Inheritance tax task: don’t leave too much to HMRC...
Given actuaries started out counting gravestones to help work out how long people live, there’s always been a mournful side to the business of putting aside enough for old age.
As I’ve written previously, the concept of retirement is shifting, as is the perception of ageing. More people want to (and can) continue to work and enjoy an active, decades-defying lifestyle.
And more are doing so but the Grim Reaper knows he’ll never be out of a job.
For many bereaved families, inheritance tax is this mythical figure made flesh (or, at least, forms). Swinging his scythe like Poldark in a cornfield, he lays waste to those who leave too much behind.
Latest figures show his cutting edge is as sharp as ever: a record £5.2bn inheritance tax was collected last year.
No-one is saying you should not pass on any wealth you are fortunate enough to possess to your loved ones, but handing it to HMRC when you don’t have to can be avoided.
You’ll be relieved to know that I don’t intend to spell out here, in detail, how you fund your retirement, leave a legacy and pay the legal rate of inheritance tax because, despite the subject matter, I intend for this blog to be thoughtful and diverting, rather than advice (which you can get from our colleagues in Punter Southall Financial Management).
Protecting your legacy
Frankly, how you manage any wealth you’ve accumulated for the benefit of your retirement and family is a welcome conundrum to solve, especially when set against the pessimism of potential poverty in your winter years through pension freedoms and other factors.
The flip side is that most members did not behave like pools’ winners (that ages me) when they were able to open their pension pot. They reverted to type and, as the figure above shows, may actually be too cautious and not spending enough in ways that can benefit both them and their family.
That brings change to the way your finances might be managed. Most managers will reflexively want to protect capital by generating income but, at this stage, is that right?
Do they now need to adjust their mindset to use both capital and income to live on, having made arrangements to protect their legacy?
Planning for retirement
I hope this is not a mixed message from someone for whom spreadsheets are as everyday as broadsheets but it is worth factoring in to how you want to live in your later years.
Planning for retirement and the shift it brings inevitably means planning for what is the final shift. None of us really wants to face up to this and would, no doubt, rather be doing anything else.
But confronting this reality, and seeking the advice that will give you and your family a sense of control and peace of mind, will sow something worth reaping for all concerned.