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The Autumn Budget contained a range of pensions-related announcements with implications for employers and trustees of all occupational pension schemes.
Salary sacrifice
Currently, employee pension contributions made via a salary sacrifice arrangement are exempt from National Insurance contributions (NICs). From 6 April 2029, this exemption will only apply to the first £2,000 of contributions made via salary sacrifice. Any excess over £2,000 will become subject to NICs. The NICs exemption for employer pension contributions and for other employee benefits provided via salary sacrifice will remain unchanged. The government has published guidance on the changes.
Lump sum death benefits
As previously announced, most lump sum death benefits paid from registered pension schemes (whether DB or DC) will form part of the member's estate from 6 April 2027 and will therefore potentially be subject to inheritance tax (IHT). However, the government has now announced that personal representatives (PRs) will be given power to direct scheme administrators to withhold 50% of any lump sum death benefits that are potentially subject to IHT for up to 15 months and to pay any IHT due in certain circumstances. PRs will be discharged from liability to pay IHT on death benefits discovered after they have received clearance from HMRC.HMRC has published a policy paper on the announcement.
DB surplus payments
The government will give "well-funded" DB pension schemes the power to make surplus payments directly to members who are aged over normal minimum pension age where the scheme rules and the trustees permit this from April 2027.No further details on this announcement have been published.
Pension Protection Fund/Financial Assistance Scheme compensation
Currently, compensation paid by the Pension Protection Fund (PPF) and the Financial Assistance Scheme (FAS) that derives from benefits accrued prior to 1997 does not receive inflation-related increases. From January 2027, such compensation will receive CPI-related increases (capped at 2.5%) if the member's original scheme provided for the indexation of pre-1997 benefits. However, this announcement only applies to the PPF and the FAS. The government is not introducing mandatory indexation of pre-1997 benefits payable from pension schemes generally.
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