The Head of Pensions Administration presented this report, which provided an overview of the Government’s budget announcement on 30th October and the associated impact on stakeholders of the Local Government Pension scheme. There was a single measure regarding pensions tax specifying that unspent defined contribution pension pots including death grants would form part of a person’s estate for inheritance tax purposes from 6 April 2027. The Government was proposing to remove the distinction between discretionary and non-discretionary schemes so that all death benefits and unused defined contribution pension pots would form part of the deceased member’s estate This doesn’t apply where the recipient of the death benefits is the deceased members spouse or civil partner as the intent is to align the tax treatment with other types of inherited assets and remove the incentive to use pensions as a tax-planning vehicle for wealth transfer after death. In circumstances where the beneficiary is not the deceased spouse or civil partner this could result in a 40% charge on those benefits where estates were above the inheritance tax threshold. It is anticipated that in 2027/28 - 49,000 estates will face an inheritance tax bill. There will be no requirement from April 2027 for scheme members to complete an ‘Expression of Wish’ form as their death benefits would automatically transfer to their spouse/ civil partner or to probate. It was noted that identifying the value of the estate to determine any tax liability would be labour intensive for both the individual and the administration team.

Resolved – That the report be noted.