She said: “We do not support unused pension and death benefits being shoehorned into the Inheritance Tax regime, as this is unworkable and riddled with issues. IHT is already complex, and including pensions within the regime makes it even more so.

“We are asking HMRC to explore a simpler and more effective alternative that would keep any tax charges payable on death within the pensions regime, such as levying a tax on pensions in scope where above a certain level. For example, the first £100,000 of unused pensions on death would be inherited free of the new pension tax charge. This also has the added benefit of avoiding encouraging individuals to run-down their pension too quickly to avoid an IHT charge.

“If HMRC does proceed with its proposals and tries to retrofit pensions into the IHT regime we believe a number of fundamental changes are needed. First, Pension Scheme Administrators and Personal Representatives need to be given much longer than the standard 6 months IHT deadline to gather all the necessary information and calculate any tax liability for what can often be multiple pension arrangements.

“Second, we strongly believe all ‘death in service’ benefits should be outside of scope. These are designed to provide a lump sum or income for beneficiaries, commonly financial dependants, on the untimely death of the individual, often before the minimum normal pension age. There’s no suggestion these can be used to avoid Inheritance Tax.

“As a whole, IHT is designed around a number of exemptions and thresholds, specifically the nil-rate band of £325,000 and the spouse exemption for legal spouses and registered civil partners. This enables these individuals to inherit significantly more, after IHT, than other potential beneficiaries, such as common-law partners or children who may be financial dependants.

“Given the steady decline in opposite-sex marriage, the increase in co-habitation, and the number of children born to unmarried parents now exceeding the number born within a marriage, we believe this is out-of-step with today’s societal norms. In the longer term, we urge the Government to carry out a review of IHT so that it reflects modern day realities.”

The Society of Pension Professionals (SPP) set out how investments made by UK pension funds already play a vital role in supporting economic growth and are a major source of long-term investment in the UK economy before going on to state, “…the industry broadly agrees it can still do more and is very much committed to doing so, as evidenced by the generally positive manner in which most of the industry has reacted to Government announcements on the need for an increased commitment to productive finance”.

However, the SPP caution that “ some of the current proposals are likely to have unintended consequences for scheme members, whose interests we believe should be at the heart of any pension policy reforms”

The SPP response further warns that, “…it is unclear if a minimum pension fund scale of £25bn AUM is needed or that scale alone will drive any substantial additional investment …in UK productive assets, let alone deliver better saver returns.”

The SPP suggest that to achieve the Government’s desired policy objective of better saver returns, “Government may wish to consider introducing industry league tables, constructed using a concise set of metrics that holistically assess member outcomes and are calculated by an independent trusted source. This would incentivise providers to aim for the size of AUM that would be most conducive to allocating investments with the most attractive net of fee risk-adjusted returns.”

With regard to exemptions, the SPP states that, “… if the Government decides to proceed with a minimum AUM requirement then it should consider a broad exemption for smaller funds that outperform their larger peers; an exempt growth period during which time any new arrangements can focus on building scale; and exemptions for schemes that serve niche markets such as Sharia compliant default arrangements and CDC schemes.”

If Government proceeds with all or any of the proposals in this consultation, the SPP stresses that, “…the sequencing in which these and other proposals are rolled out will make a very significant impact on overall costs and member experience. The SPP therefore urges policy teams to work through the optimal order of events to avoid duplication of cost and …to provide industry with a clear timetable of such sequencing.”

Sophia Singleton, SPP President, said; “We support the Government’s overarching objectives to both invest more in the UK and boost saver returns. However, we aren’t convinced that these proposals are the best way to achieve this.

“A minimum pension fund scale of £25bn AUM isn’t necessarily going to drive additional investment diversification or deliver better saver returns but could lead to unintended consequences of reducing competition, stifling innovation and potentially disadvantaging some minority groups.

“As we have set out in our response, if the Government does decide to proceed with a minimum AUM requirement then it should be at a much lower level and Government should consider a broad exemption for smaller funds that outperform their larger peers; an exempt growth period during which time any new arrangements can focus on building scale; and exemptions for schemes that serve niche markets such as Sharia compliant default arrangements and CDC schemes.

