Pension minimum age update – Who is affected and how much it could cost you

Pension: Expert advises people to 'start sooner'

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Pension minimum age is the youngest age at which someone can start collecting their retirement funds. To collect the money, they must have registered to a pension scheme and have paid in for some time. The UK’s minimum changes every few years and leaves people waiting longer for their early retirement.

When is the next minimum age update?

Minimum pension age allows people on defined contribution schemes to access their savings without incurring an additional “unauthorised payments tax charge”.

The present minimum pension age of 55 came into play in 2010.

Before then, people could start claiming their pension at age 50.

The next update is due in 2028, and those who don’t ‘lock-in’ their pension will have to wait until they turn 57 to claim it.

Ministers want to make the change as people, on average, are living and working longer.

They haven’t yet enshrined this in legislation, but consultations launched in February have now closed.

The Government has since published a policy paper, on July 20, discussing who the measure would affect and how.

The paper states it would impact any individual members of pension schemes without a protected age.

While many won’t welcome the age adjustment, the Government has provided a way out.

People can lock-in the protected age of 55 if they want to keep it.

But they will need to join a pension scheme that allows them access before April 5, 2023.

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Members of a pension scheme that enables them to take their pension from age 55 will have that enshrine after 2028.

The rules will apply to them regardless of whether they reach the age before or after that date.

Those in some public service jobs won’t have to jump between schemes, however.

Firefighters, police and armed forces schemes will continue to enjoy a minimum age of 55 regardless of whether the rules have stated so or not.

Although the Government has provided a reasonable means to sidestep the change, some in the pension world aren’t too happy.

But Jon Greer, head of retirement policy at Quilter, told the Financial Times Adviser it would complicate pension schemes.

He said the new regime would have a “material impact” on people’s decisions to transfer their pensions.

Pension administrators may also have trouble communicating to members, he added, leaving him to question “whether the increase in the NMPA is really worth it”.

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