Private pension pot

Qyburn

Bolt1234 said:

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 

That shows the reason behind the change, if bringing inherited DC pensions into the estate for IHT purposes makes the pension "a waste of time" then clearly the pension was to be used purely to avoid IHT and not for retirement.

Sarahspangles

There’s a lead time of nearly two and a half years for people to restructure their finances to mitigate this. Which, by the way, is long enough to change primary legislation.

af1963

SpeedSouth said:

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.

Inherited ISA funds are not exempt from IHT. And they don't remain as tax free accounts unless inherited by a spouse, via a mechanism where the spouse gets a one-off extra allowance to allow them to add the value of their partner's ISAs to an ISA in their own name,

af1963

Bolt1234 said:

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

I see someone has learned nothing from the three months of blowhard scaremongering in the Mail and Telegraph which had people panicking about things that were never likely to (and didn't) happen, but which persuaded them to rush to withdraw their pensions early.

FIREDreamer

dunstonh said:

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!

Would the continuing annuity payments after death be part of an estate and subject to inheritance tax?

dunstonh

FIREDreamer said:

dunstonh said:

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!

Would the continuing annuity payments after death be part of an estate and subject to inheritance tax?

There is no fund once you purchase an annuity.  You have given that up in exchange for income.  As things stand, the beneficiary would be paying income tax.  They may get dragged in if the consultation goes that way.

SpeedSouth

af1963 said:

SpeedSouth said:

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.

Inherited ISA funds are not exempt from IHT. And they don't remain as tax free accounts unless inherited by a spouse, via a mechanism where the spouse gets a one-off extra allowance to allow them to add the value of their partner's ISAs to an ISA in their own name,

When I said ISAs for them I was referring specifically to JISAs.  Essentially diverting their inheritance. Equally I could pay it into sipps for them now but that wouldn't be my first choice given timescales.

af1963

dunstonh said:

FIREDreamer said:

dunstonh said:

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!

Would the continuing annuity payments after death be part of an estate and subject to inheritance tax?

There is no fund once you purchase an annuity.  You have given that up in exchange for income.  As things stand, the beneficiary would be paying income tax.  They may get dragged in if the consultation goes that way.

But an annuity with a long guarantee period would be a possible loophole in the IHT regime, which I presume would not be the intention.

e.g. £1m pension pot and a terminal diagnosis, buy an annuity with a 30 year guarantee period using the full £1m, and expect the value of the guaranteed 30 years of payments to be exempt from IHT after dying ? I think that will likely (rightly) be blocked.

Bolt1234

As a pp says it could well be IHT on the pot and then when you take it out another tax for taking it out!

SpeedSouth

Bolt1234 said:

As a pp says it could well be IHT on the pot and then when you take it out another tax for taking it out!

So could be looking at 60% tax on any pensions left in an estate, or even 80% for HRT payers in the extreme example?
I've probably misunderstood that cos that sounds wild.  money left by other means (property/isas) in a an estate is not subject to income tax is it?