Pension change update for people born before 1974 | Personal Finance | Finance
People with a private pension pot may find themselves waiting two years longer than anticipated to access their savings, following an update from HMRC regarding plans to raise the ‘normal minimum pension age’.
The normal minimum pension age represents the earliest point at which people can tap into their private or workplace pension, and it currently stands at 55. However, HMRC intends to raise this to 57 on April 6, 2028. This change will align with the state pension age officially rising to 67 as well, through a phased implementation beginning this month.
The normal minimum pension age applies to the registered pension schemes for UK tax purposes, defined contribution schemes and defined benefit arrangements. It does not apply to the state pension and unregistered pension arrangements that are subject to separate tax rules.
The previous adjustment to the normal minimum pension age occurred 16 years ago in 2010, when it rose from 50 to 55. When that modification took place, transitional protections were introduced to ensure those directly impacted could still access their benefits without disruption.
Ahead of the increase to the normal minimum pension age, HMRC is developing similar ‘transitional regulations’ to assist and safeguard people who may be adversely affected by the policy change.
In the most recent Pension Schemes Newsletter, the department provided a significant update concerning these regulations. It stated: “While these regulations are still being prepared, we wanted to provide some early background about their intended scope and effect. All information provided here remains provisional and subject to change as the regulations are finalised ready for technical consultation.”
The primary worry concerns people born between 1971 and 1973, who will be aged between 55 and 57 when the minimum age shifts. Without transitional safeguards, this cohort could find themselves abruptly denied access to their funds.
For instance, if someone reaches 55 on April 5, 2027, they may be eligible to begin accessing their private pension at that point. Yet, because they will only be 56 when the new regulation takes effect, they won’t satisfy the eligibility requirements and their payments could be halted until they reach 57 a full year later.
HMRC observed: “The aim of the transitional regulations is to ensure that members who have already become entitled to their pension benefits can continue to do so seamlessly.”
The regulations will cover people who have reached 55 on or before April 5, 2028. Those born from 1974 onwards, who won’t be 55 by the time the new regulation is implemented, will probably face a standard minimum pension age of 57 without transitional safeguards.
Nevertheless, HMRC has confirmed that people who possess an “unqualified right” to access their pension benefits before the minimum pension age will retain this entitlement. This is also referred to as a protected pension age.
The statement read: “Although legislation sets the minimum age at which benefits can be taken, this must always be considered alongside the rules of each pension scheme, which determine what benefits are available and from what age. In some cases, scheme rules may specify a higher minimum age than the normal minimum pension age.”
