Pension changes in the Budget

The Chancellor presented her maiden Budget on October 30, 2024. There are several noteworthy developments for pensions.

Inheritance tax

• Unused pension funds and lump sum death benefits payable from registered pension schemes will be treated as falling within an individual's estate and will be potentially liable to inheritance tax (IHT) from April 6, 2027. The only exceptions will be dependant’s scheme pension and charity lump sum death benefit. 
• Personal representatives will feed information about the deceased’s estate into a new online calculator and send a report to the scheme administrator. The administrator will then calculate how much IHT is payable and pay it directly from the pension scheme.
• It appears that group life policies will remain outside the scope of IHT, but this is not expressly stated.

A consultation on these changes will run until January 22, 2025.

Overseas transfer charges

• Currently, transfers from a registered pension schemes to qualifying recognised overseas pension schemes established in the EEA or Gibraltar are excluded from the 25 per cent overseas transfer charge, provided certain conditions are met. This exclusion has been removed for transfers requested from October 30, 2024.
• The regulatory regime for overseas pension schemes established in the EEA and Gibraltar will be aligned with that for other overseas pension schemes from April 6, 2025.  

State pension

The triple lock was maintained, with the basic and new State pension set to increase by 4.1 per cent from April 6, 2025. This means the weekly amount of new State pension will rise from £221.20 in 2024/25 to £230.25 in 2025/26.