Pensions Bulletin 2026/22
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This edition: Pensions UK Retirement Living Standards updated, Pensions tax law tidy up continues, HMRC tweaks IHT Technical Note and publishes Newsletter 181, and more.
Pensions UK Retirement Living Standards updated
The latest edition of the Pensions UK’s Retirement Living Standards shows that the cost of living has increased over the last year (see Pensions Bulletin 2025/22), reflecting increased everyday costs across spending categories such as food, essential household bills and transport, as well as the social activities and hobbies. The latest typical annual costs for living outside London are:
- Minimum (“covers all your needs, with some left over for fun”) – £13,900 for a one-person household and £22,500 for a two-person household. These have increased from £13,400 and £21,600 respectively.
- Moderate (“more financial security and flexibility”) – £32,700 for a one-person household and £45,400 for a two-person household. These have increased from £31,700 and £43,900 respectively.
- Comfortable (“more financial freedom and some luxuries”) – £45,400 for a one-person household and £62,700 for a two-person household. These have increased from £43,900 and £60,600 respectively.
The full report shows what are included in each of these figures.
The research further finds that around 82% of the working population is expected to reach the Minimum level of living standards, whilst only 23% is expected to reach the Moderate level, and 9% the Comfortable level.
Comment
These figures reinforce that without higher levels of saving, there is a risk that many will face a significant lower living standard than they might otherwise expect when they stop working.
The Retirement Living Standards is an important measure used by the Pensions Commission in assessing the working population’s level of undersaving (see Pensions Bulletin 2026/20). The Commission considers that a hybrid measure based on the absolute minimum adequacy for lower earners and replacement rates for middle earners would help guide policies in the future – this could bring these Retirement Living Standards figures to the forefront of policy making.
Pensions tax law tidy up continues
Draft regulations have been laid before Parliament that contain further adjustments to pensions tax law so that the Lifetime Allowance abolition policy works as intended. This follows an extension of the power originally granted in Finance Act 2024 by Finance Act 2026 (see Pensions Bulletin 2026/10), in light of the fact that even after three previous sets of amending regulations there continued to be technical errors and omissions in the complex law required to deliver the abolition and its replacement with Lump Sum Allowances.
The same extension of regulation powers will see The Pensions (Abolition of Lifetime Allowance Charge etc) Regulations 2026 backdated so that they have effect from the 2024/25 tax year onwards.
The Explanatory Memorandum sets out the nature of the amendments being made. The amendments are wide ranging and technical, including fixes to the calculation of the permitted maximum pension commencement lump sum, the treatment of transfers between UK and overseas pension schemes and lump sums paid from overseas schemes to UK residents, various notification and disclosure requirements, and references and definitions.
Comment
This is a just-in-time set of regulations, as the power to make changes to primary legislation by statutory instrument expires at the end of June. Given the number of attempts this has so far taken, hopefully all the issues have now been identified as this will be the last chance for HMRC to fix this very complex piece of law.
HMRC tweaks IHT Technical Note and publishes Newsletter 181
HMRC has tweaked the technical note on inheritance tax changes that are being introduced in 2027, which it published in Mid-May (see Pensions Bulletin 2026/19) to clarify that once HMRC has issued a clearance certificate to let a personal representative (PR) know that they have paid all inheritance tax that is due, the PR will not be liable for any further tax if any further pension benefits are later identified. PRs will still need to report any new notional pension property that is discovered after the clearance certificate issued.
The technical note and the consultation on the associated draft secondary legislation on changes to the information sharing regulations that HMRC subsequently launched (see Pensions Bulletin 2026/20) also form the backbone of its Pension Schemes Newsletter 181. Other topics covered in the Newsletter are reminders about the withdrawal of its pension schemes online service from April 2027 and various process points for relief at source pension schemes.
SPP proposes consumer-friendly VFM ratings
The Society of Pension Professionals (SPP) has published a discussion paper arguing that the proposed Value for Money (VFM) framework should evolve beyond a regulatory and trustee oversight tool and become something that helps pension savers make better decisions. This comes at a time when we expect the Financial Services Authority to take the next steps in finalising the VFM framework rules later this year (see Pensions Bulletin 2026/10).
The SPP argues that DC members should be able to understand how well their pension is performing, particularly since it is the members who are expected to bear investment and retirement risks. In order to do so, the SPP proposes several areas for consideration, including a consumer-facing rating system similar to energy performance or food hygiene ratings; a focus on retirement income in terms such as “expected annual retirement income generated per £100 saved” rather than technical metrics; addressing behavioural biases caused by influences such as branding, apps and recent investment performance; and extending VFM assessments to decumulation solutions.
Comment
The SPP’s central argument that the current VFM proposals risk becoming another governance and regulatory exercise unless they are translated into a format that ordinary savers can understand and act upon is a concern shared by many. However, the idea of a simple pension “rating” is likely to be controversial, particularly given the challenge of reducing complex pension outcomes to a single score, but the paper highlights an important question: if the purpose of VFM is to improve member outcomes, how will members actually use the information?
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