Is the Minimum Retirement Age Increasing to 60?

In his budget today George Osborne, Chancellor of the Exchequer, announced a new Lifetime ISA which was aimed at helping younger people to save more for their retirement (or for a first home purchase). The age at which the proceeds of the Lifetime ISA could be taken for retirement purposes (if the government bonus was included in the proceeds) was set at age 60.

For this reason we are asking ‘is the minimum retirement age going to increase to age 60?’ This new product could well be the start of the introduction all round of a pensions style ISA. It is only available to those who are under the age of 40 so is aimed at younger savers initially.

Currently, the minimum age for taking savings from a personal pension is age 55 so the logical question to ask is will this be increased to age 60 at any time soon? The answer we believe is probably yes. It may not be in the next couple of years but it seems very likely that in the medium term the minimum retirement age will be 60, if not even higher.

Retirement ages are likely to keep in line in some way at least, with the increase in the State Pension Age, so increases are likely to come on an ongoing basis, although the highest state pension age announced so far is 68, so it may be some time before the minimum pension age is increased past age 60.

The fact that the Lifetime ISA has been introduced with a retirement age of 60 may indicate that it is not to long for other financial products to follow suit.

However, it is only possible to save £4,000 a year into a Lifetime ISA so it is also possible that there is a bit of a way to go before this replaces the current pensions system, if indeed it does. Contribution limits would need to be increased to enable people to save up a reasonable amount of money for their retirement.

Anyone who is eligible for the Lifetime ISA in 2017 is going to have a state pension age of 68 (or possibly 67+ if they were born in 1977/78) so they would be eligible to withdraw their savings around 8 years before their state pension was due for payment. Some may have an even higher state pension age if those are increased in future years.