The minimum age from which a member can access their pension is increasing from 55 to 57 from 6 April 2028.
NMPA is the minimum age from which a registered pension scheme can pay pension benefits without making an unauthorised payment. There are two exceptions: benefits may be paid before NMPA in circumstances where the member is suffering from ill health or has a protected pension age.
The government has confirmed that NMPA will increase from 55 to 57 with effect from 6 April 2028 and it has legislated for this change in the Finance Bill 2021-2022.
Where the rules of a pension scheme provide members with an unqualified right to draw their pension from age 55, those members will be treated as having a protected pension age of 55. This means they will continue to be able to draw their benefits from age 55 after 6 April 2028.
In order to benefit from a protected pension age, the scheme rules in force on 11 February 2021 must contain an unqualified right to draw pension from age 55, and a person must have been a member of that scheme immediately before 4 November 2021. "Unqualified" in this context means that the payment of benefits is not subject to consent, i.e. the member can request the payment of his benefits as of right.
At this stage, trustees should consider the impact of the increase to the NMPA on their own scheme. For example, will members have a protected pension age of 55 under the rules of the scheme? If they will not, trustees may wish to communicate this change to members so they can discuss the impact on their retirement planning with an independent financial adviser. The increase in NMPA could have a material impact for those members intending to access benefits before age 57, particularly those who will be aged over 55 and under 57 on 6 April 2028.
The draft legislation included a transfer window (open to 6 April 2023) which would have allowed members to transfer their pension benefits to another scheme in order to gain a protected pension age of 55. However, the recently published Finance Bill 2021-2022 reveals that the window was closed at the end of 3 November 2021. Members who have made a substantive request to transfer their pension prior to the 3 November deadline will still be able to keep or gain a protected pension age of 55 or 56 assuming the transfer is completed in accordance with current statutory requirements.
Special considerations and further complexities apply in relation to bulk transfers; trustees looking at merging or consolidating their scheme with another should seek legal advice to understand how any protected pension age may be impacted.
For the avoidance of doubt, those members with a protected pension age of less than 55 (acquired following the last increase to NMPA in 2010) will be unaffected by the change.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.