“We share the Government’s desire to make things better as soon as is practicable but getting these policy decisions right is paramount to achieving this.”

Kate Smith, head of pensions at Aegon, said: “We support the overriding aims of the Government’s pension consolidation and scale proposals including encouraging a wider consideration of investment classes. We particularly support the proposals to enable bulk transfers of members of contract-based pensions without individual consent. We see this as a lynch pin to the success of these proposals and other measures such as the Value for Money Framework as without them, it’s extremely hard to facilitate beneficial transfers en masse. As such this should be a priority for the Government and FCA to enable providers to start rationalising their default fund estates now and improve members’ outcomes.

“However, we do have some major reservations about how radical some of the proposals are and the risks they create. Scale shouldn’t be the ultimate goal, but rather a means to the end. Also, it is the provider or scheme size, not the fund or arrangement size, which is likely to lead to better governance, economies of scale and improved bargaining power on price of investment. Many multi-employer arrangements are already using their scale to meet the government’s objective of investing more in productive assets, including through LTAFs.

“Setting hard and fast rules on the minimum scale to be achieved by multi-employer schemes and a maximum number of defaults per provider by a specified date is extremely ambitious, unduly risky and possibly unachievable due to capacity issues. Consolidation of workplace schemes into multi-employer schemes takes many months, depending on the complexity of the transfer, taking up scarce and valuable resources. This could easily lead to a capacity crunch if too many schemes need to consolidate at the same time.

“In terms of greater investment in UK private assets, it’s also questionable whether there’s enough good quality supply to invest in, something the Government will need to monitor closely to avoid simply inflating prices.

“This isn’t the only pension reform the Government is looking to implement in the next few years. There’s a number of other policy measures on the go, including the Value for Money Framework and small pots consolidation. There’s an urgent need for the Government and regulators to sequence the changes in a way that works best to deliver objectives while also making sense to individuals and avoiding creating inefficiencies or capacity crunches for schemes and providers.

“The measures being considered could fundamentally change the pensions market so that it looks very different in 10 years’ time. This could be welcome if it meets the government’s objective of greater investment in productive assets, including in the UK, and crucially improves members’ outcomes. But there is no guarantee of this. The risk is that scale could be counterproductive if it dampens competition and stifles innovation.”

Research by Nextwealth, sponsored by Aegon, found that nearly three quarters (71%) of the 200 advisers interviewed pointed to this as a major worry.

The researchers defined this as clients ‘outliving their money’. The significant increase in the cost of maintaining a moderate retirement, along with a continuing rise in how long people are living are the underlying factors driving it.

See also: Blackburn man pleads guilty in £19m investment fraud case

The second biggest concern cited by the advisers was inflation and the cost of living in general at 64%, and long-term care costs at 49% of advisers was third.

Aegon noted that the PLSA Retirement Living Standards reported a substantial increase in the amount needed for a moderate retirement over the past year.

In terms of client expectations for retirement, the researchers found 76% of advisers reported clients hope to maintain the same standard of living in retirement as before retirement, 65% said clients expressed a desire to assist their children or grandchildren financially, while 45% of advisers said their clients wished to travel or live overseas.

Steven Cameron, pensions director at Aegon, said: “While the prospect of living longer brings many benefits, this research shows there are many challenges that come with navigating and making the most of your retirement years.

“71% of advisers say that clients are concerned about running out of money before they die, which raises real issues about the adequacy of current savings behaviours, as well as highlighting the value of advice at and through retirement, including if drawing a flexible income.

See also: Vanguard rolls out hub for UK advisers

“Worries about high inflation and the cost-of-living crisis also feature high on the list, with advisers finding that 64% of retirement clients raise concerns due to the current economic climate.

“It’s not surprising that worries over the cost of long-term care features as a top three concern for retirement clients,” Cameron added. “These findings highlight how important it is for Government to provide more certainty over social care funding, so advisers can help their clients to plan ahead.

“These findings reinforce the research we’ve conducted on how living longer has impacted the retirement landscape. Those approaching or in their ‘Second 50’ are bearing more of their own financial risks. This means that personalised financial planning based on an understanding of clients’ hopes and fears is crucial for tailoring strategies that meet individual needs and provide peace of mind.”

