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Savings and Investments thread
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This is my plan as well.Rob7Lee said:
Agreed, but I'd rather less was in the pension and more outside as no benefit only negative to keeping more in pension, then they are free to do with as they wish and no further income tax.Covered End said:
The pension can be transferred to the beneficiaries upon your death, via your expression of wishes and remain in SIPPs in their names with no tax to pay (apart from possible IHT).Rob7Lee said:
Something I read on the detail of pensions falling part of your estate from 2027 which I can't quite get my head around as to if I read it incorrectly (but think I have), would welcome golfies thoughts:bobmunro said:Rob7Lee said:
I agree, just changes my IHT planning. Will likely mean I retire earlier to give me a chance to spend it! Every cloud……bobmunro said:Rob7Lee said:
Looks like we'll have to spend spend spend!Covered End said:Pensions falling into IHT from 2027
Was always my plan anyway, so nothing changes.I have absolutely no issue in pension being included in an estate, it's an asset and no different to savings or property or shares. It's the change from not being included to being included that smarts.Just spend it ffs!
You've got until April 2027 to make any changes to your IHT planning.
1. We know from April 2027 your pension 'pot' forms part of your estate and therefore if your estate is big enough will attract 40% tax. Understood.
2. And this is the bit I wonder if I read incorrectly, post probate etc let's assume you had a £1m pension pot and therefore said pot is now £600k as 40% tax paid and you are over 75 on death. The beneficiary if they then ever draw on said pension pot has to pay income tax on it at their marginal rate. So it becomes double taxed, potentially your £1m becomes £360k (£1m - 40%, - 40%) if the beneficiary is a 40% tax payer. Whereas if the money was say in a savings account it would simply pass to the beneficiary after the 40% tax (so £600k) and no further tax would be payable.
That being the case, aside from the tax relief going into a pension it seems really not worth holding anything in a pension to pass down (other than to the wife!)...... am I missing something?
They could then drawdown when it is tax advantageous to them.
ie if a "child" was a higher rate tax payer, they could retire early and draw the inherited pension, thus paying no/less tax.
As I see it (all based on todays values, State pension, tax free allowance etc) I'm best to:
1. From whatever age I retire (or start drawdown which for me cannot be before 57) to draw down £50,270 per annum to use up my tax free amount and 20% band (12,570 tax free and 37,700 @ 20%). In addition to take the maximum tax free lump sum of 25%/£268,275.
2. From age 67 (my state pension age) to aged 75 to draw down £38,500 (plus £11,500 state pension).
3. From 75 no longer draw pension (see below as will have all been used) and then live off savings etc.
A pot of £1.12m (to allow for the maximum 25% Tax free) taking the above sums each year and remaining with on average growth that matches inflation (and therefore withdrawals increase inline with inflation) would last until I'm 75 (£5k left!).
Times that by 2 for my wife and I is more than ample.
So I think I'll reduce payments or stop paying into my pension and fully max out my wife's although in 5 years probably won't get her to the £1.12m but that's fine. SHe'll have to carry on working past 57
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Most people’s expression of wish would be their partner, like mine is, so I’m wondering now whether others should be included but I’d assume if they were it would dilute my wife’s share and I don’t want that.TelMc32 said:
I only, finally, put a will together recently. Your pension pot is not included as part of your will, rather you advise your pension provider of your “expression of wish”. The pension provider though is not bound by this, although they generally comply.LargeAddick said:
Is this correct? As far as I was aware when deceased your pension pot still formed part of your estate and would benefit the beneficiaries of your will as would any other monies.SE9toDA2 said:If the pension pot will now be part of the estate then you might want to review your will as previously the pension pot was not part of the estate and therefore not covered by a will where as from 2027 it will be.
At the moment my pension pot would pass to my wife as she is the named beneficiary on it but if she was already deceased then the monies in the pot would go to my estate to be shared out to the numerous beneficiaries in my will. At least that was how I thought it worked?
