Change of tac, dying below the IHT threshold

Albermarle

Workerdrone said:

Aretnap said:

zagfles said:

Why not just buy an annuity, after you've spent the TFLS on the silly car club or whatever. Then there is zero left for "the man" (or "the woman" ) when you and your wife (assuming you get a joint one) pop your clogs. If you're only going to draw down 3.5% you could probably get an index linked annuity for more than that at 60. 

Good idea, but the risk is that if they both die relatively young, the insurance company (who is also, presumably, "the man") might get some of his money, and we can't have that can we?

Safest option is probably just to burn a load of cash - then there's no risk of anyone you disapprove of getting it.

For the avoidance of doubt, the man very specifically in question is the labour government and any policies they put in place. I've no issue with insurance companies, that's a risk I can choose to take, nor how charities, my kids or even minor political parties choose to spaff up the wall what I give, again, my choice. But to only receive 20% tax relief, do the sensible thing and save for tomorrow, then to have 40% liberated from the growth and risks ive taken by a left wing government. no thank you.

On the other hand, money outside a pension would not have benefitted from any tax relief, or protection from CGT or dividend tax , and could still be hit by 40% IHT .
So could be argued that theoretically at lease that paying IHT on unused pension pots, is actually fairer than paying IHT on other assets.

In any case we are all guessing until Oct 30th, and I suspect even then it will probably be subject to an announced Pensions review of some kind. 

zagfles

Workerdrone said:

Aretnap said:

zagfles said:

Why not just buy an annuity, after you've spent the TFLS on the silly car club or whatever. Then there is zero left for "the man" (or "the woman" ) when you and your wife (assuming you get a joint one) pop your clogs. If you're only going to draw down 3.5% you could probably get an index linked annuity for more than that at 60. 

Good idea, but the risk is that if they both die relatively young, the insurance company (who is also, presumably, "the man") might get some of his money, and we can't have that can we?

Safest option is probably just to burn a load of cash - then there's no risk of anyone you disapprove of getting it.

For the avoidance of doubt, the man very specifically in question is the labour government and any policies they put in place. I've no issue with insurance companies, that's a risk I can choose to take, nor how charities, my kids or even minor political parties choose to spaff up the wall what I give, again, my choice. But to only receive 20% tax relief, do the sensible thing and save for tomorrow, then to have 40% liberated from the growth and risks ive taken by a left wing government. no thank you.

It sounds like you think it's inevitable that IHT will be charged on pensions, my guess is that won't happen, but they may do something like charge income tax on pension drawdown whatever age of death. 

CalvinHobs

I can claim my Defined Benefit pension in 2025. I have been giving serious consideration to selling my house in the UK and retiring to the coast of southern Spain. Mainly because I've had enough of rubbish UK winter weather. Also, I have family in Andalusia province - they emigrated from the UK several years ago. It turns out the inheritance laws in Andalusia are more favourable than the UK:
In Spain, inheritance tax rates vary by region. As of 2022, in regions like Andalusia, descendants, ascendants, and spouses can inherit up to €1 million tax-free and benefit from a 99% tax relief on the remaining taxable amount.

And the rules in Valencia are also favourable:
Inheritance tax has not been abolished in Spain, but its application varies significantly by region. For example, the Valencian parliament recently reduced inheritance tax to just 1% for most beneficiaries, applicable to inheritances and gifts received after May 28, 2023. However, other regions may have different rates or allowances, so while some areas offer substantial reductions or exemptions, the tax has not been entirely eliminated across the country.

Source: Inheritance Tax Spain

As I understand it, if I become a resident of Spain and all my assets are there, these would not be subject to UK IHT for beneficiaries of mine in the UK. However, the previous UK government passed a change to the law so that, from 6 April 2025, someone living in the UK who moves abroad - if they die up to 10 years from leaving the UK - their estate can become subject to UK IHT. This change may be "refined" in the forthcoming budget.

Spain also has a wealth tax but, nationally, there is an exemption of €700K - or €1.4M for couples. There are also regional exemptions for main residences. Anyway, In 2022, Andalusia abolished wealth tax for anything under €2M - I have nowhere near this amount.

I was hoping I could get a so-called "Golden Visa" - these are residency permits for non-EU nationals buying a property in Spain for €500K or more. However, in April 2024, the Spanish government voted to end this scheme - it appears this has not been put into law yet (as at Sept 2024).

I am eligible for an EU passport due to the nationality of one of my grandparents. So, if I am unable to get a Golden Visa, I will consider applying for Spanish residency as an EU citizen.

Just to be clear: Avoiding paying IHT to "the man" is not my motive for wanting to move to Spain. I was reading up on the pros and cons of emigrating there and happened upon Spanish IHT rules. Also, I began considering this move in early 2024 - so this has not been triggered by the speculation about changes to UK tax law in the forthcoming budget.

