Investment Bond Wrapper & Supermarkets

MrMicawber_2

Sorry I must be being really slow but how does a 10% tax credit + 25% further dividend make 32.5%

jem16

MrMicawber wrote: »

Sorry I must be being really slow but how does a 10% tax credit + 25% further dividend make 32.5%

It doesn't. It depends on whether you are working on the paid dividend figure or the gross dividend (tax credit + dividend)

i.e.

Dividend of £90 and tax credit of £10. Total = £100.
32.5% of this is £32.50. You have a tax credit of £10 so a further £22.50 is due. ( or 22.5%)

Dividend of £90 as above.
25% of this £22.50

EdInvestor

BTW age allowance is going up to 9030 as of next April and clawback will start at 21,800.

The basic state pension goes up to 90.70 (4,716 p.a) - don't forget to include the BSP when working about retirement taxable income.

EdInvestor

The CGT changes affecting investment bonds are sparking growing fears that advisors will take advantage by pulling their clients' money out of the bonds and putting them into unit trusts, thus earning another dollop of commission.

http://www.moneymarketing.co.uk/cgi-bin/item.cgi?id=153179&d=340&h=341&f=342

jem16

EdInvestor wrote: »

The CGT changes affecting investment bonds are sparking growing fears that advisors will take advantage by pulling their clients' money out of the bonds and putting them into unit trusts, thus earning another dollop of commission.

http://www.moneymarketing.co.uk/cgi-bin/item.cgi?id=153179&d=340&h=341&f=342

So Ed when an IFA suggests his/her client pulls out of a bond, you imply that he/she is only doing it to earn more commission but when you suggest exactly the same thing you are being helpful and just trying to keep things simple. :rolleyes:

http://forums.moneysavingexpert.com/showpost.html?p=6550301&postcount=4

Double standards Ed

EdInvestor

But I didn't recommend churning jem, did I?

Read my post.

jem16

And neither are the IFAs who recommend that their clients leave the bond in their best interests.

So damned if they do and damned if they don't.

Read the article.

dunstonh

I read that article and thought it was pathetic and just an excuse for another company to try and get their name in the media again.

The FSA has never told advisers not to switch when the justification is right. Indeed, they issued an OP a few years back called "to switch or not to switch" as well as an OP on with profits and they actively encouraged switching when justified and not when it wasnt.

An IFA has a responsibility to tell you that the product you have is no longer suitable and offer a replacement if it is justified (tied agents dont). Leaving a client in a product you know to be inferior is just as likely to end in an upheld complaint as putting them in a bad one in the first place.

Like most things when changes occur, initially you get a lot of misinformation and a bit of sensetionalism but after a period of time after the event, real analysis takes place and you realise that actually there isnt a lot of difference. Seeing as most bonds are done to reduce Higher rate tax liability, use of trusts or provide a simple plan for income provision, the extra 2% on CGT isnt actually a big deal. £100k in a bond with say 5% growth (income is not affected) means you now pay £100 a year more in CGT than you did before. If your bond is a modern version then your costs are probably around 0.2%- 0.5%p.a. lower than unit trusts. Lets assume 0.2% lower and that saves you £200. Plus, if you arent paying higher rate tax on that income, the you are saving there as well.

Plus, it looks like the Govt is going to change the CGT to 18% on bonds to match personal rate. Confirmation has yet to come but there has been coverage of this and it is expected.

MrMicawber_2

I'm still concerned about the cost of bonds and / or the choice of good funds.

Selestia for example has a good choice of top funds but charges 5% for each lump sum investment, plus a £50 per annum investment charge. You do get a good discount on the initial charge and pay the standard 1.75% or so TER. So in year 1 you pay 6.75% plus £50.

Friends Provident / Standard Life as other examples do not really have a great choice of the top funds.

Are there any investment bond providers who offer both choice (quality managers & not just number of funds) and reasonable charges?

(By the way I know I have left off Financial Advisor fees / commission)

dunstonh

Selestia for example has a good choice of top funds but charges 5% for each lump sum investment

Selestia has probably the best choice of funds out there because it uses unit trust funds and has unit trust annual management charges. However, the initial charge will vary with different IFAs as that is negotiable between the IFA and Selestia. It also depends on how much fee you discuss with the IFA. 5% would suggest the IFA is either not getting best terms or is keeping all the commission for themselves.

I think the Selestia pension plan is great (its where I have my own) but I am not keen on the Selestia investment bond as I find it too expensive. Its a clean contract but it can be beaten easily in price.

Friends Provident / Standard Life as other examples do not really have a great choice of the top funds.

Standard Life is a poor quality bond. Mainly as you are limited on fund switches for the life of the contract. Plus, its charges are not that good and the fund range although not bad, is not great.

Friends Provident is good for a fairly decent spread but its not extensive. pricing can be very good though and if you are splitting the funds between two bonds, then this can make a very good choice for one of them.

Are there any investment bond providers who offer both choice (quality managers & not just number of funds) and reasonable charges?

AXA and Norwich Union. NU are probably the cheapest (with Clerical Medical but they are only good for cautious funds). NU are mid range on fund choice but the product is well priced. Strangely, Sterling came out well priced for me on a case recently as well. Although that was mainly due to NMA level discounting and having good terms and a special offer in place.

(By the way I know I have left off Financial Advisor fees / commission)

No you havent. The charges for Selestia assume the adviser is getting full commission. So, I assume your other quotes are same as well.

Its difficult to give any more information or be more specific as product recommendations would fall foul of FSA regulations. Also, I can only base my comments on how I would arrange the bonds and what terms I have available from providers. Other IFAs would have different terms (unless they use the same network). That is important because it can make a lot of difference. I had an IFA come to me recently to place £500k of his own money through me rather than himself as the bond he wanted to do offered a lower annual management charge and higher commission through me than it did through him. Dont assume all IFAs get products at the same charges.