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Inheritance tax (IHT) receipts were reported as being £5.2bn in the last tax year. IHT is the one tax we never pay ourselves, but that does not stop it being the most unpopular, because IHT is charged at 40% on our estates – everything we leave behind, after a basic allowance of £325,000, and some concessions for the family home. Rising house prices and general wealth are leading to more families paying a tax that was once described by Chancellor Nigel Lawson as a ‘voluntary tax’, you can either do nothing and volunteer your beneficiaries to pay it, or you can take steps to avoid it.
Why you should consolidate them all
At Continuum we can help you stay out of the IHT trap. Here are just some of the potential solutions;
Your home
The pension industry grew up at a time when for many people a job was for life. It meant that when the time came to retire, in most cases they had a single pension pot, and very little choice in how they used it to provide a pension. But life, work and pensions have all moved on.
The question is, what is the best way to make the most of those pension pots?
Being at home under lockdown has been a chance to spend more time with your family, enjoy hobbies or learn a new skill – or it may have left you ready to escape the four walls and get back to work. Either way, it could be a foretaste of what life could be like after retirement.
It can be tempting to have all of these pension pots in one place, as they will be easier to keep track of. You may be able to reduce management fees if you only have one lump sum that needs care and investment on your behalf.
The value of our home will often use up your available concessions for IHT. If you bequeath a property to your direct descendants, the residence nil-rate band (RNRB) is an additional concession on top of the basic allowance of £325,000. This is a further £125,000 in the current tax year rising to £175,000 in 2020/21, after which it will keep pace with inflation.
Why you shouldn’t Give it away
Giving away surplus cash can put it out of your estate, but you must live another seven years. However, you have an annual £3,000 tax-free gift allowance, which will let you put money outside your estate immediately.
It is easy enough to do. Most of us have grown used to the idea of moving around money between accounts, but perhaps there are reasons not to put all your eggs in one basket.
The coronavirus pandemic has been spurring many to reassess their careers and their retirement plans. Some might be discovering the advantages of more family time, more hours, and less commuting. But for others it is a reminder of the effects of reduced income, pension savings, and
At Continuum, we believe that with the right planning and preparation you can look forward to the retirement you want.
There are three ways to
While it may seem the tidiest thing to do and can have some advantages, there can also be some disadvantages to merging pension pots.
transition from your full-time job: : Many people are reluctant to
You can give up to £250 each year to anyone or make a wedding gift to a family member up to £1,000 per person, rising to £5,000 for a child or £2,500 for a grandchild or great-grandchild.
Older pension policies may have attractive features which are lost if transferred, whilst small pots can benefit from tax privileges which might not apply to larger sums.
The value of pensions and investments can fall as well as rise, you may get back less than you invested. Your home may be repossessed if you do not keep up repayments on your mortgage. Estate planning is not regulated by the FCA. Levels and basis of reliefs from taxation are subject to change and depend upon personal circumstances.
Some older employer pensions come with valuable guarantees, including safeguards such as guaranteed annuity rates (GARs). Some pension schemes will guarantee a certain level of income with your pension or that the value of the units within it cannot fall below a certain level.
retire. Simply being a worker one day and then stopping altogether the can be a shock. If you’ve been putting off retirement because you can’t imagine how you would your days without working, the of social distancing might have opened your eyes to the wider possibilities of life. You may never want to go back to the grind.
Working in retirement: Today’s retirees are healthier and more active than ever before, and even before the coronavirus pandemic, many were choosing to work after retiring. Some work
PROTECTING YOUR FAMILY LEGACY FROM THE TAXMAN
SHOULD YOU CONSOLIDATE YOUR PENSION POTS?
SIMON PHILLIPS Independent Financial Adviser SIMON PHILLIPS Independent Financial Adviser SIMON PHILLIPS Independent Financial Adviser
HAS LOCKDOWN GOT YOU THINKING ABOUT RETIREMENT
If you leave 10% or more of your net estate to charity you may qualify for a reduced inheritance tax rate of 36%.
Tax efficient investment planning
past 65 because they love what they do. Others transition to part-time jobs that let them other interests while still earning, boosting their retirement and savings accounts so that their nest
: Phased retirement is a variation
When you put assets into a trust they are no longer yours, they belong to the trust. As with large gifts, assets placed in trust only fall outside your estate for IHT purposes if you live for at least more seven years.
Insure your life
Whole of life insurance could be the simple way to deal with IHT. Take out a policy in trust and your executors can use the proceeds to pay off the IHT bill.
on working in retirement, which lets you keep the job you love however steadily reducing the hours you spend on it, phasing into retirement and easing into a new routine where you’ll be spending most of your time at home. This will allow you and your partner to start ways to adjust to each other’s routines – vital for a successful life as a retired couple.
