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  • FIRST POST
    • ArmyDilllo
    • By ArmyDilllo 23rd Jul 16, 4:33 PM
    • 76Posts
    • 168Thanks
    ArmyDilllo
    Armydilllo Strategy
    • #1
    • 23rd Jul 16, 4:33 PM
    Armydilllo Strategy 23rd Jul 16 at 4:33 PM
    I was asked in another thread to post my investment strategy.
    Without making any claims of being an expert, y'ere tis:-

    I am fifty six and have no debts and no dependents.
    If I do nothing all year, my total annual outgoings are only 8k (pre-Brexit).

    1st priority:- Retirement income
    2nd priority:- Early retirement income, becoming income-tax free as early as possible, and leave an estate to family.
    3rd priority:- a second home (Florida? California?) or a boat to cruise the Med.*

    Turning forty back in 2000 I decided to focus more seriously on saving for the future.
    I began paying more into my pension(s) and started an Investment Bond (Leg & Gen) in 2003.
    One year later I took out my first share ISA with Principle (now Sanlam Wealth) The White List Portfolio.
    In 2005 I paid off my mortgage early (after eight years).

    Although buying already ISA's infrequently I only saw their potential in 2010, since when I have been religiously using my entire annual allowance every year.
    I only invest ISA's using shares or share funds.

    I invest using a kind of 'pyramid' model;
    Once I have the base level of more secure investments, I will make slightly riskier investments aimed at higher gains.
    When that level is complete I will take another step toward even higher gains, but with a higher level of risk, smaller than the last level.
    The higher levels of risk contain much smaller amounts of capital than the lower levels.

    The highest level of risk was a business I started a couple of years ago and will leave at the end of September.
    It wasn't the roaring success it might have been but it could still be for those who continue it, if they wish it to be.

    I see my pensions as being my lowest level of risk and they are only growing at 6-7% p.a. currently.
    Investment bond is currently down at 7% p.a. (went zombie last year and suffered particularly badly in the slump).
    My early ISA's were invested with safety in mind and are growing at an average of 5.5 - 7% p.a. currently.

    Later ISA's have been invested in a number of funds, until this year when I even invested directly into buying BP and Shell shares.
    These last have skewed the results as they did particularly well after Brexit (to my surprise), growing by 25% since April 7th.
    This means that the more adventurous ISA's I've invested for the last three years are growing at an average of 18% p.a. (as I say, this is distorted).

    But the boards of B.P. and Shell have been keen to stress that they will continue to offer 7% dividends as well.
    This is important for me and something I intend to exploit over the long term.

    I reckon I can continue to grow all my investments at an annual average of at least 7% (using the better years to smooth over the poorer).
    But I currently only need 4% of the annual growth to live comfortably and continue investing my full annual ISA allowance.
    The 3% difference I can choose to take, or not.

    Although I do not expect to need the extra capital I will continue to invest each year until I die.
    I have left everything to my Brother's kids (I have no other family) and they are unaware of this.
    The will is written and they will be given copies afterwards.

    I believe I can retire some time between now and 2020, when I will be sixty.
    If I leave it until 2020, I will need to draw some income from personal pensions to top up a tax-free income which I expect to be more significant from my bond and ISA's.
    I will take as little as possible from my pension, as it's taxable, and reduce that amount each year, as my tax-free income becomes greater.

    In 2026, I will be able to take my state pension which I can use to absorb most of my annual income tax allowance.
    At that point I plan stop drawing from my personal pensions entirely and live free from income tax, depending on how the morons in Westminster have managed to screw us over again by then.

    I own a three-bed detached property in the burbs of London and close enough to the capital to benefit from its' valuations.
    I will sell that and release a little of its' capital by moving (much) further out.

    My 3rd priority is an option which depends on something else not listed here.
    May or may not happen and there are too many variables to plan around.
    It's just something I'm aware of.

    Hope you found this of some interest and help.
    If you made it this far, well done and congratulations.

