Tax-free lump sum

dunstonh

badger09 said:

dunstonh said:

I've thought about annuity though.   There's counter-party risk of course, and generally I think i can do a better and more flexible job with a gilt ladder ...

What counterparty risk?  (annuities get 100% FSCS protection with no upper limit).
Annuities are also not included in the estate, and many consider that the way forward once widow/widowed or single beyond age 75.  Put a 30-year guarantee on it at 75, gift what you don't need to your beneficiaries and when you die, the beneficiaries continue to receive it with no IHT.

I didn’t know this 

@dunstonh
Could you possibly point me in the direction of a reliable source of info on this? 

Google comes up with hundreds of links, but many are just sales pitches. I’m happy to pay for advice, but want to understand the basics first. 

Apologies to OP for slight diversion 

Its early days thinking about workarounds pending the final report following consultation.  

under current rules and the early proposals, annuity income is not factored into the estate as there is no capital value.   If you bought value protect with the annuity, that would be factored in, but if you buy a guarantee period where the income continues to the end of the guarantee, then the beneficiary[s] just pay income tax at their appropriate rate.

Gits from income rules are not changed as part of the proposals either.

30 year guarantees are the maximum on lifetime annuities.  

lon_don

dunstonh said:

Its early days thinking about workarounds pending the final report following consultation.  

under current rules and the early proposals, annuity income is not factored into the estate as there is no capital value.   If you bought value protect with the annuity, that would be factored in, but if you buy a guarantee period where the income continues to the end of the guarantee, then the beneficiary[s] just pay income tax at their appropriate rate.

Gits from income rules are not changed as part of the proposals either.

30 year guarantees are the maximum on lifetime annuities.  

As I don't know much at all about IHT, so I've asked Perplexity (using some of your own words, apologies), and it seems to disagree
https://www.perplexity.ai/search/uk-dc-pension-if-i-buy-lifetim-uQLlwCoaRxKuoXhA7PwzpQ
Now I know AI is far from infallible, so would you say that the AI response here is incorrect ?

DRS1

Which would surprise you more?  Being told AI was right?  Or being told it was wrong?

dunstonh

lon_don said:

dunstonh said:

Its early days thinking about workarounds pending the final report following consultation.  

under current rules and the early proposals, annuity income is not factored into the estate as there is no capital value.   If you bought value protect with the annuity, that would be factored in, but if you buy a guarantee period where the income continues to the end of the guarantee, then the beneficiary[s] just pay income tax at their appropriate rate.

Gits from income rules are not changed as part of the proposals either.

30 year guarantees are the maximum on lifetime annuities.  

As I don't know much at all about IHT, so I've asked Perplexity (using some of your own words, apologies), and it seems to disagree
https://www.perplexity.ai/search/uk-dc-pension-if-i-buy-lifetim-uQLlwCoaRxKuoXhA7PwzpQ
Now I know AI is far from infallible, so would you say that the AI response here is incorrect ?

As I said, early days thinking based on an incomplete set of rules.   

Ciprico

lon_don said:

dunstonh said:

Its early days thinking about workarounds pending the final report following consultation.  

under current rules and the early proposals, annuity income is not factored into the estate as there is no capital value.   If you bought value protect with the annuity, that would be factored in, but if you buy a guarantee period where the income continues to the end of the guarantee, then the beneficiary[s] just pay income tax at their appropriate rate.

Gits from income rules are not changed as part of the proposals either.

30 year guarantees are the maximum on lifetime annuities.  

As I don't know much at all about IHT, so I've asked Perplexity (using some of your own words, apologies), and it seems to disagree
https://www.perplexity.ai/search/uk-dc-pension-if-i-buy-lifetim-uQLlwCoaRxKuoXhA7PwzpQ
Now I know AI is far from infallible, so would you say that the AI response here is incorrect ?

I prefer the Chatgpt response to the exact same question....(Note final chapter)

What About the 2027 Reform?

