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The Sipp Tax Reform Action Group, represented by law firm Clarke Willmott, is campaigning to bring a class action against the government to make laws fairer for those over the age of 75.

Under current tax legislation, once a Sipp holder reaches the age of 75 and decides not to purchase an annuity, the consumer can lose as much as 82 per cent of the fund.

The group argues that pensioners over the age of 75 are forced into an alternatively secured pension (ASP) and face prohibitive tax rates.

John Stewart, director at Essex-based PMI Independent Financial Advisers, described the current tax regime for Sipp holders over the age of 75 as "extortionate".

"Why should they be forced, once over 75, into an ASP?" he said. "It's crazy, and it's not consistent with other inheritance tax laws."

Mr Stewart said he was unsurprised by the lack of opposition to current laws by product providers, who have yet to pledge their support to the action.

"It's disappointing," he said. "The industry very rarely unites on anything outside of self interest."

Mr Stewart called on the Association of British Insurers, the pension and insurance trade body, to get behind the group's efforts.

Robert Morfee, partner at Clarke Willmott, said there was a strong case for the action to succeed, adding that he had secured an opinion from Nigel Inglis-Jones QC to support the legal position.

Mr Morfee said the situation currently facing surviving beneficiaries of dead ASP holders as "horrendous" and "unacceptable".

But he warned that, despite the current situation, some providers and trade bodies had been unwilling to back the action.

"Product providers haven't proved interested in the past," he said. "They've proved interested, but not willing to say so openly. They don't want to challenge the government - from a business point of view, that's not good business."

The campaign is seeking at least 500 people to participate in the class action. Should more than 1,000 people participate, contribution towards the action is unlikely to exceed £2,000. The group added that, should the action fail, it was aiming to get as close to a "no win, no fee" arrangement as possible.

Interested parties can register interest at the group's website: www.sipptaxchallenge.co.uk