Longer wait for savers

NORMAL MINIMUM PENSION AGE

AS IF pensions were not already complicated enough, savers also have to get to grips with something called the normal minimum pension age, or NMPA.

This is the minimum age at which most pension savers can access their retirement pots without incurring extra tax charges.

It was introduced in 2014 as part of pension freedom reforms, when it was set at age 55 for everyone, except for those retiring early due to ill-health.

The NMPA is designed to rise with the state pension age but with a 10-year lag, so it will climb over time.

The state pension age is now 66 but will start increasing to 67 between 2026 and April 6, 2028. On that date, the NMPA will jump to 57.

However, more than eight in 10 people aged between 40 and 49 are unaware of this rule, and could mess up their retirement planning as a result.

Lesley Alexander, president of the Pensions Management Institute, said the Government needs to make the public aware of this “significant change” in pensions policy.

“Many of those seeking to draw benefits as soon as possible may be shocked to learn that they will have to wait,” she said.

Alexander added that the increase is doubly complicated because it will not apply to everyone: “For those earning benefits in a public service pension scheme, and those who are members of some private sector arrangements, NMPA will continue to be 55.”

As a result, many do not know what their retirement choices are and these need to be “urgently” explained.

Alexander said: “It will only cause confusion when people learn that they will become eligible to draw benefits at different ages.”

Tom Selby, head of retirement policy at

AJ Bell, said the Treasury has got itself into a “bit of a pickle” over the NMPA. “This will create the ludicrous scenario where savers could have two different minimum pension access ages within the scheme,” he said.

This added complexity also risks undermining various key Government initiatives, including the upcoming pensions dashboards, and will be a gift to scammers who will take advantage of the inevitable confusion.

It will also make annual pension statements harder to understand.

The Government has created a two-tier system that would operate with different pensions carrying different minimum ages, said Hargreaves Lansdown’s senior pensions and retirement policy analyst Helen Morrissey: “This could act as a barrier to people consolidating small pots and stop them doing the right thing.”

Complex pension rules always backfire, said Becky O’connor, Interactive Investor’s head of pensions and savings.

“It puts people off planning, with negative consequences,” she said. “The Government should be looking to reduce confusion, not increase it.”

It would be simpler and better just to move everyone to 57, said head of retirement policy at Quilter, Jon Greer: “This will make the change easier to understand and will prevent damaging and unnecessary complexity.”

However, Greer said most people should be looking to draw their pension much later than 55 or 57, in any case. “Taking your pension fund at the earliest possible age may not be in your best interest.after all the purpose of pension saving is to provide money for later life,” he said.

‘It will make annual pension statements harder to understand’