Little-known pension secret that could leave you waiting for cash much longer – full list of firms affected
A LITTLE-KNOWN phrase buried in your pension documents could determine whether or not you have to wait two extra years before you can take your pension.
The Normal Minimum Pension Age (NMPA) is currently 55, but is due to rise to 57 from April 6 2028.
The NMPA is the earliest age most people can start withdrawing money from their personal and workplace pensions.
Anyone retiring after April 6, 2028, will not be able to start taking their pension until they are 57.
However, thousands of savers have access to schemes with a “protected pension age” of 55.
In these schemes, your pension will have the age of 55 specifically stated in your agreement, rather than the “NMPA”.
This means that you will still be able to start drawing it from the age of 55, even after April 6 2028.
But many savers may not realise that transferring from a pension scheme with a protected pension age to a new scheme could leave them at risk of losing this benefit for good.
In this scenario, you’d have to wait an extra two years to be able to start drawing your pension.
Last month, The Sun revealed that some of the UK’s top providers have been failing to tell customers that they would be giving up a protected pension age by switching pension schemes amid confusion over who was responsible for telling them.
We understand a “sweep up” exercise is currently going on in the industry to find customers who have transferred without being notified they had this benefit, and help them get it back.
Who’s affected?
Anyone born before April 7, 1971 will be 57 before April 6, 2028 and so will not be affected by the change to the NMPA.
But those born on or after April 7, 1971 (so younger than around 53 years and two months) could be affected depending on the rules of any schemes they have benefits in.
Across the industry, and by complete chance rather than conscious design, some scheme rules referred to an entitlement to benefits from “55”, while others referred to the “NMPA”.
Those who said 55 now have to keep this age, which has turned it into a protected benefit.
If a customer transfers out of a scheme with this protected pension age, the scheme they are transferring to may decide to honour it – but it doesn’t have to.
So, those who do transfer without realising they are giving it up could end up having to wait to take their pension for two extra years.
WHAT'S THE PROBLEM?
FINANCIAL advisers should flag a protected pension benefit to their clients.
You are required to take financial advice if the pension you’re transferring from has safeguarded benefits attached worth over £30,000.
But around a third of savers made a pension transfer without taking financial advice last year, according to pension firm My Pension Expert.
Pension firm insiders have previously told The Sun that until recently, the system which facilitates transfers has not been able to pass on information about protected pension ages.
So, non-advised customers have been reliant on pension schemes to manually check and flag this – but this hasn’t always happened.
It’s understood there is now an industry-wide “sweep up” exercise ongoing to inform pension schemes if they have taken customers who previously had this benefit.
We’ve listed the policies of each major pension provider so that you’re aware of your scheme’s rules if you decide to switch schemes.
Several firms including Aegon, AJ Bell, and Phoenix Group said they will honour those transfers with a protected pension age.
However, other firms set less clear guidelines and may only honour this benefit on a case-by-case basis.
Below, we spell out where each firm stands.
Aegon
To be eligible for a protected pension age of 55, scheme rules must give an individual an “unqualified right”, with no need to ask any other party for permission, to benefits from an age below 57.
This “unqualified right” must have already been stated in the scheme rules on February 11, 2021, and the individual must have joined the scheme before November 4, 2021.
Aegon has a mix of schemes, some with and some without a protected pension age.
A spokesperson for Aegon said: “We have not made any changes to scheme rules.
“Individuals either have a right, or they don’t.
“If they joined a pension scheme after November 4, 2021, then they won’t have it.
“If an individual does have this right and wants to transfer to another pension scheme, then they can usually transfer that right over to the new pension scheme if certain conditions are met.”
AJ Bell
AJ Bell told The Sun none of its Sipp accounts have protected pension ages.
However, the pension provider said it will continue to protect the pension age of anyone who moves from a scheme where they had a protected pension age.
What if I've given up a protected pension age?
IF you're not sure whether you have a protected pension age, ask your pension scheme to find out for you.
A financial adviser can also help find out if you have one.
If you have already given one up, unfortunately, you can’t get it back – but you can check if the scheme you transferred to honoured the benefit when you switched.
If you have one and want to transfer anyway, assess whether it’s worth keeping one.
This is dependent on your circumstances and whether you would be likely to take a pension early, such as if you are in poor health.
If you have multiple pensions, having a protected pension age for one of them doesn’t mean they will all have this benefit, so check for each individual scheme.
Aviva
Aviva manages a number of pension products – some carry the NMPA and some have a protected pension age attached.
Aviva has not rewritten any of its own contracts to move customers from a protected pension age to the incoming NMPA.
However, the provider hasn’t explicitly confirmed whether or not customers transferring into Aviva from a scheme with a protected pension age will keep those protections.
Fidelity
If you opened a SIPP with Fidelity or applied to transfer your pension to us before November 4, 2021, you’ll benefit from the protected pension age of 55.
This applies to any transfers or contributions you made to your pension on or before November 3, 2021, as well any future contributions.
If you transferred, or plan to transfer, a pension in full to Fidelity that has a protected pension age after this date, this will be retained on transfer.
But the protection only applies to those transferred funds, and these will be separated from the pensions that you can access at 57.
Hargreaves Lansdown
Hargreaves Lansdown’s SIPP uses the NMPA.
It told The Sun that all clients can transfer in a protected pension age of 55 if they have it.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “The increase in NMPA brings complexity in an area where people need certainty.
