How to minimise worry over tax changes to inherited pensions
Those affected, myself included, are already looking at how to adjust their lives, money, and estates for the future.
More than ever, your inner consultants will help you make informed and mature decisions and develop a process for redesigning your life and financial plans to minimise your qualms.
Clarity comes from knowing your numbers.
Galvanise your inner technician to discover the current and new rules on inherited pensions.
Remember that most firms will have an agenda that might slant the advice they post about inherited pension rules, so go straight to the source. HMRC’s website provides plenty of information about taxation. If that’s not authoritative, I don’t know what is.
Businesses thrive on numbers; you should apply the same to your personal and financial life.
Mobilise your inner accountant and do the maths. Calculate the value of your current assets, then determine how much tax your estate will pay if you die now and when the new rules come into force.
How to make informed decisions about tax on inherited pensions.
If you think personal financial planning is just about increasing investment returns and minimising tax, you’ve missed the point.
Consult your inner counsellor and consider your goals, ambitions, family, relationship with money and more.
Everyone has a different approach to tax. Some will do anything not to pay tax, while others see it as inevitable and take no action to minimise it. Both strategies can have undesirable consequences.
Alternatively, adopt a Purposeful Prosperity approach to align your life vision and financial goals. Consider how to use your wealth to make a difference and give your life meaning beyond increased investment returns and lower taxes.
Overcome the hurdles
You will face three fretful hurdles to Purposeful Prosperity as you make adjustments to deal with the taxation of inherited pensions:
- Inadequate self-knowledge. You must know your values, goals, relationship with money, personal and family relationships, and your definition of enough to make informed decisions. “Self-awareness is the meta-skill of the 21st Century.”
- No plan. Without an agreed and informed plan, you risk anger and strife in the family you leave behind. Make a plan for what happens when you die, and agree on this with your family. You have until April 2027 to add in the impact of tax on inherited pensions, but make sure to do it.
- No process. Without a process, you will go around in circles. A process has a start and end, so you know where you are going. Your inner counsellors will help, and you may decide to retain an external adviser, planner, or coach to help you navigate the process.
The government has been generous in the two and a half years it has allowed us to reorder our affairs. However, the delay will present a dilemma for older individuals and those with poor health. It may even push some people towards the “Swiss option”. This is unwelcome pressure, and even discussing this will cause distress in families.
However, for most, the forthcoming taxation of inherited pensions presents an opportunity to make or revise a financial life plan that quickly achieves certainty, clarity and confidence through Purposeful Prosperity for you and your family.
Photo attribution
Photo by Matt Bennett on Unsplash
Audio link
https://audio.com/jeremy_deedes/inherited-pensions/
Other attributions and references
Eurich, Tasha. Insight: How to Succeed by Seeing Yourself Clearly. London, Pan Books, 2018.
Taking it further
Go to the source of the rules relating to pensions and their taxation at HMRC: https://www.gov.uk/government/collections/pension-scheme-administration-detailed-information
Download financial statement templates at https://shrtm.nu/wAy and work out your assets and liabilities
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I work with ambitious, family-oriented professionals transitioning to independent consultants to create a 3 to 5-year holistic plan so that they grow wealthy, make a difference and find meaning.
My clients are aged 35-50. They are in a long-term relationship with family and parents who are supportive but ageing. They wrestle with personal and financial responsibilities and dream of more control, wealth, time and purpose.
If this excites you, you are coachable, willing to change, and want to stop going around in circles, then find out more at jeremydeedes.com
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