On 30 October the Chancellor of the Exchequer, Rachel Reeves, delivered the government’s Autumn Budget for 2024.

The main announcements in relation to pensions were: 

Tax paid on inherited pension to change from April 2027 

The government announced several measures to reform Inheritance Tax (IHT) in this Budget.  

As it stands at the moment, beneficiaries don’t pay inheritance tax on pension savings they will inherit. This is because pensions aren’t currently included in the calculations of a deceased person’s ‘estate’. 

If the value of an estate is over the tax-free threshold of £325,000, then the person’s beneficiaries pay tax on anything above it. The threshold can be higher for some beneficiaries. 

In the Autumn Budget, it was announced that the current tax-free threshold of £325,000 will remain the same until 2030. 

It was also announced that, from April 2027, pensions will be included in the calculations of the value of a deceased person’s estate. Because of this, they could be subject to IHT. This measure will only affect beneficiaries of pensions which haven’t yet been claimed and any death benefits due.  

Whilst this change will impact both Defined Contribution (DC) schemes, such as the IWDC, and Defined Benefit (DB) schemes, such as the Shared Cost sections of the Railways Pension Scheme, it is expected to impact unused DC funds more as funds used to provide a dependants’ scheme pension, common within DB schemes, will remain out of scope of IHT. 

The government are yet to confirm exactly how implementing the changes will work. We’ll provide more detail as we know more. 

The State Pension to increase from April 2025 

Pensioners will get a 4.1% boost to their State Pension from next year. 

This is because the government will maintain the State Pension triple lock for the duration of this parliament.  

The full new State Pension will increase to £230.30 a week (£11,975 a year) and the full, old Basic State Pension will go up to £176.45 a week (£9,175 a year). 

Tax-free overseas transfers to be reduced 

Individuals who want to transfer their pension to an overseas pension provider, called a Qualifying Recognised Overseas Pension Schemes (QROPS), may have to pay a 25% tax charge unless an exclusion applies.  

One of the exclusions to this charge was previously in relation to QROPS established in the European Economic Area (EEA) or Gibraltar. 

The government have announced that from 30 October 2024 the exclusion in respect of the EEA or Gibraltar will no longer apply in order to address the risk of individuals receiving double tax-free allowances.