TFLS rules

dunstonh

dunstonh: "pensions are more tax free than ISAs whilst invested" - could you expand on that comment please. Once you have benefited from the tax relief going into the pension is there really a significant tax benefit in a pension as opposed to ISA ?

Pensions are outside of your estate for IHT purposes. ISAs are not. When talking large amounts, you could be bringing IHT into play. With pensions and ISAs having the same investments and the same charges, the only real difference is the tax position on events.

Did you apply for any transitional reliefs over the last decade? People who were close or expected to be close to the lifetime allowance were recommended to do so in many cases.

Malthusian

TcpnT wrote: »

dunstonh: "pensions are more tax free than ISAs whilst invested" - could you expand on that comment please. Once you have benefited from the tax relief going into the pension is there really a significant tax benefit in a pension as opposed to ISA ?

Inheritance Tax is the obvious one - 40% on ISAs (if your other assets are over your nil rate band) compared to 0% on pensions if you die before age 75, and tax at the beneficiary's rate if over.

The lifetime allowance charge applies on death benefits, but it would have to be an absolutely ginormous pension fund to be worse than IHT.

zagfles

Malthusian wrote: »

Inheritance Tax is the obvious one - 40% on ISAs (if your other assets are over your nil rate band)

Or zero if it goes to a spouse. And with the new rules about property some people will soon have a nil rate band of £1million total (inc any inherited from a spouse).

compared to 0% on pensions if you die before age 75, and tax at the beneficiary's rate if over.

The lifetime allowance charge applies on death benefits, but it would have to be an absolutely ginormous pension fund to be worse than IHT.

If the OP wants to use his pension to fund his retirement rather than fund his hiers (I know - quite a radical idea ), then the LTA should be his biggest concern.

Even if he wants to use his pension to fund his hiers, and he is likely to be above the IHT nil rate band inc property allowance inc any transfer from a spouse, he could still crystallise, take the TFLS, and give it away while he's still quite young and likely to survive 7 years.