The Chancellor delivered the new Government’s first Budget on Wednesday 30 October 2024.
Before the Budget, there had been rumours that it would include changes to pension tax relief, reduce the amount of tax-free cash available on retirement or introduce employer national insurance on pension contributions. None of these changes were announced.
The announcement that may affect the LGPS is the change to inheritance tax rules. Death grants paid by the LGPS are currently out of scope for inheritance tax. The Government is consulting on changes that would mean that death grants paid by the LGPS would form part of a member’s estate for inheritance tax purposes. The change is planned to take effect from April 2027. Many LGPS death grants would continue to be paid without any tax deducted because the value of the estate is lower than the threshold for inheritance tax.
This policy is at an early stage. We will provide more information when the Government responds to the consultation after it closes in January 2025.
You can find out more about what is paid when an LGPS member dies in the After you die FAQs. As an LGPS member, it is important that your pension fund knows who you want any death grant to be paid to. You may be able to submit these details through a secure member portal or by completing an online expression of wish form. Contact your pension fund to find out more about how to update your death grant nomination details.