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Glaxo wellcome db pension offer


Google247
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Google247

Hello all

After some opinions if I may

Dad has just turned 60 and can take his glaxo welcome defined benefit pension of 30kpa. Transfer offer is 1.2m, I think he should take it open a sipp and buy a range of funds and shares, as he has just had a triple heart bypass there is no way he will get more than 1.2m out of it unless he lives til he's 100, very unlikely.

The pension does rise with inflation, up to 5% hence the rather high transfer offer

What would you all do?

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Jesus Wept
28 minutes ago, Google247 said:

Hello all

After some opinions if I may

Dad has just turned 60 and can take his glaxo welcome defined benefit pension of 30kpa. Transfer offer is 1.2m, I think he should take it open a sipp and buy a range of funds and shares, as he has just had a triple heart bypass there is no way he will get more than 1.2m out of it unless he lives til he's 100, very unlikely.

The pension does rise with inflation, up to 5% hence the rather high transfer offer

What would you all do?

Cash it out now £1.2m ..,,,and I’d spend it on women, booze and drugs the rest I’d waste. 

Is he still working? If so when will he stop. 

Seriously I would open up the SIPP and invest some of it on a mixture of shares, commodities and metals. I’d also invest in other vehicles.

He should also spend loads on himself and family and enjoy it! Holidays, cars, food food etc! Also gift a load to his kids.’

Shrouds don’t have pockets as they say. 

 

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Bobthebuilder
37 minutes ago, Vendetta said:

Shrouds don’t have pockets as they say. 

I used to tell my old man "don't be the richest man in the graveyard eh?"

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Democorruptcy

Obviously wouldn't want to wish anything ill on your father but this was a reason I transferred mine

Quote

 

Is a SIPP subject to inheritance tax?

The proceeds from a SIPP pension do not form part of your estate for inheritance tax purposes if they have remained uncrystallised at the time of your death. If, for example, you have taken the 25% tax free lump sum out of the fund and this is now in your bank account, this would form part of your estate for IHT purposes.

New SIPP inheritance rules introduced in April 2015 reduced the tax liability for any lump sums paid to a beneficiary in receipt of SIPP death benefits when a member dies beyond age 75 from 45% to their marginal rate of income tax.

https://www.onlinemoneyadvisor.co.uk/pensions/sipps/sipp-death/#inheri

 

 

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Google247

My thoughts were along the same lines re inheritance (not being greedy... just don't want to see it all go to waste) he has no spouse to pass the pension to if he dies so it would just disappear , and like I said there is no way he's living to 100.

Its the inflation linking and I guess the risk of having to invest it yourself which makes me think he's leaning towards taking the 30kpa

He has already retired with a 20kpa pension from another company

And for his sins he has 10 btls bringing in around 80kpa, all have mortgages, so his tax burden has changed massively

If he could cash it in and do what he wanted with it he would probably do it and pay off all the btl mortgages and probably buy more btls, he is very much of the property is the safest asset type of person

My point is even if he buys shares which yield 3% he will be getting more and would still have the full lump sum unless he wanted to draw some down... unlikely because he spends very little money... ever. He is a strange one, won't pay for 5 star hotels or expensive meals, loves a bargain and quite happy to get his clothes from charity shops. 

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Democorruptcy
4 hours ago, Google247 said:

My thoughts were along the same lines re inheritance (not being greedy... just don't want to see it all go to waste) he has no spouse to pass the pension to if he dies so it would just disappear , and like I said there is no way he's living to 100.

Its the inflation linking and I guess the risk of having to invest it yourself which makes me think he's leaning towards taking the 30kpa

He has already retired with a 20kpa pension from another company

And for his sins he has 10 btls bringing in around 80kpa, all have mortgages, so his tax burden has changed massively

If he could cash it in and do what he wanted with it he would probably do it and pay off all the btl mortgages and probably buy more btls, he is very much of the property is the safest asset type of person

My point is even if he buys shares which yield 3% he will be getting more and would still have the full lump sum unless he wanted to draw some down... unlikely because he spends very little money... ever. He is a strange one, won't pay for 5 star hotels or expensive meals, loves a bargain and quite happy to get his clothes from charity shops. 

His other assets/income make it a no brainer to transfer, assuming they aren't in an inheritance tax "fiddle". He doesn't need the pension income so every month he's saving it up to then pay 40% tax inheritance on the total when he dies. His £30k a year will in effect be turned into £18k a year after inheritance tax.

I am not an IFA so this is not financial advice, can I just say though, that I have always liked your dad.

 

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reformed nice guy

Another thing for your dad to think about is geographical risk.

