Aegon calls on HM Treasury to allow individuals to retain rights

HM Treasury is consulting on how to implement a previously announced increase in the normal minimum pension age, the age when individuals can typically access their pension.   

The proposals include a provision to protect those whose current scheme rules (as at the consolation launch date of February 11 2021) give them an unqualified right to benefits at age 55. 

While Aegon praised the Treasury for seeking to avoid any retrospective changes that would take away current entitlements, it highlighted significant risks of discouraging individuals from transferring into better value schemes and of detracting from other important government pension policy objectives. With this in mind, Aegon asked the Treasury to consider alternative implementation approaches. 

As reported by Pensions Expert, the proposal would see existing scheme members retain their right to access their pensions at 55, while those who become members of schemes after the date of the consultation would be subject to the updated rules.

The change, which is intended to maintain the 10-year gap between the age at which people can access their state and private pensions, was welcomed by the industry, though serious misgivings exist about its logistical and administrative implications.

Steven Cameron, pensions director at Aegon, said: “With people on average living longer, there’s merit in encouraging people to work longer and to make sure they are saving sufficiently for retirement. And with the state pension age due to increase to 67 in 2028, it’s not unreasonable to increase the normal minimum pension age from 55 to 57 at that time.

“With pensions such long-term savings vehicles, it’s important that rules don’t keep changing or that individuals see entitlements they thought they had removed. 

“On one hand, allowing those whose pension scheme or contract, as at 11 February 2021, gives them an unqualified right to take benefits from age 55 to continue to do so does protect this entitlement. But as proposed, this protection would be lost if an individual transfers to another scheme, other than as part of a ‘bulk’ exercise with other scheme members. This is likely to discourage many thousands of individuals from taking other beneficial actions such as transferring to new pensions.”

He added: “As government and regulatory policy recognises, there are many situations where an individual might benefit from transferring, including moving out of an older style contract or scheme with higher charges, with less flexibility or fewer choices; consolidation including of smaller frozen pension pots; the availability of a lower-charging current workplace pension; accessing the full range of pension freedoms; or for a minority, when transferring from a defined benefit scheme to access greater flexibility within defined contribution arrangements.”

“Having different minimum pension ages for different pensions, or even different ages for different entitlements within the same scheme, could also hamper the development of simpler communications and, through extra complexity, make pension rules even less easy for individuals to understand at a time when stronger engagement is key.”

“We hope that the Treasury will be open to considering other approaches to implementing the increase in normal minimum pension age. One approach would be to allow any individual who transfers to keep any entitlement to take their benefits from their current minimum age.”