Minimum UK pension age for private pensions rising to 57

A new PMI survey has revealed that fewer than one in five fortysomethings are aware that the age they can claim their private or workplace-based pension is set to rise from 55 to 57 in six years’ time – a significant change that could affect them.

The normal minimum pension age (NMPA) for taking benefits from a private pension was set at 50 when it was first introduced on 6 April 2006. The current NMPA is age 55, having been increased to that age on 6 April 2010. A further increase in the NMPA to 57 is due in 2028. This has now gone in to the latest Finance Bill and whilst it’s not law just yet, it is looking likely it will ultimately now pass through Parliament.

Within the consultation, as part of the implementation, the Government had originally included draft legislation for new Protected Pension Age (PPA) rules that would allow members of schemes, up until April 2023, to either join or transfer into a scheme that could offer a PPA earlier than 57 to retain this. However, in a U-turn the Government has closed this loophole without prior notice. The reason they gave was potential poorer outcomes on switching for savers or being the victim of a scam.

Under the current law 55 is the earliest age that a person can access their pension arrangements (without incurring an unauthorised payments tax charge) unless the individual satisfies certain ill health conditions.

This means the increase in the NMPA from age 55 to 57 could impact your employees and former employees that are currently intending to access their pension benefits before age 57, if they are born after certain dates.

Who is affected?

If born before 6 April 1971 an employee should be unaffected by the legislation as they will reach 55 by April 2026 and age 57 before April 2028. Therefore they should be able to access their pension savings at the current NMPA of 55.
If born on or after 6 April 1973 (with no existing protected retirement age) your employee will be unable to access their pension savings before age 57.
For people born after 6 April 1971, but before 6 April 1973, it is more complicated again. This is because people in this group will reach the current NMPA on their 55th birthday and will normally still have access to their benefits until 6 April 2028. However, if the pension funds are not then accessed, they would not then have access until their 57th birthday, thereby delaying it further for 2 years. Armstrong Watson provide this helpful example of this scenario below:

‘Someone born on the 1^st April 1973, can access their personal pension arrangements at age 55 (without incurring an unauthorised payments tax charge) if they wish ie. from 1^st April 2028. However, if they choose not to do so (which may of course be the right thing to do) once the 6^th April 2028 passes they would then have to wait until their 57^th birthday, 6^th April 2030, to have the option to access their benefits again.’

Key HR Considerations

Going forward, if your Companies’ Private Pension Scheme is a HMRC registered pension scheme as at 5 April 2023, whose rules on 11 February 2021 conferred an unqualified right to access pension benefits earlier than age 57, then access to the benefits would still be available to your staff/former staff members without incurring an unauthorised tax charge.

You will need to check with your pension scheme provider (and also the wording of your employment contracts) if it clearly states what access your people are provided with and when. For example, where the rules expressly state that benefits can be drawn from age 55, the Government considers that this would amount to an unqualified right. Conversely, where the rules refer to the NMPA or its underlying legislation, it is suggested that this would not give an unqualifying right to access benefits before age 57.

If your people have multiple pension pots with different NMPA’s careful planning and consideration around their retirement may therefore be required where they might intend to retire before age 57.

Generally it would be wise to highlight these changes to your employees so they are aware and can begin planning for their potential delay to being able to claim retirement benefits until the later age of 57. Of course, for young employees, only time will tell if the Government will continue to raise this age even higher than 57.

Summary of Key changes in the Government Bill

The NMPA will increase to 57 on 6 April 2028. For your people born before 6 April 1971 there should be no impact. For those born after that date the changes mean you may need to encourage them to look more closely at their existing pension arrangements to help them to plan their retirement effectively.
The increase to age 57 will not apply to members of the various firefighters, police and armed forces public service pension schemes (commonly referred to as uniformed services pension schemes).
There will be a new protection regime allowing those who meet the rules to take benefits before age 57, but not earlier than age 55, after 5 April 2028 where the conditions for a protected pension age (PPA) are met. This PPA regime will apply to all types of UK registered pension scheme (occupational and non-occupational).
The new PPA rules are different from the PPA that are in existence currently.
There will be no need for individuals or schemes to apply to HM Revenue & Customs to benefit from the 55 to 57 PPA option.
Care will need to be taken when individuals are looking at moving jobs, changing pension schemes, making a transfer or taking benefits to understand the impact this could have on the NMPA that will apply.
Schemes will be given the right to choose how to implement the increase in NMPA to 57 as long as it is achieved by 6 April 2028. They may implement the change before then if they want to do so, providing they notify members of the increase in NMPA when it is practical to do so and consider the relevant disclosure of information requirements.
From 2028 onwards, the government’s intention is that the NMPA for private pensions should be ten years below State Pension age, although they are not automatically linking NMPA increases to State Pension age increases at this time.

