Treasury Update

Statement

Today the government is publishing the Finance Bill 2021-22 which will include a clause to increase the normal minimum pension age from age 55 to age 57 from 6 April 2028. This increase in the normal minimum pension age was announced in 2014 in the response to the consultation on ‘Freedom and Choice in Pensions’ and the draft clause was published in July 2021. The normal minimum pension age is the lowest age at which the majority of members can take benefits from a registered pension scheme without incurring tax charges, except in cases of ill-health.

This change will not apply to members of certain uniformed public service schemes, nor to those whose scheme rules provide an unqualified right to take benefits before age 57. Members with these rights will have a protected pension age.

The draft clause included a window of time during which people could either join or transfer into a scheme which can offer a protected pension age. The window was designed to ensure that those in the process of transferring a pension could complete their transfer and not unexpectedly lose the right to a protected pension age. Stakeholders have subsequently expressed their concerns about this window running until 5 April 2023 as originally proposed, including possible adverse impacts on the pensions market and on pension savers.

The Government believes it is right to offer a protected pension age to those whose scheme rules give them an unqualified right to take their pension before age 57. The Government also believes it is right that those in the process of transferring their pension do not unexpectedly lose the right to a protected pension age. However, after listening to stakeholder views on the draft clause, the Government has decided to shorten the window. The window closed at 23:59 on 3 November 2021. Those who have already made a substantive request to transfer their pension to a pension scheme with a protected pension age of 55 or 56 will still be able to keep or gain a protected pension age assuming the transfer is completed in accordance with the current regulations. This shorter window will help address the issues raised by stakeholders whilst also being fair for pension savers.

Ordinarily this change to a Finance Bill clause would have been announced at Autumn Budget 2021. On this occasion, giving prior notice of the shorter window ahead of its closure on 3 November 2021 could have led to unnecessary turbulence in the pensions market and led to some consumer detriment. Some pension savers could find themselves with poorer outcomes (or even be the victim of a pension scam) if they were rushed by rogue advisors to make a quick transfer in the short time period before the window closed.

A Tax Information and Impact Note for this clause is also being published today.