Here is our weekly summary of key legal and regulatory developments relevant to occupational pension schemes that you might have missed, with links for further information.
In a week when there is no shortage of pensions news, our new thought-leadership campaign, Cost of Living: The Pension Dimension, is now underway. Through a series of interviews and expert insights, we will explore the challenges of pension affordability and savings adequacy. Bringing together perspectives from some of the industry's leading voices alongside commentary from our own pensions team, the campaign aims to contribute to the debate on the future of retirement saving. In our first interview, UK Pensions Minister Torsten Bell discusses the government’s approach to addressing pension adequacy. Stay tuned for the next instalment tomorrow.
Budget 2026 has caused ripples rather than waves across the pensions industry, and many of the proposed changes had already been announced by the government before 28 October (Budget Day). We summarise below some of the headlines that will have an impact for the pensions industry.
Introduction of a new pension tax allowance from April 2027 – It was announced that individuals who have reached state pension age (SPA), or will reach SPA within the tax year, with incomes at or under the full annual value of the new state pension (including income from other sources, such as private pensions) will receive the pension tax allowance and not pay income tax. Individuals with incomes slightly above that amount will benefit from part of the allowance, due to a tapering effect. For more details about the proposed new allowance, see HM Treasury’s Pensions Tax Allowance explainer.
Removal of the two-year deadline for paying death benefits – The government plans to introduce measures to provide that certain pension and lump sum death benefits (notably tax-free lump sum death benefits) will no longer be taxed solely because they are not paid within two years of the scheme administrator (which usually means the pension trustees in this context) learning of the member’s death. The proposed new rules will be included in the Finance Bill 2026-27 and will apply to payments made on or after 28 October 2026. HM Revenue and Customs (HMRC) has published a policy paper explaining the rule change.
Relaxation of HMRC serious ill health lump sum rules – We noted in our weekly update of 8 July 2026, that the government had said it would review accessibility to private pension savings in the event of terminal illness. The chancellor announced that the Finance Bill 2026-27 will introduce amendments to HMRC rules governing when a terminally ill member of a registered pension scheme can receive a serious ill health lump sum. The proposed new rules are intended to be more flexible, allowing an eligible member to receive a serious ill health lump sum if they “can be reasonably expected to die within 12 months”. The range of practitioners who can provide the required medical assessment will also be extended to include medical practitioners based outside the UK. Further explanation is provided in a HMRC policy paper. The measure is planned to have effect on and after the date of royal assent to the Finance Bill 2026-27.
Collecting tax due on excess lump sum death benefits – The government intends to change the way tax is assessed and collected where certain pension lump sum death benefits are payable, but the deceased member’s lump sum death benefit allowance has been exceeded. HMRC will apply a separate tax charge (based on the recipient’s marginal rate of income tax) on the chargeable amount of the lump sum death benefit. The excess payment will no longer be treated as pension income for general purposes. An HMRC policy paper explains that the proposed change will enable affected cases to be resolved more efficiently. HMRC’s pension schemes newsletter 186 notes that the measure will have retrospective effect for relevant lump sum death benefits paid on or after 6 April 2024.
The Mansion House Accord – The accord is predicted to unlock around £25 billion of additional investment into UK private markets, and the government states that it “will work with pension providers, asset managers and the wider industry to build on existing commitments, accelerate the deployment of capital into innovative, scaling businesses, and support the UK’s scale-up ecosystem”. Further detail on the government’s vision regarding how pension capital can be used to help grow UK companies is provided in HM Treasury’s prospectus.
Adjustment of the state pension triple lock from April 2030 –The government plans to adjust the triple lock so that the state pension will rise each year“by the highest of 2.5%, inflation, or the amount required to maintain its value relative to earnings as reached in April 2029”.
Local Government Pension Scheme (LGPS): Stamp duty land tax relief – A relief is proposed to be introduced for the pooling of local LGPS debt assets situated in England and Northern Ireland to support LGPS reforms, and it will apply to transactions from 28 October 2026 and before 1 April 2032. This is planned to be introduced through Finance Bill 2026-27. HMRC’s technical note has been updated.
The government also referred to changes to enable the consolidation of defined contribution schemes and the introduction of the guided retirement framework and retirement-only collective defined contribution pension schemes. More details are contained in HMRC’s pension schemes newsletter 186 and various documents published by the government, which we link to below. HMRC says that it intends to hold industry roundtables to discuss these changes in the new year. If you are interested in attending, email policypensions@hmrc.gov.uk.
The government has published its response to consultation on retirement collective pension schemes (RCPS) (also known as retirement-only collective defined contribution schemes), alongside a consultation on draft regulations. The draft regulations establish the framework under which RCPS can be authorised, supervised and operated. The government says that the regulations are intended to support innovation and market development while ensuring that appropriate protections are in place for members. Consultation closes at 11:59 a.m. on 15 December 2026 (although this might be an error as consultations more usually close at 11:59 p.m.).
At the same time, the government has published a policy consultation on guided retirement in collaboration with the Financial Conduct Authority (FCA) and The Pensions Regulator (TPR). The purpose of the consultation is to seek views on initial policy proposals for the implementation of guided retirement across both contract-based and trust-based pension providers. The Department for Work and Pensions (DWP) says that the proposals aim to support a broadly consistent approach across workplace pension schemes, while recognising the distinct legal and regulatory frameworks that apply to contract-based and trust-based arrangements. Consultation closes at 11:59 p.m. on 21 December 2026.
HMRC’s pension schemes newsletter 186 notes some technical amendments to be made to the new pensions and inheritance tax regime that will come into force from 6 April 2027. The government will allow prospective personal representatives to give payment notices to pension trustees where there is no will or named executor where certain conditions are met. The government says that it will also legislate to update the inheritance tax charitable giving condition to create a separate component for pension funds. Personal representatives will then be able to choose whether to include pension funds when testing to see if enough of the estate has been given to a registered UK charity to qualify for the reduced 36% inheritance tax charitable giving rate. Additionally, the newsletter signposts contact details for different types of pensions tax enquiries.
TPR has issued new guidance for trustees and scheme managers on the use of artificial intelligence (AI) in pension schemes. The guidance builds on TPR’s existing AI plan. TPR says “the use of AI does not change your existing duties and responsibilities as a trustee, including your fiduciary duties. You remain responsible for making sure your scheme is governed and administered effectively and in line with legal and regulatory requirements, regardless of which technologies are being used.”
The Economic Crime and Corporate Transparency Act 2023 (ECCTA) introduced a requirement for small- and micro-entities, which would have captured some corporate trustees, to start filing a profit and loss account with Companies House from April 2028. Following recommendations of the Small Business Regulatory Taskforce, the government has decided to pause implementing this requirement. Companies House has updated its timeline for implementing measures under ECCTA. We are still waiting to find out the date on which the restrictions in relation to corporate directors will come into force.
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If you would like specific advice on any of these issues or anything else, please contact a member of our Pensions team.
