Guidance

Newsletter 186 — October 2026

Published 29 October 2026

Budget and Finance Bill 2026

The following is a summary of all announcements made in the budget on 28 October 2026 in connection with tax relieved pension savings.

Surplus Extraction Tax Regime

As announced at Budget 2025, legislation will be introduced in Finance Bill 2026-27 to enable defined benefit occupational pension schemes to make direct payments of surplus assets to members, where permitted by scheme rules and subject to trustee discretion.

These authorised member surplus payments will be taxed as pension income where specified conditions are met, including requirements relating to the scheme’s funding position and the member having reached Normal Minimum Pension Age or, where applicable, their protected pension age.

The legislation will include safeguards to prevent avoidance. The change will take effect from 6 April 2027.

More information is available at Defined benefit pension scheme surplus payments to members.

Access to pensions for the terminally ill

As announced at Budget 2026, the government will legislate to amend the tax definition of terminal illness so that a serious ill-health lump sum can be paid where a pension scheme member can reasonably be expected to die within 12 months. The government will also extend who can provide supporting medical evidence for a serious ill-health lump sum and for ill-health retirement to recognised medical practitioners who are based outside of the UK.

This will broaden the medical evidence that you can accept when paying a serious-ill health lump sum and considering whether the following conditions are met:

• the ill-health condition when paying a scheme pension early
• the severe ill-health condition when providing a pension input amount

This will be particularly relevant where a member’s medical practitioner is based abroad. 

The measure will have effect on and after the date of Royal Assent to the Finance Bill 2026-27.

More information is available at Income Tax: changes to the definition of serious ill health lump sums and medical evidence requirements.

Lifetime allowance abolition — tax on excess pension lump sum death benefits

As announced at Budget 2026, the government will legislate to allow HMRC a practical, standalone process for assessing and collecting tax due on lump sum death benefits where a deceased member’s lump sum death benefit allowance has been exceeded.

The government will also make consequential amendments to preserve the same relief where the same benefit is subject to both Inheritance Tax and Income Tax, which will ensure that any refund of Inheritance Tax is bought into charge appropriately.

The government will also make further, minor technical amendments, governing the calculation of transitional disregards following the abolition of the lifetime allowance.

This should result in aligning how these payments are reported, assessed and collected, making the settling of any tax due much clearer. It will also ensure that certain transitional disregard provisions operate as intended following the abolition of the lifetime allowance.

The measure will have various effective dates:

• it will have retrospective effect for relevant lump sum death benefits paid on or after 6 April 2024

• transitional provisions will apply the same approach to relevant lump sum death benefit payments made in the 2023 to 2024 tax year

• consequential changes concerning the interaction with Inheritance Tax will have effect from 6 April 2027.

• amendments to the lifetime allowance disregard will also have retrospective effect from 6 April 2024.

More information is available on Income Tax: assessing and collecting tax on lump sum death benefits above the allowance.

Tax treatment of pension death benefits under the two-year rule

As announced at Budget 2026, the government is changing the tax treatment of otherwise tax-free pension and lump sum death benefits that are paid more than two years after the scheme administrator first learns of the member’s death (the two-year period). This two-year rule will be removed so that these pension benefits will not become taxable solely because a payment is made or funds are designated after the end of the two-year period. 

The measure will have effect in relation to payments made on or after Budget Day 2026. From 28 October 2026, scheme administrators and practitioners should update their processes to not deduct tax solely because a relevant payment is made or relevant funds are designated after the end of the two-year period.

More information is available on Income Tax: removing the pensions tax two-year rule.

Guided Retirement and Retirement Collective Money Purchase (RCMP) pension schemes

As announced at Budget 2026, the government proposes to make a number of changes to the operation of the tax rules to facilitate the introduction and operation of:

• RCMP schemes (more commonly known as Retirement Collective Pension schemes (RCPS))
• scheme consolidation
• Guided Retirement

Changes for Retirement Collective Money Purchase schemes only

Collective Money Purchase (CMP) schemes were introduced under Pension Schemes Act 2021. Originally CMP schemes were set up by an employer to provide benefits for their employees. Schemes for unconnected multiple employers have been permitted since 31 July 2026.

Currently the only way for an individual to access CMP benefits is to accrue them under a CMP scheme — a whole life CMP scheme.

The scope of CMP schemes will be extended with the introduction of RCMP schemes. Under these schemes members will transfer part, or all, of their Defined Contribution pension pot into a RCMP scheme to access a CMP scheme pension.

