ABI outlines 'grave concerns' about NMPA increase in letter to WPC

The Association of British Insurers (ABI) has written a letter to the Work and Pensions Committee (WPC) outlining its “grave concerns” about the government's current proposals to raise the normal minimum pensions age (NMPA).

It called for the current plan, which was consulted on and confirmed earlier this year, to be paused “as a matter of urgency” until a simpler solution could be found, and asked for the WPC to support raising the matter with the government.

The organisation, which had previously raised concerns during the WPC’s inquiry on accessing pension savings, said an alternative proposal was needed to both meet the policy intent, and cause less risk to and disruption for savers.

Although the ABI said it remained supportive of increasing the NMPA from 55 to 57, it was “seriously concerned” that the current proposals would create a protected pension age of 55 for millions of savers.

It also warned that the changes would create complexity for “years to come”, making communications on accessing more difficult and undermining efforts to simplify the pensions experience.

Furthermore, the ABI raised concerns that it would risk poor outcomes for savers, primarily due to scammers exploiting the situation, and create market distortions and further risks to consumers by creating “perverse” incentives for customers to seek out a pension age of 55 elsewhere, for advisers to recommend products with an age of 55, and for pension providers to repurpose and market those products.

The proposals could also conflict with other policy areas, especially defined contribution consolidation and small pots, the letter warned, while it said could also pose technical and legal uncertainty that “could last for decades and create significant unnecessary costs”.

As an alternative way of introducing the increase, the ABI proposed closely following the precedent of the 2010 pensions age increase from 50 to 55, whereby only those with pensions with a specific link to employment requiring an earlier retirement age would retain the right to access their pension at 55.

Therefore, under the ABI’s alternative solution, the NMPA would be 57 for all, except limited protected pension ages for those who already have them, particularly some public service workers such as uniformed services and those who already had a protected pension age from 2010.

In response, an HM Treasury spokesperson said: “We believe it’s right to protect pension savers whose scheme rules provide them with an unqualified legal right to take pension benefits before age 57.

“That is why earlier in the year we set out the details of the framework and have been consulting on the technicalities to ensure it is as simple and fair as possible.”

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