Millions of workers are reviewing their retirement plans as the age at which pensions can be accessed continues to rise.
But experts warn some savers may have accidentally put themselves at a disadvantage without realising it.
Pension specialists say thousands of workers may have unknowingly given up a valuable right that allowed them to access their pension savings at 55, meaning they could now be forced to wait an extra two years before touching their money.
The problem affects people who moved their defined contribution workplace pensions to new providers without realising they held a “protected pension age”.
This protection means some savers are still legally allowed to access their pension at 55, even though the standard pension age is rising for everyone else.
People who have lost this protection may need to rethink their plans, including working longer than expected or delaying things like paying off debts or helping family members financially.
From April 2028, the minimum age at which savers can access a defined contribution workplace pension without a tax penalty will rise from 55 to 57.
However, some private pension schemes include rules that legally allow members to keep the right to access their pension at 55 despite the change.
This protection, known as a protected pension age, was created to ensure certain savers are not disadvantaged by the new rules.
Some private pension schemes include rules that legally allow members to keep the right to access their pension at 55 despite the change
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GETTYThe problem emerged because many workers who transferred their pensions to different providers were never informed they held this protection, nor were their new providers made aware of the entitlement.
Andrew Tully of Nucleus Financial, a platform utilised by financial advisers, explained the root cause of the problem. He said: “If people transferred shortly after the rules were introduced in 2021, then the transferring scheme may not have told the receiving scheme that right existed, or the specific situation.”
Before November 2021, pension providers had no standard process for sharing information about protected pension ages when pensions were transferred.
Adding to the problem, not all pension schemes support this protection, meaning some workers may have permanently lost their right to access their pension at 55.
Prior to November 2021, pension providers had no established procedure for communicating information about protected pension ages during transfers
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GETTYOnce funds move to a new provider, that company bears no legal requirement to honour or manage the protected pension age entitlement.
Sir Steve Webb, a former pensions minister now working as a partner at consultants LCP, condemned the planned increase in minimum pension age. He said: “The standard normal minimum pension age will rise to 57 overnight on April 6 2028, which could catch some people unawares.”
Sir Steve described the situation as “a complete mess” and characterised whether individual savers were affected as “a bit of a lottery.”
Thousands unknowingly give up right to access retirement savings two years early
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GETTYHe argued that leaving the existing rules unchanged would be preferable, but if changes must proceed, greater efforts are needed to safeguard those who might inadvertently lose early access to their savings.
The Association of British Insurers has initiated a voluntary industry-wide exercise to help providers identify affected transfers and share relevant information.
HMRC has indicated it will provide further details for affected savers shortly.