Industry experts have welcomed recent changes to the government's implementation of an increased normal minimum pension age (NMPA), although concerns around the complexity involved for pension schemes remain.

The government yesterday announced that it had shortened and closed the window of time during which people can either join or transfer into a scheme that can offer a protected pension age of 55 or 56 in light of stakeholder concerns.

Hargreaves Lansdown senior pensions and retirement analyst, Helen Morrissey, explained that the change has “blocked off one avenue for scammers who would have used the initial April 2023 deadline to exploit savers”.

“There were also concerns people might be induced to transfer purely to keep a protected age of 55 rather than it being in their overall best interests, so the move is good news,” she added.

This was echoed by Canada Life technical director, Andrew Tully, who highlighted the announcement as a “sensible move by government which will help reduce the risks for clients”.

“There was a real concern people would look to transfer between now and 2023 based on access at 55 rather than wider aspects such as charges, flexibility or service,” he explained. “It should also reduce the ability for scammers to prey on client uncertainty.”

However, Tully warned that the overall move to age 57 is “still more complex than it needs to be”, suggesting that the NMPA should either be moved to 57 for all, with very limited exceptions, or the government should retain age 55 and "re-think its entire policy".

“We still have time to pause at this point rather than rushing forward with legislation,” he emphasised.

Aegon pensions director, Steven Cameron, agreed, explaining that 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," he said.

“This will complicate communications to members as well as record keeping within schemes.”

Adding to this, AJ Bell head of retirement policy, Tom Selby, argued that the government has made a "colossal meal out of increasing the minimum pension access age”, stating that whilst the change is “good news and should reduce the risk of scammers taking advantage of this government-induced confusion”, other concerns persist.

“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,” he warned. “As such, the complexity created by this change will remain.”

Despite the mixed reaction to the announcement, The Investing and Saving Alliance (Tisa) head of retirement, Renny Biggins, suggested that it is worth considering the main drivers behind it and whether there is more the industry should be doing.

He explained: “Rising life expectancy is the main factor combined with the government’s agenda around fuller working lives.

"There can no doubting the statistics – people are living longer than ever before and the number of over 70 year olds still in work has more than doubled in a decade. Like life expectancy, this is a trend which is continuing to rise.

“So on one hand, it might make sense to move the NMPA back to 57 but what about at the other end? Currently, the tax relief on pension contributions stops at age 75, it has been this age for as long as I can recall.

"But as people are now working for longer and government is encouraging us to do so, the acknowledgement of this should also reflect on this pivotal age by moving the upper age back to 77."

Biggins suggested that this would both align with government initiatives and also provide those who are having to work for longer due to the pandemic with a greater opportunity to boost or replenish their pension pots.

"Many of these groups will also be impacted by the money purchase annual allowance (MPAA) so are already facing contribution restrictions," he continued.

“The relevance of age 75 also remains in several other guises, linked to mandatory crystallisation events and death benefit taxation. These should also be moved back to age 77.

“This is a proposal I raised several years ago, however in light of recent change, it has now never been more relevant or appropriate to implement.”

Share Story: