What happens if you straddle pension age increase?

NoMore

it’s unclear what happens to people who have crystallised and uncrystallised funds in their pension. They should be able to access the crystallised part but the uncrystalised part has not yet been accessed so are they still allowed to put this into drawdown or not ?

Somebody who has a fully uncrystalised pension at April 2028 will not be able to access it unless over 57.

bownyboy

https://forums.moneysavingexpert.com/discussion/comment/81944228#Comment_81944228

Yes, this was my point. If I UFPLS then the uncrystalised part 'has not been accessed' so technically they could say you have to wait until you are 57 to access it.

SnowMan

The increase of the normal minimum pension age from age 55 to 57 and how it affects people who have already crystalised some pension benefits before April 2028 when over age 55 but are below age 57 in April 2028, is covered again in the latest pension schemes newsletter 180 that came out today

https://www.gov.uk/government/publications/pension-schemes-newsletter-180-april-2026/newsletter-180-april-2026

(edit: I've removed the text as it's substantial and best read directly from that link. Click on the sidebar link 'Normal minimum pension age' or alternatively scroll down to the section that says, 'Normal Minimum Pension Age — transitional regulations')

SnowMan

My summary of the pension newsletter 180 in relation to someone aged 55 or 56 at 6th April 2028 is, that if they don't have a protected pension age, they will be able to continue accessing their pension crystallised before 6th April 2028, but cannot access any remaining uncrystallised pension until they reach age 57.

So for example if someone aged 55 or 56 at 6th April 2028, who doesn't have a protected pension age, has taken a UFPLS (uncrystallised funds pension lump sum) on say 1st January 2028, then from 6th April 2028 they cannot take a further UFPLS from their remaining (uncrystallised) pension until they reach age 57.

Sea_Shell

Sounds like my plan will remain doable.

This tax year, once aged 55, crystallise my smaller DC pension (£60k) and take the TFLS, then drawdown at £12,570 pa.

That should last* until I can then access my main DC pension late 2028.

*Valuation fluctuations not withstanding 😉

bownyboy

https://forums.moneysavingexpert.com/discussion/comment/81974872#Comment_81974872

Yes this is my understanding too. So for example I will take a single £16,670 as an UFPLS in August 2027 at age 55, but will not be able to access any further UFPLS for another two years.

But if I chose to crystalise my whole pension and go into drawdown I would be ok.

So for those of us who chose to manage our SIPPs that are not typical we will be punished.

DRS1

https://forums.moneysavingexpert.com/discussion/comment/81975140#Comment_81975140

But you know what is coming so you can manage it. Do FAD for 2 years worth of pension/lump sum requirement and then UFPLS after you get to 57

SnowMan

https://forums.moneysavingexpert.com/discussion/comment/81975252#Comment_81975252

Yes that was my thinking too. In that sense this is a potential practical nuisance but not something that can't be worked round.

The one I'm not sure about is someone say having their 55th birthday on 5th April 2028 who doesn't have a protected pension age. The question there is, is there time for someone to get some of their SIPP into drawdown on 5th April 2028 given all the practicalities? My initial reading of the newsletter and links is that it may be down to the exact meaning of 'entitlement arising' set out in the newsletter and link to the Pensions Tax Manual (and ultimately legislation).

At first reading it seems to be saying that for someone whose 55th birthday is on 5th April 2028, a UFPLS won't be possible unless it is paid on 5th April 2028 because 'the member becomes entitled to the uncrystallised funds pension lump sum 'immediately before it is paid' which might mean seconds before it is paid.

But it may be possible to put some of the SIPP into drawdown on their birthday on 5th April 2028 (age 55), with all the paperwork having been fully completed on all sides for this to definitely happen, and if the pension commencement lump sum isn't then physically paid until a few days after 5th April 2028 it may still be treated as having been paid on 5th April 2028 (?)

That is something I am really not sure about though and others may have a clearer or more reasoned understanding of this, albeit the final legislation will determine this.

Fruga

Here's the UFPLS section from the Newsletter for ease of reference:

Uncrystallised Funds Pension Lump Sums

An uncrystallised funds pension lump sum will only be an authorised member payment where it is paid after the member has reached normal minimum pension age. Accordingly, an uncrystallised funds pension lump sum paid on or after 6 April 2028 will only be an authorised member payment if the member has reached the new normal minimum pension age of 57 at the time the payment is made. Any uncrystallised funds pension lump sum payments made before that date which were authorised member payments at the time they were paid will remain authorised payments.

For example, a member reaches age 55 on 1 March 2027 and takes an uncrystallised funds pension lump sum on 1 June 2027. As the member had reached the normal minimum pension age of 55 at the time the payment was made, the uncrystallised funds pension lump sum is an authorised member payment. The member cannot take a further uncrystallised funds pension lump sum on or after 6 April 2028 until reaching the normal minimum pension age of 57.