Where do I go after ISAs, FRB's, Pension etc?

***xyz***

Financially, I would say we are in an OK position.

I'm in higher tax band, OH doesn't work so all saving in her name.

We have about 200k in various places - ISA's maxed, various 1 and 2 year fixed rate bonds, private pension, premium bonds, no mortgage etc., but not sure where to go next. I know nothing about stocks and shares and don't really want to get too heavily involved with that route. Not sure why though, just seems to frighten me lol!

Any ideas?

gadgetmind

We're in a similar position and our "unwrapped" holdings are all in my wife's name. We hold individual blue-chip shares and also some Investment Trusts. There is no further tax on dividends for basic rate tax payers, which is nice.

However, plugging away at your pension makes sense if you save HR tax, and you might also like to do the basic £3600pa for your wife. Also check her state pension situation as there are cheap ways to make sure she gets the full whack.

gadgetmind

BTW, when you say "ISAs maxed", do you mean cash ISAs or Stocks and Shares? Cash ISAs make little sense if you have a tame non-tax payer as you can get better rates for unwrapped cash.

If you are going to be building up largish unwrapped holdings, you need to learn about capital gains tax, how interest and dividends are taxed, and you also need to keep careful records. Spreadsheets are your friend!

If you're tempted to go for investing via funds (OEICs and UTs) then it's also worth understanding why the accumulation versions of these are a PITA and that why you should stick to income units.

Of course, you also need to sit back and decide what it is you're wanting to achieve, what your investment goals and timescales are, how you'd cope with loss of job/health/etc. and much more.

psychic_teabag

gadgetmind wrote: »

BTW, when you say "ISAs maxed", do you mean cash ISAs or Stocks and Shares? Cash ISAs make little sense if you have a tame non-tax payer as you can get better rates for unwrapped cash.

Not always. Around March/April, ISA rates can be pretty good. I think I checked this year, and for every category (instant-access and all lengths of fix) ISA was paying higher than non-ISA.

Right now, it looks like it's easier to get 3% from an instant-access ISA than from a non-ISA, for example.

barak

gadgetmind wrote: »

.....If you're tempted to go for investing via funds (OEICs and UTs) then it's also worth understanding why the accumulation versions of these are a PITA and that why you should stick to income units.

Is this view to do with CGT? Otherwise please explain!

gadgetmind

barak wrote: »

Is this view to do with CGT? Otherwise please explain!

CGT and income.

An accumulation fund pays out either dividends or income (which have different tax treatments) but uses it to then buy more units. This makes working out your various income streams and capital gains purchase prices rather difficult, and it gets worse if you additionally buy/sell units which many people do.

If you go for income units, you can easily see the income (or dividends) and then decide for yourself how to re-invest.

We hold a fair few unwrapped investments, some paying income, some dividends, some (REITs) paying both, and we also have some foreign dividend income. Tracking this isn't hard, but you do need to know what you're doing. Having some of this money automatically buying more of the underlying assets would add another very unwelcome layer of complexity.

mania112

£2.70 a week into a friendly... :P

barak

gadgetmind wrote: »

CGT and income.

An accumulation fund pays out either dividends or income (which have different tax treatments) but uses it to then buy more units. This makes working out your various income streams and capital gains purchase prices rather difficult, and it gets worse if you additionally buy/sell units which many people do.....

Accumulation funds don't actually buy more units - the unit price increases instead. I understand that you may not want to 'reinvest' income and that CGT calculations might become more complicated, but the dividend or interest 'income' is provided on a tax certificate.

You also mention foreign dividend income. That could involve Foreign Tax Credit Relief which really is a bit of a nightmare! I wonder how you deal with that? Very confusing notes from HMRC.....

Linton

***xyz*** wrote: »

Financially, I would say we are in an OK position.

I'm in higher tax band, OH doesn't work so all saving in her name.

We have about 200k in various places - ISA's maxed, various 1 and 2 year fixed rate bonds, private pension, premium bonds, no mortgage etc., but not sure where to go next. I know nothing about stocks and shares and don't really want to get too heavily involved with that route. Not sure why though, just seems to frighten me lol!

Any ideas?

Sorry, the next step is shares and funds. You are in an ideal position to take advantage of the better returns you can get by equity investing as your £200K will completely outweigh any temporary losses you could make in your investment portfolio.

You could start off with £10K in an online S&S ISA and put together a simple portfolio of say 2-3 broad funds (eg global trackers, balanced managed funds and similar) and take an interest in what happens. Treat it as £10Ks worth of education and with the sort of investments I am talking about you wont lose your shirt.

I take it you are making full use of pensions to get some relief from your higher rate tax. Pensions of course generally use funds for investment.

mania112

gadgetmind wrote: »

CGT and income.

An accumulation fund pays out either dividends or income (which have different tax treatments) but uses it to then buy more units. This makes working out your various income streams and capital gains purchase prices rather difficult, and it gets worse if you additionally buy/sell units which many people do.

If you go for income units, you can easily see the income (or dividends) and then decide for yourself how to re-invest.

So you have accumulation - where the unit size increases - and withdrawals fall into the dividend tax structure (10%/32.5%/42.5%)

With income, the units are 'increased' so that they can be paid regularly - and this income falls into the interest income tax structure (20%/40%/50%).

barak

mania112 wrote: »

So you have accumulation - where the unit size increases - and withdrawals fall into the dividend tax structure (10%/32.5%/42.5%)

With income, the units are 'increased' so that they can be paid regularly - and this income falls into the interest income tax structure (20%/40%/50%).

The tax treatment doesn't depend on whether you have accumulation or income units. It depends on whether the fund pays dividends [fund invested in shares] or interest [fund invested in fixed interest bonds etc.]