Until now, a 55% tax applied to untouched ‘defined contribution’ pension pots which belong to those aged 75 and over. It also applied to pensions where money had already been withdrawn.

But from April 2015, if a pension saver dies aged over 75, beneficiaries will receive the funds free of tax if they keep them in a pension. If they draw the pension, they will pay their marginal rate of tax.

If the person who dies is under 75 there will be no tax.

The measure is to be unveiled imminently by the Chancellor at the Conservative Party conference in Birmingham. It was originally due to be announced at the Autumn Statement on 3 December.

The move would cost the Treasury some £150m per year, affect 320,000 people and apply to all inherited pensions from next April.

It is the latest in a string of pension changes brought forward by Osborne this year to indicate his support for the demographic who have been hit by eroding savings rates. 

The pensions landscape has already been radically altered after Osborne announced in March’s Budget that retirees would no longer need to buy an annuity, and would instead have the freedom to cash in as much or little of their pension as they like.