Pension warning as savers could be locked out of retirement funds for two extra years

Pension savers across Britain could find themselves unexpectedly unable to access their retirement funds when the Normal Minimum Pension Age rises from 55 to 57 on 6 April 2028.

For the past 16 years, private pension holders have been able to access their savings at 55 without incurring tax penalties. That threshold is now shifting.

Gary Smith, Partner in Financial Planning and retirement specialist at wealth management firm Evelyn Partners, warned: "This seemingly straightforward rule change could catch out thousands of unsuspecting pension savers. Many face a cliff-edge, where their ability to access their pension is suddenly put back for up to two years."

The change is designed to maintain a 10-year gap below the State Pension age, which is increasing to 67.

The impact of the reforms will depend largely on a person's date of birth.

Those born on or before 5 April 1971, who had already turned 55 before the current financial year, will not be affected and can still access their pensions from 55.

Meanwhile, anyone born after 5 April 1973 will need to wait until 57 before they can access their pension savings, with no option to withdraw funds earlier.

The most precarious position belongs to those born between 6 April 1971 and 5 April 1973. This two-year cohort turns 55 between April 2026 and April 2028.

Mr Smith explains that these individuals "have an option to retain access to funds that otherwise will be delayed" — but only if they take action before the deadline.

For this critical middle group, the consequences of inaction are stark.

Should someone in this cohort reach 55 before 6 April 2028 but fail to crystallise any retirement benefits before that date, they will be barred from accessing their pension until their 57th birthday.

Mr Smith illustrates the potential impact: consider a saver who celebrates their 55th birthday on 6 March 2028.

If they do not access their pension before 6 April 2028, they will remain locked out until 6 March 2030 — a full two years later.

However, those who do crystallise their pension before the deadline — whether by entering drawdown, purchasing an annuity, or receiving defined benefit payments — can continue accessing those funds after April 2028.

There is a catch: no further crystallisations are permitted until reaching 57.

Some pension schemes offer a safeguard through protected pension ages, which allow access below 57 even after the rule change takes effect.

These protections are scheme-specific rather than tied to individuals. Certain arrangements still permit access at 50 or even earlier, dating back to the previous minimum age increase in April 2010.

Mr Smith cautions that protected ages can be forfeited when transferring pensions to another provider. Even following proper procedures offers no guarantee, as the receiving scheme must agree to honour the protection — and is under no obligation to do so.

Savers should contact their pension providers directly to confirm whether protected retirement ages apply.

Notably, pension schemes for armed forces personnel, police officers and firefighters remain exempt from the NMPA increase entirely.

Those who cannot access their pension at 55 but had planned to retire at that age will need alternative funding sources to bridge the gap.

Mr Smith suggests ISAs, savings accounts or other investments could cover expenditure requirements between ages 55 and 57. Those unable to build such reserves may have no choice but to postpone retirement.

The upcoming inheritance tax changes affecting money-purchase pensions from April next year add another consideration, potentially prompting some savers to access funds earlier than originally intended.

Individuals with multiple pension arrangements may need to consolidate and fully crystallise before April 2028 to maintain flexibility in drawdown.

Mr Smith emphasises that specialist advice is essential before transferring any pension, particularly those with guaranteed benefits or protected features that could be lost in the process.