MORE THAN one million people between the ages of 51 and 53 could face an extra wait for their pension due to a “bizarre quirk”.
The government is increasing what is known as the “normal minimum pension age” (NMPA).
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This is the earliest age at which you are allowed to access your retirement savings from a workplace or personal pension and is currently 55.
It’s different to the state pension which you can get from the age of 66.
From April 6, 2028, the rules will change meaning that people will have to wait until they are 57 before accessing their cash private pension cash.
The government decided to change this to reflect that people are living longer and therefore need their retirement savings to last longer.
This means that anyone who was born after April 5, 1973 will have the earliest date they can access their benefits delayed by two years.
But anyone born between April 6, 1971, and April 5, 1973, will also be affected by the rules, which will change overnight.
This is people who are currently aged between 51 and 53.
Former pensions minister Steve Webb, now partner at LCP, said: “For people who reach 55 close to the changeover, they can be in the bizarre position of having a short period when they can access their pension at 55 but then the window shuts and any further pension money cannot be taken until they are 57.
“Anyone born in the early 1970s should check where they stand to make sure their early retirement plans do not have to be ripped up.”
Steve said the issue could affect well over one million people.
Some pension scheme members have a “protected pension age”, which means they will keep the right to take their pension at 55 if they want to.
Aviva, Scottish Widows and L&G are among some well-known providers with this benefit.
But the vast majority of workplace scheme rules tend to say that you can start using your savings in line with whatever age the government says.
It comes after 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.
How to check when you can access your pension
If you’ve got money in pensions savings and you’d like to check if you have a “protected pension age”, the first thing to do is to check your current scheme rules.
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.
If you have multiple pots of savings from different workplaces they may all have different rules in place so you should check them all.
Try looking on the provider website, as well as in your pension documentation and any FAQs.
If you can’t find the rules either email the company or ring them up.
What you need to find out is whether the rules specify 55 or if they just say that you can access the cash from the normal minimum pension age or according to the government rules.
If age-55 is specified, then you’ve already got the freedom locked in.
It’s important to note that 55 is a relatively early retirement. You now can’t take the state pension until you are 66.
Meanwhile, one saver turned £2,536 into £21,000 with Martin Lewis ‘most lucrative’ money move – anyone under 73 can do it.
How to track down a lost pension pot
First gather all the pensions documents you have – this could be paperwork or online documents or emails.
When you are first signed up to a pension you should get sent information about it.
Pension providers send annual statements usually by post, and that’s why it’s worth keeping your address up to date.
If you see any pension providers you don’t recognise, you can get in touch with them directly
Ask if they have more information about your pension and its value and they should be able to help.
If you don’t know who you have a pension with, it’s worth contacting old employers instead.
If they’re still in business, contact them to see if they can help you find out which pension provider administered your workplace scheme.
If you can’t get in touch with your old workplace, or your hunting for a private pension then it’s worth using the government’s free Pension Tracing Service.
This lets you search a database of hundreds of thousands of pension scheme contact details to find your provider.
You can search online by entering the name of your employer or old pension provider.
The service will tell you who managed your old company’s scheme and you will then need to contact them.
Do you have a money problem that needs sorting? Get in touch by emailing money-sm@news.co.uk.
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