Did you know that the normal minimum pension age (NMPA) is set to rise from 55 to 57 from 6th April 2028?
This latest NMPA rise was confirmed in the UK Government’s Finance Bill in November, a Bill designed to support the delivery of a stronger economy through driving growth, securing public finances and levelling up employment opportunities. The Bill also outlined the conditions that may enable some pension savers to keep a minimum pension age of 55 beyond 2028 and changed a draft rule that closed the window for transferring into a scheme to secure a protected pension age.
So, after reading those few sentences you may now be wondering how this rise and new conditions might affect you? Let’s explain.
Protecting pension savers from scammers
If your pension scheme included the right for you to take benefits when you reach the age of 55 in its rules as at 11th February 2021, that age will be protected for you as an existing member. The original draft rules announced in early 2021 had allowed people to transfer to a scheme which had a protected retirement age of 55 if this was completed by 5th April 2023. That window was closed in November’s Finance Bill following concerns that scammers could force pension savers into rushing a transfer through and capitalising for their own gain.
Who is affected by the rise?
The Government has been planning to increase the NMPA since 2014 and there will be no phased introduction. So, if you’re one of those people without a protected pension age, this is what to expect:
- If you were born before 6th April 1971 you are unaffected as you will be aged 57 before 6th April 2028 when the rise comes into effect
- If you were born after 5th April 1973, the earliest date by which you can access your pension benefits will be delayed by two years
- If you were born between 5th April 1971 and 5th April 1973, you will have a window from your 55thbirthday to 6th April 2028 to take your benefits before the rise comes into effect. It’s worth noting that if you don’t access your pension during this time you will have to wait until your 57th birthday
Protected pension age schemes – the exception rather the norm
Schemes with protected pension ages are, in our experience, the exception rather than the norm and that means that there are likely to be many people having to accept this rise and wait two more years to age 57 for take their benefits.
We don’t particularly see this as a big problem; it’s more important that your pension scheme provides you with the flexibility and choice you need to have a comfortable retirement. If you can afford to retire at 55, there are other tax efficient ways to invest your savings other than a pension including ISAs, bonds and collectives. All of these would be included in your estate for inheritance tax, so it’s wise to reduce this potential liability by accessing them first in a tax efficient way and making the most of tax allowances and lower tax bands.
If retiring at 55 isn’t viable for you financially, you could use other savings to bridge any gaps but, if you do draw down on pension savings you must remember that you will have to wait two more years before claiming your state pension at 67. Taking this into account, you may wish to rethink if you can still afford to take early retirement.
Now’s the time to take professional advice
Whether you have a protected pension age scheme or not, now is the time to take professional advice to ensure you’re fully in the picture with your pension. It’s also an ideal opportunity to review and potentially revise your retirement plans.
Either way, the team and I here at Jones & Co are on hand to provide a free consultation whatever situation you find yourself in. As experts in this field, we’re only too happy to have a chat, discuss your options and ensure you are in a position of knowledge when it comes to pensions and retirement.
Email: firstname.lastname@example.org, call 01246 550521 or pop into our offices on Glumangate in Chesterfield.
Risk warnings: Pensions and investments go up or down in value and on encashment you could potentially get back less than originally invested. The contents of this article are for information only and do not constitute financial advice. Always seek professional guidance when investing in risk-based investments.