Changes to the Local Government Pension Scheme (LGPS) are set to impact salary sacrifice arrangements and death benefits for members.
From April 2029, salary sacrifice schemes for National Insurance contributions relief will be capped at £2,000 per year. The meeting information does not specify any exceptions to this cap.
Additionally, for deaths occurring after April 2027, any unused pension funds and death benefits will be included in the estate for inheritance tax purposes. While the current threshold for inheritance tax is not specified, this marks a change from previous rules. A mechanism will be introduced to allow personal representatives to direct pension administrators to withhold 50% of taxable benefits for up to 15 months to address potential inheritance tax liabilities.
However, transfers to spouses are generally unaffected by these changes to death benefits for inheritance tax purposes.
These changes were discussed at a meeting of the Brent Pension Board on Monday, March 23, 2026. John Smith, Pensions Manager for Brent Council, provided an update on recent developments within the LGPS regulatory environment, as detailed in the LGPS Update
document 07. LGPS Update.
The meeting information also noted that employer contributions decreased by 3.9% to £10.1 billion, reflecting advance payments made in the previous year. Furthermore, employer contribution rates for most employers will be cut from 30.5% to 23% from April 2026, attributed to improved funding. However, the projected overall financial impact of these changes on LGPS members or the scheme as a whole was not detailed.
More information on the LGPS and related updates can be found in the Public reports pack for the Pension Board meeting.