The UK government has proposed removing the IHT exemption on pensions from 6 April 2027, but the key target is:

• Unused drawdown funds

• Uncrystallised pension pots

As of the latest proposals:

• Lifetime annuities are not impacted, because they are non-reclaimable products — i.e. once bought, there is no "capital value" to inherit.

• Any guarantee period payments (like your 30-year example) will likely remain outside the scope of IHT, since they are income streams, not lump sums or capital transfers.

However, legislation is still being finalized. HMRC guidance or detailed draft legislation expected before April 2027 may further clarify this point.

lon_don

Ciprico said

I prefer the Chatgpt response to the exact same question....(Note final chapter)

What About the 2027 Reform?

The UK government has proposed removing the IHT exemption on pensions from 6 April 2027, but the key target is:

• Unused drawdown funds

• Uncrystallised pension pots

As of the latest proposals:

• Lifetime annuities are not impacted, because they are non-reclaimable products — i.e. once bought, there is no "capital value" to inherit.

• Any guarantee period payments (like your 30-year example) will likely remain outside the scope of IHT, since they are income streams, not lump sums or capital transfers.

However, legislation is still being finalized. HMRC guidance or detailed draft legislation expected before April 2027 may further clarify this point.

Well, I asked Perplexity again, and it doubles down on its response

https://www.perplexity.ai/search/uk-pension-please-detail-iht-r-dz09XuR.QdC8YIRji_cRzA

(Would you have a link to your ChatGPT response so I can forward an accountant friend ?)

....So now there are 4 (or 5) choices
Being told ChatGPT was right? 
Or being told ChatGPT was wrong?
Or being told Perplexity was right? 
Or being told Perplexity was wrong?
Or none of the above ?

LHW99

lon_don said:

Ciprico said

I prefer the Chatgpt response to the exact same question....(Note final chapter)

What About the 2027 Reform?

The UK government has proposed removing the IHT exemption on pensions from 6 April 2027, but the key target is:

• Unused drawdown funds

• Uncrystallised pension pots

As of the latest proposals:

• Lifetime annuities are not impacted, because they are non-reclaimable products — i.e. once bought, there is no "capital value" to inherit.

• Any guarantee period payments (like your 30-year example) will likely remain outside the scope of IHT, since they are income streams, not lump sums or capital transfers.

However, legislation is still being finalized. HMRC guidance or detailed draft legislation expected before April 2027 may further clarify this point.

Well, I asked Perplexity again, and it doubles down on its response

https://www.perplexity.ai/search/uk-pension-please-detail-iht-r-dz09XuR.QdC8YIRji_cRzA

(Would you have a link to your ChatGPT response so I can forward an accountant friend ?)

....So now there are 4 (or 5) choices
Being told ChatGPT was right? 
Or being told ChatGPT was wrong?
Or being told Perplexity was right? 
Or being told Perplexity was wrong?
Or none of the above ?

When the legislation is still in course of preparation, I suspect the last option is the one.

Thinking of the outcomes of recent proposals on various financial matters.

lon_don

LHW99 said:

When the legislation is still in course of preparation, I suspect the last option is the one.

Thinking of the outcomes of recent proposals on various financial matters.

Yes, we are blessed to have R Reeves as Chancellor to put some excitement in our dull (financial) life.

MeteredOut

I don't know why anyone would believe anything that generative AI (which is, at the simplest level, a next-word predictor based on what the next word typically was in the mass of data fed into it) says when the data fed into that model does not (cumulatively) contain the answer to the question being asked.

It such cases, it's output is effectively a guess. It in no way understands what it has produced - its just a string of words.

Ask it where the FTSE100 will be in 5 years, and it'll give you an answer.

kempiejon

This preponderance of LLM ChatGPT, Grok et all output on the boards and the credence it seems to garner rather tragically answers a question I pose myself about actual intelligence.