Adding this additional layer of complication makes the job of planning for retirement exponentially harder. Not only does it make the process of figuring out how much you will need to take, and when, a lot harder, but introducing this significant complexity runs the risk that savers will simply disengage altogether.
It is not too much of a leap to think that someone so frustrated with the countless rules just gives up on their pension entirely and takes it all out to put it in a bank account once they are able to access it.
And when pension dashboards are launched (which ultimately aim to support better planning in retirement), having various NMPAs could well make the information presented confusing and hard to follow, and in fact may limit their eventual benefit.
Nobody is questioning whether the NMPA should actually go up. People are living longer, and with the increase in the state pension age, an increase in the NMPA alongside it is necessary to reduce the risk that savers run out of money in retirement.
But the way in which the government wants to do it will add fuel to the fire in an already complicated pension system.
The Association of British Insurers is calling for everyone to be able to access their private pension at 57 years old with some limited exceptions, and this seems like a sensible approach.
Back in 2010 when the NMPA was last increased the protection regime was only applied to occupational schemes where there was a clear reason for someone needing the money at an earlier stage linked to the nature of the individual’s employment.
This is the principle the government should stick to, otherwise they will bake in complications to the pension system for decades to come.
Gemma Harle is managing director at Quilter Financial Planning
