How minimum pension age rise to 57 might affect you

If you were born on or after 6 April 1971, a key change to private pension rules is zooming into view.

From 6 April 2028, the normal minimum pension age (NMPA) – the earliest point you can usually access your personal pension savings – will rise from 55 to 57 overnight.

At first glance, this two-year pushback may seem a minor tweak to the retirement savings landscape, not least because many savers wait until their 60s to begin drawing their pensions.

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But since the pension freedoms were introduced in 2015, people have taken a more flexible approach to retirement planning, in some cases dipping into their savings before they stop working.

For a certain group of savers, the hike from age 55 to 57 is not something to turn a blind eye to. That’s because unless you act within what might be a very slim time window, your pensions will be locked away for a further two years.

Here, I run through some of the key questions you may have about this upcoming rule change and explore whether accessing your pensions early is a sound strategy.

Who will be impacted?

Let’s start with the straightforward bits. If you were born before 6 April 1971, you will have already reached age 57 before the rules change, so are unaffected. You can access your pension savings from age 55, as currently permitted.

If you were born on or after 6 April 1973, the earliest you can take your pensions will be age 57; unless you own pensions with certain protections (which I cover below). So, if you think you’ll need money before 2030 and aimed to use your pension, you may need a plan B.

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The group that may need to give the change the most attention is those born between 6 April 1971 and 5 April 1973. Essentially, you’ll have a window between your 55th birthday and 6 April 2028 to access your pensions in some shape or form, otherwise the age you can take them will be delayed by two years.

Using the most extreme example, someone born on 5 April 1973 will have 24 hours to draw from their pensions or be forced to wait until 5 April 2030 to get their hands on the cash.

Note, the higher NMPA will apply to both defined contribution (DC) – where you save into a pot for retirement – and defined benefit (DB) – where you secure a guaranteed income.

Will all pension schemes and individuals be affected?

The short answer here is the vast majority will, but there are some exceptions.

The government has confirmed it will not apply to the public service pension schemes for the likes of the armed forces, police, and firefighters.

You can also access your pensions sooner if you meet the criteria for ill-health or serious ill-health.

Elsewhere, if your pension has a protected pension age (PPA), this will remain in place, relieving you from the age hike. The types of pensions where these might be found are pre-2010 occupational pension schemes and section 32s, which were about in the late 1980s. The scheme must have offered an unqualified right to draw benefits from age 55 on 4 November 2021.

For any older pensions that you may wish to access, it’s worth digging out the paperwork or contacting your scheme(s) to find out if you have a PPA. Be aware that if you transfer out of such schemes any PPA will be lost.

Why is the NMPA rising and will it hike again in the future?

According to the government, the NMPA hike is to stop people raiding their pensions too soon to ensure their savings “provide for later life” and boost the economy through “increased labour market participation”. Simply put, more people working, higher tax revenues.

The NMPA increase coincides with the state pension age rise. Between 6 April 2026 and 6 April 2028, the earliest you can claim your state pension will hike from 66 to 67.

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The state pension age is scheduled to rise to 68 between 2044 and 2046 – although the government is under pressure to bring the timetable forward. It was understood former government plans were to link NMPA rises to 10 years below the state pension age, but it appears that is not the case, and there are no further rises in train.

Should I access my pensions as soon as I can?

This is very much a personal decision, and hinges on several factors, including your retirement goals, access to other savings and investments, and any urgent requirement for cash, such as to clear debt.

In most cases there’s no need to access your pension savings just because you can, but there are reasons why people might consider it – notably if you’ve accumulated sufficient money or assets to pack up work and fund a comfortable life.

If this applies to you and you turn age 55 after 6 April 2028, all is not lost. Make sure you have sufficient accessible savings and investment in things such as individual savings accounts (ISA), general investment accounts (GIA) and cash accounts to plug the income gap before your private pensions can kick in at age 57.

Another reason is if you’re short on spare cash and have expensive debt, such as credit cards which can charge rates of 25% or more, that will snowball if you don’t clear it as soon as possible.

What should I consider before accessing my savings at age 55?

The main drawback of raiding your pension before you need a regular income is that there will be less in the pot by the time you fully retire. Whatever you’ve saved by the time you leave the workforce typically must last a lifetime, which could span several decades.

But should you decide to dip into your pension, carefully weigh up your options. Most plans allow you take up to 25% tax free (capped at £268,275), but once it’s drawn, you can’t put the toothpaste back in the tube.

What’s more, any excess withdrawals are taxed at your marginal rate. If you’re still working and earning a healthy income when you take the money out, you could be slapped with a hefty tax bill.

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A further pitfall of making a taxable pension withdrawal is that it may restrict future pension funding.

The money purchase annual allowance (MPAA) is triggered if you make a flexible and taxable withdrawal from your pension, shrinking your annual pension allowance - the most you can contribute every year and get upfront tax relief - from £60,000 to just £10,000.

Once the MPAA is triggered, there’s no going back – unless the government reforms the rules - posing a headache for those who plan to carry on working and beef up their pension pots.

You’d also forgo the option of carry forward, which allows you to pay more than £60,000 into a pension annually and get tax relief, provided you don’t exceed 100% of what you earn; a useful tool for savers with surplus cash looking to make up for lost time.

Importantly, the MPAA doesn’t kick in if you’ve only made tax-free withdrawals or used your pot to buy a lifetime annuity.

What should I do in the meantime?

If you reach age 55 between April 1971 and April 1973, some planning here could avert an unwanted shock in just under three years’ time. To reiterate, should you need or want to access your pension savings as soon as you can, unless your pension is exempt from the NMPA, you must act between your 55th birthday and 6 April 2028.

In the event your time window for accessing at age 55 is slim, contact your provider in advance to find out if they can process the withdrawal. If they can’t, perhaps hunt around to find one that can.

On a positive note, there’s still time to get ahead of the change. And an upside of pensions, such as self-invested personal pensions (SIPP), is that once you’re old enough to access them, you can manage the pot in a flexible way.

Before you consider any pension withdrawals, be sure to keep your broader retirement needs in mind, consider any potential tax implications, and mind the MPAA if you want to boost your pension savings down the line.