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How will the new normal minimum pension age affect me?

Following an announcement in 2014 and a consultation in 2021, the government is drafting legislation that will increase the normal minimum pension age (NMPA). This means that the minimum age that most savers can access their pensions will rise from 55 to 57 in April 2028.

The government is changing the NMPA to align with the increase in the State Pension (SP) age, which will be rising to 67 in 2028. These changes are meant to encourage people to keep working and saving for longer before retirement – but what if you want to take your private pension earlier?

What is the normal minimum pension age (NMPA)?

While the State Pension is a type of tax-funded social benefit, many people also pay into private schemes throughout their working life to increase their pension pot on top of the State Pension.

Most private or personal pension schemes are registered with HMRC, with regular contributions collected through PAYE along with the employee’s National Insurance and Income Tax. There are many types of private pensions, but the most common are occupation-based or contract-based.

The normal minimum pension age (NMPA) is the minimum age that a person can access their pension without having to pay a tax charge of up to 55%, unless their early retirement is due to poor health. Claiming your personal pension early is considered an ‘unauthorised payment’ otherwise.

The NMPA was first introduced in 2006 and set at 50 years old. This rose to 55 in 2010, then in 2014 the government announced plans to increase the NMPA to 57 in 2028. When the State Pension age
increases from 67 to 68 years old, it’s likely that the UK government will also raise the NMPA to 58.

Will the new NMPA apply to everyone?

When the NMPA rose to 55 in 2010, the government introduced a protected pension age (PPA) for registered pension schemes – meaning eligible members could keep the existing NMPA and retire between 50 and 55 years old as they pleased. There is also an updated PPA
for the new NMPA.

This means that members of eligible pension schemes could keep a PPA of 55 rather than 57. To qualify for the new PPA, you must have become a member of the registered scheme before 4th November 2021, and the scheme’s rules must have permitted early retirement on or before 11th February 2021. The new PPA will not affect members who already have the previous PPA of 50.

Otherwise, the new NMPA will affect all registered pension schemes in the UK, including the Railways Pension Scheme. Aside from those with a PPA, the only exemptions are public service pension schemes (e.g. police, fire fighters, armed forces), and early retirement from ill health.

What if I don’t have a protected pension age (PPA)?

If you won’t be eligible for the new PPA, and you won’t be retiring until after 5th April 2028, then the new NMPA will prevent you from claiming your personal pension until you’re 57 years old. This will only be an issue if you intended to retire before then, or if you’re retiring earlier but you’ll have remaining benefits to claim after that date. Here’s a quick guide according to when you were born:

  • Before 7th April 1971 – no impact, as you’ll be 57 on or before 6th April 2028
  • Between 7th April 1971 and 5th April 1973
    – no effect if you take your full pension by 5th April 2028 at 55/if pension benefits remain after this date, you’ll have to wait until you’re 57
  • After 6th April 1973 – your NMPA
    will now be 57, as you won’t turn 55 by 5th April 2028

Of course, pension scheme administrators will also need to update their systems and records in line with these changes. If you do have a PPA, you should bear in mind that changing jobs, switching pension schemes, or transferring contributions could mean losing it in favour of the new NMPA.

Contact GBAC for business or personal financial advice

The new pension age regime provides opportunities for some and risks for others, so it’s crucial to get professional advice if you’re uncertain about your financial future. You can view HMRC’s paper on their new NMPA
online; HMRC does not allow or require individual applications for PPA.

If you believe you should have a protected pension age, or you aren’t sure how the new NMPA will affect your pension and retirement plans, it’s best to seek advice from a qualified financial expert.

Here at GBAC, accountants in Barnsley, our knowledgeable accountants can provide a range of payroll, bookkeeping, tax consultancy, and estate planning services to help you get your retirement savings in order. To discuss your accounting concerns with our team, please call us on 01226 298 298 or email us at info@gbac.co.uk. The experts at GBAC, as well as our accountants in Leeds and Sheffield, are here to help from 9am to 5.30pm, Monday to Friday.