How the rise in minimum pension age might affect you

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If you reach age 55 or 56 between now and 6 April 2028, there’s an important pension rule change you need to be aware of.

The normal minimum pension age (NMPA), the earliest point most private pensions can be accessed, is currently age 55 but is rising to 57 from the start of the 2028-29 tax year – a move that will impact thousands of people.

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Unlike the state pension age increase, which is phasing in gradually over a two-year period, the NMPA hike is happening overnight.

There are, however, some nuances and key rules that may enable some people to access their pensions sooner, and it’s important to know what these are – especially if you’re affected and plan to access your pension before age 57.

Earlier this month, the government launched a consultation on draft regulations to provide transitional arrangements for those aged 55 or 56 ahead of the rise taking effect. The consultation is set to run until 28 September 2028, and the outcomes could tweak how the rules are applied.

Let’s run through the important things you need to know, based on what we know so far.

Who will the NMPA hike impact?

If you were born on or before 6 April 1971, you won’t be affected as you’ll be at least age 57 on 6 April 2028. You can therefore draw your pensions at any point from age 55.

For thoseborn on or after 6 April 1973, as you’ll turn 57 after the increase is introduced, this is the earliest age you can access your pensions.

If you were born in between 6 April 1971 and 5 April 1973, the situation is a bit more complicated. Under the draft regulations, you will be able to take pension benefits on your 55th birthday, but if you don’t start the process before 6 April 2028, you’ll have to wait until age 57. The delay could range from a couple of days to a couple of years.

What do the draft transitional regulations say?

Published on 6 August 2028, the government states that these “would provide that, in specified circumstances, members who were aged 55 or 56 on 5 April 2028 are treated as having reached age 57 immediately before certain pension payments are made”.

To elaborate, provided you had already taken steps to access your pension benefits ahead of the change, they can continue to be paid on or after 6 April 2028 as “authorised payments.”

This comprises any income from defined contribution (DC) pensions you’ve crystallised, either by moving it into flexi-access drawdown or buying an annuity, provided you’ve started the process before the hike kicks in. The same applies to any defined benefit (DB) pensions.

But for any pots or savings you’re yet to draw from, these will effectively be locked up until you reach age 57. It’s technically still possible but withdrawals would be deemed “unauthorised” and face heavy tax penalties.

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For example, say you turn age 55 on 27 March 2028 and have £500,000 in a self-invested personal pension (SIPP). On your birthday, you decide to crystalise £100,000 as you’d like some cash to fund an important purchase, taking £25,000 (25%) as a tax-free lump sum and moving £75,000 into drawdown. The process completes on 8 April 2028 after the age hike to 57 has taken effect - but as you’d started the transaction in the previous tax year, it satisfies the transitional rules.

If you wanted to take either a regular income or make one-off withdrawals from the £75,000 drawdown pot, you have the option to at any point. These would be considered authorised payments and taxed at your marginal rate.

However, with the £400,000 “uncrystallised” portion, under the draft regulations you’ll have to wait until age 57 to access these funds. You can’t move more of this pot into drawdown, use some to buy an annuity, or make any further part taxable, part tax-free withdrawals - otherwise known as uncrystallised funds pension lump sum (UFPLS).

This could temporarily derail plans for savers in their mid-fifties who are currently adopting, or seeking to adopt, a phased approach into retirement. If the early years of your strategy hinges on using UFPLS periodically or gradually shifting chunks of unvested funds into flexi-access drawdown, you might need to change tack.

Are there exceptions?

Yes, there are. Some pensions have a protected age baked into the scheme, affording the right to take benefits before age 57. Note, these may apply to some plans but not others and certain conditions must be met. According to the government, these are as follows:

• before 4 November 2021 the member had the right to take a pension or lump sum, or both, before they reached age 57
• that right was unqualified, in that the member doesn’t need anyone’s consent to take their benefits
• on 11 February 2021 the scheme rules included provision to pay benefits before age 57.

If the rise to age 57 impacts you, and you want to access some or all your pension(s) at age 55 or 56, check with each individual scheme as soon as possible to clarify the position.

The hike also won’t apply to members of the uniformed services pensions schemes, such as the armed forces, police and firefighters, and you may be able to access benefits before the NMPA if you’re in poor health and are unable to work.

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Could the NMPA rise higher in future?

This has gained a bit of bit media coverage in recent week, with reports that the NMPA will increase to age 58 by the end of the next decade.

While there are no concrete plans to increase the NMPA beyond age 57, we can’t rule it out happening down the line. The direction of travel with minimum pension ages has been evident for some time. The NMPA launched in 2006 as part of Pension Simplification, otherwise known as A-Day, and was initially set at age 50, and in 2010 was jacked up to age 55.

A similar trajectory can be seen with the state pension, which is in the process of increasing from 66 to 67 and under the current schedule will rise to 68 between 2044 and 2046. The state pension age is undergoing its third review, and one potential outcome is to accelerate the hike to age 68, although nothing is confirmed yet. We should find out more once the review has completed which is expected at some point during 2027.

Does it make sense to access your pension at the earliest opportunity?

There is no universal answer to this question - it depends on your specific circumstances at the time.

Just because you can raid your pension savings at age 55 or 57, doesn’t mean it’s the right thing to do; especially if you have no plans to retire at that point, and have no need for income or lump sums. Any money you withdraw before retirement leaves less in the pot to grow tax-efficiently when the times comes to turn your accrued savings into income and could limit your options for future tax-free withdrawals.

• Are you thinking about accessing your pension early?
• How much do you need to secure a comfortable retirement?

That said, there can be sound reasons for making pension withdrawals in your mid-fifties. For instance, your savings are big enough to last throughout retirement, or if you’ve racked up expensive debt that will snowball unless you take steps to reduce or clear the balance.

Due to the delicate and often irreversible nature of these decisions, it’s wise to take regulated advice to learn the potential impact on your finances both now and in the future.