High risk, high reward: A pauper's dream of early retirement.

LL_USS

@barnstar2077 sorry to be not thinking through. I see it elsewhere too people are saying the forum become of interest for people with more money to deal with and it's a fair comment!
Last night I was thinking of a "what if" scenario - how to invest and keep money working....

I started as a pauper a decade ago too, then with luck I worked out some thing extra and now thinking of giving the surplus to my children who went through that hard time with me, and get back to basic.

Sarahspangles

LL_USS regarding investment, I feel if the spare money is not in ISAs or some type of pension account, it's difficult to plan for early retirement as any earnings will be too heavily taxed.

Although someone on a modest pension can earn £6k of savings interest at 0% tax, split between the starter savings band and personal savings allowance. For example you can draw £12,570 from a SIPP plus 25% tax free of £4,190 and receive £6,000 savings interest = £22,760 tax free. If you need more, spend savings and leave a SIPP to draw later.

kempiejon

Sarahspangles said:

LL_USS regarding investment, I feel if the spare money is not in ISAs or some type of pension account, it's difficult to plan for early retirement as any earnings will be too heavily taxed.

Although someone on a modest pension can earn £6k of savings interest at 0% tax, split between the starter savings band and personal savings allowance. For example you can draw £12,570 from a SIPP plus 25% tax free of £4,190 and receive £6,000 savings interest = £22,760 tax free. If you need more, spend savings and leave a SIPP to draw later.

Let's not the tax tail wag the investing dog. Any post-tax return on something is better than zero return, no tax fee. Spare money is useful for expenses and contigency. With current SIPP and ISA limits anyone with enough relevant earnings can shelter* £80k a year. Once you've tucked away £80k there's a one per person £50k allowance in premium bonds all prizes tax free - though at the recent lower prize level perhaps there's not much compared to 20% net from a taxable account. Investments unsheltered still get the dividend £500 and capital gains £3000 allowances annually, Dividends are currently taxed at 8.75%, there are more onerous taxes to pay. Gold soverigns are exempt from tax on capital gains, as are gilts and shortdate low coupon gilts are good for a >3% percent tax free.

It's always difficult to plan, we do the best under prevailing onditions. I will predict there'll be future changes to taxation within (hopefully) the few more decades of political swings for my investment lifetime. I changed tack dramatically following changes in taxation of my investments; keep an eye open, react appropriately.

*often defer in SIPPs, there's an advantage to be abe to contribute and reclaim at a higher rate than during withdrawl on top of the tax free 25%.

LL_USS

Thank you very much @Sarahspangles and @kempiejon - I am not sure what I will do yet but my goodness I have never thought there were so many tax-efficient ways beyond putting money gradually into ISAs. I have copied and pasted the content to my work document so I can digest the information and use what I can. Thanks sooooo much.

@barnstar2077 my apology for using your thread to seek for answers for my case. I'll follow your thread as I am curious to see how it goes for your S&S. Again, good luck !!!!

LL_USS

@barnstar2077 I've just seen you mention (again/ in another thread) that you keep 100% equity till retirement. Does it mean you only sell your investment when you need cash? yet it only takes a few days to sell S&S, right?

Albermarle

LL_USS said:

@barnstar2077 I've just seen you mention (again/ in another thread) that you keep 100% equity till retirement. Does it mean you only sell your investment when you need cash? yet it only takes a few days to sell S&S, right?

If you sell investments you hold in a S&S ISA, the speed depends on the type of investments and the process of the provider.
Investments that are traded like shares & ETFs can be sold in seconds, but the money takes a couple of days to be cleared funds in your S&S ISA cash account.
OEIC funds can take between 12 and 36 hours to be sold, and then also a couple more days for the cash to be available.
Once the cash is available then you can just withdraw it to your bank account. Times will vary depending on provider.
So it varies, but a 'few days' is normally sufficient, although will be quicker if you sell on a Monday rather than on a Friday afternoon.

