Will Not be Drawing Pension and Almost 75

andy6247

I have a SIPP with a value of £1,470,000.00, covered by HMRC enhanced protection,
and have no need to draw a pension from this.

My retirement date at age 75 is February 2021

Currently this is covered by a letter of wish benefitting my partner and my two sons.

Is there a more tax efficient  way of dealing with this?

What type of Pension Advisor do I need at this late stage?

As you have probably guessed I have not had a pension advisor for many many years

Thank you

xylophone

https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-problems/pensions-after-death#:~:text=If you die after 75,marginal rate of Income Tax.

You might try here

https://adviserbook.co.uk/

ticking "confirmed independent" and the specialities required when the menu comes up.

https://www.cii.co.uk/membership/join-us/chartered/corporate-chartered/why-choose-a-chartered-firm/financial-planners/ may be worth a read.

zagfles

What do you want advice on? It might be worth a chat with pensionwise first and take it from there https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise

andy6247

I think the advice I am looking for is: are there more tax efficient ways of passing on my pension pot 
other than by letter of wish?

bostonerimus

I would have been giving money to your heirs for a long time, start now. There are always charities as well. I suppose you could look into a trust.

HappyHarry

andy6247 said:

I think the advice I am looking for is: are there more tax efficient ways of passing on my pension pot 
other than by letter of wish?

Not really.

The pension is not included in your estate for inheritance tax, so there is no inheritance tax due on it. This makes it as tax efficient in this respect as it can be.

However, If you want to allow your beneficiaries drawdown access to your pension rather than them taking a taxable lump sum, you should check that your pension scheme permits such plans. If not, the beneficiaries are likely to find that they cannot transfer it to a drawdown plan after your death.

andy6247

Thank you for your reply, I will check if my pension scheme permits beneficiary drawdown

jamesd

In basic terms the pension is likely to be the most efficient method.

Thinking a bit further we get into investment choices and whether yours may be more conservative than those of your intended beneficiaries. In such a case there could be an advantage to giving while alive so they can invest with their risk tolerance rather than yours. Contributions to their own pensions may serve to lock money in for a time that you might desire or you can use other forms. If using their pension you'll need to plan in conjunction with them to avoid going over contribution limits or potentially them exceeding the lifetime allowance.

If there are grandchildren they have a particularly good opportunity for compound growth and can be ideally placed to invest at high equity risk levels.

The difference here is that while this remains efficient for inheritance tax, the higher risk investments can increase the value for the recipients vs waiting until your death.

zagfles

Also worth bearing in mind that if you die over 75 then beneficiaries drawdown is taxable, whereas if you take the PCLS (tax free 25% - although I'm not sure if it's different for enhanced protection) from the pension that would be tax free on you, you could then give it away and if you survive 7 years then it won't count for IHT. Or keep it if you have headroom in your estate within the IHT threshold.

cfw1994

zagfles said:

Also worth bearing in mind that if you die over 75 then beneficiaries drawdown is taxable, whereas if you take the PCLS (tax free 25% - although I'm not sure if it's different for enhanced protection) from the pension that would be tax free on you, you could then give it away and if you survive 7 years then it won't count for IHT. Or keep it if you have headroom in your estate within the IHT threshold. 

I feel that this makes a lot of sense.

It also gives you the opportunity to actually get some pleasure from seeing how those future beneficiaries get on using the fund whilst you are still around.  Maybe a house deposit, maybe a new motor (EVs are very popular this week 🤣), perhaps some interesting investments (eg, an expensive watch).  

Offers you the chance to talk about their plans, & perhaps pass on some of your wisdom (certainly the financial wisdom that helped you built up that not-needed pot!)

Still leaves over £1m for their future.

In your shoes, I would use some of that TFLS to also arrange a big expensive family holiday or slap-up private dining with those people, and enjoy their company.  

Enjoy: it’s only money (as my dad used to say🤪)

andy6247

zagfles said:

Also worth bearing in mind that if you die over 75 then beneficiaries drawdown is taxable, whereas if you take the PCLS (tax free 25% - although I'm not sure if it's different for enhanced protection) from the pension that would be tax free on you, you could then give it away and if you survive 7 years then it won't count for IHT. Or keep it if you have headroom in your estate within the IHT threshold.

If I were to take the tax free 25% does the remainder of the pot remain in place for beneficiaries to draw on after my death or does it die with me?