Pensions taxed at 40%
Discussion
Mum is very lucky and has unbelievable pensions: State, Final Salary pension, half of my deceased dads final salary pension.
This year nudges her into 40% income tax rate. She wasn't fussed about losing winter fuel allowance.
I set her up a SIPP to put in £200/mo to take her under the 40% threshold. I figured her estate is valued as Pensions+ISAs+other assets. If the money goes to pension she saves paying £80/mo tax. She's unlikely to ever draw the SIPP unless she needs expensive care, in which case happy to pay the income tax at that point. When she dies therefore the estate will be worth £80 a month more this way.
She is now over 75, now can't make pension contributions! Seems ageist, she might live for 25 years+ yet!
So now shes got to pay 40% tax on that money and then her estate will pay IHT on the money again, instead of pre age 75 situation of no income tax and then SIPP will be liable to IHT.
I'm guessing theres no way to keep the money in the pension and never have it paid out in the first place given the nature of State and FS schemes?
This year nudges her into 40% income tax rate. She wasn't fussed about losing winter fuel allowance.
I set her up a SIPP to put in £200/mo to take her under the 40% threshold. I figured her estate is valued as Pensions+ISAs+other assets. If the money goes to pension she saves paying £80/mo tax. She's unlikely to ever draw the SIPP unless she needs expensive care, in which case happy to pay the income tax at that point. When she dies therefore the estate will be worth £80 a month more this way.
She is now over 75, now can't make pension contributions! Seems ageist, she might live for 25 years+ yet!
So now shes got to pay 40% tax on that money and then her estate will pay IHT on the money again, instead of pre age 75 situation of no income tax and then SIPP will be liable to IHT.
I'm guessing theres no way to keep the money in the pension and never have it paid out in the first place given the nature of State and FS schemes?
was8v said:
Mum is very lucky and has unbelievable pensions: State, Final Salary pension, half of my deceased dads final salary pension.
This year nudges her into 40% income tax rate. She wasn't fussed about losing winter fuel allowance.
I set her up a SIPP to put in £200/mo to take her under the 40% threshold. I figured her estate is valued as Pensions+ISAs+other assets. If the money goes to pension she saves paying £80/mo tax. She's unlikely to ever draw the SIPP unless she needs expensive care, in which case happy to pay the income tax at that point. When she dies therefore the estate will be worth £80 a month more this way.
She is now over 75, now can't make pension contributions! Seems ageist, she might live for 25 years+ yet!
So now shes got to pay 40% tax on that money and then her estate will pay IHT on the money again, instead of pre age 75 situation of no income tax and then SIPP will be liable to IHT.
I'm guessing theres no way to keep the money in the pension and never have it paid out in the first place given the nature of State and FS schemes?
She has no net relevant earnings to base the pension contributions on, so I'm surprised you claim she received higher rate tax relief. Did she file a tax return to claim it?This year nudges her into 40% income tax rate. She wasn't fussed about losing winter fuel allowance.
I set her up a SIPP to put in £200/mo to take her under the 40% threshold. I figured her estate is valued as Pensions+ISAs+other assets. If the money goes to pension she saves paying £80/mo tax. She's unlikely to ever draw the SIPP unless she needs expensive care, in which case happy to pay the income tax at that point. When she dies therefore the estate will be worth £80 a month more this way.
She is now over 75, now can't make pension contributions! Seems ageist, she might live for 25 years+ yet!
So now shes got to pay 40% tax on that money and then her estate will pay IHT on the money again, instead of pre age 75 situation of no income tax and then SIPP will be liable to IHT.
I'm guessing theres no way to keep the money in the pension and never have it paid out in the first place given the nature of State and FS schemes?
The SIPP provider accepted it because it was less than £2880 pa, and were allowed to reclaim up to £720 in tax relief.
What about paying in to children’s or grandchildren’s pensions. Whilst she won’t see any tax saving, the children or grandchildren will receive tax relief at 20% when going in so would net 20% tax to HMRC although not in her pocket.
Plus the pension for the children or grandchildren won’t form part of their estate and they cannot touch it until they retire.
Plus the pension for the children or grandchildren won’t form part of their estate and they cannot touch it until they retire.
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