Urgent Advice Needed

dunstonh

The virtues of the investment bond tax wrapper for a basic rate taxpayer with a lump sum the size of Gwendolyne's are not immediately apparent.

From a taxation point of view there are limited reasons for Gwenolyne to have done one. Age allowance, trusts and low charges (although with Britannic that is highly unlikely).

In addition these products are often sold on the basis they offer a "tax free income" - a 5% (or more) withdrawal per annum.This is not "income" - it is withdrawal from capital, that is why there is no tax payable on it.This aspect appears often to mislead people as we have discussed above.

Even if that has occured, it doesn't change the fact that it is not the tax wrapper that there are issues with but the individuals that may have said its tax free. Personally, I never call them tax free. However, when you explain the taxation status, people do often come back with the assumption that it is tax free because they are not having to pay any direct tax.

Chrismaths

Ed, are you going to come back to my comment or are you just going to ignore it and keep spreading misinformation?

EdInvestor

Chris

You mentioned HYPs but I don't think they are relevant to this thread which is about With profit bonds.

Chrismaths

I also mentioned that you are demonstrating the most expensive way to buy a bond.

The point stands.

EdInvestor

These are official figures.They come from the insurance companies and are published on the official FSA site by the regulator for the guidance of consumers.

If advisors or others think they are wrong why don't you do something about it rather than just whingeing here?

dunstonh

These are official figures.They come from the insurance companies and are published on the official FSA site by the regulator for the guidance of consumers.

The FSA also publish official figures on how much commission is taken. You never make any reference to those though. You are showing only one side of things.

If advisors or others think they are wrong why don't you do something about it rather than just whingeing here?

They are not wrong. If you choose that fund, and assume standard commission terms are taken, then the figures are correct on that basis. However, your interpretation and subsequent comments are wrong.

The FSA tables are based on highest charge assumptions. You are measuring all the products on the investment bond wrapper on that basis. This is despite evidence showing the opposite. You make a point of highlighting low cost distribution channels for other tax wrappers but never do on this tax wrapper.

This makes your comments unbalanced and biased.

EdInvestor

They are not wrong. If you choose that fund, and assume standard commission terms are taken, then the figures are correct on that basis.
The FSA tables are based on highest charge assumptions.

You make it clear that the highest charges are the standard charges. This is what most readers are going to be charged.

IMHO it is misleading to suggest that the lower charges levied by the very small number of new model type advisors like you are typical.

The info on the FSA site is going to be much more relevant to the majority - and that's quite apparent on MSE threads in the past discussing this product.

dunstonh

You make it clear that the highest charges are the standard charges. This is what most readers are going to be charged.

The FSA tables on charges show that the for business transacted by IFAs in the 6 months prior to Dec 2005, the average commission taken was 66% of the maximum entitlement.

IMHO it is misleading to suggest that the lower charges levied by the very small number of new model type advisors like you are typical.

The FSA tables on charges include ALL IFAs. New Model Advisers actually take less than the average. Average, by definition, means some will pay more, some will pay less. The fact the average is at 66% of entitlement shows that it is more than a minority involved.

IMHO, it is misleading to suggest that the higher charges you indicate are the norm, when they are not.

Plus, my example comparing a unit trust against the same fund on the investment bond was done on like for like basis. So, if you are telling people not to do investment bonds because of charges, you are by definition, telling them not to invest in unit trusts, OEICs or ISAs as well because I have shown the the charges on the bonds can be lower than these.

In the interest of balance (something you need to learn ), it was noticeable that the FSA also show Collectives (ISAs, unit trusts and oeics) commission is at 1.5% initial as average which is at 50% of entitlement. So, it does appear that IFAs do discount more on ISAs, Unit Trusts/OEICs than they do on bonds.

The info on the FSA site is going to be much more relevant to the majority - and that's quite apparent on MSE threads in the past discussing this product.

So, you are prepared to post unbalanced, inaccurate assumptions based on worst case information in the belief that it may be right in some cases. Surely its better to be accurate in all cases?

Chrismaths

Standard commission terms means not enhanced - ie the standard available to any IFA. Some companies have the fees they earn enhanced by the provider.

It does NOT mean the standard amount taken by a financial adviser. I'm not whinging about FSA tables - as dh points out they are true for a for the people at banks who take full commissions on everything they do. But even most old model (independent) advisers don't take full commissions, and new model advisers take only 1%!

It's time you took this on board and started aiming your disapproval at the real villains of the piece - the banks, tied salesmen and full commission old boys who make the charges in the first place, not some quixotic tilt at the wrapper.

I'm sure your heart is in the right place Ed, but your aim is a little off.

Have a good weekend, Chris.