The Government has made a last-minute U-turn on proposals to allow savers to dodge a planned increase in the normal minimum pension age (NMPA) from 55 to 57, which is the earliest age at which people can access their private pensions. The changes are set to come into effect in 2028.
Under the previous plans, anyone who transferred to a scheme which offered an “unqualified right” to a minimum pension access age of 55 by April 5, 2023 would have been able to retain the lower age when the changes kicked in five years later.
This had provoked industry concern about the potential for increased complexity in retirement planning, as well as leaving people vulnerable to scammers.
However, the Government has today closed the window – meaning only transfers initiated before November 4, 2021 can potentially qualify for a lower minimum pension access age.
The policy shift may reduce the risk of scammers taking advantage of the confusion, although there may still be some extra complexity added to the pension system.
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“It will also mean fewer people make decisions about their retirement pot based purely on the minimum access age when in reality other factors such as costs and charges are usually far more important in delivering long-term value.
“However, we are left with the ludicrous situation that those people who are today in a scheme with a protected pension age and later transfer might end up in a scheme with two different minimum pension access ages. As such, the complexity created by this change will remain.”
As Mr Selby referred to, people who were already on a pension scheme which gave them an unqualified right to a normal minimum pension age of 55 will still retain these rights. So, although many people will now be prevented from doing this, the problem may not be totally solved.
Andrew Tully, technical director at Canada Life offered his thoughts on the Treasury’s decision to stop savers switching to a scheme with a protected pension age of 55.
He said: “This is a sensible move by Government which will help reduce the risks for clients. There was a real concern people would look to transfer between now and 2023 based on access at 55 rather than wider aspects such as charges, flexibility or service.
“It should also reduce the ability for scammers to prey on client uncertainty.
“Despite this the overall move to age 57 is still more complex than it needs to be. The NMPA should either be moved to 57 for all, with very limited exceptions, or the Government should retain age 55 and re-think its entire policy around minimum pension ages.
“We still have time to pause at this point rather than rushing forward with legislation.”
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown was pleased to see the change announced, but warned scammers could still attempt to take advantage of the NMPA increase.
She said: “The announcement that the transfer window for people to keep a NMPA of 55 has effectively closed means the government has listened to industry concerns and blocked off one avenue for scammers who would have used the initial April 2023 deadline to exploit savers.
“However, we must still be aware that scammers are still likely to try and use the situation to their advantage.
“There were also concerns people might be induced to transfer purely to keep a protected age of 55 rather than it being in their overall best interests, so the move is good news.”
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