HM Treasury is consulting on how to implement a previously announced increase in the Normal Minimum Pension Age (NMPA), the age when individuals can typically access their pension, from age 55 to 57. The proposals include a provision to ‘protect’ those whose current scheme rules (as at the consultation launch date of 11 February 2021) give them an ‘unqualified right’ to benefits at age 55.
While Aegon has praised HMT for seeking to avoid any retrospective changes which would ‘take away’ current entitlements, it has called out significant risks of discouraging individuals from transferring into better value schemes and of detracting from other important Government pension policy objectives. With this in mind, Aegon is asking the Treasury to consider alternative implementation approaches.
Steven Cameron, Pensions Director at Aegon said: “With people on average living longer, there’s merit in encouraging people to work longer and to make sure they are saving sufficiently for retirement. And with the state pension age due to increase to 67 in 2028, it’s not unreasonable to increase the normal minimum pension age from 55 to 57 at that time.
“With pensions such long term savings vehicles, it’s important that rules don’t keep changing or that individuals see entitlements they thought they had removed. On one hand, allowing those whose pension scheme or contract, as at 11 February 2021, gives them an unqualified right to take benefits from age 55 to continue to do so does protect this entitlement. But as proposed, this protection would be lost if an individual transfers to another scheme, other than as part of a ‘bulk’ exercise with other scheme members. This is likely to discourage many thousands of individuals from taking other beneficial actions such as transferring to new pensions.
“As Government and regulatory policy recognises, there are many situations where an individual might benefit from transferring including moving out of an older style contract or scheme with higher charges, with less flexibility or fewer choices; consolidation including of smaller frozen pension pots; the availability of a lower charging current workplace pension; accessing the full range of pension freedoms; or for a minority, when transferring from a defined benefit scheme to access greater flexibility within defined contribution arrangements.
“Having different minimum pension ages for different pensions, or even different ages for different entitlements within the same scheme, could also hamper the development of simpler communications and through extra complexity, make pension rules even less easy for individuals to understand at a time when stronger engagement is key.
“We hope that the Treasury will be open to considering other approaches to implementing the increase in normal minimum pension age. One approach would be to allow any individual who transfers to keep any entitlement to take their benefits from their current minimum age. There is also scope to simplify and bring together various forms of protection. While not something all individuals would welcome, another option which would avoid many complexities would be to defer the change until state pension age increases to 68 in the 2040s but without any protections. The Government might also be able to meet its objective of longer working lives through finding other ways to discourage rather than outright ban taking benefits as early as 55.”
|
