The government has reversed its proposal to allow savers to avoid a planned increase in the minimum pension access age.
Government plans to lower the minimum pension access age for savers from 55 to 57 by 2028 have changed. Previously, anyone who transferred to a scheme that provided an ‘unqualified right’ to a minimum pension access age of less than 57 by April 5 2023, would have been able to keep the lower age. Only transfers made before November 4, 2021, will be eligible for a lower minimum pension access age.
Aegon welcomes the Treasury’s decision to change its approach to implementing the higher minimum pension access age but says that the changes continue to complicate matters for members and schemes.
Aegon pensions director Steven Cameron says: “We’re pleased that the Treasury has listened to widespread concerns over aspects of its controversial proposals around how to implement an increase in the Normal Minimum Pension Age. This is the earliest age when people can typically access their pension and, with a few exceptions, will increase from 55 to 57 from April 2028.
“The Treasury had proposed transitional arrangements seeking to ‘protect’ a small minority of individuals who are in schemes whose rules by sheer accident of history give an ‘unqualified right’ to take benefits at age 55. The way the protections were previously drafted, someone joining a scheme with such protections before April 6 2023, would have retained the right to the earlier access age. This could have distorted the market, encouraging individuals to seek out such schemes before the cut-off date even if better value alternatives were available.
“We support the Treasury removing this ‘window’ by bringing forward the cut-off date to today, November 4. This means only those already in schemes offering an unqualified right will retain the right to access that pension before age 57.
“However, changing to a new normal minimum pension age will still create complexity for members and schemes. If a member in future transfers between schemes, they may find part of their benefits can be taken from, say age 55, while other parts won’t be accessible until age 57. This will complicate communications to members as well as record keeping within schemes.”
AJ Bell head of retirement policy Tom Selby says: “The Government has made a colossal meal out of increasing the minimum pension access age, culminating in today’s last-minute change to the rules.
“Whereas under proposals published a few months ago, anyone who transferred to a scheme with a ‘protected pension age’ by April 5 2023, would have been able to retain a lower normal minimum pension age, this will now only apply to transfers initiated before November 4 2021 (today).
“This is good news and should reduce the risk of scammers taking advantage of this Government-induced confusion to defraud savers. It will also mean fewer people make decisions about their retirement pot based purely on the minimum access age when in reality, other factors such as costs and charges are usually far more important in delivering long-term value.
“However, we are left with the ludicrous situation that those people who are today in a scheme with a protected pension age and later transfer might end up in a scheme with two different minimum pension access ages. As such, the complexity created by this change will remain.”