How much could I carry forward and should I?

AlanP_2

vikkiew wrote: »

Interesting and enlightening answers.

Considering numerous factors and assuming the LTA stays around 1 million my DB scheme should reach LTA when I am 55-60.

That implies your Annual Pension at Age 55 would be £50,000 as LTA calculation is 20x Annual Pension.

Whilst not impossible it sounds a lot to me based on a £60k salary even allowing for future pay rises and / or promotions.

What Final Salary are you basing your calculation on?
.

bigadaj

vikkiew wrote: »

I have looked into VCTs. For a start, the charges put me off. Generally poor reviews advising against also due to performance and limited control. I am happy to take risks and commit long term but VCTs just don't look good.

Where have you been looking at reviews?

Charges are high, they are often high risk but as well as tax relief the dividends are tax free.

They are illiquid, need to be held for five years and may return less than contributed, but probably more than the net figure.

They are certainly not for everyone but can form a useful option for those with significant assets already within isas, pensions and unwrapped.

vikkiew

I just googled "VCT worth it", "VCT how it works", etc.

This was a typical article/review - https://www.ft.com/content/3c658664-9567-11e3-8371-00144feab7de

Holding for 5 years or more isn't an issue, I can hold for 20. Neither is high risk providing there is reasonably corresponding reward.

The reality is the majority of the "tax relief" goes to paying the fees even if holding for the minimum 5 years. Looking at performance tables the best performing of VCTs over 5 years e.g. Elderstreet hasn't been better than traditional small cap funds which are far more diverse.

Are you investing in any VCTs? Which ones?

jamesd

Albion. Merryn is very much opposed to significant fees and particularly to performance fees so often does campaigning editorials on the subject, though I don't know which of the Albion Ventures VCTs she was writing about. What she neglected to mention is that it's routine for many VCTs to pay out returns in tax exempt dividends, instead of increasing the NAV, so NAV-based performance fees can have much lower effect than might be expected.

The fees don't come from the tax relief, the fees are the fees and come out of the total return. In the case of the Albion VCT the expected result is around 30% initial tax relief, 3% purchase fees after rebate, 10% a year of tax exempt dividends on the remaining purchase price, about 1% a year of capital price decrease and sale at a discount of about 6%. So around 65% of initial purchase price in initial relief and tax exempt dividends and around 14% of capital costs. This isn't one of the higher-performing VCTs, it's focus is on the lower risk end of the market and delivers what I'm after from that: effective elimination of my income tax bill in exchange for deferring some income for five years with reasonable return on the investment during those years.

Effect of performance fees on that? Roughly nil since the NAV isn't expected to increase, the gains are coming out in the dividends instead.

Lower fees would be nice but if you think those are bad you should look at P2P where it's not uncommon for a platform to have deals that pay investors 1% a month before bad debt and the platform 0.5-1% a month plus some initial fees. Long-established players like Zopa will take around 50% of the total borrower cost while paying perhaps 3-6% a year after estimated bad debt. Unlike NAV-based performance fees when low NAV increase is expected those charges are a big deal.

hoc

Having trouble following the numbers. How much are you paying for annual fees, you don't mention. Isn't there also a selling fee similar to the initial purchase?

If I have understood correctly, ignoring the tax relief and entry/exit fees you're saying from year to year it is 10% dividend - 1% capital loss - ? % annual fees, so let's say net gain is 7% a year. Is that right?

jamesd

Those numbers are after all of their fees, those come out before the dividend. They don't charge you to sell, they are just shares and you pay whatever your broker charges. Annual return from all sources including tax relief about (65-14) / 5 = 10.2% all tax exempt.

bigadaj

hoc wrote: »

Having trouble following the numbers. How much are you paying for annual fees, you don't mention. Isn't there also a selling fee similar to the initial purchase?

If I have understood correctly, ignoring the tax relief and entry/exit fees you're saying from year to year it is 10% dividend - 1% capital loss - ? % annual fees, so let's say net gain is 7% a year. Is that right?

Fees are implicit rather than explicit, so not totally transparent but at the end of the day I'm only bothered about the returns I receive, if the manager makes good money and I get my return then that's fine.

All bank accounts have implicit fees after all.

However don't take these returns as guaranteed or interest, these are high risk products that benefit from tax advantages. There's no guarantee of dividend payments and may well be capital losses as well, caveat emptor.