Monthly income from £140,000

jem16

EdInvestor wrote:

Of course I am saying this is over the 10 year life of the bond, not every year.


Could jem state the Reduction in Yield on her bond,the time frame ( 5 or 10 years) and the assumed growth? Then the charges can be worked out.

You don't need to work them out. I gave you them in post 51 - did you not understand it?

The charges in year 2 on a share portofolio held in an account with no annual fee using a non trading strategy such as an HYP, would be negligible.If the investor was happy just to take the 5% dividend allowance, the cost would be nil. If s/he wanted to sell some shares to cash in some capital gains for spending purposes and use up the year's CGT allowance, then it would depend on how many trades were involved, unlikely to be more than 3 or 4, so that would be a maximum of 50 quid.

So it would cost me £640 if I made no trades or £890 if I made 4 trades each year for 5 years?

So on charges alone

Bond after 5 years with NMA - up £3800
Bond with ordinary adviser - down £190
HYP portfolio - down £640 or £890

We are talking major difference.

Yes we certainly are

EdInvestor

OK,the figures work out like this:

Plain example first

100k invested over 5 yrs @6% growth:

133,823 with no charges
129,462 after charges ( RIY 0.7%)
Total charges paid: 4361

Over 10 years

179,085 with no charges
172,440 after charges (RIY 0.4%)
Total charges paid: 6,645

However we have to deduct 20% of the 79,085 gains within the bond for tax, so taking off that 15,817, your returns after 10 years will be 156,623.A total of 22,462 lost by using the bond compared with holding direct - 22% of the original investment.


Looking at the quotes where they are increasing the allocation rate and using same RIY and 6% growth:

With 107,500 invested

192,516 with no charges
185,373 after charges

7143 charges paid
17,003 tax

Total deductions 24,146


With 103500 invested

185,353 with no charges
178,476 after charges

6,877 charges paid
16,370 tax

Total deductions 23,247

[Note with the NMA version you make more money and so does the advisor, though there's not a lot in it. The main problem is the tax.]

EdInvestor

So it would cost me £640 if I made no trades or £890 if I made 4 trades each year for 5 years?

No. Almost all costs are incurred right at the beginning when you buy the shares and pay the stamp duty.The 640 would be in the first year only.

In year two and from then on the cost would be around 50 pounds per year - nil if you only wanted to take the 5% divi income.

And of course no tax to pay.

jem16

EdInvestor wrote:

No. Almost all costs are incurred right at the beginning when you buy the shares and pay the stamp duty.The 640 would be in the first year only.

In year two and from then on the cost would be around 50 pounds per year - nil if you only wanted to take the 5% divi income.

Sorry I added in £50 for year 1 as well.

Year 1 = £640
Year 2 - 5 = £50 per year

Total = £840

And of course no tax to pay.

Even for higher rate taxpayers?

jem16

EdInvestor wrote:

OK,the figures work out like this:

However we have to deduct 20% of the 79,085 gains within the bond for tax, so taking off that 15,817, your returns after 10 years will be 156,623.

A total of 22,462 lost by using the bond compared with holding direct - 22% of the original investment.

You have already been told that the 20% tax is not correct in post 23 and 28. Why do you continue to ignore this?

Your figures also do not take into account the initial allocation of £7500 which I told you about.

My illustration also provides a higher return figure by about £3000.

dunstonh

And of course no tax to pay.

Since when do shares have no tax to pay?

You have been corrected on this many times in the past but continue to lie about the tax status of shares. Share ownership is not tax free. There is a tax liability on the dividends and there is the potential for capital gains tax on the gains.

jem16

dunstonh wrote:

Please can anyone else reading this thread tell me if its just me or is Ed ignoring all the points raised and just repeating a load of misinformation?

It's not just you.

Ed is completely ignoring all the points raised. Obviously blinkered against this product.

EdInvestor

The divi tax liability is met by the dividend tax credit which arrives with the divi.No further tax to pay for BRTs.

There is a CGT allowance of c 9k a year on realised gains only.So if you want to use the allowance you can sell up to 9k's worth of shares which have made profits tax free.if you don't sell, you don't pay any tax.Shares held long term get additional taper relief and any losses can be set against gains.

CGT is really very easy to avoid paying for portfolios in the 100-200k range ( especially if they only grow by a lowly amount like 6% which is a capital gain of only 1 percentage point over what I get in divis.

I'd lose the will to live if my portfolio only made 1% a year. :eek: You'd certainly never have to pay any CGT if that's all you made.

EdInvestor

Your figures also do not take into account the initial allocation of £7500 which I told you about.

Now included.

I've checked this 20% figure and am satisfied it's correct.

For example

http://www.premierfinancialsolutions.co.uk/investments/investmentbonds.html

You will have no personal liability to basic rate income tax or capital gains tax on the returns you receive because investment bond providers pay the equivalent of these taxes within the fund.

jem16

EdIvestor wrote:

With 107,500 invested

192,516 with no charges
185,373 after charges

7143 charges paid
17,003 tax

Total deductions 24,146

Illustration quotes over £5000 less but obviously you are correct and they are wrong :rolleyes:

However, out of interest, would you provide me with figures for your 100k HY portfolio taking into account initial cost, £50 per year from year 2-10 and the extra 12.5% I would have to pay as a higher rate taxpayer? We'll ignore CGT for the moment.