WEBVTT 00:00:00.080 --> 00:00:03.180 I want to talk to you about inheritance tax as 00:00:03.180 --> 00:00:05.440 it relates to pensioners. I'm going to start 00:00:05.440 --> 00:00:08.339 off with some practical information about the 00:00:08.339 --> 00:00:11.160 tax and then move on to more of an opinion piece 00:00:11.160 --> 00:00:14.619 as I do have some opinions on this and many of 00:00:14.619 --> 00:00:16.260 you unfortunately are not going to like them. 00:00:17.359 --> 00:00:19.320 It's important to do the practical bit first 00:00:19.320 --> 00:00:23.199 because I know through speaking to people via 00:00:23.199 --> 00:00:27.440 my website that a lot of angst is created about 00:00:27.440 --> 00:00:31.250 inheritance tax that comes often from a misunderstanding. 00:00:31.829 --> 00:00:34.770 For example, most of the people at Chatsu are 00:00:34.770 --> 00:00:37.909 in a couple and own a house. And once they realize 00:00:37.909 --> 00:00:40.469 that inheritance tax won't affect them really 00:00:40.469 --> 00:00:43.609 unless they're looking to pass on more than a 00:00:43.609 --> 00:00:48.570 million pound, then they kind of worry less as 00:00:48.570 --> 00:00:51.030 they don't really have them kind of assets anyway. 00:00:51.450 --> 00:00:57.710 So let's canter through the rules. So let's run 00:00:57.710 --> 00:01:00.829 through the common changes to how pensions are 00:01:00.829 --> 00:01:03.810 treated for inheritance tax. Now it's the subjects 00:01:03.810 --> 00:01:07.609 that's been framed in some pretty dramatic terms, 00:01:07.709 --> 00:01:10.170 you know, a tax on the young or even a tax on 00:01:10.170 --> 00:01:13.469 the dead, but reality is a bit more nuanced. 00:01:13.629 --> 00:01:16.329 So let's explore what's happening, why it's happening 00:01:16.329 --> 00:01:19.810 and what it could mean for you and your family. 00:01:22.590 --> 00:01:26.400 The core issue. is a policy announced in recent 00:01:26.400 --> 00:01:30.840 UK budgets. From April 2027 most unused pensions 00:01:30.840 --> 00:01:33.859 and death benefits will be included in the value 00:01:33.859 --> 00:01:36.579 of a person's estate for inheritance tax purposes. 00:01:37.019 --> 00:01:39.739 Now this is a significant shift. For decades 00:01:39.739 --> 00:01:42.540 a key benefit of pension savings was that for 00:01:42.540 --> 00:01:45.079 most people they fell outside of their estate 00:01:45.079 --> 00:01:48.060 and could be passed on to beneficiaries free 00:01:48.060 --> 00:01:51.760 of inheritance tax. Now this new rule changes 00:01:51.760 --> 00:01:55.519 that. The most controversial aspect of the change 00:01:55.519 --> 00:01:59.340 is its impact on those who died before reaching 00:01:59.340 --> 00:02:02.459 the normal pension age and for most that's currently 00:02:02.459 --> 00:02:07.060 55 it was for me and this is set to rise to 57 00:02:07.060 --> 00:02:10.300 in April 28. Now if someone passes away at say 00:02:10.300 --> 00:02:13.759 40 years old the pension pop which they are legally 00:02:13.759 --> 00:02:16.719 barred from touching could now be hit with a 00:02:16.719 --> 00:02:20.319 40 % inheritance tax bill if their overall state 00:02:20.319 --> 00:02:27.460 is large enough. This has led to some very strong 00:02:27.460 --> 00:02:30.180 criticism from financial experts. They argue 00:02:30.180 --> 00:02:33.699 it's fundamentally unfair and as one expert put 00:02:33.699 --> 00:02:38.039 it, charging IHT on an asset you have to accrue 00:02:38.039 --> 00:02:41.479 and are automatically enrolled into before retirement 00:02:41.479 --> 00:02:45.300 age is abhorrent. Now the concern is that it 00:02:45.300 --> 00:02:48.979 penalizes the families of those who had no chance 00:02:48.979 --> 00:02:52.360 to benefit from the savings. There's also the 00:02:52.360 --> 00:02:55.699 issue of a double tax hit. Now if a saver dies 00:02:55.699 --> 00:02:59.159 after the age of 75 their beneficiaries already 00:02:59.159 --> 00:03:02.180 have to pay income tax on pageant withdrawals 00:03:02.180 --> 00:03:04.500 and for a higher rate taxpayer this could mean 00:03:04.500 --> 00:03:08.620 an affected combined rate of well over 60 percent. 