£780k pot how much would you drawdown each year
Comments
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Thanks Linton. Would of thought stocks and shares ISA's is a more concentrated portfolio rather than a multi asset pension fund containing equities, bonds, shares, property etc, and carries more risk than the latter.0
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Thanks Linton. Would of thought stocks and shares ISA's is a more concentrated portfolio rather than a multi asset pension fund containing equities, bonds, shares, property etc, and carries more risk than the latter.
S&S includes funds, so you can hold multi-asset funds and bond funds in an S&S ISA if you wish. You cant hold directly owned commercial property in an S&S ISA and I think it is is more restricted as regards other more esoteric investments. For the normal investor the restrictions are irrelevent.0 -
As to LTA, does this really only come into effect if the pot exceeds £1million, or is transactions of the pot up to that figure.
LTA applies not just to the £780K residual pot but to the total value of your uncrystalised pension fund prior to drawdown which I assume is very close to £1M. When you applied for drawdown you should have received a formal drawdown account statement from your provider which quoted the percentage of your Standard Lifetime Allowance used to date. The LTA is reassessed at age 75 and applies to the total value of your residual pension pot at the time together with any lump sum you took when you went into drawdown.
In my case, I went into drawdown over 2 years ago just before the Chancellor reduced the LTA from £1.25M to £1M, so my figure is only 75.6% although my residual drawdown pot is similar to yours. If your pension pot was over £1M at that time then it was possible to apply for LTA protection - note sure if this applied to you at the time?0 -
Thanks Linton and a thank you to jamesd who provided a lot of analysis and range of options.
Hi Fermion. Pot was c£800k, took a lump sum out but it has already grown back again to the £780k figure. We must be in a very good period of pension growth given my fund has only been going 4 months.
Just looked online and I have an end year pension statement which says I have used 10.6% LTA. Do you know if this okay at this stage, or needs addressing.
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Just looked online and I have an end year pension statement which says I have used 10.6% LTA. Do you know if this okay at this stage, or needs addressing.
I don't think this 10.6% figure is the total proportion of your SIPP LTA used to date. If you had a pot of say £800K and moved all of this into drawdown but took part as a lump sum then the total figure used to date should be nearer to 80%. Best to check with your drawdown provider. Maybe the 10.6% they quote is the lump sum percentage taken to date - of the max. 25% allowed? viz. you took about £106K lump sum which is 10.6% of £1M LTA leaving £694K but this has grown to £780K???0 -
Thanks Fermion. No the pot was about £800k, took a lump sum out of £38k (more than the £28k planned but to pay off bills etc) of which £26.5k was tax free and £11.5k taxable. The £106k must be the amount crystallised.0
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So far as I know no VCT has ever been shut down for not following the rules. Occasionally one has come close to not getting enough newly raised money invested in qualifying ways within the time limits, though.I believe some have been closed down for that reason.
Those aren't predictions so much as facts. There have been regular changes in rules over the years and it's effectively certain that there will be more in the future. Money already invested could stay invested but new money isn't allowed. Last year restrictions on management buyouts were added. This Autumn Budget added restrictions on how much of an investment could be backed by things like property. Previous added restrictions included green energy and hotels. VCTs stick within whatever is eligible at the time of investment.There are continual predictions that the government will be tightening the rules.
There are a wide range of risk choices available from highly speculative research businesses to late stage established businesses. As with any other form of collective investment each person can pick the combination that fits their own preferences.the risks could (or should) outweigh the tax benefits.
The risks not only shouldn't outweigh the tax benefits, the ability of the incentive to work requires that this is not ever expected to happen. If it ever does the supply of new investor money will end and the rules will need to be adjusted to make VCTs more attractive again.
VCTs are no more evasion or undesired tax avoidance than pensions, ISAs or the personal and CGT allowances. They are all completely above board regulated options with full disclosure. So are EIS and SEIS.0 -
As usual, all investment returns are reported after charges. As usual, you can select based on charges if desired, though selecting based on profits seems more sensible. If the charges are excessive they show up as reduced profits.Thrugelmir wrote: »Nor the high charges levied on many of these schemes.0 -
Both. The first calculation happens at the time that portion of a pot is changing from uncrystallised to crystallised. The age 75 check can apply to either but normally the money will have been crystallised before then.Does LTA affect both crystallised and uncrystallised funds?
No. Both ISA and basic rate band are use it or lose it annual allowances and it appears that you should be trying to fully use both.Do you think this should wait until my annual review in August which we said we would have, though paying him he is open anytime.0 -
That's ISAs, not just S&S ISAs. Most of my ISA money will soon be in the IF ISA type, having been moved from S&S.Mentions of me taking chunks out to put into "S&S ISA's". How much interest interest do these pay as the rates on the normal cash ISA are very low. Is the money best left where it is in my pension fund to grow more, over the longer period.
Money in pensions doesn't inherently grow more or less than in ISAs. Most of the same investment options are available in both. Pensions tend to have slightly higher charges, though. If you hold fund A's pension version in a pension you can hold its ISA version in an ISA and expect the same performance. Both versions and one for holding outside either will be available. There's no investment performance reason to keep money inside pensions rather than ISAs.
Interest on uninvested cash in a S&S ISA is normally less than a cash ISA. Interest on bond funds varies but is normally more. Dividends from share funds vary based on how the money is invested but is normally more. I expect to average more than 10% interest plus some capital growth within my IF ISA, after allowing for bad debt.
The extra charges start after taking out more than a million. Since it's an "optional" tax that you, in your situation, can avoid by pre-planning to avoid ever getting to that point, you should do that. Since it is best done with the help of annual use it or lose it allowances you should get started on that as soon as you can.As to LTA, does this really only come into effect if the pot exceeds £1million, or is transactions of the pot up to that figure.
Tax planning like this is part of the core knowledge and work of IFAs. Minimise current tax, minimise future tax potential, routine stuff that they get tested on in their qualifying exams.0
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