Concern over minimum pension age rise

In the budget detail: Concern over minimum pension age rise continues but the government finally gets to grips with Net pay arrangements

  • The government announced an increase in the normal minimum pension age will be included in the finance bill. In its current form, the changes have sparked concern from the industry.
  • The government has also announced it will tackle the net pay arrangement issue were low paid people who don’t pay income tax do not benefit from pension tax relief in certain employer pension schemes.

Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown:

“Ploughing through the budget detail we are disappointed to see government will legislate for the increase in normal minimum pension age in the finance bill. In their current form, these changes bring complexity to retirement planning and open the doors to the next wave of scam activity and we had hoped the government would take the time to have another look.

While the shift from 55 to 57 should be straightforward the proposed protection regime risks delivering a two-tier system with some people able to access their pension at 55 and others 57. It is the perfect opportunity for scammers to crawl out of the woodwork offering to help people transfer to arrangements with a protected age of 55 while taking a huge chunk for themselves in the form of fees. We’ve been here before with the wave of free pension reviews offered in the wake of the pension flexibilities – we do not need to go back there again.

In addition, having a range of minimum pension ages can get in the way of retirement planning – for instance, people may not be able to consolidate pots because they have different pension ages attached to them. The government needs to look at who these changes are really benefiting and adopt a simplified approach. In short, there is no benefit to pension savers with this increase, it’s only really pension plans who stand to benefit by hanging on to the monies for an extra two years, but they’re set against it too.”

Net pay

“However, there is some positive news in the announcement that government will introduce a system to make top-up payments in respect of contributions made in 2024-25 onwards directly to low-earning individuals saving in a pension scheme using a net pay Arrangement. The purpose is to align them more closely with those in a Relief at Source scheme from 2025-26. It is expected an estimated 1.2 million individuals could benefit by an average of £53 a year. While a four-year wait is not ideal it is an issue that the government has needed to get to grips with for some time and it is hugely positive to see progress in this area.”