29/10/2026
The Chancellor’s Autumn Budget, introduced a number of measures affecting occupational pension schemes, their members and employers. While some announcements build upon reforms already underway, others represent significant developments in the taxation and administration of pension benefits.
We consider the principal announcements and their implications for the pensions industry.
Death Benefits: Removal of the Two-Year Rule [1]
One particularly welcome announcement concerns the removal of the two-year rule governing the taxation of pension death benefits.
Previously, certain death benefits could become taxable where payment was made more than two years after the scheme administrator became aware, or ought reasonably to have become aware, of the member’s death. Under the announced reforms, death benefits will no longer become taxable solely because this deadline has been exceeded. The measure applies to payments made on or after 28 October 2026.
This should provide welcome relief to beneficiaries affected by administrative delays, particularly where complex death benefit investigations or disputes have prevented timely payment. Such complexities will potentially be exacerbated by the changes to inheritance tax, so this change reduces the chances of a “double whammy”.
State Pension: Changes to the Triple Lock
The Chancellor also announced reforms to the State Pension triple lock, introducing an adjusted mechanism intended to ensure greater long-term fiscal sustainability. [2]
A new Pension Tax Allowance will be introduced from April 2027, designed to protect individuals whose income does not exceed the full new State Pension from becoming liable for income tax solely because of State Pension increases. [3]
Inheritance Tax and Pension Death Benefits
The Budget confirmed further technical amendments to the inheritance tax framework applying to unused pension funds and death benefits from April 2027. [4]
These include additional flexibility for personal representatives in arranging the payment of inheritance tax liabilities and calculating the reduced inheritance tax rate where part of an estate is left to charity. Scheme administrators and trustees will need to continue preparing for the practical implications of bringing unused pension funds and certain death benefits within the inheritance tax regime.
Looking Ahead: What Should Trustees and Employers Consider?
The Budget demonstrates the Government’s continuing focus on balancing pension scheme flexibility with fiscal sustainability.
For trustees and employers, the immediate priorities will include reviewing death benefit administration procedures, considering opportunities arising from the proposed DB surplus reforms and preparing for the forthcoming inheritance tax changes.
Further legislative developments will be important in determining how these measures operate in practice.
How Bevan Brittan Can Help
The pensions landscape continues to evolve, with employers, trustees and scheme administrators facing an increasingly complex regulatory and governance environment. Keeping pace with legislative change is essential to ensure compliance, manage risk and make the most of emerging opportunities.
Bevan Brittan LLP's specialist pensions team advises trustees, employers, public sector bodies and pension providers on all aspects of pension law. Our experience spans public and private sector schemes, governance and administration, outsourcing and TUPE projects, risk management, regulatory compliance, benefit design, disputes and scheme change projects.
If you would like to discuss how the Autumn Budget 2026 pension reforms could affect your organisation or pension scheme, please contact a member of our pensions team.
