Inheritance Tax on pensions - budget announcement and consultation

artyboy

zagfles said:

Sterlingtimes said:

marycanary said:

The book reviews who are the millionaire in the USA, and their attitudes to money. One of their findings concerned parents gifting their adult children money, or what is termed "Economic Outpatient Care". The authors found that such a strategy can produce significant negative impacts on the recipients' future wealth.  

It depends upon the behaviour of the behaviour of the adult children.

Three young adult men received a payout of £40,000 each from the Sterlingtimes Family Trust a few years ago.

The first son [my brother's] took a break from work for a couple of years, quickly depleting his money.

The second son [my brother's] used his money for general living expenses.

The third son [mine] invested £30,000 of his money in cryptocurrency, much to his father's anger, and ended up with £600,000 and a substantial CGT bill. Recently, he divested the lot and invested proceeds in technology stocks.

Yes, gifting money may be risky, but it isn't easy to give a gift and then prescribe that it must be used wisely.

Yup - parents should know the personalities of their kids and their attitude to money well enough to have a good idea what they'd do with the money. I'm pretty sure I know what mine would do. 

Gifting can definitely have a negative effect on some people. It can also change the dynamic of the relationship, create a dependency effect or a sense of loss of financial control/power that can even cause the recipient to resent the donor. Sometimes the expectation of more, or "that wasn't enough", you're richer than me, using your power to control me. Often subconscious.

I see that sort of attitude in some people I know who live off others, for instance adult kids living at home without contributing anything towards the bills, benefit claimants who resent the state and even resent family/friends who give/lend them money. 

I consider myself fortunate in that both my cherubs have a very strong work ethic even though they know full well they have a big pot of money saved/invested for them (which they have full access to now they are over 18), and they can reasonably assume that more will be coming their way. So in that respect, future gifting isn't something that makes me worry about negative dynamic changes.

That said, it's the boyfriends that I have to keep an eye on 

Emmia

Albermarle said:

 finally, if I am 25 years away from retirement, what do I make of this announcement, given that there will be many more changes and if a Conservative government comes back, they will revert it back to being outside the estate - quite likely.


Putting up taxes is painful for any political party, so if the other side has already done it and took the flak, then unlikely another will unwind it. Especially as it was a loophole.
Maybe there will be an increase in the nil rate bands one day.

Governments tend not to unwind things that raise lots of revenue, for example income tax which was originally temporary (from 1842) to cover a budget deficit... 

*It was introduced earlier to fund war, but that was time limited and temporary.

FIREDreamer

marycanary said:

Sterlingtimes said:

marycanary said:

The book reviews who are the millionaire in the USA, and their attitudes to money. One of their findings concerned parents gifting their adult children money, or what is termed "Economic Outpatient Care". The authors found that such a strategy can produce significant negative impacts on the recipients' future wealth.  

It depends upon the behaviour of the behaviour of the adult children.

Three young adult men received a payout of £40,000 each from the Sterlingtimes Family Trust a few years ago.

The first son [my brother's] took a break from work for a couple of years, quickly depleting his money.

The second son [my brother's] used his money for general living expenses.

The third son [mine] invested £30,000 of his money in cryptocurrency, much to his father's anger, and ended up with £600,000 and a substantial CGT bill. Recently, he divested the lot and invested proceeds in technology stocks.

Yes, gifting money may be risky, but it isn't easy to give a gift and then prescribe that it must be used wisely.

 Three very different young men but I think we can all agree that number 1 made the sensible choice.

 As I recall the book deals with repeated Economic Outpatient Care not one off gifts.

Number 3 was the best choice surely, set up for life albeit took some risk to achieve it.

JoeCrystal

Emmia said:

Albermarle said:

 finally, if I am 25 years away from retirement, what do I make of this announcement, given that there will be many more changes and if a Conservative government comes back, they will revert it back to being outside the estate - quite likely.


Putting up taxes is painful for any political party, so if the other side has already done it and took the flak, then unlikely another will unwind it. Especially as it was a loophole.
Maybe there will be an increase in the nil rate bands one day.

Governments tend not to unwind things that raise lots of revenue, for example income tax which was originally temporary (from 1842) to cover a budget deficit... 

*It was introduced earlier to fund war, but that was time limited and temporary.

It is still temporary and renewed on an annual basis. I remember HMRC saying that Finance Bill MUST pass or they have to refund all income taxes collected during the same tax year when MPs grumbled about voting against it.

zagfles

FIREDreamer said:

marycanary said:

Sterlingtimes said:

marycanary said:

The book reviews who are the millionaire in the USA, and their attitudes to money. One of their findings concerned parents gifting their adult children money, or what is termed "Economic Outpatient Care". The authors found that such a strategy can produce significant negative impacts on the recipients' future wealth.  

It depends upon the behaviour of the behaviour of the adult children.

Three young adult men received a payout of £40,000 each from the Sterlingtimes Family Trust a few years ago.

The first son [my brother's] took a break from work for a couple of years, quickly depleting his money.

The second son [my brother's] used his money for general living expenses.

The third son [mine] invested £30,000 of his money in cryptocurrency, much to his father's anger, and ended up with £600,000 and a substantial CGT bill. Recently, he divested the lot and invested proceeds in technology stocks.

Yes, gifting money may be risky, but it isn't easy to give a gift and then prescribe that it must be used wisely.