If he has 10 btls (and his own house) then the vast majority of his wealth is linked to the UK.

By going international then he reduces his overall risk profile. ie 20% America, 20% Asia, 20% Europe, 20% commodities etc

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Frank Hovis
5 hours ago, Google247 said:

My thoughts were along the same lines re inheritance (not being greedy... just don't want to see it all go to waste) he has no spouse to pass the pension to if he dies so it would just disappear , and like I said there is no way he's living to 100.

Its the inflation linking and I guess the risk of having to invest it yourself which makes me think he's leaning towards taking the 30kpa

He has already retired with a 20kpa pension from another company

And for his sins he has 10 btls bringing in around 80kpa, all have mortgages, so his tax burden has changed massively

If he could cash it in and do what he wanted with it he would probably do it and pay off all the btl mortgages and probably buy more btls, he is very much of the property is the safest asset type of person

My point is even if he buys shares which yield 3% he will be getting more and would still have the full lump sum unless he wanted to draw some down... unlikely because he spends very little money... ever. He is a strange one, won't pay for 5 star hotels or expensive meals, loves a bargain and quite happy to get his clothes from charity shops. 

You know what you're talking about on investments so why don't you offer to advise him on his investments if he draws down?  What investment broker to use, what funds etc.

My dad has zero interest in investments these days but he has emulated my conservative low fee portfolio and I let him know what changes I make so he has the option to copy those as well.

For instance I told him when I bought £20k of oil shares towards the end of last year so he had the option of doing the same.  He didn't because he saw that as too speculative but follows me on fund shifts.

I like the arrangement because I have sufficient interest in investments to go for a reposition every now and then which I then note down for my dad and he replicates it for him and my mother.  I'm not advising them what to do; I'm telling them what I'm doing and they're copying it.

With the markets booming he couldn't quite believe how much he had made since  he started copying me; though I have stressed that a correction may well be on its way so don't count the chickens quite yet.

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I would say the stress of 10 btls (unless they are managed for him) must have contributed to his heart problems and I would encourage him to gadually sell them. 

If he doesn't want to cash in his pension and transfer to a Sipp it's probably a combination of wanting a quiet life without the hassle of shares and/or not feeling he understands the stock market which is understandable.

As he's so frugal he probably doesn't wnat to go to an IFA but he surely is someone who should with all that dosh at stake.  He probably hates the thought of paying a lot in inheritance tax too even though he won't be the one who pays it (ie it will fall to his executors to cough up on his behalf).   The IFA could at least point out/emphasise how what is left of the company pension pot will be lost on his death and maybe encourage him to spend at least a little bit of it on himself and family.

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Good lord.  This is the most open and shut case I have every read.  He is clearly in poor health, has minimum needs covered by other pension, plus has some BTL-ery going on, plus no spouse.  It would be a race to the bottom in fees for financial advisors to sign off this transfer.  He should rationalise the property portfolio to pay off debt (not so much stress to manage if voids mean nothing).  Keep as much of the transfer in the DC account for inheritance tax planning.  He could cash in the other pension as well perhaps, but not as obvious.

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On 14/01/2021 at 07:47, Google247 said:

unlikely because he spends very little money... ever. He is a strange one, won't pay for 5 star hotels or expensive meals, loves a bargain and quite happy to get his clothes from charity shops. 

Not at all strange - that’s why he is wealthy😂.  Classic Millionaire Next Door stuff.

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longtomsilver

Take the £1.2million, get rid or the BTL empire and clear the mortgages.

Inspite of 2020 being a disastrous trading environment (economically) it has reliably paid dividends on the 80% that is held in bluechips, mostly FTSE 100 and FTSE 250 plus a few overseas stocks. It is valued at £193k now so the yield on the £155k was still 3.8% compared to 6.1% in 2019. 

The vanguard FTSE 100 ETF still yielded 3.5% for example which would have been £40k on £1.2million but I'm not telling you to go all in on that. If I'd have known where we were going to be today back at the £22 lows (£29 currently) I'd have bunged it all in there and forgotten about it. Not my money anyway just managing for the ex.

20210116_180326.jpg

20210116_180501.jpg

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Yadda yadda yadda

There is a chance that he enjoys running the BTLs. Wouldn't be for me but some do like the DIY that would go with it. Unless he enjoys it why not sell them or at least enough to clear the mortgages?

