commission v fees

jem16

EdInvestor wrote:

Around 750k, including the income.

I'm not sure what you mean by including the income?

Is the 750k what is left after you have taken off 5% every year as income plus 40% IHT.

Have you also included all charges and taxes(Income tax, CGT etc) as necessary?

Chrismaths

Hey TIGGS - my concerns have just been answered. This is not for the benefit of the elderly person. This sounds like typical elderly abuse and some IFA live off this and build big houses.

Despite the fact that this is not English in any known sense of the word, it seems you have decided that this is not a suitable investment for the OP. Have you asked the OP if she would like to pass her assets on to the next generation? Have you read Dh's post regarding how life assurance is treated for LTC?

Are you ignorant or just looking for attention?

prudryden

My apologies to you DUN - your posts have been excellent. Even though you and Ed don't agree - I also feel he made some good points. But maybe now you can understand some of my questions - even though they may not been worded clearly.

Chrismaths

I'm not sure what you mean by including the income?

Is the 750k what is left after you have taken off 5% every year as income plus 40% IHT.

Have you also included all charges and taxes(Income tax, CGT etc) as necessary?

No, it's a figure picked out of the air. To end up with £750k after tax at 40% - taking into account her other assets of around £200k, that means the £500k would have to be worth about £1.13 million after 10 years. That's a return of 8% per annum. She hasn't made clear if she expects a capital return of 8%, or a total return of 8%. Big difference there. If you illustrate potential returns on an investment, you should use 4%, 6%, and 8% for taxable investments and 5,7,9 for tax free.

Bear in mind, with RPI inflation running at 3.6% currently, that means that in ten years, £750,000 will be worth about £525k in today's money.

In 10 years, invested in the same things that Ed has invested in, taking into account the extra charges of the bond (at this IFA's rates) the OP would have £930,000. If you did the bond at half the cost of the IFA (which should be easily achievable with a bit of negotiation), It'll be around £970k.

This doesn't take into account the fact that long term care would be paid by the state.

It's a no brainer.

EdInvestor

Looking at the long term care issue first, it would appear that the cost of the care assuming we are talking about a male aged 85 is likely to be covered by the pension plus attendance allowance according to the costs listed below.

http://www.sharingpensions.co.uk/annuity_immediate_needs.htm

To be safe it would be sensible IMHO to set aside 100k for purchase at some point of an immediate needs annuity to top up income for the long term, just in case, and to provide any luxuries, holidays or whatever the rellie might want. (This type of annuity is paid tax free to the care home and is guaranteed for life, thus there should be no need to worry about the other assets being taken.) The council won't need to get involved in this, and the rellie will be able to choose whichever care home she (and you) want ( rather than the cheapest - and perhaps nastiest - the council may pick if they are paying).

That will then leave an estate of 600k (400k cash and 200k house).

Everyone has an inheritance tax exemption of 285k, which will go up to 300k next, year, let's use the latter figure for simplicity.So if he were to pass away soon after going into care, IHT of 120k would be liable on 300k of the estate, leaving an amount net of IHT for the heirs of 480k.

That's assuming the money was just sat in the bank and the house.

EdInvestor

dunstonh wrote:

So, why would that be any different with the investment bond seeing that you can invest in the same areas?

It might not be.We don't know

We still haven't seen any estimates of the encashment value of the bond after 10 years, net of chargeable gains taxes and capital withdrawals.

Tiggs_2

prudryden wrote:

Hey TIGGS - my concerns have just been answered. This is not for the benefit of the elderly person. This sounds like typical elderly abuse and some IFA live off this and build big houses.

Ho hum, another thread i give up on.

jem16

Chrismaths wrote:

No, it's a figure picked out of the air. To end up with £750k after tax at 40% - taking into account her other assets of around £200k, that means the £500k would have to be worth about £1.13 million after 10 years. That's a return of 8% per annum. She hasn't made clear if she expects a capital return of 8%, or a total return of 8%. Big difference there. If you illustrate potential returns on an investment, you should use 4%, 6%, and 8% for taxable investments and 5,7,9 for tax free.

So Ed - did you just pluck this figure out of the air?

In 10 years, invested in the same things that Ed has invested in, taking into account the extra charges of the bond (at this IFA's rates) the OP would have £930,000. If you did the bond at half the cost of the IFA (which should be easily achievable with a bit of negotiation), It'll be around £970k.

Chrismaths
Did you take the 5% pa income off this figure or not?

EdInvestor

Jem

a)No of course not.The figure of 750k includes 250k of annual payments over 10 years (the very vast majorityof which are not from the capital) and is net of inheritance tax

b)He also needs to deduct the tax on the chargeable gain when the bond is encashed as well as the 250k capital withdrawals over the 10 years.

jem16

EdInvestor wrote:

Jem

a)No of course not.The figure of 750k includes 250k of annual payments over 10 years (the very vast majorityof which are not from the capital) and is net of inheritance tax

You keep using the word "include". To me that means £750k of which £250k is withdrawn as income leaving £500k

However I'll assume you mean £750k after the £250k annual payments and the 40% tax. This means that the investment would have to make £1,250,000 - 10.5% approx. What about charges and taxes like income tax and CGT that would have to be included?

b)He also needs to deduct the tax on the chargeable gain when the bond is encashed as well as the 250k capital withdrawals over the 10 years.

Perhaps he already has.