Lump Sum from Police Final Salary Scheme - "Mad not to take it"

atush

sticky fingers is not just a criminal thing. And even if it is, a police/person who cant save/not spend it a bit criminal.

Maybe you are getting too old lol.

It means things stick to your fingers both criminal and not.

Anyway, I have had enough of your lectures (warranted or not) in this life, thanks.

Now that I think of it, you advising those of slender means to both keep in debt, and use VCts is a bit criminal as leveraging and VCTs are for advanced investors really.

While I understand and to some point agree with some of the principal (esp as to paying off low rate mtgs) I disagree with your zeal to convert the unwary.

jamesd

I'm definitely getting old.

I think that the lower to mid range of VCT risk are being under-used, in part because of the expectation that they are all high risk when they aren't. The same used to be true of P2P and some people still think that's all high risk.

When it comes to VCTs, there were only around 15,500 people claiming tax relief on them in 2012-13 and most of those were investing fairly modest amounts. As HMRC noted "The majority of investors tend to invest smaller amounts of money into VCT funds. Figure 1 shows that, in 2012‐13, half of VCT investors (50%) claimed tax relief under the VCT scheme for an investment of less than £10,000". Half of that wasn't over £5,000:

Up to £1,000: 845 5.4%
Over £1,000 to £2,500: 1305 8.4%
Over £2,500 to £5,000: 2370 15.3%
Over £5,000 to £10,000: 3320 21.4%
Over £10,000 to £15,000: 1630 10.5%
Over £15,000 to £20,000: 1330 8.6%
Over £20,000 to £25,000: 850 5.5%
Over £25,000 to £50,000: 2100 13.5%
the rest: 1780 11.5%

VCTs have been growing in popularity, though. I think the total for last year was around 22,000 people and that seems likely to continue to grow.

When it comes to VCT, P2P and investing in general it's not a zeal to convert anyone. I'm interested in educating people about options that they may not have considered or may not know much about. Whether that's knowing that the UK stock market can be expected to fall by 40% once or twice a decade or that there are asset-backed VCTs with minimal prospect of a drop of that level on the money invested. All as part of a well diversified mixture of investments.

redux

Invert the question.

If you could buy an index linked annuity of 5% from age 50, when market rates are about half that, would you do it?

Taking the lump sum, is it going into other investments such as some suggested, for instance investment trusts with a history of dividend growth, or are the first two temptations a new car and a nice holiday?

green_man

Thanks again everyone (esp jamesd)

One thing to bear in mind, if your wife takes no commutation and maximum pension - financial advisers are going to get nothing out of their, presumably, 'free' advice meeting

I would hope they are more professional than this, but I do have a healthy level of skepticism so it would certainly be in my mind.

kangoora mentioned the last five years. We've been in a bull market since early 2009 so it's pretty much useless to look at just the last five years to see what could happen. Better to use the 120 or so year long term history of the UK stock market that's 5% plus inflation

Yes as someone who got interested in investing in the late 90s I'm very much aware that the FTSE is currently no higher than where it was in 1999 despite the run of the last 5 years.

For my own (none pension fund) investments I went all cash a couple of years ago when the Greek crisis suggested a very real possibility of a serious crash (FTSE was at around 6700 when I cashed in). I am currently not looking to risk most of this as I will look for it to bridge the gap to when I can draw my DC pot (I'm 49 now). I may however consider putting some into VCTs if I like the look once I've investigated further.

System

Hi

A few years ago the factors were improved dramatically (Police and Fire) to "encourage" more people to commute.

[FONT=&quot]Table 1: PPS factors for commutation of pension to lump sum[/FONT]
[FONT=&quot]Males and Females[/FONT]
[FONT=&quot]Years[/FONT]
[FONT=&quot]Age in years and completed months on day pension commences[/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot] 0 1 2 3 4 5 6 7 8 9 10 11[/FONT]
[FONT=&quot]50 [/FONT][FONT=&quot]22.10 22.08 22.05 22.03 22.00 21.98 21.95 21.93 21.90 21.88 21.85 21.83[/FONT]


As you can see a 50 year old gets 22.1 falling to 21.83 at 50yrs 11mths.

So 5K becomes 110K.

