More budget speculation

Albermarle

What's far more likely is they make inherited pensions taxable as income on the recipient regardless of age of death (now it's taxable on death over 75 but tax free under 75).

That would make sense and easy to implement I would think .

Another point could be that Rishi is thinking  that if people thought they would lose the IHT exemption on their DC pots , they may well increase their spending, which would benefit the economy . 

We might all be eating in the Fat Duck in Bray once a week , instead of squirrelling it all away for our heirs !

Thrugelmir

Albermarle said:

What's far more likely is they make inherited pensions taxable as income on the recipient regardless of age of death (now it's taxable on death over 75 but tax free under 75).

Another point could be that Rishi is thinking  that if people thought they would lose the IHT exemption on their DC pots , they may well increase their spending, which would benefit the economy . 

Far easier to levy taxes elsewhere. All of which could have a detrimental impact on future investment returns. At a macro level and on a broad level, the impact of higher rates of corporation tax globally haven't been fully factored in yet. 

jamesd

Dazza1902 said:

Out if interest why are DC pots iht free to anybody other than a spouse ? What was the original logic in making them so ?

Pensions are trusts and hence normally outside an estate, whether that's DB or DC.

There is a potential exemption if a pension was opened in the two years before death and the primary purpose was to avoid inheritance tax. Less so if a significant purpose was to avoid it and much less so if it was incidental to the decision. This is a murky area and case law has established what might and might not be expected, with a significant chance of having to appeal and eventually take HMRC to court. That can be effective, a notable case had a newly opened pension exempted from inheritance tax because it was transferring from another pension for reasons other than IHT avoidance.

pip895

DairyQueen said:

If implemented such a policy could alienate too many voters for Tory comfort. It could potentially screw the carefully laid retirement and IHT plans of a big chunk of middle Britain. 

Provided they don't remove the exemption Re IHT for a spouse it wouldn't be too much of a problem.  As for you, such a change would rack havoc on my IHT plans but I would accept it and adapt - the money has to come from somewhere and I have never really understood the rational for having pensions as a vehicle for saving IHT.  Its not as if Middle Britain would get much sympathy from the other parties if Sunak did remove the exemption..

I have never quite understood the generosity of the HRT rebate on pension contributions either.  That one has been touted as for the axe before nearly every budget I can remember.  Not seen much on it this time - maybe it will happen this time lol.

cfw1994

pip895 said:

DairyQueen said:

If implemented such a policy could alienate too many voters for Tory comfort. It could potentially screw the carefully laid retirement and IHT plans of a big chunk of middle Britain. 

Provided they don't remove the exemption Re IHT for a spouse it wouldn't be too much of a problem.  As for you, such a change would rack havoc on my IHT plans but I would accept it and adapt - the money has to come from somewhere and I have never really understood the rational for having pensions as a vehicle for saving IHT.  Its not as if Middle Britain would get much sympathy from the other parties if Sunak did remove the exemption..

I have never quite understood the generosity of the HRT rebate on pension contributions either.  That one has been touted as for the axe before nearly every budget I can remember.  Not seen much on it this time - maybe it will happen this time lol.

I guess middle-to-old-age Britain form a decent chunk of the Tory vote, so they would be loathe to alienate such swathes of "their people".   Sunak does have challenges way beyond those of recent chancellors, of course, so who knows what the future holds!

Like you, despite being lucky to have benefited from the 40% 'rebate' on monies going in for a decent chunk of my career, it has never made a huge amount of sense to me.  

Equally, the fact that pensions are trusts & therefore outside of the estate has remained rather a little mystery to me. 

Going by Sinek's theory of value (more here), I understand the what & how about pensions today, but not always the why!

chiefie

This would be very discriminatory against the poorer in society who tend to die earlier. It is anti levelling up. 

pip895

chiefie said:

This would be very discriminatory against the poorer in society who tend to die earlier. It is anti levelling up. 

The poorer in society are not going to breach the inheritance tax limits - so having an exemption for SIPPs won’t help them…

I think adding in a final LTA check on death might be another possibility.  

I don’t like the LTA - it’s a messy tax somehow.  If pensions were inside someone’s estate - so not IHT exempt and didn’t attract an over 40% rebate on the way in, then at least he could scrap the LTA.  Pensions should really be a vehicle for providing for your retirement- not IHT planning..

arnoldy

I think the most likely option will be to look at gradually increasing the LTA "multiple" - for example completely risk free fully index linked (no cap) with spousal benefits are valued at 20 X.

But if you could buy that on the open market it would be at least 40X. 

Settling on 25 X for capped DBs, and say 30 X for fully index linked pensions would start to address the gross unfairness in LTA application. 

cfw1994

pip895 said:

chiefie said:

This would be very discriminatory against the poorer in society who tend to die earlier. It is anti levelling up. 

The poorer in society are not going to breach the inheritance tax limits - so having an exemption for SIPPs won’t help them…

I think adding in a final LTA check on death might be another possibility.  

I don’t like the LTA - it’s a messy tax somehow.  If pensions were inside someone’s estate - so not IHT exempt and didn’t attract an over 40% rebate on the way in, then at least he could scrap the LTA.  Pensions should really be a vehicle for providing for your retirement- not IHT planning..

I think I agree….although death of first spouse ought not to preclude the survivor from getting the entire pot, I feel, since partnerships will often rely on that ‘passing on’.

I’m also acutely aware that messing with things often results in unintended consequences……probably needs a decent bright spectrum of people to figure this out, & unfortunately the politicians who make changes always have their own political agenda to follow….

zagfles

pip895 said:

chiefie said:

This would be very discriminatory against the poorer in society who tend to die earlier. It is anti levelling up. 

The poorer in society are not going to breach the inheritance tax limits - so having an exemption for SIPPs won’t help them…

I think adding in a final LTA check on death might be another possibility.  

I don’t like the LTA - it’s a messy tax somehow.  If pensions were inside someone’s estate - so not IHT exempt and didn’t attract an over 40% rebate on the way in, then at least he could scrap the LTA.  Pensions should really be a vehicle for providing for your retirement- not IHT planning..

There are LTA checks after death