UK Pension Rule Change: Thousands Face Two-Year Lockout from Savings
Thousands of workers across the United Kingdom are set to be locked out of their pension savings for a period of two years due to a significant rule change implemented by the Labour Party government. Many individuals remain unaware that they will be unable to access their pension funds during this timeframe, which could have substantial implications for their retirement planning.
Key Changes to Pension Access Ages
The Department for Work and Pensions (DWP) state pension age is currently set at 66 for both men and women. However, this age will begin to increase gradually starting from May 6, 2026. By April 6, 2028, the state pension age will be firmly established at 67. This adjustment is part of a broader reform that also impacts the age at which individuals can access their private pensions.
Currently, the Normal Minimum Pension Age (NMPA) for accessing private pensions is 55. When the state pension age rises to 67 in 2028, the NMPA will simultaneously jump from 55 to 57. This overnight change means that individuals aged between 55 and 57 on April 6, 2028, will face a two-year period during which they cannot access their pension pots.
Expert Advice and Government Statements
Former Liberal Democrats and Conservative Party coalition government pensions minister, Sir Steve Webb, who is now a partner at LCP, has issued a warning to the public. He stated, “I would advise people to check with all of their pension schemes and providers whether the access age will rise to 57 in 2028 and to base their plans on this up-to-date information.”
The government has clarified the impact of this rule change, noting that individual members of registered pension schemes without a protected pension age will be affected if they take benefits before age 57 after April 5, 2028. However, there are exceptions for members of public service schemes, including firefighters, police, and armed forces personnel, who will not be subject to this increase.
Historical Context and Future Reviews
The NMPA was first introduced in 2006 and was increased from age 50 to age 55 in 2010. Following a consultation on ‘Freedom and Choice in Pensions’ in 2014, the government announced plans to raise the NMPA to age 57 in 2028, aligning it with the rise in the state pension age to 67. The Labour government has reassured the public that this measure will be kept under review through ongoing communication with affected taxpayer groups.
This rule change underscores the importance of proactive retirement planning and staying informed about legislative updates that could impact financial security in later years.
