the times | Saturday November 14 2020 1GM 65Money
O
ver the next decade nearly
£1 trillion is likely to be
passed on at death from
one generation to the next.
In a society where we
talk a lot about a growing divide
between young and old, on the face of it
that seems a substantial redistribution
of wealth.
But there is a problem: the average
age of inheritance is rising and for
many people these windfalls — sad as
they are — come too late in life.
According to the Institute for Fiscal
Studies those born in the 1960s will
be an average of 58 when their last
surviving parent dies. Those born in the
1970s will be 62 and those born in
the 1980s will be 64.
The wealth of the retired population
could do much more good if it were
received by sons and daughters in their
forties or even grandchildren in their
twenties, at the start of adulthood
rather than as they approach their own
retirement. The “giving while living”
movement was originally started as a
prompt to US billionaires to make the
best use of their vast wealth while they
were still around, rather than holding
on to it until their death.
But the case for it also applies to those
of us who may not be in the billionaire
class, but who may have some wealth
that we do not need to fund our retire-
ment. This could be wealth tied up in
our main home, buy-to-let property or
more liquid financial assets.
What are the attractions of planning
to pass on wealth long before it is forced
upon us by the passage of time?
The most positive reason is that we
get the pleasure of seeing our loved
ones benefiting from our wealth and at
a time that delivers maximum help to
them. What could be more rewarding
than knowing that wealth which we are
not relying on can be used by our child-
ren or grandchildren at a crucial time in
their life?
A well-timed gift could fund the de-rather than only think in terms of leav-
ing a legacy to charity.
There are also some tax advantages
of passing on wealth at a time of your
choosing, although the government
could think about doing more to make
giving while living more attractive.
In general, wealth passed on at least
seven years before death no longer
counts in your estate for inheritance tax
purposes. This means that for those
with the most wealth, the rewards for
passing on wealth early are the greatest.
There are also annual allowances for
lifetime gifts and other exemptions,
which mean this approach can make
sense from a tax planning point of view.
Giving while living is not about older
people depriving themselves while
their children and grandchildren enjoy
a riotous standard of living. Before
making a large gift, donors should en-
sure that they are properly provided forand have also considered the potential
impact of later-life costs such as expen-
sive long-term care. But whereas a sig-
nificant number of those now in retire-
ment have benefited from huge house-
price inflation, relatively generous final
salary pensions and free university
education, their adult grandchildren
will probably have seen none of these.
Worse still, in the current economic
climate, young people starting out on
their careers may have permanent
damage to their employment prospects
as firms lay people off and cancel in-
vestment in training and graduate
opportunities. Your lifetime gift could
help a young person weather the storm
and be better placed to prosper as the
economy recovers.
There are clearly barriers to giving
while living. For many people, a major
source of wealth is the home they live
in, and financial products that allowthis wealth to be accessed in a cost-
effective way are still far from perfect.
In addition, no one knows what the
future holds and it makes sense for old-
er people to have some financial re-
serves for unexpected eventualities.
Provided it is done carefully, why not
put your wealth to work now for the
benefit of those you love? Politicians
spend a lot of time talking about inter-
generational fairness and how to do
more for those who may be struggling.
But we don’t need to wait for the politi-
cians to redistribute wealth for us.
We can make our own choices about
how best to make sure our wealth not
only generates security for us in retire-
ment, but also gives a better start in life
to a whole new generation.
Steve Webb is a visiting fellow at the
Institute for Policy Research at the
University of Bath and a former MP
and pensions ministerposit on a first home, the cost of a wed-
ding, or money to make further study an
option. And those who give while living
can help shape how that money is used,
rather than simply pass on a cash sum.
You could enjoy seeing the impact
that this has on a family member rather
than keep it in a cash Isa earning zero
interest. Or, perhaps for those without
direct descendants, use some surplus
wealth to fund a favoured good cause
and influence how the gift is used,It means loved ones
benefit from our wealth
at the most helpful time
Energy costs are affected not just by
how much you use, but also by where
you live and whether you take gas and
electricity from the same supplier.
Comparison websites can tell you how
much you can save. You normally have
to tick a box to see a list of deals from the£300
saving possible from cheapest dealsThe joys of giving while living
Steve
Webb
Comment
Passing on money during your lifetime could help family to cover expensive childcare when your grandchildren are youngThe tax rules
6 Anything left to a spouse or civil
partner is free of inheritance tax (IHT).