    Now then, what about you?
    What are your aims, plans and strategies?
    Last edited by ArmyDilllo; 10-10-2016 at 8:15 AM.
    Save 20k in 2016 #143: achieved £23,762.38 of £20,000 target
    Retired 17:30, Friday 30Sep16 (aged 56).
Page 1
    • darkidoe
    • By darkidoe 23rd Jul 16, 7:16 PM
    • 653 Posts
    • 718 Thanks
    darkidoe
    • #2
    • 23rd Jul 16, 7:16 PM
    • #2
    • 23rd Jul 16, 7:16 PM
    If I do nothing all year, my total annual outgoings are only 8k (pre-Brexit).

    Now then, what about you?
    What are your aims, plans and strategies?
    Originally posted by ArmyDilllo
    First!

    I enjoyed your post! Very organised and well thought out risk profile model for investing.

    I am 25 this year and am still early days in my career, gross income is just hovering above the higher tax threshold. Estimated annual outgoings would be similar to yours of £8000. but probably slightly higher counting in annual long haul holidays to visit family/friends and professional fees.

    I have maxed out my ISA allowance for the past 3 years but half of it is still in a cash ISA and other half is in S&S ISA. I am slowing moving bits of the cash ISA into a HTB ISA monthly to get the government bonus when I am ready to buy (maybe within the next few years) I am not keen to shift the cash ISA into my S&S ISA as part of that cash is me holding it for another family member and I may need to pay that back at short notice.

    I have a defined benefit (I think?) pension which I have waiting to see what value of benefits have I build up, apparently they only show you after have 2 years of contributions and I am still trying to figure out how it works. It keeps changing, at one point, it was final salary, now it is a Career Average Reevaluation Earnings pension. I will attempt to crack my skull through that minefield of pension terms/calculations when it starts getting more serious for me. For now, I will just keep track of it and maybe consolidate it if I move jobs. I am keen of SIPPs if I do reach that higher threshold but will probably contribute a small amount to it if only to gain the tax advantage.

    S&S ISA are generally in a globally diversified ETF portfolio with fixed defined geographical allocations. Aim is to hold forever. This will form the main base of my pyramid i suppose. I think i will put off adding anything different to my portfolio for another 1-2 years until I get the hang of how well this will develop and get a feel of how I can react to market changes.

    I also have a 1+ years cash allocation within interest earning accounts as an emergency fund.

    The overall aim is Financial Independence asap whilst I am still young. Hopefully within 10 years. Hence the prioritization of ISA allowance. I like to keep things simple as well.
    Last edited by darkidoe; 23-07-2016 at 7:18 PM.
    Save 12K in 2016 # 8 £16 253.55/12 000 (135.45%) Achieved!
    • Pincher
    • By Pincher 23rd Jul 16, 8:27 PM
    • 5,860 Posts
    • 2,143 Thanks
    Pincher
    • #3
    • 23rd Jul 16, 8:27 PM
    • #3
    • 23rd Jul 16, 8:27 PM
    Now then, what about you?
    What are your aims, plans and strategies?
    Originally posted by ArmyDilllo
    Use up as much tax free allowance as I can.

    For 2016/17:

    Personal allowance, £11,000, on track to be used up.

    Saving Allowance, £1,000, on track to be used up.

    CGT Allowance £11,100, already used up.

    Dividend Allowance £5,000 , on track to be used up.

    So, getting £28k tax free this year. As there is overspill for each, I will be paying some tax for 2016/17, but I should manage to avoid higher rate tax.

