The pensions and tax industries are strongly opposed to the government’s proposal to bring unspent pension pots into the scope of inheritance tax (IHT) from April 2027, according to survey from WBR Group.

Its study of industry professionals highlighted “significant concerns” about the fairness and practicality of the proposals, with 90 per cent believing that the introduction of IHT on unused pensions was retrospective and unfair.

Furthermore, 97 per cent of respondents agreed or strongly agreed that the proposals forced pensions into an IHT regime that does not accommodate the practicalities of current pension rules or administration processes.

They felt that the timescales for payment of any IHT were unworkable and failed to acknowledge the complexity of discretionary death benefits, reflecting the industry’s concern that the proposals were impractical and could lead to significant administrative challenges.

Almost all (97 per cent) agreed or strongly agreed that trustees and providers would incur additional costs to administer the changes, which “will likely be passed on to consumers”.

The survey highlighted fears that this burden would be unfair and reduce pension engagement, and would be a significant obstacle that could deter individuals from engaging with pension schemes.

All respondents agreed that the proposals assume personal representatives will have the necessary information to pay discretionary benefits immediately after a member's death and that the pension has sufficient liquidity to cover any IHT due, with 82 per cent strongly agreeing.

These assumptions were seen as unreliable, with WBR Group saying that this further highlighted the impracticality of the proposed changes.

More than eight in 10 (82 per cent) respondents strongly agreed that the proposals, alongside the potential unexpected tax burden and increased complexity, would act as a “major disincentive” for consumers to engage with pensions.

In response to the findings, WBR Group head of SSAS proposition, Caitlin Southall, has published an open letter to Pensions Minister, Torsten Bell, urging a reconsideration of the proposed IHT changes.

“The proposed introduction of IHT on unused pensions is not just a concern, it is a looming disaster for the pensions industry,” Southall commented.

“These changes are not only impractical but also a grave injustice to those who have diligently and responsibly saved for their retirement.

“We implore the government to reconsider these draconian proposals and collaborate with pension experts such as us to forge a more balanced and equitable solution that truly supports long-term pension savings.

“The future financial security of countless individuals hangs in the balance.”

---