If we are talking about people in the south east who own a house, then their pension pot doesn’t need to be very big, and their standard of living does not need to be much more than basic, for this to affect them.
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For it to affect a married couple owning an average house in the SE (value c.£450k) they would need to have savings plus "excess" pension - i.e. pension that they don't draw/annuitise etc - of £550k before it becomes an issue. And then IHT is only on the excess.
aug 20, 2025, 10:51 am • 0 0 • view
550k gets you a 20k a year pension at the recommended 4% withdrawal rate. They aren’t living like kings.
aug 20, 2025, 12:02 pm • 0 0 • view
But at that level they also won't have any IHT exposure - and on average you are looking at the fund level after 10+ years of withdrawal, not the "peak" value before drawdown. The peak fund value you would need to have to expect to have a death estate subject to IHT is a lot more than £550k.
aug 20, 2025, 12:15 pm • 0 0 • view
25k then. The avarice.
aug 20, 2025, 12:19 pm • 0 0 • view
yes but again, if they actually draw it they won't end up with an IHT liability. We are only talking about situations where they have a fund that would support drawing e.g. £30kpa, they only draw £20k, and they end up with a larger balance on death. It's not a tax on large pensions that are "used"
aug 20, 2025, 12:38 pm • 0 0 • view
Because no one can predict when they are going to die. These people are not in receipt of index linked pensions, guaranteed for life.
aug 20, 2025, 1:56 pm • 0 0 • view
...and have chosen not to annuitise in the hope of passing on the surplus they have over and above meeting their lifetime income needs? It's a chosen strategy, not one that is forced on people (it's pension freedom, not compulsion....)
aug 20, 2025, 2:42 pm • 0 0 • view
More likely because for the last 20 years annuity rates have been awful.
aug 20, 2025, 2:48 pm • 0 0 • view
yes, because they think they will achieve greater value (higher income and retained surplus) through this route - if they "win" that bet, then the surplus forms part of their estate for IHT purposes.
aug 20, 2025, 2:59 pm • 0 0 • view
I think for most just higher income. Still nowhere near what their compatriots in the public sector enjoy.
aug 20, 2025, 6:30 pm • 0 0 • view
What needs looking at is the disparity between those who have saved for a pension in the private sector vs what is available in the public sector, through taxpayer funded contributions well in excess of 20% pa and index linked and guaranteed until death. Compare that to an equivalent 550k annuity.
aug 20, 2025, 12:22 pm • 0 0 • view