At a superficial level, the government’s announcement that the normal minimum pension age – the earliest point at which most scheme members can access their pension benefits – will increase from 55 to 57 in April 2028 does not appear to be worthy of immediate consideration. However, appearances can be misleading.
At the same time as confirming the increase, the government has also introduced a protection regime allowing some individuals to retain access to their benefits from age 55, provided they and the scheme they are a member of meet certain requirements.
The new protection regime is wide-ranging and complex.
It offers opportunities for those with a protected pension age in a particular scheme to retain it on transfer, and in some circumstances for non-protected benefits in the receiving scheme to inherit that protection.
The protection regime also appears – although this is still the subject of some debate because of confusing messaging from the Treasury – to allow individuals who qualify for protection in one scheme to transfer other non-protected benefits into that scheme and for those transferred benefits to obtain protection.
So let us run through the immediate opportunities and risks that apply as a result of the rules.
No worries for some
We will start by saying, you should be able to forget these rules in relation to any clients born before April 6 1971.
Pension providers are allowed to increase the NMPA – applying to their own scheme – from 55 to 57 before April 6 2028, but I suspect it is very unlikely that any will.
So anyone born before April 6 1971 will have reached 57 before the increase in NMPA, meaning it will have no relevance to them.
Clients born between April 6 1971 and April 6 1973 and who will want/need to access their benefits before they reach 57 are in a similar position of not needing to worry about very much right now.
However, they may need to access their benefits between their 55th birthday and April 5 2028. If they do not, then, depending on whether or not they will hold, or can obtain a protected pension age of 55 in their scheme(s), they may face a period between April 6 2028 and their 57th birthday when they are not able to access further benefits.
Members of uniformed services pension schemes also benefit from protection against the increase in the NMPA. This means that most members of the armed forces, police force, or firefighters will not see their NMPA rise to 57.
So, under what scheme is a protected NMPA of 55 available?
In trying to understand the mechanics of the protection system, it is important to remember that there is one element linked to the design of the pension scheme, and one linked to a client’s membership of a scheme.
The scheme-linked condition is that the pension offered a right to access benefits from age 55 on February 11 2021.
The legislation just refers to an “actual or prospective right”, which makes it sound as though most schemes would qualify.