4 Sep
2:01pm, 4 Sep 2024
4,441 posts
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Cheg
Ok when I say final salary scheme, I will concede average salary. Which is still tidy. Teachers, police and doctors. I would imagine fire and nurses as well. In regards teachers you used to have 2/3rds final salary. So say £45k x 2/3 somewhere in the region of £30k salary plus your your £12k state pension. Putting into the teachers pension calculator: 40 year-old £40k salary current Working to 60. Annual Pension £20.5k Lump Sump £23k I can't quite find it, but I am sure that is index linked. |
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4 Sep
2:05pm, 4 Sep 2024
4,442 posts
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Cheg
jda wrote: It is clear that there are a lot of poor pensioners - I think I’ve read that the UK state pension is one of the worst in the developed world - and also a lot of hugely rich ones, with about 25% of pensioner households having a million quid in assets. Generalising about pensioner wealth is difficult. That looks high. 1 in 25 households pay IHT. Given that most of that is in their residential property unless they want to use equity release they aren't going to be able to convert that to cash until they die. There are lots of graphs flying about, about how poor our state pension is. But the range of employer, employee and government contributions there are across the globe with those state pensions makes comparisons tricky. |
4 Sep
2:20pm, 4 Sep 2024
17,736 posts
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jda
I agree it looks hard to reconcile with the IHT figures. But Tim Hartford mentioned this 25% number (IIRC) recently and I've seen it before so think the general gist is valid. 22%, not 25% (but also, the data are well out of date and will surely be higher now) fullfact.org (NB it also includes the wealth of a younger householder if their partner is pensionable, it's the household not the individuals being counted here, which seems to be full fact's main niggle with the claim) |
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4 Sep
2:23pm, 4 Sep 2024
17,737 posts
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jda
Once the pension is converted into an annuity, or savings used up (eg care costs in later old age) the total may go under a million hence no IHT. Plus, the IHT statistic is based on historical data where the 2nd death of a couple already happened, whereas the pensioner wealth statistic is based on one person reaching 65. That 4% number of estates paying IHT will surely rise quite sharply in the coming years.
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4 Sep
2:33pm, 4 Sep 2024
4,443 posts
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Cheg
Yeah if a husband and wife live in a £1m house mortgage free then neither is a millionaire. One of them snuffs it and the remaining one then becomes a millionaire overnight. Agreed that with house prices and people passing away in the next 20 years or so, those IHT numbers will shift signifcantly without the thresholds rising. |
4 Sep
3:55pm, 4 Sep 2024
25,510 posts
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larkim
Cheg wrote: Yeah if a husband and wife live in a £1m house mortgage free then neither is a millionaire. One of them snuffs it and the remaining one then becomes a millionaire overnight. Agreed that with house prices and people passing away in the next 20 years or so, those IHT numbers will shift signifcantly without the thresholds rising. Most H&W transfers on death like that are done in trust anyway, with the surviving partner only having a life interest in the property, so technically the survivor doesn't own the remaining half of the property - at least, not if they have "properly" planned their IHT arrangements. I say "properly" because that sort of configuration is effectively a way of minimising tax, and whilst a lot of people (myself included) have put that arrangement in place with a view to enriching our children with our unearned wealth, not everyone has access to the advice or forethought to do that and it might even be considered to be immoral by some. |
4 Sep
4:04pm, 4 Sep 2024
22,970 posts
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rf_fozzy
"might even be considered to be immoral by some." Might.... |
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4 Sep
4:16pm, 4 Sep 2024
25,511 posts
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larkim
Yep, and yet might not. Is tax effective planning immoral? I'm an accountant, I was trained in optimising tax as part of my professional studies with my Institute (as well as trained not to evade tax, of course). Perhaps by being exposed to far more info about discretionary tax claims / carry-backs / use of unused allowances etc I've been schooled to see effective IHT planning as no more than getting the basics "right"; if I'd answered one of my tax exam questions about the advice to be given to a husband and wife about how to minimise tax on their deaths, I'd have failed at the first hurdle if I'd not answered "Dissolve the joint tenancy and split the property into tenancies in common, and pass the spouses' share of the house in trust to your remaining spouse with the remainder to your children as Trustees" (or something very similar). When I view "fair share" of tax, I view it from a perspective of ensuring all the rules apply to me as much as to anyone else. I could choose to ignore the availability of that option, but why would I? It's legal, cheap and easy to implement, widely used etc. And if a government wanted to come along and remove that option because they want more tax in the coffers, I would not complain. |
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4 Sep
4:33pm, 4 Sep 2024
22,971 posts
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rf_fozzy
Unless everyone has free and easily accessible advice to do the same, how is this not murky waters?
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4 Sep
4:44pm, 4 Sep 2024
17,738 posts
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jda
That whole “trust” thing died out ages ago for basically any couple with assets up to a million (per household). The tax exemption automatically passes to the surviving spouse. And at least for the time being that has covered a very large proportion of estates.
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