On 11 February 2021, HM Treasury and HM Revenue and Customs published a consultation paper on increasing the NMPA to 57 with effect from 6 April 2028.

The NMPA is the minimum age at which most pension savers can access their pensions without incurring an unauthorised payments tax charge (unless they are retiring due to ill-health). The NMPA is currently age 55. Having an NMPA helps to ensure that tax relieved pension savings are used to provide benefits in later life. The NMPA was introduced in 2006 to ensure a balance between the generous tax relief that the Government provides to enable people to save for retirement and setting the right incentives for them to accumulate sufficient pension savings and not fall back on state support in retirement.

Importantly, the consultation paper sets out a proposed protection regime for the increase in NMPA in 2028 for all types of registered pension scheme. This would mean that an individual member of any registered pension scheme (occupational or non-occupational) who has a right under the scheme rules at the date of the consultation (11 February 2021) to take pension benefits at an age below 57 will be protected from the increase in 2028. Where the consultation paper talks about a ‘right’ under the scheme rules to take benefits, it means an unqualified right under which an individual does not need the consent of any other person (such as an employer or scheme trustees) before they can take their benefits at a particular age.

This change will not affect ill-health retirement and the Government is not proposing to make any changes to the current pension tax rules in that area as part of the NMPA increase.

Scheme trustees and managers will need to carry out an analysis of their scheme rules in order to determine whether or not individual members will be protected from the increase in NMPA.