MSE News: Pension inheritance tax to be axed

SallyG

https://www.gov.uk/government/news/chancellor-abolishes-55-tax-on-pension-funds-at-death
"Anyone who dies with a drawdown arrangement or with uncrystallised pension funds at or over the age of 75 will also be able to nominate a beneficiary to pass their pension to." ......so just one beneficiary?

"The nominated beneficiary will be able to access the pension funds flexibly, at any age, and pay tax at their marginal rate of income tax...".............so no age threshold for the pension fund inheritor taking cash/payments?
"There are no restrictions on how much of the pension fund the beneficiary can withdraw at any one time.
There will also be an option to receive the pension as a lump sum payment, subject to a tax charge of 45%" ..........so if death occurs after age 75 an inherited pension fund taken as a lump sum will be taxed at 45% instead of 55%?

robin61

SallyG wrote: »

https://www.gov.uk/government/news/chancellor-abolishes-55-tax-on-pension-funds-at-death
"Anyone who dies with a drawdown arrangement or with uncrystallised pension funds at or over the age of 75 will also be able to nominate a beneficiary to pass their pension to.
The nominated beneficiary will be able to access the pension funds flexibly, at any age, and pay tax at their marginal rate of income tax...".............so no age threshold for the pension fund inheritor taking cash/payments?
......"There are no restrictions on how much of the pension fund the beneficiary can withdraw at any one time.
There will also be an option to receive the pension as a lump sum payment, subject to a tax charge of 45% ..... "
So if death occurs after age 75 an inherited pension fund taken as a lump sum will be taxed at 45% instead of 55%?

Seems like this could be a decent option to prevent inheritance tax.

Sterlingtimes

The socialist will always be upset that individuals are permitted to keep their own savings.

For the main part, income tax will apply for any income or capital extracted from the pension fund.

The thoughtful individual may choose to assure by the way of pension or insurance policy against being poor, sick, unemployed or disabled, and expect that children may benefit.

The socialist is always free to gift (in the interest of having a free conscience) his/her estate to the Revenue & Customs.

atush

No handouts for the richest, but return of their own savings to those who worked hard enough to save something.

which will be taxed on 75%, so the socialists can spend that?

Last I checked, education thru a level is free in the UK. If people are poor, perhaps they did not take full advantage of that free education. I know plenty of those who grew up poor and did. And are now no longer poor.

dunstonh

So, you think its fair that those paying benefits have had their income stagnate or fall whilst those getting handouts have seen theirs continue to rise?

There has to be a balance between those taking and those giving. It is very sad that some of those taking from the state have such a negative attitude towards those that fund their benefits.

Pincher

This thing reminds me of the £400 boiler scrappage allowance.
At 20% VAT, if you spend £2,000+VAT on a typical boiler replacement, the VAT is £400. As it turns out, I spent more like £4,000, and therefore paid £800 in VAT. The Treasury actually made £400 out of me, what kind of "incentive" is that?

They don't really want to give you any tax back at all.

45% and 55% clawback? The tax relief they put into the pension pot is 20%! Some relief was 30% - 33% from 30 years ago. What with zero growth for years, but the fund managers still raking in the fees, and the inital set-up charges (commission), I'll be lucky to have what I put in the pension pot before any draw down.

Now that they realise the annuity system is so poor value for money, that they cannot in all conscience force you to buy one, what are they going to do with YOUR money in the pension pot? All they can think about is how to get THEIR money (tax) back! Funny thing is, they didn't care when the annuity fat pigs swallowed all the money in one big gulp. Maybe it's because the annuity providers usually bought gilts to cover the annuity?

In the movie "The Firm", Tom Cruise told the mobster that he will feel like he has been (text removed by MSE Forum Team) by a rhino, when the tax man is finished with him. After a life time of this tax relief dangled in front of me, only to be snatched away if I try to draw down or just die, I feel like there are TWO rhinos, and I am getting (text removed by MSE Forum Team) at both ends.

dunstonh

Now that they realise the annuity system is so poor value for money, that they cannot in all conscience force you to buy one, what are they going to do with YOUR money in the pension pot? All they can think about is how to get THEIR money (tax) back! Funny thing is, they didn't care when the annuity fat pigs swallowed all the money in one big gulp. Maybe it's because the annuity providers usually bought gilts to cover the annuity?

Annuities appear poor value compared to historic rates. However, they provide a guaranteed income for life at around 6% plus. Whereas can you get that guaranteed rate?

There hasnt been a requirement to buy an annuity for nearly a decade.

The issue of annuities wasnt that in-house annuities were poor value. Open market option offered good value. The response wasnt to force OMO or ban in-house annuities. It was to give total control over choice.

There is still an expectation that annuities will form the majority of purchases for retirement income from pension funds. Although those wtih small funds will almost certainly draw theirs as a lump rather than use any income provision method.

SallyG

http://www.moneymarketing.co.uk/news-and-analysis/pensions/osborne-creates-confusion-over-pension-death-tax-abolition/2014725.article

"Speaking at the Conservative party conference this afternoon, Osborne announced the abolition of the tax penalty on pensions taken before the age of 75.
Earlier today the Treasury said the changes will take effect from April 2015 but in his speech Osborne suggested the new rules would apply from today.
He said: “People who have worked and saved all their lives will be able to pass on their hard-earned pensions to their families tax-free. Effective from today.”
A Treasury spokesperson told Money Marketing the tax cut will apply to payments made after April 2015 and that Osborne meant that people could “benefit immediately” because they could defer taking their pension until April."

It remains unclear whether the savings of people who have already died will be subject to the current or new tax rules."

zagfles

dunstonh wrote: »

Annuities appear poor value compared to historic rates. However, they provide a guaranteed income for life at around 6% plus. Whereas can you get that guaranteed rate?

Guaranteed nominal rate. No inflation increases (unless you're telling us you can get a 6% index-linked annuity). So it's not a guaranteed income in today's money terms. You take the inflation risk.

dunstonh

zagfles wrote: »

Guaranteed nominal rate. No inflation increases (unless you're telling us you can get a 6% index-linked annuity). So it's not a guaranteed income in today's money terms. You take the inflation risk.

And how does that compare with a savings account which would have capital erosion or an investment that could have capital erosion.