    Can't bed and breakfast houses, BTL, so had to pay £120k+ in capital gains on one after eighteen years. If I could have carried forward eighteen years worth of CGT Allowances, the tax bill would have been much smaller. So, profit take when you can, and use the CGT Allowance up.
    What happens if you push this button?
    • enthusiasticsaver
    • By enthusiasticsaver 23rd Jul 16, 9:51 PM
    • 2,568 Posts
    • 4,377 Thanks
    enthusiasticsaver
    • #4
    • 23rd Jul 16, 9:51 PM
    • #4
    • 23rd Jul 16, 9:51 PM
    I too am 56 married with no dependants (grown up and financially independent now). No debt, mortgage free on main property and 1/3 share in a further property with brother and sister. We are looking for an income of at least £20k net per annum to do holidays etc still and aiming for early retirement at 58 (OH this October and me February 2018 at latest).

    OH due to retire at age 58 this October on part defined benefit/part defined contribution pension which will give at least £25k gross plus lump sum of around £145k as worst possible scenario. That is company pension scheme quote but IFA currently looking to see if better option out there for us.

    I have been investing in S and S ISA and additional pension contributions into my LGPS since becoming mortgage free in 2008. This is buffer to my pension which is not as good as OH as I have worked part time for 2/3 of career. GMP on ex Barclays pension due to pay out in 2020 so savings will bridge the gap between 2018 and 2020 and will delay taking LGPS until 65 if possible.

    Aim is to enjoy retirement and be comfortable financially.
    Debt and mortgage free and saving for early retirement
    • ArmyDilllo
    • By ArmyDilllo 24th Jul 16, 12:39 PM
    • 76 Posts
    • 168 Thanks
    ArmyDilllo
    • #5
    • 24th Jul 16, 12:39 PM
    • #5
    • 24th Jul 16, 12:39 PM
    Excellent hearing everyone else's plans and aspirations (especially the tax-avoidance side!!!).

    @ darkidoe
    I hear what you're saying about a very early retirement, but don't forget you can save 40% income tax with AVC's into a pension and then a further 25% when you (eventually) draw it out.
    Downside being that (currently) the rules won't allow you to take it until much later in life.
    Has to still be worth doing though, especially if you can afford to this early in your working life.
    You won't be contributing further if you retire early and it could be very uself by the time you would have been retiring later anyway.
    It's a long way ahead.

    @ enthusiasticsaver.
    Fifty six.
    It's definitely the way forward.
    All the best people are doing it now you know.

    @ Pincher.
    Ouch!
    Save 20k in 2016 #143: achieved £23,762.38 of £20,000 target
    Retired 17:30, Friday 30Sep16 (aged 56).
    • darkidoe
    • By darkidoe 25th Jul 16, 1:18 AM
    • 653 Posts
    • 718 Thanks
    darkidoe
    • #6
    • 25th Jul 16, 1:18 AM
    • #6
    • 25th Jul 16, 1:18 AM
    I wouldn't take early retirement lightly but would definitely welcome financial independence early in my life. I am aware of how much of a boost pension contributions can be: 40%+25% later on!!! However because of the limitations I value the freedom of ISAs that bit more just now. I think I would make use of AVC for anything above the higher tax rate, once I am well above the waters.

    Since I started reading into this, I am pleasantly surprised this whole journey is pretty multifaceted and interesting and being savvy about tax efficiency is one of them. I prefer the term 'tax efficiency' as its all within the rules. I need to learn how to utilise all the other tax allowances at some point once I get a steady portfolio

    @Pincher That is one very well planned out tax efficient scheme! You must either be a pro or have worked really hard at it!
    Save 12K in 2016 # 8 £16 253.55/12 000 (135.45%) Achieved!
    • Ifts
    • By Ifts 25th Jul 16, 4:08 AM
    • 1,726 Posts
    • 1,073 Thanks
    Ifts
    • #7
    • 25th Jul 16, 4:08 AM
    • #7
    • 25th Jul 16, 4:08 AM
    Can't bed and breakfast houses, BTL, so had to pay £120k+ in capital gains on one after eighteen years. If I could have carried forward eighteen years worth of CGT Allowances, the tax bill would have been much smaller. So, profit take when you can, and use the CGT Allowance up.
    Originally posted by Pincher
    Unfortunately you cant carry forward CGT Allowance but if you had any capital losses that you have registered you can carry them forward to offset against the CGT on the BTL property sale.

