Apparently IHT on may not be too bad?

AlanP_2

SouthCoastBoy said:

AlanP_2 said:

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.

BikingBud said:

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

Do you have a source for that statistic as it sounds extremely high to me?

Out of 7 pensioner couples I am familiar with I can think of only one couple whose assets would get to that level and the main factor there  is a large house 2 miles outside the M25 in Hertfordshire.

1M isn't much when you sum up a house and a DC pension, different if there is a DB pension involved. 

Two points come to mind there.

1) Down south / south east probably correct but not necessarily so once you start going out to cheaper property areas. My son is in Yorkshire and has two houses, one of which is let out, total value less than £450k.

2) Even if all INDIVIDUAL pensioners with a house and a DC pension have assets >£1m is that the same as 1 in 4 pensioners as that is the number I queried? 

Cobbler_tone

RogerPensionGuy said:

https://www.thisismoney.co.uk/money/pensions/article-14263403/Fears-inheritance-tax-raid-pension-overcooked-BILLY-BURROWS.html

Articles like this are scaremongering BS at best, I'm not sure why people give them oxygen.
An arbitrary figure of £59k (net) per annum means absolutely nothing without context.

1. How many working families survive comfortably on less than this, with kids, a mortgage and all the trappings? This includes paying income tax/national insurance and mortgages.
2. This must assume that this is when you are in receipt of the state pension, i.e approaching your twilight years, when it recognised that spending will decline, at least to some level, many say by 40%. Without the benefit of paying less tax, no NI and independent kids if you have them.  

Clearly you can paint a scenario of couples in later life with mortgages, bank rolling kids, travelling the world, keeping expensive pets, having expensive holidays, wanting £500k aside for care etc...but that is not the norm.

We have £6k a month net and I can confidently say that we will have a good lifestyle, replace the car, have health care, keep warm and eat well on 50% of that. (in fact 40% of it goes into pensions) Chances are the boost of the state pension will be on top and 'bonus' money.

The point is that everyone should have some level of understanding of what they realistically need and not aimlessly panic that they are unlikely to have £59k a year net with their current projections. Looking at point 1, common sense should give you most of the answers. The alternative for many (if you are aiming that high) is work until you drop because chances are you're not even earning that in work, let alone retirement.

Moonwolf

AlanP_2 said:

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.

BikingBud said:

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

Do you have a source for that statistic as it sounds extremely high to me?

Out of 7 pensioner couples I am familiar with I can think of only one couple whose assets would get to that level and the main factor there  is a large house 2 miles outside the M25 in Hertfordshire.

It is probably from the ONS data. https://fullfact.org/online/pensioner-millionaire-households/  

https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/pensionwealthingreatbritain/april2016tomarch2018

There are a few newspaper stories that use this and I think an old thread on here.

However, as I pointed out in an earlier post, this includes a "wealth" pot imputed from DB pensions and annuities.

zagfles

Albermarle said:

SouthCoastBoy said:

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.

I live near to a very wealthy area. I am sure some of the people there would happily spend £59K on a birthday party, or on racehorse training fees, or a luxury family holiday, or cosmetic surgery, or a box at Royal Ascot etc
For them living on £59K a YEAR would only be for the great unwashed.

So what? The ridiculous PLSA claim is that's what people need to be comfortable. Not what people with loads of money actually spend. 

zagfles

MallyGirl said:

SouthCoastBoy said:

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.

Move to the South East within commuting distance of London - and get a dog!

I know a couple in the SE with two dogs and 2 kids who live on under half that after mortgage costs. They are "comfortable". 

SmokeysTravels

I used to work as a Pension Wise Guider and probably did around 2000 appointments- together with my colleagues between us the number would be in the 10000s. The average pot size of the people we saw was around £50000. Most people were going to carry on working until their state pension started and try and live off that. Downsizing and equity release were often also mentioned to try to get by. The level of understanding of pensions was worryingly low. We used to reference the PLSA figures but most wouldn’t have enough to cover the minimum levels. 

I really think there should be much better financial education that starts in schools. Unfortunately, the penny only drops that people didn’t start early enough or pay enough into their pensions when it’s usually too late to do anything about it.

zagfles

Sarahspangles said:

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!

Don't panic, who needs farmers anyway, if farmers' offspring have to sell up because they can't afford the IHT on their inherited farm, we can just import everything we need from "the breadbasket of Europe". Oh, hang on...

zagfles

SmokeysTravels said:

I used to work as a Pension Wise Guider and probably did around 2000 appointments- together with my colleagues between us the number would be in the 10000s. The average pot size of the people we saw was around £50000. Most people were going to carry on working until their state pension started and try and live off that. Downsizing and equity release were often also mentioned to try to get by. The level of understanding of pensions was worryingly low. We used to reference the PLSA figures but most wouldn’t have enough to cover the minimum levels. 

I really think there should be much better financial education that starts in schools. Unfortunately, the penny only drops that people didn’t start early enough or pay enough into their pensions when it’s usually too late to do anything about it.

Which is why the article is probably right for most people, IHT on pensions just isn't a big deal because they either won't have a big pot, or they'll use it to buy an annuity rather than managing drawdown. 

Hoenir

SouthCoastBoy said:

Hoenir said:

MarkCarnage said:

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.

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. 

Totally agree. We appear to be living in an illusory world. Where money is made , and subsequently spent,  by simply purchasing an "asset" . Watching it inflate in price then selling it on to somebody else who funds this with an ever increasing level of debt. While the number of people actually working productively diminish in number.  

I'm quite happy to jump on this band wagon and see house prices significantly reduce in real terms, however been wanting that to happen for over 20 years, can't see it ever happening as the economy is based on rising house prices.

Always remember debating with friends the crazy rapid rise of property prices in the late 90's. We could never figure out what had changed. When Northern Rock finally collapsed in 2008 became possible to build an understanding of what the main drivers had been. Though no correction subsequently followed. As interest rates rapidly fell to rock bottom levels. In effect deferring the day of reckoning. 

Find it interesting that mortgage borrowing rates are considered high now. Yet are well below those in 2007 (prior to the (GFC).  

BikingBud

Sarahspangles said:

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!

Cabbages and carrots!

Not imputed wealth by getting your buddies to say something is really very good value. When in fact it is quite the opposite.