Inheritance Tax on pensions - budget announcement and consultation

RogerPensionGuy

eskbanker said:

RogerPensionGuy said:

I must say I'm enjoying reading and watching people/children who were expecting to be getting tax free or low taxed wealth out of parents & grandparents estates, some feel hard done by that only the 1st million pounds will be tax free now. 

Charming!

To be fair, those on here objecting to the change are largely (exclusively?) those already with the pension pots and planning to leave them, rather than greedy offspring looking forward to receiving them, so I'm not sure your rather unpleasant schadenfreude is directed accurately in any case....

My view is the IHT loophole being closed on DC pensions was a door just waiting to be pushed at some point, the removal of the LTA just made more certain than it ever was.

People plan and hope for rules today, many people liked the DC pension IHT set up and transferred from good DB pensions as they felt the risk/rewards made it a better deal, but rules change and pension rules football just goes on.

Just like the Farmers and IHT changes, there are many others in society who don't like all these tax changes, both people who may leave estates over IHT thresholds or people that were/are expecting inheritance from these estates and we must remember IHT is applied to the estate after passing, not on those who receive inheritance .

We should consider that unless the UK economy/growth really does better than is most likely, more tax and/or borrowing will be required, we will see more of what we just seen in the budget two days ago, Oct24 budget was just the 1st instalment I suspect.

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https://www.ft.com/content/03d3850b-af84-4f59-8678-fdb230b4b789   

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  https://www.fidelity.co.uk/markets-insights/personal-finance/personal-finance/qa-new-double-tax-on-inherited-pensions/

german_keeper

RogerPensionGuy said:

german_keeper said:

RogerPensionGuy said:

https://www.forbes.com/uk/advisor/investing/average-pension-pot-in-uk/#:~:text=Unbiased.co.uk-,Overall average,20,077 as of May 2024.

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Posted the above on here as a point of reference about average pension pots at various stages of life/age.

The article mentions average and median picks a value, great information, I have friends & family from fairly similar backgrounds, jobs, kids, pay and houses in the current 50 to 70 years range, a few have no pension, maybe 40% have the average, maybe 40% double the average and 10/15% have 4, 5 or more times the average mostly because they became engaged in pension & AVC feeding early on by family or trusted friends and picked the pension extra route and stuck to it by and large and the last few or 5 years of paid employment filled pensions at maximum possible inputs reference their living needs and spare cash, they weren't getting anywhere near the AA or LTA limits, however with time and low cost pensions, a few have sailed past that last LTA figure that was essentially removed April 2024 and just the 268 25% LTA remains. 

Blimey, you must have very different conversations with friends and family than I do. I don't know anything like that amount of information. The only one that comes near is a good mate, a former work colleague and now my retirement walking partner, who I have helped over the last 10 years or so with his Civil Service pension and retirement planning in general.

A lot of our walking conversation centres around retirement and pension related stuff but not at the cost of the usual beer, women and football nonsense. I use that phrase as a colloquialism as he is actually teetotal!! 

The family & friends I talk about are aware that I take more than a passing interest in pensions, similar and trying to achieve a life and financial experience that maybe conducive to a relaxing lifestyle with safe margins in place, so yes these guys often ask about stuff, I just sign post them and explain they can use IFAs or the like, do their own research etc.

I know plenty of friends & family who are very less interested in having an interest in their futures, they just amble by and learn about Waspi, NI opting out shortfalls, lack of pension wealth, long mortgages that were kicked down the road, a few being interest only, no ISAs or GIAs, still renting accommodation at plus 60 and it goes in. 

My viewpoint is many UK people in their 60s now probably maybe have good old pensions, savings and paid off any mortgage well pre 60 as that's the way it was.

As we now slide down todays age demographics to 50s and below, the picture is way different.

Use 40s and this is very different, yes many of these have new cars every two years, great holidays and maybe more chance they rent or live at home. 

Reference all the spill above, the UK looks like we will have a lesser economic environment the next 20/30 years than we enjoyed in the preceeding period, especially the 80s,90s & 00s.

Rolled in the above I can fully understand why people who were expecting pots of tax free inheritance appear most upset that 40% plus will be getting diverted and blended with this, I can see lots more DC Pots buying annuties and/or just taking it out and spending it, personally I was going to leave my DC coppers as source of last resort for cash and saw the advantage of no IHT, but now my plans will adjust and using DC cash very early on.

It will be interesting to see the rise of new annuities these next few years. 

Taking of annuities, I am also revisiting purchased annuties currently. 

Cheers Roger. 

