13:52 I already appreciated the fact that pensions could be inherited but its interesting to also take into consideration that fact that a) you can use them to keep investing even during retirement and get tax relief b) use them to plan for your partner's use (and then still pass them on after they die) and c) you get to maintain control even though they are outside of the IHT limits (ie not given away "YET", which if you had already given away you'd need to survive 7 years and you can't control how the money is spent).
I can see that contributions would get free 20% tax relief but when you withdraw it would you not just pay back the 20% tax and be back where you started. At best you could get 25% tax free cash and only really save 5% tax. How am I wrong?
It's just the way percentages work. You only pay 20% income tax on the bit after tax free cash. Imagine a pension of £100 (it makes the maths easier... 25% tax free cash = £25 So there's £75 left in the pension If this £75 is withdrawn there's 20% tax (i.e. £15) so you actually receive £60. (£75 - £15 = £60) So £25 tax free cash plus £60 taxed pension = £85 Which is £5 more than the £80 originally contributed to get the 20% tax relief.
