The normal minimum pension age (NMPA) is the earliest age most people can start withdrawing money from their personal and workplace pensions.
This a common question I get asked during my daily job role whilst speaking to clients aged over 50, who are thinking of accessing their personal or workplace pensions. At present through the introduction of Auto enrolment (AE) most employees are contributing into a Defined contribution https://www.moneyhelper.org.uk/en/pensions-and-retirement/pensions-basics/defined-contribution-pension-schemes. Where you funds are invested and the figure will go up and down on a daily basis.
It’s currently 55 years but this will increase to 57 from 6th April 2028, unless you have a Protected Pension Age or you’re retiring due to ill health. The NMPA is set by the UK government.
What is all the fuss about it being increased ?
Quite simply, The government is raising the NMPA (normal minimum pension age) to coincide with the rise of the state pension age to 67. Which is currently due at age 66 but this will be extended to age 67 in stages with effect from 6th April 2028.
These increases are designed to reflect our longer life expectancies – as we’ll spend more time in retirement. Although recent studies have shown that life expectancy has plateaued in recent years. It’s not rising as much or a fast as in recent years, due to improved better quality of life, better health provision and medical care being around.
So how am I affected ?
If you are looking to access your pension in the coming years, you may be affected so. So if you are currently born on or after 6th April 1973 may see their minimum pension age move to 57.
This means you might not be able to take some or all of your pension benefits until you reach that age, which could be up to two years later than expected.
People born between 6 April 1971 and 5 April 1973 may be caught in a transitional phase, possibly accessing their pensions at 55, then losing access from 6 April 2028 until they reach age 57.
So it’s advisable to check with your current pension provider (or past provider if you have several pots) if the minimum age for accessing your pension will increase. As some individulas might qualify for a protected pension age on some or all of their benefits.
Warning: Be very aware, that the earlier you start taking money out of your pension, the longer it might need to last. So it’s important to think carefully about how you manage your money – to avoid it running too low as you get older. As present people are living until the mid 80’s, so a pension pot could last someone for 30 years.
What about Defined benefits pension schemes ?
If you have a defined benefit pension, you can usually begin taking it from the age of 60 or 65. Each individual scheme will have what we call a normal retirement date (NRD) linked to it. Which is set by the scheme trustees who control the rules and governance of that scheme. The amount of income payable is dependent on the accrual rate, length of service and members salary.
You might be able to start receiving income from it at 55. However, the income you get is likely to be reduced as you’re taking it earlier than the scheme’s normal pension age. Most schemes will apply what is called an early reduction factor (which could be a few % each year). Which will lower the amount being paid to the member as it is paid for a greater number of years.
Equally, if you begin taking money from it later, you could get a higher income. This is because it could potentially be paying out for a shorter time. A defined benefit or final salary was also called as gold plated as the risk on that scheme is done to the sponsoring employer.
What is a protected age ?
A Protected Pension Age lets you withdraw money from your pension earlier than the normal minimum pension age. A simple example due be for severe ill-health or incapacity.
In 2010, the then NMPA was increased from age 50 to 55 by pensions legislation. Some customers would have qualified for a Protected Pension Age of 50 at that time. If you’re unsure whether your pension qualified for a Protected Pension Age of 50, or a Protected Pension Age of 55, please contact your pension provider. Who will be able to provide you with the proper advice and guidelines relating to that specific pension scheme.
Do this increase affect all pension schemes ?
The change to the normal minimum pension age effective from 6th April 2028 is a regulatory change introduced by government and pensions law. Which will therefore affect most pension schemes and providers. There will be very limited schemes such as those in the public sector – such as workplace pension schemes offered to firefighters, police and armed forces – which won’t be affected by this increase.
Is the NMPA likely to be increase in future ?
At present it is too early to tell, who knows what may happen in future years. As we know from past experience the goalposts and rules are forever being tinkered with.
It may well be that it is increased again, say when the state pension is increased to age 68 from between 2044 to 2046.
It will then be to to the current government to decide what course of action they make take. But the proposals moving forward has been mentioned that the NMPA will always be 10 years lower that the state pension age at that time.
The government will also provide information and consultation to the general public when any such changes will be announced and introduced.
Remember !
If you found this blog post useful and informative. Please feel free to check out my other posts on https://moneyminted.co.uk which covers pensions, savings, investing, recommended investing books. So you too can improve your financial or investment knowledge and ultimately reach your investing and financial goals.
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