The Lemon Fool

hiriskpaul wrote:We fully crystallised a few years ago

genou wrote:But if you have no uncrystallised funds, there is nothing to test / charge at 75.

BCE 5A: age 75 having previously designated funds as drawdown pension
It may happen that a member has earlier designated funds as available to provide a drawdown pension or flexi-access drawdown pension and reaches age 75:

- without either having taken a lifetime annuity (in which case BCE 4 would have occurred), or
- without having taken a scheme pension (in which case BCE 2 would have occurred), or
- when a lifetime annuity or scheme pension has been taken, but only by application of part of the drawdown pension fund or flexi-access drawdown fund. So part of the drawdown pension fund or flexi-access drawdown fund is still in place when the member reaches age 75.

TedSwippet wrote:

genou wrote:But if you have no uncrystallised funds, there is nothing to test / charge at 75.

https://www.gov.uk/hmrc-internal-manual ... 0#IDADZNKB

BCE 5A: age 75 having previously designated funds as drawdown pension
It may happen that a member has earlier designated funds as available to provide a drawdown pension or flexi-access drawdown pension and reaches age 75:

- without either having taken a lifetime annuity (in which case BCE 4 would have occurred), or
- without having taken a scheme pension (in which case BCE 2 would have occurred), or
- when a lifetime annuity or scheme pension has been taken, but only by application of part of the drawdown pension fund or flexi-access drawdown fund. So part of the drawdown pension fund or flexi-access drawdown fund is still in place when the member reaches age 75.

BrummieDave wrote:Two points I'd make:

You never pay IHT, your dependents do. Worth thinking about this IMHO, as it's your money to spend as you see fit whilst you're alive.

Don't view IHT as some kind of failure, and necessarily bad. It's a gift to the ultimate charity effectively, paying for the schools, hospitals and benefits of future generations.

hiriskpaul wrote:Am I wrong? When would it make sense to draw down the SIPP before exhausting non-SIPP investments?

kempiejon wrote:

hiriskpaul wrote:Am I wrong? When would it make sense to draw down the SIPP before exhausting non-SIPP investments?

If you die over 75 and the recipient(s) would pay tax at the highest rate?
My IHT and SIPP knowledge might be flaky but if the donor dies over 75 the recipient pays at their marginal rate so with IHT at 40% (above the threshold) the highest tax rate is at 45% additional rate. Similarly if below the threshold the recipient pays no IHT on ISA etc yet any SIPP is at the marginal rate again.

xxd09 wrote:You first duty is to yourself and your wife once your kids are provided for
My children are all married -in jobs and don’t need my money
I have told them if any money is left -it’s theirs but don’t count on it
One thing that could cause a hole in your boat is care home fees
At £40-50000 pa per person-a portfolio could soon be depleted by a couple needing care
xxd09

hiriskpaul wrote:If you die over or under 75, IHT at 40% is paid on the estate, but there are allowances. Nil rate band of £325k, resident nil rate band up to £175k (depending on size of estate). Unused NRB and RNRB can pass to spouse/civil partner if not used on first death. BUT SIPPs/DC pensions are NOT part of the estate so are not subject to IHT. Pensions have trustees who decide which beneficiaries get the residual pension pots, usual according to letters of wishes of the deceased. Tax on these inherited pensions are taxed on the person who draws them. It is taxed as income, along with the beneficiaries other income. It could be drawn by a beneficiary over many years within the personal allowance, in which case no tax would be paid.

hiriskpaul wrote:

xxd09 wrote:You first duty is to yourself and your wife once your kids are provided for
My children are all married -in jobs and don’t need my money
I have told them if any money is left -it’s theirs but don’t count on it
One thing that could cause a hole in your boat is care home fees
At £40-50000 pa per person-a portfolio could soon be depleted by a couple needing care
xxd09

I believe that when being assessed for care, if someone have an ISA, or other investments, most of this has to be exhausted before local authority picks up the bill. But if someone has a SIPP they are not obliged to draw and spend it all on care. Instead the SIPP is considered to be providing an income and only that income is considered. Another potential benefit of the SIPP over the ISA.

Chrysalis wrote:

hiriskpaul wrote:

xxd09 wrote:You first duty is to yourself and your wife once your kids are provided for
My children are all married -in jobs and don’t need my money
I have told them if any money is left -it’s theirs but don’t count on it
One thing that could cause a hole in your boat is care home fees
At £40-50000 pa per person-a portfolio could soon be depleted by a couple needing care
xxd09

I believe that when being assessed for care, if someone have an ISA, or other investments, most of this has to be exhausted before local authority picks up the bill. But if someone has a SIPP they are not obliged to draw and spend it all on care. Instead the SIPP is considered to be providing an income and only that income is considered. Another potential benefit of the SIPP over the ISA.

Yes but surely you don’t anticipate being able to receive local authority care? And would you want to?

TUK020 wrote:

hiriskpaul wrote:If you die over or under 75, IHT at 40% is paid on the estate, but there are allowances. Nil rate band of £325k, resident nil rate band up to £175k (depending on size of estate). Unused NRB and RNRB can pass to spouse/civil partner if not used on first death. BUT SIPPs/DC pensions are NOT part of the estate so are not subject to IHT. Pensions have trustees who decide which beneficiaries get the residual pension pots, usual according to letters of wishes of the deceased. Tax on these inherited pensions are taxed on the person who draws them. It is taxed as income, along with the beneficiaries other income. It could be drawn by a beneficiary over many years within the personal allowance, in which case no tax would be paid.

hiriskpaul,
something for you to investigate:
Set up trusts for your offspring. Set these as beneficiaries of your pension assets in the event of your death.
Then offspring tax is only payable when money withdrawn from the trust (I think).
However, offspring can borrow money from the trust (with trustees agreement) for the purposes of property purchase. This has 2 big benefits - postponing tax payable, while still able to use the money - and in the event of marriage/divorce, the trust loan is due back to the trust, rather than part of the marital home to split.
Complicated and expensive arrangements, but sounds like you have a big enough pot to make it worthwhile
tuk020