Help Please

redmalc · 15 February 2018 at 10:03AM

My situation is as follows ,i am due to retire in two/three years and the wife does not work now and is 61 years young with a full state pension entitlement in 5 years.
We are buying a property in Spain for 175K and for the hell of me cannot come up with what will be the best way to pay given the following scenario.
My Private Pension Pot is currently 310K,shares 50K S&S Isas 130K and cash Isa 65K

Wife,No private pension,S&S Isa 65K and cash Isa 62K

We have general cash savings of approx 25K and am thinking of taking 25% of my pension pot approx 75K and the balance to be paid from cashing the shares 50K and the remaining 50k from the cash isa
Any advice would be welcome,its difficult these days when you have looked after your money and the main job is keeping it from the tax man

kidmugsy · 15 February 2018 at 11:39AM

Suppose you are happy with your current ratios of equities:bonds:cash. Look upon the property as being equity-like. Then you might reasonably aim to preserve your ratios.

Starting with the shares is good because they are not in a tax shelter. Taking the TFLS is OK if it amounts to removing money from equities to buy property, but that depends what the pension is currently invested in and which investments you intend to sell. Then the balancing trick can be achieved by taking suitable amounts from the Cash ISAs and the S&S ISAs.

My own preference might be to use S&S ISA money rather than pension TFLS because the pension money gets some advantages that might seem a big deal as one gets older. For example, if you die before 75, then as long as you have completed your nomination form the money passes to your widow who can withdraw it free of all tax. That's right; no income tax to pay. If she has predeceased you, you could ensure that it passed to children, grandchildren, or whomever. Being pension money it is not part of your estate, or eventually your widow's, and therefore it won't be liable for IHT; that's an advantage whether or not you die before 75. So do consider funding the house entirely from shares and S&S ISAs.

Anyway, that's one possible strategy. Another possibility is entirely separate but would be wise. Start filling a private pension of some sort for your wife. If she has no earnings she's still allowed to contribute £2880 net = £3600 gross per tax year. Perhaps she could get on with it and make her 17/18 contribution by April 5th. Our experience is with the Hargreaves Lansdown SIPP which might suit her well: their service is unusually good. Other firms that people here praise include Cavendish and A J Bell. There's an up to date comparison of costs at Monevator.
http://monevator.com/find-the-best-online-broker/
The point is that she should be able to draw income tax-free from her pension because she doesn't have (I assume) enough other income to use up her Personal Allowance against income tax.

Quite separately: is it wise to press ahead until the Brexit outcome is clear? What's the hurry?

AnotherJoe · 15 February 2018 at 11:43AM

Wife,No private pension,S&S Isa 65K and cash Isa 62K

Why arent you putting £2,880 into a SIPP for her every year?

atush · 15 February 2018 at 1:24PM

AnotherJoe wrote: »

Why arent you putting £2,880 into a SIPP for her every year?

I agree, do this.

Then i would use your cash ISas as I am sure they dont pay much in interest.

kangoora · 15 February 2018 at 9:38PM

Assuming you have a lot of capital gains being made on the sale of the shares the following probably applies. The CGT limits will change in a few years time when you decide to sell but are done using this years allowance in the example. You can make £11,300 profit this tax year on sale of shares before paying CGT (at 20% or 28%) on anything over that. If you are not making more than £22,600 profit then you could get away with just selling over 2 tax years from the original holder.

You don't say who holds the shares, if they are in one persons name then you need to transfer half of them to your spouse (inter-spousal transfers are not considered income). You can then EACH make £11,300 in capital gains, so £22,600 profit before paying any tax.

If you expect more profit than that then sell half the shares in one tax year (before 6th April) and half in the next tax year - that way you can take out £45,200 profit in total before paying CGT.

If you are making more than £45k profit then give me some share tips :rofl

If you are planning on doing the above then don't leave it late to transfer, my experience with transferring shares to my wife was that it took quite a long time with paper forms needing to be filled in, signed and posted.

Hope this helps.

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