Further Guidance

Notfarfromtheborder

Afternoon all

Can't believe nearly two years have gone by since my first post, the recent passing of a parent has meant I need to change plans I feel as have an imminent £200K inheritance.

This is currently with a discretionary stockbroker who charges .75%+ vat, currently the funds are invested to provide income rather than capital growth. Will get these into isa funds as soon as possible, could also use other half's isa allowance also. Not sure if I like the idea of someone doing what they want without consultation but in all fairness they did a good job for my recent parent. I could however move this from them and self manage or just whack into some passive trackers, opinions on this welcome. One thought is to use the income from this to supplement further salary sacrifice as detailed below?

Ideally I don't want to pay tax where i don't have to so will try and utilise £5K dividend income allowance (x2) and £1K savings allowance (x2), but income from this legacy would put me back into HRT territory. I could get this back down by further salary sacrifice, anywhere up to £30K sacrifice which would get me £40K into pension with employers contributions and employers NI added in. This would, however, increase the % of liquid / non liquid assets up to 55 and it would also take a lot longer to get it out of pension without tax but also realise that this would sit outside of estate for IHT up to 75. Is this something I should be concerned with?

As an update, DC pension pot has increased to £151K due to £2K per month into pension at present via SS, this takes me to just below 40% tax bracket at present

Both in mid to late 40's, wanting to get to 55 with options regarding retirement, I'd like to have enough pension provision in the next four years at the latest which would enable me to look for a more local less stressed role or reduce hours giving me the same net income but with no further pension or savings to pay. Should also get me 35yrs contributions to state pension.

Mortgage totally gone, however, liquid assets now up to £15K once regular savers mature shortly and will be sent straight to 123 acct. Will continue to save around £15K pa in cash also and spread around to get best rates with a reasonable amount of effort but son off to Uni may put a dent in this...

OH is in NHS 1995 scheme, just under higher rate tax threshold and has been in it since 21 so she will get a decent £10k pa pension from 55 in 1995 scheme, depends how long she works but am planning for another £7.5K from 67 in new 2015 care scheme

Other pension is an old db pension that is forecast to pay circa £8K pa after 65.

In drawdown from 55 will try and further maximise tfls /dividend / saving / cgt / personal allowances so limited tax will be paid up until further pensions kick in for us both then tax at 20% will be unavoidable.

Any other ideas that I am missing?

Maybe time for an IFA?

dunstonh

Not sure if I like the idea of someone doing what they want without consultation but in all fairness they did a good job for my recent parent.

This is known as discretionary fund management. However, they are meant to do it within a structure and risk profile. So, it is not complete freedom but within a remit.

I could however move this from them and self manage or just whack into some passive trackers

Whacking into some passive trackers would suggest no particular structure. So, whilst your charges will go down, your long term returns may well do so as well.

Ideally I don't want to pay tax where i don't have to so will try and utilise £5K dividend income allowance (x2) and £1K savings allowance (x2), but income from this legacy would put me back into HRT territory.

Depending on how quickly you can bed & ISA to take you back into basic rate territory and the amounts involved, you may need to consider an investment bond. That can defer the the tax calculation until later years when you are basic rate again. Or increase pension contributions.

kidmugsy

Notfarfromtheborder wrote: »

Ideally I don't want to pay tax where i don't have to ..... Both in mid to late 40's, wanting to get to 55 with options regarding retirement

An IFA might be well worthwhile, perhaps saving you the cost of the discretionary broker too.

With ten years or less to go to 55 I'd have thought that the inflexibility cost of pension contributions might be acceptable, as long as you've piled up money in ISAs too.

You could also consider putting your unsheltered capital into investments designed to give much of their return as capital gains rather than income: then your divi allowances would stretch further.

And, at risk of annoying the po-faced, let me suggest (i) that you could both buy up to £50k of Premium Bonds while awaiting the chance to put more money into ISAs, and (ii) you consider making some investment into precious metals: your IFA will presumably discuss the pros and cons of various methods of doing so.

For instance you could consider buying gold sovereigns from the Royal Mint, and paying to have them stored there. There's no VAT to pay on the gold, no CGT and, inevitably, no income tax. There are annual costs, and probably quite a big buy/sell spread; the latter won't much matter if you hold them for a long time. If you happen to live near a safety deposit, you could do the storage yourself I suppose, and perhaps buy the sovs from a cheaper supplier.

Notfarfromtheborder

Thanks Dustonh

This is known as discretionary fund management. However, they are meant to do it within a structure and risk profile. So, it is not complete freedom but within a remit.
Thanks, exactly the term they used, I'd forgotten it, they have sent risk profiling over. I've been using the same DFM at the same firm for years as POA and been happy with their performance in the past.


Whacking into some passive trackers would suggest no particular structure. So, whilst your charges will go down, your long term returns may well do so as well.
Fair point, I've not got the knowledge of this market, was considering a VLS or L&G multi index income funds.

Depending on how quickly you can bed & ISA to take you back into basic rate territory and the amounts involved, you may need to consider an investment bond. That can defer the the tax calculation until later years when you are basic rate again. Or increase pension contributions.
Thanks, will take 6 yrs if I use spouses ISA allowances as well, will look at investment bonds thanks for the heads up. As you state, still got the pension option.

Thinking it might be time for an IFA.....

Notfarfromtheborder

Thanks Kidmugsy

With ten years or less to go to 55 I'd have thought that the inflexibility cost of pension contributions might be acceptable, as long as you've piled up money in ISAs too.
Tend to agree, I'd transfer some of legacy into ISA's every year but as mentioned would take 6 years. That said it wouldn't take that long to ensure I wasn't paying tax on the income due to dividend tax allowance. Probably best to put higher yielding holdings in ISA initially?

You could also consider putting your unsheltered capital into investments designed to give much of their return as capital gains rather than income: then your divi allowances would stretch further
Good point, this is where maybe a DFM or IFA will help to ensure most tax allowances are used effectively.

And, at risk of annoying the po-faced, let me suggest (i) that you could both buy up to £50k of Premium Bonds while awaiting the chance to put more money into ISAs
Good option I hadn't thought of, and I do like a gamble.......:)