IHT changes!

RogerPensionGuy

Marcon said:

RogerPensionGuy said:

OldScientist said:

RogerPensionGuy said:

Maybe the IHT rules will change for DC pension pots as well, with so many people's plans wrecked, it would be reasonable to hope more changes will occur. 

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BBC News - Government waters down farm inheritance tax plan - BBC News

https://www.bbc.co.uk/news/articles/c8e9n3y28g1o?app-referrer=deep-link

In general*, offspring should be standing on their own two feet and not be relying on an inheritance and therefore out of the just over 30000 estates that paid IHT in 2022, it is unlikely that more than a few plans would have been wrecked.

My point is many people had augmented their plans on DC pots not getting involved with IHT as per the rules.

But the DC pot IHT rules were very changed. 

Makes planning very hard. 

I still find strange the 375K IHT or 500K for property owners a strange quirk, how unfair for the many that pay rent.

Farmers IHT is 20% but others is 40% is just another quirk. 

I agree people should stand on their own feet, but IHT rules should be stable and balanced for all.

Inheritance wealth transfer will continue to have many winners and loosers. 

That's the nature of life - or in this case, death. Paying out DC pots free of IHT never made much sense, given that pensions are (still) intended to provide a tax-efficient way of saving for the pot-owner's old age, not a mechanism for avoiding IHT and passing on wealth to the next generation.

It'll be interesting to see how many claims there are against financial advisers who recommended transferring out of a DB scheme primarily because the member wanted to be able to leave the unused part of the pot to their offspring or other parties, and failed to put a caveat in their report warning that legislation is never cast in stone.

Yes it will be interesting how many claims will be getting tried down road. 

However Advisors generally work with the rules as they stand at a point in time and trying to 2nd guess where the goalposts will be next year or decades away is not simple.

It's not just transfers from DB to DC schemes, people have made irreversible financial decisions based on the current IHT rules, pensions and farming are just some of them. 

Maybe I shouldn't of bothered working for 43/46 years and being bothered about moving goalposts(thankfully I'm not personally bothered) maybe I should of chilled out more, but I can always go back to work and pay more tax by the sounds of it. 

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https://www.gbnews.com/money/rachel-reeves-tax-breaks-pensioners

Andy_L

leosayer said:

Bringing pension pots into the scope of IHT has plenty of scope to generate negative headlines for future (if not this) government given that it could be seen as a "tax on dying young" as well as an increase in unfairness between public and private sector employees.

If parents are unlucky enough to die after having accumulated a decent pot but before drawing / annuitising then their dependents could lose up to 40% of that pot. Such tax doesn't apply to defined benefit ie.public sector  pensions.

Those caught in such a trap will only increase with the IHT allowance being frozen since 2009.

Adult children generally get nothing from a dead parents public sector DB pension, so effectively 100% IHT

Albermarle

Andy_L said:

leosayer said:

Bringing pension pots into the scope of IHT has plenty of scope to generate negative headlines for future (if not this) government given that it could be seen as a "tax on dying young" as well as an increase in unfairness between public and private sector employees.

If parents are unlucky enough to die after having accumulated a decent pot but before drawing / annuitising then their dependents could lose up to 40% of that pot. Such tax doesn't apply to defined benefit ie.public sector  pensions.

Those caught in such a trap will only increase with the IHT allowance being frozen since 2009.

Adult children generally get nothing from a dead parents public sector DB pension, so effectively 100% IHT

Good point, as is often said on these forums - Better to have 60% of something, than 100% of nothing.