Will the second LTA test even be there in 17 years time??

chucknorris

jamesd wrote: »

About 9% of my total investments are in VCTs, limited in part because I've been a very high user of pension salary sacrifice. About 5.5% is in AAVC and that shouldn't surprise anyone who's read my posts over the years.

For AAVC the current value is about 43% above my after tax relief purchase cost and I've so far received an additional 32% of that cost in dividends. 100 / 70 = 1.429 so if there were no purchase costs the initial tax relief would be expected to produce a gain of 42.9% on the after relief cost. As anticipated most of the non-relief returns for this VCT have been via the dividends, not capital value increases. The current dividend rate is 10% of my after relief purchase cost a year. My purchases were in two consecutive tax years.

I anticipate adding around 4% this tax year and similar for a few more years as I use the basic rate band to move money rapidly out of pension pots to the point where I'll expect to remove the rest before and after state pension age within the income tax personal allowance. This move is:

1. to increase flexibility of investing, including making almost all of the capital available without high tax costs once the VCT holding time is over. I might use this flexibility beyond just possibly repaying a 10% of investments interest only mortgage around its end day
2. to lower costs, drawdown inside a pension tends to be a bit higher cost than ISA or other outside
3. so that all or almost all of my income becomes free of tax for the rest of my life, wrapped initially in pension then VCT and on to ISA or other.
4. long term I anticipate higher income tax beyond what the Scottish government has done, so prefer to move into untaxed wrappers at current income tax rates, offset by the VCT buying
5. incidentally eliminating the chance of a pension lifetime allowance charge

Within VCTs I intend to continue increasing diversification mainly in the generalist type. I like AAVC and it's been delivering as anticipated but diversification is a necessary risk management tool.

Expect me to execute on the relevant to me optimisation strategies I've been writing about over the years: I am.

I must admit that I have a lot to learn about VCT's, I looked at them a few years ago, but I was too concerned about the risk to invest. Did you ever feel that the risk was off putting, if so, how did you resolve your doubts? Is it that for all the fails, it is normal that within the funds there will be some real successes that average out to a good return. I thought that the fees looked on the high side too. I would appreciate it if you could point me to a few links where I could learn more about VCT's.

jamesd

I used VCTs from the lower risk end.

Yes, some investments within a VCT can fail and others make up for that.

Snakey

It would seem that Philip Hammond, at least, has no plans to relax either the AA or LTA: Link (scroll down to Qs 336-340).

ex-pat_scot

Snakey wrote: »

It would seem that Philip Hammond, at least, has no plans to relax either the AA or LTA: Link (scroll down to Qs 336-340).

Yes it's all about making it "fair"!

Mr Hammond: The pension tax reliefs we give are extraordinarily generous and among the most expensive elements of tax relief in the system.

Another disingenuous approach, where they do not recognise pension tax relief as tax deferral - the income will be taxed once it is realised. To suggest that there is full relief (as he does) is simply wrong.


I love the bit where Mr Hammond is pressed on the newspaper reports. His response is priceless:

Mr Baker: We are relying on newspaper reports and perhaps the Committee might look at this.
Mr Hammond: It is the Daily Mail.

Snakey

TBF if it was my job to balance the books I'd see it as people nicking my resources too. Knowing that they'll be paying it in twenty years' time instead probably isn't much comfort.

But yeah, it's more about geese, feathers and hissing than fairness per se.