Government Scrap Protected Pension Age Window

We previously issued a newsletter in February 2021, outlining government proposals to increase the Normal Minimum Pension Age (NMPA) from 55 to 57, with the change due to come into effect from 6 April 2028. This means that from April 2028, the earliest a member of a pension scheme will be able to access their pension benefits will be 57, unless a Protected Pension Age (PPA) applies or they are members of the firefighters, police or armed forces public service schemes.

What is a PPA?

As part of the change to the NMPA, the government has clarified that members of a scheme whose rules (at 11 February 2021) confer an unqualified right to access benefits prior to age 57 will continue to be able to benefit from this PPA.

What have providers done?

We have seen that a number of providers currently confirm that they offer PPA’s for pensions held on their platform.

Which clients will be affected?

  • Clients born prior to 6 April 1971 are unlikely to be affected by the changes to NMPA as they will be aged 57 prior to 6 April 2028;
  • Clients born after 6 April 1973 that are member of a scheme without a PPA will be affected by the changes;
  • Any client who is born between after 6 April 1971, but before 6th April 1973 may be affected as they will be aged between 55 and 57 prior to 6 April 2028. This means that they would be able to access benefits under the current NMPA (of 55) from their 55th However, pension benefits not accessed as of 6 April 2028, would not be able to be accessed for up to a further two years (until they turn 57).

Latest Development

The government had previously stated that a PPA window was available in which a member could switch pensions from a plan without a PPA, to a plan with a PPA prior to April 2023. In doing so, the member would qualify for a PPA on both the transferred in benefits and any future accrual. However, without prior notice, the government has since closed this window and as such, any pension switches that take place after 3 November 2021 will not qualify for a PPA.

Implications for Suitability

The age at which a client is looking to access pension benefits should be taken into consideration as part of any retirement planning advice. For some clients, this will be of greater importance than for others, and consideration of whether a client’s existing scheme offers a PPA should be a starting point, as any transfer or switch may potentially lose this right. Firms should therefore consider the new and ceding scheme characteristics as part of any switch recommendation, and the loss of any PPA should only be recommended where it can be justified from a suitability perspective.

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Our View

The decision to cancel the PPA window has come somewhat out of the blue, although if this window was allowed to stay open until April 2023, it may well have resulted in a frenzy of pension switching activity prior to the deadline. It also reduces the potential for people falling victim to pension scams, as rogue advisers try to exploit the uncertainty and complexity that the PPA window offered. The downside is that going forward, members will no longer be able to switch to a plan which benefits from a PPA.

Action Required By You

For pension switches, you should continue to consider the full characteristics of the ceding scheme against the target destination, and this will need to takes into account whether there is a PPA. This is particularly important for clients who will be impacted by the changes to the NMPA, and where they have an existing scheme offering a PPA, as this will be lost on switching.
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About the Author

Paul is a Chartered Financial Planner and is well on his way to a Fellowship. He has a thirst for technical knowledge and, while he advises on all aspects of financial services regulation, he specialises in pensions and investments.

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