Investment options beyond ISAs

Wobble101

I was left some money last year which has radically changed my thinking about retirement - my plan being to use to tide me over when I retire at 62 (in seven years) before various pensions options kick in. 

Between my husband and I we maxed out our ISAs last year, and will do the same this year. We both have the maximum amount of premium bonds. We’ve more or less paid off the mortgage and I am overpaying my civil service pension in order to take full pension payments two years early. (However it’s a small pension as only joined relatively recently). 

I’ve been pondering what to do with some of the money currently in premium bonds. My thinking is to keep £50k as an emergency fund but having more than that seems unnecessary. I have been wondering about a general investment account with my ISA provider (Vanguard) as I understand I can then move the investments into future ISAs. I understand that there are tax implications to this prior to that. I am new to investing and mainly have used the Vanguard LS and retirement fund options.

I’d probably be looking at putting £60k or so into the GIA. I will have some outgoings before then (eg university expenses, home things) but can fund these through ongoing savings from my salary.

Interested in others’ views in this approach. I can see the appeal of the Vanguard GIA but are there arguments for diversifying the platform I use? Many thanks. 

jimjames

General investment account could be a good idea but you can't move investments into an ISA, you have to sell and rebuy so don't let that be something that sways your choice of options.

Wobble101

jimjames said:

General investment account could be a good idea but you can't move investments into an ISA, you have to sell and rebuy so don't let that be something that sways your choice of options.

Thanks, that is my mistake - have just had a look at the Vanguard site and it’s exactly as you say. ‘Bed and ISA’ apparently?!

jimjames

Wobble101 said:

jimjames said:

General investment account could be a good idea but you can't move investments into an ISA, you have to sell and rebuy so don't let that be something that sways your choice of options.

Thanks, that is my mistake - have just had a look at the Vanguard site and it’s exactly as you say. ‘Bed and ISA’ apparently?!

Yes that's the terminology

underground99

Wobble101 said:

jimjames said:

General investment account could be a good idea but you can't move investments into an ISA, you have to sell and rebuy so don't let that be something that sways your choice of options.

Thanks, that is my mistake - have just had a look at the Vanguard site and it’s exactly as you say. ‘Bed and ISA’ apparently?!

 'Bed and Breakfasting' is jargon for when you sell an investment to make a gain or loss for tax purposes, and then try to buy it back again the next day with a new base cost.  HMRC have some anti-avoidance rules to make it harder to get away with doing that.

Still, you can annually 'bed and ISA' where you sell some of your assets from your general investment account and then buy them back inside an ISA; the new purchase can't be matched with the sale because you're not buying them back in the same capacity, and once inside the ISA there are no further UK tax consequences of any income or gain that might be made going forwards.

You can also 'bed and pension', similar concept, if you haven't maxed out your pension allowances each year. 

I wouldn't worry too much about having a large amount with a reputable and profitable provider such as Vanguard. However, if there were some calamitous problem with vanguard's platform making it hard to get your money out at short notice, you might find it useful if you or your husband had some of your investments on a different platform in case you somehow needed to access more money than your £50k premium bonds.

bostonerimus

Your plan to keep a safe emergency fund and then open a GIA with the excess s a good one and you are using sensible funds. For someone who claims to be inexperienced you are making very good decisions. You will need to pay tax on capital gains and dividends on funds outside of your ISA, but there are generous allowances for those. Don't worry about  having everything with Vanguard. It is as safe there as in any investment platform.

kidmugsy

If you spread the spare money across two GIAs, one for you and one for your husband, you reduce the risk of having to pay income tax and CGT, and also effectively double the amount of legal protection your assets get.

Wobble101

Many thanks everyone, this is very helpful (and reassuring).

chiny

I retired at 62 (must be a good age) and like the OP, having maxed out ISAs ever since, started up a Vanguard GIA.   HMRC noticed the income and flagged it on my self assessment return - presumably you have to self-confess if you do not usually fill in a tax return.   Also, I sold the profitable funds just getting in under the CGT allowance but triggering the lesser known "sales greater than" limit.   This is not to put anyone off, just a note that outside an ISA, (e-)paperwork is involved as well as paying tax - showing a need to keep records.