The Association of British Insurers (ABI) has warned MPs government plans to hike the minimum pension age in 2028 will "bake in complexity for decades to come" and called for them to be shelved.
The ABI has written to Stephen Timms, chairman of the Work and Pensions Select Committee, saying, as a matter of urgency, the current plan to increase the normal minimum pension age (NMPA) from 55 to 57 should be paused until a simpler solution can be found.
The ABI is not against the age hike as such but warned of the disruption that would be caused by the use of protected pension ages.
This concern had previously been outlined by former ABI tax adviser Dan Gallon in a blog post in September when he wrote the government’s plans were “too complicated and would create too much confusion for the tens of millions of people affected".
The government first announced in 2014 that the NMPA would increase to age 57 in April 2028 to reflect long-term increases in longevity and changing expectations of how long people will remain in work and in retirement.
But not all pensions will be caught up in the rules as some might offer their members the right to take their benefits at the earlier age.
For instance, the government said in July that due to their special circumstances, members of the police, firefighters and the armed services would automatically have protected pension ages even if their scheme rules did not state this.
It also proposed that members should keep their protected pension age when they become a member of another scheme on a block transfer, but it did not address individual transfers.
In its letter, the ABI warned this change would make any general communication on accessing pensions more difficult and would lead to a general confusion about what is a “normal” pension age.
“This will go against joint efforts by the government and the industry to simplify the experience people have with their pension journey,” the ABI stated.
It added that the plans could lead the way for scammers to exploit the situation and could create "perverse" incentives for savers to shift their pensions to a plan which offered an access age of 55 and for advisers to recommend these specific products.
There could also be a clash with other policy objectives, such as defined contribution consolidation and small pots.
This is because a transfer may not necessarily be in a saver’s interests if they have a pension age of 55, because the amount transferred would be ring-fenced and the customer could no longer add to it.
Finally the ABI said it could raise new challenges and legal uncertainty which public bodies such as the Financial Ombudsman Service and the Pensions Ombudsman would need to handle.
The ABI has suggested that instead the government should follow its simpler approach taken back in 2010, when the pension age was increased from 50 to 55.
The ABI said in 2010, it was clear that only a limited group of savers would retain the right to access their pension from 50, based on their employment.