The UK Government will remove the two-year rule so that beneficiaries will no longer be taxable solely because tax-free pension and lump sum death benefits are paid more than two years after the member’s death.
The Budget document today (28 October) said the change will apply to any pension and lump sum death benefit payments made on or after 28 October 2026, regardless of when the member died, and will be introduced through Finance Bill 2026-27. It said the move would cost around £5m in the 2026-27 tax year and then £15m a year thereafter. The government also confirmed it will make changes to the way tax is assessed and collected where a deceased member's lump sum death benefit allowance has been exceeded to provide greater certainty to individual beneficiaries. The move comes af...
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