Is it possible to become a millionaire (or near to) through investments?

bowlhead99

BananaRepublic wrote: »

An example of a stealth tax is employer's NI as it is not seen by most people. Another example is pension fund tax credit on dividends. It so happens that Brown increased both, read into that what you will. The latter is relevant to this thread as it reduces pension fund growth.

Some might characterise any removal of benefits or handouts or credits, as a 'stealth tax'. Ergo, the actions taken to stop giving pension funds free money would be seen by them as a stealth 'tax'.

But really it was just stopping giving them the free money which had been a nice little gift which directly handed them a piece of the corporation tax which was paid by the companies in which they invested. The 'credit' was not for a tax that the pension fund had directly suffered, because pension funds don't pay tax on their earnings. So, the 'raid' was just taking away a benefit or a gift, not increasing their tax bill.

Indeed, the current government have got rid of the whole notion that a theoretical imputed tax credit should even exist, and from April all individual investors simply get their first £5k dividends tax free and only pay tax on dividends after that. Pension funds of course do not need an allowance to get the first £x of their dividends tax free, because all of their dividends are tax free.

bigadaj

BananaRepublic wrote: »

Your little argument started when you stated that VAT was a stealth tax. It is most certainly not a stealth tax as it is extremely visible. An example of a stealth tax is employer's NI as it is not seen by most people. Another example is pension fund tax credit on dividends. It so happens that Brown increased both, read into that what you will. The latter is relevant to this thread as it reduces pension fund growth. The recent changes to the state pension mean that I will retire on £8,000 pa (or the equivalent inflation adjusted value when I retire) rather than £14,000 under the old rules. That £14,000 is roughly equivalent to a pension pot of £400,000.

How has your pension reduced when you would normally get the higher of the two figures. Is this related to a projection of the value of ssp should it have been retained or something else, I would just like to clarify as it may be misinterpreted by others, along the line of teh waspi campaign.

talexuser

I have also been told that the state pension will be whichever of the old amount or new amount is the larger. Perhaps it depends on your age?

Back to the original subject, the Brown "raid" on pensions was just another nail in the coffin of final salary schemes as far as I can see. I've already said there are ISA millionaires, those that could put max into peps and isas every year - many cannot achieve that.

However the changing nature of globalisation and end of jobs for life meant the death of final salary schemes whereby you could be almost a millionaire in terms of final pension income from your theoretical "pot" after 40 years of contributions or 2/3 of a good final salary? You did not have a million to spend but had the near equivalent of the income from it?

BananaRepublic

bigadaj wrote: »

How has your pension reduced when you would normally get the higher of the two figures. Is this related to a projection of the value of ssp should it have been retained or something else, I would just like to clarify as it may be misinterpreted by others, along the line of teh waspi campaign.

I am sure you know all of this but I will first give a rough summary.

The old system had two pension schemes, the basic state pension, and the additional state pension. The former was earned as credits for each qualifiying year, for example by working and paying NI contributions, up to a maximum of 30 years of credit. The latter was acrued from NI contributions, and was based on the number of years of contributions and salary. The new state pension is a fixed amount built up from credits over 35 years. The new scheme starts in April 2016. As an aside the new scheme is better for low paid workers.

As I understand it when calculating my pension, they will work out the amount I would have got under both schemes and give me the higher of the two, as you indeed say. I will have built up about £8,000 - under todays values - by April 2016 with 30 years of contributions under the old scheme. The new scheme will not allow me to increase that amount, as the maximum under the new scheme is about £8,000. And I will no longer be contributing under the old scheme. This is one case where I would like someone to tell me that I am mistaken.

I also read today that Osborne is said to be talking about removing the 25% tax free lump sum. Given that I and others have made contributions based on calculations taking into account that 25% tax free lump sum, it seems to me to be immoral. Any other organisation trying to make retrospective changes to a financial product would be taken to court. But the government is free to do almost what they like.

BananaRepublic

bowlhead99 wrote: »

Some might characterise any removal of benefits or handouts or credits, as a 'stealth tax'. Ergo, the actions taken to stop giving pension funds free money would be seen by them as a stealth 'tax'.

But really it was just stopping giving them the free money which had been a nice little gift which directly handed them a piece of the corporation tax which was paid by the companies in which they invested. The 'credit' was not for a tax that the pension fund had directly suffered, because pension funds don't pay tax on their earnings. So, the 'raid' was just taking away a benefit or a gift, not increasing their tax bill.

