7 Autumn Budget | 28 October 2026 Pension tax allowance A new pension tax allowance will be introduced for 2027/28 – 2029/30 for those who have reached state pension age by the end of the tax year. The value of the pension tax allowance is calculated by applying the basic rate of income tax (20%) to the difference between the full new state pension and the personal allowance. For individuals with total income above the value of the full new state pension, the pension tax allowance will be withdrawn at a rate of £1 for every £3 of income above this level. Pension death benefits For payments made on or after 28 October 2026, beneficiaries will no longer be taxable solely because tax-free pension and lump sum death benefits are paid more than two years after the member’s death. The Finance Bill will make changes to the way tax is assessed and collected when a deceased member’s lump sum death benefit allowance is exceeded. The excess will no longer be treated as pension income of individual beneficiaries. Instead, a tax charge will be raised against those beneficiaries on their portion of the excess by reference to their marginal rate of income tax for the year the lump sum was paid. Definition of terminal illness for pensions access The Finance Bill will make changes to the definition of terminal illness to make it easier for terminally ill individuals to access their pensions savings and allow for overseas registered medical practitioners to provide medical evidence. Saver Investing in pensions. Remember the annual allowance is £60,000, so you may be able to make larger pension contributions before the salary sacrifice rules are changed in 2029.
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