly if they are not to be faced with a five-year wait.
This is because the age at which people can draw on their personal retirement funds rises as of 6 April from 50 to 55.
Under the rules at the moment, anyone who reaches the age of 50 can have access to their personal or workplace pension fund. This gives them the option of taking 25 per cent of their retirement savings as a tax-free sum. But come the end of the current tax year, on 6 April, the age threshold moves up to 55.
After that date, people will need to wait a further five years before they can receive payments from an occupational or personal pension scheme.
The only exceptions are those suffering severe ill health or those who are allowed to begin their pensions at an age lower than that protected by pension tax law.
The changes are part of reforms introduced by the government in 2003. Before the reforms, different types of pension scheme offered members different ages at which they could start to access their pension savings.
The 2003 regulations set in place a basic, across-the-board minimum age of 50 at which people could draw on pension funds that qualified for tax relief.
The same regulations are now raising the minimum age to 55 in April 2010. The upper age limit for drawing a pension – 75 – is unaffected by the rules.
With the April date approaching, anyone under 55 wishing to draw down their pension early should act soon as it requires time to secure the funds from pension providers or insurance companies. It can take an average of 38 days between informing a pension provider of an intention to access a pension fund and getting the funds in place to buy an annuity.
However, savers and investors are also being warned that it is not always a financially beneficial move to opt for early access to a pension.
Most people are advised to wait until they reach 60 or retire fully before accessing their pension fund. Anyone contemplating doing so early should first seek expert advice.
Tags: Pensions, Regulations
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