PATHways 168

HMRC newsletter

HM Revenue & Customs (HMRC) has published Pensions schemes newsletter 166, which includes the following:

Inheritance tax on pensions - consultation

Following the announcement in the Autumn Budget that unused pension funds and death benefits payable from a pension scheme will form part of a person’s estate for Inheritance Tax (IHT) purposes from 6 April 2027, HMRC has informed that they are reviewing the responses received as part of the consultation, which ended on 22 January 2025. This consultation focussed on HMRC’s proposed approach for schemes to report and pay any IHT due on unused pension funds and death benefits.  HMRC currently expects to publish both a formal response to that consultation, along with draft legislation, later in the year.

Tax codes for scheme pensioners

From April 2025 HMRC is improving how tax code information is used for new scheme pensioners, so they pay the right amount of tax faster.  HMRC will automatically update the tax code for members who are on a temporary tax code and would benefit from being on a cumulative code, avoiding an overpayment or underpayment at the end of the tax year.  An update to the newsletter was made the day after it was first published, to clarify that the rules for taxing the first pension payment (including taxable lump sum payments) are not changing and that the normal rules of PAYE will continue to apply.

Pension scheme return

HMRC provides a reminder on how to prepare for the new 2024 to 2025 pension scheme return, including that from April 2025 returns for that tax year onwards will need to be submitted via the Managing pension schemes (MPS) service. New or amended returns for previous tax years can continue to be made using the Pension schemes online service.

Lifetime allowance protections and enhancements

Information in relation to the deadlines for applying for various lifetime allowance protections and enhancements, following the abolition of the lifetime allowance is provided.

The application deadline for fixed and individual protection 2016 is 5 April 2025.  This is also the latest deadline for both international and pension credit enhancement applications, although the actual deadline for these enhancements may be earlier depending on the circumstances explained.

HMRC also informs that it aims to move the current protection look-up service to MPS in late 2025 and that this will provide additional information, when checking whether a protection or enhancement remains valid.
 

Torsten Bell appointed as Minister for Pensions

Labour MP for Swansea West, Torsten Bell has been appointed as Minister for Pensions, taking over from Emma Reynolds, who was appointed in July last year. Reynolds has replaced Tulip Siddiq as Economic Secretary to the Treasury, following Siddiq's resignation. Alongside the role of Parliamentary Under Secretary of State in the Department for Work and Pensions, Bell has also been named as Parliamentary Secretary in HM Treasury.

Pensions Dashboards Programme publishes blog

Following the publication of the updated draft reporting standards, Chris Curry, Principal of the Pensions Dashboards Programme (PDP) has written a blog, Reporting standards: what they are, what’s been updated and next steps.  This includes commentary on what this means for the PDP in 2025, given the start of wider industry connection to the dashboards ecosystem.

In the blog, Mr Curry confirms that they do not expect to make any significant changes to the most recent draft reporting standards before seeking formal approval from the Secretary of State for Work and Pensions, with a view to publishing the final standards in the first quarter of 2025.  However, they may make minor corrections and clarifications if necessary.

The PDP will also provide further full technical details for how providers and schemes will report data to the Money and Pensions Service.