00:03:08.680 --> 00:03:11.620 When you factor in both the incomes and the inheritance 00:03:11.620 --> 00:03:14.439 tax that is in the government's decision to press 00:03:14.439 --> 00:03:17.159 ahead with this despite the warnings has been 00:03:17.159 --> 00:03:24.870 a major point of contention. So why is the government 00:03:24.870 --> 00:03:27.969 doing this? Their position is clear. They want 00:03:27.969 --> 00:03:31.050 to reinforce the original purpose of a pension. 00:03:31.509 --> 00:03:35.330 Pensions are a taxed advantage saving vehicle 00:03:35.330 --> 00:03:38.710 designed to fund your retirement. Now the generous 00:03:38.710 --> 00:03:41.430 tax relief you receive on contributions and investment 00:03:41.430 --> 00:03:45.229 growth is meant to incentivize you to save for 00:03:45.229 --> 00:03:49.409 your later years, not to create a tax free vehicle 00:03:49.409 --> 00:03:54.520 for passing on wealth to your heirs. Our treasury 00:03:54.520 --> 00:03:57.520 spokesman has confirmed this, stating that they 00:03:57.520 --> 00:04:00.560 want to incentivise pension savings for their 00:04:00.560 --> 00:04:03.719 intended purpose of funded retirements, instead 00:04:03.719 --> 00:04:07.699 of them being openly used as a vehicle to transfer 00:04:07.699 --> 00:04:11.400 wealth. Now the government estimates that a relatively 00:04:11.400 --> 00:04:15.560 small number of states, around 1 .5 % of total 00:04:15.560 --> 00:04:19.550 UK deaths will be newly liable for inheritance 00:04:19.550 --> 00:04:22.470 tax due to this change. They believe that this 00:04:22.470 --> 00:04:25.949 measure corrects an imbalance that brings pensions 00:04:25.949 --> 00:04:30.949 in line with other inherited assets. Now, they've 00:04:30.949 --> 00:04:33.949 also been responsive to some concerns, for example, 00:04:34.810 --> 00:04:38.790 by exempting death in service benefits from the 00:04:38.790 --> 00:04:45.009 new rules. This isn't going to affect everyone. 00:04:45.389 --> 00:04:49.339 Now, inherited tax is only levied on estates 00:04:49.339 --> 00:04:52.720 above a certain size. The nilweight band is currently 00:04:52.720 --> 00:04:57.639 £325 ,000 for a single person or £650 ,000 for 00:04:57.639 --> 00:05:00.819 a married couple or civil partners. Now on top 00:05:00.819 --> 00:05:04.060 of this there's the residence nilweight band 00:05:04.060 --> 00:05:08.800 which can add up to £175 ,000 per person if you 00:05:08.800 --> 00:05:11.600 leave the home direct to descendants. This means 00:05:11.600 --> 00:05:13.949 a married couple where the home could potentially 00:05:13.949 --> 00:05:16.670 leave up to a million pounds to their children, 00:05:17.110 --> 00:05:21.410 completely tax free. So the key takeaway is this. 00:05:22.129 --> 00:05:25.410 You need to understand where your personal situation 00:05:25.410 --> 00:05:29.430 fits within these rules. If your total estate, 00:05:29.910 --> 00:05:33.269 including your pension pot, is below these relevant 00:05:33.269 --> 00:05:35.069 thresholds, then you've got nothing to worry 00:05:35.069 --> 00:05:38.430 about. But if you do have significant assets, 00:05:38.529 --> 00:05:42.410 then... These changes require you to potentially 00:05:42.410 --> 00:05:45.209 re -evaluate your financial and estate planning 00:05:45.209 --> 00:05:53.649 strategies. So how do you navigate these changes? 00:05:54.449 --> 00:05:58.550 Here's some legitimate strategies to think about. 00:05:59.189 --> 00:06:02.350 Assess your estate by getting a clear picture 00:06:02.350 --> 00:06:05.910 of your total wealth. Use the thresholds we just 00:06:05.910 --> 00:06:09.029 discussed to see. if you're likely to be affected. 00:06:09.670 --> 00:06:13.170 Maybe lifetime gifting. So one of the most effective 00:06:13.170 --> 00:06:15.670 ways is to make gifts while you're still alive. 