Pensions updates | July 2025

Confirmation of Pensions Changes for Inheritance Tax (IHT)

On 22 July 2025 we received the outcome of the technical consultation which ran from October last year, through to January this year.  The current position is that, generally, pension benefits and insured death benefits are excluded from a deceased's estate for IHT purposes.  There may be income tax payable by the recipient if the deceased passed away over the age of 75.  However, it has now been confirmed that from 6 April 2027 unused pension funds and death benefits will also be subject to IHT if the estate exceeds the nil-rate band threshold.

Death-in-service benefits from a registered pension scheme, such as group life assurance, it has been confirmed, will remain excluded from IHT calculations, along with dependents' scheme pensions from defined benefit arrangements or collective money purchase arrangements.

There had been significant concern about the administrative burden intended to be placed on scheme administrators in being responsible for calculating, reporting and paying any IHT due to HMRC.  It was therefore gratefully received news that following the consultation, the Government has instead decided that it will be the personal representatives of the estate who will have this responsibility. 

Receipt of confirmation of the plan means that it is now a good time for employers to review their arrangements. 

For support or further information please do get in touch with Céline Mather-Franks.

TPR issues a costly reminder to report breaches of law

The Pensions Regulator (TPR) has issued a press release outlining that it has fined pension master trust NOW: Pensions Ltd and its trustee £100,000 in total for failing to notify the Regulator of communication system failures and resulting breaches of the law.

TPR issued NOW: Pensions Ltd and NOW: Pension Trustee Ltd with a £50,000 fine each for not correctly reporting ‘significant’ issues linked to their failure to send out information to pension members. Alongside the press release, TPR also published a regulatory intervention report (under section 89 of the Pensions Act 2004) explaining how it used its powers following the decision of its Determination Panel to do so.

Master trusts are occupational pension schemes used by many unconnected employers and as occupational pension schemes they are required to report to TPR under its ‘significant event regime’ any system failures that have a significant effect on the operation of their services. In this case, both the master trust and trustee failed to send out more than 80,000 statutory communications to members and potential members about their rights under pension legislation.  The Determination Panel deemed that this resulted in pension savers suffering non-financial and financial detriment by not having the opportunity to make choices in their pension options. Furthermore, although the master trust and trustee did report two of the three communication failures as breaches of law in 2021 and 2022, they failed to do so as "soon as reasonably practicable’ under the regime.

NOW has since satisfied TPR that it has made changes to enhance its processes around reporting so that TPR can continue to manage risks effectively, ensuring the security and quality of the scheme for its members.

So what kind of breaches of law need to be reported?

There is a duty to report to TPR any breach of law that is likely to be of material significance.  This includes:

Breaches of the law relating to scheme administration - this covers a wide range of areas, including funding, investment, benefit administration, member communications and payroll.

Breaches related to the employer's obligations – this includes failing to pay contributions on time, failing to comply with benefit rules or failing to provide adequate information,

Breaches caused by poor governance or ineffective controls – this includes situations where the scheme's systems and processes are not robust enough to prevent errors or fraud, or where decisions are made without proper oversight or documentation.

Breaches that have a significant impact on members' benefits or rights – this includes situations where members are not receiving their correct benefits, where their benefits have been miscalculated or where they have been denied access to their benefits.

Breaches that have wider implications – this includes breaches that may be minor on their own, but suggest that there are similar problems across the scheme.

What are some common examples of breaches that might require notification?

• The employer has failed to pay contributions on time
• A significant number of members did not receive their annual benefit statements
• Benefits have been miscalculated for a significant number of members
• The scheme has failed to meet its funding targets due to mismanagement
• There has been a data breach involving members' personal information

Who is responsible for reporting breaches?

The duty to report a breach falls on trustees, employers, administrators, professional advisers and anyone else involved in the administration or management of the pension scheme.  This includes employees who routinely carry out tasks like payroll or pensions administration.

How do you report a breach of law?

TPR provides guidance on its website, including details of their traffic light system to grade the seriousness of the breach and online forms and contact details.  If you have concerns about a possible breach of law, then please do get in touch with our pensions team to assess the specific circumstances and we can guide you on steps to address the breach and what to include in a report to TPR.  It is important to remember that if reports are not made "as soon as reasonably practicable" TPR can still impose a fine.  TPR considers that 10 working days is the maximum reasonable time, starting from either the breach occurring or discovery of the breach.