IHT set to wipe out PEP/ISA savings?

Thousands of families are in danger of being hit for an Inheritance tax IHT penalty because so many elderly parents cling on to tax free investment plans - without taking action to protect their estates on death. So warns investment adviser, the WAY Group.

Based on Office of National Statistics ONS figures for holders of ISAs and PEPs, combined with its own research, the firm estimates that some 165,000 elderly investors aged 70 or older are holding 'tax-sheltered' portfolios in excess of £100,000. And, based on published mortality rates, this would mean that some £0.5 billion, or one sixth of the annual total IHT tax take of £3 billion, arises from IHT on PEPs and ISAs.

Chairman of WAY, Paul Wilcox says: "Investors have been seduced by the Government into accumulating their investments within a 'tax free umbrella' but what so many don't realise is that they will then suffer a punitive IHT sting at death, whereby they and their families potentially lose 40% of their hard-earned savings."

The firm believes that more than 300,000 investors currently hold substantial equities-based tax free investments within their portfolios with no provision for their portfolios to be transferred into an alternative investment scheme sheltering the savings built up in tax free vehicles.

"Over recent years the Government has made it increasingly difficult for investors to mitigate IHT on their homes," says Wilcox.

"By stealth tactics it is also misleading investors into thinking there are substantial tax benefits in retaining PEP and ISA portfolios, while simply ensuring that they can continue to collect large amounts of IHT from the unwitting and unprepared elderly investor," he adds.

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2006-11-14 10:45:32 © Moneyextra.com