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OECD calls for higher inheritance tax after Covid pandemic


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3 hours ago, Sprrite said:

Changing the inheritance tax % and threshold is pretty much redundant as most people will transfer most of their wealth before they die thus escaping any inheritance tax.

I think you have to transfer seven years before you die to avoid IHT. Most people want to retain control, and they don't know when they will die, so they won't transfer soon enough. Even if they do, aren't their limits on transfers before taxes are applied?

I'm a bit sceptical of the claims inheritance tax doesn't matter:

1) I thought they were a significant factor in reducing wealth inequality in the last century (a lot of rich families couldn't afford to keep their stately homes and pay the inheritance tax on them).

2) Joint life second death whole of life policies are still popular. Several years ago I worked on pricing these policies for rich clients (people who wanted cover of tens or hundreds of million - i.e. they expected their estate to pay at least that much tax when they died).

1 hour ago, crescent said:

I think if anyone gets a big inheritance good luck to them, it does not have any adverse affect on my own life.

A big inheritance can affect everyone. Look at how the rich are controlling things. Gates on health policy. Zuckerburg, Murdoch, Mercers etc. on elections. Koch on climate policy. Of course it could matter if such concentrations of wealth were broken up.

Not to mention the fact that there are resource constraints, so that to some extent if people have wealth, others go without. Yes, the economy isn't a zero-sum game. But the accumulation of wealth is not purely the result of creating economic value.

1 hour ago, crescent said:

What is fair that if a person gets of their backside and works and shows their kids a work ethic and that is the way to get on in life that their hard works goes to their own family

How does this fit in with inheritance tax? If your parents accumulated a fortune, but weren't allowed to leave it to you, couldn't you have still learned a work ethic from them? Whereas if you left you £100m or whatever, wouldn't that remove the need for a work ethic?

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4 minutes ago, Young Turk said:

I'm a bit sceptical of the claims inheritance tax doesn't matter:

1) I thought they were a significant factor in reducing wealth inequality in the last century (a lot of rich families couldn't afford to keep their stately homes and pay the inheritance tax on them).

Why does it matter if they keep their stately homes? For a change to inequality to benefit it needs to bring the bottom up rather than the top down, otherwise it's just jealousy.

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4 hours ago, Unmoderated said:

That's not really a reform, that's virtually the UK right now lol. 

How about giving all inheritees a tax free inheritance allowance of £100K. This way families with lots of kids don't pay as much as the single child inherent the whole lot. Seems reasonable, would raise more money AND impact far fewer people making it politically acceptable. 

I think there should be a tax-free allowance to cover the costs of dying.  We paid out the thick end of £15k; everyone is after your money when you die.

So I would have a generous tax-free allowance, but above-inflation HPI above that allowance would have a graduated tax.  The justification being HPI gain was just luck, living in the right place.

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1 hour ago, crescent said:

What is fair that if a person gets of their backside and works and shows their kids a work ethic and that is the way to get on in life that their hard works goes to their own family

Maybe but serious wealth doesn't come from work any more.

Londoners have seen their houses double in value since 2009.  It's not something they worked for.

When someone wants something these days the last thing that crosses their minds is working and saving up for it.  Those days need to come back.

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Before you snuff it buy assets like a house in Croatia or Slovenia- zero inheritance tax.  I mean if a Slovene or rich Croat dies and his kid move to UK , he doesnt  have to pay IHT - best get rid off it. Cut spending instead

 

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2 minutes ago, kzb said:

I think there should be a tax-free allowance to cover the costs of dying.  We paid out the thick end of £15k; everyone is after your money when you die.

So I would have a generous tax-free allowance, but above-inflation HPI above that allowance would have a graduated tax.  The justification being HPI gain was just luck, living in the right place.

Direct disposal.... Direct Disposal - The Good Funeral Guide

Pay for it and specify, in your will, that if it is not used your entire estate will go to Battersea Dogs Home.

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16 minutes ago, kzb said:

We've discussed this on here before.

173,000 Covid deaths out of 16 million pensioners is only about 1%.  You can argue about how many excess deaths there have been and how many years of life were lost, but it doesn't affect the conclusion that it is only single digits per cent saving.

However that small percentage should have an effect, because it still comes to billions over the years.  My favourite question is how much the pensions industry will be saving, and who is getting that money.  Because they all have models forecasting future outgoings, which have now been reduced by a per cent or few.

