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 plans to increase the normal minimum pension age from 6 April 2028.
 

Core considerations 

• The Normal Minimum Pension Age 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 Normal Minimum Pension Age is set to increase 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 Normal Minimum Pension Age.

Contents 

• The Normal Minimum Pension Age (NMPA)
• Protected pension ages 
• Age 55 protected pension age
• Losing a protected pension age
• Taking benefits before age 50
• Ill health and Serious ill health

The Normal Minimum Pension Age (NMPA)

The 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 normal minimum pension age will increase to age 57. 

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

• Those born before 6 April 1971 will be at least 57 by 6 April 2028 and so will not be affected by the increase in normal minimum pension age.  
   
• 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 normal minimum pension age increases to 57. If they don't access their pension during this time, they will need to wait until their 57th birthday. It’s currently not clear how those who access part but not all of their benefits during this widow will be treated. The government has stated they will provide further guidance on the transitional arrangements in due course.

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 a right to a lower pension age (typically age 50), or because they had a certain occupation such as a sportsperson. Provided they meet certain requirements these individuals may have retained that lower pension age. 

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 buying 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 and means protection may or may not be available. Pension providers may have some schemes which would enable age 55 protection, and others which do not. 

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 give members an unqualified right to take their pension savings before age 57.
   
• Those scheme rules were in place on 11 February 2021.

Unlike other protected pension ages, you don’t need to take all your pension savings at once.

With individual transfers that include this protection, the receiving scheme must ringfence the benefits with the protected age to ensure that any benefits that don’t include this protection don’t get mixed. 

Block transfers of this protection will require the receiving scheme to apply the protected pension age to all benefits that member has in the receiving scheme. 
 

Losing a protected pension age

Except for Age 55 protection (noted above), pre age 55 protected pension ages may be lost on a transfer from one scheme to another unless certain conditions are met. The pre 55 pension age will continue to be protected if:

• the transfer is part of a block transfer, or
   
• on scheme wind-up, benefits are transferred to an individual buyout contract (section 32) or assigned to the member, or 
   
• a transfer is made to a scheme that already has the protected low pension age.

Block transfers effectively treat the receiving scheme as if it were the original scheme, so any new contributions or transfers in will benefit from the protected age.

Any benefits transferred into a pension scheme that has a protected low pension age can also be paid from that protected pension age, even if they came from a scheme which did not have any protection. 
 

Taking benefits before age 50

Where an individual has a protected pension age of lower than 50 and takes their benefits before the normal minimum pension age 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 applies to the lump sum and death benefit allowance. 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 must be taken into account, including any benefits taken early tested against the lifetime allowance. 
 

 

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 because 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 the member’s benefits need to be paid as a lump sum, which will be paid free of tax up to their lump sum death benefit allowance (LSDBA), if they meet all the conditions.