The Year of the 55 Year Old

Did you know that nearly one million people will celebrate their 55th birthday in 2020?

In fact, more people are set to celebrate their 55th birthday in 2020 than any other age.

Data also predicts that the next decade should see more people reach their 55th birthday – 9,063,137 - than in any decade gone before, and likely any decade that will follow.

Of the ten most populous ages in the UK, six are set to reach their 55th birthday in the next ten years.

This means more people will be able to access their pension for the first time and if they are not in a post-Pension Freedom pension plan, it is highly likely that they will have limited accessibility options available to them. 

At such an important life event, the need for financial advice has never been more important as shown by recent HMRC statistics on pension withdrawals.

Apparently, 2019/20 tax year was a record year for the amount of emergency tax applied to pension withdrawals, with HMRC revealing it repaid ￡166,619,969 to people it had initially deducted too much tax from.

In the first quarter of 2020, HMRC also announced that it had processed 6,286 P55 forms, 2,973 P53Z forms, and 1,138 P50Z forms – with the total value repaid during the three months reaching ￡32,659,329.

This is so important with the current economic uncertainty for many individuals affected by the Coronavirus pandemic. For anyone thinking that their pension will be like a cash machine, they need to be mindful that any withdrawals over the 25% PCLS amount are taxed as income.

This is further compromised as HMRC often requires the first withdrawal to be taxed at the emergency rate, which normally means too much tax is deducted.

For professional advice on your pension please get in touch.