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Personal Pensions. This can't be fair


Nightcrawler
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I recently requested a form from my pension provider to nominate my daughter to receive the full value of my policy when I kick the bucket. 

I then gave them a call today to ask about the surrender value. 

Apparently, if I die before I reach the age of 75, then she will receive 100% of the policy surrender value. 

But............. If I die after 75 then it will be subject to 55% tax

This is criminal.  Why the hell should the UK government take over half of it.  It isn't even about limits and applies no matter how much is left in the pot.

Bastards 

 

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Higher tax on unauthorised payments

You’ll pay up to 55% tax on payments from your pension provider if they make an ‘unauthorised payment’. This is a payment made outside of the government’s tax rules and usually includes:

https://www.gov.uk/tax-on-pension/higher-tax-on-unauthorised-payments#:~:text=You'll pay up to,re 55 (there are exceptions)

Notice that it says "up to". More details are here: https://www.gov.uk/guidance/pension-schemes-and-unauthorised-payments#tax-charges-on-unauthorised-payments

 

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1 hour ago, Nightcrawler said:

But............. If I die after 75 then it will be subject to 55% tax

 

1 hour ago, Bazle said:

You’ll pay up to 55% tax on payments from your pension provider if ......

Notice that it says "up to".

A quick bit of Googling suggests to me that that 55% rate applies only if you had pension savings worth more than £1,073,100.

Lucky man!

 

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33 minutes ago, Bazle said:

No need. Just die before you are 75! 🙂

Well that is a possible option. I am technically a "coffin dodger" already. A couple of trips to the Land of Smiles would not go amiss before hand.

That said, I would not like to be found dead in a Gentleman's Club or in an upstairs room in Soi 6 though and bring shame on my family and the Church 🙄

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2 hours ago, Bazle said:

 

A quick bit of Googling suggests to me that that 55% rate applies only if you had pension savings worth more than £1,073,100.

Lucky man!

 

That must be one of the highest pension contributions in existence ??   Like old Harold Wilson days .... 55% .... mind you Nightcrawler has a few hundred quid, some old Spanish pesetas and dozens of Bitcoins that he's forgotten the passwords for. 

Oh and some old Green Shield Stamps books and a £20 Premium Bond.

Should be safe .....

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5 hours ago, Nightcrawler said:

Well that is a possible option. I am technically a "coffin dodger" already. A couple of trips to the Land of Smiles would not go amiss before hand.

That said, I would not like to be found dead in a Gentleman's Club with a ladyboy hanging out of my arse or in an upstairs room in Soi 6 Throb a GoGo though and bring shame on my family and the Church 🙄

Fixed that for ya.

Get yourself a decent accountant or brief specialising in the field mate, it won't be cheap but it will be money well spent, and you can always invoice your daughter...

Edited by Butch
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2 hours ago, nampla69 said:

That must be one of the highest pension contributions in existence ??   Like old Harold Wilson days .... 55% .... mind you Nightcrawler has a few hundred quid, some old Spanish pesetas and dozens of Bitcoins that he's forgotten the passwords for. 

Oh and some old Green Shield Stamps books and a £20 Premium Bond.

Should be safe .....

I am not going to part with my Green Shield stamps at death. I intend to use them to buy a Goblin Teasmade when I become bed bound. 

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10 hours ago, Nightcrawler said:

I recently requested a form from my pension provider to nominate my daughter to receive the full value of my policy when I kick the bucket. 

I then gave them a call today to ask about the surrender value. 

Apparently, if I die before I reach the age of 75, then she will receive 100% of the policy surrender value. 

But............. If I die after 75 then it will be subject to 55% tax

This is criminal.  Why the hell should the UK government take over half of it.  It isn't even about limits and applies no matter how much is left in the pot.

Bastards 

 

You reap what you sew.

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14 hours ago, Nightcrawler said:

But............. If I die after 75 then it will be subject to 55% tax

Either they've misunderstood the question or you have unusual pension arrangements as pensions are usually not subject to inheritance tax.

