01 JAN 2026

Technical Newsletter - January 2026

Issue 11 - January 2026

 

Welcome to Issue 11 of our newsletter and a happy new year to our readers.

 

The pension landscape after the budget

The chancellor gave her budget on 26 November last year and again there was heated speculation beforehand about what changes she might make to pensions.

In the event she left the relief and taxation regime alone, which was good news for our SIPP and SSAS clients. However, for employees who are members of DC (workplace, but also SIPP and SSAS) schemes there was an unwelcome sting in the tail. From April 2029, the national insurance (NI) exemption for salary sacrifice pension contributions will be limited to the first £2,000 per year. Contributions above this level will incur standard NI rates for both employees and employers.

For employees who are crossing the higher rate threshold, this is perhaps not too onerous as it will cost them an additional 2% but for employers, already burdened by the recently increased 15% rate this will be quite expensive. Indeed, it is not hard to predict that firms might factor this change into bonus and pay awards, as well as other employee benefit decisions.

In other bad news, the Government has not thus far rowed back on its proposals to include discretionary pension schemes within the scope of inheritance tax (IHT) from April 2027. The recent announcement that it is increasing the threshold for both business property relief (BPR) and agricultural property relief (APR) might provide a glimmer of hope that there is still time for some sort of u-turn, but arguably the farmers issue has been a political hot potato and received far more (potentially damaging) media coverage than the pension IHT announcement which seems to have been largely accepted with a shrug of the shoulders, apart from a petition from the likes of industry body AMPS.

One change was announced however which will provide some relief for legal personal representatives (LPRs) from April 2027, as they try and deal with the complex issue of valuing an estate and paying any resulting IHT. The Government announced that there will be a withholding option from April 2027. This means that personal representatives can instruct the pension provider to withhold 50% of taxable pension-death benefits for up to 15 months after death, giving them time to calculate the final IHT bill.

No doubt 2026 will be another year of speculation when budget time arrives again. The Government has announced an ambitious public spending plan, so it remains to be seen whether they make any further changes to the pension tax and relief system, or (as seems unlikely right now) water down the IHT proposals in any way.

 

Pension Dashboards

After it was put on hold for a period by the government, the pension dashboard programme kicked off again last year and IFGL Pensions is pleased to confirm that we have successfully connected to the Pensions Dashboard Ecosystem, ahead of our 31 January deadline.

Run by the Money and Pensions Service (MaPS) in partnership with the Government, industry and regulators, the Pensions Dashboard will allow customers to:
 
* Find lost pensions.
* See all of their pensions (not in payment) in one place online, along with a projected total retirement income, meeting a key customer need in understanding what they might have.

The Pensions Dashboard will be available to the public from October 2026 and in the meantime remains in live industry testing.

 

Use it or lose it! Tax relief on pension contributions

As we enter a new calendar year it is a reminder that the current tax year is in its final quarter. This means it is a good time for your clients to be thinking about using up any unused tax relief by making a pension contribution.

Putting aside the IHT changes which some commentators have suggested could mean the end of the pension industry (not a view shared by IFGL Pensions you won’t be surprised to hear), a SIPP or a SSAS remains an incredibly tax efficient vehicle. Arguably the most important relief is the tax relief that is available to UK residents on contributions, particularly personal ones. A one-off contribution can for example be used to mitigate one of the higher rate tax thresholds. Particularly useful where someone receives a significant end of tax year bonus which pushes their income into a higher tax band. Recent expats may also have valuable reliefs available, and ensuring these are highlighted and used are a key area advisers can add value.

Carry forward is also a useful option allowing individuals to use unused tax relief from the previous three tax years and add it to the relief available in the current tax year.

 

Example

Martin has not made any contributions for the last 3-4 years, though he does have a SIPP. He has received a large bonus. He decides to invest this in his pension. The contribution he wants to make is £120,000, which exceeds the 2025/26 annual allowance. He can make this contribution by using unused tax relief from the previous three tax years, the oldest year first.

So, £60,000 is offset by his 2025/26 annual allowance.

The earliest tax year he can use is 2022/23. The annual allowance was £40,000 then. He therefore carries £40,000 relief forward to 2025/26.

This leaves a shortfall of £20,000, which he uses by carrying forward £40,000 of his unused relief from tax year 2023/24.

For 2026/27, tax year 2022/23 drops off, but he still has £20,000 unused relief from 2023/24 available (the annual allowance that year was £60,000) plus £60,000 for 2024/25.

Employers can also make contributions, and these are not limited by the salary earned by their employee. Again, carry forward is available to maximise the amount that can be paid.

Non-UK residents do not usually qualify for tax relief (unless they are a recent expat), but IFGL Pensions can still accept a contribution from them if they wish to top up their SIPPs. Some of our non-UK based members work for UK companies and these are also able to make employer contributions into one of our pensions.

Where tax relief is available, use it or lose it!

We hope you find our Technical Newsletters useful. If there are any areas you would like more information, or if you have suggestions for future articles, please let us know.

 

IMPORTANT NOTE Please note that any information provided is not financial advice. IFGL Pensions is not authorised to provide financial advice, or taxation advice. This information is based on our understanding of current regulations and requirements.