How does Rest Less make money
We make money through advertising and commission from affiliate links, which enable us to offer Rest Less as a free service to our users. The content on this page may use affiliate links, which track traffic from our website to a third party provider and enable us to receive a commission or payment from any traffic we refer.
* Affiliate links on this page have an * next to them. We place enormous importance on our editorial independence and the integrity of our content which means that we will never change how we write about something as a result of an affiliate link.
Steep living costs continue to place retirement incomes under strain, with many people hoping that some of the changes due to be introduced at the start of the 2026/27 tax year on April 6 might see some of these pressures start to ease.
There are certainly a few welcome changes coming, including increases to the State Pension and Pension Credit, for example, but these may not be enough to meet rises in energy costs, food bills and other living expenses seen in recent years. Although inflation has gradually eased this year, the Office for Budget Responsibility (OBR) predicts it will average 2.5% in 2026, which is still higher than the government’s 2% target.
Here, we look at some of the changes that have happened to pensions this tax year, alongside other benefits you may be entitled to, and potential ways to boost your pension.
Advertisement
If you’re considering seeking professional financial advice on the options available to you, nationwide advice firm HUB Financial Solutions is offering you a free initial consultation with an expert retirement specialist. There’s no obligation; it’s to help you understand your options and how our services work. If you choose to receive paid-for regulated advice, we’ll explain how that works and the fees involved.
HUB Financial Solutions is rated ‘Excellent’ on Trustpilot (Mar 2026). With investing, your capital is at risk.
State Pension to increase
The State Pension will rise by 4.8% in April 2026, in line with earnings growth. This follows a 4.1% increase in April 2025 and an 8.5% increase in April 2024.
The triple lock guarantee means the State Pension increases each year by the highest of September’s inflation figure, earnings growth, or 2.5%. Find out more in our article What is the pension triple lock?
From April 2026, someone on a new full State Pension will see their payments go up from £230.25 a week in the current tax year to £241.30 a week, while the old basic State Pension is set to rise from £176.45 a week to £184.90 a week. Read more in our articles What will the State Pension be in 2026? and How the State Pension works.
Capital Gains Tax rates remain high
Capital Gains Tax (CGT) was hiked in the 2024 Budget, with CGT rates rising from 10% to 18% for basic rate taxpayers and from 20% to 24% for higher rate taxpayers. These changes came into effect on October 31, 2024, with these rates applying in the 2026/27 tax year too.
One way to potentially reduce any likely Capital Gains Tax bill you might be facing is to look at ways to lower the tax band you fall into. For example, if you are paid enough to just fall into the higher earnings tax band, you could consider increasing the amount you pay into your pension each year, so that you then fall into the basic rate of income tax, and will pay the lower rate of CGT. Bear in mind, however, that any money paid into your pension cannot be accessed until you reach the age of 55. Learn more in our guide When can I retire?
Alice Haine, Personal Finance Analyst at Bestinvest by Evelyn Partners, said: “Making investments more tax efficient by topping up ISAs and pensions will continue to benefit an individual’s overall financial position over the long term, provided that money was not earmarked for more immediate needs. While money funnelled into a flexible ISA is still accessible, funds loaded into a pension cannot be touched until the individual reaches 55 or 57 from 2028.”
Learn more in our guide Is it better to save into an ISA or a pension?
Pension Credit to increase
As many as 760,000 pensioners may be eligible for but are failing to claim Pension Credit, which could provide a valuable income boost of as much as £4,300 a year. It’s vital that you claim this money if you’re eligible, as it could make a real difference if you’re struggling financially, and it could help you to qualify for other benefits too (see below). This includes the Winter Fuel Payment, which is now means-tested. Find out more in our article Winter Fuel Payment: who is eligible, and how can I claim?
Pension Credit is a means-tested benefit and from April 2026 it’s expected to increase retirement income by up to £238 a week if you’re a single person (up from £227.10 a week in the 2025/26 tax year), or £363.25 for couples (up from £346.60 in 2025/26), and may be higher in some situations, for example if you’re caring for someone. Read more in our article Pension Credit explained.
Find out more about Pension Credit and eligibility requirements in our guide Pension Credit Explained. If you think you might be eligible to claim it, you can make a claim by phone using the Pension Credit claim line on 0800 99 1234. If you’d rather make a paper application, you can request one on the above number, or you can download and print a Pension Claim form here.
You can find out if you’re eligible for Pension Credit and how much you can get using the Gov.uk Pension Credit calculator.
Pensions dashboard to launch
Monitoring several pensions isn’t easy, especially if you’ve moved house a few times and forgotten to let your providers know your new address. As a result, around £26.6 billion is currently sitting in ‘lost’ pensions across the UK, according to the Pensions Policy Institute (PPI) and the Association of British Insurers (ABI).
The government wants to make it easier for people to keep track of their pensions with the long-awaited pensions dashboard, with 2025 having seen most of the biggest pension schemes connect to the system. The pensions dashboard will allow you to view information about all your pension savings, including your State Pension, on a single website. The dashboard is expected to launch to the public after all pension providers are legally required to connect to it by October 31, 2026.
In the meantime, it’s well worth checking whether you have any lost or forgotten pensions that could boost your income in retirement. Learn more about how you might be able to track these down in our guide Tracing lost pensions – How to find my old pensions.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “It’s easy to lose track of pensions from old employers, but not tracking them down can leave you thousands of pounds worse off. If you think a pension has gone astray then contact the government’s Pension Tracing Service. You will need either the name of your employer or pension provider and they will give you contact details so you can get in touch.
“Once you’ve gathered your pensions together it might make sense to consolidate them. This could save you time, money and admin. However, before you do, make sure you aren’t incurring.”
