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...

In what way does that invalidate my argument, Pausing ?

I also find frankly bizarre this notion that the government should feel entitled to confiscate huge chunks of people's savings (pension pots are savings!) because it's not fair on others that they should be allowed to do what they like with that money or pass it on to their families after death.

In my view the tax system is the core of a social contract in which everyone agrees to give up some of their earnings, in proportion according to how much they have, to contribute to a common social pool that pays for stuff that's in the common good such as schools, roads and support for those that can't support themselves.

In this view the tax system is used to appropriate money from people who have worked and saved it, not just to spend it for the common good but for ideological reasons, ie because the system believes they shouldn't be allowed to keep it in case it's unfair on others.

To me that's a total perversion of the basic social contract

"In what way does that invalidate my argument"

Depends whether your argument was pragmatic or completely idealogical.

If you have an ideology that there should never be inheritance taxes, then of course the actual numbers don't matter.

If it's pragmatic, then the numbers matter a lot.

What about money that hasn't been worked for and saved, but was itself inherited or unearned?

Just throwing this one in pot. DC has announced that Tory government will raise income TAX threshold to £12,500 apparently giving 30 million people a TAX cut also they have decided to raise the 40p rate to start at £50k from £42K

But my argument was that death taxes on pensions penalise the aspirational upper working and middle classes, not the super-rich that so many on MN hate. I think it's fair to presume that the kind of people who scrape and save hope to leave something behind not just for their descendants under 23, or for their surviving spouse, but for whoever their surviving loved ones are. Hence the exceptions you quote on death taxes are irrelevant to my point.

My further point was about the ideological defence of a death tax on pension pots, ie the belief that allowing people to determine what happens, after their death, to money they earned and saved, is unfair on others who couldn't or didn't save themselves and therefore feeling entitled to confiscate huge chunks of that money. My view is that this is an abuse of the basic contract we all agree to when contributing taxes for the common good.

Pension pots can come from all sorts of places.

They can be entirely provided by an employer as part of an earned package, a home for lump sums, or a place to stash your unearned income from the shares gt-granddad left you.

The first and last examples are taking advantage of the fact that pension contributions aren't taxed.

If that untaxed income can then be handed down untaxed, and to non-dependents at that, it provides a vehicle for accumulation of unearned wealth.

In what way would taxes on pension pots after death not affect the super-rich?

"scrape and save hope to leave something behind not just for their descendants under 23, or for their surviving spouse, but for whoever their surviving loved ones are."

So, leave it to them. Just not in the pension.

There's austerity for yah, LittlePeaPod.

Pausing - the super rich don't tend to have pension pots. As someone else upthread said, they have assets instead.

They might not rely on their pension pot.

But pensions are just another financial vehicle. If they're attractive, people with money will use them. And the removal of tax, plus the removal of the requirement to purchase an annuity, will change how attractive they are.

So you're happy to advocate for swingeing taxes on a saving mechanism favoured by the squeezed middle, on the speculative basis that changes in drawdown rules might make them more attractive to the wealthy

I'm happy to keep 55% tax on the unspent part of a previously untaxed pension pot, provided this only occurs when there is no surviving spouse or dependent children, when over on another thread someone is busy explaining that of course nurses' wages must be frozen because there isn't enough money to pay them.

And the nurses are the sodding squeezed middle.

Not only the nurses........

Agree with Pausing. This just isn't a priority for having money thrown at it to me. If I die early and my husband is dead and my kids are over 23 (they should be in their 30s by the time I'm pensionable at this rate) then if they get 45% of my pension that should still be a bonus as they should be capable of earning their own money. I'd rather it went on benefits or raising the rate at which people start being taxed, or the NHS or education.

ITA with your posts, Manatee.

I agree, the very/super wealthy will not be wholly reliant on pension pots.

Current rules are £1.5m total pot dropping to £1.25m from next year. This means if your pot goes above the rates then the extra will be subject to tax. Which is a problem if you are on or near the threshold. This sounds like a fortune but didn't exactly buy much on the old annuities market.

Under the old rules pension companies did very well out of (crappy) annuities and claw backs of unused pension monies.

I'm in favour of not being forced to buy a complicated/crappy financial products (annuity) and being able to pass on unused monies - my money.

Government will still collect tax. Pension/insurance companies will loose out. I think they've had a very easy ride up till now. We will have more choice with our pensions and how we choose to spend them.

It's not unused money though. Pensions work on an average life expectancy. The people who die young get less pension and those who live longer more. If we give more money to those dying younger then the money will need to come from somewhere else to support those who live longer. if you want to put money away and get a fixed amount at the end then you don't get a pension you get a savings account.

Is it not more in order to encourage people to put in to pensions (considering those who are paying ni now aged under 40 are unlikely to get any state pension ) rather than savings etc?