IHT Planning

Aretnap

Unlikely to engender any sympathy from the masses, but when you stack that on top of the base IHT and then the marginal income tax rate for a beneficiary on withdrawing that pension… Well, I haven't done the sums, but I'm guessing it could end up being above an effective 80% tax in certain cases.

Not sure how you'd get to 80%. A £100K pot might be subject to IHT at 40%, effectively reducing it to £60K. Even if the withdrawals were subject to additional rate tax (45%) that still leaves £33K after tax: an effective tax rate of 67%.

And of course, if the beneficiary ends up paying additional rate tax on withdrawals from an inherited pension, that must fall into the category of either "dreadful financial planning" or "very nice problem to have".

artyboy

https://forums.moneysavingexpert.com/discussion/comment/81996110#Comment_81996110

You're ignoring the effective 60% IHT rate that can apply as a result of RNRB tapering, and which was the whole point of my post. So yes, I think it can get to about 80%, although I agree that any half decent planning should mitigate that.