The majority of over-50s are unaware of the upcoming changes in the minimum retirement age, and other legislation affecting their retirement planning, according to a report published this week*.
As many as 59% of people over 50 are currently unaware that from 6th April 2010, the minimum retirement age will increase from 50 to 55.
This means, for example, that a person now aged 50, who is able and wishing to retire soon, must act quickly, as from April they will be ‘locked out’ of taking their personal pension until they reach 55.
Given the administrative process involved in cashing in a pension fund and selecting and purchasing an annuity to provide an income, it would be necessary to take action by February 2010, in order to avoid the April deadline, according to Rockingham Retirement, the authors of the report.
Over-50s also now have ISAs advantage
Another legislative change that affects over-50s, but in a positive way, is the recent alteration of their annual allowances for saving in Individual Savings Accounts (ISAs).
As of 6th October 2009, people over 50 have been allowed to place up to £10,200 per annum in ISAs, compared to £7,200 for those younger than that.
ISAs offer tax-advantaged savings using two account models, the cash ISA and the stocks and shares ISA. Money held in the cash ISA is as secure as in a bank deposit account, but interest is paid tax-free. Investing in the stocks and shares ISA is slightly more risky as the funds are invested in the stock markets, but there is a possibility of a better return than a cash investment if the funds can be left invested in the longer term.
The stocks and shares ISA is not a totally tax-free savings opportunity, as government takes a small amount of tax (10%) on share dividends paid within the fund, but still offers a tax advantage when compared with a conventional bank account.
*Survey of 500 over-50s in Britain by Rockingham Retirement, November 2009
