Would this be sensible?

tony4147

Possible strategy to reduce tax implications following the budget?

Age 61, intend to work another 4 years. Current SIPP value is £520k and I contribute £40k/yr via salary sacrifice. I work contract via an umbrella company. Currently in the process of moving house and will have a mortgage of £75k over 5yrs, on a house worth £900k, the interest rate is fixed to next June. 

Savings in ISA of £60k.

 My other half has a TPS pension and will draw a pension of approx £30k/yr and TFLS of £90k when she retires in 18 months time. We are also expecting an inheritance probably within the next 5yrs of between £250-500k.

Both of us will receive the full state pension.

 Like a lot of people we have both worked hard for over 40yrs and would like to leave some of our estate to our 2 children when we pass away, and we loathe to see anymore tax paid on hard earned money, whether we pay it or our beneficiaries pay it.

With the budget changes, pension IHT and Employer NI I’m considering taking £70k TFLS next June from my SIPP to clear the mortgage, and then increasing my pension contributions to £50k/yr. By doing this I can save £10k+ in mortgage interest and also reduce my exposure to the increase in Employer NI. 

To reduce possible claims of pension recycling I could increase my contributions now prior to taking £70k TFLS next June.

 My thoughts for when I do retire are to max out drawdown from my SIPP pot but keep it under the HRT and feed it into a SSISA (invest in the same funds as my SIPP) which will not be hit by the ‘double tax’ that the pension would be when we pass away.

I was always a great believer in paying into a pension so that I could stand on my own two feet when retired and not be a burden on the state etc but this meddling by governments has killed that in my eyes and I’m sure Labour haven’t finished with their meddling. 

 Appreciate any thoughts on the above?

 

El_Torro

Since the extra money you are taking out of your pension will end up in a S&S ISA I don't see a problem with your plan. Your reasons for doing it seem sensible too. 

Sarahspangles

If you retire and feel ‘comfortably off’, and then you inherit, you could consider varying the relevant wills to give your inheritance to the next generation.

tony4147

Sarahspangles said:

If you retire and feel ‘comfortably off’, and then you inherit, you could consider varying the relevant wills to give your inheritance to the next generation.

I will be reviewing the Wills every few years and as circumstances change 

Keep_pedalling

tony4147 said:

Possible strategy to reduce tax implications following the budget?

Age 61, intend to work another 4 years. Current SIPP value is £520k and I contribute £40k/yr via salary sacrifice. I work contract via an umbrella company. Currently in the process of moving house and will have a mortgage of £75k over 5yrs, on a house worth £900k, the interest rate is fixed to next June. 

Savings in ISA of £60k.

 My other half has a TPS pension and will draw a pension of approx £30k/yr and TFLS of £90k when she retires in 18 months time. We are also expecting an inheritance probably within the next 5yrs of between £250-500k.

Both of us will receive the full state pension.

 Like a lot of people we have both worked hard for over 40yrs and would like to leave some of our estate to our 2 children when we pass away, and we loathe to see anymore tax paid on hard earned money, whether we pay it or our beneficiaries pay it.

You will still be able to leave them £1M tax free and they get 60% of anything above that which seems more than fare considering for them it is unearned wealth.

I was always a great believer in paying into a pension so that I could stand on my own two feet when retired and not be a burden on the state etc but this meddling by governments has killed that in my eyes and I’m sure Labour haven’t finished with their meddling. 

 Appreciate any thoughts on the above?

What has changed? that has always been the actual purpose of building up a good pension. 

LHW99

Keep_pedalling said:

tony4147 said:

Possible strategy to reduce tax implications following the budget?

Age 61, intend to work another 4 years. Current SIPP value is £520k and I contribute £40k/yr via salary sacrifice. I work contract via an umbrella company. Currently in the process of moving house and will have a mortgage of £75k over 5yrs, on a house worth £900k, the interest rate is fixed to next June. 

Savings in ISA of £60k.

 My other half has a TPS pension and will draw a pension of approx £30k/yr and TFLS of £90k when she retires in 18 months time. We are also expecting an inheritance probably within the next 5yrs of between £250-500k.

Both of us will receive the full state pension.

 Like a lot of people we have both worked hard for over 40yrs and would like to leave some of our estate to our 2 children when we pass away, and we loathe to see anymore tax paid on hard earned money, whether we pay it or our beneficiaries pay it.

You will still be able to leave them £1M tax free and they get 60% of anything above that which seems more than fare considering for them it is unearned wealth.

I was always a great believer in paying into a pension so that I could stand on my own two feet when retired and not be a burden on the state etc but this meddling by governments has killed that in my eyes and I’m sure Labour haven’t finished with their meddling. 

 Appreciate any thoughts on the above?

What has changed? that has always been the actual purpose of building up a good pension. 

This is true, and I understand the disgruntlement (anger?) caused by people who have used the changed rules purely to build up an untaxed inheritance.