6 IHT is charged at 40 per cent on
assets above the tax-free threshold
of £325,000. The rate falls to 36 per
cent if you leave at least 10 per cent
of your estate to a charity. There is
no tax if you leave everything over
the threshold to a charity or a
community amateur sports club.
6 You get an additional allowance
of £175,000 if you leave a main
residence to a direct descendant.
6 Any unused allowances can be
passed on to spouses or civil
partners, so a couple could leave
a total of £1 million tax-free.
6 You can give away anything
without any IHT repercussions if you
live for seven years after the gift.
6 You have an annual exception of
£3,000 worth of gifts each tax year
and you can carry that forward for
one year if you don’t use it.
6 You can make gifts from regular
income of as much as you like so
long as does not affect your
standard of living. You could, for
example, pay school fees for a
grandchild, or living costs for
a child or an elderly relative.
6 You can make as many gifts of up
to £250 as you like, as long as they
are not to someone you have used
other allowances on.GETTY IMAGESevidence of mass tax avoidance was re-
vealed in the so-called Panama Papers
scandal of overseas investment in 2016.
The role of the unit is to use criminal
and civil powers to investigate suspi-
cions of serious noncompliance by
companies and some of Britain’s
wealthiest taxpayers. Since it was set up
£1.8 billion extra tax has been collected.
Andrew Sackey, a partner at Pinsent
Masons and former head of the OCW,
said: “The unit has really found its feet.
Due to the complexity of the cases it in-
vestigates, it can take time for criminal
cases to reach the public domain of the
prosecution stage.
“The increase in charging decisions
demonstrates that the unit’s early work
is now starting to pay off.”
HMRC was creating “a level playing
field for businesses and citizens” who
“shouldn’t be disadvantaged or affected
by the criminal actions of others”.
Ali HussainDawn raids help snare
more wealthy tax-dodgers
T
ax investigations and arrests in-
volving some of Britain’s wealthi-
est people and corporations have
risen 40 per cent in a year after a crack-
down on offshore avoidance schemes.
There were 70 arrests, dawn raids or
interviews by the HMRC’s elite Off-
shore Corporate and Wealthy (OCW)
unit in the 12 months to the end of
March, up from 50 in the previous year.
The investigations yielded £414 million
for the Treasury, according to Pinsent
Masons, a law firm.
Most recently, the OCW won a case
against the former BHS owner Domin-
ic Chappell at Southwark Crown Court.
Chappell was sentenced to six years in
prison for evading tax on £2.2 million of
income he received when his company,
Retail Acquisitions Ltd, bought BHS for
£1 in 2015 from its previous owner Sir
Philip Green. The chain collapsed,
resulting in the loss of 11,000 jobs.
The OCW was established afterIgnore ‘fake news’ from energy firms
E
nergy customers are being ad-
vised to ignore letters from sup-
pliers that tell them they are bene-
fiting from price cuts.
Eon and Ovo are among the compa-
nies that have written to people on
default tariffs — the rates they are
moved to after a fixed or variable rate
deal ends. These standard variable
tariffs (SVTs) fell by £84 to £1,042 for
the average dual fuel customer because
of a regulatory price cap that aims to
help those people who do not regularly
switch deals or suppliers.
SVT customers will still be paying
about £300 more than the cheapest
tariffs, however, and that figure could
rise because there is likely to be a surge
in bills during a lockdown winter when
more people are working from home.
This hike in usage could add 20 per cent
to energy bills, analysts have said.
About 11 million households are pay-
ing an SVT. They will have received
letters or emails assuring them that
they are getting a good deal and need
do nothing to benefit from a price drop.whole of the market, rather than just
those the site can switch you to. Check
several sites because they have exclu-
sive deals with different suppliers.
It is also worth contacting a supplier
directly because it may be able to pass
on cost savings by not having to pay a
commission to a comparison site.
You can also use auto-switching
websites that scour the market regular-
ly and, with your permission, move you
between suppliers to ensure you never
pay default rates. Flipper charges £30 a
year, which can be more than offset by
not being on an SVT. Other firms
include Look After My Bills and We
Flip. They do not charge a fee, but get
commission from suppliers.
Ovo and Eon said they were simply
contacting SVT customers to inform
them of price changes in line with the
price cap. Ovo said it set out options,
including switching to a fixed plan or
shopping around and Eon said custom-
ers could check if they were on the best
tariff on its website.
Ali Hussain