QA51 - Listener Questions, Episode 51 cover art

QA51 - Listener Questions, Episode 51

QA51 - Listener Questions, Episode 51

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In this Meaningful Money Q&A episode, Pete and Roger answer six listener questions on pensions, retirement planning and tax for a UK audience. We cover whether to put life insurance into trust, how to reduce the 60% marginal tax trap around £100k income, and whether taking a defined benefit pension early can make sense when health is a factor. Plus, we explain the Royal Mail Collective Defined Contribution (CDC) pension, share practical guidance on dealing with overseas pensions, and discuss when to take 25% tax-free cash for the best outcome. Shownotes: https://meaningfulmoney.tv/QA51 01:36 Question 1 Hi both, I have a question relating to discretionary trusts for life insurance policies. I'm from Scotland, 37, married with 2 young children and have a life assurance policy with Vitality which is currently not in trust. I was considering putting into a trust for the benefits associated to inheritance tax but was looking to get your opinion on whether it was necessary or not, and what the pros/cons are. Thanks, Marc 05:46 Question 2 Hi Pete and Roger I am a relatively latecomer to the podcast - its been a year or so now but your work makes the complications of planning for retirement so much more understandable so thank you for bringing clarity to a very difficult subject. I have two first world questions if I may. Neither are time critical. I am in a fortunate position. DB pensions will kick in over the next 2 years (I am 63) totalling circa £75K pa and with the state pension at 67 it won't be very long - if tax thresholds and rates don't change - before I will be hitting the 60% effective rate. So to delay the inevitable, I am thinking I will need to contribute to a DC pension! As I understand it, if I have a DC scheme for three tax years and presumably contribute to such a scheme each year (say £100?) in the year I hit the £100K income, I will be able to contribute gross £3600 x 4 (so £2160 pa or £8640 in total, less any annual contributions along the way) in the first year or with care spreading that amount over 2-3 years to ease the tax burden. I realise when the money is withdrawn it will still be taxed at my marginal rate, but maybe the 60% marginal rate will have been removed by then - I can hope! Is that right? Have I missed anything or are there any other techniques generally available? I am also in a position that when my wife and I both die, unless carehome fees have eaten into the estate, there will be inheritance tax to pay as our combined wealth is well over £1m and we have already given away what we reasonably can to our children. As I understand it, inheritance tax is payable 6 months after death but all being well probate will be granted well before that so our bank accounts can be used to pay the tax (our children have financial and health powers of attorney but they are irrelevant on death). Apart from incredibly expensive life assurance or a lifetime gift of cash for this purpose, is there anything else we can do to facilitate payment (the nature of our affairs means there's not much more we can do to mitigate the liability itself, ie the vast majority of the value is in the family home!) Many thanks, David 11:46 Question 3 Hi Roger and Pete, First of all thank you for all the content you provide, it has been incredibly useful as I start to really take the idea of early retirement seriously. I am 49 and looking to retire as early as financially possible as I have medical issues that mean my life expectancy is somewhat curtailed - though I plan on defying the inevitable for as long as possible. I have a DC pension which I plan to access as soon as I stop working in hopefully 10 years' time. I also have an index-linked deferred DB pension which provides a 50% widows pension as one of the benefits. I am torn between accessing this 6 years early (with a 25% reduction) as I start drawing from my DC pension, or delaying so that my wife is better taken care of later in life. Whatever I choose, all the projections seem to stack up that my DC pension should last into my 90s, but I'm acutely aware that I will probably want to go a bit overboard when I first retire and try to maximise travel and experiences. My question is, am I missing something in the DB trade off? Assuming I live a while after retiring, accessing the pension early will take a decent amount of time before we're financially worse off than we would have been if we'd waited (~13 years). However the combined loss of my state pension and the smaller DB income could leave my wife short of funds. I would really appreciate your perspective on this scenario and anything else you think I might want to consider, many thanks again for all of your words of wisdom, Dan Meaningful Academy Retirement Planning: https://meaningfulacademy.com/retirementplanning 19:40 Question 4 Hi Pete and Roger! My partner works for Royal Mail, she is under the new starters contract and started ...
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