Private pension pot

Bolt1234

Lots of people are higher rate tax payers, nurses, teachers etc. Its not that unusual. So yep - 80% tax!! All the media are saying you can leave to your spouse free of tax after 2027.  Then perhaps give it to your grown up children and live 7 years!! 

Anyone who has an unused pension pot is unlikely to be needing it for care home fees.  They will have their own house which can be sold for care or other savings.  

SpeedSouth

Bolt1234 said:

Lots of people are higher rate tax payers, nurses, teachers etc. Its not that unusual. So yep - 80% tax!! All the media are saying you can leave to your spouse free of tax after 2027.  Then perhaps give it to your grown up children and live 7 years!! 

Anyone who has an unused pension pot is unlikely to be needing it for care home fees.  They will have their own house which can be sold for care or other savings.  

So logic says towards the end you pull it all out, pay 40% /55% tax on whatever you have left and leave it outside the pension pot for the estate?

That way they'd not have to pay the 2nd income tax part?

SnowMan

SpeedSouth said:

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?

You get tax relief on the pension as it goes in and usually if you take it out you incur a slightly lower rate of tax (allowing for tax free cash amongst other things). If you then die you pay inheritance tax on it. But the tax saving (= tax relief rate in less tax rate out) mitigates the estate inheritance tax bill.

Alternatively you get tax relief as it goes into the pension. You leave it in the pension, you die, and your dependants take it out incurring a slightly lower rate of tax than the tax relief you got on the way in (or no income tax if you die before age 75). Your estate pays inheritance tax on the amount in the pension but the tax saving (= tax relief rate in less tax rate out) mitigates that.

Either way you pay less overall tax than if the money hadn't gone into the pension and say had been put into an ISA until death, because of the tax saving.

Pat38493

SpeedSouth said:

Bolt1234 said:

Lots of people are higher rate tax payers, nurses, teachers etc. Its not that unusual. So yep - 80% tax!! All the media are saying you can leave to your spouse free of tax after 2027.  Then perhaps give it to your grown up children and live 7 years!! 

Anyone who has an unused pension pot is unlikely to be needing it for care home fees.  They will have their own house which can be sold for care or other savings.  

So logic says towards the end you pull it all out, pay 40% /55% tax on whatever you have left and leave it outside the pension pot for the estate?

That way they'd not have to pay the 2nd income tax part?

Needs some time for the experts to consider things, but I would expect that people will change their behaviour - most likely many people will start pulling money out of the pensions faster, but trying to stick within reasonable tax bands, then give some of the money away earlier while they are still alive.

Pension planning is a long term game so there is no need to panic and talk about pulling all the money out - more likely a case of pulling the money out faster than originally planned but still quite slowly.

Andy_L

Bolt1234 said:

Lots of people are higher rate tax payers, nurses, teachers etc. Its not that unusual. So yep - 80% tax!! All the media are saying you can leave to your spouse free of tax after 2027.  Then perhaps give it to your grown up children and live 7 years!! 

Anyone who has an unused pension pot is unlikely to be needing it for care home fees.  They will have their own house which can be sold for care or other savings.  

IIRC about 15% of people are HR tax payers

CSL0183

Andy_L said:

Bolt1234 said:

Lots of people are higher rate tax payers, nurses, teachers etc. Its not that unusual. So yep - 80% tax!! All the media are saying you can leave to your spouse free of tax after 2027.  Then perhaps give it to your grown up children and live 7 years!! 

Anyone who has an unused pension pot is unlikely to be needing it for care home fees.  They will have their own house which can be sold for care or other savings.  

IIRC about 15% of people are HR tax payers

In 1990 that figure was 3%

Current statistics show there are 37.4m taxpayers with 6.3m of them paying HRT (17%)

This is growing yearly with fiscal drag.

The numbers of people earning above £50,270 will also be higher than that 17% as it will include those paying into pensions / SS schemes to bring tax below £50,270. Also factor in those drawing pensions at a figure just below £50,270 to keep them away from HRT, along with the SE who take dividends instead. 

Scotland has a ridiculously low HRT band at just £43,662 also. 

Cobbler_tone

My salary is £64k but make sure I never pay higher rate tax via share purchase and high pension contributions. The downside is that my net income hasn't changed in the past 4 years, so for most that approach comes down to net affordability.
With the frozen bans the number is always going to continue to grow, that's just maths! As will the number of tax payers at the lower end. 

Cobbler_tone

Looking for a thread to tag this question on.
My workplace DC has grown 7.35% since April 2021 (the start date) is this typical or would I be better off looking at any of the 47 alternative funds available? It could be a bit of a challenge trying to pick the bones out of them all. It's with L&G which I don't get a choice on.

MallyGirl

This is the performance of Vanguard Lifestrategy 60 (a commonly used middle of the road multi asset fund) over the much of period you are talking about. Plenty of ups downs. Your chosen fund will probably have has a similar ride - depending on what it is

bjorn_toby_wilde

Seems on the low side but performance can vary a lot depending on how cautious/adventurous your investment choices were.