Tax rule removal
The UK government announced in the Budget on 28 October 2026 that it will remove the two-year rule that currently subjects pension and lump sum death benefits to income tax if paid more than two years after a member's death. The change applies to payments made on or after 28 October 2026, regardless of when the member died, and will be enacted via Finance Bill 2026-27. The Treasury estimates the measure will cost £5m in the 2026-27 tax year and £15m annually thereafter. Additionally, the government will change how tax is assessed and collected when a deceased member's lump sum death benefit allowance is exceeded.