The Government has announced that it will move to exempt pension payments from approved pension fund plans and approved deferred annuity plans from income tax, effective January 1st, 2026.
The announcement was made by Prime Minister Kamla Persad-Bissessar SC in the Lower House on Friday, in relation to a measure outlined in the 2026 Budget Statement by the Minister of Finance. She confirmed that this measure will be included in the upcoming Finance Bill.
“Under the proposed changes being introduced, income derived from pension fund plans and deferred annuity plans approved by the Board of Inland Revenue will be exempt, exempt from income tax. This was a promise made and it is a promise we’re keeping. These are structured, regulated arrangements that individuals enter into over the course of their working lives. The exemption will take effect, very important Mr. Speaker, will take effect on income earned on or after January 1, 2026. What this means is that any pension payments you receive from these plans from that date onward, January 1, 2026, from that date onward will not be subject to tax income.”
The Prime Minister described the proposal as a matter of fairness and recognition of long-term savings, noting that thousands stand to benefit, including private sector workers, annuity holders, middle-income earners, and future retirees.
“Based on past Income Tax Return filings and TD1 declarations for Income Year previously, to date, 39,063 taxpayers made claims for annuity contributions. This is a significant portion of our hard-working population that we are committed to protecting. Furthermore, a vast majority of these citizens are modest savers.”
The Prime Minister said pensions should not be treated as additional income subject to taxation, adding that Government “believes that such responsibility should be rewarded, not penalised.”
“For too long, many persons who did the right thing, those who worked hard, they saved consistently and contributed to pension plans or deferred annuities, have found that when the time comes to benefit from those savings, a portion is taken away through taxation. That reality has not always reflected the values we believe in as a nation. A pension is not a windfall. It is not a bonus. It is the result of years, sometimes decades, of sacrifice, discipline, and commitment.”
Safeguards will remain in place for early withdrawals. The Prime Minister also said the policy is not intended for short-term use or tax avoidance.
“By maintaining taxation on early withdrawals, we preserve the integrity of our tax system and ensure that the benefit is aligned with its true purpose, which is for retirement.”
The Prime Minister said the measure fulfills a Manifesto commitment and reflects a promise to the public.
“Too often we have heard commitments were made and not kept. So we are saying my government is different, promise made, promise being kept.”