Increase in normal minimum pension age in 2028
The normal minimum pension age is increasing for most individuals on 6 April 2028 to age 57. This change affects people born after 6 April 1971.
- Normal minimum pension age is increasing to 57 in 2028, at the same time the State Pension age is increasing to 67.
- Government has not linked further increases to increases to State Pension age.
- Some individuals will have a protected pension age of less than 57. This doesn’t need to be registered with HMRC.
- Some pension schemes are exempt from the increase.
- Protected pension ages are maintained on transfer, assuming the receiving scheme do this.
- There’s no change to benefits paid on ground of ill-health.
The government originally announced their intention to increase the normal minimum pension age from age 55 to 57 from April 2028 back in July 2014. The legislation required to make the change was included in the Finance Act 2022.
Some individuals have a protected pension age in their pension scheme, which is the right to take benefits before age 57. Individuals don’t need to register this right with HMRC.
In 2028 the State Pension age is increasing to 67. Originally it was proposed the minimum pension age would be linked to State Pension ages, so it was always 10 years earlier, but this was not included in the Finance Act 2022.
Are there any exemptions?
Yes, there are. Members of uniformed service pension schemes are not affected by the increase, this includes:
- the naval, military or air forces of the Crown (including members of any reserve force)
- a police force other than the Civil Nuclear Constabulary
Also, there are no changes for individuals who already have an existing 6 April 2006 protected pension age of 55 or lower. Their protection is similar but not identical to the protection described in this article. This is on a plan-by-plan basis and may not apply to all their benefits. There is more information on this in our taking benefits article.
What is a protected pension age?
A protected pension age applies at scheme level so an individual may have a protected pension age under one scheme, but not under another.
The individual will have a protected pension age under a scheme if:
- before 4 November 2021 they had the right to take benefits before they reached age 57
- that right was unqualified
- on 11 February 2021 the scheme rules included provision to pay benefits before age 57
- they were in the process of a substantive transfer to a scheme before 4 November 2021
These requirements are known under the legislation as the ‘entitlement condition’. Where these conditions are met, the individual’s protected pension age under the scheme will be the age at which they have the right to take benefits immediately before 4 November 2021.
The individual does not need to leave the service of their employer to take their benefits before age 57.
What does an unqualified right mean?
Basically, it means the individual doesn’t need anyone’s consent to take their benefits.
An individual has an unqualified right to take benefits if they do not need the consent of anybody before they can take their benefits. If the scheme documentation states the consent of the trustees or employer is required to take benefits the individual does not have an unqualified right to take benefits. It does not matter if the trustees have always operated their discretion to allow the payment of early benefits, the right is still not an unqualified right.
What does a substantive transfer mean?
In the initial consultation paper in February 2021 the Government introduced a window to give individuals an opportunity to transfer to, or set up, a new plan in a pension scheme which offered a protected pension age, where:
- the scheme rules on 11 February 2021 already conferred an unqualified right to take pension benefits below age 57, and
- the individual joined that scheme by 5 April 2023
But the Government decided to close the window early and it was removed on 4 November 2021.
Any individual who on 4 November 2021 was in the process of a transfer to a scheme which met the above criteria could still have a protected pension age below 57 in the new scheme, even if the transfer process completed after 4 November 2021. A general query about a transfer did not count as a substantive transfer request.
Individuals who have an unqualified right to take their benefits before age 57 can transfer their benefits now and maintain that right in their new plan. There are 2 ways of doing this:
- they can do it as part of a block transfer
- they can do it as part of an individual transfer
Unfortunately, nothing to do with this change is straightforward!
For a block transfer any benefits already in the plan that receives the block transfer will benefit from the lower minimum pension age as will anything that builds up after the transfer.
The existing rules on block transfers involving a protected pension age or protected tax-free cash exclude transfers to plans the individual has held for more than 12 months, unless it’s a plan in existence before 5 April 2006 that only holds contracted-out benefits. This rule DOES NOT apply for transfers here.
Another difference is all the benefits don’t have to be taken at the same time. For all other types of block transfer all the benefits under the scheme (not just the plan) have to be crystallised at the same time.
There is no restriction on the individual’s re-employment after taking benefits.
And for the second type of transfer, an individual transfer, individuals can transfer on their own and not as part of a block transfer and maintain their protected pension age. But these benefits need to be ring-fenced and the protection will only apply to the benefits from that transfer. This means any benefits already in the plan and any new benefits that build up after the transfer will not benefit from the protected pension age.
|Before 4 November 2021||From 4 November 2021|
|Transfer from a scheme without an unqualified right to take benefits at age 551 to a scheme that does||Can transfer and have a right to take all benefits at age 551 in the new scheme.||Not possible unless the individual was in the process of transferring when the rules changed on 4 November 2021.|
Individual transfer from a scheme with a protected pension age of 551
|It wasn’t possible to transfer and protect a minimum pension age of 551.||Transferred benefits with a protected pension age of 551 must be ringfenced in the new scheme. All other benefits and future benefits stay at 57.|
|Block transfer from a scheme with a protected pension age of 551||All benefits transferred, existing and future benefits will have a pension age of 551.||All benefits transferred, existing and future benefits maintain a protected pension age of 551.|
1 Unlikely, but it is possible the protected pension age in the original scheme was 56, if so the protected pension age in the new scheme will be 56.
What do we still not know?
The government acknowledges the importance of establishing a clear position on the transitional arrangements. For example, individuals who have taken benefits at age 55 but who have not reached age 57 by 6 April 2028.
The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. Also it may not reflect the options available under a specific product which may not be as wide as legislations and regulations allow.
All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.