is this normal savings behaviour

Pincher

Try it this way.


If you don't spend it, inheritance tax will be 40%.
After a life time of saving, Gorge Osborne gets nearly half!


Just had a Kaiseki (Japanese multi-course meal) for £120.
Totally not worth it for £120, but if I don't spend it, my heir only gets £72. So, you can look at it two ways:


1. The meal only cost £72.


2. I have denied George Osborne £48. :T


The pedantic would point out that George still gets a cut, via the VAT on the meal, which is why I am spending it in Japan.

redux

Pincher wrote: »

Try it this way.


If you don't spend it, inheritance tax will be 40%.
After a life time of saving, Gorge Osborne gets nearly half!


Just had a Kaiseki (Japanese multi-course meal) for £120.
Totally not worth it for £120, but if I don't spend it, my heir only gets £72. So, you can look at it two ways:


1. The meal only cost £72.


2. I have denied George Osborne £48. :T


The pedantic would point out that George still gets a cut, via the VAT on the meal, which is why I am spending it in Japan.

You could spend £20 or £40 on a different meal, give £100 or £80 to the heir now, survive another 7 years and not incur inheritance tax on that money.

colsten

joeblags wrote: »

the rent is cheap and I can live here for life if need be.

You can never be certain about this.

Pincher wrote: »

If you don't spend it, inheritance tax will be 40%.

There is a significant IHT allowance - currently £325,000. Without knowing how much the OP has in savings, you can't say that how much if any of their estate would be subject to a 40% tax. We also don't know whether the OP cares about events once they are gone, nor do we know what their pension arrangements are and whether they'd need some of their savings for old age.

Pincher wrote: »

2. I have denied George Osborne £48. :T

Clearly, nobody particularly likes paying tax but it's worth remembering that we don't give our money to some nasty creature called the Chancellor but that it's money that gets spent in the country's household. We all benefit in some way or other from paying taxes - free health care, a safe and secure country to live in, free basic education for all that want it, a clean environment, a social security safety net if we fall on hard times etc etc etc etc.

enthusiasticsaver

I always think you need to find a balance between spending and savings. We have a number of regular savings accounts and a stocks and shares isa which we pay into every month. The amount we pay in is strictly calculated as the difference between what we earn now and the amount we will receive in retirement in 3/4 years time so we know we can live within our pensions and have the added bonus of an extra lump sum saved between now and then.


As far as spending goes we have a budget we keep to for house, entertainment, gifts, everyday spends and holiday. Normally in January we talk about holidays and I calculate the costs and the same goes for home improvements or any furniture which needs replacing. We prioritise it and work within the budget each month. We do not worry too much if the budget is blown in one month or if there is some left and figure it will probably be spent at some time. I certainly do not feel the need to spend just because it is there - it is on a need (not want) basis it gets spent.

Pincher

Some people object to double taxation.


Let us say you make £100, pay around £30 on income tax and National Insurance, so you get £70 in your pocket. Just because you didn't spend it, George Osborne then gets 40% of the £70?


VAT is also a bit iffy, as you are spending the post tax £70, and paying 20% on that.


If I had assets under the £325k threshold, I think I would have scrimped and saved to get there, and the idea of dying without spending it is even more galling than if I had millions. Obviously, the ideal is to die on the last penny.


If only time travel was possible for money, I would transfer all my money, tax free, back to when I was 18, on my death. Physically, I had far more capacity to enjoy myself. It would come with a note that says, "Don't not spend it and invest it, did it the last time round."

Newly_retired

As a senior citizen, I wonder how much I need to keep back in case I need to pay for care in later life. Probably it won't be enough, one never knows. So a balance between saving and spending is hard to find. I am not a spender, generally, but I might as well enjoy some of my hard earned savings whilst I am healthy.

joeblags

the other thing is , we have a work pension with legal & general. I cancelled myn because i wanted the money now to save incase i do buy a house, i always have the feeling that they may one day say my money is lost as they made a bad investment, or the government changes laws and raids all pensions as they need the money. yes i get £100 from only paying in £80 and my company matches what i put in , but i do worry that's what will happen


i have been looking at it 2 ways over the last year


1. buy a house and don't have rent to pay when im older
2. keep renting but pay loads into a pension and hope it doesn't vanish.

bob_a_builder

I cancelled mine .... and my company matches what i put in

So you are turning down Free money
not an offer you'll get every day
of course you will have to (currently) get to 55 to see any benefit of it

joeblags

that's my one worry, its a long time till im 55, im only in my late twentys so anything could happen, but I think I should just set up and pay in the min at least for now, I think the company matches upto 7%

nicknameless

joeblags wrote: »

that's my one worry, its a long time till im 55, im only in my late twentys so anything could happen, but I think I should just set up and pay in the min at least for now, I think the company matches upto 7%

Just do it now. Your thinking is likely to be a little different in 10,15,20 years and awful decisions like not taking this free money are likely to be regretted.