Index linked gilts and index linked annuities: are you moving money into them, yea or nay?

MarkCarnage

zagfles said:

MarkCarnage said:

But it's usually better than that because you get the PCLS. So effective tax rate out is only 30% (ie 40% of 75%) So you get £2333 net out. Or even if the tax rate out was 45%, you get £2208 out. 

Agree if you get that, but I know of a few people, including myself, where that's already been taken. 

Usually the pension would be much better, particularly if you pay higher rate tax and will withdraw when you're a basic rate taxpayer. 

If your tax bands go in that direction then yes, less tax (but lower income too). However, the example I quoted above may become increasingly common due to fiscal drag and increased higher rates....already seen in Scotland....which could well mean 40% relief on way in and 45% tax on way out. 

Again - very niche. Live in Scotland, will have £75k+ income in retirement, but not while working, and used up the full £268k LSA (ie a pension over a million). The implication of your PP was that this was common, I doubt it is, even with fiscal drag. 

It's a minority yes, but my point re tax bands is that when working, top rate was 40% for quite a number of years and hence tax relief limited to that. Tax on way out now in Scotland is 42% above c£43k and 45% above £75k as you note. 

Anyway back to whether IL gilts are a good idea....they are certainly a better idea than they were several years ago. Note that the real yield figures now may include an element of allowing for the change in RPI calculation from 2030, but still look reasonable if held to maturity. Whether we get back to 3-4% real yields is a moot point. 

Hoenir

MarkCarnage said:

 Whether we get back to 3-4% real yields is a moot point. 

Who knows where interest rates might go in the future. The USA might hack off international buyers of it's Treasury Stock with current policies. That would put the cat amongst the pidgeons. If they were to go out on strike. Make the objective of extending the debt maturity dates longer even more challenging than it already is. Yellen having already left behind a major headache.