I wonder now whether this will change given the new rules and whether you will be allowed to formally include in your will.0 -
Correct and another dilemma.LargeAddick said:
Most people’s expression of wish would be their partner, like mine is, so I’m wondering now whether others should be included but I’d assume if they were it would dilute my wife’s share and I don’t want that.TelMc32 said:
I only, finally, put a will together recently. Your pension pot is not included as part of your will, rather you advise your pension provider of your “expression of wish”. The pension provider though is not bound by this, although they generally comply.LargeAddick said:
Is this correct? As far as I was aware when deceased your pension pot still formed part of your estate and would benefit the beneficiaries of your will as would any other monies.SE9toDA2 said:If the pension pot will now be part of the estate then you might want to review your will as previously the pension pot was not part of the estate and therefore not covered by a will where as from 2027 it will be.
At the moment my pension pot would pass to my wife as she is the named beneficiary on it but if she was already deceased then the monies in the pot would go to my estate to be shared out to the numerous beneficiaries in my will. At least that was how I thought it worked?
I wonder now whether this will change given the new rules and whether you will be allowed to formally include in your will.
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If you've other money and a house in the SE you're going to use up a lot if not all of your IHT allowance anyway. Post the budget changes mine's just being left to Mrs R7L.LargeAddick said:
Most people’s expression of wish would be their partner, like mine is, so I’m wondering now whether others should be included but I’d assume if they were it would dilute my wife’s share and I don’t want that.TelMc32 said:
I only, finally, put a will together recently. Your pension pot is not included as part of your will, rather you advise your pension provider of your “expression of wish”. The pension provider though is not bound by this, although they generally comply.LargeAddick said:
Is this correct? As far as I was aware when deceased your pension pot still formed part of your estate and would benefit the beneficiaries of your will as would any other monies.SE9toDA2 said:If the pension pot will now be part of the estate then you might want to review your will as previously the pension pot was not part of the estate and therefore not covered by a will where as from 2027 it will be.
At the moment my pension pot would pass to my wife as she is the named beneficiary on it but if she was already deceased then the monies in the pot would go to my estate to be shared out to the numerous beneficiaries in my will. At least that was how I thought it worked?
I wonder now whether this will change given the new rules and whether you will be allowed to formally include in your will.0 -
Covered End said:
This is my plan as well.Rob7Lee said:
Agreed, but I'd rather less was in the pension and more outside as no benefit only negative to keeping more in pension, then they are free to do with as they wish and no further income tax.Covered End said:
The pension can be transferred to the beneficiaries upon your death, via your expression of wishes and remain in SIPPs in their names with no tax to pay (apart from possible IHT).Rob7Lee said:
Something I read on the detail of pensions falling part of your estate from 2027 which I can't quite get my head around as to if I read it incorrectly (but think I have), would welcome golfies thoughts:bobmunro said:Rob7Lee said:
I agree, just changes my IHT planning. Will likely mean I retire earlier to give me a chance to spend it! Every cloud……bobmunro said:Rob7Lee said:
Looks like we'll have to spend spend spend!Covered End said:Pensions falling into IHT from 2027Was always my plan anyway, so nothing changes.I have absolutely no issue in pension being included in an estate, it's an asset and no different to savings or property or shares. It's the change from not being included to being included that smarts.Just spend it ffs!
You've got until April 2027 to make any changes to your IHT planning.
1. We know from April 2027 your pension 'pot' forms part of your estate and therefore if your estate is big enough will attract 40% tax. Understood.
2. And this is the bit I wonder if I read incorrectly, post probate etc let's assume you had a £1m pension pot and therefore said pot is now £600k as 40% tax paid and you are over 75 on death. The beneficiary if they then ever draw on said pension pot has to pay income tax on it at their marginal rate. So it becomes double taxed, potentially your £1m becomes £360k (£1m - 40%, - 40%) if the beneficiary is a 40% tax payer. Whereas if the money was say in a savings account it would simply pass to the beneficiary after the 40% tax (so £600k) and no further tax would be payable.
