Raising of the State Pension age

Encouraging individuals to save longer for their retirement

The normal minimum pension age (NMPA), currently 55, is the earliest age that members of a registered pension scheme can draw their benefits without incurring an unauthorised payments tax charge, other than in cases of ill health or where they have a protected pension age.

Pensions tax rules in the UK are some of the most complicated aspects of UK tax legislation – not ideal when pretty much everyone has to interact with them. The last thing that is needed is anything that significantly adds to this complexity, particularly where the impacts will be felt for decades.

Increasing on a staggered basis
The increase in NMPA to 57 is intended to align with the raising of the State Pension age to 67, and will reinstate the ten-year difference between the two ages. The State Pension age is increasing on a staggered basis depending only upon your date of birth. Although younger people lose out by having to wait longer, the position is clear to everyone and is as simple and fair as it can be. Unfortunately, the implementation of the increase in the NMPA is neither simple nor fair and it is going to be incredibly complicated.

Individual members of registered pension schemes who do not have a protected pension age will not be able to take scheme benefits before age 57 after 5 April 2028. However, members of uniformed public service pension schemes and those with unqualified rights to take their pension below age 57 will be protected from
these changes.

Transferred to a new pension scheme
HM Revenue & Customs have indicated that where pension schemes rules include a reference to benefits being taken from age 55, this would be an unqualified right; however, a reference to taking benefits from the NMPA would not meet the requirement.

Increasing the NMPA reflects increases in longevity and changing expectations of how long we will remain in work and in retirement. Raising the NMPA to age 57 could encourage individuals to save longer for their retirement, and so help ensure that individuals will have greater financial security in later life.

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