If you’ve set your sights on tapping into your retirement pot early under the pension freedoms then you might have to re-think your financial strategy if new Government plans are given the go-ahead.

The freedoms introduced in 2015 have given people far greater choice as to how and when they access their money, including enabling individuals to start drawing on their pot from the age of 55 onwards.

But the new proposals could see the minimum age you’re able to tap into your funds increase to 57 from 2028 and then rise in line with the State Pension age minus 10 years from then on.

According to the Pensions Advisory Service, the change would apply to all pension schemes other than those in the public sector that do not link their normal pension age to the state pension, such as police officers and firefighters.

Although the plans are subject to parliamentary approval and could change or be ditched altogether, anyone considering early retirement needs to plan carefully to ensure they’re not caught out.

People need to spend a bit of time thinking about what assets they’ll need to draw on between 55 and 57 if they’re caught by these proposed changes.

That might be in the form of cash that they would have otherwise kept in savings accounts and ISAs or other savings they’ve built up over time, such as investment ISAs, Unit Trusts or anything that’s not going be restrictive in terms of getting the money out at 55 on your own terms.

Build A Bridge

This is designed to act as a bridge for two years but in any event we would always recommend that people keep sufficient money in readily realisable assets, ie non-pension assets, that they can draw on in the event of emergency.

Planning is the key here and we’d recommend that you keep an eye on the rule changes. If they do change you will have the opportunity to think about things and plan ahead because these rules at the very least are not going to come in until 2028.

Therefore you’ll have time to invest accordingly based on the new regime that’s in place at that time. Knowing where you are going to get sufficient money from to tide you over for the extra couple of years is vitally important.

At Faron Partnership we use sophisticated forecasting software to map out exactly how much cash you have now and how your finances will look further down the road to ensure there are no nasty surprises.

Knowing what changes you need to make – if any – sooner rather than later is important when settling on a strategy for your long term financial future. We can model in many of the events that life can throw at us to see how this could affect your financial plan.

Remember, the value of your investments can go down as well as up. Past performance is not a reliable indicator of future outcomes.

For a free consultation about your financial needs call 0118 974 0159 or email andy@faronpartnership.co.uk.