Fresh calls for early state pension access – here’s what you’d get if you retired at 63

Expert on how to get the most from your state pension

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Millions struggle to work on until age 66, especially those in poor health. Allowing them to access their State Pension early would be a huge help, but they might have to take it at a reduced rate, experts say.

The Department for Work and Pensions (DWP) has launched a second review of the State Pension age, and the consultation process closes today.

This will examine whether the State Pension age should increase again, which could see millions retiring later.

Currently, it is set to climb to 67 between 2026 and 2028, then rise again to age 68 between 2044 and 2046.

The current review could even accelerate that second increase, so the State Pension age increases to 68 between 2037 and 2039.

Yet there are growing calls for the age at which people can start taking their money to be CUT, possibly to as low as 63.

As we reported on Saturday, one in six Britons would consider taking their State Pension early if they could, even if it meant accepting a reduced rate.

Tom Selby, head of retirement policy at AJ Bell, said allowing people to access their State Pension early could make the system more flexible, and help those with limited life expectancy get something in return for years of National Insurance (NI) contributions.

He added: “It could also be relatively simple to implement.”

Becky O’Connor, head of pensions & savings at Interactive Investor, has also called for greater flexibility.

Asking people in poor health or who have spent their life doing manual work to wait longer for their State Pension is not fair, she said.

Healthy, often better-off people with higher life expectancy could claim it for years, while those at the sharp end won’t, O’Connor warned. “That’s if they live long enough to claim it at all.”

So how much could people get under early State Pension access?

We asked Steven Cameron, pensions director at insurer Aegon, to crunch some numbers to show how much State Pension people would get at age 63.

Currently, people can take their State Pension LATER, and get 5.8 percent more pension for each year they delay taking it.

Cameron turned this round by applying the same formula to taking a pension three years EARLY instead.

The full new State Pension for those who retire at 66 is now £185.15 a week. “Using the same formula, it could fall to £152.93 a week if you accessed it at age 63 instead.”

That would reduce your annual income from £9,627.80 a year to £7,952.36. It is a big drop but it does mean you will getting paid an extra three years.

These figures assume that somebody has made the maximum 35 years of qualified National Insurance contributions, and will qualify for the full new State Pension.

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However, workers who have made fewer NI contributions will see their State Pension reduced proportionately, further lowering their income.

Early access may nonetheless appeal to those in poor health or simply exhausted from work, Cameron said. Many may have a lower life expectancy so the sooner they start claiming their State Pension, the better.

Cameron said this option would be a huge help for people in physical or stressful occupations.

Under pension freedom rules, people are allowed to draw their workplace and personal pensions from as early as 55. “Yet there is no flexibility to take an early State Pension,” Cameron said.

However, those to retire early on an income below the Pension Credit benefit level may have to wait until they turn 66 to get that means-tested top-up.

Early State Pension access should be explored. It could help millions.

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