That being the case, aside from the tax relief going into a pension it seems really not worth holding anything in a pension to pass down (other than to the wife!)...... am I missing something?
They could then drawdown when it is tax advantageous to them.
ie if a "child" was a higher rate tax payer, they could retire early and draw the inherited pension, thus paying no/less tax.
As I see it (all based on todays values, State pension, tax free allowance etc) I'm best to:
1. From whatever age I retire (or start drawdown which for me cannot be before 57) to draw down £50,270 per annum to use up my tax free amount and 20% band (12,570 tax free and 37,700 @ 20%). In addition to take the maximum tax free lump sum of 25%/£268,275.
2. From age 67 (my state pension age) to aged 75 to draw down £38,500 (plus £11,500 state pension).
3. From 75 no longer draw pension (see below as will have all been used) and then live off savings etc.
A pot of £1.12m (to allow for the maximum 25% Tax free) taking the above sums each year and remaining with on average growth that matches inflation (and therefore withdrawals increase inline with inflation) would last until I'm 75 (£5k left!).
Times that by 2 for my wife and I is more than ample.
So I think I'll reduce payments or stop paying into my pension and fully max out my wife's although in 5 years probably won't get her to the £1.12m but that's fine. SHe'll have to carry on working past 57It's my plan, in operation now. All funds sit outside pension and therefore no further income tax to pay on drawings - just on the investment returns (which is primarily interest on cash savings as I divested pretty much everything non-cash years ago). I'm older than R7L so less years to worry about!On the point on wills - unless both spouses die at the same time it doesn't make sense other than to leave everything to the surviving spouse as it kicks the IHT can down the road and gives more time for the surviving spouse to spend anything that's left! I cannot stress enough the importance of making wills (if you haven't yet then do it now). Also Lasting Powers of Attorney.6 -
What do we think Trump winning will do? We do third party due diligence for major companies and have seen a bit of a slowdown in the last month as companies pause investment until they understand who wins etc.
I'm guessing there's a bit of pent up deals which would have triggered whoever won, but they needed to know more about who would actually be in charge0 -
Out of interest does anyone know when the consultation period between the government and the pension companies, is meant to be completed by? Want to arrange a meeting with my financial adviser, to see the best way forward as I’m 72, and I got to make a few important decision on inheritance tax before I’m 75.0
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Good for bitcoinHuskaris said:What do we think Trump winning will do? We do third party due diligence for major companies and have seen a bit of a slowdown in the last month as companies pause investment until they understand who wins etc.
I'm guessing there's a bit of pent up deals which would have triggered whoever won, but they needed to know more about who would actually be in charge 0 -
good for everything at the moment, pretty much. Interesting to see where markets go from here
1 - Sponsored links:
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My crypto has been flying since he took Georgia, up about 15%. No doubt be down 20 by the end of the day 😂BigRedEvil said:
Good for bitcoinHuskaris said:What do we think Trump winning will do? We do third party due diligence for major companies and have seen a bit of a slowdown in the last month as companies pause investment until they understand who wins etc.
I'm guessing there's a bit of pent up deals which would have triggered whoever won, but they needed to know more about who would actually be in charge0 -
Markets surging this morning which is nice1
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I have a pot of about 850k. I’m interested in your numbers …. Are you saying to draw down circa 50k per year runs you out of money around 75 years of age. I’m guessing you might be mid fifties now ?Rob7Lee said:
Agreed, but I'd rather less was in the pension and more outside as no benefit only negative to keeping more in pension, then they are free to do with as they wish and no further income tax.Covered End said:
The pension can be transferred to the beneficiaries upon your death, via your expression of wishes and remain in SIPPs in their names with no tax to pay (apart from possible IHT).Rob7Lee said:
Something I read on the detail of pensions falling part of your estate from 2027 which I can't quite get my head around as to if I read it incorrectly (but think I have), would welcome golfies thoughts:bobmunro said:Rob7Lee said:
I agree, just changes my IHT planning. Will likely mean I retire earlier to give me a chance to spend it! Every cloud……bobmunro said:Rob7Lee said:
Looks like we'll have to spend spend spend!Covered End said:Pensions falling into IHT from 2027Was always my plan anyway, so nothing changes.I have absolutely no issue in pension being included in an estate, it's an asset and no different to savings or property or shares. It's the change from not being included to being included that smarts.Just spend it ffs!
