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Gifting My Pension And Tax

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Mike25 | 17:40 Fri 13th Sep 2024 | Law
34 Answers

My mum has let her pension build up in her savings account. She wants to split the savings between her 4 kids. When she went into the bank to take out 3k in cash the bank refused her the cash. What will be the implications of a bank transfer of the money regarding the tax on the gift? Can she make 4 transfers of 3k? Will the recipient have to pay tax?

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22:12 irrelevant to this.

FGS she can divvy up savings it's NOT a pension, stop confusing the man.

We have answered the question asked.

But it would be wrong not to point out potential pitfalls regarding disposal of assets.

TORATORATORA, if the mother is in receipt of pension credit, a reduction in savings of £12,000 would make a difference to the amount payable and deprivation of capital would have to be considered by a Decision Maker.

TORATORATORA, it's all well and good saying the proposed action won't affect tax but if it were carried out and she were treated as having that £12,000 still for the purposes of entitlement to pension credit, it is worth being aware of that fact.

My posts are correct and confirmed by buenchico.

Phew that is OK then.

state pension: it seems obvious she just whacks it off to the people she wants. ( as a short amswer)

"no tax is payable on gifts unless she dies within 7 years then it will be treated as part of her estate for IHT on a taper relief basis" ( one of the usual suspects) .... nope - only if she exceeds the £325k limit which from the discussion is extremely unlikely.

What will be the implications of a bank transfer of the money regarding the tax on the gift? None

Can she make 4 transfers of 3k?  yes

Will the recipient have to pay tax? no

 

Question Author

Yes, pension credit. Does that make a difference to the question?

Only one thing better than iteration and that's reiteration.

As your mum is in receipt of Pension Credit (PC), depending on the reasons for withdrawing money, a Decision Maker may decide it was what is known as, "Deprivation of Capital" and treat her as having the £12,000 in her account still and it would be, "Notional Capital” as it’s not actually in her account.

Deprivation of Capital is not straightforward and I suggest you get in touch with Citizens Advice or a welfare rights advice centre to talk you through the possible consequences of making the transfers.

Don't let Starmer and Reeves know that someone on pension credit can save thousands, or they will cut it.

How has she got pension credit with a lot of savings?

CBL - you asked about pension assignment ( to heirs) and a  recent case - - Staveley

It is here:

https://www.curtisbanks.co.uk/advisor-insight/staveley-case-summary-and-outcomes

andres, you can have £10k in savings before it affects pension credit. Over that amount and every £1k is treated as £2 a week income so can reduce the amount of pension credit.

Annoyingly, anyone with £2 a week over the threshold and zero savings is entitled to nowt 

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