How to manage my parents' SIPPs going forward?

itwasntme001

Thanks for the replies so far, it has been really helpful.

Malthusian - just to reply to your helpful post - my parents do not have any assets that would fall under BPR.

My parents have gifted us considerable sums of money over the years, so far close to half a million and most of this does not have long left for the 7 years to elapse since gifting (we have kept records).  Once my parents start getting their SP in a years time, they will have surplus income to their requirements so will gift the excess.  For the next year, given the pandemic, it is pretty much a write-off with regards to holidays etc so spending more than their current income from annuity and rent will be difficult to do.

So I think we have and are already doing a lot to mitigate IHT as much as possible and my question arose around the SIPPs to see if we could do anything "clever" about it to mitigate taxes in general (e.g. make use of TFLS).  It appears that this will not be sensible to do as it'll create a sudden IHT liability and given that my parents do not need the money from the SIPPs, it is best left untouched and passed down to us, especially since we will have the flexibility when to draw and even pass down to our own heirs.

So the strategy is for my parents to continue contributing the £2.88k to the SIPPs, selling the equivalent amount of stocks from their ISAs and passing this to us (no 7 year rule as gifts up to 3k a tax year are exempt) and gifting us the surplus income over and above their required income for spending.

There is still a fair chunk of liquid savings and investments outside their SIPPs that could be gifted and for the 7 year rule to start ticking.  But does it make sense to just bring the total down to below the NRB?

coyrls

At 65, I would prefer to be making these decisions myself.  Only your parents can decide if it makes sense to bring the total to below the NRB; they should decide their standard of living and what resources they require, in my opinion.

itwasntme001

Well yes, it is ultimately my parents' decision and I would much prefer it if they would keep it to spend it to live the lives they want.  But they insist that they will not need the money and for it to be passed onto us.  Asking whether it makes sense to bring the total below NRB was in response to Malthusian's comments.

itwasntme001

Just wanted to see if anyone has further suggestions on this?

Robert_McGeddon

itwasntme001 said:

Once my parents start getting their SP in a years time, they will have surplus income to their requirements so will gift the excess. 

Ideally they should keep records to support this - very hard for someone elser to do this retrospectively.

The exemption relates to regular gifts out of income. It would do no harm if your folks gave you a letter with rhe first payment stating it was out of excess income and it was their intention to carry on doing so in future years. Even if they don't do so (for whatever reason) the intent is established.