You've got until April 2027 to make any changes to your IHT planning.
1. We know from April 2027 your pension 'pot' forms part of your estate and therefore if your estate is big enough will attract 40% tax. Understood.
2. And this is the bit I wonder if I read incorrectly, post probate etc let's assume you had a £1m pension pot and therefore said pot is now £600k as 40% tax paid and you are over 75 on death. The beneficiary if they then ever draw on said pension pot has to pay income tax on it at their marginal rate. So it becomes double taxed, potentially your £1m becomes £360k (£1m - 40%, - 40%) if the beneficiary is a 40% tax payer. Whereas if the money was say in a savings account it would simply pass to the beneficiary after the 40% tax (so £600k) and no further tax would be payable.
That being the case, aside from the tax relief going into a pension it seems really not worth holding anything in a pension to pass down (other than to the wife!)...... am I missing something?
They could then drawdown when it is tax advantageous to them.
ie if a "child" was a higher rate tax payer, they could retire early and draw the inherited pension, thus paying no/less tax.
As I see it (all based on todays values, State pension, tax free allowance etc) I'm best to:
1. From whatever age I retire (or start drawdown which for me cannot be before 57) to draw down £50,270 per annum to use up my tax free amount and 20% band (12,570 tax free and 37,700 @ 20%). In addition to take the maximum tax free lump sum of 25%/£268,275.
2. From age 67 (my state pension age) to aged 75 to draw down £38,500 (plus £11,500 state pension).
3. From 75 no longer draw pension (see below as will have all been used) and then live off savings etc.
A pot of £1.12m (to allow for the maximum 25% Tax free) taking the above sums each year and remaining with on average growth that matches inflation (and therefore withdrawals increase inline with inflation) would last until I'm 75 (£5k left!).
Times that by 2 for my wife and I is more than ample.
So I think I'll reduce payments or stop paying into my pension and fully max out my wife's although in 5 years probably won't get her to the £1.12m but that's fine. SHe'll have to carry on working past 570 -
Will we get a 'Santa' rally this year?0
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There are plenty of "cash flow modelling" apps online if you want to work through different examples.holyjo said:
I have a pot of about 850k. I’m interested in your numbers …. Are you saying to draw down circa 50k per year runs you out of money around 75 years of age. I’m guessing you might be mid fifties now ?Rob7Lee said:
Agreed, but I'd rather less was in the pension and more outside as no benefit only negative to keeping more in pension, then they are free to do with as they wish and no further income tax.Covered End said:
The pension can be transferred to the beneficiaries upon your death, via your expression of wishes and remain in SIPPs in their names with no tax to pay (apart from possible IHT).Rob7Lee said:
Something I read on the detail of pensions falling part of your estate from 2027 which I can't quite get my head around as to if I read it incorrectly (but think I have), would welcome golfies thoughts:bobmunro said:Rob7Lee said:
I agree, just changes my IHT planning. Will likely mean I retire earlier to give me a chance to spend it! Every cloud……bobmunro said:Rob7Lee said:
Looks like we'll have to spend spend spend!Covered End said:Pensions falling into IHT from 2027Was always my plan anyway, so nothing changes.I have absolutely no issue in pension being included in an estate, it's an asset and no different to savings or property or shares. It's the change from not being included to being included that smarts.Just spend it ffs!
