UK Pension Rule Changes 2023–2026: Everything You Need to Know

The years from 2023 to 2026 have produced the most concentrated set of UK pension rule changes in recent memory. For clients who have not kept pace with the legislation — or whose advisers have not flagged the implications — there are both opportunities missed and risks incurred.

This guide provides a structured chronological summary of the key changes, what they mean in practice, and what is still expected to change in the coming years. We also note what has not changed, since some of our clients have been misinformed about the scope of recent reforms.

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April 2023: The Annual and Money Purchase Allowances Raised

Annual Allowance: £40,000 to £60,000

From 6 April 2023, the standard Annual Allowance — the maximum amount that can be contributed to registered pension schemes in a tax year and attract tax relief — rose from £40,000 to £60,000. This was the first increase in the Annual Allowance in over a decade, and it significantly expanded the scope for tax-efficient pension saving for higher earners and those wishing to make carry-forward contributions.

The increase applied from 2023/24 onwards. For carry-forward purposes, the £60,000 allowance applies to 2023/24, 2024/25, and 2025/26. Prior years remain at their historical levels: £40,000 from 2016/17 to 2022/23.

MPAA: £4,000 to £10,000

The Money Purchase Annual Allowance — which limits defined contribution contributions once you have flexibly accessed pension income — rose simultaneously from £4,000 to £10,000 in April 2023. This was welcome for clients who had triggered the MPAA and then returned to work or wished to continue contributing. The previous £4,000 limit was widely seen as prohibitively low.

Taper Threshold Raised

The adjusted income threshold for the tapered Annual Allowance rose from £240,000 to £260,000 (with the threshold income at £200,000 unchanged). The floor for the tapered allowance remains £10,000 — the same as the MPAA. This means the taper now bites less frequently than under the previous thresholds, benefiting many senior professionals and executives who were previously subject to it.

For detail on how the Annual Allowance and taper work in practice, see our guide on the annual allowance and pension contributions.

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April 2024: The Most Significant Structural Changes in Two Decades

Lifetime Allowance Abolished

The Lifetime Allowance (LTA) was fully abolished from 6 April 2024. This had been trailed in the March 2023 Budget (when the LTA charge was suspended) and legislated in the Finance (No. 2) Act 2023.

The LTA had capped the total amount that could be held in pension funds and benefit from tax relief over a lifetime. At its peak, it stood at £1.8 million; in its final years, it was frozen at £1.073 million, creating a significant tax charge for clients with large funds.

With abolition, the LTA charge (55% on lump sum excess, 25% on income excess) no longer exists. However, two new allowances replace it:

• Lump Sum Allowance (LSA): £268,275 — caps the total tax-free cash element of pension commencement lump sums and serious ill-health lump sums over a lifetime.
• Lump Sum and Death Benefit Allowance (LSDBA): £1,073,100 — caps lump sums paid tax-free on death or serious ill-health.

For a full explanation of these allowances and what happened to existing LTA protections, see our guide on the abolition of the Lifetime Allowance and what replaced it.

Transitional Tax-Free Amount Certificates

Individuals who had already taken some pension commencement lump sums before April 2024 were given the option to apply for a Transitional Tax-Free Amount Certificate (TTFAC) to establish their remaining LSA entitlement based on actual benefits taken, rather than the standard calculation method. The deadline for applying was April 2025 in most cases, though scheme administrators had further time to process applications.

If you took pension commencement lump sums before April 2024 and have not confirmed your remaining LSA entitlement, you should do so before making further crystallisation events.

State Pension: 8.5% Triple Lock Increase

From April 2024, the full new State Pension rose by 8.5% under the triple lock, reaching approximately £221.20 per week (£11,502 per year). This was the largest State Pension increase in many years. It followed the prior year's earnings-linked rise and reflected strong wage growth in the reference period.

The triple lock guarantees the State Pension rises each April by the highest of: earnings growth, CPI inflation, or 2.5%. It has been government policy since 2010 and is currently committed to for the duration of the present parliament, though its long-term sustainability is periodically debated.

Pension Age Rise to 57 Confirmed

The Normal Minimum Pension Age rise from 55 to 57 — legislated in the Finance Act 2022 — was confirmed to take effect on 6 April 2028. No delay or reversal was introduced. For detail on the cohort most affected and planning strategies, see our guide on pension access age rising to 57.

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April 2025: State Pension Increase and Ongoing Reviews

State Pension Increase: April 2025 and April 2026

Under the triple lock, the new State Pension rose in April 2025 to £230.25 per week (a 4.1% earnings-linked increase), and again in April 2026 to £241.30 per week (£12,548 per year). The 2026/27 rate is the current rate as of mid-2026. Figures should be verified with the Department for Work and Pensions or the government's official rate tables, as the triple lock calculation is finalised each autumn and figures can differ based on whether you receive the "new" or "old" State Pension.

For non-UK residents, State Pension is paid at the current UK rate if you live in a country with a reciprocal social security agreement with the UK. If you live in a country without such an agreement, your State Pension may be frozen at the rate it was when you left the UK — or when you first became entitled to it. This is a significant issue for clients retired to certain countries. See our guide on the UK State Pension for expats.

