People aged 55 and 56 are being warned about a major pension rule change that could affect when they can access their retirement savings. Currently, most people can start taking money from a workplace or personal pension from age 55 without facing additional tax charges for accessing it too early. But this minimum age is set to rise by two years to 57 from April 6, 2028.
Concerns over delayed payments
The change could be particularly important for people who are 55 or 56 when the new rules come into effect. Pension experts are now calling for more clarity over what will happen in certain cases where someone completes the necessary steps to claim money before the deadline but does not receive it until afterwards. There are concerns that delays in processing a payment could potentially leave some savers facing unexpected tax consequences.
The Society of Pension Professionals (SPP) has raised the issue in its response to an HM Revenue and Customs (HMRC) consultation on the rules surrounding the change. The organisation wants stronger protection for people who became entitled to certain pension payments before April 6, 2028, but whose money was delayed until after the new minimum age came into force. It has also asked for greater clarity on Uncrystallised Funds Pension Lump Sums (UFPLS), according to Daily Record reports.
Risk of unauthorised payment charges
Its concerns include cases where someone has completed the necessary steps to claim the money before the deadline, only for the payment to arrive after April 6, 2028. Without clear rules for these situations, the SPP warned that pension schemes and their members could face significant unauthorised payment charges due to administrative delays outside their control.
The Normal Minimum Pension Age (NMPA) is the earliest age most people can normally access their workplace or personal pension without facing additional tax charges for taking it too early. It is completely separate from the State Pension age, so the 2028 change will not mean people can start receiving their State Pension at 57. The SPP also wants confirmation that pensions which are already being paid before April 6, 2028 will be able to continue without interruption once the minimum age changes.
Call for clarity from HMRC
Oliver Topping, chair of the SPP's Legislation Committee, said: "The increase in the Normal Minimum Pension Age is a significant change for members approaching retirement, and it is essential that the transitional arrangements are clear, consistent and workable in practice. Members should not face unexpected tax consequences simply because an administrative process crosses the 6 April 2028 boundary. We are urging HMRC to quickly finalise the Regulations and provide the clarity schemes need to protect members and communicate the new rules with confidence."
However, the change will not necessarily mean that everyone has to wait until their 57th birthday to access their pension. Some people have a protected pension age under existing rules, which may allow them to take their money earlier, while different rules can also apply when accessing pension benefits because of ill health. The exact rules will therefore depend on someone's pension scheme and their individual circumstances.
The SPP is not calling for the planned rise to 57 to be scrapped. Instead, it wants HMRC to make the transition clearer so people are not hit with unexpected tax consequences simply because processing a pension payment falls after the April 2028 deadline.