You've got until April 2027 to make any changes to your IHT planning.
1. We know from April 2027 your pension 'pot' forms part of your estate and therefore if your estate is big enough will attract 40% tax. Understood.
2. And this is the bit I wonder if I read incorrectly, post probate etc let's assume you had a £1m pension pot and therefore said pot is now £600k as 40% tax paid and you are over 75 on death. The beneficiary if they then ever draw on said pension pot has to pay income tax on it at their marginal rate. So it becomes double taxed, potentially your £1m becomes £360k (£1m - 40%, - 40%) if the beneficiary is a 40% tax payer. Whereas if the money was say in a savings account it would simply pass to the beneficiary after the 40% tax (so £600k) and no further tax would be payable.
That being the case, aside from the tax relief going into a pension it seems really not worth holding anything in a pension to pass down (other than to the wife!)...... am I missing something?
They could then drawdown when it is tax advantageous to them.
ie if a "child" was a higher rate tax payer, they could retire early and draw the inherited pension, thus paying no/less tax.
As I see it (all based on todays values, State pension, tax free allowance etc) I'm best to:
1. From whatever age I retire (or start drawdown which for me cannot be before 57) to draw down £50,270 per annum to use up my tax free amount and 20% band (12,570 tax free and 37,700 @ 20%). In addition to take the maximum tax free lump sum of 25%/£268,275.
2. From age 67 (my state pension age) to aged 75 to draw down £38,500 (plus £11,500 state pension).
3. From 75 no longer draw pension (see below as will have all been used) and then live off savings etc.
A pot of £1.12m (to allow for the maximum 25% Tax free) taking the above sums each year and remaining with on average growth that matches inflation (and therefore withdrawals increase inline with inflation) would last until I'm 75 (£5k left!).
Times that by 2 for my wife and I is more than ample.
So I think I'll reduce payments or stop paying into my pension and fully max out my wife's although in 5 years probably won't get her to the £1.12m but that's fine. SHe'll have to carry on working past 571 -
I had an update from my advisors after the budget. With regard to the consultation period, it was 12 weeks from 30th October. As far as I can understand it, it’s simply about the processes of reporting and collecting the pension values & IHT due which should, as far as the pension is concerned, be paid by the pension company.CharltonKerry said:Out of interest does anyone know when the consultation period between the government and the pension companies, is meant to be completed by? Want to arrange a meeting with my financial adviser, to see the best way forward as I’m 72, and I got to make a few important decision on inheritance tax before I’m 75.2 -
Thanks.TelMc32 said:
I had an update from my advisors after the budget. With regard to the consultation period, it was 12 weeks from 30th October. As far as I can understand it, it’s simply about the processes of reporting and collecting the pension values & IHT due which should, as far as the pension is concerned, be paid by the pension company.CharltonKerry said:Out of interest does anyone know when the consultation period between the government and the pension companies, is meant to be completed by? Want to arrange a meeting with my financial adviser, to see the best way forward as I’m 72, and I got to make a few important decision on inheritance tax before I’m 75.1 -
Yes, this.TelMc32 said:
I had an update from my advisors after the budget. With regard to the consultation period, it was 12 weeks from 30th October. As far as I can understand it, it’s simply about the processes of reporting and collecting the pension values & IHT due which should, as far as the pension is concerned, be paid by the pension company.CharltonKerry said:Out of interest does anyone know when the consultation period between the government and the pension companies, is meant to be completed by? Want to arrange a meeting with my financial adviser, to see the best way forward as I’m 72, and I got to make a few important decision on inheritance tax before I’m 75.
Although changes to pensions / IHT need to go through statute, with the large majority that Labour have I don't see anything being voted down or even amended.
