Budget 2026: targeted pension reforms, with wider changes still to come

Today’s Budget has brought a number of targeted pension measures, covering retirement taxation, death benefits, options for defined contribution savers and pension scheme investment.

The new Pension Tax Allowance aims to remove the administrative burden of small income tax liabilities for pensioners whose total income is no more than the full new State Pension. Other measures include the removal of the two-year rule for tax-free pension and lump sum death benefits, alongside changes to the taxation of excess lump sum death benefits.

Looking further ahead, the proposed Guided Retirement and Retirement-only Collective Defined Contribution frameworks could broaden the options available to people approaching and taking retirement. The Government is also continuing its focus on encouraging pension investment in the UK economy.

While the Budget has not brought wider changes to the pensions tax regime, there is clearly more change ahead for the pensions industry.

Read the Budget 2026 documents:
Budget 2026 in full - GOV.UK