The Budget of 30 October 2024 did not include changes to tax relief or introduce a new limit on tax-free cash on retirement (about which there had been speculation), but it did deliver some announcements that affect the Local Government Pension Scheme.
The Government has launched a consultation on Inheritance tax on pensions: liability, reporting and payment.
The proposed changes would mean that:
- LGPS death grants would be subject to Inheritance Tax from April 2027
- Personal representatives* would calculate whether any Inheritance Tax was due, and pass on the relevant information to the pension scheme administrator
- Administering authorities (such as East Sussex County Council) would be responsible for paying and reporting to HMRC any Inheritance Tax deducted from an LGPS death grant.
* A personal representative is the person, or it may be more than one person, who is legally entitled to administer the estate of the person who has died.
The LGA provide the secretariat service for the Local Government Pensions Committee (LGPC) which provides technical advice and information on the Local Government Pension Scheme (LGPS) and related compensation matters to LGPS administering authorities and employers. The LGA will be responding to the consultation before it closes on 22 January 2025.
The Government announced a change in pension transfers to a QROPS in the European Economic Area (EEA) or Gibraltar. From 30 October 2024, these transfers are no longer excluded from the overseas transfer charge. These transfers will be covered by the same rules as transfers to other countries. If the member has sufficient overseas transfer allowance, then they may not have to pay the overseas transfer charge if one of the exclusions applies. You can read more about the exclusions in HMRC Pension Schemes Newsletter 164.
Transitional arrangements mean that the exclusion will still apply where:
- a member requested a transfer before 30 October 2024 and
- the transfer is completed before 30 April 2025.
The Government will require scheme administrators of registered pension schemes to be UK resident from April 2026. We expect further information on this requirement to be published in the coming months.