A big topic of discussion recently has centred around the increase to the Normal Minimum Pension Age (NMPA) from 55 to 57 from 6th April 2028. The intention is then that the NMPA tracks 10 years behind the State Pension Age – so, under current plans, we can expect this to increase.
The NMPA is the earliest age someone is able to access their retirement benefits (outside of an ill health situation)
For most private pensions this is something that is relatively straight forward in its execution – individuals will only be able to access their pension when they are 57 or over from April 2028.
However, for the public sector schemes such as the NHS and Civil Service, there are various considerations regarding the interaction of the changes to the NMPA and the regulations that govern the schemes.
Final Salary Schemes
Due to how Final Salary scheme regulations were drafted, the minimum retirement age was specified as the set age of 50 or 55 [depending on membership] rather than Normal Minimum Pension Age and members therefore have a right to access their benefits under those schemes at age 50/55.
From 6th April 2028, this right (to access benefits at 55) will only exist if the member has an unqualified right. An unqualified right is interpreted as meaning ‘able to retire without needing their employer’s permission’.
CARE Schemes
For CARE schemes, these regulations set out the NMPA as the NMPA rather than a specific age, so this will change to 57 from April 2028 and follow suit with any future increases.
What does this mean for members?
This raises some questions around situations such as partial/flexible retirement – an individual can access their pension whenever they choose without usually needing permission. However, in the situation of partial/flexible retirement as individuals require their employer’s permission to change their hours, does this exclude them from the unqualified right definition for their final salary benefits?
Similarly, those schemes with premature retirement/redundancy after age 55, as this has an element of employers’ decisions, will this also see them excluded from the unqualified right in these situations.
The Teachers’ Pension Scheme appear to be the first to provide some information on their website although they have set out that they await further guidance regarding partial retirement and premature retirement.
What do we think?
It does seem certainly that the initial increase from 55 to 57 for the CARE schemes will have little impact as we do not usually see people accessing these benefits so early (remember the normal pension age is state pension age). However, it could create challenges with potential partial and flexible retirement and even undo some of the good work that some of the schemes have put in to try and encourage a balance between retirement and retaining experience within the workforce.
The proof will be in the pudding, as we often see with proposed changes, more detail is required and will come as to how this will impact those scenarios as set out above.
Have you reviewed your internal policies around partial/flexible retirement and other policies to ensure they reflect the recent changes? With changes coming into place, it can be a good opportunity to take stock and make sure your policies are up to date.