No changes for pensions on the Budget?

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I didn't hear anything on pensions. Did nothing happen? No chsnge? No NI on pensions or changes to lump sums tax free amount?

The only change I could make out was that to IHT - no longer exempt. Otherwise nothing. I was expecting something, but no.

Can't see any change in IHT just the tax free threshold hasn't been increased.

Ignore my message above. I see the thread relates to pensions and IHT ...I should read more carefully. !!

There isn't anything other than the tax free threshold not changing. My DH retires early next year and has been watching keenly.

Inherited pensions will be subject to IHT from 2027- they previously weren't.

Xpost!

This change makes complete sense to me.

It will change financial planning though as lots of wealthy people never touch their pension pots due to the current IHT rules and fund income in other ways. They may decide to change the way the do things now and possibly start gifting some money to kids now.

The pension inheritance thing confuses me. Can all pensions be inherited or only certain schemes?

So the 25% tax free lump sum at 55 remains?

Defined Contribution (I.e private) pension pots could be left to a beneficiary free of IHT. Though if the pension holder died after the age of 75 the amount would be subject to income tax for the beneficiaries.

Defined Benefit pensions (typically public sector) will have specific conditions about ongoing payments to a spouse or dependent children, but apart from that payments typically stop on the death of the pensioner.

@FrequentlyAskedQuestion thank you, and do the changes means the pension gets included in the estate with the 1m exception or are they taxed separately?

Which was set to change to 57 in a couple of years anyway, but no change to that announced.

(You can also opt to not take a lump sum out if your pension, and you get 25% of it tax free on your draw down amount. If you use your tax free allowance in the lump sum you don’t then get the 25% tax allowance on your draw down payments)

As far as I can see the remaining pension pot will simply be added to the rest of the estate along with any other assets or savings.

@FrequentlyAskedQuestion thank you.

Hmmmm, which is interesting because this could work out less well for the gvt…but disclaimer, I am not an accountant or even very financially literate.

BUT:
My understanding was that if someone died after the age of 75 their pension (if the right sort) would be given to the beneficiariary but subject to income tax.

Now that the pension is included in the estate, the gvt will only get a tax payment if the estate as a whole is subject to IHT. Which the vast majority are not. Probably not even with whatever is left in the pension is added.

Making unspent pension funds liable for IHT will have a huge impact on some family finances. If you’ve saved for your retirement and die early, the remainder of the pot will be subject to 40% tax (unless it goes to a spouse). Furthermore, it will then be taxed at the kids’ marginal rate as income.

Take a look at "Technical consultation - Inheritance Tax on pensions: liability, reporting and payment" published on the government website. Example 1 clearly indicates that an inherited pension pot will not only be subject to IHT, but it will also be subject to Income tax at the beneficiary's marginal rate.

Giving with warm hands will go into overdrive.

Eek, yes, taxing it twice will be bad.

But how many of us die with lots left in our pension? My family are ridiculously long lived and living fairly frugally my pension will run out when I am about 90. House value and pension pot won’t total £500k if I die when I am 80.

But then the threshold will probably have need reduced by then.

The £325k limit is going to be in place until 2030, so it’s reasonable to suggest a £270k semi’s inflationary price increase will gobble up the nil rate band. Let’s say you’ve been careful and still have £50k in ISAs or a SIPP upon death. £20k will be taken in IHT, then what’s left will be taxed again at 20 or 40%. For this example we’ll assume your offspring is a basic rate taxpayer so they will get 4/5th of £30k, so £24k. The tax take on your £50k is 52%. Why on earth would anyone wish to save/ work beyond leaving the £325k threshold?

The law of unintended consequences (early retirements and gifting outside the seven year rule) is going to kick in.

Thank you.
Dh will still be able to do it at 55 (just!)

We have massive pensions and we are not bothered. I'd prefer the current rule than anything else. It means that so far my lifetime isn't affected. For my children, 60percent of something is better than nothing, which it may well be as care home fees are extortionate.

I'm happy with this. And I didn't vote labour.

For the moment. RR will probably do an April budget too. It could happen then. She has set out so much additional spending she has to get my ney from somewhere.

Constantly changing policy on the treatment of pensions undermines the confidence in the system. People will stop saving into a pension if they are not certain that the savings rules will remain in place.