Govt U-turns on minimum pension age hike protections

The government plans to raise the normal minimum pension age to 57 in April 2028 and had originally given people until April 2023 to either join or transfer into a scheme that could offer a protected pension age.

But it has now closed this window without prior notice. The last accepted applications for transfer had to be made before midnight on Wednesday.

In an announcement on Thursday, John Glen, economic secretary to the Treasury, said the move was meant to be announced at the Autumn Budget but concerns over a rush to transfers led the government to do it this way. 

Some pension savers could find themselves with poorer outcomes – or even be the victim of a pension scam – if they were rushed by rogue advisers to make a quick transfer in the short time period before the window closed

John Glen, HM Treasury

Glen said: “Some pension savers could find themselves with poorer outcomes — or even be the victim of a pension scam — if they were rushed by rogue advisers to make a quick transfer in the short time period before the window closed.”

Those who have already made a “substantive request” to transfer their pension to a pension scheme with a protected pension age of 55 or 56 will still be able to keep or gain a protected pension age, assuming the transfer is completed in accordance with the current regulations, the government said.

It was first announced in 2014 that the NMPA would increase to age 57, effective from April 2028, to reflect long-term increases in longevity and changing expectations of how long people will remain in work and in retirement.

The Treasury confirmed this intention in a consultation document, published in February, which set out proposals about who would be eligible for a protected pension age and the circumstances in which someone could lose this.

Pensions Expert reported in July on the Treasury’s decision to extend these protections, after parts of the pensions industry criticised the initial proposal that members should keep their protected pension age on a block transfer, but not in individual transfers.

In September, the Association of British Insurers called on the government to scrap its “complicated”, “arbitrary” and “confusing” plans to raise the NMPA, “until something fit for purpose” has been developed.

Industry reacts

Yvonne Braun, ABI’s director of long-term savings and protection, welcomed the latest government announcement. However, she argued it could make it harder to plan for retirement as people will have different ages to contend with.

Braun said: “The changes stop scammers from exploiting uncertainty, and also prevent market distortions as there are now no incentives to transfer purely to access a pension at age 55. 

“However, most savers have more than one pension pot and millions will now have a mix, with some pots they can access at age 55 and others where they need to wait to 57, making it harder to plan for retirement.”

Jon Greer, head of retirement policy at Quilter, also hoped the rules will not mean that schemes will have to ringfence certain rights.

He said: “This complexity is all for a two-year increase in the pension age, which for the overwhelming majority isn’t going to make a jot of difference. And it will still add complexity to the future pensions dashboards system and ‘simpler’ pension statements.

“The government should grasp this opportunity to simplify the pensions system, and a good place to start is on the rules around block transfers.”

Tom Selby, head of retirement policy at AJ Bell, also said complexities brought about by the age change will remain.

He said the industry is now in a “ludicrous situation” where people who are today in a scheme with a protected pension age and later transfer might end up in a scheme with two different NMPAs.

“As such, the complexity created by this change will remain,” he said.

This article originally appeared on FTAdviser.com