The government is facing growing pressure to rethink its plans to bring pensions into the scope of inheritance tax (IHT), with a number of industry organisations calling on the government to make "fundamental" changes to the plans.

Chancellor, Rachel Reeves, previously announced plans to remove the concession for pension pots to be passed on to anyone free of IHT as part of her inaugural Budget last year, launching a consultation on the plans shortly after this.

However, industry experts have already identified a number of problems that could be caused by the proposals, urging the government to consider “less costly, quicker, and ultimately more effective” alternatives.

These calls have continued to grow as more industry organisations share their responses to the government consultation, with the Association of Professional Pension Trustees (APPT) the latest to join the chorus of organisations calling for changes to the plans.

In particular, the APPT called for the provisions to be as streamlined as possible and to operate to timescales that are both "realistic and sympathetic" to those affected.

“Our principal concern – shared by many other respondents – is that the proposals place a very significant burden on not only pension scheme administrators (PSAs) generally and on third-party administrators (TPAs) in particular at a time when there is already a huge resource and capacity stress on the sector due to other ongoing government-led reforms," APPT chair, Rachel Croft, said.

"The impact will be felt most harshly by smaller schemes and smaller employer sponsors, adding further costs and anti-growth administrative obligations upon them.

“We further believe that some of the obligations it is proposed to place on PSAs are unreasonable and not appropriate.

"Our final comment is that however this policy is implemented, the process for PSAs, TPAs and beneficiaries should in the end be as streamlined as possible and operate to timescales that are both realistic and sympathetic to those affected.”

Whilst the Investing and Saving Alliance (Tisa) said it was supportive of the policy intent of introducing a policy which reduces these benefits and incentivises pensions being used for their originally designated purpose, it warned that the current uncertainty around the plans could have unintended consequences for savers.

"The uncertainty of whether current or increased pension saving levels might lead to an IHT charge in the future may result in individuals reducing or delaying planned contribution increases, to ensure they remain well below the threshold," Tisa head of retirement, Renny Biggins, cautioned.

"This would clearly be a very poor outcome and creates a direct conflict between these proposals and wider government objectives to boost personal saving and financial resilience in later life."

Biggins also noted that the proposals do not discriminate between those more-wealthy individuals who are deliberately using pensions as a wealth transfer vehicle and those who are simply doing the right thing and saving for later life.

"It is challenging to achieve the distinction between these groups if pension entitlements are bundled into the total estate value, however if pensions retained their existing IHT status and an additional charge was instead levied as a standalone inheritance charge, this could be mitigated to an extent through the introduction of a nil rate band or de minimis," he continued.

Biggins acknowledged that there are options to adapt the existing process to make this more workable from a beneficiary and PSA perspective.

However, the primary recommendation outlined in Tisa's response was to change the fundamental approach and instead, create a new tax charge on death akin to pre-pension freedoms and the lifetime allowance (LTA) excess.

This is not the only call for broader change, as the Pensions Administration Standards Association (Pasa) also previously said that there is a "strong case" for the proposed approach to be fundamentally changed, highlighting the concept of discretionary payments as another possible option.

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