Martin Lewis on how much you should be putting in your pension
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Pension rules are set to change, but new research has indicated significant numbers of people face challenges due to their lack of knowledge of this fact. The issue to be aware of is something known as Normal Minimum Pension Age (NMPA). This is the youngest age at which someone can usually expect to be able to access their pension.
While this has been age 55 since 2010, the Government is set to go ahead with its plans to increase eligibility.
In April 2028, the NMPA is set to rise to 57, potentially impacting a whole swathe of Britons currently saving for their retirement.
However, the Pensions Management Institution (PMI) – a trade body for pension workers – has warned of a lack of awareness.
Its research found four out of five people in their forties do not know these changes are taking place.
As a result, individuals could be in for a nasty shock when they come to withdraw from their pension pot.
Many may be forced to work an extra two years to compensate for the change going ahead.
A survey conducted by the body on some 2,000 people aged 40 to 49 found only four percent could correctly identify the current minimum age of 55.
In addition, 18 percent of those asked knew the NMPA is set to increase imminently.
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Lesley Alexander, President of the PMI, said: “The results of this research are particularly worrying, as they suggest strongly that the Government has failed to make the general public aware of a significant change in pensions policy.
“This news comes just six months after the Parliamentary and Health Service Ombudsman judged that Department for Work and Pensions was guilty of maladministration over its failure to provide adequate notice of the change to state pension age for women born in the 1950s.
“There is very real potential for another embarrassment.
“It is vital that the general public understands clearly what their retirement choices are.”
The Government published a policy paper in November 2021 outlining its aims for the NMPA and also highlighting who could be impacted.
It read: “Individual members of registered pension schemes who do not have a protected pension age but take scheme benefits before age 57 after April 5, 2028 or those who would like to have taken a benefit but will not be able to.
“However, members of the firefighters, police and armed forces public service schemes will not be affected by this increase.”
The rise of the NMPA is also set to coincide with the increase to the state pension age to 67 at the same time.
At present, withdrawing money from a pension before the NMPA could have serious consequences.
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Unless a person meets specific conditions such as having ill health, then they could be charged a substantial amount of tax and risk running out of money in retirement.
Because of such high tax charges – in some cases 55 percent – many reputable companies will not permit early withdrawals.
As a result, some will turn to third parties, but these groups could also charge a fee which eats away at a pension pot.
In many circumstances, scammers and con-artists attempt to convince Britons they could withdraw early without charges, but this is unfortunately how a number of people have ended up losing their money altogether.
Britons are always advised to think about any decisions on their pension carefully, and consult an advisor if they need further assistance.
Help is also available via the Government’s PensionWise service and the online tool MoneyHelper.
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