Wealth management trade association PIMFA has warned that draft inheritance tax reforms are unworkable in their current form.

Under the proposals, executors and administrators of a deceased person’s estate must report and pay IHT within six months of death or risk interest charges.

However, pension schemes have up to two years to determine who should receive discretionary pension benefits.

This means administrators could be forced to either file potentially inaccurate IHT accounts, risking errors and overpayments, or delay filing until pension decisions are made and risk paying interest charges on money they may not even owe.

Julia Sage-Bell, senior policy adviser at PIMFA, said: “While we understand the Government’s aim of addressing the use of pensions for intergenerational wealth transfer, we are urging HMRC to revisit the administrative framework. In its current form, this legislation risks creating unnecessary burdens, delays, and unfair costs without delivering the intended policy benefits.”

PIMFA added that platform firms within its membership have also highlighted a number of other concerns about the current proposals.

Other potential issues highlighted to PIMFA from members include:

• Small estates - The draft legislation could push more estates into full IHT reporting unnecessarily if they have to report before the beneficiaries have been confirmed.
• Valuations - The draft rules require pensions to be valued as of the date of death; however, providers may not learn of a death until sometime afterwards, potentially months or even years later.
• Liquid assets - Pensions holding complex or illiquid assets, such as property, could be complicated and costly to value at a specific date in the past.
• Payment of tax - The proposed requirement for schemes to settle IHT within three weeks on behalf of beneficiaries is "unrealistic", especially where pensions include illiquid or complex assets or the pension is paid as a dependant’s drawdown.
• Refunds - Too much tax upfront may be paid if an estate is later revalued, and it will be difficult for HMRC to issue refunds if the executors and/or pension providers are no longer in contact with beneficiaries.
• Vulnerable customers - Expecting non-professionals, often grieving family members, to calculate, report and pay IHT within compressed timescales – even without the clash of deadlines highlighted above - risks "distress, errors and delays".

HMRC published the draft Finance Bill legislation in July, confirming it plans to go ahead with the proposal to impose IHT on pensions from April 2027.