7 Days is a weekly round up of developments in pensions, normally published on Monday mornings. We collate this information from key industry sources, such as the DWP, HMRC and TPR.

In this 7 Days

Pensions announcements in Budget 2026

In a relatively quiet Budget for pensions news, the Chancellor’s Budget speech on 28 October 2026, together with supporting documents, included the following relevant announcements:

  • Tax treatment of lump sum death benefits:
    • the “two-year rule” will be removed so that beneficiaries will no longer be taxable solely because tax-free pension and lump sum death benefits are paid more than two years after the pension scheme administrator first knew, or could reasonably have been expected to know, of the member’s death. This legislative change will have retrospective application to payments on and from 28 October 2026. HMRC has asked pension scheme administrators to update their processes to ensure that tax is not deducted solely because a relevant payment is made or funds designated after the end of the two-year period, and
    • to create a “practical, standalone process for assessing and collecting tax due on lump sum death benefits”, some technical changes to existing legislation are planned, which will have retrospective effect for relevant lump sum death benefits paid on or after 6 April 2024. There will also be consequential changes concerning the interaction between income tax and IHT on and from 6 April 2027
  • DB surplus: HMRC has confirmed that new authorised member surplus payments can only be paid once a member reaches normal minimum pension age (including any protected pension age) or earlier because of ill-health. Following HMRC’s July consultation (see our consultation response), the final legislation is expected to be included in the Finance Bill 2026/27
  • IHT: minor technical changes will be made to the legislation extending IHT to pensions from 6 April 2027. This includes allowing a prospective personal representative to direct pension scheme administrators to pay IHT due to HMRC via a “payment notice” when certain conditions are met, as well as formally appointed personal representatives
  • Definition of terminal illness for pensions access: changes will be made to provide greater flexibility in the medical evidence requirements for serious ill-health lump sums. This will have effect from the date the Finance Bill 2026/27 receives Royal Assent
  • DC consolidation: legislation will be introduced in a future Finance Bill to support the consolidation of DC schemes (and the development of guided retirement and retirement CDC (“R-CDC”)), including:
    • expanding the circumstances when a member may keep their protected pension age or lump sum protection following a transfer (including removing the prior membership requirement from the definition of a “block transfer”), and
    • allowing members, where the R-CDC arrangement offers the option, to transfer from an R-CDC pension to a drawdown arrangement within a set timeframe
  • State pension:
    • from 6 April 2027, pensioners with income up to the value of the full new state pension will not pay income tax (the “Pension Tax Allowance” or “PTA”). The reduction is tapered for individuals with total income above that level. The PTA will apply for the tax years 2027/28 to 2029/30, and
    • as announced on 29 September 2026, the state pension triple lock will be adjusted from April 2030, and
  • Mansion House: the Government will work with pension providers and wider industry to “accelerate more private investment into Britain’s innovative, fast-growth firms”.

TPR publishes new AI guidance

On 29 October 2026, TPR published new guidance encouraging trustees of pension schemes to explore how AI could “deliver better member outcomes while understanding and managing risks”.

The guidance is intended to help trustees understand how their existing duties and good governance requirements apply to using AI. TPR has also convened a data and digital industry working group which has produced a Jargon Buster to help demystify some of the AI-related terminology. See our Alert for more details.

Pension dashboards guidance on deletion of definite match pension identifiers

The PDP has published guidance explaining how pension providers, schemes and third-party connection providers should delete pension identifiers (“PeIs”) registered as definite matches following registration errors (where duplicate PeIs are registered for the same user and pension) or matching errors (where the wrong user has been matched to the pension).

The technical standards are expected to be updated in due course to include the above as part of the compulsory framework. In the meantime, the PDP asks pension providers and schemes, or their third-party connection providers, to follow the guidance.

GAD blog on quality assurance

On 23 October 2026, the GAD published a blog on embedding quality assurance in governance, operations, technology and member communications. It outlines practical approaches, controls to prevent errors and improve service, as well as some metrics schemes can consider monitoring to measure whether quality assurance is working.

HMRC publishes pension schemes newsletter 186

On 29 October 2026, HMRC published pension schemes newsletter 186. This includes:

  • a summary of the pensions measures contained in the Budget (see above), and
  • a reminder that HMRC plans to use future newsletters to highlight what schemes need to be aware of as implementation of the pensions IHT changes approaches, and to signpost other guidance and support when available.