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£100k cost as Revenue thwarts early retirer

The legislation behind the Government&#39s Pensions Green paper looks set to claim its first victim, with a 41-year-old man prevented from taking pension benefits at 50 despite having the funding.

The Department for Work and Pensions&#39 plans to raise the minimum age for taking retirement benefits from 50 to 55 in 2010 will result in former human resources officer Mike Bagley losing up to £20,000 a year.

Bagley, who was made redundant in August 2002, paid his severance payment into his final-salary scheme. He stands to lose £100,000 when the retirement age is raised.

Bagley will not be able to retire until 2016 and will miss five years&#39 pension payment.

He paid £63,000 of his severance payment into the British American Tobacco scheme on his redundancy. The scheme rules do not allow an increased pension if his payment is deferred by five years.

The DWP Green Paper says the rule change is designed “to signal that working up to age 55 at the very earliest is the norm”.

IFAs have branded raising the limit as a pointless gesture that hits people who have made provision and detracts from pension saving.

Bagley says: “There will be a five-year gap for me to fund, which I have not planned and funded. If the Green Paper takes effect as written, I will lose £100,000 in lost pension.”

An Inland Revenue spokesman says: “We cannot comment on the cases of individual taxpayers.”

Richard Jacobs Pension & Trustee Services director Richard Jacobs says: “This guy may be stuck. But in this case, everyone loses out, even the Inland Revenue. If someone can afford to retire at 50, why make them wait?”

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