The Pensions Brief: August 2026

Issues Affecting All Schemes

Inheritance Tax Changes: Information-Sharing Requirements Finalised

Regulations have been made setting out the finalised information-sharing requirements that will be imposed on schemes and personal representatives in connection with the changes to the inheritance tax (IHT) treatment of death benefits. The regulations remain largely as consulted on. The main change is that payment of a death in service benefit will not now become an event which must be reported to HM Revenue & Customs (HMRC). The regulations will come into force on 6 April 2027 and broadly have effect in relation to deaths occurring on or after that date.

HMRC has announced it will publish a further technical note later this summer on the IHT changes. This will contain information on withholding and payment notices and scenarios to illustrate the new IHT on pensions process and will address common queries raised by industry stakeholders.

Action
Trustees and administrators should ensure that their scheme’s administration processes and communications around the distribution of death benefits are updated to reflect the new requirements in time for 6 April 2027.

Pensions Reform: Updated Government Roadmap

The government has updated the roadmap for implementation of its pension reforms. The key dates are:

TPR has published its own version of the roadmap.

Action
Trustees should factor the updated implementation dates for those developments that are relevant to their scheme into their scheme planning.

VAT Recovery: Updated HMRC Guidance

HMRC has updated its VAT Input Tax Manual in relation to the recoverability of VAT on services supplied to pension schemes. HMRC has also updated VAT Notice 700/17 which provides guidance for employers and trustees on the recoverability of VAT.

While some of the changes reflect HMRC’s announcement in June 2025 that it would no longer require apportionment of dual use costs, the updates appear to go further than contemplated in that announcement. In particular, the amendments appear to narrow the circumstances in which employers can recover VAT charged on administration services where such services are supplied to and paid for by the trustees and entirely remove previous guidance on the use of tripartite agreements for recovering VAT.

For more information, please see our Legal Update on the updated HMRC policy.

Action
Given the lack of clarity following the updates, the industry has requested further clarity/guidance from HMRC. Employers and trustees should hold off on doing anything in response to the updates pending HMRC’s response.

General Levy: Proposed Rate Changes

The government is consulting on proposed changes to the general levy on occupational and personal pension schemes for the period from April 2027 to March 2030. It is proposing the following increases to the levy:

• DB schemes: 5% per annum.
• Master trusts and GPPs: 9% per annum.
• Other DC schemes: 6.2% per annum.

The consultation closes on 8 September 2026.

Action
Trustees should monitor the outcome of the consultation.

Pensions Ombudsman: Guidance on Complaints

The Pensions Ombudsman (TPO) has published a new web page explaining the types of complaints it is unlikely to uphold, such as falling pension pot or transfer values. TPO is encouraging schemes to share this webpage, as well as its resources on overpayments, ill-health pensions, lump sum death benefits, and incorrect pension information with members at the appropriate point in their complaint journey to ensure they are well-informed and know what to expect as their complaint progresses.

Action
Trustees and administrators should consider whether, and at what point, to share the resources with members who make a complaint under the scheme’s internal dispute resolution procedure.

Issues Affecting DB Schemes

Authorised Member Surplus Payments: Draft Legislation

HMRC is consulting on draft legislation to create authorised member surplus payments. Under the draft provisions, several conditions must be met for a payment to be an authorised member surplus payment. Firstly, the payment must be made to a member who has reached normal minimum pension age or meets the ill-health condition or to a dependant of a deceased member. Secondly, the following conditions must have been satisfied at the point the payment was granted:

1. The decision to grant the payment was at the discretion of the trustees.
2. The payment was to be made from DB assets.
3. The scheme was an occupational pension scheme and was not an investment-regulated scheme or treated as one.
4. The scheme was not in wind-up.
5. The payment would be an authorised employer surplus payment if made to the employer.

HMRC can prescribe other conditions. Payments will be taxed as pension income rather than as lump sums and will not count towards a member’s annual allowance or lump sum/lump sum and death benefit allowances. The consultation closes on 7 September 2026.

Action
Trustees and employers of DB schemes should monitor the outcome of the consultation.

Bank Ring-Fencing: Proposed Reforms

The government is consulting on proposed reforms to the bank ring-fencing regime. Among other things, the proposals include allowing DB schemes within a ring-fenced banking group to transfer a surplus to other schemes within the wider banking group, subject to conditions. These include the receiving scheme being a DC scheme and the employer of the transferring scheme not becoming an employer in the receiving scheme. The consultation closes on 8 September 20206.

Action
Trustees and employers of DB schemes within a ring-fenced banking group should monitor the outcome of the consultation.

Issues Affecting DC Schemes

Value for Money: Further Consultation

The government, TPR, and the Financial Conduct Authority (FCA) are consulting on draft regulations and amended FCA rules setting out the new VFM framework for DC schemes. The main change from the proposals consulted on in January 2026 is the introduction of a staggered timetable for implementation of the framework. Master trusts, GPPs, and other occupational pension schemes with 50,000+ active/deferred DC members will become subject to the new requirements in 2028, while all remaining occupational DC schemes will become subject to them in 2029. The other changes largely relate to:

• Introduction of transitional provisions for the first year of the framework.
• The timing for annual publication of data under the framework.
• How schemes produce their assessment data and use it to compare themselves against the market.

The consultation closes on 1 September 2026.

Action
Trustees of DC schemes should monitor the outcome of the consultation.

Guided Retirement: Key Principles and Intended Outcomes

The government has published a paper setting out its guiding principles for default pensions and the outcomes they are intended to deliver for members:

• There should be no requirement for complex decision-making by the member.
• Default pensions should provide protection against longevity risk.
• Members should retain freedom of choice.
• Members must consent to receiving payment via the default option.

Action
No action required.

Mayer Brown News

Recent Work

• Tom MacAulay and Henry Corrigan advised Royal London on a £208 million bulk purchase annuity transaction (BPA) with the trustees of the Hickson UK Group Pension Scheme. The transaction is Royal London’s third-largest external BPA transaction to date. 

Media Comment

• Henry Corrigan contributed to a white paper prepared by FTI Consulting which explores the future of the UK DB pensions market. Henry is quoted directly in the report (p. 4), discussing how optionality is reshaping the DB endgame landscape. The report has also been covered by Professional Pensions.

Insights

• Employer Recovery of VAT on Pension Scheme Costs: Updated HMRC Policy

View all our Insights.