Most firms in this industry offer annuities (regular payments until you die) and protection (lump sum payout when you die). When people die earlier than expected, that is good for annuities and bad for protection and vice versa. The two never offset fully, but they do to a significant extent.

 

The pensions industry will largely be suffering due to the hit to financial markets (low interest rates and poor stock market performance).

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4 minutes ago, Young Turk said:

The pensions industry will largely be suffering due to the hit to financial markets (low interest rates and poor stock market performance).

I don't know why that would be because they'll just lower their pay out rates to compensate.  They'll never suffer.  You have to live 34 years on an annuity before you even get back what you paid in.

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2 minutes ago, kzb said:

I don't know why that would be because they'll just lower their pay out rates to compensate.  They'll never suffer.  You have to live 34 years on an annuity before you even get back what you paid in.

14 in my case, one year to go, but I did retire in my mid 50s.

Edited by Bruce Banner
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10 minutes ago, Bruce Banner said:

Direct disposal.... Direct Disposal - The Good Funeral Guide

Pay for it and specify, in your will, that if it is not used your entire estate will go to Battersea Dogs Home.

There's a lot of other stuff besides the funeral.  You need a lawyer to deal with probate and stuff.  Everybody charges an admin fee.

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31 minutes ago, kzb said:

I think unearned property equity above inflation should be taxed after the owners are dead.  The proceeds to be ring-fenced for social care so that cost does not fall on the working young.

It's unfair that offspring of Londoners get to inherit millions, whilst Blackpudlians only get thousands.  This only feeds our gross regional inequality.

This also adjusts investment money away from property speculation and hopefully into more productive industries.

exactly 

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13 minutes ago, Riedquat said:

Why does it matter if they keep their stately homes?

I didn't say whether it mattered. I was simply saying that I thought a lot of families couldn't afford their stately homes due to inheritance tax. Therefore the commonly held view that rich people don't pay inheritance tax seems questionable. Though perhaps it just took several decades for them to figure out how to avoid it.

16 minutes ago, Riedquat said:

For a change to inequality to benefit it needs to bring the bottom up rather than the top down, otherwise it's just jealousy.

I think this was arguably achieved in the mid twentieth century with things like the NHS, and more public funding of schools, housing, infrastructure.

I can see the argument about jealousy applying to specific goods. Maybe you can read a rare language and you have a valuable book collection in that language. If I seize that from you and place in library where everyone ignores it, that benefits nobody. But I don't see how that applies to wealth in general. 

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1 minute ago, Young Turk said:

I can see the argument about jealousy applying to specific goods. Maybe you can read a rare language and you have a valuable book collection in that language. If I seize that from you and place in library where everyone ignores it, that benefits nobody. But I don't see how that applies to wealth in general. 

People are often jealous of others with more money than them.

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34 minutes ago, Bruce Banner said:

Eh!

55(ish) +13 = 70(ish) 

How did you get such a good annuity rate?  Over 7% ?  I thought the days of that kind of rate were long gone.

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1 hour ago, kzb said:

I think unearned property equity above inflation should be taxed after the owners are dead.  The proceeds to be ring-fenced for social care so that cost does not fall on the working young.

It's unfair that offspring of Londoners get to inherit millions, whilst Blackpudlians only get thousands.  This only feeds our gross regional inequality.

This also adjusts investment money away from property speculation and hopefully into more productive industries.

So southerners paid the same for property say 40 to 50 years back as those in blackpool ?

Or did they have to work harder in the first place then also.

 

 

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1 minute ago, kzb said:

How did you get such a good annuity rate?  Over 7% ?  I thought the days of that kind of rate were long gone.

7.5%, and yes it was a good rate in 2008, the best I could find was 6.5%, but a financial adviser I knew found it on his secret squirrel list and I bit his arm off. One of my better decisions going for annuity rather than drawdown.

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5 minutes ago, Bruce Banner said:

7.5%, and yes it was a good rate in 2008, the best I could find was 6.5%, but a financial adviser I knew found it on his secret squirrel list and I bit his arm off. One of my better decisions going for annuity rather than drawdown.

To get 7.5% from age 55 is unbelievable.  I bet you can't get 2% at that age now.

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1 hour ago, PeanutButter said:

Go on, give us a breakdown of what you've accumulated. How much did you inherit? How much is unearned HPI? 