    Or if you were holding any other investments that have tanked and don't stand a realistic chance of recovery you could have sold them at a loss to again offset against that BTL property CGT bill.
    Never let the perfume of the premium overpower the odour of the risk
    • Pincher
    • By Pincher 25th Jul 16, 7:37 AM
    • 5,860 Posts
    • 2,143 Thanks
    Pincher
    • #8
    • 25th Jul 16, 7:37 AM
    • #8
    • 25th Jul 16, 7:37 AM
    Unfortunately you cant carry forward CGT Allowance but if you had any capital losses that you have registered you can carry them forward to offset against the CGT on the BTL property sale.

    Or if you were holding any other investments that have tanked and don't stand a realistic chance of recovery you could have sold them at a loss to again offset against that BTL property CGT bill.
    Originally posted by Ifts
    Yes, hence I carried £30k+ of losses laboriously forward for around 16 years!

    In fact, during the year of disposal, it is good to gamble more, because losses can be used to offset the big gain. If it goes the other way, and goes up, damn , don't sell until next year.

    There is an interesting disparity from April 2016, in CGT rate. I am paying 28% on the BTL gain, so any losses is reducing tax at 28%, but any gain will be taxed at 10% from April 2016, or 20% if there is a lot of it.


    Sadly, this strategy was totally thrown overboard by the buyer dithering until he was forced into the deal by the stamp duty rise, and we completed with days to the deadline.
    Last edited by Pincher; 25-07-2016 at 7:55 AM.
    What happens if you push this button?
    • darkidoe
    • By darkidoe 25th Jul 16, 1:18 PM
    • 653 Posts
    • 718 Thanks
    darkidoe
    • #9
    • 25th Jul 16, 1:18 PM
    • #9
    • 25th Jul 16, 1:18 PM
    Yes, hence I carried £30k+ of losses laboriously forward for around 16 years!

    In fact, during the year of disposal, it is good to gamble more, because losses can be used to offset the big gain. If it goes the other way, and goes up, damn , don't sell until next year.

    There is an interesting disparity from April 2016, in CGT rate. I am paying 28% on the BTL gain, so any losses is reducing tax at 28%, but any gain will be taxed at 10% from April 2016, or 20% if there is a lot of it.


    Sadly, this strategy was totally thrown overboard by the buyer dithering until he was forced into the deal by the stamp duty rise, and we completed with days to the deadline.
    Originally posted by Pincher
    That's some very perverse psychology going on there I can imagine.
    Save 12K in 2016 # 8 £16 253.55/12 000 (135.45%) Achieved!
    • Thrugelmir
    • By Thrugelmir 25th Jul 16, 1:43 PM
    • 51,307 Posts
    • 43,127 Thanks
    Thrugelmir
    But the boards of B.P. and Shell have been keen to stress that the will continue to offer 7% dividends as well.
    Originally posted by ArmyDilllo
    The boards aren't setting the dividends at a 7% level. The shares offer 7% because the large market investors believe that longer term the level of dividend being paid is unsustainable ( at current $ oil barrel prices). To pay dividends Companies have generate cash. Cash is far more important than profit which is little more than an accounting number.
    “A man is rich who lives upon what he has. A man is poor who lives upon what is coming. A prudent man lives within his income, and saves against ‘a rainy day’.”
    • Pincher
    • By Pincher 25th Jul 16, 3:30 PM
    • 5,860 Posts
    • 2,143 Thanks
    Pincher
    That's some very perverse psychology going on there I can imagine.
    Originally posted by darkidoe
    I had a lecturer who said investment decisions shouldn't be based on tax reliefs. I myself cannot imagine doing anything to do with money without thinking about tax.