“People with several different pensions may find they can access some at 57 and others at 55 and this can undermine their plans if they are taken unawares.
“They may have planned to go part-time, or even retire at 55 – having to work a further two years would be a bitter blow. Others may have had plans to use their tax-free cash for a specific purpose at age 55 and now find these plans have to be shelved.”
M&G
M&G’s personal pension schemes don’t have a protected age, but some of the occupational pension schemes that it administers do.
The firm told The Sun that if anyone transfers into its retirement account product, its main personal pension scheme for new business, they can maintain their protected pension age on the transferred monies only.
This means that any extra savings generated into a customer’s new M&G personal pension scheme will still be bound by the NMPA.
What is a pension transfer?
A PENSION transfer is where you move one of your pensions to another provider, or merge pension pots together.
Pension providers are large firms which look after your pension and manage it on your behalf.
They will do things like invest it with the aim of growing your pot over your lifetime so you have more money for retirement.
In exchange, they charge a small fee.
Savers might switch their pensions from one firm to another because the new scheme has lower fees, or because they want to keep all of their pensions in one place.
You need to track old pensions down in order to combine them together.
You can do this using any paperwork you can find and giving it to a new pension provider of your choosing – they will do the rest of the work for you.
If you aren’t sure where your old pensions are, you can use services like the government’s Pension Tracing Service online or by calling them on 0800 731 0193.
PensionBee
PensionBee plans use the NMPA, which is rising to 57 on April 6, 2028.
Becky O’Connor, Director of Public Affairs, said: “The NMPA has always meant to rise roughly in line with rises in the state pension entitlement age, which is now 66 and rising to 67 between 2026 and 2028. This is the way it is meant to be.
“The reason some pensions have a protected age of 55 is possibly more by accident than design.
“Policies which were meant to be based on an access age of the NMPA had age 55 written in the policy terms instead, so when the planned rise in the NMPA was announced, it transpired that some plans wouldn’t be able to increase the access age for some of their plans, because of the way the conditions were worded.
“For pension savers who value the ability to access their pensions two years earlier, at age 55, having such a plan may appear lucky.
“However, in reality, few people give up work in their mid-fifties, so the need for access at this point will likely be for something other than retirement.”
The company added that some of PensionBee’s customers have left plans with a protected age of 55, knowing that the access age with our plans will rise in accordance with the legislation to age 57 by 2028, and they are fine with this.
As such, the firm hasn’t denied that those choosing to transfer their pensions over to PensionBee won’t have any protected pension ages honoured.
Phoenix Group
Phoenix Group has acquired brands and companies with a large mix of pension plans.
Some customers have a protected pension age, and others have plans, which means their NMPA will need to increase in 2028.
Phoenix Group said that customers whose policy or pension scheme rules do not include a protected pension age will see an increase in their NMPA.
A spokesperson said: “We are informing those impacted by the change to ensure they are aware.”
Phoenix said that it will continue to honour those transferring pensions with a protected pension age.
Scottish Widdows
Scottish Widdows plans use the NMPA, which is rising to 57 on April 6, 2028.
The firm told The Sun that all customers looking to transfer should check whether the pensions they are transferring have a protected pension age.
Customers will need to check with Scottish Widdows directly and ask if it will honour the transfer of a pension with a protection pension age.
Vanguard
The Vanguard Personal Pension (SIPP) uses the NMPA.
The firm told The Sun that all Vanguard customers will align to the NMPA, unless they transferred in with a protected pension age.
For those transferring in with a protected pension age, their benefits will be protected, and only benefits accrued since joining Vanguard will be subject to NMPA.
A spokesperson said: “We see the NMPA as aligned to the broader effort to recognise increased longevity in the UK, such as the state pension age changes.
“As people live longer their pension inevitably needs to last longer.
“Raising the access age is intended to allow investors to save more, but also ensure their retirement savings can last through retirement.
“For those who had planned early retirement, they are able to access their pension early, or to get protection with a scheme that supports it. This ensures a degree of fairness.”
What are the different types of pensions?
WE round-up the main types of pension and how they differ:
- Personal pension or self-invested personal pension (SIPP) – This is probably the most flexible type of pension as you can choose your own provider and how much you invest.
- Workplace pension – The Government has made it compulsory for employers to automatically enrol you in your workplace pension unless you opt out.
These so-called defined contribution (DC) pensions are usually chosen by your employer and you won’t be able to change it. Minimum contributions are 8%, with employees paying 5% (1% in tax relief) and employers contributing 3%. - Final salary pension – This is also a workplace pension but here, what you get in retirement is decided based on your salary, and you’ll be paid a set amount each year upon retiring. It’s often referred to as a gold-plated pension or a defined benefit (DB) pension. But they’re not typically offered by employers anymore.
- New state pension – This is what the state pays to those who reach state pension age after April 6 2016. The maximum payout is £203.85 a week and you’ll need 35 years of National Insurance contributions to get this. You also need at least ten years’ worth to qualify for anything at all.
- Basic state pension – If you reach the state pension age on or before April 2016, you’ll get the basic state pension. The full amount is £156.20 per week and you’ll need 30 years of National Insurance contributions to get this. If you have the basic state pension you may also get a top-up from what’s known as the additional or second state pension. Those who have built up National Insurance contributions under both the basic and new state pensions will get a combination of both schemes.