Millions of savers are at risk of plunging their loved ones into an expensive bureaucratic nightmare when they die as a result of new rules taking effect next spring.

A study for Money Mail reveals very few are ready for the major legacy planning changes, which were set out by former chancellor Rachel Reeves and will be enforced from April.

The red tape will require executors of estates to identify and pass on to HMRC the details of every single pension held by the deceased.

'Families who don't have this information ready could face a race against time, searching for old pension documents to meet HMRC deadlines to pay inheritance tax and avoid extra interest,' says John Chew, a tax and estate planning expert at Canada Life.

Its research shows nearly half of over-55s have not appointed executors to sort out their estate yet, and even fewer have given them vital pension information.

Former pensions minister Baroness Altmann, who has raised the alarm in the House of Lords, says the changes and the burden they place on relatives are completely unworkable.

'Forcing people to pay nearly 8 per cent interest if they don't pay inheritance tax within six months, while the rules ban them from obtaining any money to pay the tax until they have probate and have worked out what pensions hold, is like a scam,' she says.

'It is great for the Treasury but wholly unfair on the bereaved. This must be rethought to avoid a disaster.'

Here, Money Mail explains exactly what is changing and what you can do now to prevent unnecessary anxiety for your family after you are gone.

Inheritance tax on pensions

Pensions will start to be included in estates for inheritance tax calculations from April. That means thousands more families will be dragged into paying death duty for the first time at a flat rate of 40 per cent.

Thresholds start at £325,000 per person, or £500,000 if you leave a home to direct descendants. Couples can double those thresholds because spouses are exempt from IHT.

Once an estate reaches £2million, which more people will reach once pensions are included, the allowance for leaving your home to a descendant begins to be removed by £1 for every £2 above this threshold. It vanishes completely by £2.3million.

Inheritance tax has to be paid upfront before you can access or receive a penny from a loved one's estate. 

Even when no inheritance tax is due, a deceased person's finances still need to be examined and information must often be submitted anyway to prove that to the taxman.

Until the rule change, it is not necessary to report any pension information to HMRC because they can be passed on free of inheritance tax.

But from April, the details of every pension – including the balances and where the pensions are held – will be needed to wrap up the estate.

Importantly, this will create admin headaches even for families with no bill to pay, because they will need to prove that to HMRC.

If you have a tendency to mislay, forget about or throw away pension paperwork, you are far from alone. 

Few of us are on top of our personal admin enough to have a list of all our private and work schemes, plus contact details and online log-ins.

Many of us have multiple workplace pensions, one from every employer we have worked for. 

It's no wonder there are an estimated 3.3million lost pension pots in the UK, according to the Pensions Policy Institute – which estimates the total to be worth £31billion.

But if it's hard keeping track of your pensions, it will be even harder doing it on behalf of someone else. 

That's why finance experts are now urging people to create a checklist of pension information, and either hand it to relatives or keep it somewhere easy to find alongside important documents.

Stiff interest charges, which accrue on a daily basis and are currently set at 7.75 per cent a year, could be levied if you fail to track down all pensions and settle the bill within six months. If no money is due, you get 12 months to simply fill in the forms to show nothing is owed.

That means interest of £7,750 could be racked up on a £100,000 bill after one year. Separate from interest, you can face a £100 penalty if a bill is paid six months late, an additional £200 if it is six to 12 months late, and up to £3,000 if it is more than 12 months late. But these penalties are subject to appeal if you have a reasonable excuse.

'Personal representatives' – meaning executors or administrators of an estate, who are often family members or friends – will be liable for the reporting and payment of inheritance tax on pensions. 

These personal representatives, alongside the beneficiaries inheriting the estate, are jointly responsible for paying the bill, either as a group or individually.

They are expected to make reasonable efforts to locate all pensions, which are explained below.

Appoint an executor

Mr Chew says leaving a clear will and appointing a trusted executor are crucial steps to making things simpler for your loved ones when you die.

You should then provide those you chose with information about how to locate assets. 

'This will become even more important when pensions are set to fall into scope for inheritance tax calculations, and executors have the added responsibility of tracking down pension arrangements to assess for a liability,' he adds.

However, just 52 per cent of over-55s have appointed an executor, according to a survey by Canada Life. 

