Michael Summersgill, chief executive of wealth management firm AJ Bell, has written to the Chancellor warning of the consequences of the changes.
“At what will be an emotionally challenging time for those close to the deceased… the process of distributing much-needed support will end up stalled in a much more complicated probate process,” he told Ms Reeves.
“Settling inheritance tax to be paid from the pension scheme within six months of the member’s death – the time limit for gaining probate – will prove impossible in many cases for reasons out of the control of the pension scheme,” the letter added.
“All of this complexity will cause significant delays and additional costs, but as is often the case in financial services, it is liquidity that will prove to be the real stumbling block.”
Mike Warburton, The Telegraph’s tax specialist, said that the new rules could become “unfair”.
He said: “There will inevitably be some cases where the pension fund overpays inheritance tax and a refund is due to the executors, but I am not clear whether this will then suffer income tax. It would be unfair if this would have been avoided with accurate information and some flexibility.”
The Government will consult with industry experts on the implementation, but the current proposals would force bereaved families to track down all of the deceased’s pensions, contact each scheme individually and calculate the inheritance tax bill themselves.
They would also have to notify every scheme of the amount due for that pot and allow time for HMRC to communicate with each one before waiting up to six months for payments to arrive.
Mr Summersgill also warned that leftover pensions will also be subject to a double tax as higher earners will face paying income and inheritance tax on the savings.