SIPPs and inheritance tax

Albermarle

german_keeper said:

arnoldy said:

bermudianmark said:

NottinghamKnight said:

NHS isn't really underfunded, it's just very inefficient.

I think its both underfunded and very inefficient.

When NHS can afford to give "gender reassignment" to school kids it's hard to believe NHS are short of money. 

I do hope you will reconsider the wisdom of posting such an offensive comment on an albeit obscure Internet forum. 

Apart from that it is clear that in a huge organisation like the NHS , dealing with a myriad of issues ,  you can not point to one minor controversial point  , as some kind of proof that that they have too much money .

coyrls

Apart from that, what's this got to do with inheritance tax on a SIPP?

BuildTheWall

While I agree that tax rule changes cannot be predicted, usually such drastic changes, if introduced, are not retroactive. A new law is applicable on actions taken after the law is passed. For example, contributions made after the rule change might be liable for IHT. Obviously it can get quite complex to administer (no surprise as to why our pension system has gotten complex so far), but that’s the fair and just way to bring changes. 

An easy example is the childcare vouchers scheme. Those who enrolled before the recent changes can continue to enjoy benefits as long as they are eligible. 

fred246

The rules state that I can pass the SIPP to my children and if they don't use it they can pass it to their children so potentially the rule could last for generations. The rules don't affect those who have bought annuities or have a DB pension. Most DC pensions are small and owned by people who wouldn't pay inheritance tax. So it's only the well paid 'fat cats' like bankers and FTSE bosses that it will affect. Maybe they are affected by the lifetime allowance so use another tax avoidance technique? Seems like a Tory type policy that Labour might scrap at a whim. Was it done to stop people spending their pension too fast? "I might as well spend it or else the government will take it all in tax". 

Albermarle

For sure it does not affect most people , but its clear that you do not have to be a fat cat banker or a FTSE boss to face IHT issues.
A nice four bedroom detached in London, or even the Home Counties and you are already there.
However the issue raised about DC pensions and IHT will only become wider, as millions of people in the private sector have been switched to DC from DB in the last decade ( and before) + of course all those who have transferred out of DB to DC .

cfw1994

Middlestitch said:

fred246 said:

When I went for my free meeting at Pension Wise the one thing that he went on and on about was that you should put money in a SIPP to avoid inheritance tax. The more I think about it the more I think that a government will just suddenly change the rules. How many people use a SIPP in this way? How safe is it to assume it will work? Can the rules just be changed overnight?

Which is OK if you'd specifically asked about how to minimise IHT in terms of your pension - people normally put money in a SIPP to save for their retirement. Most people would use a paid adviser for a conversation about minimising IHT, because using a SIPP is only one consideration and there are plenty of other ways to do so, some much more efficient and predictable.

Tax rules can be changed at any time, so it would be foolish in the extreme to blindly follow one course without considering others. Nobody here can guess what will happen any more than you can, so a maximum involving the words 'eggs' and 'baskets' could be a handy guideline.

So: using PET sums in later years are one such consideration, but that is relatively small beer. 
Maybe passing on property in some way (whilst avoiding a deliberate avoidance for care home fees - eg, do it early enough?) is another - moving property to Joint Tenants and pass the half on first death to children, instead of the more usual Tenants in Common.
What other "plenty of ways" are you thinking of?  Trust funds?
What MSE hints and tips would you suggest to help people on this MSE forum?

fred246

If I had paid advisers to manage my investments I wouldn't have made enough to have to pay inheritance tax. Giving my money to advisers so I don't have enough to pay inheritance tax is a technique I would prefer to avoid. At least if I paid inheritance tax there is a chance the government might use it for something useful.

cfw1994

fred246 said:

If I had paid advisers to manage my investments I wouldn't have made enough to have to pay inheritance tax. Giving my money to advisers so I don't have enough to pay inheritance tax is a technique I would prefer to avoid. At least if I paid inheritance tax there is a chance the government might use it for something useful.

Your deep love of IFA/FAs due to a bad experience your father had many, many years ago is well known in these parts.... 
So now you presumably are in a position for your descendants to pay IHT: what mechanisms do you prefer to help minimise that, or are you simply happy for that to be their 'problem', & that avoidable IHT is all good to be paid by your offspring?

My view is that where tax can be legally avoided, then it is fair game.  Ethically?  well, I am all for reasonable tax to be paid - I believe there is far more missed from Corporations than individuals, so I'll sit on the fence on that....

I was coming back to the topic & asking @Middlestitch what their thoughts were on minimising IHT, since they implied a knowledge of the topic!
Maybe they or others might like to respond.

Thrugelmir

fred246 said:

If I had paid advisers to manage my investments I wouldn't have made enough to have to pay inheritance tax. Giving my money to advisers so I don't have enough to pay inheritance tax is a technique I would prefer to avoid. At least if I paid inheritance tax there is a chance the government might use it for something useful.

I'd still suggest consulting a professional adviser. Than random strangers on an internet forum.

 A good reason not to endlessly spam other peoples threads with your personal views on the topic.

fred246

My own private pension started as an FSAVC which was sold to me in my twenties so the IFA could get commission. The commission was very front loaded so when I had paid all the commission she told me it was a 'load of rubbish' and I should stop contributing. Most of it was in a with profits fund but she had also put some in a 'money market' fund. After a few years I asked another IFA to take a look but she said that her fees were such that there would be nothing left. So I sorted it out myself. Needless to say a 'money market' fund wasn't the best place for a pension for someone in their twenties. With profits wasn't great either so I have done a much better job with it than the IFAs. Obviously I know the current rules but I am more interested in how easily they can be changed. It's more interesting to know the views of a wide range of people than a single adviser who is only interested in their fees. I intend to spend quite a lot more and give more away but spending in lockdown isn't easy. Meanwhile the investments are going up but tomorrow may be different.