The Finance Act 2022 will increase the earliest age at which members can draw their benefits in good health (the “normal minimum pension age (NMPA)”) from 55 to 57 from 6 April 2028, unless they are entitled to a protected pension age (“PPA”). Our understanding is that existing disclosure requirements may require schemes to notify members of an increase to their NMPA within three months of 24 February 2022 (the date of Royal Assent of the Finance Act), as this is likely to be a material change to basic information. Schemes that still accept transfers will also need to decide how to treat transferred-in benefits.
Schemes will need to work with their legal advisers to identify which, if any, members are entitled to a PPA below 57 (for members who don’t already have a PPA of under 55, such an age would normally be 55, so we refer to this as “PPA55”). This depends both on when a member joined the scheme and the scheme Rules. One of a number of criteria for PPA55 is that, on 11 February 2021 (the date on which HMRC published a consultation on protecting existing NMPAs), the scheme Rules must have included an unqualified right to take scheme benefits below 57, eg at age 55. HMRC confirmed in its January 2022 pension schemes newsletter that an unqualified right means that the member does not need the consent of anyone before they can take their benefits. This is in line with the requirements set in 2010 when NMPA was increased from 50 to 55. If members have a PPA of 55 or below, there is no change to communicate. However, where it is challenging to identify members affected and/or issue a communication within the timescale noted, then legal advice should be sought to confirm whether the disclosure legislation applies. Administrators will also need to be able to identify members with PPA55 so that they can provide this information to members seeking to transfer.
Schemes that accept individual transfers will also need to consider whether any Rule or process changes are required. The legislation provides that members who would not otherwise have PPA55 can retain PPA55 on benefits transferred in, but only if the receiving scheme Rules permit benefits to be taken from the earlier age (with or without consent). This would also mean that the scheme would need to record transferred in benefits and benefits accrued within the scheme separately. For the avoidance of doubt, if a member already has PPA55 in a scheme, then this would apply also to any benefits transferred in.
Similarly, from 4 November 2021 (the date that the Finance Bill was published), for block transfers from a scheme where members have a PPA, benefits can retain a PPA if the receiving scheme Rules permit benefits to be taken from the earlier age (with or without consent). A key difference here is that the PPA would apply to all benefits in the scheme, not just those transferred in.
Finally, we still await details of transitional provisions, for example covering members who retire before 6 April 2028, but have not reached age 57 by that date.