Find out more about pension consolidation in our article Should I consolidate my pensions?
Make the most of pension salary sacrifice while you can
The 2025 Autumn Budget capped the amount of salary that workers can sacrifice into a workplace pension at £2,000 from April 2029. Salary sacrifice allows employees to reduce their salary or bonus payments in exchange for increased pension contributions, which can be extremely valuable. As this change doesn’t come into effect for a while, it’s worth making the most of existing rules while you can and increasing your contributions if you can afford to do so.
Alice Haine, Personal Finance Analyst at Bestinvest by Evelyn Partners, the online investment service, explained: “While restricting salary sacrifice is yet another tax hit for people trying to save efficiently for retirement, the new cap does not come into effect for well over a year. This gives workers a unique window to take full advantage of the tax benefits before the deadline. Salary sacrifice schemes reduce income tax and enable both employee and employer to pay lower National Insurance contributions (NICs), making pension saving even more tax efficient.
“This can be particularly effective for those nearing crucial tax cliff edges where an individual’s marginal rate can jump dramatically. This includes employees close to the £50,270 earnings threshold where the higher 40% tax rate kicks in – they can potentially dip under it by using salary sacrifice pension contributions.
“For those nearing the £100,000 threshold, salary sacrifice can help mitigate the unique tax challenge where every £2 of taxable income above £100,000 reduces the personal allowance by £1. Combined with the 40% income tax rate, this creates an effective tax rate of over 60%. Salary sacrifice can also be beneficial for those that might lose out on child benefit because their salary is too high.”
Learn more about pensions and salary sacrifice in our guide What could changes to salary sacrifice mean for your pension?
Start preparing for 2027 pension inheritance tax changes
When you die, inheritance tax (IHT) is charged on the value of your assets above a certain threshold. This IHT threshold, known as the ‘nil-rate band’, is currently £325,000, and any assets above this amount are usually liable to a 40% tax charge.
However, if you’re married, or have a civil partner, you can leave your entire estate to your spouse or partner free of inheritance tax. The good news is that transfers between spouses like this do not use up any of your nil rate band and in fact, your unused nil rate band can be transferred to your spouse or civil partner.
There’s also a main residence allowance, which applies in addition to the existing nil rate band, but only where the person who has died is transferring a property that was once their home, to their direct descendants (for example, their children or grandchildren). The residence nil-rate band is currently £175,000, having increased to this limit in April 2020.
You can transfer this extra allowance to your surviving spouse when you die if you haven’t already used it. This means that in the current tax year, a married couple could potentially leave their children a combined estate of up to £1m, without facing an inheritance tax bill.
Under current rules, pensions are exempt from IHT, but this is changing from 6 April 2027, so it’s well worth giving some thought now as to how these changes might affect you. From this date, unused pension funds and death benefits will be included in your estate for IHT purposes, potentially leading to a significant tax bill for your loved ones when you die.
A spokesman for Interactive Investor said, “In this new paradigm, pensioners might be more inclined to draw down their pension pots during their lifetime, rather than preserving them for inheritance purposes. This could lead to a shift in focus towards other tax-efficient savings vehicles, such as ISAs.
“The ISA versus pension debate, therefore, could gain fresh momentum. ISAs offer the advantage of tax-free growth and withdrawals. Pensions, on the other hand, still provide upfront tax relief on contributions and potential for employer contributions, but their appeal may be blunted somewhat by the new inheritance tax considerations.”
Learn more in our guides Inheritance tax and pensions: what’s changing in 2027 and Is it better to save into an ISA or a pension?
Some pension savers may also decide to provide more generous or frequent gifts during their lifetime so they can pass wealth to beneficiaries free from inheritance tax. You can learn more about current allowances in our article Which gifts are exempt from Inheritance Tax?
Extra benefits
If you are in receipt of certain pension benefits, you may be entitled to additional money in 2026 to help meet the cost of energy bills, for example, and other outgoings.
- Free TV licence: If you are a pensioner aged 74 or over and claiming Pension Credit you are entitled to receive a free TV licence, and a refund for any payments made while not being aware you were eligible, if that is the case.
- Cold weather payments: If you are receiving low-income benefits such as Pension Credit, you should be entitled to automatic payments of £25 when your local temperature sits at an average of zero degrees Celsius or below for at least seven consecutive days between 1 November and 31 March each year.
- Warm homes discount: You may be able to get £150 off your electricity bill as a one-off bill reduction, which is paid directly to your energy provider each year if you receive certain means-tested benefits such as the Guarantee Credit element of Pension Credit. Find out more about what help is available towards energy bills in our article Are you eligible for help with heating costs?
Where to go for more help
It’s more important than ever to explore all the different ways you might be able to increase your retirement income. You can seek free guidance from the age of 50 and above from the Government’s Pension Wise service on your pension choices at retirement. You can call them on 0800 138 3944 to book a free appointment, or book one through their website.
Advertisement
If you’re considering seeking professional financial advice on the options available to you, nationwide advice firm HUB Financial Solutions is offering you a free initial consultation with an expert retirement specialist. There’s no obligation; it’s to help you understand your options and how our services work. If you choose to receive paid-for regulated advice, we’ll explain how that works and the fees involved.
HUB Financial Solutions is rated ‘Excellent’ on Trustpilot (Mar 2026). With investing, your capital is at risk.
If you’re lucky enough to have a defined benefit or final salary scheme, you’ll get a guaranteed income at retirement which can make it much easier to plan your budget. Check with your scheme’s administrator if you’re not sure when this income will start being paid. Find out more in our article Your options at retirement.
Rest Less Money is on Instagram! Check out our account and give us a follow @rest_less_uk_money for all the latest Money News, updated daily.
Join the discussion
Read our full commenting terms and guidelines