On 30th October 2024, Chancellor Rachel Reeves delivered the first Budget by the new Labour Government. Here’s a breakdown of the key pension points and what they could mean for you.

State Pension and Pension Credit

The State Pension will increase

The Budget confirmed the Government’s commitment to the State Pension triple lock. State Pensions will therefore increase by 4.1% (in line with earnings growth) in April 2025. This will bring payments to £230.25 a week if you receive the full amount of the new State Pension, and £176.45 a week if you receive the full amount of the old Basic State Pension.

Pension Credit will increase

Pension Credit provides a top-up to a minimum amount for pensioners on low incomes. The Pension Credit Standard Minimum Guarantee will also see a 4.1% increase from April 2025, to £11,850 a year for a single pensioner.

It is estimated there could be up to 850,000 pensioners who are eligible for Pension Credit and have not claimed it. Claiming Pension Credit could also provide access to help with housing costs, council tax deductions and access to Winter Fuel Payments which are becoming means-tested from this year. The Winter Fuel Payment could be worth £200 for eligible households, or £300 for eligible households with someone aged over 80. If you’re receiving Pension Credit, you’re automatically eligible for the Winter Fuel Payment.

Tax changes

Your pension may be included in Inheritance Tax (IHT)

IHT is a tax on the estate (the property, money, and possessions) of someone who has died. In the past, pension savings have not typically counted towards the value of a person’s estate for IHT purposes – so, for example, if you died before retiring and had pension savings worth £100,000, that sum could be passed to your dependants tax-free without being factored into IHT calculations.

From April 2027, inherited pensions (except for spouse’s and dependants’ pensions from defined benefit schemes) will be included in IHT. More details are still to come regarding how this will work in practice, but it may mean more people’s estates exceed the IHT thresholds and therefore trigger a tax payment.

Here’s a reminder of the IHT thresholds:

• The first £325,000 of any estate can be inherited tax-free, rising to £500,000 if the estate includes a residence passed to the direct descendants, and £1 million when a tax-free allowance is passed to a surviving spouse or registered civil partner. Inheritance that exceeds these thresholds is taxed at 40%.
• From April 2026, the first £1 million of combined business and agricultural assets will attract no IHT, but assets over £1 million will be taxed at an effective rate of 20%.

To find out more about IHT, visit gov.uk/inheritance-tax

Rules around overseas transfers have changed

If you want to transfer your pension to a scheme outside of the UK, you’ll need to check how much tax you’ll pay. Visit gov.uk/transferring-your-pension for further information.

As ever, the Budget will affect some people more than others – but whatever your situation, we’d like to take the opportunity to remind you to check in on your PSPS pension and make sure you understand what it’s worth. The easiest way to do so is via your online account in MyPension.