Look at your pension
Pensions can provide a solution. If you die before 75 the money in your pension can be passed to anyone you nominate tax free. If you die after 75 your beneficiaries usually only have to pay income tax on what they take out of the pension.
Make a will
A will is the most basic estate planning measure you can take to minimise IHT. With no will, your estate would be processed according to the Rules of Intestacy, which could result in more going to the taxman.
our retirement: Whether you are planning on cutting down your hours or giving up work altogether, you will need to ensure that you have the as well as the necessary life skills in place. At Continuum we can work with you to create your retirement plan. We can help you plan how you could build up the pension pot you need to have a choice in how you will retire – and we will show you the best ways to use that pot to provide the income and the security you need.
Get some expert help
Whatever the solution, getting expert help is essential for successful estate planning.
The one thing to remember is that it is never too early to start thinking about your retirement. The longer pension savings have to grow, the larger your pension pot and your retirement income could actually be.
Fortunately, at Continuum we can help check the benefits offered by each pot you have accumulated over the years.
You also need to consider just what you will do with your pot if you do consolidate it. Unless you are an expert investor, choosing how your newly consolidated pension should be invested can be daunting.
Lockdown gives you more time to spend on the things that really matter. So make sure you spend some time with a Continuum to make sure you have the plans you need in place.
At Continuum we know that getting the right mix of investments should involve not just a knowledge of the investment market, but an understanding of your own attitude to financial risk and your individual circumstances. Everyone has different tolerance of risk and different plans for retirement, and this can make a huge difference to how your money should be invested.
So, the real answer to what should you do if you are thinking about consolidating your pension pots, is simply to talk to Simon at Continuum before you decide.
T The information contained in this article is based on the opinion of Continuum and does not constitute a recommendation suitable investment strategy, you should seek independent financial advice before embarking on any course of action. The value of your pension and investments, and the income they produce, can fall as well as rise and you may get back less than you invested. Levels and basis of reliefs from taxation are subject to change and depend upon your personal circumstances.
he information contained in this article is based on he opinion of Continuum and does not constitute financial advice or a recommendation to to suitabtment strategy, you should seek independentare embarking on any course of action. lue of your
tments, and the income they produce, can fall as well as rise and you may get back less basis of reliefs from taxation are subject to change and depend upon your personal circumstances.
MORTGAGES MORTGAGES
LONG TERM CARE PLANNING INVESTMENTS
LIFE INSURANCE LIFE INSURANCE SAVINGS SAVINGS
IHT PLANNING PENSIONS
INVESTMENTS
FOR A FREE INITIAL CONSULTATION CONTACT SIMON PHILLIPS Independent Financial Adviser: T: 07484 095 044 E:
simon@mycontinuum.co.uk
Continuum (Financial Services) LLP, Falcon House, Eagle Road, Langage, Plymouth, PL7 5JY T: +44 (0)345 643 0770 E:
info@mycontinuum.co.uk www.mycontinuum.co.uk Continuum is a trading name of Continuum (Financial Services) LLP Falcon House, Eagle Road, Langage, Plymouth, PL7 5JY which is authorised and regulated by the Financial Conduct Authority
Based in Kingswear, providing coverage across the South West. Based in Kingswear, providing coverage across the South West.
Continuum (Financial Services) LLP, Falcon House, Eagle Road, Langage, Plymouth, PL7 5JY T: +44 (0)345 643 0770 E:
info@mycontinuum.co.uk www.mycontinuum.co.uk Continuum is a trading name of Continuum (Financial Services) LLP Falcon House, Eagle Road, Langage, Plymouth, PL7 5JY which is authorised and regulated by the Financial Conduct Authority
www.mycontinuum.co.uk www.mycontinuum.co.uk
FOR A FREE INITIAL CONSULTATION CONTACT SIMON PHILLIPS Independent Financial Adviser: T: 01803 752 177 T: 07484 095 044 E:
simon@mycontinuum.co.uk Based in Kingswear
FOR A FREE INITIAL CONSULTATION CONTACT SIMON PHILLIPS Independent Financial Adviser: T: 07484 095 044 E:
simon@mycontinuum.co.uk
INVESTMENTS PENSIONS PENSIONS
LIFE ASSURANCE RESIDENTIAL MORTGAGES
ESTATE PLANNING ESTATE PLANNING
So, what should you do? If you are considering consolidating your pensions you should seek professional help. There is actually a requirement for those with the safeguarded benefit of a guaranteed final salary to take financial advice, if they want to transfer and their pension pot is worth more than £30,000.
What’s more, charges on pensions vary considerably, and it’s not always true that a consolidated pension will have lower charges. There could even be charges simply for transferring your pension with some providers.
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