Increasing the Normal Minimum Pension Age – downloadable summary of responses to the consultation and draft legislation.
In this short report, Paul Squirrell, pension expert at Fidelity FundsNetwork, provides a summary of the responses and how the draft legislation might affect those of pensionable age or planning their retirement.
Introduction to the consultation and draft legislation
On 20 July 2021 HM Treasury published their response to the consultation on the implementation of the increase to the Normal Minimum Pension Age (NMPA) from 55 to 57 which is proposed to take effect from 6 April 2028. Alongside their response, HM Treasury also issued draft legislation and explanatory notes for the proposed legislative changes which are to be laid before parliament in the forthcoming 2021-22 Finance Bill.
NMPA is the earliest age that a pension saver can access their pension benefits (without incurring an unauthorised payments tax charge) unless the individual satisfies certain ill health conditions, or they have a protected retirement age. Therefore, the increase in the NMPA could adversely impact clients that are intending to access their pension benefits before age 57, if they are born after certain dates (more later).
As part of the implementation, the Government has issued draft legislation for a new Protected Pension Age (PPA) rules that will allow members of schemes that have an unqualified right to access earlier than 57 to retain their PPA. Under the draft legislation, this protection will apply to members of schemes who, as at 5 April 2023, had an unqualified right to access benefits at an age less than 57 (as per scheme rules on 11 February 2021). This would create a window for individuals to join a scheme that offers a protected retirement age should they wish to do so before 5 April 2023.
The Government have also proposed changes to the transfer rules for members to retain their PPA following block or individual transfers to another provider. However, until full legislation and guidance is received, it is unclear what potential impact this could have on any clients that transfer from a scheme that would offer a PPA to a scheme that does not offer the same protection before 5 April 2023.
Paul Squirrell provides more details on these points and others in the report.