You live in a country that has allowed you to gather a massive hoard of wealth, not on an island populated solely by yourself. You live in a society. You have benefited from a safe, clean, educated, free, well-run society. And now you want to hive off to some tax avoidance scam land. :D What an absolutely wonderful lesson for your kids. Very Trumpy, much Philip Green vibes.

Accumulated enough to not have to work, and would like to give my children the same luxury. I have already paid my taxes once.

I have inherited zero as still have my parents but will not receive much anyway. I own my house but price is irrelevant as will always need somewhere to live. 

My children's standard of living is all I care about and will do all in my power to ensure it's maximised. 

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20 minutes ago, kzb said:

I don't know why that would be because they'll just lower their pay out rates to compensate. 

Which firms and which products are you referring to? A typical pensions provider has several types of service. 

Annuities, protection and savings.

The only one I can think where they can choose to offer lower payout are with profits policies (but they would have to justify the level of bonuses in with profit funds). Any other type of policy they are contractually obliged to give the payout they promised. If they offer reduced pay out for new business, they lose customers to their competitors.

Annuities and protection offset as I have explained.

Savings will have taken a hit. People are probably contributing less to their pensions (the unemployed stop making contributions and I think furloughed staff make lower contributions. People worried about prospects will make fewer contributions, so probably less is being contributing in SIPPs). But the main hit will be the management charges (these are a percentage of value of the pension pot). These were much lower for most of 2020 and are still below pre-covid levels, so the income from these charges will be much lower.

Another downside will be to new business. People tend to get life cover when they buy a house, so there will be less of that. Young and middle aged people might like to have life cover during a pandemic, but they will probably be a lot more worried about losing their job than losing their life, so many will put off and other will lapse their policies.

1 hour ago, kzb said:

They'll never suffer.

Have a look shares like L&G and Aviva. They crashed when the market crashed and recovered when the market recovered. They are a little lower than the pre-covid high. This suggests they didn't suffer much harm from higher mortality, but will have lower income as people reduce contributions and overall haven't done well. The harm to Aviva shareholders is understated by their share price, as they didn't receive a dividend.

1 hour ago, kzb said:

You have to live 34 years on an annuity before you even get back what you paid in.

Insurance companies are harmed by low interest rates, just like banks. It reduces their margins.

If you took out an annuity 20 years ago, you would receive a much better rate, but the annuity provider held bonds with much higher rates as well.

Builders and landlords are benefitting. Ordinary homeowners might think they are benefitting too, but only if they are willing to "look through" their children being priced out of homeownership.

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1 hour ago, Riedquat said:

People are often jealous of others with more money than them.

But you said it was "just jealousy!" That requires that nothing could be achieved through taxation.

That seems ludicrous.

e.g. Consider a person saving to buy a flat, has an income of £30k, can borrow £150k, doesn't have enough savings to put down a deposit to afford anything. Student loan repayments are deducted from his salary. If tuition fees had been eliminated, he would have saved enough. If the elimination of tuition fees had been funded by a tax increase on the wealthy, would that tax only be because he is envious of the rich? If it actually allowed him to buy a flat, how could that have anything to do with envy? Could it be the case that if he weren't envious of the rich, he wouldn't want to own a flat?

And if additional taxes on the wealthy are bad, how are current levels of taxation justifiable? Or should all progressive taxation be eliminated? 

 

I don't think you're wrong to acknowledge that envy is a factor, but I think that probably mainly applies to a narrow section of the middle class. A certain type of left-wing politician, academic and some professionals are probably particularly likely to be envious of the rich (they feel they are better educated, more clever and do more good than most rich people), but that has no bearing on whether a tax is good or bad. That depends on its consequences and not the motivations of the people who advocate for it.

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Taxes in general are theft. The only 'fair' way if you are going to do it is flat tax rates that apply to everyone equally. Rewarding losers whilst punishing winners leads to perverse incentives.

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3 minutes ago, doomed said:

Taxes in general are theft. The only 'fair' way if you are going to do it is flat tax rates that apply to everyone equally. Rewarding losers whilst punishing winners leads to perverse incentives.

So perverse that we have growing inequality as "the winners" slack off?

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2 minutes ago, dugsbody said:

So perverse that we have growing inequality as "the winners" slack off?

Or some realise the effort isn't worth it so don't bother at all. You can pretend people do not choose benefits as a way of life if you want.

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