The normal minimum pension age (NMPA), which is currently 55[1], is the earliest age at which a member of a registered pension scheme can take their benefits without incurring an unauthorised payments tax charge. On 4 November 2021, as part of the Finance Bill 2022, draft provisions to increase the NMPA to 57 with effect from 6 April 2028 were published. The increase comes after the government set out its intention in 2014 to coincide the NMPA with the increase in State Pension Age to 67, which is due to take place between 2026 and 2028.
There are some exceptions to the increase in NMPA, namely:
- members of a uniformed services pension scheme (such as the armed forces, firefighters and police schemes);
- those who qualify for a new form of protected pension age (PPA) to be introduced by the Finance Bill (see further below); or
- those who have one of the two pre-existing forms of PPA.[2]
Members who had an unqualified right to take their benefits at an age below 57 immediately before 4 November 2021 will benefit from the new protection regime. A member will qualify for the new form of PPA if, immediately before 4 November 2021:
- they are a member of a scheme whose rules as at 11 February 2021 gave them an unqualified right to take their benefits between the age of 55 and 57; or
- they are in the process of becoming a member of such a scheme, so that they would have had such a right had they been a member on that date.
Under the Finance Bill, an individual who made a request to transfer prior to 4 November 2021 will still benefit from the new PPA in the receiving scheme.
Commentators have welcomed the changes, whilst raising concerns over the complexity that will be involved for pension schemes. There has been some further provisional information issued by HMRC on the rise in the NMPA and further guidance is expected. The Finance Bill is progressing through parliament and, whilst there is still time before this change is due, in order to prepare, steps can be taken now – for example, considering member communications to explain that the change is coming (although appreciating that further communications will be needed in the run-up to the change). Similarly, trust deeds and rules may need to be amended in light of the change and should therefore be reviewed. Trustees may also wish to consider putting in place procedures to identify cases where members will qualify for protection.
[1] It was previously increased from 50 to 55 on 6 April 2010.
[2] There are currently two forms of PPA: one form which relates to when the NMPA of age 50 was introduced on 6 April 2006, and another form which relates to when the NMPA was raised to age 55 on 6 April 2010.
