Taking taxable income only from SIPP to maximise IHT protection
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Albermarle wrote: »Whichever route you take , you can 'adjust' the possible growth rates in the SIPP ( or ISA) by changing the risk/reward balance in the investment portfolio. Not a lot of point going for a high risk/high potential growth investment strategy in a pension if you are in the LTA limit area. Maybe not even the usual medium risk 50:50 ( +/- 10%) strategy is ideal and something safer still can make sense ?
Quite agree, in practise this part of portfolio likely to be mainly in cash and defensive assets returning a lot less than 5%Depends on the circumstances and preferences. Some might invest in VCTs to mitigate the income tax while alive and make potentially exempt transfer gifts while alive. Either way can work.
The VCT then gift approach has lower likely total tax cost if death is at 75 or older because then the pension money is taxable as income for the beneficiary when withdrawn, while a PET given 7 years before death is tax free for the recipient and estate. But babies have their own income tax personal allowance and withdrawing 12.5k for 18 years and using it for the benefit of the child, which includes food, clothing and such, can be a viable alternative tax reduction approach.
Although some assets can be protected from IHT via PETs clearly this is not guaranteed: the point I am making is that, if a PCLS is expected to be part of estate that will eventually be subject to IHT if retained outside the SIPP, then IHT tax considerations favour foregoing the apparent benefit of taking it out of the SIPP tax-free.0 -
Perhaps. Some will have a preference for being alive to see the benefit of the money. Either way is fine, just do whatever fits the desires best.caveman8006 wrote: »the point I am making is that, if a PCLS is expected to be part of estate that will eventually be subject to IHT if retained outside the SIPP, then IHT tax considerations favour foregoing the apparent benefit of taking it out of the SIPP tax-free.0
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