The government has recently announced that from 6th April 2028, the minimum pension age will increase to 57. The NMPA is the earliest age to exercise your pension options, apart from ill health and some occupations. Taking benefits before these dates could mean tax penalties.
The government issued a consultation in 2014. The aim was to review the age at which retirees could access benefits. The impact of people living longer was a big factor. The government wanted to ensure people saved privately into pensions for a more secure retirement.
Is the 55 pension age changing?
The increase to age 57 will take place such that:
- Those born before 6th April 1971 (age 57+ on 5th April 2028) may continue accessing their pension at age 55.
- Those born after 5th April 1973 (age under 55 on 5th April 2028) must wait until they are 57 to access their pension.
- Those born between 5 April 1971 and 5 April 1973 (age 55-56 on 5 April 2028) will have an opportunity to access their pension from their 55th birthday to 6 April 2028. After this, they will need to wait until their 57th birthday to do so.
Can I take my pension early if I am in serious ill health?
Anyone with a pre-existing protected pension age of under 55, such as members of the police and armed forced public service schemes, will not be affected. Their specified scheme pension age will remain valid. This also applies to those who retained their early retirement age in 2010 when the NMPA increased from 50 to 55.
For pension schemes that, on 11th February 2021, had age 55 as the age that benefits can be taken written into the scheme rules, they can protect this age for their existing members and anyone else that joins the scheme by 5th April 2023. However, this only applies if the member does not need consent from trustees, the scheme administrator or the employer to take their benefits at that age. It is unclear how some pension arrangements, such as SIPPs and personal pensions, are affected. It depends on the scheme rules and whether the NMPA will be adopted rather than specifying a particular age. Therefore, some schemes will not benefit from this protection.
There is also an exception for those with serious ill health as they are generally entitled to access their pension savings early in certain circumstances. This often depends on the rules of the specific pension scheme.
Summary
This is a significant change in rules that could potentially devastatingly impact pension advice. It is important to be familiar with how your specific situation may be affected. It is highly recommended that the scheme rules be checked before any pension transfers. It is worth ensuring you know when you may take advantage of your benefits. This can avoid unpleasant surprises when retiring and trying to access your pension.
The legislation allows transfers to benefit from a protected pension age of 55 as long as they are done before 5 April 2023. However, as mentioned above, most SIPPs and personal pensions use the NMPA as the age at which benefits can be accessed so that a limited choice may exist.
