Tax-free sum ... hedging my bets

Albermarle

valiant24 said:

Albermarle said:

The £450,000, however invested, will henceforth grow and the growth will attract CGT and income tax.

Have you considered that managing £450K of investments outside a tax wrapper will be quite an admin exercise/headache if you are not used to it.
Whereas zero input needed at the moment.

I'm not quite sure I get your point.  The amount of management in investing the £450k within an (say) AJ Bell dealing account will be exactly the same as within an AJ Bell SIPP account.

Unless you mean that, within the dealing account, I'll need to keep a track on gains, losses and income and include them on my annual tax return?

Thanks
V

Yes, I meant as in your comment in bold.

valiant24

wjr4 said:

Why are you asking your accountant for financial advice? Most accounts I know don’t have a clue about pensions and basic financial advice!

Mine does.

valiant24

NoMore said:

Your not hedging your bets at all, you are going all in on the assumption that something might happen.

Indeed, if there's no "cooling-off period" I am.  Hence the question.

TheSpectator

valiant24 said:

wjr4 said:

Why are you asking your accountant for financial advice? Most accounts I know don’t have a clue about pensions and basic financial advice!

Mine does.

Are they a qualified IFA? I'm betting not.

Your proposal is verging on ludicrous. You would be as well asking your mates down the pub what they are doing and follow suit.

valiant24

Dazed_and_C0nfused said:

valiant24 said:

Dazed_and_C0nfused said:

valiant24 said:

I have quite a substantial sum in my SIPP.  I also have "2012 Protection" which means that as things stand today I could take out up to £450,000 tax free.

Concerned as I am about Ms Reeves' intentions in next week's budget I have applied to take the full tax-free sum that I can now.  Obviously if she doesn't lower or abolish the tax-free sum I'll have done so unnecessarily.

My accountant reckons that there's a 14-day grace period and that, if the Chancellor doesn't touch the lump-free sum in a way that affects me, I can repay it all and carry on as before.

I can't find any reference to that anywhere via web searches though.   Does anyone have an informed view on his opinion?

Thanks
V

I presume you understand the tax implications for the remaining 75% (assuming you plan on taking taxable income in the future)?

I'll pay income tax on it as I withdraw it.

And on any increase from investment performance, interest and dividends which increases the 75%.

That isn't true, is it?   Yes I'll pay income tax on the 75% and the amount it grows by as time goes buy as I withdraw it.   But that's true irrespective of whether I take the lump sum now or later.

phlebas192

This is from the AJ Bell SIPP Key Information Document https://www.ajbell.co.uk/sites/default/files/useful-forms/AJBYI_SIPP_key_features.pdf

"What if I change my mind?
You can cancel your SIPP if you change your mind, as long as you do it within 30 days of the date you receive our email
confirming your SIPP has been opened. You can transfer out to another provider at any time.
You’re also able to cancel transfer payments, and your decision to access your pension. You have 30 days from the date that
you receive our email confirming your transfer, or your intention to access your pension, to exercise your right to cancel."

Crystallising some or all of your SIPP and taking the PCLS is accessing your pension so the 30 day period applies (this was confirmed in the letter she got when my wife took her PCLS from AJ Bell).

nb: this is the situation with AJ Bell. It might not apply with other providers although I did think it was a legal requirement to have a cooling off period, even if shorter than 30 days. Have you checked with your SIPP provider?

valiant24

phlebas192 said:

This is from the AJ Bell SIPP Key Information Document https://www.ajbell.co.uk/sites/default/files/useful-forms/AJBYI_SIPP_key_features.pdf

"What if I change my mind?
You can cancel your SIPP if you change your mind, as long as you do it within 30 days of the date you receive our email
confirming your SIPP has been opened. You can transfer out to another provider at any time.
You’re also able to cancel transfer payments, and your decision to access your pension. You have 30 days from the date that
you receive our email confirming your transfer, or your intention to access your pension, to exercise your right to cancel."

Crystallising some or all of your SIPP and taking the PCLS is accessing your pension so the 30 day period applies (this was confirmed in the letter she got when my wife took her PCLS from AJ Bell).

nb: this is the situation with AJ Bell. It might not apply with other providers although I did think it was a legal requirement to have a cooling off period, even if shorter than 30 days. Have you checked with your SIPP provider?

My SIPP provider is indeed AJ Bell, but I haven't actually checked with it, preferring to ask random people I don't know on the internet ;-)

I shall do so forthwith, thank you.

Could you possibly send me your wife's letter (suitably redacted of course)?

valiant24

TheSpectator said:

valiant24 said:

wjr4 said:

Why are you asking your accountant for financial advice? Most accounts I know don’t have a clue about pensions and basic financial advice!

Mine does.

Are they a qualified IFA? I'm betting not.

Your proposal is verging on ludicrous. You would be as well asking your mates down the pub what they are doing and follow suit.

Thanks for your interest, and your comment.

I personally don't think that asking an accountant who has served me and my businesses well over almost 3 decades, qualified IFA or not, is remotely akin to asking my mates (if any, obvs!) down the pub, and am unclear how you might think that, unless you have had particularly unpleasant experiences with accountants in the past.

But we're all entitled to our opinion!

dunstonh

Concerned as I am about Ms Reeves' intentions in next week's budget I have applied to take the full tax-free sum that I can now.  Obviously if she doesn't lower or abolish the tax-free sum I'll have done so unnecessarily.

You have transitional relief.  Why are you worrying about media speculation when you have that?

My accountant reckons that there's a 14-day grace period and that, if the Chancellor doesn't touch the lump-free sum in a way that affects me, I can repay it all and carry on as before.

Your accountant is wrong.  

You're right, my accountant isn't an IFA, and he explicitly stated that he cannot offer advice on this matter.  He did tell me that he's taken his tax-free sum  though.   I did ask him to point out any errors in my reasoning.  

Many accountants have very poor knowledge of pensions.   What your accountant does is not necessarily a good thing for them, let alone you.   I have seen some very senior accountants make a right pigs ear of UK tax wrappers (not just pensions).   Which is why many accountants have links with IFAs as both advisers and accountants can stay in their own lanes and not give their respective clients duff information.

 3.      The £450,000, however invested, will henceforth grow and the growth will attract CGT and income tax.  But if I left it within the SIPP and it grew free of these things, I'd still pay income tax on the surplus when eventually I withdrew it, so the loss of tax-free gain is fairly small relative to the impact of a retrospective reduction in the tax free sum.

CGT is almost certainly going to change (where pension TFC is lower odds of change).  But its also dividend tax.

However, an Offshore bond may end up being the best solution as that would be free of CGT and dividend tax and only subject to tax on withdrawals under income tax (on the gains).    If CGT goes up above a certain amount then offshore bonds come back into play as a potential option.

valiant24

dunstonh said:

Concerned as I am about Ms Reeves' intentions in next week's budget I have applied to take the full tax-free sum that I can now.  Obviously if she doesn't lower or abolish the tax-free sum I'll have done so unnecessarily.

You have transitional relief.  Why are you worrying about media speculation when you have that?

Because a chancellor who has backed herself into a corner over mainstream taxes; with an expectation that she will increase further funding of the NHS (actually the expectation is that her party will improve the NHS, but increasing funding to and improving it seem to be synonymous in the eyes of her supporters); and whose client constituency is public sector workers may well reduce the tax-free sum for private sector workers at least, and decline to honour transitional relief.