Pension Age

Introduction 

This briefing sets out details of when individuals can take benefits from their pension. It includes details of those who may be able to take benefits earlier than normal due to protections or ill health. It also outlines the changes to the normal minimum pension age (NMPA) from 6 April 2028.
 

Core considerations 

• The NMPA is currently 55 and is the earliest age that most people can take their pension benefits.
•  An individual can take their retirement benefits at any time from that point and there is no longer a requirement to take benefits at a specific age. 
• The NMPA is increasing to 57 for those taking benefits from 6 April 2028. 
• In the past there were lower pension ages and some individuals can still take their benefits earlier because they have protected pension ages.
• Those in ill health may also be able to take their benefits earlier than the NMPA.

Contents 

• The Normal Minimum Pension Age (NMPA)
• Protected pension ages 
• Age 55 protected pension age
• Transferring benefits (not in payment)
• Taking benefits before age 50 reduces the lump sum allowance
• Ill health and serious ill health

The Normal Minimum Pension Age (NMPA)

The Normal Minimum Pension Age (NMPA) is currently 55. This is the earliest age when most people can take benefits from their pension. Once an individual reaches the NMPA they can take all or part of their benefits.

Under the pensions legislation there is no longer a maximum pension age but different products and providers may set ages at which members will be required to take their benefits.

From 6 April 2028 the NMPA will increase to age 57. 

Where an individual doesn’t have a protected pension age they may be affected by the increase in the NMPA depending on their date of birth:

• Those born before 6 April 1971 will be at least aged 57 by 6 April 2028 and so will not be affected by the increase in NMPA.  
   
• Those born after 5 April 1973 will not be able to take benefits until they reach the age of 57. 
   
• Those born between 6 April 1971 and 5 April 1973 will have a window from their 55th birthday to 6 April 2028 to take benefits before the NMPA increases to 57. If they don't access their pension during this time, they will need to wait until their 57th birthday, however if they do choose to access their benefits before 6 April 2028 these can continue in payment beyond this date. They will be able to vary any drawdown income amounts and/or take lump sum withdrawals from funds crystallised before 6 April 2028, but they will not be permitted to access any uncrystallised funds until they reach their 57th birthday.

Protected pension ages

Some individuals will have protected pension ages. Under previous rules some individuals could take their benefits at an earlier age, for example, their scheme gave them an unqualified right to a lower pension age (typically age 50), or potentially as low as age 35 because they had a certain occupation such as a sportsperson. Provided they meet certain requirements these individuals may have retained that lower pension age, but it is important to note that they must have the right to take benefits earlier than the NMPA, and not merely an option that the scheme could choose to offer.

To benefit from the protected pension age it is usually a requirement that all the member’s benefits under the scheme are taken at the same time, for example by taking all of their tax free cash entitlement and moving the rest of the funds into drawdown or using them to buy an annuity.
 

Age 55 protected pension age

A new set of protections are being introduced to allow some individuals to keep a minimum retirement age of 55 where their scheme rules gave them a right to do so before the change was announced. Each scheme will have unique rules, meaning that depending on the wording of the scheme rules, protection may or may not be available. Pension providers may have some schemes which would enable age 55 protection, and others which do not.

In order to benefit from age 55 protection:

• Someone must have money invested in a pension scheme on 3 November 2021 (immediately before 4 November 2021)
   
• The rules of that pension scheme must give members an unqualified right to take their pension savings from age 55
   
• Those scheme rules needed to have been in place on 11 February 2021
   
• Or, the retirement benefits need to be held in one of the qualifying uniformed services pension schemes

Unlike with other protected pension ages, members don’t need to take all of their pension savings at once.
 

Transferring benefits (not in payment)

The question of whether or not a member can retain a Protected Pension Age (PPA) following a transfer of benefits is complex, depending on whether the transfer is or is not part of a block transfer, and whether certain conditions are met.

Sub 50 PPA: 

• Transfer to a scheme with a PPA up to age 50 – the lower PPA will apply to all benefits in the receiving scheme, including those that are transferred in
   
• Transfer from a scheme with a PPA up to age 50, where the transfer is a block transfer – the lower PPA will apply to all benefits in the receiving scheme, including any benefits accrued in the receiving scheme, before or after the transfer
   
• Transfer from a scheme with a PPA up to age 50, where the transfer is not a block transfer – the member will lose their right to a sub 50 PPA as provided under the transferring scheme*

50-55 PPA:

• Transfer to a scheme with a PPA 50-55 – the lower PPA will apply to all benefits in the receiving scheme, including those that are transferred in
   
• Transfer from a scheme with a PPA 50-55, where the transfer is a block transfer – the lower PPA will apply to all benefits in the receiving scheme, including any benefits accrued in the receiving scheme, before or after the transfer
   
• Transfer from a scheme with a PPA 50-55, where the transfer is not a block transfer – the member will lose their right to a sub 50 PPA as provided under the transferring scheme*

Retention of a PPA up to 55 will require the member to become entitled to all of their benefits under the scheme on the same date, and could be lost if after taking the benefits, they are employed or re-employed by a sponsoring employer of the pension scheme or a connected party.

* If the receiving scheme has a sub 50, a 50-55, or a 55-57 PPA, in its own right, that PPA will also apply to the transferred benefits (subject to the retention requirements above for a PPA up to 55).
 

55-57 PPA

• Transfer to a scheme with a PPA 55-57 – the 55-57 PPA will apply to all benefits in the receiving scheme, including those that are transferred in
   

• Transfer from a scheme with a PPA 55-57, where the transfer is a block transfer – the 55-57 PPA will apply to all benefits under the receiving scheme, not just to those that were transferred in
   

• Transfer from a scheme with a PPA 55-57 to a scheme without a PPA, where the transfer is not a block transfer – the 55-57 PPA will apply to the benefits transferred in (which will become ringfenced in the receiving scheme), including any growth/revaluation etc on those benefits, but not to any other benefits accrued under the receiving scheme

Taking benefits before age 50 reduces the lump sum allowance

Where an individual has a protected pension age of lower than 50 and takes their benefits before the NMPA they will have a reduced lump sum allowance (LSA). The LSA is reduced by 2.5% for each complete year before age 55. The same 2.5% reduction also applies to the lump sum and death benefit allowance (LSDBA). For those with transitional protections the reduction applies to their protected allowance.

When an individual accesses further pensions, the amount already taken at the early pension age has to be taken into account, including any benefits taken early tested against the lifetime allowance (LTA).

Ill health and serious ill health

Where an individual is in ill health or serious ill health, they may be able to take their benefits earlier than the normal minimum pension age.

Ill health benefits can be paid where the member is medically incapable of continuing their current occupation as a result of injury, sickness, disease or disability. In this case they can take benefits in the normal way but at an age lower than 55. Benefits will also be taxed as normal i.e. they will be entitled to take up to their full LSA without any reduction, and any income will be subject to income tax.

A serious ill health lump sum can also be paid at an earlier age. This is available where a medical practitioner has confirmed that the member has a life expectancy of less than one year. Normally all of the member’s benefits need to be paid as a lump sum, which will be paid free of tax up to their LSDBA, if they meet all the conditions.