Simple Steps Anyone Can Use To Protect Your Pension Wealth From NEW Death Taxes.

In this weeks' video "How to protect your pension wealth from death taxes" where we will look at the new controversial rules which merge pensions and IHT together.

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#financialeducation #financialfreedom #financialplanning #retirement

As the Government tightens tax rules around pensions, safeguarding your wealth for future generations has never been more critical. From April 2027, pensions will come under the Inheritance Tax (IHT) regime, meaning many families could face unexpected bills on assets they thought were tax-efficient.

Let’s explore the challenges and strategies to shield your wealth from punitive taxes.

The Growing Tax Trap: Inheritance Tax and Pensions

Inheritance Tax (IHT) already looms large for families with estates exceeding the Nil Rate Band (NRB)—currently £325,000.

Thanks to property value increases, more estates now exceed the Residential Nil Rate Band (RNRB) of £175,000, which is added for direct descendants inheriting the family home.

These allowances may seem generous, but they have been frozen since 2009 and can be quickly used up especially when pensions join the IHT fold in 2027.

What’s worse? Withdrawals from pensions after death will also attract income tax, leading to double taxation.

This combination of IHT at 40% and income tax (up to 45%) can create an effective tax rate of 67% or more—a staggering blow to generational wealth.

Smart Solutions to Minimize Death Taxes

Thankfully, proactive planning offers powerful solutions to reduce or avoid these tax burdens.

The 7-Year Rule and Gifting:

One of the simplest ways to reduce IHT is by gifting assets during your lifetime. If you survive for seven years after making the gift, its value falls outside your estate for IHT purposes. However, large one-off gifts can still face taper relief if you pass away within the seven-year window.

Gifts from Regular Income:

If your income exceeds your spending needs, you can make regular gifts from surplus income without these being subject to IHT. This method is highly tax-efficient and allows you to pass on wealth incrementally, all while retaining flexibility.

Whole of Life Insurance Policies:

For those seeking a comprehensive safety net, a Whole of Life insurance policy on a second death basis (typically for couples) can provide funds to cover IHT liabilities. When placed in trust, the payout is outside your estate, ensuring the money is protected from IHT and quickly accessible to beneficiaries to pay any due tax.

Why Act Now?

The 2027 changes make it essential to act now. Pensions have long been seen as an IHT-free vehicle, but this shift will impact thousands of families. Coupled with rising income tax rates and the removal of other allowances, failing to plan could result in significant wealth erosion.

Final Thoughts: Take Control of Your Legacy

Your hard-earned wealth deserves protection. By leveraging tools like gifting, regular income strategies, and trust-based life insurance plans, you can preserve more for your loved ones while reducing unnecessary taxes. Don’t let double taxation rob your family of its future.

Chapters

00:00 Introduction
03:30 What are the pension changes?
04:18 What are the current rules?
05:10 What are the IHT allowances?
06:20 What's included in the Estate?
07:34 How is the IHT and income tax calculated?
09:34 What other problems are there?
12:08 What are the solutions?

#inheritance #iht #estateplanning #retirementplanning #wealth

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[oldmukker]

Seems labour have guaranteed they will not have a second term.

[Clampers]

Wow what a great presentation!! I am a new subscriber to your channel. A very well delivered video. I will look forward to your future content.

[chapman]

I predict more people will spend more to avoid crossing threshold. People formerly being prudent and planning for care costs formerly had the compforting thought that if the provisiin remained unspent it would go to the children. Now they will spend it leading to a bigger burden for the state as more of us spend the last couple of years in care homes. Very cruel to shut this down with such little notice.

[craigmccorkell]

Good information here, thank you. People need to listen and understand what Labour is doing to hard-working people.

[willlsmith]

Brilliant know this new setup has not been fully signed off yet and there maybe more twists and turns but this has certainly got me thinking different about when I intend to retire.

[robhemsley]

Want to know more about single life IHT insurance policies or pre arranged executor loan facilities to pay IHT in 6 m window

[jamieclay]

IHT NRB frozen since 2009... where the average UK house price was 166k. Property legacy nrb at 175k was set commensurate.
Average UK property price now 300k+?
It'll be at least 2030 before the respective NRBs are increased.
It's a stealth death tax of the most rancid kind..
Absolutely awful governance...what happened to fair and equitable.
Despicable government.

[winchesterpat]

Good video, one question if an inheritance is over the IHT 1m limit. Can the excess over the 1 m be passed on the children via a Deed of Variation. So the 1 million is retained as the Will the rest is the passed directly on the children within the 2 years. assuming the 2 m limit is not reached. Would this comply with the IHT rules?

[JamesKerr-zo]

The double tax sounds really unfair until I worked through an example assuming no growth to make it simple.
Let’s suppose I’m paying 40% tax and I build a pension of £1million. I would claim £400k tax back, so I’ve saved £600k.
If I had left this £600k in an ISA upon death it could be taxed at 40% leaving £360k.
If I leave a £1million pension upon death it will be taxed at 40% leaving £600k if this is then drawn down paying 40% tax leaving £360k.

The discussion over if this is fair should be about what the government and tax payers want the tax rebates on pension payments to be used for. Is it to provide a comfortable retirement for the pension holder? or is this tax relief to be used to build generational wealth for children of people with large pensions?
As a tax payer I don’t think it should be used to build generational wealth, but having a large pension I obviously don’t want it taxed if it is passed on. This is the discussion we need to have as a society.

[gandhi]

Pension changes are very bullish for the economy.

[kalpnashah]

I understand what you saying but why should pensions be outside estate yet if you invest in property or anything else it is part of IHT. pp were using it to pass wealth. A pension is for you to use for your needs in retirement and it should die with you like a defined pension. I understand for those who saved for years its a bitter pill but I do understand why they done it.

[Joe-lbqn]

Looks like my best option is to give away / spend a lot. Pro rating your example of a 40k benefit, to get 400k and assuming i live 15 years that would mean paying out £110k eg if 40k needs £60 month then 400k needs 600 month? I might do a few trial quotes and see what they say presumably they are banking on many of their clients dying early.

[TaiwoOmotosho-mv]

What is the value of Term Life Insurance and can one go back to put it in Trust, Pls?Can this be used for IHT purpose, Pls?At what stage should one stop contributng into it?

[andyballard]

The exemption should have been increased to 1 million at the same time as bringing this change in. It's totally immoral to penalize single people over married people, tax should be an individual situation not joint. Moving abroad is the best choice, Portugal has no IHT for direct descendants

[pha]

I can understand now why the farmers are so outraged.

[chrismartin]

Going to be a necessity to consolidate if you do so, is your financial protection still only £85k? No where near enough.

[bonditltd]

Becoming domiciled elsewhere solves this problem. No tax. That’s my solution

[johndinsdale]

You just need to survive 10 years aboard?

[jimdavis]

Old Man Clarkson bought a farm.
E-i-e-I-Owe-U.
And on that farm he had an accountant/banker/tax advisor.
E-i-e-I-Owe U.
With a tax fiddle here and a tax fiddle there.
Here a fiddle, there a fiddle, everywhere a tax fiddle.
Old man Clarkson had a farm.
Down on Fiddly Tax Farm.

[MrTpain]

Definitely not happy about IHT on pensions. Time replan and move to another country. Move where you are treated best