Peter Smith, 71, started thinking properly about his finances – and passing money on to his children – after the 2024 Budget.
It was then that the Chancellor, Rachel Reeves, announced that, from 2027, pensions would be subject to inheritance tax (IHT), prompting Peter to consider whether he would be better off giving his two sons some of their inheritance now rather than leaving it until after he passed away.
He has three sources of retirement income: his state pension, a civil service pension and a separate private pension pot.
Peter started looking into giving money from the pensions straight to his two children – now aged 37 and 39 – but decided that the tax implications for him were too great.
He would pay income tax on the money he withdrew and could also end up being dragged into paying the 40 per cent rate of tax if he used more than £50,270 in a single year.
