Pension contributions after age 75 - way to reduce IHT liability?

lucyandthomas

Hi all

I know there isn't any tax relief on pension contributions after age 75, but is it still possible to make contributions? 25% tax free cash was taken a few years ago, and there have been no taxed withdrawals. Non earner, so limited to £2880 even if Standard Life would accept contributions.

Just wondering if this could potentially be used to chip away at IHT liability (as well as annual gift allowances, gifts from surplus income, and potentially exempt transfers).

Thanks

xylophone

Will your provider accept contributions after age 75?

https://www.investorschronicle.co.uk/pensions/2023/09/26/why-you-shouldn-t-load-up-your-pension-to-avoid-inheritance-tax/?gad_source=1&gclid=EAIaIQobChMI75HH2aDMhAMVd5NQBh1W8QNYEAMYASAAEgJrCvD_BwE

Keep_pedalling

Probably the best way to reduce IHT, is to have a good time and spent every thing you have in excess of £500/£1M.

lucyandthomas

xylophone said:

Will your provider accept contributions after age 75?

https://www.investorschronicle.co.uk/pensions/2023/09/26/why-you-shouldn-t-load-up-your-pension-to-avoid-inheritance-tax/?gad_source=1&gclid=EAIaIQobChMI75HH2aDMhAMVd5NQBh1W8QNYEAMYASAAEgJrCvD_BwE

Not sure - next job is to find out. Thanks 

Grumpy_chap

How far into IHT liability is the OP?
Where will they be after meeting care costs etc?
The priority should be to use their assets to live the best life possible?
If there will be excess assets after all that, why not simply gift early?

Malthusian

lucyandthomas said:

Just wondering if this could potentially be used to chip away at IHT liability (as well as annual gift allowances, gifts from surplus income, and potentially exempt transfers).

If you can find a provider that will accept the contributions, then in theory yes. But why not just give it away?

Even if it wouldn't qualify as a "regular gift out of income", it would still be free of IHT after 7 years, which is better than your beneficiary paying income tax at their marginal rate. Worst case scenario is that it falls back into the estate and your estate pays IHT that it was going to anyway.

Marcon

lucyandthomas said:

Hi all

I know there isn't any tax relief on pension contributions after age 75, but is it still possible to make contributions? 25% tax free cash was taken a few years ago, and there have been no taxed withdrawals. Non earner, so limited to £2880 even if Standard Life would accept contributions.

Just wondering if this could potentially be used to chip away at IHT liability (as well as annual gift allowances, gifts from surplus income, and potentially exempt transfers).

Thanks

...and donations to charity, whether made before or after death... Leave at least 10% of your estate to charities and the rate of IHT reduces to 36% of the net value.

Malthusian

Marcon said:

...and donations to charity, whether made before or after death... Leave at least 10% of your estate to charities and the rate of IHT reduces to 36% of the net value.

10% of the net estate, i.e. the amount over the nil rate band(s). Which is usually quite a bit lower.

zagfles

lucyandthomas said:

Hi all

I know there isn't any tax relief on pension contributions after age 75, but is it still possible to make contributions? 25% tax free cash was taken a few years ago, and there have been no taxed withdrawals. Non earner, so limited to £2880 even if Standard Life would accept contributions.

Just wondering if this could potentially be used to chip away at IHT liability (as well as annual gift allowances, gifts from surplus income, and potentially exempt transfers).

Thanks

The £2880 is the tax relief limit. After 75 that drops to zero. So you have no "£2880" once you reach 75. But you can make non relievable contributions if your provider accepts them. But many/most don't allow non relievable contributions - check the terms. 

But have you actually thought about it? It would be taxable as income on whoever inherits the lump sum or drawdown, and I don't think that's changing with the new rules. If you wanted the money after all, it'd be taxable on you when withdrawing even though you got no relief on the way in. If you're sure you don't need it, then why not give it away now. No IHT at all if you survive 7 years. No IHT anyway if it's "out of income" and doesn't reduce your standard of living. Then there's the various IHT gift allowances. 

Making non relievable contributions to a pension as an IHT avoidance strategy is unlikely to be sensible except in niche circumstances.