Small pots member exchange trial scuppered by NMPA

But in November it U-turned and closed this window without prior notice. The last accepted applications for transfer had to be made before midnight on November 3. 

However, some members might be able to transfer their pot and still access their pension at age 55, depending on the receiving scheme rules, which is the crux of the problem for the small pots trial exchange, explained CMS senior associate Hadassah Shulman.

“In order to retain the right to retire at age 55 after April 2028, a member must have had an ‘unqualified’ right to retire at age 55 that was written into the rules of the relevant pension scheme as at February 11 2021 – known as a protected pension age.”

But with the new rules introduced in November, “if you were not already in a scheme which had such a right in its rules, even if you transfer into a scheme which has a right in its rules, that right will not apply to you,” she added.

This does not mean that transfers between a scheme with a protected pension age have been banned, it just means that the member cannot gain a protected pension age of 55 now, she continued.

Members with a right to retire at age 55 after April 2028 can “still transfer and retain that right provided certain conditions are met,” Shulman explained.

“It may however mean that you can only take your transferred in benefits at age 55 and not any further benefits accrued in the receiving scheme.”

Shulman argued that since the trial would imply transfers without member consent it is probable there will be member complaints.

“Whilst they may not be many people who are in a position to retire before age 57, anyone who does want to and loses this right as a result of an action they did not consent to, it likely to complain to the [Pensions] Ombudsman.”

Hopes for new legislation

Philp noted that these changes “have caused widespread concern among the pensions industry and have had significant knock-on consequences for the member exchange pilot, meaning that some schemes that should never have had a protected pension age have now got one due to a quirk of drafting of the trust deed and rules”.

B&CE director of policy Phil Brown, also involved in the trial through The People’s Pension, said: “Good ideas sometimes fail for reasons beyond your control and that’s exactly what happened with member exchange.”

Since the trial relied on trustees initiating bulk transfers without consent, “we needed there to be no significant member detriment as a result of the transfer,” he noted.

“This was potentially viable up until November last year when the new protection regime for pots in schemes with a pension age of 55 written into their scheme rules was announced.