Using pension wrapper to pass on inheritance 15 March at 6:36PM in Pensions, annuities & retirement planning 3 replies 365 views

lucypilates

I'm a bit naive about pensions etc but my situation is that I currently have a good size pot in ordinary stocks and shares which I am gradually putting into an ISA. At the moment, I don't need this money as I am living off my income and this money will be my 'pension'.

I've only recently opened a SIPP (consolidating my 4 small pensions) and am making as much use as possible of the tax relief to put money into my SIPP (I am self employed so no employer contributions).

For inheritance purposes, I understand that anything in my SIPP won't be included in my estate for IHT purposes.

So just thinking ahead, am I right in thinking that I should continue to move money across into my ISA and SIPP as per relevant allowances and once I retire, I could continue to move money that I 'probably' won't need from my general shares a/c into my SIPP because when I die, they will be passed on tax free?

And if that's the case, I would start to draw down from my ISA first, then when that's depleted, draw down from my ordinary shares (which will be subject to capital gains tax) and then start on my SIPP if I need to (which will be taxed at whatever my rate is at the time ...)

I'm 54 atm but don't really intend to 'retire' for at least 5-10 years because I actually like working ... 

Any guidance would be gratefully received and please do excuse my lack of knowledge ... but as they say, you don't know if you're not taught! 

Thanks again

Marcon

lucypilates said:

I'm a bit naive about pensions etc but my situation is that I currently have a good size pot in ordinary stocks and shares which I am gradually putting into an ISA. At the moment, I don't need this money as I am living off my income and this money will be my 'pension'.

I've only recently opened a SIPP (consolidating my 4 small pensions) and am making as much use as possible of the tax relief to put money into my SIPP (I am self employed so no employer contributions).

For inheritance purposes, I understand that anything in my SIPP won't be included in my estate for IHT purposes. Correct, provided the beneficiaries are at the discretion of the SIPP trustees (so important to ensure your Expression of Wish/Nomination Form is up to date, to ensure they are aware of your preferences).

So just thinking ahead, am I right in thinking that I should continue to move money across into my ISA and SIPP as per relevant allowances and once I retire, I could continue to move money that I 'probably' won't need from my general shares a/c into my SIPP because when I die, they will be passed on tax free? There's a limit on how much you can pay into your SIPP. Currently that's the higher of your earnings or £40K (soon to rise to £60K, given today's budget announcements), assuming you haven't 'flexibly accessed' any taxable income from your SIPP.

And if that's the case, I would start to draw down from my ISA first, then when that's depleted, draw down from my ordinary shares (which will be subject to capital gains tax) and then start on my SIPP if I need to (which will be taxed at whatever my rate is at the time ...)

I'm 54 atm but don't really intend to 'retire' for at least 5-10 years because I actually like working ... 

Any guidance would be gratefully received and please do excuse my lack of knowledge ... but as they say, you don't know if you're not taught! 

Thanks again

Please see above. 

k_man

Marcon said:

lucypilates said:

I'm a bit naive about pensions etc but my situation is that I currently have a good size pot in ordinary stocks and shares which I am gradually putting into an ISA. At the moment, I don't need this money as I am living off my income and this money will be my 'pension'.

I've only recently opened a SIPP (consolidating my 4 small pensions) and am making as much use as possible of the tax relief to put money into my SIPP (I am self employed so no employer contributions).

For inheritance purposes, I understand that anything in my SIPP won't be included in my estate for IHT purposes. Correct, provided the beneficiaries are at the discretion of the SIPP trustees (so important to ensure your Expression of Wish/Nomination Form is up to date, to ensure they are aware of your preferences).

So just thinking ahead, am I right in thinking that I should continue to move money across into my ISA and SIPP as per relevant allowances and once I retire, I could continue to move money that I 'probably' won't need from my general shares a/c into my SIPP because when I die, they will be passed on tax free? There's a limit on how much you can pay into your SIPP. Currently that's the higher of your earnings or £40K (soon to rise to £60K, given today's budget announcements), assuming you haven't 'flexibly accessed' any taxable income from your SIPP.

And if that's the case, I would start to draw down from my ISA first, then when that's depleted, draw down from my ordinary shares (which will be subject to capital gains tax) and then start on my SIPP if I need to (which will be taxed at whatever my rate is at the time ...)

I'm 54 atm but don't really intend to 'retire' for at least 5-10 years because I actually like working ... 

Any guidance would be gratefully received and please do excuse my lack of knowledge ... but as they say, you don't know if you're not taught! 

Thanks again

Please see above. 

Did you mean the lower of:

There's a limit on how much you can pay into your SIPP. Currently that's the higher of your earnings or £40K (soon to rise to £60K, given today's budget announcements),

Peterrr

Besides the inheritance tax aspect, there might be income tax savings too: My wife and I are a similar age and we're putting as much as we can into our pensions in order to benefit from the tax relief, while at the same time gradually using ISA savings supplement our remaining income for living expenses. This is based on the fact we don't expect to ever be higher rate tax payers in our retirement years, so will pay considerably less tax then than we would now, and enjoy growth on the larger invested amount in the meantime.