Coffey says state pension age 'will not be reviewed' in September
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NMPA changes were announced earlier this year, and will be introduced in the Finance Bill 2021-22. However, many Britons might be unsure as to what this will mean for them and their pension.
The changes will mean the NMPA is lifted from age 55 up to 57, from April 6, 2028.
What is the NMPA?
The NMPA is the earliest point at which Britons can draw their private pensions them without receiving tax penalties. This is different to the state pension age, which is currently 66 for both men and women.
It is not currently possible to receive any state pension before age 66.
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The current NMPA allows people to access their pension savings at age 55, however, it should be noted that many people do not do this as they have not yet saved enough money for retirement.
This is not surprising considering an 11-year gap between the NMPA and state pension age. Over a decade’s worth of savings could make a big difference to people’s pension pots.
Therefore, the increase in NMPA is not likely to impact a huge number of Britons, as many of them would not be able to retire at 57, let alone 55. However, for those who can afford to, having to wait two extra years could be a tough pill to swallow.
There are several concerns which have been stirred up by the announced changes, one of which is that through the Government drawing attention to NMPA, people may mistakenly believe this is the age they should access their pension, when in fact this would not be right for everyone.
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Another potential issue is that despite the increase, some people will be able to maintain a NMPA of 55, which could cause complications and confusion.
People who were on a pension scheme which offered an “unqualified right” to a minimum pension access age of 55 before November 4, 2021 will be able to retain the lower age when the changes take place.
Previously, the Government had planned to allow people to take advantage of this loophole up until April 5, 2023, but made a U-turn to avoid the potential issues that could arise from this.
Had this not been done, even a child could have joined an applicable pension scheme before 2023 and secured a NMPA age of 55.
However, many Britons will have already possessed this “unqualified right” to a NMPA of 55 before the November 4 cut-off, meaning the problem may not have been completely solved.
There have been calls for everyone be treated equally, with either everyone’s NMPA becoming 57 or staying at 55.
The increased complexity of the new NMPA framework has sparked worries that scammers could take the opportunity to confuse savers and steal their pension savings from them.
There are also fears that mistakes could be made when people transfer schemes. For example, if someone is confirmed as having a minimum pension age of 55, when it should actually be 57, they could be subject to charges if they access their pension before age 57.
At present, it is unclear how severe the charges will be if someone accesses their private pension before they reach their minimum pension age.
Another worry is that the changes could dent the Government’s attempts to provide Britons with more simplicity regarding their pensions and increase their understanding of them.
The Pensions Dashboard is set to go live in 2023 and will aim to give savers an easy way to assess the state of their retirement savings, but it is based on the idea of people having one pension age. Therefore, if someone is able to access one of their pension schemes at age 55 and another at age 57, there could be a problem.
The Department for Work and Pensions (DWP) has also announced they will introduce simplified annual pension statements, but again, if someone has two different pension ages, they may end up receiving two statements each year anyway.
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