Rachel Reeves has been under fire ever since delivering the Budget (Image: Getty)

       Plans to slap inheritance tax on undrawn pension pots will be “disastrous”, former pensions minister Baroness Altmann has warned.

       The former director-general of the Saga group predicts that imposing the tax on inherited pension funds will “cause administrative chaos” as well as “huge delays for bereaved families, extra costs for all pension providers and long-term damage”.

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       She fears people respond to the changes by taking by money out as quickly as possible “to avoid the draconian death taxes” – and this will harm defined contribution schemes.

       Baroness Ros Altman fears plans to slap inheritance tax on undrawn pension pots will be a disaster (Image: Ros Altman)

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       The peer is concerned that people will “spend all their pension before they reach old age” and there will be “less investment in long-term assets”.

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       Instead, she recommends a “flat-rate 20 per cent inheritance tax on all unused pension funds on death, regardless of age of death”.

       Daniel Herring of the Centre for Policy Studies said: “Inheritance Tax is complex and encourages the wrong sorts of behaviour, and Labour's planned changes only make it worse. As Ros Altmann rightly points out, these changes could undermine investment and penalise those who, even in retirement, want to prioritise passing their savings on to their children after death.”

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       Blow to Rachel Reeves as Chancellor's plan to tax pensions slapped down as 'unworkable'

       446 Comments

       Labour votes to hit war heroes with Rachel Reeves's nightmare pension death tax

       52 Comments

       Rachel Reeves's new pensions hitman is after YOUR savings - he'll strike on 4 fronts

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       Dyson boss brands Rachel Reeves 'vindictive' for 'destroying' family businesses

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       446 Comments

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       52 Comments

       Rachel Reeves's new pensions hitman is after YOUR savings - he'll strike on 4 fronts

       425 Comments

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       52 Comments

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       Julian Jessop of the Institute of Economic Affairs said: “Inheritance tax is a bad tax. It is damaging to economic growth, because it discourages the creation of family wealth. And it is unfair, because it means people who save and invest are taxed more at death than people who simply give their money away when still alive.”

       Calls for a u-turn have also come from some of the UK's most influential wealth management firms, Hargreaves Lansdown, AJ Bell, Interactive Investor and Quilter. In a letter to the Chancellor, the bosses warn the plans would "compound an already difficult situation" for grieving families and describe the approach as "flawed and potentially damaging".