SIIP contribution without tax relief?

talexuser

I see, and understand the difference now. Thing is I have no need to ever withdraw cash from the SIIP, it will just be used for income eventually after maybe 10+ years of accumulation. If I ever do withdraw it would only be for the 25% tax free, and then only if I can't fill the isa any other way. The rest will go into my estate for the kids.

I just thought it would be simpler than the alternative of income reporting and paying tax on accumulation funds outside an isa with its relative complexity of then taking me over the 40% income tax threshold?

TH1878

talexuser wrote: »

I see, and understand the difference now. Thing is I have no need to ever withdraw cash from the SIIP, it will just be used for income eventually after maybe 10+ years of accumulation. If I ever do withdraw it would only be for the 25% tax free, and then only if I can't fill the isa any other way. The rest will go into my estate for the kids.

I just thought it would be simpler than the alternative of income reporting and paying tax on accumulation funds outside an isa with its relative complexity of then taking me over the 40% income tax threshold?

Even if you can find a pension provider that will allow non tax-relievable pension contributions, I can assure you the ongoing battle with them will not be worth the hassle.

Buy income units rather than accumulation units which should keep the administration to a minimum.

There are other avenues you can explore that could help keep admin low, I'm thinking onshore or offshore bonds and Maximum Investment Plans (up to £3,600pa).

What amounts are we talking here?

xylophone

Had you considered contributing to your children's pensions or setting one up for the grandchild you mentioned in a previous post?

talexuser

TH1878 wrote: »

There are other avenues you can explore that could help keep admin low, I'm thinking onshore or offshore bonds and Maximum Investment Plans (up to £3,600pa).
What amounts are we talking here?

ps thanks for taking the trouble to spreadsheet the example. I've not heard of a maximum investment plan. The SIIP has been started with 2 lots of 3600. I could invest maybe 50k to 100K relatively safely.

talexuser

xylophone wrote: »

Had you considered contributing to your children's pensions or setting one up for the grandchild you mentioned in a previous post?

The mother does not use all her isa allowance, so we all agreed to use that for the benefit of the grandchild. Invested in Murray International at the moment (not doing too well now because quite defensive waiting for a correction) with a time frame of 16-17 years, and we should be topping up around 6k a year. I understand your point about a pension started now should grow spectacularly as long as the companies are still around.

TH1878

talexuser wrote: »

ps thanks for taking the trouble to spreadsheet the example. I've not heard of a maximum investment plan. The SIIP has been started with 2 lots of 3600. I could invest maybe 50k to 100K relatively safely.

If the investment is around £100k, you could be looking at offshore bonds (probably best onshore below this).

No tax is paid until you actually withdraw some of the funds (offshore) but the bond can be written as a series of segments (mini-policies). The segments can be assigned to children / grandchildren in the future who can encash them and utilise their own tax rates (rather than yours). The gain can also be averaged over the number of years the bond has been in force (top-slicing) to reduce the tax payable.

Onshore bonds can also be written on a segmented basis but tax is deducted at a rate of around 12-17% which satisfies the requirement for a basic rate taxpayer. Additional tax is only paid on surrender.

The bond could also be written on a Capital Redemption Basis (offshore) which means that it can continue after your death.

Alternatively, it can be written on a last death Life Assurance basis (put your children or grandchildren on as lives assured) and the investment wouldn't be considered to be yours if you need future care (unless the CRAG guidelines change).

Investment bonds are excellent investment vehicles once ISAs and pensions have been utilised but if you do go down this route, please please get advice from a decent adviser so you don't make this kind of mistake:

http://citywire.co.uk/money/investor-faces-financial-ruin-for-ticking-the-wrong-box/a664405

talexuser

Thanks for the explanation. I shall consider these carefully after a lot of reading. The alternative remains some trusts paying income and cg tax. On that basis they look a better bet.

TH1878

talexuser wrote: »

Thanks for the explanation. I shall consider these carefully after a lot of reading. The alternative remains some trusts paying income and cg tax. On that basis they look a better bet.

What do you mean by this? Using a discretionary trust to purchase Collectives? Unlikely to be a good idea as you will lose control of the assets and income tax and capital gains will taxed at the trust rate (45% and 28%) with reduced annual exemptions.

Bonds are usually much better investment options for trusts because they don't produce income (which is taxable at 45%) and they can be assigned out to beneficiaries in the future to take advantage of the beneficiary's own tax rates.

bigadaj

TH1878 wrote: »

What do you mean by this? Using a discretionary trust to purchase Collectives? Unlikely to be a good idea as you will lose control of the assets and income tax and capital gains will taxed at the trust rate (45% and 28%) with reduced annual exemptions.

Bonds are usually much better investment options for trusts because they don't produce income (which is taxable at 45%) and they can be assigned out to beneficiaries in the future to take advantage of the beneficiary's own tax rates.

Reference to Murray international previously would suggest that the poster is referring to investment trusts rather than a discretionary trust. With acknowledgement that purchasing these unwrapped would leave them open to paying tax on income and potentially on capital gains over the longer term.

TH1878

bigadaj wrote: »

Reference to Murray international previously would suggest that the poster is referring to investment trusts rather than a discretionary trust. With acknowledgement that purchasing these unwrapped would leave them open to paying tax on income and potentially on capital gains over the longer term.

I had missed that, cheers.