Pensions Bulletin 2026/29

IHT on pensions: reporting regulations laid  

The Government has now laid regulations setting out the information sharing requirements needed to support the changes that will bring most unused pension funds and death benefits within the scope of inheritance tax (IHT) for deaths occurring on or after 6 April 2027.  

The final regulations retain the framework proposed for technical consultation in May (see Pensions Bulletin 2026/20), under which information will flow between pension scheme administrators (PSAs), insurers, personal representatives (PRs), beneficiaries and HMRC. However, they include some welcome practical changes following consultation feedback. 

Most notably, PSAs will no longer have to report all death in service payments to HMRC. Instead, they must provide prescribed information to PRs only in cases where an IHT account is required. This removes a potentially significant additional reporting burden for PSAs.  

There is also a modest easement for PRs, who will have two months, instead of 30 days, to provide confirmation to HMRC of how much a beneficiary’s entitlement to a lump sum death benefit was reduced by because the PSA paid IHT. 

The regulations also reshape the information which schemes must provide following payment of a lump sum death benefit that uses up a member’s lump sum and death benefit allowance. PSAs must automatically provide PRs with core scheme and payment details within three months of the final payment. More detailed information - including recipient details, payment history and any reduction in the lump sum death benefit paid as a result of any IHT adjustment - must be supplied within one month of a request from the PRs. 

The regulations will come into force at the same time as the tax changes on 6 April 2027. 

IFS analyses trends in employer pension contributions and options for future increases

A new report by the Institute for Fiscal Studies (IFS) examines how employer contributions have evolved since automatic enrolment (AE) was introduced and the potential effects of higher minimum contribution rates. 

The research finds that average private sector employer pension contributions have increased since AE was introduced, from a low of 3.4% of earnings in 2012 to 5.1% in 2024. Contribution rates have also become somewhat more equal across age and sex. However, substantial differences remain by employer size, sector and level of earnings. For example, 46% of savers in the highest quartile of earnings received employer contributions of at least 6% of gross pay, compared with 22% in the lowest quartile.

The IFS models and compares the effects of four approaches to increasing minimum contributions rather than recommending a preferred option. It concludes that increasing minimum contribution rates would materially improve retirement adequacy but would inevitably reduce employees' take-home pay and increase employer costs. The impact would be uneven across the economy. Employers currently contributing only the statutory minimum, particularly those in low-margin sectors such as accommodation and food services, would face the largest increases in pension costs. This could in turn affect employment or future pay growth.

The report concludes that policymakers face a difficult balance. Although the second Pensions Commission estimates that around 15 million people of working-age are currently under-saving for retirement (see Pensions Bulletin 2026/20), increasing compulsory pension saving comes with its own challenges, imposing additional costs on workers, employers and public finances through additional tax relief. The authors argue that future reforms should therefore be designed carefully with this balance in mind.