The Government has published a consultation with the aim of increasing the earliest age from which pension benefits can usually be paid as authorised benefits – normal minimum pension age (NMPA) – to 57 on 6 April 2028.
NMPA is currently defined as 55, having been 50 until 6 April 2010.
In 2014 the Government stated a policy intention that NMPA would increase from 55 to 57 in 2028 and would thereafter rise in line with State Pension Age (SPA), so that it remains 10 years before SPA. Last year it confirmed that the timetable for change still stood, stating that it would be “legislated for in due course”.
The Government still intends that the NMPA will rise to 57 in April 2028. However, in contrast to its original proposition, there will be no ongoing automatic tracking to SPA “at this time”. The consultation also outlines a protection regime for rights subject to a NMPA below 57. The deadline for responses is 22 April 2021, with an intention to publish draft legislation in summer 2021 and to implement the changes through Finance Bill 2022.
The consultation proposes a protection regime that is more generous than that already in place for NMPAs younger than 55. Significantly, the new protection will apply to personal as well as occupational pensions – the protections for NMPAs below 55 were restricted to the latter.
Under the existing NMPA protection (below age 55), a member must cease work and become entitled to all benefits under the scheme on the same date. The Government proposes that these will not be conditions of the new NMPA protection for ages below 57 ie a member will be able to phase-in drawing their benefits and continue to work, without losing protection.
Under the proposed protection regime, the scheme rules must, as at 11 February 2021 (the date of this consultation) confer a right to draw benefits before age 57 and that right must be unconditional ie not dependent on the consent of anybody, such as the trustees.
Where these conditions are met within a scheme, a member’s right to draw benefits before 57 will be maintained, applying both to existing rights and future rights that accrue under the scheme.
Where a member is entitled to the existing NMPA protection (ie younger than 55), this will continue provided that the conditions explained in HMRC guidance are met.
The consultation proposes that a protected NMPA will be retained following a block transfer (but will otherwise be lost on transfer). It does not offer further details, but such a condition exists within the existing NMPA protection rules.
A block transfer is a defined term, which includes the condition that before the transfer the member had not been a member of the receiving scheme for more than 12 months. This condition has become problematic over recent years, which has seen many schemes block transfer their liabilities to a master trust (MT).
It is increasingly likely that an individual block transferred into a MT might already have been a member of it for more than a year as a result of a prior transfer and/or membership from a completely unconnected employment. If this condition is not amended, many individuals are at risk of losing their NMPA protection.
