You might well not care about the chancellor’s move to charge inheritance tax on pensions, but I’m going to make the case that you should not only care, but be deeply concerned.

This mindless tax grab, and that’s exactly what it is, is the result of a kneejerk reaction to the former Tory chancellor Jeremy Hunt’s decision to scrap the lifetime allowance on pension savings.

The £1,073,100 cap on tax-free savings was abolished in 2023 to stop senior NHS doctors retiring early to avoid shock tax bills. Anything above that amount was taxed at up to 55 per cent.

Rachel Reeves, the shadow chancellor at the time, swore she would undo this move as soon as she could, dismissing it as a “gilded giveaway”, but as it transpired, reversing the legislation would be more hassle than it was worth.

So, intent on taxing pension pots at any cost, Reeves announced in her first budget in October last year that she would instead charge 40 per cent inheritance tax on defined contribution (DC) pension pots from April 2027.

The former Conservative pensions minister Baroness Altmann has said that she “can’t warn strongly enough how much of a disaster” this will be. The pensions industry has also warned of the omnishambles in store, but so far no one in government seems to have taken note.

At the moment, when someone dies, their DC pension pots are moved seamlessly to their spouse because it is certain there is no tax due. But this will all end when inheritance tax comes into the equation. Even though pensions, like all assets, will continue to be inherited by spouses and civil partners tax-free, pension firms will be reluctant, unable even, to transfer them until they can confirm whether there is an inheritance tax liability and then, if it has been settled.

Anyone who has dealt with the death of a loved one will know that these things don’t happen overnight. Probate can take weeks if not months, and the tax clock starts ticking as soon as someone dies — meaning relatives face interest of 8 per cent if they cannot pay inheritance tax within six months. We could quite easily find that widows are left with no income when their husband dies.

• Your retirement is under threat from a runaway gravy train

Secondly, this is a retrospective tax grab. Imagine saving heavily into an Isa, only to be told that your returns are not tax-free after all. This is essentially what has happened here.

Savers have diligently filled their pensions on the understanding that they could be passed on to children or non-spouses without them having to pay tax, only for that to be snatched away. Changing the goalposts like this, when many have made retirement plans around the laws, is tantamount to theft, and it blurs the line between what is ours and what is the government’s to tax as and when it pleases.

This tax raid is also heavy-handed, and will lead to some families paying effective tax rates of more than 90 per cent on inherited pensions, according to the accountancy firm RSM. This could occur if adding a pension pot to an estate took it over the threshold for getting the extra main residence tax-free allowance, and if the beneficiary was a top rate tax payer.

Furthermore, the inheritance tax is charged on the total money in the pot, even though income tax would have been paid on it if it had been taken as income before you died. So the government is inflating the true value of your pension, and leaving your family with less.

• ‘We can’t pay £700,000 inheritance tax if our farm makes no money’

If that wasn’t enough, HM Revenue & Customs has confirmed that inheritance tax will be charged on the pensions of those who die under the age of 55 — before they even had the chance to access their pension. In all, the government expects to tax the pensions of nearly 2,000 savers who die before 55 by the end of the decade. This means that the young families of those who die well before their time could be punished.

What’s more, this is only truly a tax on those in the private sector with a defined contribution pension fund available to raid. This is unlike public sector workers who are still lucky enough to retire with an inflation-linked income from a defined benefit pension — based on nothing but a guarantee from the taxpayer. This means those who have to risk their retirement savings on the stock market to have any hope of beating inflation are penalised for that gamble paying off.

Perhaps the most damaging edge to this policy is that it risks deterring savers from putting money into a pension for retirement. We are said to be hurtling towards a retirement crisis, and yet ministers are squeezing our pensions and punishing prudent saving and investment growth.

• We’re Gen Z and worry we’ll never retire

And finally, by catching our pensions in the inheritance tax net, the chancellor is exposing tens of thousands more families to death duties. Anyone with an estate worth more than the threshold of £325,000 (or £500,000 with the residence allowance) can now expect to leave loved ones with an inheritance tax bill.

For example the inheritance tax liability of someone with a £600,000 pension pot could soar £240,000 overnight in April 2027, and if that saver is too young to access their pension, there is nothing they can do about it. Every £10,000 saved into a pension from then on builds that tax liability by £4,000.

As tax allowances remain frozen, and inflation remains out of control, we can expect many more families with modest assets to get caught out.

One can understand the desire to limit how much money in a pension is tax-free, but this policy takes it too far. The inheritance tax raid on pensions is undignified revenge politics. It penalises the enterprising private sector and it cashes in on those who die early having worked hard to enjoy retirement.