Monthly income from £140,000

ReportInvestor

jem16 wrote:

No I could take out 7.5% of the original investment each year with no charge

I think you'll find the taxman would be licking his lips at that course of action.

Though you could get away with 5% so you're not far off your ISA allowance.

Why the taxman allows investors to get away with this beats me. But I'm not complaining.

jem16

ReportInvestor wrote:

I think you'll find the taxman would be licking his lips at that course of action.

You're correct - I realised that after I'd typed it. The taxman would only allow 5% in my circumstances.

EdInvestor

So in reality the difference to me regarding costs is negligible as both could cost around £10,500 over 10 years.

It's interesting to find there is no benefit from investment bonds to higher rate taxpayers.

We can ignore this product completely then - it's already deemed the wrong choice for basic rate taxpayers, as it will cost them more than direct investing because of the tax, regardless of the charges.

EdInvestor

Why the taxman allows investors to get away with this beats me.

It's because the withdrawals are from your capital, not your income.It's the same principle as Purchase Life Annuities, where the tax is reduced because part of the income you get is the lifeco giving you back your own money.

EdInvestor

toshkininny wrote:

So, is it clear in your head what your mother needs to do now, Alrightfatbloke?!

You mean apart from ignoring investment bonds?

Unfortunately the poor lady's already got several and will probably be subject to penalty charges if she wants to leave in the first 5 years

jem16

EdInvestor wrote:

It's interesting to find there is no benefit from investment bonds to higher rate taxpayers.

You're selectively ignoring again Ed

If you look back you will see that I have amended your costs(and edited my post to take this into account) for the HYP as you decided to move the goalposts by moving half into an ISA in later years yet not doing the same with the bond. You also ignored the possible extra tax on divis which you later quoted to be about £28 per year.

If we keep both exactly the same, i.e. no moving to an ISA

Bond - £10, 715
HYP - £12,340 PLUS extra £28 per year in increased tax for divis for how long?

So the HYP is more expensive for me in charges alone. Plus the bond includes advice, yearly rebalancing - the HYP doesn't.

Other advantages to me;

I'm only just a higher rate taxpayer as it's my savings income that puts me into it. If I remove the savings income by investing in a bond, I can get out of it. Divis from an HYP would put me further into it.

I can write the bond into trust and decrease my IHT.

It will help in later life for age allowances etc.

There may be more but I'll leave that to the experts.;)

We can ignore this product completely then - it's already deemed the wrong choice for basic rate taxpayers, as it will cost them more than direct investing because of the tax, regardless of the charges.

I don't think so for all the above reasons and probably more that I don't know about.

dunstonh

So, is it clear in your head what your mother needs to do now, Alrightfatbloke?!

I feel sorry for him. The subject matter of this thread started givin rise to a very good discussion but as usual it turned into a mess because certain individuals chose to ignore facts and information posted to continue posting incorrect information.

This board used to have more IFAs contributing but most have gone now because they got fed up that despite posting information and facts correcting the misinformation given out, this was ignored time after time and a certain few continue to post the misinformation.

Ed has had responses to her posts that have shown that her information on charges are incorrect. Her posts on tax are incorrect and her posts on risk have been inappropriate to the OP. Yet, all of that is ignored.

I'm totally bored and fed up of posting factual data only for it to be totally ignored by someone who is known to be anti-financial services. If you cannot be objective, I see no reason in continuing to contribute to this thread.

EdInvestor

It's interesting to see that a 100k investment bond even with hyper low charges can only save a high rate taxpayer 162 quid a year, and that's only if the said HR taxpayer ignores the existence of the ISA tax wrapper ( the bond is after all supposed to be an alternative to an ISA).

It should be mentioned that most investment bonds have a reduction in yield of more like 2%, not 0.4%, so the charges will be much higher, for both types of taxpayer.This is an unusually cheap bond.

Oh and BTW, on other alleged benefits of investment bonds:

Only 6% of estates pay IHT and only 4% of people over 65 go into care homes.As has been said, this "threat" is somewhat of an urban myth.

So I wouldn't allow that kind of issue to affect your investment decisions too much.

Unless you're aged around 90 of course, in which case, why don't you just go out and spend some of your money? .

jem16

EdInvestor wrote:

It should be mentioned that most investment bonds have a reduction in yield of more like 2%, not 0.4%, so the charges will be much higher, for both types of taxpayer.This is an unusually cheap bond.

Designed to show you the difference between comparing an expensive bond with a discount HYP as you usually do. At least here the comparisons are equal.

Oh and BTW, on other alleged benefits of investment bonds:

Only 6% of estates pay IHT and only 4% of people over 65 go into care homes.As has been said, this "threat" is somewhat of an urban myth.

Not in my case it isn't. My estate is already above the threshold.

So I wouldn't allow that kind of issue to affect your investment decisions too much.

So ignore it and it will go away :rolleyes:

Unless you're aged around 90 of course, in which case, why don't you just go out and spend some of your money? .

But I'm not and I don't intend to fritter my money away just yet.

Ed,

I have read a lot of your other posts and you seem to have a lot of valuable points to make. However your inability to post accurate information on bonds in particular make me seriously question the accuracy of any other posts you make.

jem16

EdInvestor wrote:

It's interesting to see that a 100k investment bond even with hyper low charges can only save a high rate taxpayer 162 quid a year, and that's only if the said HR taxpayer ignores the existence of the ISA tax wrapper ( the bond is after all supposed to be an alternative to an ISA).

I don't need to ignore it though - as I said I can put 5% from the bond into an ISA every year which saves on the charges.

A saving is a saving, no matter how small - true MSE style.