If you would like any help or support in communicating these changes to your team members please feel free to reach out on hello@HROptimisation.co.uk

Hannah Powell

Privacy policy

This privacy policy sets out how HR Optimisation Ltd uses and protects any information that you choose to provide when you use this website. HR Optimisation Ltd is committed to ensuring that your privacy is protected. Should we ask you to provide certain information by which you can be identified when using this website, then you can be assured that it will only be used in accordance with this privacy policy. HR Optimisation Ltd may change this policy from time to time by updating this page. You should check this page from time to time to ensure that you are happy with any changes. This policy is effective from: 25th May 2018. If you have any queries in relation to how we use your personal information, please contact hello@hroptimisation.co.uk

What we collect

No personal information has to be given in order to navigate around the HR Optimisation website. However, any information which you choose to provide via the website will be added to our marketing database and used by us for administration of our contact and client information and for marketing our services and events to those whom we believe will have an interest in these. On occasion it is possible that these messages will contain input from other companies or organisations with whom HR Optimisation Ltd is working, however HR Optimisation will never share your personal information with third parties without express permission. HR Optimisation Ltd may also store and use personal information which you have provided on the website or during email communications with us, during relationship management activities, provision of services and commercial administration. In all our dealings we abide by the principles of the Data Protection Act 2018 and General Data Protection Regulation 2018.

What we do with the information we gather

We require this information to understand your needs and provide you with our services, and in particular for the following reasons:

Internal record keeping e.g. administration of our services and for accounts processing

We may use the information to improve our products and services

Where you have supplied your details specifically in relation to our recruitment services, to provide information to prospective employers. In this regard you expressly agree that your personal details may be submitted to client contacts as appropriate in order to offer our services

We may periodically send promotional emails and newsletters about our services, special offers or other information which we think you may find interesting using the email address which you have provided.

From time to time, we may also use your information to contact you for market research purposes. We may contact you by email, phone, fax or mail.

Law Enforcement

HR Optimisation Ltd may be obliged to provide personal information to law enforcement officials during the investigation of any alleged unlawful activities and we shall have no legal liability for disclosures of this kind.

Security

We are committed to ensuring that your information is held securely. In order to prevent unauthorised access or disclosure, we have put in place suitable physical, electronic and managerial procedures to safeguard and secure the information we collect online. All information supplied to HR Optimisation online or via any other means is stored securely and HR Optimisation will take all reasonable steps to ensure that no unauthorised third parties may gain access to this database/documentation.

What is a cookie?

Cookies are text files containing small amounts of information which are downloaded to your device when you visit a website. Cookies are then sent back to the originating website on each subsequent visit, or to another website that recognises that cookie. Cookies are useful because they allow a website to recognise a user’s device. You can find more information about cookies at:

Cookies do lots of different jobs, like letting you navigate between pages efficiently, remembering your preferences, and generally improve the user experience. They can also help to ensure that adverts you see online are more relevant to you and your interests. The cookies used on this website have been categorised based on the categories found in the ICC UK Cookie guide. Our website only uses cookies for anonymous page tracking, allowing us to improve your experience of our website. No personal data is collected.

Links to other websites

Our website may contain links to other websites of interest. However, once you have used these links to leave our site, you should note that we do not have any control over that other website. Therefore, we cannot be responsible for the protection and privacy of any information which you provide whilst visiting such sites and such sites are not governed by this privacy statement. You should exercise caution and look at the privacy statement applicable to the website in question.

Controlling your personal information

When you request information from us, or send an email enquiry, you will be given the opportunity to unsubscribe at any time, and cease receiving any further emails, by clicking on the unsubscribe link at the bottom of our emails. We will not sell, distribute or lease your personal information to third parties unless we have your permission or are required by law to do so. You may request details of personal information which we hold about you in line with the Data Protection Act 2018. A small fee will be payable. If you would like a copy of the information held on you please write to: hello@HROptimisation.co.uk If you believe that any information we are holding on you is incorrect or incomplete, please write to or email us as soon as possible at the above address. We will promptly correct any information found to be incorrect. However, if you feel that any issue raised has not been adequately addressed, you can contact the Information Commissioner’s Office at www.ico.org.uk.

Minimum pension age for private pensions rising to 57

Who is affected?

Key HR Considerations

Summary of Key changes in the Government Bill

Categories

Latest Projects