Pensions - Articles - Increasing the Normal Minimum Pension Age Consultation


Dalriada, Hymans Robertson and Canada Life comment on the government consultation on Normal Minimum Pension Age

 Sarah Brough, a professional trustee at Dalriada Trustees, said: “There is a possibility that some employees will rush to retire before the step up kicks in. So communication with members will be important, ensuring they make informed decisions on taking benefits rather than just a knee-jerk reaction to the change in the law. As with the 2010 change, increasing normal minimum pension age (NMPA) from 50 to 55, trustees and members will need to pay close attention to the requirements for protected pension ages (PPAs). For those affected, failure to adhere to the PPA conditions can be costly. Employers and trustees will need to give thought to implementation of the change at a scheme level, subject to the overriding requirement that NMPA is 57 by 2028. A phased introduction may be influenced by an employer’s own philosophy on working longer and flexibly.”

  

 Michael Ambery, Partner, Hymans Robertson says: “Many individuals and corporate sponsors will need to carefully consider the implications of proposed increase in age at which pensions savers can access their pensions without penalty to 57. In particular it will have an impact to the decisions on the timing of when they take their pension benefits. Individual pension savers could be put off by changes that on the face of things may just sound like you need to work for longer and money is locked away. In the current environment saving for retirement and what that looks like may mean this may feel unpopular. A change to the earliest point at which an individual can claim pension benefits and the payment of benefits such as State pension and other pensions becomes a juggling act where an individual will need help and support in order to determine best approach and timing of taking benefits.

 “Most pension arrangements are still based on anticipated retirement at age 65. Recent experience shows less than half of individuals actually retire at the age they have targeted. This means that individuals could be invested incorrectly.

 “If there are changes, as proposed in this consultation integrating retirement age and adequacy, and communicating this clearly to members, will be key to ensure that any change legislation is understood and made appropriate for the individual investor. Focus should be on how providers of pensions and corporates deliver the changes through pension scheme design and via member engagement/ wellbeing.

 “In effect individuals with protected pension age, within pension plans which give them a right to take benefits at age 55 (or transferred with this right retained) or specific professions such as Police and Firefighters. The right to keep that earlier retirement age is scheme specific which could lead to confusion for individuals with many different pension pots. The confusion will be when can an individual retire from which scheme, how do they take the benefits from the scheme and what are the implications for lifestyle, outcome and tax.”

  

 Andrew Tully, Technical Director at Canada Life commented: “This confirmation of the timing of the increase in the normal minimum pension age will be welcome to individuals and advisers and give time for appropriate planning over the next seven years. A protection regime will benefit those who currently have a right to take benefits before age 57, but it is disappointing to see the Government propose a continuation of the existing ‘block transfer’ rules. These rules are complex and can prevent individuals benefitting from the pension freedoms, by taking the most suitable option for their circumstances. Removing the block transfer rules and allowing those affected to keep their entitlement to a lower pension age on transfer would be a positive move.”

  

 https://www.gov.uk/government/consultations/increasing-the-normal-minimum-pension-age-consultation-on-implementation

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