The tax rules in place for whole life CMP schemes are not always appropriate for a RCMP scheme. The following changes will be made:

Calculation of the maximum pension commencement lump sum (PCLS)

The calculation will remain unchanged for whole life CMP schemes. The calculation under a RCMP scheme will be calculated by reference to the money purchase ‘scheme pension purchase price’ unless limited by the member’s available lump sum allowance or lump sum and death benefit allowance. This means that for most RCMP scheme members the maximum PCLS will be, broadly, 25% of the amount of the transferred DC pension pot.

Calculation of the maximum annuity protection lump sum death benefit

Where provided under a RCMP scheme, the calculation will be based on the ‘scheme pension purchase price’. Where provided under a whole life CMP scheme, the maximum amount will be calculated in a similar way to the maximum pension protection lump sum death benefit

Scheme pension reduction

Scheme pensions will be allowed to reduce at different rates for different cohorts of RCMP scheme members. Currently a reduction to the annual rate of a CMP scheme pension is allowable if the same rate of reduction applies to all scheme members. This is how whole life CMP schemes operate. Members of RCMP schemes may be taken on in separate cohorts. The rate of any reduction in the annual rate of scheme pension will be the same for every member in a cohort but the rate may differ between different cohorts.

Drawdown transfer

All, or part, of a member’s drawdown fund will be allowed to be transferred directly to a RCMP scheme to provide CMP scheme pension.

These proposed changes are dependent on regulations made under Pension Schemes Act 2021 defining a RCMP scheme. The changes will have no practical application until RCMP schemes are introduced.

Pension age and lump sum protection

Currently members with a protected pension age below age 55, or scheme specific lump protection, lose these protections when they transfer to another pension scheme and that transfer is not a block transfer.

Guidance on the different types of protected pension ages and block transfers can be found in the Pension Tax Manuals:

• PTM062205 ― Basic principles
• PTM062240 ― Right to keep a protected pension age after transfers or winding-ups

Guidance on scheme specific lump sum protection is in the Pension Tax Manual at PTM063130 ― Scheme-specific lump sum protection - overview.

The Government proposes to make changes to allow these protections to continue following certain transfers. This should ease some of the administrative challenges for defined contribution consolidation and Guided Retirement where a member has both defined benefit (DB) and defined contribution (DC) rights under the protected scheme or they are transferred without consent into a scheme they are already a member of.

The proposals are to:

• remove the prior membership requirement from the definition of a block transfer
• allow protection to continue under the receiving scheme where a no-consent transfer of all the member’s DC rights is made from an occupational pension scheme. Where an individual holds only DC rights under a scheme, this should already be a block transfer. It would not be a block transfer if the member had both DB and DC rights under a scheme and left the DB rights under the original protected scheme. This extension will allow members with both DB and DC rights under a scheme to keep their protection where all their DC rights are consolidated into another pension scheme. This extension will not apply to members of an investment-regulated pension scheme as the members control the operation of the scheme
• allow protection to continue where a member transfers all their DC rights to another pension scheme to enable benefit payment, and within three months of the transfer the member crystallises all their pension rights under the new pension scheme

The relevant payment or retirement conditions will continue to apply. To use the protection members will still need to:

• become entitled to all their benefits under the scheme (other than benefits put into payment before 6 April 2006) on the same date
• satisfy the employment condition for a protected pension age that derives from a pre A-Day occupational pension scheme

Where a member’s DB rights remain under the protected scheme and all their DC rights are transferred as set out above, the member’s protected pension age will apply to both schemes. There will be no requirement for the protected pension age to be ringfenced to the transferred DC rights.

The situation relating to scheme specific lump sum protection is not so straightforward where DB rights remain under the original scheme. Due to how the calculation of the maximum protected PCLS works, it is not possible for both schemes to be protected as this would give a larger PCLS.

Our understanding is that where a member has both DB and DC rights under the scheme, members generally take their PCLS from the DC rights. Retaining lump sum protection under the original protected scheme may not be the best outcome for members who would need to commute DB pension to provide the PCLS.

HMRC wishes to work with industry representatives to better understand how members access their PCLS when they have DB and DC rights under a scheme and consider the most appropriate calculation of the maximum PCLS following a partial transfer.

Conversion of RCMP scheme pension

The Government proposes to legislate to allow for a RCMP scheme pension to be converted to an unsecured drawdown pension within a set period.

This is a change to the tax legislation that would enable RCMP schemes to give a conversion option within the boundaries set by the tax legislation. It will be up to schemes to choose if they provide the conversion option and any conditions that they choose to apply to limit the conversion option.

The Government is minded to allow a period of up to one year in which a member may convert RCMP scheme pension to flexi-access drawdown. 

