HM Treasury has confirmed the government’s intention to raise the normal minimum pension age from 55 to 57 in April 2028.
But the government is devising a “protection regime” to ensure members of some pension schemes retain their current rights.
In its consultation document, the government said increasing the minimum pension age reflects "increases in longevity and changing expectations of how long people will remain in work and in retirement".
Schemes will be afforded the right to choose how to implement the rise so long as it is accomplished by April 2028. They may act before then if they so wish.
This change, which is intended to maintain the 10-year gap between the age at which people can access their state and private pensions, was welcomed by the industry, though there are misgivings about the logistics of implementing it.
The proposal for a "protection regime", now the subject of an open consultation, would see existing scheme members retain their right to access their pensions at 55, while those who become members of schemes after the date of the consultation will be subject to the updated rules.
Due to their special circumstances, members of the police, firefighters and the armed services will not have the age increase applied to their schemes.
Michael Ambery, partner at Hymans Robertson, noted that "many individuals and corporate sponsors will need to carefully consider" the implications of the proposed change.
“In particular it will have an impact [...] on the timing of when they take their pension benefits. Individual pension savers could be put off by changes that on the face of things may just sound like you need to work for longer and money is locked away,” he said.
Ambery suggested that, in the current environment, saving for retirement may not be everyone’s first priority and measures like those proposed by the Treasury “may feel unpopular”, and individuals will need help with the “juggling act” that is determining when best to access benefits.
“Communicating [the change] clearly to members will be key to ensure that any change legislation is understood and made appropriate for the individual investor. Focus should be on how providers of pensions and corporates deliver the changes through pension scheme design and via member engagement/wellbeing,” he said.
‘Protection regime’ could create ‘second class’ schemes
LCP warned that the proposals risked creating a “second class” of pension schemes. Under the proposed “protection regime”, people in schemes that are already open — as of the date of the consultation — will be able to access their money from age 55, and this right continues to apply even for money paid in after Thursday.
However, those in pension arrangements joined or opened from February 12 will be subject to the NPA increase in 2028.
This will be particularly relevant for those in or below their forties, who will only be able to access their pensions before age 57 if they are already a member of a scheme, the consultancy noted.