Trapped by minimum pension age

CH writes: I own a small business and eight years ago took out a self-invested personal pension (SIPP). Most of my investments were in shares but in 2000 I bought some land and built three industrial units and have since bought some more. I paid the maximum amount in to my pension fund to get the tax relief and planned to semi-retire at 50. I envisaged taking a 25% lump sum tax-free at 50 and living on the rents from the units, which should amount to about £80,000 a year.

Under the government's new pension proposals the age at which you can draw your pension will rise from 50-55 in 2010. I am 50 in 2012 and miss this by two years. Is there anything I can do as I would like to take things a little easier when I am 50?

Answer

Unfortunately, there is nothing you can do unless you are in serious ill health, writes Derek Prentice, a director with Kingston Smith Financial Services. The minimum age at which you can draw on your pension fund will be kept at the current limit of 50 until April 5, 2010, but will then be raised to 55.

Even the rules for specialists such as footballers and deep-sea divers will be affected by the new law. Only if you are seriously ill, can you apply to take your benefits earlier.

The fund you have built up will not be affected by the change in the age rule and it will continue to grow for a further five years free of tax.

If you still want to take it easy after 50, it may be possible for you to use other assets to finance your lifestyle. This could include taking on some additional personal debt to supplement your income for 5 years until you reach 55. The money you borrow could be repaid when you are able to start taking benefits from your pension fund.