Key Changes to Workplace and Private Pension Arrangements Announced by Rachel Reeves

The Autumn Budget 2024, presented by Chancellor Rachel Reeves, has introduced several significant changes to workplace and private pension arrangements. These changes aim to address various economic challenges and ensure the sustainability of pension schemes. Here are the key changes that will impact individuals and businesses alike.

Inheritance Tax on Pension Funds

One of the most significant changes is the inclusion of unused pension funds and lump sum death benefits payable from registered pension schemes in the scope of Inheritance Tax (IHT) from April 2027. This means that pension pots, which were previously exempt, will now be included in the value of the estate for IHT purposes. This change is expected to increase the IHT liability for many families and requires careful estate planning.

State Pension Triple Lock

The government has committed to maintaining the State Pension triple lock for the duration of this Parliament. As a result, the basic and new State Pension will increase by 4.1% in 2025-26, in line with earnings growth. This ensures that the State Pension continues to rise in line with the higher of earnings, inflation, or 2.5%.

Changes to Overseas Pension Transfers

The budget also includes changes to the tax treatment of overseas pension transfers. From October 30, 2024, the exclusion from the Overseas Transfer Charge for transfers to Qualifying Recognised Overseas Pension Schemes (QROPS) in the European Economic Area (EEA) or Gibraltar will be removed. This aims to address the risk of individuals receiving double tax-free allowances.

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Despite these changes, Pensions remain an extremely tax efficient way to save for retirement but it can be a complex area, particularly for high earners and those with large pension funds. If you have a question or are concerned about your own position please click the button below.