After death spouse/partner pension choices

gadgetmind

PennyForThem wrote: »

yes gadetmind - all this has rocketed me into a higher (40%) tax band which is why I would have liked choice.

In that case, contributing everything that's taxed at higher rate into a fresh pension makes a lot of sense.

You also need to carefully consider when to take your deferred state pension lump sum as this is always taxed at your marginal rate and doesn't push you up tax brackets. If your only income in the tax year you take it is those other pensions, then you should be able to draw this quite efficiently.

dzug1

PennyForThem wrote: »

. I probably am going to owe tax this financial year - luckily I have the capital for rainy day to be able to cope with this.

Not sure I follow the capital bit - you'll have the extra income to pay the tax from surely?

property.advert

Moving into the 40% tax bracket does not mean everything is taxed at 40%, only the marginal amount. Thus, with a limit of £35k and a salary of £36k, only £1k would be taxed at 40%.

jackyann

I wonder if this is a time to speak to a proper, independent financial advisor (I am a little wary of them, see previous posts, they are a little wary of me!) but this is complex and needs careful consideration. They may be able to advise about say, giving money to family members (if that is what you want!) or other things. So may well be worth the money - I am not talking about avoiding tax, but managing money for the best against the future (which I am sure is what your husband would want)

And I would add that there is a difference between money that is put into a pension, state, public, private, saved by someone for their's or partner's retirement; and benefits for the needy. A civilised society needs to make provision for the latter. The state may decide, through the tax system, to encourage the former (so it is less likely to pay out benefits).
I have paid into a pension scheme for my own & my husband's retirement, I have contributed to the State pension scheme for my retirement, I have paid taxes towards benefits for those who need them, and charitable donations as I wish. These are all different things and should not be confused.

omits

You would seem to be pretty well off for pensions. I would not put more into pensions but save hard in ISAs and other 100% safe (!) investments. That way I have ALL that cash to hand later. Giving money away to investment managers who take their charges up front and don't guarantee to loose some or all of it for you does not make sense to me.

gadgetmind

omits wrote: »

Giving money away to investment managers who take their charges up front and don't guarantee to loose some or all of it for you does not make sense to me.

There is close to zero difference regards what you can invest in within SIPPs and ISAs, in fact, you can access a greater and (if you want) more cash-like selection of assets in a SIPP.

My SIPP is in low-TER trackers, bonds ETFs and REITs - narry an investment manager in sight.

jamesd

PennyForThem wrote: »

As an aside, anybody thinking of funeral plan - do consider seriously.

One alternative is simply to have money in an account at one of the major banks. Given an invoice from an undertaker and a death certificate NatWests say will have a cheque with them within a week, as I know from experience.

Omits, you can use deposit accounts within a SIPP if you like. Just pick one that offers them as an option. From age 55 you can put money into a pension, get 25% added (if basic rate tax payer, else 25% added and another 25% refunded by HMRC) then take out 25% of the total as a tax free lump sum and leave the rest in the pension. So for higher rate tax:

Pay in £10,000
25% basic rate tax added, £12,500 in pension
25% higher rate refund, net cost drops to £7,500
Take 25% tax free lump sum from the £12,500, £3,125 leaving £9,375 in the pension.

At that point your net cost has dropped to £4,375 and you have £9,375 in the pension. That's more than doubling your money before you even get started with investing it somewhere, something you can't hope to do outside a pension with a cash ISA.

Now you can, if you like, put the money in the pension into a savings account and take the interest as income, subject to the GAD limit calculation. And even for a 40% tax payer, you're going to end up with more money after tax than an ISA would pay tax free.

But you're not limited to deposit accounts within a pension, you can use things like corporate bond and other funds, some of which are paying over 8%, plenty paying over 6%. Capital value will vary but that doesn't matter so much if you're thinking of 25-30 years of retirement income. If you don't like funds because they have managers, you could always use retail corporate bonds directly held, no manager involved, or PIBS, some of which I list here. Not going to get say 8.5% from a Co-op Bank deposit account but you can get that from their corporate bonds (without the FSCS protection that the savings account would provide!).

atush

omits wrote: »

You would seem to be pretty well off for pensions. I would not put more into pensions but save hard in ISAs and other 100% safe (!) investments. That way I have ALL that cash to hand later. Giving money away to investment managers who take their charges up front and don't guarantee to loose some or all of it for you does not make sense to me.

Saving into ISAs is all well and good, but would not help take the OP out of HRtax. Only saving into a pension will.

When you save into a pension, the money is yours- you are not 'giving it away to managers'. In any case, many ISAs are run by equivalent 'managers'.

PennyForThem_2

Hi

Financial advisor is good advice - have checked around and will be making an appointment for end January/beginning of February so that I know exactly where I am with pensions, lump sums etc.

Interesting advice too about pension (SIPPs?) - I will definitely check that out.

As to funeral plan - thanks, didn't know that the bank would pay out as long as money in account, death cert and funeral invoice. Interesting - do I pay now or let my estate pay when it is likely to have increased in cost considerably from what I have been reading.

One side: Hassle taken away from children as part of the plan is sorting out what you want or how could they cost it?

Other side: as long as I leave instructions as to what I want then estate can pay for it....

will have to ponder that one! I know this argument has been in threads in over 50s forum but didn't take much notice of them - may go back and search

jem16

property.advert wrote: »

Moving into the 40% tax bracket does not mean everything is taxed at 40%, only the marginal amount. Thus, with a limit of £35k and a salary of £36k, only £1k would be taxed at 40%.

Just for clarification here. Higher rate tax starts at £35,000 plus £7475 (personal allowance) so it needs to be above £42,475.

PennyForThem wrote: »

Hi

Financial advisor is good advice - have checked around and will be making an appointment for end January/beginning of February so that I know exactly where I am with pensions, lump sums etc.

Make sure it's an IFA and not an FA from a bank.

Interesting advice too about pension (SIPPs?) - I will definitely check that out.

I'm in a similar position and make sure to put any amount in the higher rate bracket into a pension so I get 40% tax relief and avoid paying higher rate tax.