Obviously there is the option to commute just 97 pounds if that is what is wanted, and get £2130.00 ish as a tax free lump sum.

It is not necessary to take the maximum.

So commute just enough for a Lamborghini or World cruise;~)) or none of it.

green_man

Thanks Johndough

Where did those figures come from. Is the source document available online?

Those figures do seem to match the quotes she has had from the administrators.

green_man

2. When I name specific VCTs I've tended to name those that are secured on property of some sort and that provides a debt collection method if something does go wrong. The 10.02% and 11.12% ones are Albion VCT and Crown Place.

@Jamesd
I've been looking at the Albion VCTs and quite like the look of them. Have you invested directly with the company or through a broker etc. Is there any advantage to go through a broker (e.g. HL).
Have you invested across all six of the Albion VCTs or just a couple (all six seems to give more diversification and monthly div payments - but lower overall dividends)

I may have to delay this somewhat as I'm unsure of my job outlook and hence tax position so would not want to commit and then not be able to claim the tax (I assume tax can only be claimed back in the year of purchase?)

princeofpounds

Yes as someone who got interested in investing in the late 90s I'm very much aware that the FTSE is currently no higher than where it was in 1999 despite the run of the last 5 years.

The FTSE index we all concentrate on is (totally stupidly in my opinion) a price index, not total return. So it omits all the dividends. If you had actually invested over the period you mention you would have made about 66% return.

jamesd

green_man wrote: »

@Jamesd
I've been looking at the Albion VCTs and quite like the look of them. Have you invested directly with the company or through a broker etc. Is there any advantage to go through a broker (e.g. HL).

I used HL. There can be a discount from a broker but I think that all discounts have now expired. They usually start higher near the time that the fund is initially offered and drop gradually over time. Sometimes offers are only available via a broker but in this case Albion do also sell directly to investors.

Before filling out an application form it'd be a good idea to use the freephone number in the prospectus to ask Albion which of their VCTs is still open to new investment. No point in forcing them to either refund some of the money or allocate it proportionately to other VCTs if you chose that option, when you can instead say exactly what you want based on what's available. Tax Efficient Review and other places offer varyingly out of date summaries of what's still available but don't trust that unless the date is recent, a free call is fast, easy and gets you an accurate answer.

green_man wrote: »

Have you invested across all six of the Albion VCTs or just a couple (all six seems to give more diversification and monthly div payments - but lower overall dividends)

I bought some of each in early April, near the end of the tax year. I didn't use anything remotely close to an even amount in each, choosing £1,000 for all but one of them. That's because I liked the 100% secured nature and higher dividend of the Albion VCT. I did consider using a higher weighting to the Crown Place VCT (11.16% vs 10.02% dividend) but ultimately decided not to. Given the chance to do it again I would have used more in Crown place than I did but that's the call I made at the time.

I've received intermediate dividends for Kings Arms Yard and Albion Tech and General already, at the end of April, paid directly into the bank account I specified. There's an online site where those account details can be changed at any time, though a letter is sent with confirmation code before you can use it, so don't register there at the last minute. The payments were 3.57% and 2.12% of my after rebate purchase price of each.

green_man wrote: »

I may have to delay this somewhat as I'm unsure of my job outlook and hence tax position so would not want to commit and then not be able to claim the tax (I assume tax can only be claimed back in the year of purchase?)

Yes, it's only in the tax year of purchase. The rebate is done by reducing the amount of income tax payable in the year so if you don't have enough tax paid/payable you won't get it all. Job uncertainty is also not the greatest of times to be considering a five year lock-in, though that's shorter then pension lock-ins for those not aged over 50.

It took HMRC less than one week from me submitting my tax return online to the rebate money being in my bank account. That's not quite as nice as getting them to adjust the PAYE tax code to give you the relief during the year but it's pretty good given their reputation!

green_man

Job uncertainty is also not the greatest of times to be considering a five year lock-in, though that's shorter then pension lock-ins for those not aged over 50.

Yes the job uncertainty is only w.r.t my early retirement plans. It's just I haven't made the decision exactly when to stop the job yet, Do albion launch these buy-ins every year? (a punt next Jan might be a better option for me should it be available)