The government has 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.

In a parliamentary statement, Economic Secretary to the Treasury, John Glen, confirmed that the government is pushing ahead with a clause to increase the normal minimum pension age (NMPA) from 55 to 57 from 6 April 2028 in the Finance Bill 2021/22.

However, he announced that the window of time during which people could either join or transfer into a scheme that can offer a protected pension age has been shortened in light of industry feedback, and was closed at 23:59 on 3 November 2021.

He stated: “Stakeholders have subsequently expressed their concerns about this window running until 5 April 2023 as originally proposed, including possible adverse impacts on the pensions market and on pension savers.

“The government believes it is right to offer a protected pension age to those whose scheme rules give them an unqualified right to take their pension before age 57.

“The government also believes it is right that those in the process of transferring their pension do not unexpectedly lose the right to a protected pension age.

“However, after listening to stakeholder views on the draft clause, the government has decided to shorten the window. The window closed at 23:59 on 3 November 2021.

“Those who have already made a substantive request to transfer their pension to a pension scheme with a protected pension age of 55 or 56 will still be able to keep or gain a protected pension age assuming the transfer is completed in accordance with the current regulations.

“This shorter window will help address the issues raised by stakeholders whilst also being fair for pension savers.”

Concerns over the proposed NMPA were previously raised by industry experts, with industry organisations highlighting the Budget as a 'missed opportunity' to address these concerns.

However, whilst Glen acknowledged that the change to a Finance Bill clause would have ordinarily been announced at the Autumn Budget 2021, he clarified that prior notice was not given in an effort to reduce the risk of pension scams.

“On this occasion, giving prior notice of the shorter window ahead of its closure on 3 November 2021 could have led to unnecessary turbulence in the pensions market and led to some consumer detriment,” he explained.

“Some pension savers could find themselves with poorer outcomes (or even be the victim of a pension scam) if they were rushed by rogue advisors to make a quick transfer in the short time period before the window closed.”

Industry experts have since broadly welcomed the changes made by the Treasury, with Association of British Insurers director of long-term savings and protection, Yvonne Braun, suggesting that this will help tackle some of the industry’s principal concerns about an orderly implementation and help reduce the risks to savers.

"The changes stop scammers from exploiting uncertainty, and also prevent market distortions as there are now no incentives to transfer purely to access a pension at age 55," she continued.

“However, most savers have more than one pension pot and millions will now have a mix, with some pots they can access at age 55, and others where they need to wait to 57 making it harder to plan for retirement.

"It is vital that government and the pension sector work together closely to ensure that customers are clear about their private pension position and when they can access their money.”

This was echoed by Quilter head of retirement policy, Jon Greer, who emphasised that whilst this is "certainly a much better position than what was previously proposed", concerns over the broader complexity of the NMPA changes remains.

He said: "We hope that the rules on transfers do not bake in additional complexity into the pension system where pension schemes will have to create a ring-fencing system to certain rights, albeit for a much smaller cohort.

"This complexity is all for a two-year increase in the pension age, which for the overwhelming majority isn’t going to make a jot of difference. And it will still add complexity to the future pension dashboard system, and ‘simpler’ pension statements.

“The government should grasp this opportunity to simplify the pension system, and a good place to start is on the rules around block transfers.”

Share Story: