69: Increase in normal minimum pension age
The statutory normal minimum pension age (NMPA) is increasing from age 55 to age 57 with effect from 6 April 2028. NMPA is the earliest age at which people can usually take their pension benefits.
Draft legislation (the Finance (No.2) Bill 2021/2022) which will implement this change was published on 4 November 2021. The draft legislation allows for people who are currently entitled to take their pension benefits at age 55 to retain this right as a protected pension age.
The requirements for a protected pension age in the draft Finance Bill are similar to, although not the same as, the requirements in relation to protected pension ages following the increase in NMPA in 2010.
Protected pension ages
The new protected pension age will, in general, apply to members who do not already have a protected pension age under the post-2010 protections and if the ‘entitlement condition’ is met.
To meet the entitlement condition, the following would need to apply:
- the member must have had an actual or prospective right to benefits from an age of less than 57 immediately before 4 November 2021;
- the scheme rules on 11 February 2021 conferred this right on some or all of the members; and
- the member either had such a right under the scheme on 11 February 2021 or would have had such a right had the member been a member of the scheme on 11 February 2021.
Members who meet the entitlement condition will be able to retain their protected pension age in their scheme for both historic and future accrual of benefits.
Members will also be able to retain their protected pension age on a subsequent transfer, whether it is made on an ‘individual’ or a block transfer basis, provided certain conditions are met. Where a block transfer is made the protected pension age may apply to both historic and future accrual of benefits whereas the protection may only apply to the transferred funds where an individual transfer is made.
Originally the window for members to transfer to a scheme in order to benefit from a protected pension age was going to stay open until April 2023, but this was brought forward to 4 November 2021 without notice. However, if a member had already made a transfer request before 4 November 2021, but the transfer itself takes place after this date, the member will still, where applicable, be able to benefit from a protected pension age under the terms of the receiving scheme.
Trustees should review their scheme rules to understand whether some or all of the members have an actual or prospective right to take their benefits at an earlier age than age 57. Legal advice may be needed to determine whether members have this right for the purposes of the legislation.
If members do have a protected pension age under the scheme rules, the trustees must make sure this is notified to the receiving scheme where a member makes a subsequent transfer request. Trustees will also want to make sure that members understand the potential consequences of transferring their benefits to another scheme going forwards.
If you require any assistance with these issues or any pensions matter contact our legal experts here BDB Pitmans pensions team.