By Mark Ormston
Many people may still be unaware that the normal minimum pension age (NMPA) is increasing by two years, affecting thousands of savers across the UK.
The NMPA is the age at which most people are able to access their pension scheme savings without incurring a penalty. The NMPA is currently 55, but from 6 April 2028 it will increase to 57.
Withdrawals from your pension fund before reaching your NMPA will normally be unauthorised and could incur heavy tax charges. However, there are some savers who will still be able to withdraw their money earlier than 57. This includes those living with ill health or those with a protected pension age built into their schemes.
Of course, you don’t have to access your pension savings when you reach the NMPA; it is merely the earliest age that you can do so.
Some people choose to withdraw some of their money from the earliest possible age - perhaps to top up their income until they reach State Pension age. Others choose to wait a few years until they arrange an annuity or other pension income solution, leaving their money untouched to continue growing until it is needed.
First introduced in 2006, the NMPA was increased to age 55 (from 50) in 2010. The next planned change is the increase to age 57 in 2028.
According to the government’s website, the increase coincides with the phased rise of the state pension age to 67. The change will ensure the NMPA remains at around ten years before the State Pension age.
If you do intend to access your money as soon as possible, how the change will impact you will typically depend on when you were born. However, some people will not be affected by the NMPA, including:
Firefighters, the police and armed forces public service schemes.
Pension savers living with poor health, who can retire early and access their pension savings on grounds of ill-health.
Those with a protected pension age (more on this further on).
Here’s how your age group will be affected by the pension age increase:
You will be able to access your pension savings from the age of 57 instead of age 55.
This may mean that you won’t be able to retire as early as planned. However, the alternative view is that working and paying into your pension scheme for an additional two years will at least bolster your pension savings.
Of course, you might not intend to access your pension savings before you reach 57 anyway. In this case, the change won’t affect your future plans.
If you choose to, you can access your pension savings between your 55th birthday and 5 April 2028, which is the last day before the NMPA increases to 57.
If you decide against accessing your pension savings during this timeframe then you will need to wait until your 57th birthday. From this date you can access your pension savings in the normal way.
The change to the normal minimum pension age won’t affect you, so you can still access your pension savings from your 55th birthday if you wish.
When the NMPA previously rose from 50 to 55 in 2010, some pension schemes allowed their members to protect their pension age of between 50 and 55. In light of this new increase to 57, some scheme members will be able to benefit from a protected pension age of 55 or 56.
How you can access your money depends on the protected pension age that you are offered by your scheme provider:
A protected pension age of 55 or 56. This means you can still take some, or all, of your pension at your protected age, despite the NMPA increase to 57.
A protected pension age of less than 55. This means you can still access your pension savings when you reach the specified age, despite the NMPA increase to 57. However, you should consider that you will have to withdraw all of your pension savings from the relevant pension scheme.
If you are 55 or over and want to talk to someone about your options for securing a guaranteed income with an annuity, call our friendly team today.
You can speak to our Annuity Specialists by calling 0800 652 1316 or request a free call back.