Authors: Chris Biddle & Nathan Salter
The Chancellor of the Exchequer, John Healey MP, delivered his Autumn Budget 2026 to the House of Commons on Wednesday.
The most significant change in the pensions space relates to the new Pension Tax Allowance (“PTA”) for low-income pensioners.
From April 2027, the new PTA will mean pensioners whose total income does not exceed the full new State Pension will not be brought into paying tax because of State Pension uprating during this Parliament. The PTA will run from 6 April 2027 to 5 April 2030, rising in line with the State Pension. A taper mechanism will be in place for those with incomes just above the value of the full new State Pension. The Government has indicated it will look at arrangements beyond April 2030 in due course.
While private occupational pension schemes did not feature as heavily in the Budget, there are a handful of developments to be aware of:
- Serious ill-health lump sums: The Government is changing the test used to decide whether a serious ill-health lump sum qualifies as an authorised payment for tax purposes. Currently, the test is that the trustees must have received evidence from a registered medical practitioner that the member is expected to live for less than one year. This will be changed to a test that death can reasonably be expected within 12 months. This is expected to allow such payments to be treated as authorised in more cases than at present, though scheme rules will need to be checked individually to see how this applies.
- Tax treatment of pension and lump sum death benefits: With a view to improving fairness and reducing the administrative burden, the Government is removing the “two-year rule”, so that beneficiaries are no longer taxed solely because a tax-free pension or lump sum death benefit is paid more than two years after the member’s death. This change applies to payments made on or after 28 October 2026.
- Mansion House Accord: The Government has reiterated its commitment to making better use of UK pension schemes’ assets as productive assets to invest in the UK economy, stating that “the Mansion House Accord should unlock around £25 billion of additional investment into UK private markets. The government 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.”
- Guided Retirement and Retirement-only Collective Defined Contribution (“RCDC”) schemes: The Government will make changes in legislation to allow for easier consolidation of defined contribution schemes, alongside introducing the new Guided Retirement framework and the introduction of RCDC schemes. The measures will also widen the circumstances in which members can keep certain protections following a transfer, and allow members to move from an RCDC arrangement into a drawdown arrangement within a set window.
- Coal Pension Schemes: The Government will change the surplus sharing arrangements for the Mineworkers’ Pension Scheme and the British Coal Staff Superannuation Scheme, so that members receive 100% of the surpluses generated from these schemes’ performance. It also plans to work with the schemes' trustees towards a full transfer of what remains of the Guarantor's Fund.
We will keep you posted as the changes above move through Parliament.
For more information, please speak to your usual Linklaters contact.
