IFA Retiring, Portfolio Advice Needed

jimjames

Malthusian wrote: »

I don't find it surprising that the OP's IFA didn't recommend pension contributions. Especially as the OP's investment portfolio is entirely wrapped in ISAs.

With the new info maybe not. However the situation in the OP was of a company director of own company with no pension. Pension contributions for company and director would have been a good way to maximise untaxed income.

tiptop77

Thanks for the input so far. Regarding the high interest account sidetrack, I just meant that I'd already stored the funds in the best easy access accounts currently available while I do some research, to save someone suggesting it.

jdw2000 wrote: »

Have you thought about investing it instead in another property?

I considered it, but property currently makes up a third of my total net worth so I don't really want to expose myself to it much further. We also had recent nightmare tenants who trashed a property and broke in again after they'd moved out, so right now I'd rather drag myself over three miles of upturned plugs than go through that again anytime soon.

In anticipation of breaking the 40% tax barrier this year, can anyone summarise the benefits of pensions for higher rate tax payers in my situation, and what types of pensions I should start researching? This is an entirely new area for me, so I feel like I need an idiot's guide. On the plus side, I know a lot more now than I did last week.

jdw2000

tiptop77 wrote: »

Thanks for the input so far. Regarding the high interest account sidetrack, I just meant that I'd already stored the funds in the best easy access accounts currently available while I do some research, to save someone suggesting it.



I considered it, but property currently makes up a third of my total net worth so I don't really want to expose myself to it much further. We also had recent nightmare tenants who trashed a property and broke in again after they'd moved out, so right now I'd rather drag myself over three miles of upturned plugs than go through that again anytime soon.

In anticipation of breaking the 40% tax barrier this year, can anyone summarise the benefits of pensions for higher rate tax payers in my situation, and what types of pensions I should start researching? This is an entirely new area for me, so I feel like I need an idiot's guide. On the plus side, I know a lot more now than I did last week.

I used to own a BTL. And I only had good tenants who paid on time. And I STILL found it a massive pain in the rear. My personal opinion is, though, that property is the best bet. Just my view. That being said, I have invested my money instead into Funds and I am happier as a result. Even an impending crash is less stressful than an impending tenant default or annoying phone call asking for a boiler repair etc.


Regarding your pension: I have my stocks and shares ISA, my unwrapped trading account, and my pension (a SIPP) all with Halifax. Just like with my ISA and trading account, I have my SIPP invested in VLS. A SIPP pension is thus just like an ISA or trading account - except you cannot access the money until you're 55. Other than that, there is no difference to you.


Tax-wise, paying into your SIPP/pension each month means that as far as the taxman is concerned you are earning less (because the pension money is deducted from your gross earnings. This then puts you back into lower-taxband territory. You therefore avoid paying 40% tax on the upper part of your salary. Pensions are therefore very tax efficient things for higher-rate earners who want as little as possible taken by the tax man.

Malthusian

tiptop77 wrote: »

In anticipation of breaking the 40% tax barrier this year, can anyone summarise the benefits of pensions for higher rate tax payers in my situation, and what types of pensions I should start researching?

I can go through my list from 2014 in reverse. Briefly, you can get 40% tax relief on the way in, and you can often avoid paying 40% tax on the way out. Death benefits are free of tax if you die early (before 75) and are taxed at the beneficiary's rate after 75. Growth is tax free which is increasingly important with the dividend allowance being cut to £2,000 - it doesn't sound as if you have to worry about this yet if you have everything in ISAs, but you need to keep an eye on it. From 55 you can still draw out 25% tax free. And you can now draw funds out at will once you pass age 55, although for various tax reasons it conventionally makes sense to do so only when you need it in retirement.

In short pensions are a very good way of sheltering long term investments from tax on growth. There is a constant war between the incentives to put money in and the restrictions and tax on taking money out, and the Government constantly tinkers with both sides. Currently the incentives are winning, especially for higher-rate taxpayers.

jamei305

Malthusian wrote: »

From 55 you can still draw out 25% tax free. And you can now draw funds out at will once you pass age 55, although for various tax reasons it conventionally makes sense to do so only when you need it in retirement.

The age rises to 57 from 2028 and thereafter increases at the same rate as the state pension age. For a 37 year old they will need to be at least 60 and quite possibly older before they can touch their pension. This uncertainty is one of the reasons I, as another 37 year old, am sticking to ISAs at the moment.