LL_USS

@Albermarle thank you very much. Your note has been copied and pasted right away into my document of "learning S&S" :-)

barnstar2077

A quick update from me.  I have sold out of my US only position and bought back into my global funds, within my works pension and my holdings within Vanguard too.  It does not seem to have made much of a difference to my total, with me being about six or seven thousand up on my position from six weeks ago.

I made the move for several reasons.

Firstly, it is clear that the US economy is not going to be sorted out any time soon.  I had hoped that tariff deals would have been made a bit quicker, and although I originally said I would wait years if necessary, I am not too proud as to admit that the idea of it dragging on until the US president is replaced is not an appealing one to me. 

Secondly, and this really makes up a vast percentage of the reason for me, the US centric fund I have access to in my works pension only has a hundred different stocks in it, and most of those are tech.  If they had bounced back quite quickly I would have been up considerably, but with the ongoing problems (or just one orange problem in particular) I have just became more and more uneasy about the fund and it's lack of diversity.  Especially when Trump seems to be doing everything he can to get in the way of the biggest companies in North America.

Thirdly, when the Ukraine war is resolved (which we all pray for), then it stands to reason that European stocks will benefit more than US.  Europe will hopefully be reenergised, with a reduction in energy and consumable prices, while the US will still be churning out random new ideas and threatening tariffs etc.

Also, my original plan is a solid one, and there is an excellent chance for it to succeed as long as I don't get in the way of myself. 

Lastly, I was giving it way too much thought every day, which is never a good sign.

I am still 100% equities, with roughly 60% in US stocks, and I still plan on staying that way for a very long time.  I feel very comfortable with this, unlike the US decision, which I found to be a bridge too far for me in the end.

Pat38493

barnstar2077 said:

A quick update from me.  I have sold out of my US only position and bought back into my global funds, within my works pension and my holdings within Vanguard too.  It does not seem to have made much of a difference to my total, with me being about six or seven thousand up on my position from six weeks ago.

I made the move for several reasons.

Firstly, it is clear that the US economy is not going to be sorted out any time soon.  I had hoped that tariff deals would have been made a bit quicker, and although I originally said I would wait years if necessary, I am not too proud as to admit that the idea of it dragging on until the US president is replaced is not an appealing one to me. 

Secondly, and this really makes up a vast percentage of the reason for me, the US centric fund I have access to in my works pension only has a hundred different stocks in it, and most of those are tech.  If they had bounced back quite quickly I would have been up considerably, but with the ongoing problems (or just one orange problem in particular) I have just became more and more uneasy about the fund and it's lack of diversity.  Especially when Trump seems to be doing everything he can to get in the way of the biggest companies in North America.

Thirdly, when the Ukraine war is resolved (which we all pray for), then it stands to reason that European stocks will benefit more than US.  Europe will hopefully be reenergised, with a reduction in energy and consumable prices, while the US will still be churning out random new ideas and threatening tariffs etc.

Also, my original plan is a solid one, and there is an excellent chance for it to succeed as long as I don't get in the way of myself. 

Lastly, I was giving it way too much thought every day, which is never a good sign.

I am still 100% equities, with roughly 60% in US stocks, and I still plan on staying that way for a very long time.  I feel very comfortable with this, unlike the US decision, which I found to be a bridge too far for me in the end.

Just one observation - the Nasdaq index is currently around 3.5% below the all time high, and the S&P is about 2.5% drawdown - the rest of the recent losses to UK investors is mainly FX.

Also - I saw an article this morning that the MSCI world shares index hit an all time high in the last couple of days, so overall global markets are at, or close to, all time high.  Again, UK investors will not see this at the moment as the dollar got weaker and a lot of these passive funds have 70% or so dependent on dollar valuations.

kempiejon

My UK focused share portfolio is testing all time highs. FTSE100 up around 6% year to date, S&P500 down a similar amount, but yes currencies play for global investors.