On 6 April 2028, the normal minimum pension age (NMPA) will rise from 55 to 57. With so many things on the to do list, 2028 might seem a long way away, but there are actions that trustees need to think about taking now.
Understand the impact
Broadly, the new NMPA of 57 will apply to all registered pension scheme members except members of the armed forces, police or firefighters' pension schemes, or people who retire early due to ill health or have a protected pension age.
When the NMPA rose from 50 to 55 in April 2010, special rules allowed some members to keep a protected pension age - and so NMPA - of between 50 and 55. New rules will allow some members to keep a protected pension age - and so an NMPA - of 55 or 56 when the NMPA rises to 57 in 2028. In practice, the protected pension ages are usually 50 or 55.
Your legal advisers will be able to confirm whether any of your scheme members have a protected pension age, and how the protections work.
One big difference between the protected pension ages of 50 and 55 is that a protected pension age of 55 will survive any type of transfer. There are points to think about if your scheme still accepts individual transfers-in.
Your scheme administrators need to check whether benefits being transferred-in carry a protected pension age of 55. If you accept the transfer, the protection will only apply to the transferred-in benefits. Your administrators will need to be ready to ring fence those benefits while they are in your scheme and to flag the protection to another scheme if the member transfers on in the future.
There is the question of whether the scheme rules - especially the early retirement rules - are written in a way that will allow the member to take any transferred-in benefits with a protected pension age of 55 from age 55. The protection reduces the earliest age at which benefits can be paid, but does not require you to pay at that age.
There are options here and it is possible that a member will not be able to afford to retire before age 57. However, if there are going to be any limits, the trustees need to make these clear to members before they take a transfer decision.
The fact that a protected pension age of 55 will survive an individual transfer also means that, if any members of your scheme have one, your scheme administrators will need to flag it to any scheme the member asks to transfer to.
Trustees need to give special thought to protected pension ages in their scheme if they are considering a bulk (more than one member) transfer to another scheme or other major project - for example, a closure to future accrual.
Trustees need to think about what and when they tell members about the 2028 change and follow up with more detail at a later date.
Members who reach age 55 around 6 April 2028 could have concerns. It might also be helpful to explain that the entitlements to protected pension ages have been set. Members cannot get hold of one by transferring to another scheme.
The 2028 change coincides with the state pension age increasing to 67. The policy seems to be that the NMPA will continue to track changes in the state pension age. If trustees and employers are concerned about this, they might like to consider (with advice) trying to future-proof their scheme rules.
Look out for guidance
Changes have been made to the Finance Act 2004, and HMRC has published initial guidance and started to update the pensions tax manual. However, the pensions industry is expecting more guidance and transitional provisions for members who will reach age 55 around 6 April 2028.
Advisers and administrators are waiting for a complete picture of how the new protected pension age of 55 will work. There is enough to make a start though, and this is what we suggest trustees do.
Claire Rankin is a partner at Osborne Clarke
The normal minimum pension age (NMPA)
The NMPA is the youngest age at which benefits can be paid to a member of a registered pension scheme. Payments made before NMPA will usually be unauthorised and attract heavy tax charges.
With the NMPA set to rise from 55 to 57 on 6 April 2028 and track future increases in the state pension age, this is a significant change.
Although some of the pieces of the jigsaw are still missing, there are actions for trustees to take now.