Indeed, the current government have got rid of the whole notion that a theoretical imputed tax credit should even exist, and from April all individual investors simply get their first £5k dividends tax free and only pay tax on dividends after that. Pension funds of course do not need an allowance to get the first £x of their dividends tax free, because all of their dividends are tax free.

Without going into technical details, from the point of view of pension savers, to get the same level of pension one had to pay in more, and hence one's after tax income was in effect reduced. So whether it was a direct tax increase, or some sophisticated fiddling, is neither here nor there when it comes to the bottom line. So describing it as a stealth tax is quite acceptable in my book, even if that has to be taken as short hand rather than a literal interpretation. Of course Brown would use a clever argument to explain that it was not a tax increase, but then again he was rather good at creating Byzantine schemes that would have left Heath Robinson green with envy.

Glen_Clark

bowlhead99 wrote: »

Some might characterise any removal of benefits or handouts or credits, as a 'stealth tax'. Ergo, the actions taken to stop giving pension funds free money would be seen by them as a stealth 'tax'.

But really it was just stopping giving them the free money which had been a nice little gift which directly handed them a piece of the corporation tax which was paid by the companies in which they invested. The 'credit' was not for a tax that the pension fund had directly suffered, because pension funds don't pay tax on their earnings. So, the 'raid' was just taking away a benefit or a gift, not increasing their tax bill.

Indeed, the current government have got rid of the whole notion that a theoretical imputed tax credit should even exist, and from April all individual investors simply get their first £5k dividends tax free and only pay tax on dividends after that. Pension funds of course do not need an allowance to get the first £x of their dividends tax free, because all of their dividends are tax free.

True. So I expect it to be seen by some as another 'left wing political rant'.

Glen_Clark

BananaRepublic wrote: »

I also read today that Osborne is said to be talking about removing the 25% tax free lump sum.

Where else can he find the money for his housing market interventions now he has doubled the 300 year old National Debt in 5 years?
Sir Jimmy Savile was a property millionaire - maybe he learned something from his weekends at Chequers. All we get is the official spiel about a 'March of the Makers' But manufacturing has been a terrible sector to invest in compared to London property - capital value alone having doubled in 10 years, thanks to supply (planning) restrictions, and taxpayer subsidies like 'Help to Buy', Housing Benefit etc

talexuser

BananaRepublic wrote: »

As an aside the new scheme is better for low paid workers.

Not according to these pension experts:
http://www.theguardian.com/money/2016/feb/20/20-million-lose-out-pension-reform

"20 million low paid workers lose out in the new scheme with government saving 8 billion".

bowlhead99

Glen_Clark wrote: »

Sir Jimmy Savile was a property millionaire - maybe he learned something from his weekends at Chequers. All we get is the official spiel about a 'March of the Makers' But manufacturing has been a terrible sector to invest in compared to London property - capital value alone having doubled in 10 years, thanks to supply (planning) restrictions, and taxpayer subsidies like 'Help to Buy', Housing Benefit etc

I have some BAESystems shares. They're a UK listed company that manufactures things. In 2005 the shares were £2. Now they're comfortably more than double, ignoring dividends. So if 'capital value alone having doubled in ten years' is criteria for success, there are certainly manufacturing companies which achieved that. My London property has also done OK, though I haven't had it ten years.

I'm still not quite sure why you keep wanting to bring this thread back to Jimmy Savile?

Glen_Clark

bowlhead99 wrote: »

I have some BAESystems shares. They're a UK listed company that manufactures things. In 2005 the shares were £2. Now they're comfortably more than double, ignoring dividends. So if 'capital value alone having doubled in ten years' is criteria for success, there are certainly manufacturing companies which achieved that. My London property has also done OK, though I haven't had it ten years.

I'm still not quite sure why you keep wanting to bring this thread back to Jimmy Savile?

Arms manufacturers have done well, The Government sees its first duty as defending the Government, so no expense spared there. But I was referring to the manufacturing sector as a whole, compared to the property sector. I mentioned Sir Jimmy Savile OBE KCSG in reply to BananaRepublic. Pointing out Savile had made his millions out of property investments and wondered if he had gleaned some inside knowledge from his visits to Chequers, who knew they were going to introduce policies which boosted property prices, rather than the 'Northern Powerhouse' and 'March of the Makers' flannel they put out for public consumption.