Quilter has written to MPs to ask them to amend the Finance Bill to avoid “decades of complexity” in relation to the increase in the normal minimum pension age (NMPA).
Quilter asked members of the Treasury Select Committee and the Work and Pensions Select Committee, as well as the Treasury to table an amendment to ensure that individual transfers are treated in the same way as block transfers.
The NMPA will increase to 57 in April 2028 but some pensions will offer a protected pension age of 55.
The government sought to remove the complexity this would create by closing the window in which people can either join or transfer into a scheme which would offer a protected pension age in November.
But Quilter said complexity still remains as members with a protected pension age who wish to transfer to another scheme without protection will have their transfer treated differently depending on whether it is an ‘individual’ or ‘block transfer’.
Jon Greer, head of retirement policy at Quilter said: “As things currently stand, the draft legislation will create a two-tier pension system in which some people will be able to access their pension at 55 and others will have to wait until they are 57.
“Exactly who will be able to access their pension earlier is complicated enough, but things could get even more confusing when people with a lower pension age want to transfer their pension to another scheme in the future.
“Due to the way the legislation is currently drafted, if someone with a protected pension age transfers through a block transfer then they’ll get the protection at scheme level, meaning any new money paid in the scheme will also enjoy a lower pension age. However, if someone transfers on an individual basis, then only the transferred amount will receive the protection. Anything else will only be accessible from 57.”
A block transfer is where at least two members of a scheme transfer at the same time in the same transaction to another registered pension scheme.
These transfers retain a protected pension age on not only the amount transferred but any additional money paid into the new scheme.
However, individuals choosing to change their provider will only keep the protection on the transferred sum. Any additional payments will be subject to a minimum pension age of 57.
Therefore providers will have to ringfence pension benefits within the same pension pot.
Quilter said this will significantly complicate retirement planning as people will have two ages in which they can access their pot.
Greer said: “On the surface, this doesn’t seem like a big deal. But it could bake in decades of complexity in the pension landscape and retirement planning process.
"Schemes will have to ringfence rights within the same pension pot, meaning someone could well have two different pension ages for the same pension scheme, making already complex pension rules even more confusing.
“A simple amendment which has the effect of ensuring individual transfers are treated in the same way as block transfers should do the trick, and will make life much easier for both pension savers and pension schemes for years to come.”