I will add one thing to all these discussions. Pensions have been, and should always be seen as a tool to provide income in retirement. The fact that a few years ago the then Chancellor made it possible for a pension to be passed onto dependants should been seen as an added bonus. Before pensions "freedom" and the rise of Drawdown it was always the case that on retirement your pension was swapped for an annuity and your pension "pot" was then gone. Most people took the 25% tax free allowance before doing so and some then looked at using that money to produce further income if needs be.......in more tax efficient vehicles if the annuity was going to be taxed.
There are other ways you can pass money down to your children & grandchildren so maybe think of these vehicles as well as your pension.
Also bear in mind that one vehicle you can use is an Investment Bond - money in which is not classed as an asset when being assessed for Care costs.4 -
£50k for 10 years (from age 57) = £500kholyjo said:
I have a pot of about 850k. I’m interested in your numbers …. Are you saying to draw down circa 50k per year runs you out of money around 75 years of age. I’m guessing you might be mid fifties now ?Rob7Lee said:
Agreed, but I'd rather less was in the pension and more outside as no benefit only negative to keeping more in pension, then they are free to do with as they wish and no further income tax.Covered End said:
The pension can be transferred to the beneficiaries upon your death, via your expression of wishes and remain in SIPPs in their names with no tax to pay (apart from possible IHT).Rob7Lee said:
Something I read on the detail of pensions falling part of your estate from 2027 which I can't quite get my head around as to if I read it incorrectly (but think I have), would welcome golfies thoughts:bobmunro said:Rob7Lee said:
I agree, just changes my IHT planning. Will likely mean I retire earlier to give me a chance to spend it! Every cloud……bobmunro said:Rob7Lee said:
Looks like we'll have to spend spend spend!Covered End said:Pensions falling into IHT from 2027Was always my plan anyway, so nothing changes.I have absolutely no issue in pension being included in an estate, it's an asset and no different to savings or property or shares. It's the change from not being included to being included that smarts.Just spend it ffs!
You've got until April 2027 to make any changes to your IHT planning.
1. We know from April 2027 your pension 'pot' forms part of your estate and therefore if your estate is big enough will attract 40% tax. Understood.
2. And this is the bit I wonder if I read incorrectly, post probate etc let's assume you had a £1m pension pot and therefore said pot is now £600k as 40% tax paid and you are over 75 on death. The beneficiary if they then ever draw on said pension pot has to pay income tax on it at their marginal rate. So it becomes double taxed, potentially your £1m becomes £360k (£1m - 40%, - 40%) if the beneficiary is a 40% tax payer. Whereas if the money was say in a savings account it would simply pass to the beneficiary after the 40% tax (so £600k) and no further tax would be payable.
That being the case, aside from the tax relief going into a pension it seems really not worth holding anything in a pension to pass down (other than to the wife!)...... am I missing something?
They could then drawdown when it is tax advantageous to them.
ie if a "child" was a higher rate tax payer, they could retire early and draw the inherited pension, thus paying no/less tax.
As I see it (all based on todays values, State pension, tax free allowance etc) I'm best to:
1. From whatever age I retire (or start drawdown which for me cannot be before 57) to draw down £50,270 per annum to use up my tax free amount and 20% band (12,570 tax free and 37,700 @ 20%). In addition to take the maximum tax free lump sum of 25%/£268,275.
2. From age 67 (my state pension age) to aged 75 to draw down £38,500 (plus £11,500 state pension).
3. From 75 no longer draw pension (see below as will have all been used) and then live off savings etc.
A pot of £1.12m (to allow for the maximum 25% Tax free) taking the above sums each year and remaining with on average growth that matches inflation (and therefore withdrawals increase inline with inflation) would last until I'm 75 (£5k left!).
Times that by 2 for my wife and I is more than ample.
So I think I'll reduce payments or stop paying into my pension and fully max out my wife's although in 5 years probably won't get her to the £1.12m but that's fine. SHe'll have to carry on working past 57
£38.5k from state pension age to 75. 8-9 years = £345k
total plus around 268k tax free (25%) uses up most of the £1.1m
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Looks like worldwide markets are now having a rethink re Trump.
