Increase to Minimum Pension age from 55 to 57 on 6th April 2028

edited 28 March at 10:01AM in Pensions, annuities & retirement planning
244 replies 35.3K views
hugheskevihugheskevi Forumite
3.3K Posts
Part of the Furniture 1,000 Posts Name Dropper Car Insurance Carver!
Forumite
Latest position:
24th February 2022: The Finance Act which contains the legislation making the change receives Royal Assent. Discussion of this starts from page 22 at this link. Most pension schemes have not yet made clear whether they are protected or not.
---------------------------------------------------------------------------------------------------------------------
4th November 2021: HMT close window at 2359 on 3rd November 2021, during the window individuals could change provider to get a protected age (previously announced as 5th April 2023)
---------------------------------------------------------------------------------------------------------------------
12th October 2021: In response to concerns raised by Association of British Insurers, HM Treasury state:
"We believe it’s right to protect pension savers whose scheme rules provide them with an unqualified legal right to take pension benefits before age 57. That is why earlier in the year we set out the details of the framework and have been consulting on the technicalities to ensure it is as simple and fair as possible.”
---------------------------------------------------------------------------------------------------------------------
20 August 2021, Fidelity provisionally confirm their SIPP appears to have a protected minimum pension age of 55, but this is subject to final HMT/HMRC legislation. Discussion of this starts from 25th August 2021 on page 16 of the thread, at this link.
---------------------------------------------------------------------------------------------------------------------
20 July 2021, HM Treasury publish a consultation response, and HMRC published a policy paper, draft legislation and explanatory notes.
Discussion of this starts from 20th July 2021 on page 10 of the thread, at this link.
---------------------------------------------------------------------------------------------------------------------
Original post from 11 February 2021:
HM Treasury have published a consultation document about increasing the minimum pension age from 55 to 57 in 2028. Key points for me are:
  • Change will be a 'cliff-edge' change on 6th April 2028
  • Individual schemes can however choose to increase minimum age before 2028 if they wish, which would enable a tapered increase for example. I find it difficult to envisage any scheme wishing to do that, however, as it would surely just irritate its members?
  • Existing pensions (that currently have a minimum pension age of 55) appear to be protected: "Protection from the increase in NMPA will only apply to those individuals who have an existing right within their scheme rules at the date of this consultation to take pension benefits before age 57. In other words, a member’s protected pension age will be the age from which they currently have the right to take their benefits." 
  • If a member is protected, future contributions to the protected scheme - including those after 2028 - can be accessed from age 55.
  • Pensions opened after 11th February 2021 will have a minimum pension age of 57 from 6 April 2028. Protection is on a pension-arrangement basis, not related to the individual, so changing jobs would mean the new pension would have a minimum pension age of 57 from 6 April 2028. However, it presumably would be possible to transfer newly accrued pension into the protected pension arrangement if desired (and if permitted by former scheme).
  • There will be no automatic link between minimum pension age and State Pension age, although the govt. considers it appropriate for the MPA to be about 10 years below NPA. Hence although State Pension age is legislated to increase to age 68, there will not be an automatic increase in the minimum pension age to 58.
  • Armed Forces, Police and Fire Service schemes will continue to have a minimum pension age of 55
  • Protection will be lost on pension transfer, unless part of a 'block transfer' (a block transfer is where at least 2 members switch pension scheme at the same time, so some schemes operate a 'buddy' system, but this is administratively difficult)
  • Previous minimum pension age protection from 2006 allowing pension to be accessed from age 50 is not affected.
The consultation appears to address all the unanswered questions, and seems to have about as few restrictions as could be hoped for, with generous protection measures and no mandatory tapering in of increase prior to 2028.

The key thing I will be looking at as this progresses is whether the protection is as broad as it appears to be. It will also be interesting to see whether pensions accessed via UFPLS prior to 6 April 2028 will be able to be accessed prior to age 57 after 6 April 2028.

