Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@. Skimlinks & other affiliated links are turned on

Search
  • 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 2
    • ArmyDilllo
    • By ArmyDilllo 12th Oct 16, 11:48 AM
    • 76 Posts
    • 168 Thanks
    ArmyDilllo
    Sorry, I replied to this twice yesterdayand was logged out both times before I could post.
    (Will remember to copy the text this time....!)

    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
    Originally posted by Dird
    I have to remain a U.K. resident in order to continue a programme of ISA investment I plan to exploit for my retirement fund.
    I'm happy with that as I do not care to fully leave the U.K. anyway.

    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)?
    Originally posted by Dird
    There's a few things to consider there.
    If you see pension growth as equal to any other investment I would say contribute to a pension.
    • You get an automatic 20% (min) contribution from the Govt., on any taxed income you contribute, so you're already up.
    • You can take 25% tax-free when you decide to withdraw it, providing your total taxable income is within your basic rate tax band. If you go over you pay at the higher rate tax band. Don't forget you also get a personal allowance of currently £11k tax-free anyway.
    • Your employer may contribute to an occupational pension alongside your own contributions.
    There's a lot to be said for pensions.
    But now there's a Lifetime ISA you could use as well (you might not persuade your employer to contribute as there is no N.I. incentive for them to do so yet).
    With a LISA there are similar benefits but, because it's and ISA tax-wrapper, the return is 100% tax-free rather than just 25%.
    You can only start one if you're under 40 and only claim it after you're 60 (or there are penalties to pay).

    I'm 56.
    So I can't claim my state pension for another ten years (2026).
    When I can claim it I fully intend to use it to absorb my personal allowance and top it up with other savings vehicles which are more tax efficient (ISA's, investment bonds, endowment, etc).

    Until 2026 I have personal pensions which I can use on a variable drawdown type basis.
    If I only withdraw from my pensions up to my personal income allowance I have other savings vehicles from which I can withdraw further income on a tax free basis, making my retirement income entirely income-tax efficient (damn you, Vat-Man!).
    So, this year, apart from retiring, I have also become income-tax free
    I was not expecting this for another ten years but, thanks to Brexit, it appears, for now, that I am already there.
    I have sufficient savings in place that I believe it should be possible (barring another Wall Street style crash) to live on the natural growth without touching the capital.
    I believe that I should also be able to continue investing to grow the estate I'm leaving to my beneficiaries; I am happy in my own skin and have relatively simple needs (owning my own boat would be a luxury I can live happily with or without).

    Once my state pension kicks in and takes up my income allowance, I will leave my personal pensions alone and forget about them.
    They'd become taxable anyway so they may as well recover and grow within my estate.
    Much better for me to use the tax efficient status of my other investments.
    If my estate grows at 7-8% per year I can live on 4% and re-invest the remainder.
    As I re-invest I hope that my estate will continue to grow and my demands upon will become less, until I need someone to wipe my backside and feed me (let's hope they get that the right way around).
    I see that my funds will initially reduce but start growing again in three to four years and become self-funding in ten (some already are).

    I have a will and now I've begun to put plans in place to deal with the I.H.T. on my estate, which will continue until I snuff it.

    { 8-]
    Last edited by ArmyDilllo; 12-10-2016 at 11:56 AM.
    Save 20k in 2016 #143: achieved £23,762.38 of £20,000 target
    Retired 17:30, Friday 30Sep16 (aged 56).
    • ArmyDilllo
    • By ArmyDilllo 12th Oct 16, 11:54 AM
    • 76 Posts
    • 168 Thanks
    ArmyDilllo
    • You get an automatic 20% (min) contribution from the Govt., on any taxed income you contribute, so you're already up.
    • You can take 25% tax-free when you decide to withdraw it, providing your total taxable income is within your basic rate tax band. If you go over you pay at the higher rate tax band. Don't forget you also get a personal allowance of currently £11k tax-free anyway.
    Originally posted by ArmyDilllo
    Although I am already retired, I have not started using my personal pension.
    So I will be contributing the remainder of the taxable income I have earned this year into it (under the £40k limit).
    This will recover the tax paid on it and increase my allowable income by 25% (due to the 25% tax-free portion).


    Happy for anyone who thinks I could improve my plans to chime in and offer advice.

    { 8-]
    Save 20k in 2016 #143: achieved £23,762.38 of £20,000 target
    Retired 17:30, Friday 30Sep16 (aged 56).
    • Dird
    • By Dird 13th Oct 16, 1:05 PM
    • 2,362 Posts
    • 1,361 Thanks
    Dird
    Oh OK, I guess I'll do the 4+4 if I get the new job. The reason I don't like LISA/pension so much is how they force you to wait & with the earliest penalty-free withdrawal age only rising
    Mortgage (Nov 15): £79,950 | Cashback sites: £785 | Current accounts: 15
    Mortgage (Nov 16): £76,486 | £30k in 2016 #96: £27,530 (91.7%)
    • ArmyDilllo
    • By ArmyDilllo 13th Oct 16, 7:13 PM
    • 76 Posts
    • 168 Thanks
    ArmyDilllo
    The reason I don't like LISA/pension so much is how they force you to wait & with the earliest penalty-free withdrawal age only rising
    Originally posted by Dird
    Yep.
    But don't forget you don't have to wait until you're able to use them.
    I won't be able to draw my state pension for another ten years and I'm not waiting that long to retire.
    I have other savings I can replace that amount until I can.

    There are great benefits to pensions and now LISAs.
    I personally believe I can get more from other investments but I have not neglected my pensions.
    I use them to get the tax-free benefits and tax refunds.
    Unfortunately I can only get 25% tax-free from a pension, whereas I can get all of an ISA free of tax.
    I seem to be growing ISAs better than my pensions and I have a longer growth period/potential with them too.
    Save 20k in 2016 #143: achieved £23,762.38 of £20,000 target
    Retired 17:30, Friday 30Sep16 (aged 56).
    • ArmyDilllo
    • By ArmyDilllo 14th Oct 16, 10:30 AM
    • 76 Posts
    • 168 Thanks
    ArmyDilllo
    I should add that this year is the most important as far as my personal pension is concerned;
    I can add to it (up to my contribution limit) and get a free 25% top-up from that nice Mr Hammond.
    What a very nice man.


    { 8-]
    Save 20k in 2016 #143: achieved £23,762.38 of £20,000 target
    Retired 17:30, Friday 30Sep16 (aged 56).
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

2,764Posts Today

6,413Users online

Martin's Twitter