The Normal Minimum Pension Age is set to rise to 57. What does this mean?
For those planning their retirement in the next 10 years or so, it’s worth looking ahead to April 2028. At that time the Government is preparing to introduce a two year increase in the age that people can access their retirement pot. While the Treasury is currently in consultation around how best this decision can be implemented, this would mean the age at which you can access your private pension pot rising from 55 to 57.
Why is this change being introduced?
Well, the increase in what’s called the NMPA or ‘normal minimum pension age’ is intended to work alongside the concurrent increase in life expectancy. The Government also has the intention to increase the state pension age to 67 at the same time, so this too is reflected in the change.
The official report from the Government states, “the NMPA is the minimum age under the legislation at which most pension savers can access their pension savings. Pension schemes and providers are permitted to have a higher minimum age under their individual scheme 9 rules. The Government therefore believes that schemes should be free to decide how and when to move to the new NMPA (age 57) by 2028.”
The Government stated that they expect “trustees and managers of schemes to notify members of the increase in NMPA when it is practical to do so and in any event in line with the usual disclosure of information requirements.”
This would suggest that pension providers will be free to decide when these changes are made and in what way that will happen. In turn, this could result in some confusion for both pension savers and their providers. What is certain is that for those who were expecting to retire at 55 after April 2028, there are now two more years to consider.
What can you do to make the most out of this extension?
The situation may not be ideal, depending on your retirement or pension plans, but there is always a way to make the best out of any situation. Here are two suggestions on how to do just that:
Understand your mortgages and loans: should you have any which require repayment from your tax-free lump sum upon reaching the NMPA, open that line of conversation between yourself and your lender. The earlier you discuss these changes with the relevant parties, the earlier you can start to develop an understanding of your options and any potential repayments.
Understand your pensions: if, for example, your pension includes involvement in a lifestyle fund which invests at decreasing risk over time, a change in retirement date may impact your opportunity to make the most out of the investment potential. Talk to your provider.
You should always seek professional advice and guidance before acting. The key here is to fully understand both your situation and your options to develop the best financial future for your lifestyle. At Questa Chartered, we have a wealth of experience in helping families make provision for their future. If these uncertain times have caused you to think about planning not only for unprecedented events, but also for those that are more predictable, give yourself some peace of mind and get in touch.