Employer NI and Auto-Enrolment

April 2025 saw significant changes to employer National Insurance contributions — the rate rose to 15% from 13.8%, with the threshold lowered. While not directly a pension rule change, this affected the relative attractiveness of salary sacrifice arrangements (since salary sacrifice reduces employer NI liability). For some employers, the increased NI cost made salary sacrifice more valuable to both parties; for others, it accelerated the review of total employment costs.

Auto-enrolment minimum contribution rates remain at 8% total (3% employer minimum, 5% employee minimum) as of 2025/26. The government has signalled a desire to increase minimum contribution rates over time, but no formal timetable has been legislated.

State Pension Age: Under Review

The government commissioned a review of the timetable for raising the State Pension age to 68. As of early 2026, no formal decision has been announced to accelerate the rise beyond the current legislative timetable (age 67 by 2028, age 68 by 2044–2046). However, the review remains ongoing and further changes are possible.

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From April 2027: Pensions and Inheritance Tax

Pensions Within the IHT Estate

This is the most significant change on the horizon. Announced in the October 2024 Autumn Budget and subsequently legislated in the Finance Act 2026 (Royal Assent 18 March 2026), from 6 April 2027 unused pension funds and certain death benefits will be brought within the scope of inheritance tax (IHT).

Currently, pension funds fall outside the IHT estate on death (they are not legally the deceased's property). This has made the pension an extremely effective vehicle for multi-generational wealth transfer — particularly for clients who die before fully drawing down their fund.

Under the change:

• Uncrystallised and drawdown funds not yet accessed will be included in the estate for IHT purposes.
• Defined benefit death benefits and annuity protection lump sums may also be affected, depending on scheme rules.
• IHT applies at 40% above the nil-rate band (currently £325,000, plus any residence nil-rate band), unless IHT reliefs or exemptions apply.

Important points:

1. The change is now law under the Finance Act 2026 (Royal Assent 18 March 2026) and takes effect from 6 April 2027. Some detailed operational guidance continues to be issued, but the principle and effective date are settled.

2. Personal representatives of the estate are liable for the IHT due on the pension element. (Earlier consultation proposals had placed this duty on pension scheme administrators; the final position makes personal representatives responsible, with mechanisms for the pension scheme to pay the IHT from the fund where requested.)

3. Existing IHT planning strategies around pensions — particularly the use of discretionary nomination rather than binding nomination, and the decision to crystallise or not — may need to be revisited.

Because the rules take effect from April 2027, clients have a window to review their pension, estate, and Will arrangements with regulated advice. We caution against rushed restructuring, but the direction of travel is now fixed in legislation rather than uncertain.

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What Has Not Changed

Amid the significant reforms, certain core features of the pension system remain unchanged:

• Tax-free cash is still 25% (up to the LSA of £268,275). The principle of tax-free cash has not been abolished — only the LTA charge on amounts above the old limit.
• Pension contributions still attract tax relief at the contributor's marginal rate. Relief at source, net pay, and salary sacrifice arrangements are all unchanged.
• Flexi-access drawdown rules introduced in April 2015 are unchanged. You can still draw any amount from a DC pension at or after the NMPA.
• QROPS rules remain broadly in place, though individual scheme recognition status changes from time to time. Note one significant change: the 25% Overseas Transfer Charge previously did not apply to transfers to QROPS in the EEA or Gibraltar, but that exemption was abolished on 30 October 2024. The 25% charge now applies to most overseas transfers unless the member is tax-resident in the same country as the receiving scheme (the same-country exemption).
• Death benefit nominations remain discretionary (and therefore outside the estate under current rules — see the IHT proposal above).
• The triple lock on the State Pension remains in policy for this parliament.

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Keeping Pace with an Evolving Landscape

The pace of pension legislation has been unusually high in recent years. We expect further changes — particularly around the IHT/pension interaction — and the general principle that rules can and do change at short notice means that pension planning must be reviewed regularly, not set and forgotten.

The fundamental message to our clients is this: pension rules have become significantly more generous in some respects (Annual Allowance, LTA abolition), but the proposed extension of IHT to pensions could reduce their attractiveness for estate planning. The optimal strategy is one built for the rules as they are, with an eye on the direction of travel — and reviewed whenever the rules change.

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How Global Investments can help

Staying on top of pension rule changes is part of what our advisers do year-round. We maintain up-to-date knowledge of Annual Allowance calculations, the new LSA and LSDBA framework, the implications of the proposed pension IHT changes, and the interaction between these rules and international tax positions for our cross-border clients.

If you have not reviewed your pension strategy since any of the changes described above, now is the right time to do so. In particular, clients with large funds who benefited from LTA protections, those approaching retirement in the 2026–2028 window, and those with estate planning strategies built around pension assets all have specific reason to reassess. Please note that pension legislation is evolving rapidly; this guide reflects the position as of early 2026 and should not be relied upon as personal advice. Always seek guidance from a regulated financial adviser before acting on any of the information here.