More than 80% of state-employed workers benefit from lucrative employment “Defined benefit” (DB) plans which pay a guaranteed income until death. Only 7% of employees in the private sector benefit from this advantage.

A defined benefit pension cannot be inherited, although the surviving spouse typically receives 50% of the deceased participant’s pension, which is subject to income tax.

On the other hand, unused funds in a defined contribution plan can be passed on to beneficiaries in the event of death and have been exempt from inheritance tax since 2015. This is considered one of the few major advantages of a defined contribution pension .

This difference means the rule change will only affect public sector workers in a limited number of circumstances, according to Ian Cook, of wealth manager Quilter.

He said: “Rachel Reeves has saved the public sector and widened the gap between defined benefit and defined contribution pensions.

“Some private sector working families will find themselves saddled with an unexpected tax bill, while public sector workers will be able to continue to support their spouse in the event of their death.

“If a beneficiary of a DB pension who is not a spouse or civil partner inherits an estate above the inheritance tax threshold and a death benefit is paid to them, then this benefit will be subject to inheritance tax. This is almost the only scenario in which DB retirees will be affected.