22 July 2021
HMRC have published their response to the consultation about raising the Normal Minimum Pension Age (NMPA) to 57 from the current age of 55, from 6 April 2028. They have confirmed the change will go ahead and the draft legislation will be published shortly. This is not a surprising announcement as the Coalition Government announced the intention to make this change back in 2014.
What is the NMPA?
The NMPA is the age at which most pensioners can access their pension savings without incurring unauthorised payment charges which are effectively penalties for accessing tax privileged pension savings early. The government believes that it is right to encourage taxpayers to save for their retirement and raising the NMPA merely reflects increasing longevity and changing expectations about how long people will remain in work.
Who will this impact?
On the face of it, the change will affect people who turn 55 on 6 April 2028 or shortly afterwards, as they will now have to wait another two years to access their pension savings. However, there are proposals to enable those who are affected to have a Protected Pension Age (PPA) – which broadly enables those affected to access benefits at their protected age rather than the NMPA. This will apply to the armed forces, police and fire public service pension schemes. Additionally, anyone who was a member of a registered pension scheme on 11 February 2021 whose scheme provided an unqualified right to take pension benefits before the age of 57, will qualify for a PPA.
An unqualified right will arise in schemes where benefits were accessible at a specified age (usually 55) rather than by reference to the NMPA. Transitional provisions for those affected will be in place, but there is no detail yet on what those provisions will be. The upshot appears to be that some people may get a PPA by virtue of the scheme they are currently in, and those that don’t but are affected, will get some type of transitional protection. This does however beg the question of why not give everyone affected the same PPA.
The pension industry has plenty of time to implement the change, but the real test now is how the change will be publicised, so it does not come as a shock to those retiring in 2028.
If you would like to find out more about the increase in the NMPA and pension planning please contact Rachel de Souza.