The normal minimum pension age (NMPA) will increase from age 55 to 57 on 6 April 2028. Trustees should understand how the change impacts their scheme and any action that may be required.

What is the NMPA?

The NMPA is the earliest age at which most pension savers can access their private pensions without incurring an unauthorised payments tax charge (unless they take their pension due to ill-health or have a protected pension age (PPA)). It was introduced in 2006 and increased from age 50 to age 55 in 2010.

What is a protected pension age?

Where certain statutory conditions are met (see below), a member retains a right to retire before NMPA (this is known as a PPA).

An individual’s PPA is scheme specific. For example, an individual may have a PPA of 50 under one scheme and of 52 under another. PPAs may also differ between categories of members within the same scheme.

Separate protection regimes apply in relation to each increase in NMPA, so members may have a PPA under the 2010 protection regime or the 2028 protection regime.

2010 protection

A member will preserve a right to retire earlier than age 55, provided the following conditions are met:

• The entitlement condition: on 6 April 2006 the member must have had an unqualified right under the scheme to take their benefits at an age of less than 55. The scheme rules must have contained provisions conferring such a right on some or all of the members on 10 December 2003. Such a right either was then conferred on the member or would have been had the member been a member of the scheme on that date.
• The retirement condition: broadly, the member must leave employment and become entitled to all benefits under the registered pension scheme at the same time.

A PPA can be lost on transfer unless certain conditions are met. A member will retain their PPA following a bulk transfer to another registered pension scheme, provided all their accrued rights under the transferring scheme and those of at least one other member are transferred in a single transaction (known as a “block transfer”).

2028 protection

Anyone who on or before 5 April 2023, was or became a member of a scheme whose rules (as at 11 February 2021) conferred on them an unqualified right to take their benefits earlier than age 57 (but not less than 55) will be eligible for a PPA.

In contrast to the 2010 protection, individuals with a PPA under the 2028 regime will not be required to meet the retirement condition (see above) and will be able to retain their PPA following both block and individual transfers. However, where a transfer is made, the individual’s PPA will only apply to the transferred-in rights. Any benefits the individual already holds in the receiving scheme prior to transfer, or which are accrued or transferred-in on / after that date will not be covered by the PPA.

Action points

With 6 April 2028 approaching, trustees should:

• identify which members (if any) have a PPA
• consider whether any rule amendments are required to reflect the NMPA changes and / or to future proof the rules against further increases
• ensure administration teams are prepared for a potential increase in early retirement applications ahead of the changes
• ensure administration processes can identify members that have a PPA
• ensure administration processes will be able to ring-fence transferred-in rights received after 6 April 2028, where necessary
• assess the impact of the changes on any ongoing and upcoming projects
• if not already addressed, consider how and when to communicate with members, including through newsletters or other regular communications.