However, as someone who has always been a basic rate taxpayer, but has managed (with OH) to build a combined portfolio above the £1m, if DC pensions are included, I am not sure I would have put as much in over the last 10 or so years if this had been the case.

My thoughts had always been - put it in the pension, it will be there for income, it will be there for care fees, and if there's a bit left over that doesn't end up being needed, then there would be a bit of extra pension money for splitting between the kids, which is not a bad thing as no one can be sure how their health would change.

That last is no longer there to the same extent, so any extra could have been sent directly to their pensions as gifts from income. Which would cut down on the reserve available.

net result - less IHT for the Governent and possibly an extra bill in due course to them for care fees. I doubt deprivation of assets would come in, if the gifts were only from income that would have been inexcess anyway, but used to provide a "planning surplus".

Changes in behaviour are likely to ensure that not as much is pulled in by this move. IMO reducing the annual amount back to £40k would have reduced the significance of anyone using the pension purely for inheritance, particularly as a significant proportion of the population don't necessarily ever earn enough to take advantage of that level of contribution.

tony4147

LHW99 said:

Keep_pedalling said:

tony4147 said:

Possible strategy to reduce tax implications following the budget?

Age 61, intend to work another 4 years. Current SIPP value is £520k and I contribute £40k/yr via salary sacrifice. I work contract via an umbrella company. Currently in the process of moving house and will have a mortgage of £75k over 5yrs, on a house worth £900k, the interest rate is fixed to next June. 

Savings in ISA of £60k.

 My other half has a TPS pension and will draw a pension of approx £30k/yr and TFLS of £90k when she retires in 18 months time. We are also expecting an inheritance probably within the next 5yrs of between £250-500k.

Both of us will receive the full state pension.

 Like a lot of people we have both worked hard for over 40yrs and would like to leave some of our estate to our 2 children when we pass away, and we loathe to see anymore tax paid on hard earned money, whether we pay it or our beneficiaries pay it.

You will still be able to leave them £1M tax free and they get 60% of anything above that which seems more than fare considering for them it is unearned wealth.

I was always a great believer in paying into a pension so that I could stand on my own two feet when retired and not be a burden on the state etc but this meddling by governments has killed that in my eyes and I’m sure Labour haven’t finished with their meddling. 

 Appreciate any thoughts on the above?

What has changed? that has always been the actual purpose of building up a good pension. 

This is true, and I understand the disgruntlement (anger?) caused by people who have used the changed rules purely to build up an untaxed inheritance.

However, as someone who has always been a basic rate taxpayer, but has managed (with OH) to build a combined portfolio above the £1m, if DC pensions are included, I am not sure I would have put as much in over the last 10 or so years if this had been the case.

My thoughts had always been - put it in the pension, it will be there for income, it will be there for care fees, and if there's a bit left over that doesn't end up being needed, then there would be a bit of extra pension money for splitting between the kids, which is not a bad thing as no one can be sure how their health would change.

That last is no longer there to the same extent, so any extra could have been sent directly to their pensions as gifts from income. Which would cut down on the reserve available.

net result - less IHT for the Governent and possibly an extra bill in due course to them for care fees. I doubt deprivation of assets would come in, if the gifts were only from income that would have been inexcess anyway, but used to provide a "planning surplus".

Changes in behaviour are likely to ensure that not as much is pulled in by this move. IMO reducing the annual amount back to £40k would have reduced the significance of anyone using the pension purely for inheritance, particularly as a significant proportion of the population don't necessarily ever earn enough to take advantage of that level of contribution.

And this was my thoughts, pay in to a pension to provide for yourself when older, a pension is a long term plan BUT meddling by governments just doesn’t give people the stability for long term planning.

jimjames

tony4147 said:

LHW99 said:

Keep_pedalling said:

tony4147 said:

Possible strategy to reduce tax implications following the budget?

Age 61, intend to work another 4 years. Current SIPP value is £520k and I contribute £40k/yr via salary sacrifice. I work contract via an umbrella company. Currently in the process of moving house and will have a mortgage of £75k over 5yrs, on a house worth £900k, the interest rate is fixed to next June. 

Savings in ISA of £60k.

 My other half has a TPS pension and will draw a pension of approx £30k/yr and TFLS of £90k when she retires in 18 months time. We are also expecting an inheritance probably within the next 5yrs of between £250-500k.

Both of us will receive the full state pension.

 Like a lot of people we have both worked hard for over 40yrs and would like to leave some of our estate to our 2 children when we pass away, and we loathe to see anymore tax paid on hard earned money, whether we pay it or our beneficiaries pay it.

You will still be able to leave them £1M tax free and they get 60% of anything above that which seems more than fare considering for them it is unearned wealth.

I was always a great believer in paying into a pension so that I could stand on my own two feet when retired and not be a burden on the state etc but this meddling by governments has killed that in my eyes and I’m sure Labour haven’t finished with their meddling. 