Definitely take the £1.2m as it is way more than he'll get out otherwise. The inheritance tax advantages are great too. I'd look at passing money on now to avoid inheritance tax later. The £20k pension and a bit of drawdown from the other one would be plenty to live on. No need to keep the property equity so that could all be passed on now tax free (sliding scale of tax reaching zero if he lives for 7 years after the gift). He could take 25% tax free from the sipp.  It doesn't have to be in one go either. That is £300,000 or £20k per year tax free until he reaches 75 at which point the inheritance tax advantages decrease slightly. Before 75 pension money in a SIPP can be passed on as income without tax, eg withdrawn all in one go. After 75 it can be passed on without inheritance tax but is liable to income tax so may be better kept in a pension wrapper.

It is well worth paying for advice as the amount of tax that could be saved is vast. Far more than the cost of advice.

If he doesn't go for this thank him from me for paying more tax than necessary. Should mean I have to pay slightly less.

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Democorruptcy
26 minutes ago, Yadda yadda yadda said:

Before 75 pension money in a SIPP can be passed on as income without tax, eg withdrawn all in one go. After 75 it can be passed on without inheritance tax but is liable to income tax so may be better kept in a pension wrapper.

How does that work? I thought only the first 25% was tax free if withdrawn in one go?

It could be passed on by divorce in a pension sharing settlement.

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Yadda yadda yadda
9 minutes ago, Democorruptcy said:

How does that work? I thought only the first 25% was tax free if withdrawn in one go?

It could be passed on by divorce in a pension sharing settlement.

You can move portions of a pension into a drawdown account. At that point you can take 25% of each portion tax free. In my scenario of 15 chunks by age 75 that would be £80k each time with £20k being taken tax free and the other £60k ending up in the drawdown pension account still in a tax wrapper. I think this is fine legally.

Obviously I've ignored investment return but the drawdown account is segregated from the rest.

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Democorruptcy
2 minutes ago, Yadda yadda yadda said:

You can move portions of a pension into a drawdown account. At that point you can take 25% of each portion tax free. In my scenario of 15 chunks by age 75 that would be £80k each time with £20k being taken tax free and the other £60k ending up in the drawdown pension account still in a tax wrapper. I think this is fine legally.

Obviously I've ignored investment return but the drawdown account is segregated from the rest.

That's not in one go, it's in chunks.

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Yadda yadda yadda
1 minute ago, Democorruptcy said:

That's not in one go, it's in chunks.

That is what I meant.

"He could take 25% tax free from the sipp. It doesn't have to be in one go either."

I'm taking the aim as being having as much of the money in a position to be passed on tax free as possible.

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Democorruptcy
4 minutes ago, Yadda yadda yadda said:

That is what I meant.

"He could take 25% tax free from the sipp. It doesn't have to be in one go either."

I'm taking the aim as being having as much of the money in a position to be passed on tax free as possible.

I was asking about your other bit:

Quote

Before 75 pension money in a SIPP can be passed on as income without tax, eg withdrawn all in one go.

 

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Yadda yadda yadda
2 minutes ago, Democorruptcy said:

I was asking about your other bit:

 

That is in the event of death. If someone dies before 75 their pension fund can be passed on and taken in one go without income tax.

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Democorruptcy
Just now, Yadda yadda yadda said:

That is in the event of death. If someone dies before 75 their pension fund can be passed on and taken in one go without income tax.

OK. I thought you meant you could pay it to others as their income. I was just about to employee some "workers". xD

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On 14/01/2021 at 07:47, Google247 said:

My thoughts were along the same lines re inheritance (not being greedy... just don't want to see it all go to waste) he has no spouse to pass the pension to if he dies so it would just disappear , and like I said there is no way he's living to 100.

Its the inflation linking and I guess the risk of having to invest it yourself which makes me think he's leaning towards taking the 30kpa

He has already retired with a 20kpa pension from another company

And for his sins he has 10 btls bringing in around 80kpa, all have mortgages, so his tax burden has changed massively

If he could cash it in and do what he wanted with it he would probably do it and pay off all the btl mortgages and probably buy more btls, he is very much of the property is the safest asset type of person

My point is even if he buys shares which yield 3% he will be getting more and would still have the full lump sum unless he wanted to draw some down... unlikely because he spends very little money... ever. He is a strange one, won't pay for 5 star hotels or expensive meals, loves a bargain and quite happy to get his clothes from charity shops. 

All the caveats I had to your initial posting have been answered here. I n addition with his other drawdown pension (and BTLs) its not as if he is reliant on it for a regular income. I would however encourage him to consider his BTLs, future health, and the future market I.e I can't see property increasing in real terms.

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Google247

Thanks for all the replies guys

Will try and get him to atleast book a consultation... might seem clearer coming from a professional

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