This one year period will run from the date the member becomes entitled to the scheme pension. For example, if the default benefit solution is flex (drawdown) then fix under RCMP, the one year conversion period starts from the date the member is moved from drawdown to RCMP scheme pension.

Conversion from secured pension to unsecured flexi-access drawdown may be provided by transferring to another pension scheme or by conversion under the same registered pension scheme. For example, where a Master Trust Scheme provides drawdown pension and has a RCMP section, sums and assets representing the member’s scheme pension may be moved to the Master Trust section and designated into drawdown pension. 

If a member chooses to opt out of secured pension to flexi-access drawdown, the money purchase annual allowance rules will apply as they do with any flexi-access drawdown. Unless the individual has already flexibly accessed benefits, the first payment of drawdown pension triggers application of the money purchase annual allowance rules.  Guidance on the money purchase annual allowance is in the Pension Tax Manual at PTM056510 ― General.

Next Steps

HMRC intend to hold industry roundtables to discuss these changes in the new year. If you are interested in attending, email policypensions@hmrc.gov.uk.

HMRC are also liaising with DWP colleagues on their linked upcoming consultations on Guided Retirement and RCMP.

Inheritance Tax — minor technical amendments to the extension of Inheritance Tax to pensions from April 2027

As announced at Budget 2026, the government will legislate to make changes to help support the delivery of the new Inheritance Tax rules on pensions that apply to deaths on or after 6 April 2027.

The government will allow prospective personal representatives to give payment notices where there is no will or named executor where certain conditions are met. The process will be similar to the current one set out in section 226B of Inheritance Tax Act 1984 and will not alter how payments are made to HMRC. There will also be consequential changes to SI 2006/567 The Registered Pension Schemes (Provision of Information) Regulations 2006 to reflect the new prospective personal representative payment notice.

The government will also legislate to update the Inheritance Tax charitable giving condition to create a separate component for pension funds. Personal representatives will then be able to chose whether to include pension funds when testing to see if enough of the estate has been given to a registered UK charity to qualify for the reduced 36% Inheritance Tax charitable giving rate.

The government will also legislate to make minor amendments to correct a reference and remove a redundant definition. These changes do not result in changes to the underlying policy.

Inheritance Tax on pensions — Technical Note 2

In pension schemes newsletter 181 — May 2026 we notified you of the publication of a Technical Note setting out further detail on how the legislation is intended to work in practice for personal representatives, pension scheme administrators and beneficiaries. On 27 August 2026 the government published a second Technical Note that provides further information on the Inheritance Tax treatment of pensions legislated for in Finance Act 2026.

In the coming months, we will use the Pension Schemes Newsletters to:

• highlight what you need to be aware of as implementation approaches
• signpost guidance and support when it is available

Digitalisation of relief at source (DigiRAS) strategic payments service delayed until 2027

In pension schemes newsletter 182 — June 2026, we explained that we intended to start processing relief at source claims through the strategic payments service during 2026.  We now expect the new service to be delivered in 2027. Although we may be able to deliver earlier in the 2027 calendar year, we have decided to implement the change to the new strategic payments service for the new 2027 to 2028 tax year, aiming for you to have a clearer distinction for payments and processes.

We will confirm the exact implementation date once plans are finalised, ensuring there is at least one month’s notice before the strategic payments service goes live. These updates will be shared in the pension schemes newsletter. We recognise that this change may affect your planning and we are sorry for any inconvenience.

We are working with the pensions industry to ensure the new payments service works effectively for all customers. The payments technology has been developed and we are completing the remaining work needed to support a reliable transition.  

Until the new service becomes available, we will continue to process relief at source payments through the existing service. You do not need to take any action at this stage. 

New online tool to help customers claim pension tax refunds

HMRC has introduced an updated online guidance tool to help customers identify the correct process for claiming a pension tax refund.

The new triage tool replaces direct access to individual repayment forms and guides customers through a series of questions before directing them to the correct form for their circumstances.

This change is designed to reduce errors caused by customers submitting the wrong claim form, helping to minimise delays and unnecessary rework.

You may wish to make members aware of the updated guidance when discussing pension tax refund claims.

Customers can access the revised guidance on check how to claim a tax refund on your pension and follow the steps provided to identify the correct claim route.

Contacting HMRC about pensions tax and pension scheme matters

We know it is not always easy to identify the right HMRC contact route for a pensions tax or pension scheme enquiry. Using the correct route will help your enquiry reach the right team and avoid unnecessary redirection.

This article brings together the main contact routes and explains what each should be used for. Before contacting HMRC:

• consult the Pensions Tax Manual
• check the relevant GOV.UK guidance
• choose the contact route that most closely matches your enquiry

Pension scheme general enquiries

For general enquiries about registered pension schemes, you can contact Pension Schemes Services online.

