What happens at 75?

Moonwolf

OK, I am only 60 so have a while to go but can I ask about the fine print at 75?

Although I am in drawdown I still pay £240 (net) into my pension.

I understand that I will no longer get tax relief from 75 but is that from my 75th birthday, from the tax year before I reach my 75th or the tax year after I reach my 75th.

I understand that most people take any remaining TFLS at 75 because if you die before 75 your partner gets your whole pension tax free, (and I assume this is date of death before your date of birth) on or after your 75th birthday they pay tax at their marginal rate when they take it out so having the TFLS out in savings already reduces the tax they pay.

For other relatives, when IHT comes in, I assume it is neutral, it won’t matter if it is in the pension or cash.

Tax benefits for your partner aside, or if you don’t have a partner, if you are allowing the tax free cash to grow and/or using it as part of flexible drawdown or UFPLS to keep your income below a tax threshold, can you continue to do this after 75. Obviously before pension freedoms you would have had to take an annuity by then.

SacredStephan

You will get tax relief on a personal pension contribution made before your 75th birthday.

Marcon

I understand that most people take any remaining TFLS at 75 because if you die before 75 your partner gets your whole pension tax free

I'm afraid that understanding is a bit wide of the mark:

• a lot of people take the whole of their TFLS at a much younger age than 75 for the simple reason they need the cash. Others are willing to take the risk(!) of living beyond age 75, either because it suits their financial planning, or because they aren't bothered about the tax consequences
• your partner doesn't necessarily get the whole pension tax free if you die before age 75. You may have left an expression of wish form leaving some to (say) your children, so they would only get part - or possibly none - of the pot; or there may be tax payable in certain circumstances:

Source: https://adviser.royallondon.com/technical-central/pensions/death-benefits/pension-death-benefits/

DRS1

For other relatives, when IHT comes in, I assume it is neutral, it won’t matter if it is in the pension or cash.

I may be being a bit slow but we are assuming you die after age 75 here, aren't we? So whether you take the money out of the pension (as TFLS) or leave it in may be neutral from an IHT point of view but what about the income tax? The money they draw from the pension will be taxed at their relevant income tax rates but the cash inherited from the estate will not have that income tax charge. Isn't that right? So doesn't it become a case of can you draw money out of the pension at a lower income tax rate than your other relatives would pay after they inherit it and start to draw down pension - obviously yes if it is a TFLS?

Tax benefits for your partner aside, or if you don’t have a partner, if you are allowing the tax free cash to grow and/or using it as part of flexible drawdown or UFPLS to keep your income below a tax threshold, can you continue to do this after 75. Obviously before pension freedoms you would have had to take an annuity by then.

I wonder if this is going to be one of those cases where the law allows one thing and the pension you are in doesn't - eg because it is an old one predating pension freedoms or whatever. That may be worth asking the pension provider and if you get the wrong answer then a transfer to a more modern scheme may be the solution. You'd think it shouldn't be a massively difficult change to make to a computer system but who knows.

Moonwolf

https://forums.moneysavingexpert.com/discussion/comment/82184354#Comment_82184354

Who could drawdown from my pension apart from my wedded spouse? We don’t have our own children although I do have an adult, not adopted stepdaughter. My spouse is quite a lot older than me.

I’m already using flexible drawdown and I’m drawing to the higher rate limit. My policy doesn’t support UFPLS but it does support UFLPS style flexible drawdown which I am happy with and have discussed on here before.

Moonwolf

https://forums.moneysavingexpert.com/discussion/comment/82184239#Comment_82184239

So simply I may want to make a lump sum payment before my birthday to ensure I hit the £2880.

Marcon

https://forums.moneysavingexpert.com/discussion/comment/82184437#Comment_82184437

You don't have to be married/civil partnered to inherit a pension pot, so the answer is 'normally whoever inherits it'.

https://forums.moneysavingexpert.com/discussion/comment/82184443#Comment_82184443

If you want to get full tax relief, you need to make the payment at any time up to the day before your 75th birthday.

I think you might have quite a few misconceptions/misunderstandings (along with about 95% of the population!), so perhaps a free appointment with PensionWise could help to ensure you have a clearer understanding of this horribly complex topic: https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise

DRS1

https://forums.moneysavingexpert.com/discussion/comment/82184437#Comment_82184437

You were the one who mentioned "other relatives" so I think it was fair to assume you had some.

Still if we are talking about a DC scheme the class of beneficiaries which you can nominate to receive the pension when you die will be very wide and would surely include your step daughter. It can also include a charity if you felt that way inclined.

Moonwolf

https://forums.moneysavingexpert.com/discussion/comment/82184577#Comment_82184577

I do have other relatives, half sisters, nephews and nieces but I’m not making a big effort to plan for them. I assumed my partner, who is a lot older than me, would need, if I did die first, would want and need to take an income from what was left of my DC. The questions were actually prompted by me writing out the list of “II die this is where everything is, account numbers, links to organisations bereavement teams, etc.”

If I live the longer, everything goes to my stepdaughter but she is quite close in age to me, has other people much older than me who will include her in their inheritance and will probably be sorted by then.

The big error is I assumed that for anyone other than a spouse or child, the DC cash would pass on but it would cease to be a pension, not sure why I thought this. The fact it doesn’t, is interesting but does not have any impact on my planning, it will be a windfall for them, they can sort it out.