I also wonder whether there will be changes to the transfer restriction, to permit protection to remain if pension is transferred on an individual basis. In some cases this could mean a member is in a scheme that only offers very limited decumulation options (eg annuity) but if a member transfers their pension to access drawdown they lose minimum pension age protection, effectively preventing them from using drawdown or UFPLS until age 57 despite having a protected minimum pension age. Plus there are the general competitiveness and consumer choice arguments.
I wonder how this new type of protection will be factored into transfer guidance, it could be quite beneficial to keep a small, protected, DC pot that allows transfers-in as a future option. It will also be interesting to see whether it is permitted to transfer unprotected pension accrued in the future into a protected pension arrangement, thus enabling all funds to be drawn from 55.
(note - I have edited this initial post to keep it up-to-date and cover interesting points raised in subsequent posts)

«13456725

Replies

  • AlbermarleAlbermarle Forumite
    13.7K Posts
    10,000 Posts Fourth Anniversary Name Dropper
    Forumite
    Would make people think twice about transferring pensions , which is a pity as often it can be beneficial move . Especially if you had older /expensive/inflexible pension .
  • TwentytwothousandTwentytwothousand Forumite
    41 Posts
    Eighth Anniversary 10 Posts Combo Breaker
    Forumite
    I would have thought they’d be encouraging people to retire. Or does this incentivise people to retire “early” whilst they still can.  There will be mass unemployment if people can’t afford to retire, surely.
  • zagfleszagfles Forumite
    18.7K Posts
    Part of the Furniture 10,000 Posts Name Dropper Chutzpah Haggler
    Forumite
    Do DC schemes usually have an age specified in their rules? I suspect it's mainly DB schemes that specify an age.
    Also it should be noted that the protected age (like the 50 to 55 increase) only applies if there's an unconditional right, rather than a right that depends on employer/trustee consent even if that consent is usually given.
    Seems to be no mention of those who turn 55 in the couple of years before 2028. For instance, someone who turns 55 in Jan 2028. Do they have 3 months in which they can take their pension, up to Apr 2028, but if they don't they have to wait till Jan 2030 when they're 57? What if they've crystallised, can they carry on drawdown? What if they've been taking UFPLSs, will that ability stop in Apr 2028 until Jan 2030?
    Or are they considered "past NMPA" in Jan 2028 and therefore can take pensions whenever they want from Jan 2028?
  • michaelsmichaels Forumite
    26.6K Posts
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    Forumite
    Annoying if you turn 55 on the 6 April 2028....
    I think....
  • HM Treasury have published a consultation document about increasing the minimum pension age from 55 to 57 in 2028. Key points for me are:
    • Change will be a 'cliff-edge' change on 6th April 2028
    • Individual schemes can however choose to increase minimum age before 2028 if they wish, which would enable a tapered increase for example. I find it difficult to envisage any scheme wishing to do that, however, as it would surely just irritate its members?
    • Existing pensions (that currently have a minimum pension age of 55) appear to be protected: "Protection from the increase in NMPA will only apply to those individuals who have an existing right within their scheme rules at the date of this consultation to take pension benefits before age 57. In other words, a member’s protected pension age will be the age from which they currently have the right to take their benefits." 
    • If a member is protected, future contributions to the protected scheme - including those after 2028 - can be accessed from age 55.
    • Pensions opened after today will have a minimum pension age of 57. Protection is on a pension-arrangement basis, not related to the individual, so changing jobs would mean the new pension would have a minimum pension age of 57. However, it presumably would be possible to transfer newly accrued pension into the protected pension arrangement if desired (and if permitted by former scheme).
    • There will be no automatic link between minimum pension age and State Pension age, although the govt. considers it appropriate for the MPA to be about 10 years below NPA. Hence although State Pension age is legislated to increase to age 68, there will not be an automatic increase in the minimum pension age to 58.
    • Armed Forces, Police and Fire Service schemes will continue to have a minimum pension age of 55
    • Protection will be lost on pension transfer, unless part of a 'block transfer'
    • Previous minimum pension age protection from 2006 allowing pension to be accessed from age 50 is not affected.
    The consultation appears to address all the unanswered questions, and seems to have about as few restrictions as could be hoped for, with generous protection measures and no mandatory tapering in of increase prior to 2028.

