The minimum age at which retirement savers can withdraw tax-free cash from their private pension pots will increase from 55 to 57 in 2028.

The Government will raise the normal minimum pension age at the same time as the state pension age is due to increase from 66 to 67.

In July 2021, HMRC published detailed guidance on the plans, which will be written into law in Finance Act 2021/22.

Most private pensions are either age-55 schemes or ones where the saver has to wait to reach the normal minimum pension age.

Savers who fall into the latter category will be affected from 6 April 2028, as the move aims to nudge people into saving for longer and reflect longevity.

Members of public service pension schemes, such as those in the police, fire service or armed forces, will not be affected.

The state of play in 2021/22

Anyone can flexibly access their pension savings from the age of 55. This has been an option since 2015 when pension freedoms were expanded.

Savers can withdraw 25% of their pension without paying tax, usually by either cashing in the whole lot, taking regular income or lump sums.

Swapping the money for guaranteed income via an annuity remains an option, although record-low interest rates offer miserly returns.

Income drawdown remains in favour with savers, who can access part of their savings while leaving it in an investment venture to allow for future growth.

The freedoms also allow savers to customise their approach towards funding retirement by mixing and matching several flexible options.

Turning 55 in 2028

Savers who are due to celebrate their 55th birthdays in 2028 could be impacted by these changes, depending on the type of scheme they have.

Those born on or after 6 April 1971 and in pension schemes based on the normal minimum pension age might have to wait an extra two years.

People born before this date should be unaffected by the change as they will turn 55 before 6 April 2026, and 57 before 6 April 2028.

Further government guidance on this is expected to be published in due course.

Potential loophole

According to consumer website Which?, draft legislation published in July 2021 offers a loophole to savers who switch pension providers.

Those who join a defined contribution pension scheme before 5 April 2023 can access their savings at 55, even if they don't reach 55 until after 2028.

Former pensions minister Steve Webb said:

"As a first step, pension savers should find out where their own [pension] scheme stands.

"If their scheme's access age will rise to 57, they may wish to review where they hold their pension savings."

Things to consider include early exit fees, potentially losing any valuable benefits, additional costs, and investment returns.

Pension providers usually have different rules for different schemes, and it's important to find out what the scheme's rules are.

Armed with those facts, the next thing to do is seek professional advice to help you get a full picture of your retirement before making a big decision.

Talk to us about retirement planning.