Apparently IHT on may not be too bad?

ali_bear

There is such a thing as fiscal policy. By ending the IHT exemption for pensions it means that those with excess money in later life will start thinking about passing some of that on to the next generation earlier, instead of hoarding it away to pass down the generations unused. It brings that money back into the real economy where it can possibly benefit real living people. 

Obviously if you're a farmer then even paying half the IHT everyone else pays is the end of the world. 

BikingBud

Perhaps it's me but I understand that if we "need" more money in the economy some people have the power to create it.

No require to produce anything, not carrots or cabbages to sell, they just create money.

It's a kind of magic!

Oh and the kicker literally is that the future pays.

p00hsticks

ali_bear said:

There is such a thing as fiscal policy. By ending the IHT exemption for pensions it means that those with excess money in later life will start thinking about passing some of that on to the next generation earlier, instead of hoarding it away to pass down the generations unused. It brings that money back into the real economy where it can possibly benefit real living people. 

Obviously if you're a farmer then even paying half the IHT everyone else pays is the end of the world. 

It will also perhaps reduce the amount of people who are making the most of the tax advantages of putting money in a pension when they have no real intention of using it for the purpose for which it is intended and which the taxation  rules were put in place for - i.e. to provide an income during retirement - but instead see it as a way of avoiding paying some IHT. 

af1963

I'll possibly be affected.  I still think it's the right thing to do.  Never saw any good reason why money  I saved into an ISA was potentially taxed on inheritance, but money saved in a pension wasn't. 

What I'm hoping they'll sort out is the potential extra bureaucracy immediately after a bereavement.  As I read the current proposals, there's a lot of IHT paperwork that may need sorted out, even by people who end up paying little or no IHT. before pensions can be paid out.  Some kind of "interim payments" rule would help - so the pension companies could withhold the maximum potential IHT liability but pay out the balance immediately.

Sarahspangles

ali_bear said:

Obviously if you're a farmer then even paying half the IHT everyone else pays is the end of the world. 

Farmageddon!

Universidad

incus432 said:

 the inclusion of pensions in IHT is a serious issue... affect those with property whose pensions and other assets put them over the 1 million mark.

That's about a quarter of all pensioners.

BikingBud said:

Tell me again how house price inflation was good for us all!

It used to be good when you bought a house at the limit of affordability and over time inflation and wage increases made it a lower and lower proportion. Since salaries stopped keeping up with inflation, its made mortgages for the current generation much more expensive in real terms over time.

QrizB

Universidad said:

BikingBud said:

Tell me again how house price inflation was good for us all!

It used to be good when you bought a house at the limit of affordability and over time inflation and wage increases made it a lower and lower proportion. Since salaries stopped keeping up with inflation, its made mortgages for the current generation much more expensive in real terms over time.

I'd rather like to see house prices fall by 50%, despite the fact it would reduce my paper assets by several £100k. But that would be quite the bursting bubble.

SouthCoastBoy

Somebody said:

I think the article says that £59k is not too out of reach when taking into account 2 lots of state pension totalling c£23k.

Just the 36k after tax 45k before tax, so about 1m pot needed.

Personally I think 59k is way too much, we need 30k after tax,so basically half that suggestion, not sure how I would spend 59k after tax.

MarkCarnage

QrizB said:

Universidad said:

BikingBud said:

Tell me again how house price inflation was good for us all!

It used to be good when you bought a house at the limit of affordability and over time inflation and wage increases made it a lower and lower proportion. Since salaries stopped keeping up with inflation, its made mortgages for the current generation much more expensive in real terms over time.

I'd rather like to see house prices fall by 50%, despite the fact it would reduce my paper assets by several £100k. But that would be quite the bursting bubble.

Agree. I suspect it will be largely a real terms rather than nominal adjustment, but house prices haven't really adjusted to the reality of more normalised interest rates yet. I get annoyed when I hear lazy commentary about them being 'high'. 
Best thing that could happen for this country (and some others) is significant real fall in house prices allowing money to go to more productive areas of the economy. 

Moonwolf

Universidad said:

incus432 said:

 the inclusion of pensions in IHT is a serious issue... affect those with property whose pensions and other assets put them over the 1 million mark.

That's about a quarter of all pensioners.

I think that quarter is an exaggeration when used for IHT calculations. 

"Estimates of the value of pension pots where a specific level of payment is guaranteed at retirement, such as occupational defined benefit type schemes (actively contributing or preserved), or for pensions in payment where an annuity has already been purchased, are calculated using expected or received retirement income with external economic indicators such as annuity rates and discount factors."

So it includes "wealth" assumed from DB schemes which will obviously not include a real pot for IHT purposes. This is what the ONS says elsewhere about pension wealth.

"For those closest to retirement, (aged 55 years to State Pension age), median wealth in active occupational defined benefit pensions is 10 times higher than in active occupational defined contribution pensions in July 2010, increasing to 26 times in April 2016 to March 2018."

I think from that it is reasonable to assume that a high proportion of "millionaire" pensioners from that one quarter figure don't actually have a £1m in realisable assets.

It would also include those who had to buy annuities before the changes 15 years ago or bought them since.  Also, a quarter wouldn't include those who eventually reduce their pot through spending, not everyone uses a safe withdrawal rate.