Guidance

Newsletter 164 — October 2024

Published 31 October 2024

Autumn Budget 2024

The following is a summary of all the announcements in the budget on 30 October 2024 in connection with tax relieved pension savings.

Extending inheritance tax to pension death benefits

The government announced that unused pension funds and death benefits payable from a pension will form part of a person’s estate for Inheritance Tax (IHT) purposes from 6 April 2027. As part of this change, the government proposes that pension scheme administrators will become liable for reporting and paying any IHT due on unused pension funds and death benefits.

A technical consultation has been launched, seeking views on the processes and information reporting requirements required to implement this change. The consultation closes on 22 January 2025.

Responses can be sent by email to ihtonpensions@hmrc.gov.uk or by post to:

Assets, Residence and Valuation team 
HMRC 
100 Parliament Street 
Westminster 
London SW1A 2BQ 

The government will publish draft legislation for these changes in 2025.

Qualifying recognised overseas pension schemes (QROPSs): removal of an exclusion for overseas transfer charge

The government announced that, with effect from 30 October 2024, the overseas transfer charge (OTC) exclusion that applied to members transferring to a QROPS in the European Economic Area (EEA) or Gibraltar has been removed.

The transfer will now be subject to an OTC unless the member has sufficient overseas transfer allowance (OTA) and one of the following exclusions applies:

• the member is a resident in the country that the QROPS receiving the transfer is based in
• the QROPS is an occupational pension scheme, and the member is an employee of a sponsoring employer under the scheme at the time of the transfer
• the QROPS is an overseas public service scheme, and the member is employed at the time of the transfer by an employer that participates in that scheme
• the QROPS is a pension scheme of an international organisation, and the member is employed at the time of transfer by that international organisation

Where a member requested a transfer to a QROPS in the EEA or Gibraltar before 30 October 2024, the (now removed) exclusion can still be applied as long as the transfer is completed before 30 April 2025. The Pensions Tax Manual: PTM102300 provides guidance on what we would consider as a transfer request.

Scheme managers will need to make sure they operate the new tax charge where applicable.

We have updated our overseas pension scheme (OPS) forms and guidance to reflect these changes.

Requirements for EEA overseas pension schemes

The government announced that, from 6 April 2025, the conditions for a scheme to be an OPS or recognised overseas pension scheme (ROPS) established in the EEA, will be brought in line those applicable to OPSs and ROPSs established in the rest of the world.

This means that:

• for a non-occupational pension scheme established in the EEA to be an OPS, it must be regulated by a regulator of such schemes, if such a regulator exists in the country in which the scheme is established — if there is no regulator of non-occupational schemes, the scheme provider must be regulated by a regulator of providers of pension schemes for the purposes of establishing that scheme
• for a pension scheme to be a ROPS established in the EEA, it must be established in a country with which the UK has either a double taxation agreement or a Tax Information Exchange Agreement

UK resident pension scheme administrators

The government announced that with effect from 6 April 2026, all pension scheme administrators of a UK registered pension scheme will be required to be UK resident.

We will provide more information on this change and what it means for existing non-UK pension scheme administrators in future newsletters.

Speculation about budget changes

We are aware that in the lead up to a budget there is often speculation about changes that might occur affecting members’ pensions. This can result in some companies marketing schemes that claim to allow individuals early access to their pensions to reduce their tax bill, or to reduce their exposure to changes that may come at a budget.

We would be grateful if you can remind your members that early access to pensions is rarely in anyone’s long-term financial interests and can carry tax charges of more than half the unauthorised payment. Members should get suitable professional advice, including from a regulated financial adviser.

If you identify any new schemes entering the market that propose access to pension savings in a manner that raises concerns, email pensions.compliance@hmrc.gov.uk with details.