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Last call for retirement at 50

RETIREMENT: This is the last chance for 50-year-olds to convert a private pension to income
June 15, 2009

Thousands of 50-year-olds who expect to start drawing an income from a private pension next year could be in for a nasty surprise: they can't. A change in the rules means that from April 2010, the earliest age that both men and women will be able to claim their private pension will rise from 50 to 55.

Those born after 6 April 1960 will not be able to take their pension until after 6 April 2015. However, a survey by independent annuities broker Rockingham Retirement found that eight in 10 50-year-olds are ignorant of the imminent increase in pensionable age.

Steve Hunt, managing director of Rockingham Retirement, says: "It's crucial that those currently aged 50 to 54 who are thinking about retirement act now as they have less than one year to do something about it - or else they will have to wait until they are 55."

There are some exceptions to the rule. Employment law usually overrides pension law, so if a contract of employment allows for retirement at age 50 (for example, with the Police Force) then this will still be possible, even after April 2010.

But this is unlikely to apply to the majority, and the financial implications of having to wait another four years are likely to be harsh considering the economic climate.

People currently aged 50 with a fund of £100,000 could expect to receive a level annuity (one that doesn't rise in line with inflation) of £5,478 a year, according to Mr Hunt

If they delay, they might find that the fund grows only modestly, say 10 per cent over the next five years as the global recession deepens while annuity rates may also fall by 10 per cent because of increased longevity and low interest rates. Based on these assumptions, they would receive an annuity of £5,771 per year. Their income has increased by just £293 a year, but they will have lost five years of income at £5,478 a year, which equates to £27,390 in lost income.

However, there are many other factors to consider in your decision, such as inflation, which may pick up over the next few years, and the possibility of buying an enhanced annuity due to ill health in later years.