Prudential Bond - best IFA?

dunstonh

These days basic rate taxpayers can invest directly in shares/equity funds without worrying about tax wrappers, makes life a lot less complicated.

Just for balance. ISAs are a tax wrapper and you can invest directly into equity funds within an investment bonds if you want. With the ability to invest directly into UT/OIEC funds within ISAs, UT/OEICs, Pensions and Investment Bonds, there has never been a better time to look at tax wrappers more closely. Failure to get the tax wrapper right can mean you end up paying more tax than is needed and that can wipe out any small difference in charges there may be plus more.

In this case, an investment bond doesnt appear to be the right wrapper but there will be many more cases when it is.

EdInvestor

What with the A day changes to pensions, and recent changes to ISA rules re the tax credit and commercial property, seems to me there's now a considerable gap between best advice for those on basic rate rate and those on higher rate.

Other than the cash ISA,many of the tax wrappers are now only very marginally useful to many younger people on basic rate tax, it seems to me, unless they have accumulated substantial assets, and often even then there isn't much to be gained.

dunstonh

Thats fair comment Ed. For smaller investments/holdings, the tax wrappers don't come into play as much and direct holdings (such as UT/OEIC/IT) make sense. Obviously, where an ISA allowance exists, it should be utilised as it costs nothing to do so.

Its when you start getting larger and/or long term holdings or higher rate taxpayers or over 65s investing and not wanting to lose their age allowance or people not wanting to lose their assets in the case of old age care where the tax wrappers can come into play. Higher rate tax payers have the most to gain from tax wrappers.

Chrismaths

Sure Ed, but don't forget the cumulative effect of ISAs. When PEPs first came out, you could only put in around £1200! However, if you used up your allowances each year, you ended up with a significant pot of tax-free cash - I've seen million pound PEPs before. If you keep putting money into ISAs now, although you might not see any immediate benefits, with the amount of fiscal drag Gordon Broon has used, it won't be long before we are all HR taxpayers! My piddly amount of money is invested in equity based funds within ISAs, as although I may not see any particular immediate benefit, it costs me next to nothing, and as and when I become a HR taxpayer then it will be a significant benefit to me.

EdInvestor

Quite agree on the investment ISA question, everyone who can should use it very year.

...over 65s investing and not wanting to lose their age allowance or people not wanting to lose their assets in the case of old age care...

IMHO this area is still very prone to abuse. There are far too many people with maturing pensions put into poor quality or over-risky annuities, overly expensive and badly invested drawdowns and even more expensive investment bonds for the tax-free cash.[And now we have the dreaded offshore bond joining the fray as well :rolleyes: ]

Another thread about that area later, perhaps.;)

dunstonh

IMHO this area is still very prone to abuse. There are far too many people with maturing pensions put into poor quality or over-risky annuities, overly expensive and badly invested drawdowns and even more expensive investment bonds for the tax-free cash.[And now we have the dreaded offshore bond joining the fray as well :rolleyes: ]

Again though you are measuring all investment bonds by the most expensive examples. You also assume that every drawdown is expensive and invested badly. There are going to be a more badly invested DIY drawdown cases than advised ones. You always seem to measure things on advice basis by the most expensive or worst case scenario.