It doesn't appear to be your daughter's circumstances causing it either as there's no marginal rate of 55% and she should be able to take it and pay only her current marginal rate.

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3 hours ago, KWA said:

Either they've misunderstood the question or you have unusual pension arrangements as pensions are usually not subject to inheritance tax.

It doesn't appear to be your daughter's circumstances causing it either as there's no marginal rate of 55% and she should be able to take it and pay only her current marginal rate.

. It is not inheritance tax. It is possible that the person I spoke with at the Pension company misinformed me. Nothing to do with my daughter's circumstances, as they have no information about her financial affairs. She is just listed as a beneficiary. The info I have been given is as in my first post.  I shall initially contact Pension wise, who are a UK Govt Pension advisory service and or appoint an independent Financial Adviser to look into it or find ways around it if it proves to be the case of 55% after 75.

I took this Policy out over 35 years ago and it is likely that tax laws may have changed during that time but certainly I have received no information from my pension company about any changes. 

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2 hours ago, Nightcrawler said:

. It is not inheritance tax. It is possible that the person I spoke with at the Pension company misinformed me. Nothing to do with my daughter's circumstances, as they have no information about her financial affairs. She is just listed as a beneficiary. The info I have been given is as in my first post.  I shall initially contact Pension wise, who are a UK Govt Pension advisory service and or appoint an independent Financial Adviser to look into it or find ways around it if it proves to be the case of 55% after 75.

I took this Policy out over 35 years ago and it is likely that tax laws may have changed during that time but certainly I have received no information from my pension company about any changes. 

I believe there was a change in the tax laws concerning pensions during the same year I moved to Thailand back in 2006 and retired as an accountant. I was so thankful that never again would I have to give boring taxation advice my knowledge of such things decreased in direct proportion to the increase in my adventures in Pattayaland.

The concept of having a "LIfetime Allowance" was apparently then introduced which meant the possibility of taxation of the accumulated fund in the event of death if the total contibutions to the fund exceeded the "Lifetime Allowance."  I was not aware that reaching age 75 also created a potential tax liability. Doesn't seem fair now does it?

Prior to that change I always understood that on death the fund itself was not taxed  and the "nominated" beneficiaries would not incure a personal tax liability as the pension was written under a discretionary trust.

No idea how they arrived at my own "Lifetime Allowance" but apparently my own pension contributions have nowhere near exceeded the limits.

 

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23 hours ago, Jambo said:

I believe there was a change in the tax laws concerning pensions during the same year I moved to Thailand back in 2006 and retired as an accountant.

That would have been Gordon Brown's changes. I was a self-employed contractor in the oil industry in Aberdeen and to minimise my tax exposure I opened an Executive Pension Plan with Standard Life. This was a great scheme, as not only did the government in effect match every groat I put into the pension, but the fund wasn't limited to a 25% tax-free lump sum payout. Then the one-eyed idiot mucked the whole thing up in 2006 and the lump sum paid out on growth in the fund after that date was subject to the 25% limit. Nae bother, though, because after the financial crisis the blasted fund hardly grew anyway, and I ended up getting a 60% tax-free lump sum. My brother was a tax inspector and he couldn't believe it as he'd never heard of anyone getting over 25%. Good old Brian Adie, my pensions adviser in Aberdeen, he knew his stuff.

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The one eyed idiot also brought in IR35 to try & catch the likes of me,working through my own limited company & taking dividends.He or his underlings made a complete hash of it and it has still to be fully implemented.

But when the Icelandic banks went tits up I think he was the Chancellor who saw to it that people like me got paid out,including outstanding interest.So he did have his uses.

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10 minutes ago, Bazle said:

Before you do that (if you haven't already done it), you might be able to get some free advice from the government here:
https://www.pensionwise.gov.uk/en/appointments?ici=top-financial-advice&icn=book-appointment

Thanks. Already rang them and the person I spoke to was most unhelpful. I might try an online booking. 

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