Plans to bring unused pension funds and death benefits into the scope of inheritance tax (IHT) could create “considerable additional burdens” for both pension scheme administrators and personal representatives (PRs), The Society of Pension Professionals (SPP) has warned, urging the government to provide clarity and allow sufficient time for implementation.

The House of Lords inquiry, launched last month, is examining government proposals to bring unused pension funds and death benefits into the scope of IHT from April 2027, a move that has sparked significant concern across the industry about administrative feasibility and fairness to savers.

In its response to the House of Lords Finance Bill Sub-Committee’s call for evidence, the SPP said that while it welcomed the government’s decision to make PRs - rather than pension scheme administrators - responsible for reporting and paying IHT, the timescales for the payment of IHT under the intended new regime are a "serious concern" for both PRs and PSAs.

The SPP suggested that "with hindsight, it might have been better to operate a separate taxation solution for pension death benefits rather than consolidate the process into the existing IHT framework.”

The professional body also highlighted concerns about the proposed three-week deadline for schemes to pay IHT on behalf of beneficiaries, warning that the timeline would be “administratively difficult” - particularly where assets are held in illiquid funds - and that such requirements could lead to unintended consequences once the policy comes into effect in April 2027.

While acknowledging HMRC’s commitment to providing “clear guidance, a calculator, and a straightforward system to pay tax liabilities”, the SPP said policymakers should go further by allowing executors or PRs to access the deceased’s pension dashboard data directly, which would “greatly speed up the process” of identifying pension assets and providers.

The society also suggested that the implementation timetable is now “getting considerably tighter”, noting that “critical details are yet to be settled”, and that this increases the likelihood of “oddities, anomalies and unintended consequences” emerging after the changes take effect.

Consequently, it called for the early publication of secondary legislation and guidance, alongside the primary legislation, to give the industry sufficient time to adapt its systems and processes.

In addition, the SPP recommended transitional arrangements during the first three years of the new regime, including a “good faith exemption from liability and interest” where delays occur through no fault of the scheme, beneficiary, or PR, as the new processes bed in.

The society further urged the government to improve future consultation processes, arguing that greater early engagement with the pensions industry could have prevented some of the issues that have since arisen.

The deadline for the submission of written evidence to the House of Lords is 5pm on Tuesday, 7 October.

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