Minimum Retirement Age To Increase From 55 To 57 In 2028

6th September 2022

With people living longer and spending more of their life in retirement than before, it may not come as a surprise that there are planned increases to the age pension scheme members can first access their state and private pension. From 6 April 2028 the age most people can access their pensions without incurring tax penalties, (excluding ill-health retirement) will increase from 55 to 57. The age people can start to take their state pension will also increase to 67 on the same date.

Who is likely to be affected
Individual members of registered pension schemes who do not have a protected pension age but take scheme benefits before age 57 after 5 April 2028 or those who would like to have taken a benefit but will not be able to. However, members of the firefighters, police and armed forces public service schemes will not be affected by this increase.

Scheme administrators of registered pension schemes will need to modify their systems to accommodate for these changes.

General description of the measure
Following its announcement in 2014, this measure increases the normal minimum pension age (NMPA), which is the minimum age at which most pension savers can access their pensions without incurring an unauthorised payments tax charge unless they are retiring due to ill-health, from age 55 to 57 in April 2028.

The government consulted on the implementation of the increase and a proposed framework of protections for pension savers who already have a right to take their pension at a pre-existing pension age on 11 February 2021. The consultation closed on 22 April 2021 and received 142 responses.

Policy objective
This measure supports the government's fuller working lives agenda and has indirect benefits to the economy through increased labour market participation, while also helping to ensure pension savings provide for later life.

Background to the measure
The NMPA was introduced in 2006 and was increased from age 50 to age 55 in 2010. In 2014, following the consultation on ‘Freedom and Choice in Pensions’, the government announced it would increase the NMPA to age 57 in 2028 to coincide with the rise of state pension age to 67.

Following the consultation on a proposed framework of protections this measure will legislate for the increase in NMPA.

Detailed proposal
Operative date[b]
The increase in NMPA will have effect on and after 6 April 2028.

[b]Current law
Registered pension schemes must not normally pay any benefits to members until they reach NMPA. Sections 165(1) and 279(1) of the Finance Act 2004 provides that from 6 April 2010, the NMPA is age 55 (before 6 April 2010 it was age 50).

Registered pension schemes are also not permitted to have a normal pension age lower than age 55 and this applies equally to individuals in occupations that usually retire before 55 (for example, professional sports people). Although the legislation provides the minimum age at which benefits can be taken, the rules of a scheme will state what benefits can be taken and the age at which they can be taken from. The age at which they can be taken from can be higher than NMPA.

If a registered pension scheme does pay benefits to a member before the NMPA unauthorised payment charge liabilities may arise unless the benefits are paid on ill-health grounds, or the member had a right on 5 April 2006 to take benefits before the NMPA. An individual may have a right to take benefits before the NMPA where this is not dependent on anything else or somehow qualified - for example requiring employer or trustee consent. Where certain conditions are met these individuals may take their benefits earlier than age 55 without a tax charge. This is known as the individual’s protected pension age.

If an individual has a protected pension age, the tax rules provide that it replaces the prevailing NMPA for all purposes of the pensions tax legislation except for the lifetime allowance reduction that may apply where the protected pension age is less than 50 and benefits are taken before NMPA. This means, subject to that exception that when taking benefits from the relevant registered pension scheme, the tax rules apply to the member based on their protected pension age rather than the prevailing NMPA.

Proposed revisions
Legislation will be introduced in Finance Bill 2021-22 to provide a framework of protections and increase the NMPA from age 55 to 57.

The legislation introduces an increase in the NMPA to 57 from 6 April 2028. Following publication of the draft legislation, the government carefully considered further representations and concerns it received from industry regarding the length of the window for individuals to join a protected scheme. The legislation will now protect members of registered pension schemes who before 4 November 2021 have a right to take their entitlement to benefit under those schemes at or before the existing NMPA. The legislation exempts members of the firefighters, police and armed forces public service schemes and for protected members it reduces the restrictions on retaining a protected pension age following a block or individual transfer.