£150K + shares to invest

EdInvestor

jem16 wrote: »

I wondered how long it would take before your usual dig at investment bonds.

Actually I wish I didn't have to.But I do feel it's something that any investor with a large capital sum needs to be aware of, ptreferbaly before he embarks on the advice trail.

For while there may be some circumstances where a bond is appropriate, there are numerous examples of the product being used to extract very high commisssions from naive (and especially elderly) people.

They do account for the second largest group of complaints to the Ombudsman after endowments.

Forewarned is forearmed,I say.

If the first thing an advisor suggests is an investment bond, you'll know.

jem16

EdInvestor wrote: »

One thing to remember (apart from the fact that there is no tax to pay on dividends from shares or equity funds for basic rate taxpayers because it is covered by the tax credit) is that you have an annual capital gains tax allowance on realised profits of over 9k.

A big disadvantage of the bonds is that gains (whether realised or not) are taxed within the bond @20% and this tax isn't reclaimable. If held direct, gains are tax free until realised, and are then only taxable if over 9k p.a

Holding shares directly also usually incurs no charges once they have been bought.It's thus quite easy for the BRT to invest in equities entirely tax and charge free without using any wrappers.This doesn't however apply to cash, bonds/gilts or property funds.

Have you actually read any of what mvteng has posted?

mvtang wrote:

absolutely on the borderline. Instead of recent pay rises, I've salary sacrificed to take pension payments & Childcare vouchers in order to stay under the limit

What you have just said has no relevance to the OP and will only cause confusion. With the dividends alone, never mind the cash, he/she will not be a BRT.

EdInvestor wrote:

For while there may be some circumstances where a bond is appropriate,

This may well be one of them

If the first thing an advisor suggests is an investment bond, you'll know.

Know what? That he knows what he's talking about in this case?

dunstonh

Eds last few posts are wrong in a number of places. Bond taxation is wrong. Tax credit information is wrong and anyone that posts that basic rate tax payers can invest in equities entirely tax and charge free really needs to consider if they should be posting such rubbish to the inexperienced individuals who often frequent this section.

If the first thing an advisor suggests is an investment bond, you'll know.

I recommended an investment bond last week. It's going to save the person around £7000 a year in tax over the unit trust alternative. It is invested in an portfolio with a reduction in yield of 1.1% compared to around 1.7% on unit trusts.

The product is not a majority product but it can safe a fortune when used in the right circumstances. Had that individual read your post here, they would probably be doubting my advice and may have even rejected it and gone with unit trusts and a higher tax bill and charges. Just like that woman you confused last year when you made her doubt the IFAs recommendation that could have saved upto £200,000 in IHT. Yet you made her more concerned over the couple of thousand he would have earned from it and suggested she went with unit trusts instead.

A little bit of knowledge in the wrong hands can be far more damaging and Ed, you are a good example of that at times.

EdInvestor

Never let the tax tail wag the investment dog.

jem16

So you post all this about tax....

EdInvestor wrote:

One thing to remember (apart from the fact that there is no tax to pay on dividends from shares or equity funds for basic rate taxpayers because it is covered by the tax credit) is that you have an annual capital gains tax allowance on realised profits of over 9k.

A big disadvantage of the bonds is that gains (whether realised or not) are taxed within the bond @20% and this tax isn't reclaimable. If held direct, gains are tax free until realised, and are then only taxable if over 9k p.a

Holding shares directly also usually incurs no charges once they have been bought.It's thus quite easy for the BRT to invest in equities entirely tax and charge free without using any wrappers.This doesn't however apply to cash, bonds/gilts or property funds.

and when dunstonh points out that most of it is wrong, you then post this...

EdInvestor wrote: »

Never let the tax tail wag the investment dog.

:rotfl: :rotfl: :rotfl:

cheerfulcat

EdInvestor wrote: »

One thing to remember (apart from the fact that there is no tax to pay on dividends from shares or equity funds for basic rate taxpayers because it is covered by the tax credit) is that you have an annual capital gains tax allowance on realised profits of over 9k.

Only the OP has already stated the tax position as borderline; the dividend income, combined with the tax credit, will push him into higher rate tax.

jamesd

EdInvestor wrote: »

Never let the tax tail wag the investment dog.

We're talking about tax wrappers, not the investments held within them. An investment bond can hold a range of investments and the 20% tax that can't be reclaimed from your earlier post, that is a superior position to 40% higher tate tax that the bond will protect mvteng from.

ISA to hold income-producing investments, CGT used for pure growth and an investment bond wrapper for the remainder seems like a reasonable first approximation.

Even if your claims about fees for investment bonds apply because mvteng pays higher than necessary fees, that tax advantage is large by comparison and will more than offset the charges, because of the higher rate tax bill that is being reduced.

dunstonh

Never let the tax tail wag the investment dog.

Investment bonds have exactly the same funds available to unit trusts and some modern onshore investment bonds actually use unit trusts at exactly the same charges. That gives no differential between the two in charges or funds. So the only difference to worry about is tax.

Even if your claims about fees for investment bonds apply because mvteng pays higher than necessary fees

Like any retail product, you get cheaper ones and more expensive ones. You dont measure the product by the most expensive examples (unless you are Ed). Cautious investors in particular can do better with bonds with regards to charges as they will hold a larger amount of lower risk funds and that is where insurance companies tend to be quite good (compared to being usually dire with equities). You can get these funds at 1% typically compared to 1.5% in unit trust form.

mvteng

So can anyone recommend some good websites for research.

I've found https://www.fool.co.uk but want to do some more research.

EdInvestor

Perhaps you could tell us what your situation is property wise MVT?

Using the cash to offset your mortgage, if you have one, would give you a risk and tax free return at the mortgage interest rate and would not affect your income tax position. The next thing would be to take up the full allowance of NSI index linkers (30k for two of you) for the cash.

If you choose " growth" shares/funds which don't pay dividends there will be no effect on your income tax position, and your CGT allowance would still be usable if needed on any realised gains.