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We Have Significant Pensions and Investments and Need Income

Funding Children’s/Grandchildren’s Pensions Combined with Inheritance Tax Savings

We need income from our pensions and investments but want to pass as much to our children/grandchildren as possible.

Client Circumstances

  • Mr and Mrs Thorpe are Aged 70
  • They have one daughter and 3 grandchildren (aged 6, 8 and 10)
  • They have investments of £500,000
  • They have a pension fund of £500,000 (lump sum already taken)
  • Remaining estate exceeds the nil rate band
  • They don’t want to gift capital now
  • They need income of approximately £50,000pa
  • Current income taken:
    - Pension £30,000pa
    - Investments £20,000pa

Recommended Solutions

  • Stop all income from pension
  • Draw all income from investments only
  • Set up nomination of Death Benefit for pension in favour of daughter/grandchildren in desired proportions.

Benefits from advice given

  • Reduces Income Tax paid
  • Utilises annual Capital Gains Tax allowance
  • Daughter / Grandchildren receive pension fund free of Inheritance Tax
  • Protects greater value in pension from Inheritance Tax
  • Approximate value of investments in 10 years after Inheritance Tax = £185,553
  • Approximate value of pensions in 10 years free of Inheritance Tax = £814,447
  • Total increase in value passed £150,935 (see overleaf)

Position 10 Years

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Future Servicing

We will look to carry out a regular review of your circumstances, objectives, needs and portfolio performance to ensure all arrangements continue to be suitable and advise of any changes that may be appropriate.

This example is for illustrative purposes only, based on current legislation and tax allowances. Tax rules and regulations are subject to change.

IHT Solutions Helper Will you have to pay Inheritance Tax?

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