The Society of Pension Professionals (SPP) has called on HMRC to rethink key aspects of its proposed inheritance tax (IHT) framework for pensions, arguing that it could place “unrealistic pressures” on pension schemes, and create delays and confusion for bereaved families.

Unused pension pots and lump-sum death benefits will be brought into IHT calculations in relation to deaths on or after 6 April 2027.

As a result there will be a need for greater information sharing between pension providers and personal representatives, as well as pension beneficiaries and HMRC, in connection with pensions assets.

But the SPP said that the proposed information sharing regulations present a range of operational, legal and practical concerns that must be addressed before the new regime is introduced.

One of the main concerns made by the SPP was that “pension scheme administrators and insurers cannot reasonably be expected to determine whether beneficiaries qualify for IHT exemptions, particularly where complex long-term residency rules apply".

The body argued that this responsibility should remain with the personal representatives who are already responsible for assessing the wider estate.

The organisation also called for a “significant simplification of reporting requirements” and questioned the notion that schemes should be obligated to provide information on benefits that fall outside the scope of IHT.

Furthermore, it asserted that some of the proposed deadlines were “too restrictive” and “fail to reflect the practical realities of verifying identities, gathering information and obtaining valuations".

The SPP also criticised a number of “technical drafting issues and operational uncertainties,” such as issues with withholding notices, payment notice processes, overseas estates, the treatment of joint personal representatives and the data protection implications, among other concerns.

SPP’s chair of the Legislation Committee, Shayala McRae, said HMRC had made “good progress in engaging with the industry,” but added: “Further refinements are needed to ensure the system is workable, proportionate and does not create unnecessary delays for bereaved families.

“The pensions industry is committed to helping make government reforms work, but the current proposals place significant responsibilities on schemes that are simply not practical in many cases. Determining IHT exemptions often requires information that pension schemes simply do not have and cannot reasonably obtain.”

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