Sipp Pension (Inherited) Question

[Gargamel]

I am after some advice

My Father left a Sipp pension invested, its slightly less than 100k.

My mother is quite elderly (above 75) and unlikely to need the additional income from drawing down the pension.

However from a tax POV.

If I leave the SIPP invested - then we the Next Generation inherit - we close it and pay IHT over the value ?

Alternatively

I withdraw it now for my mother - she pays income tax, and then we would pay IHT on the remaining amount

Do I have that correct ?

[911hope]

HMRC website has this information. Better to read that than rely on opinions posted here.

I had a quick look and it is quite understandable.

[Gargamel]

911hope said:

HMRC website has this information. Better to read that than rely on opinions posted here.

I had a quick look and it is quite understandable.

Ah thats interesting - I could then potential nominate the grandkids (with low / no incomes) and avoid Income tax.

Thanks !

[craig1912]

Currently no IHT on pensions but will be in 2027.

This might help

https://www.aviva.co.uk/retirement/aviva-pension/k...

Assuming your father left it to your Mother then she can nominate the grand kids as beneficiaries- payments to them after your mother passes would be potentially taxable, it would still also form part of the estate for IHT purposes

Edited by craig1912 on Friday 17th October 14:38

[Car bon]

If your mother really isn't going to need the money - and hasn't yet accepted the SIPP into her own name, then she can ask the scheme trustees to transfer it directly to someone else.

I did this with the part of my late father's SIPP that he'd specified for me. I asked the trustees to replace me with my wife - she only had a small SIPP and wasn't working and not yet at state pension age. They agreed & voila, she can withdraw 12,570 tax free every year until her state pension kicks in

Your father has only 'requested' that the trustees give it to your mother - the final decision is theirs. Thats the loophole that means that SIPPs are not part of your estate.

Edited by Car bon on Friday 17th October 18:46

[Enut]

Car bon said:

Your father has only 'requested' that the trustees give it to your mother - the final decision is theirs. Thats the loophole that means that SIPPs are not part of your estate.

Edited by Car bon on Friday 17th October 18:46

Not currently part of your estate. Lovely Rachel from Accounts has scuppered that from April 2027, an easy tax attack when you, and your mates' pensions, don't have any 'unspent' elements just lovely taxpayer funded final salary benefits.

[Car bon]

It's not yet clear how they will be treated in future, but agree it's going to change.

They will certainly be subject to IHT, but other elements like not having to wait for probate are not yet clear. You can currently get the funds from a SIPP relatively quickly after someone dies - that may or may not change in April 2027.

[mikeiow]

Car bon said:

If your mother really isn't going to need the money - and hasn't yet accepted the SIPP into her own name, then she can ask the scheme trustees to transfer it directly to someone else.

I did this with the part of my late father's SIPP that he'd specified for me. I asked the trustees to replace me with my wife - she only had a small SIPP and wasn't working and not yet at state pension age. They agreed & voila, she can withdraw 12,570 tax free every year until her state pension kicks in

Your father has only 'requested' that the trustees give it to your mother - the final decision is theirs. Thats the loophole that means that SIPPs are not part of your estate.

Edited by Car bon on Friday 17th October 18:46

This is (likely) the best idea.
Additionally, I believe she could also ask split it further, between multiple people, if there are grandchildren who could benefit.