FTSE ends lower.....but by just 5 points
Germany ends lower......but by 1.1%
France ends lower by 0.67%
Spain lower by almost 2.5%......but that is probably more due to the big rebuilding costs needed
But the US powers upwards.
Dow Jones up 3.25% & smashing through its all time high.
S&P500 up 2% and again at an all time high.4 - Sponsored links:
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FTSE was up at least 1.3% this morning. Germany & France were both positive this morning too. Hard to see what the result means yet until he starts actually implementing policy. I’m sure Elon will be delighted if massive tariffs hit BYD and other foreign electric car imports to the US - Tesla up over 13% today and I’m sure that’s made him back his outlay over the last few weeks.1
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When will the inevitable booming US deficit start to worry the markets; Trump is like Truss on steroids (which in itself is a horrific image!)2
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Tempted to take some profits on a couple of things and possibly buy back in lower down0
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To add onto the mix, both the BOE & the Federal Reserve are due to announce any rate reductions tomorrow. Since their last meetings the economic situation has changed with both economies expecting inflation to start to rise again over the next few years.
Might not be so many rate reductions that the markets were anticipating during 2025 & 2026.2 -
Was always going to be the case. He’s talked about penal tariffs for Europe. That’s why I switched some out of UK to US (also pre UK budget)golfaddick said:Looks like worldwide markets are now having a rethink re Trump.
FTSE ends lower.....but by just 5 points
Germany ends lower......but by 1.1%
France ends lower by 0.67%
Spain lower by almost 2.5%......but that is probably more due to the big rebuilding costs needed
But the US powers upwards.
Dow Jones up 3.25% & smashing through its all time high.
S&P500 up 2% and again at an all time high.1 -
There also the factor that a lot of profits of UK companies are $ based. Quite common for UK markets to fall when the $ rises and vice versa.Rob7Lee said:
Was always going to be the case. He’s talked about penal tariffs for Europe. That’s why I switched some out of UK to US (also pre UK budget)golfaddick said:Looks like worldwide markets are now having a rethink re Trump.
FTSE ends lower.....but by just 5 points
Germany ends lower......but by 1.1%
France ends lower by 0.67%
Spain lower by almost 2.5%......but that is probably more due to the big rebuilding costs needed
But the US powers upwards.
Dow Jones up 3.25% & smashing through its all time high.
S&P500 up 2% and again at an all time high.1 -
That's been my plan and I cashed in the lump sum last week. I haven't put anything into my pension for 10 years and just been topping up my wife's. I'm still not planning to draw down on mine just yet. I have a redundancy cheque from May that will last another few months and still have a few quid in the company, and still expect to take some contracts here and there.Rob7Lee said:
Agreed, but I'd rather less was in the pension and more outside as no benefit only negative to keeping more in pension, then they are free to do with as they wish and no further income tax.Covered End said:
The pension can be transferred to the beneficiaries upon your death, via your expression of wishes and remain in SIPPs in their names with no tax to pay (apart from possible IHT).Rob7Lee said:
Something I read on the detail of pensions falling part of your estate from 2027 which I can't quite get my head around as to if I read it incorrectly (but think I have), would welcome golfies thoughts:bobmunro said:Rob7Lee said:
I agree, just changes my IHT planning. Will likely mean I retire earlier to give me a chance to spend it! Every cloud……bobmunro said:Rob7Lee said:
Looks like we'll have to spend spend spend!Covered End said:Pensions falling into IHT from 2027Was always my plan anyway, so nothing changes.I have absolutely no issue in pension being included in an estate, it's an asset and no different to savings or property or shares. It's the change from not being included to being included that smarts.Just spend it ffs!
You've got until April 2027 to make any changes to your IHT planning.
