to say I dont understand the new tory policy...how can pension pots be handed down once you die?

[ssd]

I have just seen on the news the tories are cutting the tax on pension pots handed down to children

can anyone explain this, how it works?

I dont have a pension so am a bit thick here...

And the whole point about inherited wealth is it's NOT the person doing the working hard and sacrificing who benefits...

The only people I know who inherited pensions had parents who died when their children were under 23. It was quite important to them to provide financially for their young adult children simply because they were aware they couldn't provide moral or emotional support after their death :(
I don't know anybody who inherited a pension when older. I wonder if that's cause they're usually used up?

Yep, I'm guessing that still having a substantial pension pot after the age of 75 is the marker of having a bloomin' huge one in the first place.

With, as pointed out earlier, 40% tax relief on the money paid into it, at current rates.

aj unless you're very unusual it will also be the result of employer contributions and tax relief (aka contributions from the state).

Agree with babycham, pausing.

There's not really anything to understand, it's a Tory policy before a general election. If you're likely to vote Tory, it could benefit you. If not, it will be paid for by you ;)

Inheritance tax is NOT a tax on the dead, it's a tax on the transfer of unearned income, payable by the beneficiary.

Inheritance tax is very much a tax on the dead. That's why it's paid by an estate, rather than by the individual beneficiary. If it was only paid by individuals then a rich person could leave a small amount to many people, and as long as each person gets less than the Inheritance tax threshold, then no tax would be payable. But it doesn't work like that, the tax comes straight out if what one dead person has left before anyone else sees a penny.

WooWooOwl - wish I could 'like' that - this is why it's seen as so unfair. Changing it from the person who dies paying it to the person who recieves the money would take away a lot of the 'planning' to avoid it. That would be seen as a lot fairer.

They are the party of self-interest, so this is entirely expected.

Tabby
It's actually the result of DH and I making decisions about our future financial security, and spending less in the course of our everyday life in order to do so.
No-one has contributed to my pension pot except for me - it's our company, so no lovely big company hierarchy looking after my interests sadly!

People who retire around 65 can expect on average to live another 20 years, so some will live even longer, and life expectancy is improving all the time.

Annuities are being scrapped so that moves us away from the insurance idea - sharing the risk of living too long and money running out. Now the Tories want to take less in tax from those who die with pension funds.

So how the heck is society at large going to fund the basic needs and care of those of now in our fifties (and younger) when we reach our eighties and nineties? There's going to be an awful lot of us. No wonder it's called the demographic timebomb!

Inheritance tax is very much a tax on the dead. That's why it's paid by an estate, rather than by the individual beneficiary

This is simply wrong - it is only collected from the estate for ease of collection (and minimising evasion). IHT is what is known as a transfer tax - ie. a tax on the transfer of money between owners, as is capital gains tax. It was formerly known as Capital Transfer Tax and was renamed inheritance tax as a political manoeuvre under the Thatcher government in 1986, but it is still legally a transfer tax (eg. a tax on the passing of money or property from one person (or entity) to another). It is a tax on the transfer of money to the beneficiary, NOT on the deceased. I'm afraid you're just wrong on that one!

Of course IHT is a death tax - it's deducted from the estate of the deceased when probate is being assessed.

No, this is done for administrative reasons - see above.

In my experience, capital gains tax has been paid after the sum has been received by an individual. That is what makes it different to inheritance tax, because there the tax is paid before the individual has received the sum.

But IHT is a transfer tax. The method of collection doesn't make the difference here, because that's not what's being taxed.

The method of collection makes all the difference IMO.

CGT is paid in relation to money people actually receive, not money that people could potentially receive 10-20% of.

Call IHT a transfer tax if you like, it won't make it the same as CGT.

It seemed weird as a tax cut to me and just cements the Tories as a party for people wealthy enough to understand wtf he is talking about and worry about not being left a fortune. I think pensions should be for the person paying into them with a small amount going to your spouse/ whoever you nominate if you die prematurely. If you want people who haven't paid into your pension to benefit from your death you get a life insurance policy.
They should have reduced tax on something that normal people care about, or left the taxes alone and not cut back on benefits.

I have an NHS pension I,m not a manager just a mere staff nurse I can claim my pension At 63 ish after forty years service can claim it earlier but would lose a lot what would happen if I as to die at 65 would my husband/kids get my pension? If I was to die now ie in service my husband would get about 70 grand lump sum And about 9 grand a year apparently .

2rebecca
It not a case of being wealthy enough to understand, it's a case of being interested enough to find out!

agree 2rebecca

I find it odd that people are automatically assuming that those with pension pots are wealthy. Actually wealthy people tend to have assets, not pension pots - property, shares, art etc. Those whose main source of retirement cash is a pension are more likely to be the struggling middle and upper working classes who are paid salary rather than dividends and find that the most cost-effective and tax efficient way to put away a bit at a time for retirement.

Hence most people with pensions have worked and scraped to salt the money away. It's effectively savings in a form that the government makes very tax-efficient in order to encourage people to adopt it. And yet everyone on this thread is saying that because all these people have saved in the form of a pension rather than a bank account the government should feel entitled to appropriate their savings when they die rather than let their children inherit it.

Loads of people work really hard in order to ensure their children have a more comforrtable future than they do. Those are the people the Tories are targeting with this policy: aspirational people. Not the super-rich. The point of the policy is surely to incentivise people to save for retirement and for their children's futures.

Those saying it would be more meritocratic to confiscate the savings of dead people rather than allowing their families to benefit from it are ignoring the impetus to social mobility from people who aspire for their children, not just for themselves. Think of all the first-generation immigrants to the country who work ridiculous hours in menial jobs so their children could become bankers, lawyers, accountants. Do we really want to disincentivise middle-class aspiration? Inheritance is part of that aspiration. The argument about using death taxes to enforce meritocracy is bullshit as the seriously wealthy would find plenty of ways either to avoid death duties or give their kids a leg up while still alive. Death taxes on pension pots penalise the aspirational lower middle classes, not the wealthy.

People are just using it as something to kick the Tories with, rather than finding out the facts and thinking about it logically.

Can you imagine the uproar if the Govt. emptied your building society account when you died!

Thanks for speaking for me, aj, but I'm judging it for what it is, not who's doing it (though the Who doesn't come as a surprise).

This is the removal of a form of inheritance tax, which will consolidate inherited wealth.

It is being done at a time of "austerity" when the government claims that cuts to essential services are necessary due to lack of public funds.

Have you looked at the actual thresholds, OTheHugeManatee?

The 55% DID NOT AFFECT:

• widows and widowers
• children under 23
• any case where the person dies under 75.

So the only time this money can be taxed at 55% is when:

• the person lives to more than 75
• their spouse has already died
• their children have long grown up and left home and indeed left university
• there is money left in this pension pot

This tax was only on the pension pot - money on which NO income tax was paid in the first place.

Not on the whole estate.