Bostonerimus1

zagfles said:

Workerdrone said:

Aretnap said:

zagfles said:

Why not just buy an annuity, after you've spent the TFLS on the silly car club or whatever. Then there is zero left for "the man" (or "the woman" ) when you and your wife (assuming you get a joint one) pop your clogs. If you're only going to draw down 3.5% you could probably get an index linked annuity for more than that at 60. 

Good idea, but the risk is that if they both die relatively young, the insurance company (who is also, presumably, "the man") might get some of his money, and we can't have that can we?

Safest option is probably just to burn a load of cash - then there's no risk of anyone you disapprove of getting it.

For the avoidance of doubt, the man very specifically in question is the labour government and any policies they put in place. I've no issue with insurance companies, that's a risk I can choose to take, nor how charities, my kids or even minor political parties choose to spaff up the wall what I give, again, my choice. But to only receive 20% tax relief, do the sensible thing and save for tomorrow, then to have 40% liberated from the growth and risks ive taken by a left wing government. no thank you.

It sounds like you think it's inevitable that IHT will be charged on pensions, my guess is that won't happen, but they may do something like charge income tax on pension drawdown whatever age of death. 

I've never understood why the beneficiaries don't have to pay income tax on inherited pension withdrawals depending on when someone died. As my US pensions will be counted within my estate for UK IHT purposes my selfish hope is that the UK pension situation is changed so that they are included in IHT calculations and that the tax free IHT allowance is increased from 325k to a far higher number. I would also make the IHT rates progressive above the tax free threshold as the current cliff edge of 40% is tough. When we settled my Mum's estate we ended up paying a little in IHT as it was just above the allowance. She had SP and my Father's DB pension to live on and a life time of savings in the bank and a cash ISA and a suburban semi and it was the house that was the vast majority if the estate's value. I think the current tax free IHT allowance hasn't kept pace with house prices and far too many families are having to deal with it.

Right now UK DC pensions are an excellent way to avoid IHT for those with a plan and the resources to use them and if I was trying to minimize UK IHT I'd put as much as I could into a pension and live in the least expensive house I could.

Workerdrone

zagfles said:

Why not just buy an annuity, after you've spent the TFLS on the silly car club or whatever. Then there is zero left for "the man" (or "the woman" ) when you and your wife (assuming you get a joint one) pop your clogs. If you're only going to draw down 3.5% you could probably get an index linked annuity for more than that at 60. 

That is the conclusion I have come to. As long as I can keep the total value of the estate including a portion in pension to below the supposed IHT threshold, I can throw the rest into an annuity. I may as well have some use from it. I never thought I'd be looking at annuities. 

Grumpy_chap

CalvinHobs said:

I was hoping I could get a so-called "Golden Visa" - these are residency permits for non-EU nationals buying a property in Spain for €500K or more. However, in April 2024, the Spanish government voted to end this scheme - it appears this has not been put into law yet (as at Sept 2024).

I am eligible for an EU passport due to the nationality of one of my grandparents. So, if I am unable to get a Golden Visa, I will consider applying for Spanish residency as an EU citizen.

I am perplexed as to why you would be attracted by the "Golden Visa" route rather than simply gaining the EU passport that your heritage permits.
EURO 500 is a very low value for obtaining a "Golden Visa".

CalvinHobs

Grumpy_chap said:

I am perplexed as to why you would be attracted by the "Golden Visa" route rather than simply gaining the EU passport that your heritage permits.
EURO 500 is a very low value for obtaining a "Golden Visa".

When I looked into it, I realised an EU passport does not give an automatic right to live in an EU country indefinitely. In Spain, you can apply for a residency permit if you provide proof of employment within Spain. However, for a non-worker (like me) you must supply proof of medical insurance and evidence of income aka "sufficient economic means".

I believe my work pension and savings would meet the Spanish test for being economically self-sufficient. On the other hand, the "Golden Visa" scheme appears a lot more straightforward for someone who is buying a property in Spain, anyway.

Btw, it's actually €500K - i.e. €500,000

Bostonerimus1

CalvinHobs said:

Grumpy_chap said:

I am perplexed as to why you would be attracted by the "Golden Visa" route rather than simply gaining the EU passport that your heritage permits.
EURO 500 is a very low value for obtaining a "Golden Visa".

When I looked into it, I realised an EU passport does not give an automatic right to live in an EU country indefinitely. In Spain, you can apply for a residency permit if you provide proof of employment within Spain. However, for a non-worker (like me) you must supply proof of medical insurance and evidence of income aka "sufficient economic means".

I believe my work pension and savings would meet the Spanish test for being economically self-sufficient. On the other hand, the "Golden Visa" scheme appears a lot more straightforward for someone who is buying a property in Spain, anyway.

Btw, it's actually €500K - i.e. €500,000

Interesting. I knew the UK had different classes of passports only some of which gave automatic right of abode in the UK, but didn't realize the same when for Spain...probably something to do with colonial history like the UK. I know that Portugal has a popular "Retirement Visa" scheme for people who can prove their income.