And of those, only 42 per cent have handed over all necessary pension information, while 17 per cent have given some of it, and 21 per cent have shared nothing at all.

Personal representatives are usually executors, who are appointed in a will, but it is possible to make a valid will without naming anyone specific to wind up your affairs.

In that case, someone who knows you can step in to be an administrator of an estate, usually a loved one, if approved by court. 

If not, a professional such as a lawyer is appointed by a court. This can cost thousands of pounds that eats into your legacy.

Create a clear record

Those put in charge of sorting out estates are usually trustworthy and responsible, but laypeople when it comes to financial or tax matters. 

Therefore, you need to give them a helping hand by getting your information in order in advance.

Former pensions minister Sir Steve Webb says this job will be much easier if you have kept paperwork, especially where the pensions were taken out years ago.

'Things like annual statements provide clear evidence of pension rights and usually have vital information such as membership numbers and contact details for the people who run the scheme,' he says. 

After your death, your loved ones will be able to see in black and white what you were entitled to and who they need to contact, he adds.

Sir Steve, who is now a partner at LCP, says it's also important to be systematic about listing websites and login details where everything is done electronically.

'With so many usernames and passwords to remember, it's easy to forget how to access sites which are only accessed occasionally, such as those of our pension schemes.'

Heather Rogers, founder and owner of Aston Accountancy, says: 'The process of gathering information from pension scheme administrators is likely to take place alongside the valuation of the deceased's other assets and liabilities.

'If your family know where your pension documentation is, where your pensions are held and the type of pension held, then that will help. 

'All pensions have to be valued at the date of death and where a pension pot contains more than one type of pension, then both have to be valued separately.'

Mr Chew advises: 'Prepare a simple record of your pension arrangements including workplace schemes and personal pensions, listing provider names, policy or account numbers and contact details.'

Without the documents, executors may need to complete a 'missing policy declaration' with the pension provider to confirm the original documents have been lost or cannot be located, he also says.

'Pension paperwork can be stored digitally or as hard copies, as long as it is kept secure and your executor knows where to find and how to access it.'

What if a pension is overlooked?

In future personal representatives are going to need to find a lot of additional information on pensions to a very tight timescale, warns Sarah Lister, partner in the probate team at Thomson Snell & Passmore.

If pension information is not immediately available, this could cause delays and add additional costs such as legal fees and potentially interest on outstanding tax.

In general, legal costs vary depending on the law firm and where they are located, but a complex case that drags on might cost thousands of pounds extra.

And people are always losing track of pensions, so it is not outside the realms of possibility that another turns up after everyone involved thinks an estate is settled for good.

'Where personal representatives discover an additional pension after distributing the estate, they will need to notify HMRC and correct the inheritance tax return,' says Ms Lister.

This is likely to mean additional tax, and it is possible for HMRC to charge a penalty. But Ms Lister says as long as the representatives have made reasonable efforts to locate all pensions and made the correction unprompted by HMRC, no fines should be imposed.

However, she notes: 'Personal representatives may need to recover funds from estate beneficiaries to cover an increase in tax and possibly interest. 

If the beneficiaries do not comply or have already spent their inheritance, the position gets even more complicated and risky.'

Ms Lister says the personal representatives could have to cover the inheritance tax out of their own pockets, though they can protect themselves by applying for a 'clearance certificate' from HMRC.

This is an official document which personal representatives apply for when they believe they have declared and, where appropriate, paid tax on the assets in a deceased's person's estate. It releases them from further inheritance tax liability for the assets specified in the certificate.

In the case of the new pension rules, there is a specific provision that means once clearance has been obtained, you will not be liable for inheritance tax on any pensions which come to light after that, as long as you made 'reasonable efforts' to locate the pensions, Ms Lister says.

This will be evaluated on a case-by-case basis, but she says you should be able to prove you've been 'inquisitive' about locating assets. 

She adds: 'This generally involves a search of the deceased's home, looking through their papers, records and bank accounts and legally accessing any computers and phones used by them.

'It also involves speaking to the deceased's relatives, advisers and previous employers along with the beneficiaries of their estate.'

• Are you preparing for the inheritance tax changes coming into force next year? Email moneymail@dailymail.co.uk