Guidance

Newsletter 175 — November 2025

Published 27 November 2025

Autumn Budget 2025

The following is a summary of all announcements made in the budget on 26 November 2025 in connection with tax relieved pension savings.

Collective money purchase schemes

As announced at Autumn Budget 2025, the government will legislate to:

• enable unconnected, multiple employer collective money purchase schemes to apply to HMRC to become a registered pension scheme
• allow HMRC to refuse to register or to de-register an unauthorised collective money purchase scheme

The government will also take a regulation-making power to allow HMRC to legislate for collective money purchase schemes more efficiently in the future.

The measure will have effect on and after the date of Royal Assent to the Finance Bill 2025. However, the provisions relating to unconnected, multiple employer schemes will be operational only after the Department for Work and Pensions’ unconnected, multiple employer schemes legislation has taken effect.

The tax information and impact note for this measure, Collective money purchase scheme — registration for unconnected multiple employers, provides more information.

Defined benefits surplus payments

As announced at Autumn Budget 2025, legislation will be introduced to enable defined benefit pension schemes to make direct payments of surplus assets to members or other beneficiaries, where permitted by scheme rules and subject to trustee discretion. These payments will be:

• treated as authorised payments
• taxed as pension income at the individual’s marginal rate of tax

For these payments to be made, schemes must be in surplus on the same funding basis as applies to payments to employers. The payments will be subject to certain conditions, which include the member being above the Normal Minimum Pension Age (NMPA).

Trustees must continue to act in accordance with their duties to protect the interests of scheme beneficiaries. This will be legislated for in Finance Bill 2026-27, and the change will take effect from 6 April 2027.

Inheritance Tax on pensions

Thank you to those who responded, for your valuable input on the draft legislation published at Legislation Day.

The government will introduce legislation in Finance Bill 2025-26 to bring unused pension funds and death benefits payable from a pension into a person’s estate for Inheritance Tax purposes, for deaths on or after 6 April 2027. As part of these changes, personal representatives will be liable for reporting and paying any Inheritance Tax due on unused pension funds and death benefits.

As announced at Autumn Budget 2025, if personal representatives reasonably expect Inheritance Tax to be due, they can direct pension scheme administrators to withhold 50% of the taxable benefits for up to 15 months from the date of death.  Personal representatives can then direct pension scheme administrators to pay the Inheritance Tax due to HMRC from the benefits that have been withheld before releasing the rest of those benefits to the pension beneficiaries.

The remaining funds can be paid out if either the:

• withholding instruction is withdrawn
• period ends

This will not apply to:

• exempt beneficiaries
• benefits under £1,000
• continuing annuities

Personal representatives will also be discharged from liability for any pensions which are discovered after they have received clearance from HMRC.

The Finance Bill will be published shortly and will include updated legislation reflecting the changes outlined above and further amendments arising from responses to the consultation. We will contact the Inheritance Tax on pensions working group shortly to discuss the detail of these changes. Comprehensive guidance will be made available in due course.

The tax information and impact note for this measure, Inheritance Tax — unused pension funds and death benefits, provides more information.

Changes to tax rates for property, savings and dividend income

As announced at Autumn Budget 2025, the government is changing rates of tax on property, savings and dividend income. Pension contributions are normally made from relevant UK earnings which do not include these types of income therefore no changes will be made to the way pensions tax relief is given.

Salary sacrifice reform for pensions contributions

As announced at Autumn Budget 2025, the government will limit the National Insurance contributions advantages of salary sacrifice for pension contributions from April 2029 onwards. The government will introduce an employer and employee National Insurance contributions charge on contributions above £2,000 made through salary sacrifice.

Employees can continue to contribute more than the £2,000 through salary sacrifice but contributions above £2,000 will have National Insurance contributions applied in the same way as other employee workplace pension contributions. HMRC will engage with industry and employers on the design and operability of the cap and will legislate in a National Insurance Bill in due course.

Speculation about budget changes

In the lead up to a budget there is often speculation about changes that might occur affecting members’ pensions. This can result in some companies marketing schemes that claim to:

• allow individuals early access to their pensions to reduce their tax bill
• reduce their exposure to changes that may come at a Budget

We would be grateful if you can remind your members that early access to pensions is rarely in anyone’s long-term financial interests and can carry tax charges of more than half the unauthorised payment. Members should get suitable professional advice, including from a regulated financial adviser.

If you identify any new schemes entering the market that propose access to pension savings in a manner that raises concerns, email: pensions.compliance@hmrc.gov.uk.

Checking your pension protections and enhancements service

The ‘Check your pension protections’ service has been renamed to ‘Check your pension protections and enhancements.’

Individuals will now be able to:

• view all protection and enhancements online
• submit amendments to some protections online

Applications and amendments for enhancements will remain paper based.

Reporting a transfer to a qualifying recognised overseas pension scheme (QROPS)

Later this year, a new feature will be available on the Managing pension schemes service that will allow you to report a transfer to a qualifying recognised overseas pension scheme (QROPS).

The details you will be required to complete on Managing pension schemes service will be the same as you currently provide on the print and post APSS262 form.

The new feature will allow you to compile, save, or submit the report. When you submit you’ll receive an on-screen message confirming HMRC have received your report.

You’ll also be able to amend submitted reports if required.

If your pension scheme has a Pension Scheme Tax Reference (PSTR) beginning with 0, and you have not already done so, you will need to migrate the pension scheme to Managing pension schemes service before you can report a transfer to a qualifying recognised overseas pension scheme. 

There’s a short YouTube video about enrolling and migrating to the Managing pension schemes service on YouTube. You will find out about how to:

• enrol your scheme administrator ID onto the service
• register a new pension scheme and manage the schemes you are administrator for
• migrate your open pension schemes onto the service

Watch Enrolling and migrating to the Managing pension schemes service on YouTube.