 Appreciate any thoughts on the above?

What has changed? that has always been the actual purpose of building up a good pension. 

This is true, and I understand the disgruntlement (anger?) caused by people who have used the changed rules purely to build up an untaxed inheritance.

However, as someone who has always been a basic rate taxpayer, but has managed (with OH) to build a combined portfolio above the £1m, if DC pensions are included, I am not sure I would have put as much in over the last 10 or so years if this had been the case.

My thoughts had always been - put it in the pension, it will be there for income, it will be there for care fees, and if there's a bit left over that doesn't end up being needed, then there would be a bit of extra pension money for splitting between the kids, which is not a bad thing as no one can be sure how their health would change.

That last is no longer there to the same extent, so any extra could have been sent directly to their pensions as gifts from income. Which would cut down on the reserve available.

net result - less IHT for the Governent and possibly an extra bill in due course to them for care fees. I doubt deprivation of assets would come in, if the gifts were only from income that would have been inexcess anyway, but used to provide a "planning surplus".

Changes in behaviour are likely to ensure that not as much is pulled in by this move. IMO reducing the annual amount back to £40k would have reduced the significance of anyone using the pension purely for inheritance, particularly as a significant proportion of the population don't necessarily ever earn enough to take advantage of that level of contribution.

And this was my thoughts, pay in to a pension to provide for yourself when older, a pension is a long term plan BUT meddling by governments just doesn’t give people the stability for long term planning.

Nothing has changed with pensions for providing for yourself when older. There has been no meddling or change to that, only that IHT may be due if you don't use it all before you die.

AlanP_2

tony4147 said:

LHW99 said:

Keep_pedalling said:

tony4147 said:

Possible strategy to reduce tax implications following the budget?

Age 61, intend to work another 4 years. Current SIPP value is £520k and I contribute £40k/yr via salary sacrifice. I work contract via an umbrella company. Currently in the process of moving house and will have a mortgage of £75k over 5yrs, on a house worth £900k, the interest rate is fixed to next June. 

Savings in ISA of £60k.

 My other half has a TPS pension and will draw a pension of approx £30k/yr and TFLS of £90k when she retires in 18 months time. We are also expecting an inheritance probably within the next 5yrs of between £250-500k.

Both of us will receive the full state pension.

 Like a lot of people we have both worked hard for over 40yrs and would like to leave some of our estate to our 2 children when we pass away, and we loathe to see anymore tax paid on hard earned money, whether we pay it or our beneficiaries pay it.

You will still be able to leave them £1M tax free and they get 60% of anything above that which seems more than fare considering for them it is unearned wealth.

I was always a great believer in paying into a pension so that I could stand on my own two feet when retired and not be a burden on the state etc but this meddling by governments has killed that in my eyes and I’m sure Labour haven’t finished with their meddling. 

 Appreciate any thoughts on the above?

What has changed? that has always been the actual purpose of building up a good pension. 

This is true, and I understand the disgruntlement (anger?) caused by people who have used the changed rules purely to build up an untaxed inheritance.

However, as someone who has always been a basic rate taxpayer, but has managed (with OH) to build a combined portfolio above the £1m, if DC pensions are included, I am not sure I would have put as much in over the last 10 or so years if this had been the case.

My thoughts had always been - put it in the pension, it will be there for income, it will be there for care fees, and if there's a bit left over that doesn't end up being needed, then there would be a bit of extra pension money for splitting between the kids, which is not a bad thing as no one can be sure how their health would change.

That last is no longer there to the same extent, so any extra could have been sent directly to their pensions as gifts from income. Which would cut down on the reserve available.

net result - less IHT for the Governent and possibly an extra bill in due course to them for care fees. I doubt deprivation of assets would come in, if the gifts were only from income that would have been inexcess anyway, but used to provide a "planning surplus".

Changes in behaviour are likely to ensure that not as much is pulled in by this move. IMO reducing the annual amount back to £40k would have reduced the significance of anyone using the pension purely for inheritance, particularly as a significant proportion of the population don't necessarily ever earn enough to take advantage of that level of contribution.

And this was my thoughts, pay in to a pension to provide for yourself when older, a pension is a long term plan BUT meddling by governments just doesn’t give people the stability for long term planning.

If government hadn't meddled a few years ago this subject wouldn't even be under discussion as you would have had to buy an annuity. 

Some exceptions I'm sure but the point stands, without government meddling the vast majority of people wouldn't have been able to pass on a DC pot whether before or after IHT.

wjr4

tony4147 said:

Sarahspangles said:

If you retire and feel ‘comfortably off’, and then you inherit, you could consider varying the relevant wills to give your inheritance to the next generation.

I will be reviewing the Wills every few years and as circumstances change 

They mean varying whoever you inherit from, so that you don’t receive the inheritance at all, it can go to your children instead of you. 

wjr4

You could always downsize and gift money to your beneficiaries now if you’re that worried.