pension cashing out

ggmf

Not sure why but this thread is giving me safeguarding concerns. 

brehom5

RogerPensionGuy said:

brehom5 said:

in the UK, please can someone confirm if this method is correct if parent has a untouched pension pot that needs passing to an offspring

example:

73 years old, untouched pension amount total 60k

This needs going to offspring as gift

Withdraw 25% tax free, transfer straight to offspring

withdrawn 75% which is taxable, transfer straight to offspring

Is there any other way to cash in on this to reduce the 75% tax, and as it will be gifted, should offspring be aware of any tax implications or the parent gifting it e.g. if using it to buy a home or any other investment?

Also if theres an alternative method which makes more sense e.g. cash out 25% tax free but then set the offspring as a beneficiary, and the offspring withdraws it after that?

Any advice appreciated

Why does pension pot need to be passed on offspring?

Is it possible the person whos pension it is may need this cash in the future, maybe they need a new car, house maintenance or possibly need a hip replacement and want to go privately as they don't want to wait 5 or more years?

When offspring get the cash, what are they doing with it?

Why isn't the pension holder asking these questions?

Any feedback will be interesting. 

Cheers Roger. 

the info on who and amounts etc is all quite generic and its a second pension pot not the main one in question, but just trying to understand the pension tax rules and making use of the tax allowance. There is apparently a 2027 law changing and something came out today in the news does any of this affect the tax rules? From what I can find that if a beneficiary is listed on the pension pot when this change is done, it is liable to income tax or 40% whereas a cashout before this date could avoid this? and if there is a spouse it is only tax free if its passed on as a beneficiary

artyboy

brehom5 said:

RogerPensionGuy said:

brehom5 said:

in the UK, please can someone confirm if this method is correct if parent has a untouched pension pot that needs passing to an offspring

example:

73 years old, untouched pension amount total 60k

This needs going to offspring as gift

Withdraw 25% tax free, transfer straight to offspring

withdrawn 75% which is taxable, transfer straight to offspring

Is there any other way to cash in on this to reduce the 75% tax, and as it will be gifted, should offspring be aware of any tax implications or the parent gifting it e.g. if using it to buy a home or any other investment?

Also if theres an alternative method which makes more sense e.g. cash out 25% tax free but then set the offspring as a beneficiary, and the offspring withdraws it after that?

Any advice appreciated

Why does pension pot need to be passed on offspring?

Is it possible the person whos pension it is may need this cash in the future, maybe they need a new car, house maintenance or possibly need a hip replacement and want to go privately as they don't want to wait 5 or more years?

When offspring get the cash, what are they doing with it?

Why isn't the pension holder asking these questions?

Any feedback will be interesting. 

Cheers Roger. 

the info on who and amounts etc is all quite generic and its a second pension pot not the main one in question, but just trying to understand the pension tax rules and making use of the tax allowance. There is apparently a 2027 law changing and something came out today in the news does any of this affect the tax rules? From what I can find that if a beneficiary is listed on the pension pot when this change is done, it is liable to income tax or 40% whereas a cashout before this date could avoid this? and if there is a spouse it is only tax free if its passed on as a beneficiary

It was announced in the budget that residual DC pension pots on death would be treated as being within your estate for IHT purposes from April 2027, and so could therefore incur an IHT charge of 40% (or possibly even as high as 60%) when you die. There has always been an IHT exemption if you pass your estate to your spouse, and that isn't changing.

coyrls

brehom5 said:

RogerPensionGuy said:

brehom5 said:

in the UK, please can someone confirm if this method is correct if parent has a untouched pension pot that needs passing to an offspring

example:

73 years old, untouched pension amount total 60k

This needs going to offspring as gift

Withdraw 25% tax free, transfer straight to offspring

withdrawn 75% which is taxable, transfer straight to offspring

Is there any other way to cash in on this to reduce the 75% tax, and as it will be gifted, should offspring be aware of any tax implications or the parent gifting it e.g. if using it to buy a home or any other investment?

Also if theres an alternative method which makes more sense e.g. cash out 25% tax free but then set the offspring as a beneficiary, and the offspring withdraws it after that?

Any advice appreciated

Why does pension pot need to be passed on offspring?

Is it possible the person whos pension it is may need this cash in the future, maybe they need a new car, house maintenance or possibly need a hip replacement and want to go privately as they don't want to wait 5 or more years?

When offspring get the cash, what are they doing with it?

Why isn't the pension holder asking these questions?

Any feedback will be interesting. 

Cheers Roger. 

the info on who and amounts etc is all quite generic and its a second pension pot not the main one in question, but just trying to understand the pension tax rules and making use of the tax allowance. There is apparently a 2027 law changing and something came out today in the news does any of this affect the tax rules? From what I can find that if a beneficiary is listed on the pension pot when this change is done, it is liable to income tax or 40% whereas a cashout before this date could avoid this? and if there is a spouse it is only tax free if its passed on as a beneficiary

It's probably worth doing some research and trying to understand the changes.  Withdrawing money from a pension prior to 2027 will likely increase your IHT liability.  Withdrawing money from a pension after 2027 will likely not change your IHT liability.  There are no proposed changes to the IHT gifting rules either before or after 2027.  Also try to understand if IHT is likley to be an issue at all, for most people it isn't.