See also: The Lang Cat: Advised platforms suffer record outflows in 2023

Fixed income strategies Aegon High Yield Bond and BlueBay Emerging Market Unconstrained Bond were among the funds to receive the rating, which recognises strategies the FundCalibre research team believes to be the best among their asset class peers.

FundCalibre research director Juliet Schooling Latter noted the £611m Aegon fund’s “excellent” track record in recent years, which has seen it placed among the top quartile of performers in the IA Sterling High Yield sector over one, three, and five years, according to FE Fundinfo data.

Elsewhere, Ashoka India Equity Investment Trust was also commended by Schooling Latter.

She said: “Launched in 2018, this trust invests in Indian companies of all sizes. The trust adopts a stock-picking approach to target scalable businesses with sustainable superior returns on capital. Aided by a huge bank of experienced research analysts, the trust has comfortably been the best performer in its sector since inception.

“We like the trust’s unique approach to stock selection and its ability to go deeper into both the mid and small-cap markets. A highly unconstrained vehicle, we also like its approach to ESG, specifically governance, which can be a critical issue in India.”

See also: Lindsell Train, Invesco and Schroders managers join 2024 FE Alpha Manager list

Fidelity Asian Smaller Companies fund manager Nitin Bajaj was commended by FundCalibre for his clear philosophy and wealth of experience investing in the region.

“This is a genuine stockpicking fund with an emphasis on buying good businesses at prices discounted by the market. The fund has a contrarian ‘value’ bias and high active share. Risk is considered in absolute terms rather than relative to any benchmark or peer group,” Schooling Latter noted.

Comgest Growth America was commended for its “clear process” and “experienced management team”. The $990m strategy has achieved top quartile returns in the IA North America sector over one, three and five years.

Meanwhile, the £257m Martin Currie Global Portfolio Trust was also highlighted for its long term performance.

“The trust’s manager, Zehrid Osmani, has proven himself to be an excellent manager of high conviction strategies. The highly-driven research approach has proven to be extremely successful over the longer term across a range of portfolios and we see no reason why this cannot continue on this trust,” Schooling Latter said.

See also: Investors increasingly eyeing alternatives as volatility fears rise

Ninety One Diversified Income, which launched in 2012, is designed to either replace or complement bonds in a portfolio. The majority of the fund is held in fixed income assets, while it also incorporates strategic equity positions.

“We also like the team’s use of future options and swaps to hedge equity, duration and credit risk,” the FundCalibre research director added.

Four funds were also handed the ‘Elite Radar’ badge, which is awarded to strategies that are on the research team’s shortlist and could receive an Elite rating in the future.

The strategies receiving the rating were Artemis Leading Consumer Brands, GQG Partners US Equity, Man GLG Dynamic Income, and Redwheel Biodiversity.

This article was written for our sister title Portfolio Adviser

Research by NextWealth for Aegon UK found 68% of advisers said some or most of their clients have stayed in work longer than earlier planned, or deferred accessing retirement savings.

More than half of advisers (59%) said clients are reviewing the amount, or timing, of passing wealth to the next generation.

See also: The Lang Cat: Advised platforms suffer record outflows in 2023

Other notable findings included 53% saying their clients wanted to decrease their level of investment risk, although 36% noted they had seen clients increasing their investment risk.

NextWealth also found 53% of advisers said their clients were looking to guarantee some income through a combination of an annuity and drawdown.

The research was conducted in November 2023 and gathered responses from 200 financial advisers.

Steven Cameron, pensions director at Aegon UK, said: “The challenging economic conditions of late have impacted most people, including those approaching or in retirement. This research shows just how widespread behavioural changes are, which in turn shows just how valuable retirement advice is, especially in times of change.

See also: It’s time for multi-asset managers to ditch bond proxies

“The recent high interest rate levels and the corresponding rise in annuity rates may also have led to more clients seeking to guarantee some income, including through combinations of annuity and drawdown.”

“Overall, the research paints a picture of many clients changing their behaviour around retirement, but in a wide variety of ways. This shows the important role advisers play in tailoring their advice to individual needs and preferences, particularly amongst those approaching or in retirement.”