    Eighteen years of tax deductibles against rental income was a major factor in my return on investment.
    What happens if you push this button?
    • badger09
    • By badger09 25th Jul 16, 3:40 PM
    • 4,266 Posts
    • 3,480 Thanks
    badger09
    I had a lecturer who said investment decisions shouldn't be based on tax reliefs. I myself cannot imagine doing anything to do with money without thinking about tax.

    Eighteen years of tax deductibles against rental income was a major factor in my return on investment.
    Originally posted by Pincher
    There is however a big difference between 'thinking about tax' when making investment decisions, and making those decisions based solely on the tax position.

    Eg the very large proportion of savers who still insist on using cash ISAs with miniscule interest rates 'because the interest is tax free'
    • Thrugelmir
    • By Thrugelmir 25th Jul 16, 7:16 PM
    • 51,307 Posts
    • 43,127 Thanks
    Thrugelmir
    I had a lecturer who said investment decisions shouldn't be based on tax reliefs. I myself cannot imagine doing anything to do with money without thinking about tax.
    Originally posted by Pincher
    Most entrepreneurs focus their energy on making lots of money first then worry about the tax afterwards. Tax legislation as BTL investors have found out recently is not set in stone.
    “A man is rich who lives upon what he has. A man is poor who lives upon what is coming. A prudent man lives within his income, and saves against ‘a rainy day’.”
    • Pincher
    • By Pincher 25th Jul 16, 8:24 PM
    • 5,860 Posts
    • 2,143 Thanks
    Pincher
    Most entrepreneurs focus their energy on making lots of money first then worry about the tax afterwards. Tax legislation as BTL investors have found out recently is not set in stone.
    Originally posted by Thrugelmir
    Entrepreneurs can sell their startup business tax free, that's why they don't need to think about it.

    The re-investment of income in the early years means they cannot be taxed as profit.
    What happens if you push this button?
    • Eco Miser
    • By Eco Miser 26th Jul 16, 10:27 AM
    • 2,444 Posts
    • 2,260 Thanks
    Eco Miser
    If I leave it until 2020, I will need to draw some income from personal pensions to top up a tax-free income which I expect to be more significant from my bond and ISA's.
    I will take as little as possible from my pension, as it's taxable, and reduce that amount each year, as my tax-free income becomes greater.
    Originally posted by ArmyDilllo
    It's taxable, but is it actually taxed? Remember your first £11k is tax-free (plus £1k PSA, £5k dividend allowance, and possibly £5k starting rate on savings).
    I'd be looking to draw up to my personal allowance, and stuffing the excess into ISAs, or even unwrapped investments if there was available dividend allowance.
    Eco Miser
    Saving money for well over half a century
    • ArmyDilllo
    • By ArmyDilllo 7th Aug 16, 11:06 AM
    • 76 Posts
    • 168 Thanks
    ArmyDilllo
    It's taxable, but is it actually taxed? Remember your first £11k is tax-free (plus £1k PSA, £5k dividend allowance, and possibly £5k starting rate on savings).
    I'd be looking to draw up to my personal allowance, and stuffing the excess into ISAs, or even unwrapped investments if there was available dividend allowance.
    Originally posted by Eco Miser
    Exactly!

    I've already paid tax on it when I earned it in the first place, I don't want to pay even more just because I've put the rest to work.

    I will max my income allowances while I can and draw anything else I need from tax-free sources; ISA's slicing an Investment Bond, etc.
    As the tax-free sources increase in value I will take less an less from the taxable sources.
    My state pension will kick in in 2016 and use most of my allowance anyway.

    Because of their starting value, the growth of my tax-free investments should increase at a greater rate than my 'taxable' source.
    Eventually I will only be drawing from tax-free income, leaving the taxable sources to grow again.

    I do not intend to purchase any annuities, unless my calculations prove wildly inaccurate (in which case that's one of my back-up plans).
    I will put my pensions into Drawdown and estimate that I can generate a significantly larger return from doing this than from an annuity (which would also die with me).
    If I die before 75, my beneficiaries will get the tax-free benefits of my continuing drawdown arrangement.
    If I die later, they'll have to pay tax on them and everything else in my estate anyway.
    But at least they'll benefit from it and not some warped insurance company.