This forum is obviously populated by people who have a healthy interest in all things pension related. When I was working I think some people looked on me as a strange little bloke who was obsessed with retirement rather than promotion. As an inherently lazy person I know which one I preferred.

I suppose my greatest achievement was to bring up 3 kids and retire at the age of 57, my wife at the age of 56, whilst never earning any more than about £40k between us. One of the things that I find quite frustrating is that I suspect that there are lots of people out there who just don't understand what retirement options they have, end up working till SPA and then realising they are the richest pensioners in the village and could have retired years earlier. Not so bad for those strange people who enjoy going to work but really disappointing for those that don't. 

JayRitchie

Appreciate that the fine details are not yet set in stone and there may be significant revisions, but I still feel unclear on what might happen and whether the age of 75 years old still holds a large significance?

As I am a long way under 75 years old what happens to the money in my pension funds should I die before reaching that age. I appreciate that they would fall within the IHT rules from 2027. For the beneficiaries what options do they have? Is the understanding that the can access the money without incurring income tax (or other taxes)?

RogerPensionGuy

JayRitchie said:

Appreciate that the fine details are not yet set in stone and there may be significant revisions, but I still feel unclear on what might happen and whether the age of 75 years old still holds a large significance?

As I am a long way under 75 years old what happens to the money in my pension funds should I die before reaching that age. I appreciate that they would fall within the IHT rules from 2027. For the beneficiaries what options do they have? Is the understanding that the can access the money without incurring income tax (or other taxes)?

Link here below for interest. 

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https://www.thisismoney.co.uk/money/pensions/article-14026463/Double-tax-hit-wealthy-families-pensions.html#:~:text=Wealthy families could face a,investments starting from April 2027.

eskbanker

RogerPensionGuy said:

eskbanker said:

RogerPensionGuy said:

I must say I'm enjoying reading and watching people/children who were expecting to be getting tax free or low taxed wealth out of parents & grandparents estates, some feel hard done by that only the 1st million pounds will be tax free now. 

Charming!

To be fair, those on here objecting to the change are largely (exclusively?) those already with the pension pots and planning to leave them, rather than greedy offspring looking forward to receiving them, so I'm not sure your rather unpleasant schadenfreude is directed accurately in any case....

My view is the IHT loophole being closed on DC pensions was a door just waiting to be pushed at some point, the removal of the LTA just made more certain than it ever was.

People plan and hope for rules today, many people liked the DC pension IHT set up and transferred from good DB pensions as they felt the risk/rewards made it a better deal, but rules change and pension rules football just goes on.

Just like the Farmers and IHT changes, there are many others in society who don't like all these tax changes, both people who may leave estates over IHT thresholds or people that were/are expecting inheritance from these estates and we must remember IHT is applied to the estate after passing, not on those who receive inheritance .

We should consider that unless the UK economy/growth really does better than is most likely, more tax and/or borrowing will be required, we will see more of what we just seen in the budget two days ago, Oct24 budget was just the 1st instalment I suspect.

I wasn't disputing the need for change, or its predictability, but just highlighting how distasteful it is for someone to derive some sort of perverse pleasure out of others' misfortune - were you smirking about all those pensioners losing their winter fuel allowance too?

bjorn_toby_wilde

eskbanker said:

RogerPensionGuy said:

eskbanker said:

RogerPensionGuy said:

I must say I'm enjoying reading and watching people/children who were expecting to be getting tax free or low taxed wealth out of parents & grandparents estates, some feel hard done by that only the 1st million pounds will be tax free now. 

Charming!

To be fair, those on here objecting to the change are largely (exclusively?) those already with the pension pots and planning to leave them, rather than greedy offspring looking forward to receiving them, so I'm not sure your rather unpleasant schadenfreude is directed accurately in any case....

My view is the IHT loophole being closed on DC pensions was a door just waiting to be pushed at some point, the removal of the LTA just made more certain than it ever was.

People plan and hope for rules today, many people liked the DC pension IHT set up and transferred from good DB pensions as they felt the risk/rewards made it a better deal, but rules change and pension rules football just goes on.

Just like the Farmers and IHT changes, there are many others in society who don't like all these tax changes, both people who may leave estates over IHT thresholds or people that were/are expecting inheritance from these estates and we must remember IHT is applied to the estate after passing, not on those who receive inheritance .

We should consider that unless the UK economy/growth really does better than is most likely, more tax and/or borrowing will be required, we will see more of what we just seen in the budget two days ago, Oct24 budget was just the 1st instalment I suspect.

I wasn't disputing the need for change, or its predictability, but just highlighting how distasteful it is for someone to derive some sort of perverse pleasure out of others' misfortune - were you smirking about all those pensioners losing their winter fuel allowance too?

