Private pension pot

Albermarle

Bolt1234 said:

I'm horrified that inheritance tax will apply to pensions. How is this meant to work within married couples?

It was always on the cards, as it is effectively a loophole, and some people were using pensions to avoid IHT, either deliberately or unknowingly. 

af1963

Bolt1234 said:

I'm horrified that inheritance tax will apply to pensions. How is this meant to work within married couples?

I didn't hear anything in the budget to suggest that the current position - where there is no IHT payable on *any* assets passed to a spouse - would change.

Pat38493

Albermarle said:

Bolt1234 said:

I'm horrified that inheritance tax will apply to pensions. How is this meant to work within married couples?

It was always on the cards, as it is effectively a loophole, and some people were using pensions to avoid IHT, either deliberately or unknowingly. 

To some extent, but I would still assume that everything inherited by your spouse will still be free of IHT, including pensions - I think this change will impact on passing the pension to those other than your legal partner?

So if you are married, this changes nothing directly - but indirectly it might remove some or all of the incentive to leave as much in your pension as possible.

Bolt1234

It could be that pensions are 'special' and that they exclude from your late husbands/wife spousal exemption.  Reeves wouldnt of course go into the finer details.  I am wondering whether they even know how this will work if you leave your pension pot to your wife

Bolt1234

I agree Pat.  It was very attractive if you wanted to avoid giving to your spouse if for example they were very elderly and give it straight to your children tax free if you died undder the age of 75.

I think assuming that everything inheirted by your spouse is free of IHT is a dangerous assumption with this Labour government.

Pat38493

Bolt1234 said:

It could be that pensions are 'special' and that they exclude from your late husbands/wife spousal exemption.  Reeves wouldnt of course go into the finer details.  I am wondering whether they even know how this will work if you leave your pension pot to your wife

I highly doubt it because this would cause a huge pushback, especially if they tried to hide it in the small print.   (it would also cause even more complications if there is a portion of a DB pension inherited to the spouse). 

SpeedSouth

I'm a long way from IHT being a thing for me, but until this point part of my planning had been load up the pensions with a view to leaving what's left at the end to the kids.

Be keen to see where this lands if I need to funnel some of that money into ISAs for them as method of keeping it tax free.

Bolt1234

Ah yes the DB - the golden child of this Labour government. If they start making it a waste of time to get a private pension then we all either go and work in the public sector and get a much better scheme or we just dont save into a private pension the way we used to 

Bolt1234

They might say we will treat it as tax free to your spouse providing the overall estate is say £1 million.  Anything over that its taxed seperately.

dunstonh

Maybe hoping for a longer life and buying a lifetime annuity in your late 70s/early 80s with a 30 year guarantee would be the cheaper option!