Minimum communication? 40-somethings don’t know about NMPA 57
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The majority of working people in their 40s are unaware of the rise in normal minimum pension age to 57 from 55, and almost as many say the government should have communicated the policy better. The government is relying on its 2014 statements and yet to be launched dashboards for people to find out. Is another comms disaster looming?
The normal minimum pension age will go up to 57 in April 2028, which is when state pension age will rise to 67, but the change could take many by surprise, new research by the Pensions Management Institute has shown, as 4 in 5 working people (82%) currently in their 40s are not aware of it. A majority (78%) also believe the government should have communicated the policy change more effectively.
‘Government has failed to make public aware’
The implication of the 2014 changes to state pension age was that minimum retirement age would be 10 years earlier, so with state pension age rising to 67 – and to 68 by 2046 – this also increases the earliest age at which people can access their pension. If they access it before then without being in ill health, they can end up paying a hefty tax charge. The PMI’s research shows some could be in for a shock when they turn 55 if they had planned to use some of their money.
“The results of this research are particularly worrying, as they suggest strongly that the government has failed to make the general public aware of a significant change in pensions policy,” said the PMI’s president, Lesley Alexander.
This is not the first time there are issues with the government’s communication of pension age changes. Only last year, the Parliamentary and Health Service Ombudsman concluded that the Department for Work and Pensions was guilty of maladministration over its failure to provide adequate notice of the increase to women’s state pension age. “There is very real potential for another embarrassment,” Alexander warned.
The DWP considers itself not responsible for communicating the change, saying minimum pension age is a Treasury policy. A government spokesperson at the Treasury said: “We announced the change in the normal minimum pension age to 57 in 2014, 14 years in advance of the change to give people time to make financial plans.”
Exemptions risk confusing people
Early last year, the government consulted on the increase, including on protections for savers who have a right to take their pension at a pre-existing pension age. It was widely criticised for making the system more complex with exemptions, such as for public service pensions, potentially confusing savers. Once made aware of the changes, a quarter of respondents to the PMI’s survey said they don't know whether the change will affect them.
The government seems to be suggesting that pensions dashboards, due to go live in 2023, will clarify these questions for people. The government spokesperson said: “We are revolutionising how consumers keep track of their pension information by introducing pensions dashboards – a single online place for people to access via their digital device at any time, putting the saver more in control and transforming how they think and plan for their retirement.”
But Alexander said the complexity of the rules make communicating them very difficult and predicted that people will be confused when they see their different pension ages on the dashboards, with some schemes having a lower access age than others. “The need for a new communication programme to explain this to the public has become urgent,” she said.
Elsewhere, the outcome of the second state pension age review, launched last month, could potentially influence the schedule of future rises in minimum retirement age, although the independence of the review has been questioned. Calls for a slowdown in raising state pension age – and in consequence, minimum pension age – have been growing as longevity figures show that even before the pandemic, improvements were less pronounced than anticipated.
Is the government doing enough to communicate the pension age changes?