    I have recently stopped working full time to ease toward full retirement
    I will be able to live comfortably on less than I generate so my estate will continue to grow for my beneficiaries as long as I'm alive and could be quite significant in just a couple of decades as I also believe that it will outpace inflation
    .
    The longer I stay alive this will compound and generate even more for them, although the cost of having hot nurses/hookers around to change my nappies later on might make something of a dent later.
    Save 20k in 2016 #143: achieved £23,762.38 of £20,000 target
    Retired 17:30, Friday 30Sep16 (aged 56).
    • ArmyDilllo
    • By ArmyDilllo 10th Oct 16, 8:15 AM
    • 76 Posts
    • 168 Thanks
    ArmyDilllo
    Update:-

    Last month I sold the holding I had in Royal Dutch Shell 'A' and moved everything to B.P.

    One other tiny little detail;
    On Friday 30th September I retired.
    I'll let you know if I've got my sums right in due course.
    Right now I'm eyeing up boats in case events prove that I did.
    Last edited by ArmyDilllo; 10-10-2016 at 8:17 AM.
    Save 20k in 2016 #143: achieved £23,762.38 of £20,000 target
    Retired 17:30, Friday 30Sep16 (aged 56).
    • Dird
    • By Dird 10th Oct 16, 4:16 PM
    • 2,389 Posts
    • 1,402 Thanks
    Dird
    It's only worth making pension contributions for a few years right? Current state pension gives £8k of the £11k tax free allowance so once you've got enough to cover £3k (inflation linked or DC high enough that it reaches the new allowance at retirement age) more then you'll end up paying 20% on withdrawal in income tax. Or it's still good because you get an extra 80% from employer from matched contributions (less the 20% income tax)?

    Also, if you are cruising around on your boat does that make you able to avoid any income tax? I think I read before that a person is deemed a resident for tax purposes if they spend 6 months+ in the country in a year
    Last edited by Dird; 10-10-2016 at 4:18 PM.
    Mortgage (Nov 15): £79,950 | Cashback sites: £785 | Current accounts: 15
    Mortgage (Nov 16): £76,486 | £30k in 2016 #96: £27,530 (91.7%)
    • Thrugelmir
    • By Thrugelmir 10th Oct 16, 6:52 PM
    • 51,307 Posts
    • 43,127 Thanks
    Thrugelmir
    Last month I sold the holding I had in Royal Dutch Shell 'A' and moved everything to B.P.
    Originally posted by ArmyDilllo
    What was your thinking behind the switch?
    “A man is rich who lives upon what he has. A man is poor who lives upon what is coming. A prudent man lives within his income, and saves against ‘a rainy day’.”
    • ArmyDilllo
    • By ArmyDilllo 11th Oct 16, 8:51 AM
    • 76 Posts
    • 168 Thanks
    ArmyDilllo
    What was your thinking behind the switch?
    Originally posted by Thrugelmir
    Annoyingly, B.P. has outperformed RDSA in the period I held both.
    Of course, since the day I switched RDSA has outperformed B.P.!
    lolol.
    Them's the breaks.
    BP are still up (+12%) since I switched.


    I also felt more comfortable with BP as a company moving forward but now OPEC and Putin have joined forces both should be safer with the imminent rise in oil prices.
    I bought BP six months ago, thinking they may reach £5.00 by xmas and with the intention of cashing in at that point.
    Now I'm hoping for £6.00 before next Spring and holding them.
    The dividend's still around 7% p.a. and now the producers are getting their act together the oil companies and everything else could benefit.
    Not that we're on solid ground yet.


    { 8-]
    Last edited by ArmyDilllo; 12-10-2016 at 11:11 AM.
    Save 20k in 2016 #143: achieved £23,762.38 of £20,000 target
    Retired 17:30, Friday 30Sep16 (aged 56).
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