    The key thing I will be looking at as this progresses is whether the protection is as broad as it appears to be.

    I also wonder whether there will be changes to the transfer restriction, to permit protection to remain if pension is transferred on an individual basis. In some cases this could mean a member is in a scheme that only offers very limited decumulation options (eg annuity) but if a member transfers their pension to access drawdown they lose minimum pension age protection. Plus there are the general competitiveness and consumer choice arguments - I wonder how this new type of protection will be factored into transfer guidance, it could be quite beneficial to keep a small, protected, DC pot that allows transfers-in as a future option.
    Do we have access to the previous document when the age went from 50 to 55 in April 2010 for comparison with the above?
  • hugheskevihugheskevi Forumite
    3.3K Posts
    Part of the Furniture 1,000 Posts Name Dropper Car Insurance Carver!
    Forumite
    Croeso69 said:
    Do we have access to the previous document when the age went from 50 to 55 in April 2010 for comparison with the above?
    It was December 2002, and I think the comparable document would be this consultation. See page 21.
  • NotnewnotoldNotnewnotold Forumite
    116 Posts
    Fifth Anniversary 100 Posts Combo Breaker
    Forumite
    michaels said:
    Annoying if you turn 55 on the 6 April 2028....
    Or the 7th April, in my case  :s
  • michaelsmichaels Forumite
    26.6K Posts
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    Forumite
    michaels said:
    Annoying if you turn 55 on the 6 April 2028....
    Or the 7th April, in my case  :s
    I would still rather be 3 years younger and be impacted by this change....

    I had an interesting thought, I wonder how much of a blip covid is making to life expectancy (and thus the actuarial costs of pensions for the govt and providers), increasing life expectancy is the rationale behind increases to pension ages.

    Back of the envelope, if we got to 140k extra deaths that would be about one sixth of normal annual deaths.  If each covid victim lost on average 6 years of life (probably an overestimate) then life expectancy would be down by 1 year which is pretty large in the scheme of things (although it should then be recovered over the next decade or so if covid ends)
    I think....
  • edited 12 February 2021 at 12:55AM
    hugheskevihugheskevi Forumite
    3.3K Posts
    Part of the Furniture 1,000 Posts Name Dropper Car Insurance Carver!
    Forumite
    edited 12 February 2021 at 12:55AM
    michaels said:
    I had an interesting thought, I wonder how much of a blip covid is making to life expectancy (and thus the actuarial costs of pensions for the govt and providers), increasing life expectancy is the rationale behind increases to pension ages.

    Back of the envelope, if we got to 140k extra deaths that would be about one sixth of normal annual deaths.  If each covid victim lost on average 6 years of life (probably an overestimate) then life expectancy would be down by 1 year which is pretty large in the scheme of things (although it should then be recovered over the next decade or so if covid ends)
    So far, my understanding is that the standard actuarial assumption is that it is simply bringing forward deaths that would have otherwise occurred fairly soon by a short amount (more like a year than 6 years) and that excess deaths will return to zero fairly rapidly (ie no permanent effect).
    So the position over even the medium term is unchanged, and far less significant than the lower than expected increases in longevity which have taken place over the last decade.
    The rationale behind increases to pension ages somewhat flexible anyhow, as a key assumption is the average proportion of working life the Government thinks should be spent above State Pension age. Back in 2013 it was 'up to a third' whereas at the last review in 2017 it was 32%. Take your pick as to whether that is refining the numbers or choosing the number to fit your preferred policy outcome.
  • MordkoMordko Forumite
    2.9K Posts
    1,000 Posts Third Anniversary Name Dropper
    Forumite
    A good reason to fill up your ISA with shares. 
Sign In or Register to comment.
Latest MSE News and Guides