Pension age changes set to go ahead as Rishi Sunak misses ‘last opportunity’ for a U-turn
Coffey says state pension age 'will not be reviewed' in September
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The Chancellor of the Exchequer, Rishi Sunak announced his Autumn Budget today, with no alteration made to the current plans for the normal minimum pension age.
Proposed changes to the normal minimum pension (NMPA) age were unveiled earlier this year, which would lift the NMPA from age 55 up to 57.
The NMPA is the earliest point Britons are allowed to access their private pension pots and draw money from them without tax penalties. This is different to the state pension age, which is 66 for both men and women. It is not currently possible to receive any state pension before age 66.
However, there is concern among many observers that changes to the NMPA could cause confusion for savers, who could wind up with two different minimum pension ages.
This is because along with the changes will come a protection scheme which will allow some people to keep a NMPA of 55, while others make the jump up to 57.
Anyone who wants to stay at 55 can simply transfer their private pension to a scheme which allows them to keep a lower minimum pension age, providing they do so before April 5, 2023.
Many people have voiced the opinion that to avoid all the potential issues the protection scheme could bring, everyone should be treated equally, with either everyone’s NMPA becoming 57 or staying at 55.
With that in mind, there was speculation that the Chancellor could announce the proposed changes were to be put on hold for the time being at his Autumn Budget, however, this did not transpire.
Tom Selby, head of retirement policy at AJ Bell, explained in more detail the complex process that is currently set to be put into place regarding the normal minimum pension age changes.
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He said: “The Treasury has got itself into a bit of a pickle over plans to increase the normal minimum pension age (NMPA) to 57 in 2028.
“Rather than simply raise the NMPA for all, policymakers have proposed a complicated protection regime for those who had an ‘unqualified right’ to access their retirement pot before age 57 on 11th February 2021.
“People will have until April 5, 2023 to transfer to a scheme with an unqualified right and retain a lower NMPA.
“This will create the ludicrous scenario where savers could have two different minimum pension access ages within the scheme.”
Mr Selby believes the NMPA plans could lead to a whole host of problems, which could be avoided by the Government altering course and announcing the changes will be put on hold.
He said: “Such complexity risks undermining various key Government initiatives, including pensions dashboards, and will be a gift to scammers who will take advantage of the inevitable confusion it will create.”
As an example, if someone selects a retirement age of 55, but is only able to access part of their pension savings at that age, because the remainder is not accessible until age 57, it is not yet clear how their predicted income would be shown on the Pensions Dashboard. This is because the dashboard is built around the concept of people having one single retirement age.
Mr Selby had pinpointed the Budget as the “last opportunity” to hold off on the proposed changes, but with no mention of the NMPA from the Chancellor today, it appears the plans will go ahead as scheduled.
Nigel Borwell co-founder at Local Financial Advice gave his thoughts on the minimum pension age plan that is expected to be announced in the documentation following the budget announcement:
“Rishi Sunak has plans to block savers from accessing their pension from age 55, to 57. This will impact thousands who want to retire early as they will now have to avoid dipping into retirement savings for an extra two years in order to avoid punitive tax bills.
“If this goes ahead the government will need to provide extra clarity and make the minimum pension age the same for all no matter what pension plan, so that pension savers can save with confidence in the future.
“However, while the age increase might disappoint many soon-to-be retirees, a longer investment window could mean greater financial security in the long run.”
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