Autumn Budget 2026 – What it means for your pension
The October 2026 budget unveiled some key announcements for the pensions landscape. Looking at the budget and beyond, this article aims to break down the forthcoming changes that are most relevant to our members when it comes to their pension.
Main changes include:
- HMRC to change definition of terminal illness for pensions access - Changes are being made to the definition of terminal illness by government, to make it easier for terminally ill individuals to access their pension. This change will allow for greater flexibility in the evidence required for members to receive their serious ill-health lump sums and will grant overseas medical professionals the ability to provide medical evidence.
- A new Pension Tax Allowance to protect low-income pensioners - From 6 April 2027, a new allowance will be brought in to ensure that pensioners with income at or below the full new State Pension (£13,036.40) will not have to pay income tax solely due to increases to the State Pension. With the full new State Pension set to exceed the Personal Allowance (£12,570), this will ensure pensioners do not face an additional tax. Individuals with slightly higher incomes may benefit too, as the allowance will be tapered – for every £3 of income above the full level of the full new State Pension, the pension tax allowance will reduce by £1.
- September 2026 CPI rate announced - The annual rate of increase in the Consumer Prices Index (CPI) for September 2026 was 3.5%. The September CPI is normally the rate applied to Local Government Pension Scheme (LGPS) active, deferred and pensioner payments, it is expected this will be the same for 2027 but we are awaiting final confirmation.
- Inheritance Tax on pensions - With the expectation that from April 2027, most unused pension pots will be included in estates for inheritance tax purposes, technical changes were announced in the budget. Of particular relevance is that a personal representative can now instruct pension schemes to report and pay the inheritance tax directly to HMRC following a member’s death. More information on how this will be actioned is expected in due course.
Some of these updates may not be relevant for all members or may only apply under certain circumstances. For more general information on your NESPF pension, visit the member pages of our website at Active Member, Deferred Member and Pensioner.