I can’t help thinking that this measure isn’t going to bother the fabulously wealthy one bit. It will however easily hit many whose homes have seen their value inflated because of supply and demand and those who squirrelled away money to help their less well off children.  Unintended consequences I guess

I don’t think that’s amusing @RogerPensionGuy but each to his own

MK62

RogerPensionGuy said:

eskbanker said:

RogerPensionGuy said:

I must say I'm enjoying reading and watching people/children who were expecting to be getting tax free or low taxed wealth out of parents & grandparents estates, some feel hard done by that only the 1st million pounds will be tax free now. 

Charming!

To be fair, those on here objecting to the change are largely (exclusively?) those already with the pension pots and planning to leave them, rather than greedy offspring looking forward to receiving them, so I'm not sure your rather unpleasant schadenfreude is directed accurately in any case....

Just like the Farmers and IHT changes, there are many others in society who don't like all these tax changes, both people who may leave estates over IHT thresholds or people that were/are expecting inheritance from these estates and we must remember IHT is applied to the estate after passing, not on those who receive inheritance .

This isn't necessarily true though.......if there is insufficient money left in the estate to pay any outstanding IHT on any potentially exempt transfers less than 7 years old, then HMRC will come after the recipients of those transfers for the outstanding IHT. 

RogerPensionGuy

Reference the pensioners cold weather allowance, it wasn't well targeted previously, a cash needy government just made very very blunt changes and must of done no thinking, I'm guessing these new changes to it will at best be cist neutral or more likely cost negative overall and a total PR disaster with bells on.

In my head the way in which they treated the cold weather allowance is just a sign how they will treat people, espically older people who can be soft targets. 

As for the pensions IHT loophole door, with frozen thresholds and inflation, it was very very unlikely it would remain for ever, it was just when they closed it and if they would blend it like the farms IHT or do a cliff edge.

The pension IHT loophole tempted many people to transfer good DB schemes to DC SIPP schemes and in my experience, IFAs told me it was a great ploy.

As other posters have mentioned, the super rich or poor don't pay much % tax overall, the masses pay and with frozen allowances and inflation, house prices and healthy DC SIPP pots, IHT take will just grow and grow as time slides by.

Reference all the rumours of the last budget, I was a bit surprised ISAs were left alone, I think we will see ISAs getting tweeking in the future. 

That old phrase about we can only plan under the current rules and requlations may not be so goldplated and maybe using historical information/changes and balance can be considered as indeed pension IHT shows us. 

MK62

RogerPensionGuy said:
Reference the pensioners cold weather allowance, it wasn't well targeted previously, a cash needy government just made very very blunt changes and must of done no thinking, I'm guessing these new changes to it will at best be cist neutral or more likely cost negative overall and a total PR disaster with bells on.

Do you mean Winter Fuel Payment?.......the Cold Weather Payment is different, and hasn't changed AFAIK.

PS...apologies if this seems a bit pedantic, but just so everyone is on the same page here.......

Sea_Shell

RogerPensionGuy said:

Reference the pensioners cold weather allowance, it wasn't well targeted previously, a cash needy government just made very very blunt changes and must of done no thinking, I'm guessing these new changes to it will at best be cist neutral or more likely cost negative overall and a total PR disaster with bells on.

In my head the way in which they treated the cold weather allowance is just a sign how they will treat people, espically older people who can be soft targets. 

As for the pensions IHT loophole door, with frozen thresholds and inflation, it was very very unlikely it would remain for ever, it was just when they closed it and if they would blend it like the farms IHT or do a cliff edge.

The pension IHT loophole tempted many people to transfer good DB schemes to DC SIPP schemes and in my experience, IFAs told me it was a great ploy.

As other posters have mentioned, the super rich or poor don't pay much % tax overall, the masses pay and with frozen allowances and inflation, house prices and healthy DC SIPP pots, IHT take will just grow and grow as time slides by.

Reference all the rumours of the last budget, I was a bit surprised ISAs were left alone, I think we will see ISAs getting tweeking in the future. 

That old phrase about we can only plan under the current rules and requlations may not be so goldplated and maybe using historical information/changes and balance can be considered as indeed pension IHT shows us. 

And so if this does go ahead as planned, and turns out to be a very lucrative cash cow for the government, the chances become greater that any future change to said government are unlikely to revert back.    Do they ever?

All that lovely £££ flowing into the coffers, what's not to like!  


However, it sounds like it could be an administrative nightmare for the unwary executor.  Or even a clued up one!