The Government is increasing the earliest age at which people can normally draw their pension and is also consulting on increasing the state pension age. Inevitably this will mean people working later in life and will likely have an impact on employers in terms of workplace planning.
Normal minimum pension age rising
The Finance Act 2022 contains an increase from 6 April 2028 in the normal minimum pension age (NMPA) from age 55 to 57. The NMPA is the earliest age under legislation at which a member of a UK registered pension scheme can normally start drawing down pension benefits. There are certain limited exceptions to this, including for ill-health early retirement or where someone has a protected pension age.
This means that from 6 April 2028, members cannot receive any pension benefits until they reach the age of at least 57, unless one of those exceptions applies.
State pension age rising?
The Department of Works and Pensions has also begun to collate evidence as part of its six-yearly review of the state pension age. The report is expected to be published in May 2023 and could also include changes to the state pension age, currently 66 but rising to 67 between 2026 and 2028 with a planned increase to 68 between 2037 and 2039.
What does this mean for employers?
Almost inevitably these changes will also change employee decisions about when to retire and this, in turn, will impact employers’ workforce planning. Some of the possible impacts include:
- An increase in retirements in the run-up to 6 April 2028, as employees retire before the NMPA increases to 57 where they can afford to do so;
- Then some employees retire later, with both the earliest date of retirement and the state pension age delayed;
- Older employees increasingly making flexible working requests where they need to keep working for financial reasons but can’t manage full-time work (either due to ill-health or because of caring for others with ill-health) or don’t want or need to work full time;
- It may also mean that ill-health retirement applications rise, as employees are expected to work longer but are not able to do so.