Millions of UK retirement savers will be blocked from taking action to preserve access to their pensions at age 55 under a dramatic overnight move by the Treasury.
Savers building retirement pots in defined contribution schemes, which do not guarantee a fixed sum, can currently access their funds when aged 55.
In July, the Treasury confirmed plans to increase this “normal minimum pension age” for defined contribution schemes from 55 to 57 from April 2028 to reflect long-term increases in life expectancy and changing expectations of how long people will remain in work.
With most private sector schemes not having a stated pension age of 55 written into their rules, savers in these schemes would see their pension age rise in line with the government’s reform.
The Treasury initially proposed giving these savers until April 2023 to transfer their funds to a pension plan which had an access age of 55 written into its rules. The move was welcomed by some financial advisers with clients not wanting to wait an extra two years to access their pensions.
However, the pensions industry warned that this concession might prompt some savers to move their pension pots merely to beat the age deadline, as well as opportunities for scammers.
In a dramatic U-turn announced on Thursday, the Treasury revealed that it had closed the transfer window overnight.
“After listening to stakeholder views on the draft clause, the government has decided to shorten the (transfer) window. The window closed at 23:59 on November 3,” said John Glen, economic secretary to the Treasury, in a written statement.
“This shorter window will help address the issues raised by stakeholders whilst also being fair for pension savers.”
The ABI estimates that several million savers will no longer be able to take advantage of the window to transfer their pensions.
The minister said that ordinarily the change — which is a finance bill clause — would have been announced in the Budget, which was last week, but doing this could have led to “unnecessary turbulence” in the pensions market and therefore consumer detriment.
“Some pension savers could find themselves with poorer outcomes (or even be the victim of a pension scam) if they were rushed by rogue advisers to make a quick transfer in the short time period before the window closed,” said Glen.
The Association of British Insurers, which represents pension providers, said: “We welcome the changes to the implementation of the normal minimum pension age which tackle some of the industry’s principal concerns about an orderly implementation and help reduce the risks to savers.
“The changes stop scammers from exploiting uncertainty, and also prevent market distortions as there are now no incentives to transfer purely to access a pension at age 55.”
However, the ABI warned that the government’s decision to allow some savers to keep their current access age of 55 risked creating confusion.
“Most savers have more than one pension pot and millions will now have a mix, with some pots they can access at age 55, and others where they need to wait to 57 making it harder to plan for retirement,” said Yvonne Braun, the ABI’s director of long-term savings and protection.
On Thursday, the Treasury said that savers who had already made a “substantive” request to transfer their pension to a pension scheme with a protected pension age of 55 or 56, before the transfer window closed overnight, would still be able to keep or gain a protected pension age assuming that the transfer is completed in accordance with the current regulations.
The Treasury added that the increase to 57 would not apply to members of certain uniformed public service schemes, nor to those whose scheme rules provide an unqualified right to take benefits before age 57.
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