 Three very different young men but I think we can all agree that number 1 made the sensible choice.

 As I recall the book deals with repeated Economic Outpatient Care not one off gifts.

Number 3 was the best choice surely, set up for life albeit took some risk to achieve it.

With hindsight yes, but he took a massive risk with a large amount of money. Not much different to putting it all on the the favourite in the 3:30 at Kempton Park and it won. Was it a sensible thing to do? No. Did it work out well, yes. 

But even with the big win, how will affect him in the future? Does he now consider himself an investment genius and think he can carry on making brilliant investment decisions? Or does he just like a gamble, in which case the £600k may not last long. Or does he think "phew that was lucky" and decide to invest more rationally, diversely, and lower risk in the future? 

zagfles

artyboy said:

zagfles said:

Sterlingtimes said:

marycanary said:

The book reviews who are the millionaire in the USA, and their attitudes to money. One of their findings concerned parents gifting their adult children money, or what is termed "Economic Outpatient Care". The authors found that such a strategy can produce significant negative impacts on the recipients' future wealth.  

It depends upon the behaviour of the behaviour of the adult children.

Three young adult men received a payout of £40,000 each from the Sterlingtimes Family Trust a few years ago.

The first son [my brother's] took a break from work for a couple of years, quickly depleting his money.

The second son [my brother's] used his money for general living expenses.

The third son [mine] invested £30,000 of his money in cryptocurrency, much to his father's anger, and ended up with £600,000 and a substantial CGT bill. Recently, he divested the lot and invested proceeds in technology stocks.

Yes, gifting money may be risky, but it isn't easy to give a gift and then prescribe that it must be used wisely.

Yup - parents should know the personalities of their kids and their attitude to money well enough to have a good idea what they'd do with the money. I'm pretty sure I know what mine would do. 

Gifting can definitely have a negative effect on some people. It can also change the dynamic of the relationship, create a dependency effect or a sense of loss of financial control/power that can even cause the recipient to resent the donor. Sometimes the expectation of more, or "that wasn't enough", you're richer than me, using your power to control me. Often subconscious.

I see that sort of attitude in some people I know who live off others, for instance adult kids living at home without contributing anything towards the bills, benefit claimants who resent the state and even resent family/friends who give/lend them money. 

I consider myself fortunate in that both my cherubs have a very strong work ethic even though they know full well they have a big pot of money saved/invested for them (which they have full access to now they are over 18), and they can reasonably assume that more will be coming their way. So in that respect, future gifting isn't something that makes me worry about negative dynamic changes.

That said, it's the boyfriends that I have to keep an eye on 

Mine too. I know they'll save/invest it rather than blow it. It was hard enough to try to get them to spend their pocket money They both finished uni with savings rather than an overdraft. Although a massive student loan. 

Quidditch

For a high rate tax payer, what is now the best vehicle to pass down wealth through generations?
Pensions felt very attractive given the tax relief and the flexibility I.e. I will spend as much as I need in retirement and the rest just gets handed down. What’s the best equivalent?

poseidon1

artyboy said:

HUMBUG said:

I'm assuming I can leave the country before I die (maybe emigrate to Portugal that has no IHT) , take all my savings and not have to pay any extra taxes or penalties to the HMRC?

Portugal had an exceptionally benign golden visa scheme that allowed you to take your pension income tax free for 10 years. Sadly that's now wound down, and there are (I believe) no QROPS options there so it's not quite such the slam dunk location it once was.

Ive decided though there's no point in investigating further right now, given I've got another 5 years before I can even touch my pensions...

The closure of Portugal's golden visa scheme is sadly mourned.

Without that 10 year tax exemption,  Income rates there are worse ( 43.5% hits at 37,791 euros and 48% at 81,199 euros ). Worst still capital gains are added to income and taxed at your income tax marginal rate.

Tax free nature of UK ISAs not recognised there ( or any other country with a developed tax system for that matter).

On the plus side no Inheritance tax per se, but Stamp Duty on inheritances at 10% only applies to Portuguese assets and only  if gifted otherwise than to direct family ( forced heirship rules apply but can be overridden with appropriate tax consequences). This can be especially useful when combined with qualifying UK IHT exempt investments discussed below.

 A quirk of the IHT system worth noting for Brits  who relocate permanently abroad, relates to personally holding Fotra government gilts ( effectively all UK gilts).

Fortra ( Free of Tax For Residents Abroad ) securities if purchased after April 2013 , are an  asset class which is IHT free for all non UK resident persons.  Provides an opportunity to have a fiscal foot in the UK without being hammered for IHT thereon even if still treated as UK domiciled.
However remains to be seen if this quirk survives the complete demolition of the non dom tax system  in  April 2025 ( this quirk  historically only favoured non doms until its extension to all non residents in 2013).

marycanary

FIREDreamer said:

marycanary said:

 Three very different young men but I think we can all agree that number 1 made the sensible choice.

 As I recall the book deals with repeated Economic Outpatient Care not one off gifts.

Number 3 was the best choice surely, set up for life albeit took some risk to achieve it.

I was trying to make a joke as I didn't expect anyone on this site to think 1 was the best choice. Clear, from your reply it was a poor attempt at humour.

MarzipanCrumble

No IHT in Australia
https://www.ato.gov.au/individuals-and-families/deceased-estates/if-you-are-a-beneficiary-of-a-deceased-estate