1. We know from April 2027 your pension 'pot' forms part of your estate and therefore if your estate is big enough will attract 40% tax. Understood.
2. And this is the bit I wonder if I read incorrectly, post probate etc let's assume you had a £1m pension pot and therefore said pot is now £600k as 40% tax paid and you are over 75 on death. The beneficiary if they then ever draw on said pension pot has to pay income tax on it at their marginal rate. So it becomes double taxed, potentially your £1m becomes £360k (£1m - 40%, - 40%) if the beneficiary is a 40% tax payer. Whereas if the money was say in a savings account it would simply pass to the beneficiary after the 40% tax (so £600k) and no further tax would be payable.
That being the case, aside from the tax relief going into a pension it seems really not worth holding anything in a pension to pass down (other than to the wife!)...... am I missing something?
They could then drawdown when it is tax advantageous to them.
ie if a "child" was a higher rate tax payer, they could retire early and draw the inherited pension, thus paying no/less tax.
As I see it (all based on todays values, State pension, tax free allowance etc) I'm best to:
1. From whatever age I retire (or start drawdown which for me cannot be before 57) to draw down £50,270 per annum to use up my tax free amount and 20% band (12,570 tax free and 37,700 @ 20%). In addition to take the maximum tax free lump sum of 25%/£268,275.
2. From age 67 (my state pension age) to aged 75 to draw down £38,500 (plus £11,500 state pension).
3. From 75 no longer draw pension (see below as will have all been used) and then live off savings etc.
A pot of £1.12m (to allow for the maximum 25% Tax free) taking the above sums each year and remaining with on average growth that matches inflation (and therefore withdrawals increase inline with inflation) would last until I'm 75 (£5k left!).
Times that by 2 for my wife and I is more than ample.
So I think I'll reduce payments or stop paying into my pension and fully max out my wife's although in 5 years probably won't get her to the £1.12m but that's fine. SHe'll have to carry on working past 57
As Golfie says, there's quite a few cash modellers out there but you can relatively easily model things in a spreadsheet.
In Excel, have a look for the FV (Future Value) function. You can do a simple model to show how much your pot could grow and then another one that shows how long it would last. It allows you to put in a starting value, a regular (constant) cash contribution (or withdrawal), and an interest rate (growth, can be adjusted for expected inflation) and then you can forecast the 'future value' over a series of dates.
It works exactly the same way for mortgages.
So, I have a whole bunch of rows of various pots and assets (no mortgage now!) and they all have different returns (rates) and that gives me an idea of future value.
If you want to do anything more sophisticated than constant payments in or out, then you'd have to schedule out discrete payments/withdrawals over time but I think that's OTT for most needs, given future returns aren't guaranteed.0 -
This morning when we woke up my wife and I were wondering how the markets would react to Trump's win. I checked at 6 pm and our combined portfolios had increased by £90K from this morning's value.golfaddick said:Looks like worldwide markets are now having a rethink re Trump.
FTSE ends lower.....but by just 5 points
Germany ends lower......but by 1.1%
France ends lower by 0.67%
Spain lower by almost 2.5%......but that is probably more due to the big rebuilding costs needed
But the US powers upwards.
Dow Jones up 3.25% & smashing through its all time high.
S&P500 up 2% and again at an all time high.6 -
Yeah, just checked my pension and it grew 2.65% yesterdayrobinofottershaw said:
This morning when we woke up my wife and I were wondering how the markets would react to Trump's win. I checked at 6 pm and our combined portfolios had increased by £90K from this morning's value.golfaddick said:Looks like worldwide markets are now having a rethink re Trump.
FTSE ends lower.....but by just 5 points
Germany ends lower......but by 1.1%
France ends lower by 0.67%
Spain lower by almost 2.5%......but that is probably more due to the big rebuilding costs needed
But the US powers upwards.
Dow Jones up 3.25% & smashing through its all time high.
S&P500 up 2% and again at an all time high. 0