Pension Schemes Services online covers a range of pension scheme matters, including:

• applying to register pension schemes and accessing the managing Pension Schemes Service
• migrating your pension schemes from the pension schemes online service to the managing Pension Schemes Service
• amending pension scheme details and winding up schemes
• pension scheme tax returns
• Accounting for Tax and other pension scheme charges
• annual allowance charge requests
• pension protections
• repayments
• pension scheme administration and associated forms

You can also contact the Pension Schemes Services by post or by telephone.

Pension Schemes Services
HM Revenue and Customs
BX9 1GH
United Kingdom

Telephone: 0300 123 1079
Outside UK: +44 300 123 1079

Opening times: 9am to 5pm, Monday to Friday

Further information is available on the Pension schemes: general enquiries page.

Managing Pension Schemes Service migration

You can get help with enrolling and migrating by watching the managing pension schemes YouTube video.

If you’re having any technical issues with migrating your pension schemes email: migration.mps@hmrc.gov.uk.

Pension scheme administration

Send an email to administrationpensions@hmrc.gov.uk if:

• your pension scheme was only registered through the managing Pension Schemes Service and you need to file or amend an AFT return for a quarter prior to 1 April 2020
• your pension scheme was only registered through the managing Pension Schemes Service and you need to file or amend an event report for a tax year prior to 2023 to 2024
• you need to file an event report for events 10, 11, 12, 13, 14, 19 and 20 for tax years 2011 to 2012 and 2022 to 2023
• you are registering a non-trading company or public sector organisation as a scheme administrator or scheme practitioner and require a Corporation Tax UTR

Filing pension scheme forms and returns online

For help with filing pension scheme forms and returns online, contact Pension schemes: forms and returns.

Relief at source

For matters specifically relating to relief at source (RAS), including guidance and claims, email: pensionschemes.reliefatsource@hmrc.gov.uk.

This includes RAS processes including:

• forms APSS103 and APSS103A
• relief at source details and specimen signatures
• APSS105 and APSS106, relating to interim and annual Relief at Source claims

Certificates of residence and letters of confirmation

The way pension schemes request certificates of residence and letters of confirmation changed on 27 August 2026.

For a certificate of residence or letter of confirmation, requests should now be made using the digital application form. For a pension scheme request, select the relevant Pension Schemes option when completing the form.

The former Double Taxation Pensions Schemes mailbox closed on 1 October 2026 and should no longer be used for these requests.

Non-statutory clearances

HMRC’s non-statutory clearance service can be used where there is genuine uncertainty about the application of legislation for which HMRC is responsible.

The service is not intended for general enquiries or as a route for asking HMRC to agree a particular tax treatment. Check the non-statutory clearance guidance before making a request.

Further details can be found in Pension schemes newsletter 184 — August 2026.

Pensions tax policy

For responses to pensions policy consultations and questions relating to draft pensions tax legislation email: policypensions@hmrc.gov.uk.

For significant policies or consultations different emails may be used and this will be communicated via the Pension schemes newsletter.

This should not be used for general questions about how existing pensions tax legislation operates. For these enquiries, check the Pensions Tax Manual first and, where necessary, use the appropriate operational HMRC contact route.

Providing feedback on the Pensions Tax Manual

If you identify an issue with guidance in the Pensions Tax Manual, you can provide feedback through the relevant GOV.UK page.

At the bottom of the Pensions Tax Manual page, you can indicate whether the page was useful or use ‘report a problem with this page’ to report an issue with the content.

Personal tax and pensions statistics

For questions about HMRC’s published personal tax statistics, including pensions statistics, email: personaltax.statistics@hmrc.gov.uk.

This mailbox can be used for:

• questions about published personal tax statistics and accompanying releases
• clarification of methodology, definitions or data sources
• queries about personal tax statistics publications
• reporting potential errors or issues with published statistical outputs

Pension flexibility statistics

HMRC can now give more information on the number of tax repayment claim forms processed for pension flexibility payments.

From 1 July 2026 to 30 September 2026, we processed:

• P55 — 13,383 forms
• P53Z — 3975 forms
• P50Z — 915 forms

Total value repaid: £64,962,461

The tax repayment figures for the period 1 October 2026 to 31 December 2026 will be published in Pensions schemes newsletter ― January 2027.

Registration statistics

For the period 6 April 2026 to 30 September 2026 HMRC received in total 993 applications to register new pension schemes.

Of these applications, 46% have been registered and HMRC has currently refused registration for about 30% of applications. No decision has yet been made on the outstanding applications.