UK GOVERNMENT PROPOSES INCREASE TO AGE TAX FREE WITHDRAWALS CAN BE MADE FROM PRIVATE PENSION
Recently, the UK government has proposed an increase in the minimum age at which people can make a tax-free withdrawal from their pension pot. Currently, people can access their pension savings from the age of 55, with 25% of the total amount withdrawn tax-free. However, the government has proposed that this age should be increased to 58, which has sparked some debate and controversy.
Firstly, it's important to understand why the government say they are proposing this change. According to the government, the main reason for the proposed increase in age is to reflect increases in life expectancy. People are living longer and; therefore, the government believes that it's appropriate to adjust the age at which people can access their pension savings. There are conflicting studies that disprove the idea that people are living longer. We have all heard numerous reports and have personal experience of the sudden deaths in relatively young people over recent years.
The proposal has received criticism from some quarters. One argument is that the government is simply trying to save money by delaying tax-free withdrawals. People who have planned to retire at 55 may now have to work for an additional three years, which could significantly impact their retirement plans.
Another argument is that people should be free to access their pension savings when they see fit. Many people have worked hard and saved diligently throughout their lives, and they may feel that they deserve to access their savings as soon as they reach the current minimum age of 55. Critics argue that the proposed increase in age is unfair and goes against the principles of personal choice and individual responsibility.
We also need to consider the wider impact in that those who can afford retire early free up jobs for people who need them, including the young. We have seen that many businesses closed during lockdown and people were forced to find news jobs and streams of income.
Let’s talk about the elephant in the room. Could it be that all the money we've been paying in, has been spent and the pot is empty, hence they keep raising the age you can draw your state pension and now your private pension?! A probable reason for upping the age of your private pension, is to make sure you have money left in the pot come retirement age as there may be no state pension.
However, supporters of the proposed change argue that it's necessary to ensure the long-term sustainability of the pension system. With people living longer, the government needs to ensure that pensions can support people for longer periods of time. Additionally, supporters argue that delaying tax-free withdrawals can encourage people to save more, as they have to work longer and therefore have more time to save.
It's also worth noting that the proposed change is not set in stone. The government is currently consulting on the proposal, and there is still a chance that it may not go ahead. However, if it does, the change will likely come into effect in 2028.
In conclusion, the proposed increase in the minimum age for tax-free pension withdrawals from 55 to 58 has sparked debate and controversy. While supporters argue that it's necessary to ensure the long-term sustainability of the pension system, critics argue that it's unfair and goes against the principles of personal choice and individual responsibility. Ultimately, it will be up to the government to decide whether or not to implement the proposal, but it's clear that the issue is a complex one that has significant implications for people's retirement plans.
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