Raising the Normal Minimum Pension Age from 55 to 57
- Author : Novia Financial
- Date : 8 Mar 2021
The government’s recent consultation proposes a change to the Normal Minimum Pension Age (NMPA) from April 2028. The publication has raised some questions about the proposed protection regime. The paper proposes that members of pension schemes who are currently able to retire at age 55 will have their minimum pension age protected. Our interpretation based on the consultation is that the Novia SIPP will be a protected scheme, meaning that all members of the Novia SIPP as at 11th February 2021 (the date the consultation was published) will retain indefinitely their ability to take benefits from the scheme at age 55.
Clients who will turn 55 before April 2028 will be able to take benefits at 55 regardless of the rule change. What remains unclear is the impact on younger clients who transfer their pensions after 11th February 2021. The consultation suggests that the existing block transfer provisions could be utilised to preserve protection, modified for greater flexibility in light of pension freedoms (for example, the benefits will not have to be taken all at once).
The amendment to the NMPA is only in its consultation phase, so it’s not clear what the final outcome will be. We have outlined some features of block transfers that you may find useful.
What is a block transfer?
Sometimes referred to as a ‘buddy’ transfer, it’s where 2 or more people transfer their whole pension from one scheme to another, at the same time. Under these circumstances, a protected pension age (and/or any protected lump sum entitlement) can be carried intact from scheme to scheme.
Will my client get a protection certificate?
No. Unlike lifetime allowance protection, a protected retirement age is specific to the scheme rather than the individual, so there are no certificates issued by HMRC. A client’s protected pension age is confirmed across a block transfer by the ceding scheme directly to the receiving scheme.
Do the individuals in the block transfer need to be related?
No. In fact there doesn’t need to be any connection between them at all. The clients just need to be members of the same pension scheme, transferring to the same pension scheme, at the same time.
What does ‘at the same time’ actually mean, and are there any other conditions?
The rules recognise that for any number of practical reasons, the money from both transfers may arrive at the receiving scheme on different days. What qualifies a block transfer is that the instruction is for both transfers to be processed under a single transaction. If the transfer instructions are explicit and reference all parties to the block transfer, the ceding scheme should be able to process both transfers as part of the same instruction and the ‘single transaction’ requirement for a block transfer will be met. For further requirements see here.
Can a block transfer be in-specie?
What’s the process for doing a block transfer into the Novia SIPP?
There is a block transfer button available at application stage, which prompts further details. Using this means that the Transfer/Re-registration Authority form will carry block transfer information. You should also use the notes section of the form to identify the other party(ies) involved in the block transfer.
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