00:06:15.769 --> 00:06:20.569 You can give up up to £3 ,000 each tax year without 00:06:20.569 --> 00:06:23.490 it being added to your estate. Now there's also 00:06:23.490 --> 00:06:26.490 a generous exemption for gifts made from your 00:06:26.490 --> 00:06:29.329 surplus income as long as you can prove it to 00:06:29.329 --> 00:06:33.050 HMRC. Now a popular strategy might be to take 00:06:33.050 --> 00:06:35.990 out a life insurance policy and place it in a 00:06:35.990 --> 00:06:39.300 trust and this provides a tax -free payout to 00:06:39.300 --> 00:06:42.079 your beneficiaries upon your death. This can 00:06:42.079 --> 00:06:45.779 be used to cover any inheritance tax bill on 00:06:45.779 --> 00:06:48.680 your other assets. There's also a spousal exemption 00:06:48.680 --> 00:06:51.240 and this is the simplest, most powerful exemption. 00:06:51.939 --> 00:06:54.399 Leave your estate to your spouse or your civil 00:06:54.399 --> 00:06:57.899 partner and this is completely free of inheritance 00:06:57.899 --> 00:07:01.360 tax and it also allows you to pass on your unused 00:07:01.360 --> 00:07:04.699 tax -free allowances to them, doubling their 00:07:04.699 --> 00:07:12.389 inheritance tax threshold. How about using your 00:07:12.389 --> 00:07:14.629 pension for retirement? The most straightforward 00:07:14.629 --> 00:07:17.649 way to avoid the tax is to use the pension for 00:07:17.649 --> 00:07:21.069 its intended purposes. Now, many savers with 00:07:21.069 --> 00:07:23.350 large pensions are now planning to spend more 00:07:23.350 --> 00:07:27.029 on holidays or maybe luxuries to draw down the 00:07:27.029 --> 00:07:30.589 funds during their lifetime. Well, be mindful 00:07:30.589 --> 00:07:35.180 of the income tax, obviously. This is a dynamic 00:07:35.180 --> 00:07:37.920 situation. The government has confirmed that 00:07:37.920 --> 00:07:40.699 they're working with industry experts to refine 00:07:40.699 --> 00:07:43.600 the process for executives and beneficiaries, 00:07:43.779 --> 00:07:47.060 but it's clear that the days of pensions being 00:07:47.060 --> 00:07:50.620 a completely tax exempt vehicle for wealth transfer 00:07:50.620 --> 00:07:53.860 are coming to an end. It's now more important 00:07:53.860 --> 00:07:56.480 than ever to have a bit of a plan for yourself 00:07:56.480 --> 00:07:59.459 really. That accounts for all of your assets. 00:08:00.100 --> 00:08:02.300 So I'd love to hear from you what your thoughts 00:08:02.300 --> 00:08:05.399 are on these particular changes before I get 00:08:05.399 --> 00:08:09.839 into my thoughts on these. So if you do have 00:08:09.839 --> 00:08:12.459 any comments at this stage, leave them in the 00:08:12.459 --> 00:08:21.779 comments below. We often dream about what we 00:08:21.779 --> 00:08:25.040 would do with a massive inheritance. The kind 00:08:25.040 --> 00:08:27.699 of money that would mean we'd never have to work 00:08:27.699 --> 00:08:30.480 a day in our lives. We imagine the freedom, the 00:08:30.480 --> 00:08:33.620 travel, the luxury. But what if I told you that 00:08:33.620 --> 00:08:37.240 for some people, that exact dream becomes a nightmare. 00:08:37.840 --> 00:08:41.460 I want to tell you about a character named Ben. 00:08:41.960 --> 00:08:44.539 Ben grew up with everything, mansion, private 00:08:44.539 --> 00:08:48.000 school, the trust fund. That will make most of 00:08:48.000 --> 00:08:50.500 the dizzy. He didn't have to worry about rent, 00:08:50.799 --> 00:08:54.919 about bills, about a job that he hated. Now his 00:08:54.919 --> 00:08:58.509 dad Robert worked his entire life to give him 00:08:58.509 --> 00:09:02.590 this and to give him a head start. But then Ben 00:09:02.590 --> 00:09:05.590 one day said to his father, you didn't give me 00:09:05.590 --> 00:09:09.009 a head start. You made me start at the finish 00:09:09.009 --> 00:09:13.309 line. Think about that for a second. Ben has 00:09:13.309 --> 00:09:16.370 everything, but he's got no purpose. He never 00:09:16.370 --> 00:09:19.950 had to work for anything. He never had to fail. 00:09:20.070 --> 00:09:24.090 He never had to struggle. And struggle as uncomfortable 00:09:24.090 --> 00:09:28.870 as it is, Sometimes it's what forges us. It's 00:09:28.870 --> 00:09:33.149 how we learn to get back up. It's how we find 00:09:33.149 --> 00:09:37.549 what we're truly capable of. Ben's father thought 00:09:37.549 --> 00:09:41.190 he was giving him a safety net, but it became 00:09:41.190 --> 00:09:45.289 what they call a gilded cage, a beautiful, expensive 00:09:45.289 --> 00:09:49.860 prison. Now, Ben... becomes a professional consumer 00:09:49.860 --> 00:09:53.980 just buying things to fill a void. He's a ghost 00:09:53.980 --> 00:09:56.639 hunting his own life. Now, the model of story 00:09:56.639 --> 00:10:00.120 is simple. Money can give you a life without 00:10:00.120 --> 00:10:03.240 problems, but it can also take away a life without 00:10:03.240 --> 00:10:06.799 purpose, without the need to strive to overcome, 00:10:06.960 --> 00:10:11.620 to build what we are. Now, this isn't to say 00:10:11.620 --> 00:10:15.470 money's bad, but... unearned fortune without 00:10:15.470 --> 00:10:18.950 any guidance or reason or work behind it can 00:10:18.950 --> 00:10:23.350 be soul crushing. It can make you feel like you've 00:10:23.350 --> 00:10:26.269 nothing to do with your life because you already 00:10:26.269 --> 00:10:33.169 have everything. Is it better to have a life 00:10:33.169 --> 00:10:37.590 of struggle and purpose or a life of ease with 00:10:37.590 --> 00:10:40.919 no particular clear direction? Now from a second 00:10:40.919 --> 00:10:43.980 story, I want to talk about the incredible weight 00:10:43.980 --> 00:10:47.100 of doing absolutely nothing. Now imagine you're 00:10:47.100 --> 00:10:50.120 an artist. You have a talent, a vision, but every 00:10:50.120 --> 00:10:52.779 time you sit down to create, a voice in your 00:10:52.779 --> 00:10:56.259 head says, so what if you fail? You don't need 00:10:56.259 --> 00:10:58.740 the money. You can just buy a new easel tomorrow 00:10:58.740 --> 00:11:03.679 and try again. Now that's the core problem with 00:11:03.679 --> 00:11:06.759 unearned inheritance. It removes the stakes. 00:11:07.179 --> 00:11:09.950 Now let's imagine two characters. We've got Chloe 00:11:09.950 --> 00:11:13.970 and Liam who are siblings. Now, Chloe is a socialite 00:11:13.970 --> 00:11:17.289 and an influencer who loves their life of no 00:11:17.289 --> 00:11:21.590 consequence. Now, Liam is the artist who can't 00:11:21.590 --> 00:11:24.169 bring himself to paint. Liam says to his sister, 00:11:24.330 --> 00:11:27.769 talent isn't enough. You have to be hungry. You 00:11:27.769 --> 00:11:30.350 have to want it so badly that you can't sleep. 00:11:30.970 --> 00:11:33.750 And that's the missing ingredient, the large 00:11:33.750 --> 00:11:37.000 inheritance. removes that hunger for some. It 00:11:37.000 --> 00:11:40.740 also acts as an anchor. It holds you in place. 00:11:40.940 --> 00:11:44.299 You can't fail, so you never really learn how 00:11:44.299 --> 00:11:48.500 to succeed. Now, there's no pressure to find 00:11:48.500 --> 00:11:51.299 your passion because you'll be comfortable no 00:11:51.299 --> 00:11:54.840 matter what. And it feels like you're a professional 00:11:54.840 --> 00:11:58.419 consumer instead of a creator. Your life becomes 00:11:58.419 --> 00:12:01.480 more about spending money rather than making 00:12:01.480 --> 00:12:03.659 a mark on the world. Now, this isn't the life 00:12:03.659 --> 00:12:07.600 of freedom. It's a velvet cage. What's the danger? 00:12:08.039 --> 00:12:10.799 The real danger for me is that this complete 00:12:10.799 --> 00:12:15.740 lack of motivation, it's the slow, quiet erosion 00:12:15.740 --> 00:12:19.100 of your purpose. You might have the freedom to 00:12:19.100 --> 00:12:21.860 do anything, but you lack the drive to do anything 00:12:21.860 --> 00:12:25.879 at all. This isn't just a hypothetical problem. 00:12:26.240 --> 00:12:29.899 Many children of extremely wealthy families talk 00:12:29.899 --> 00:12:33.139 about this as a very, very real struggle. The 00:12:33.139 --> 00:12:35.460 money is a constant reminder that you didn't 00:12:35.460 --> 00:12:38.179 earn your place in the world. So the question 00:12:38.179 --> 00:12:42.480 isn't what you can buy with that money, but what 00:12:42.480 --> 00:12:46.679 you lose. So I'm curious, if you had an unlimited 00:12:46.679 --> 00:12:49.580 safety net, what would you choose to do? Would 00:12:49.580 --> 00:12:53.639 you find purpose? Would you find yourself in 00:12:53.639 --> 00:12:55.740 a gilded cage? Let me know what your thoughts 00:12:55.740 --> 00:12:56.580 are in the comments