Inheritance - investing for income
Discussion
xeny said:
popeyewhite said:
OP has stated a stable income for 30 years is planned. Withdrawals are not mentioned. Unless something spectacular happens then there will be growth. Mind you another pandemic, Ukraine etc
I'd treat the £27K you call "generated" as a "withdrawal". Depending on exact asset mix, I think I've seen net negative growth (including "generated" returns reinvested) for the year in 2008, 2011, 2016, 2022, and that is neglecting the impact of inflation, which I think would make 2023 also negative.
Double Fault said:
Mr Whippy said:
In 20yrs with VWRL you can get £400k into ISA wrappers. Or near half. There is CGT but only at 20pc… and you can sell up a bit at a time (increasingly almost zero as CGT allowance drops to zero, who knows how long that’ll last?) to optimise things.
I’m pretty sure there’s no CGT to pay on gains within an ISAEdited by Mr Whippy on Saturday 4th May 09:01
There is CGT on VWRL but it’s 20pc vs property at a higher rate.
And the CGT can be spread out.
And slowly made irrelevant by wrappering with ISA.
The point is property hasn’t got a great deal going for it if you count liquidating it at the end.
Edited by Mr Whippy on Saturday 4th May 14:49
Interesting what distinction people see between an investment chosen specifically for income pinging a dividend into the bank v an investment chosen specifically for total return but using your platform to simply sell the amount you need every month/quarter/whatever so money lands in your bank account 
Mr Whippy said:
In 20yrs with VWRL you can get £400k into ISA wrappers. Or near half. There is CGT but only at 20pc… and you can sell up a bit at a time (increasingly almost zero as CGT allowance drops to zero, who knows how long that’ll last?) to optimise things.
Trouble is, capital return on £1M in VWRL is on average more than the annual ISA allowance, so yes you can get £20K in an ISA, but it will probably be a very long time before the majority is wrapped.stuthe
said:
said: If you go globally diversified equities or gilts, IFAs will love to advise.
They will ask for about 1-1.5% of assets under management to look clever by putting your money in actively managed funds that will probably take another 1% management fee, from which they’ll also get a kickback. Ie 2-2.5% of your return every year is taken by fees.
If you just put the funds in VWRL or similar you’ll be paying around 0.2% fees with a typical return of say, 6-8% averaged over a 5 year period (equities need to be thought of over a 5 year period as it removes any near term price fluctuations).
IFA advised funds tend to do no different/better than simple global trackers and often chase a bit more risk to try and beat the global tracker return and pay off the ifa and manager. 2% drain on 6% income is 1/3 of your money every year lost in fees / it’s HUGE.
That said, IM are definitely worth a call as they aren’t lazy idiots like most IFAs I’ve heard about. They seem to offer balanced advice vs just trying to get as many assets under management as possible to enrich themselves. But a lot of people advise keeping things simple, global equities low fee, and leave it to cook.
Fully agree with the first 3 paragraphs. Speak to a professional is dangerous advice in my opinion. They will ask for about 1-1.5% of assets under management to look clever by putting your money in actively managed funds that will probably take another 1% management fee, from which they’ll also get a kickback. Ie 2-2.5% of your return every year is taken by fees.
If you just put the funds in VWRL or similar you’ll be paying around 0.2% fees with a typical return of say, 6-8% averaged over a 5 year period (equities need to be thought of over a 5 year period as it removes any near term price fluctuations).
IFA advised funds tend to do no different/better than simple global trackers and often chase a bit more risk to try and beat the global tracker return and pay off the ifa and manager. 2% drain on 6% income is 1/3 of your money every year lost in fees / it’s HUGE.
That said, IM are definitely worth a call as they aren’t lazy idiots like most IFAs I’ve heard about. They seem to offer balanced advice vs just trying to get as many assets under management as possible to enrich themselves. But a lot of people advise keeping things simple, global equities low fee, and leave it to cook.
Globally diversified funds with Vanguard is going to be a better outcome for most people.
xeny said:
Trouble is, capital return on £1M in VWRL is on average more than the annual ISA allowance, so yes you can get £20K in an ISA, but it will probably be a very long time before the majority is wrapped.
If the lady is still employed she could max out her pension contributions each year.Edited by Sheepshanks on Saturday 4th May 15:34
bhstewie said:
hstewie said: Actually I just clocked that.
What's the IFA fee and the platform fee to end up at 1.4% all in on a "low cost global tracker"?
Totally take YouWhat's point that if advice gets you 8 years doing what you want rather than working it may be "cheap" but looking at the raw numbers it does look a bit pricey assuming a six figure sum under management.
It’ was 1% for the IFA but it’s dropped to 0.5% now it’s into 7 figures. But I’m happy with that as I don’t think I would have got to this point without their help and support. What's the IFA fee and the platform fee to end up at 1.4% all in on a "low cost global tracker"?
Totally take YouWhat's point that if advice gets you 8 years doing what you want rather than working it may be "cheap" but looking at the raw numbers it does look a bit pricey assuming a six figure sum under management.
It sounds like this person has little experience of investing / managing money, so an IFA would be prudent. Despite the reputation there are good ones around, and some will work on a fixed fee basis. I would definitely advise that the client should mandate passive investments only to the IFA.
A lot of PHers will have decades of investing experience and be well used to the volatility. Asking someone who (I presume) has little experience to invest £1m without guidance seems unwise to me.
Re: Bonds. They are volatile but this can be mitigated by buying direct from the DMO.
Again, expecting a newbie to do this without advice is questionable.
For me, if you want genuine hands off income it has to be stocks / bonds.
You could buy a few commercial properties, at most with £1m (with no experience) vs owning a slice of thousands of the best companies in the world that trillions of £ in the market have determined there value.
I know which I think is more diversified / safer.
A lot of PHers will have decades of investing experience and be well used to the volatility. Asking someone who (I presume) has little experience to invest £1m without guidance seems unwise to me.
Re: Bonds. They are volatile but this can be mitigated by buying direct from the DMO.
Again, expecting a newbie to do this without advice is questionable.
For me, if you want genuine hands off income it has to be stocks / bonds.
You could buy a few commercial properties, at most with £1m (with no experience) vs owning a slice of thousands of the best companies in the world that trillions of £ in the market have determined there value.
I know which I think is more diversified / safer.
Briefly,
- IFA? This may well be a suitable case.
- Direct property? I wouldn't.
- Active or passive? Depends to some extent on the relationship wanted with IFA.
- Consult a reputable IFA for one-off advice for a one-off fee. Needs to cover overall financial situation, not just this £1m. Especially tax.
- Ask for an approach to investing that has low annual charges and only needs a low level of ongoing attention.
- After a few years see how things have worked out and, if felt appropriate, seek further advice.
YouWhat said:
It’ was 1% for the IFA but it’s dropped to 0.5% now it’s into 7 figures. But I’m happy with that as I don’t think I would have got to this point without their help and support.
Fair point - if you couldn't have achieved what you want without them, it pretty much has to be considered worth it for you.Edited by xeny on Saturday 4th May 20:11
LooneyTunes said:
Mr Whippy said:
My issue with property is CGT and income will always be fully exposed to tax.
Not necessarily the case with that level of upfront cash if it is genuinely a long-term investment and you put in the time and effort to structure.Ie, a Ltd pays corp tax at 19%
Shirley if property is so awesome then a reit or commercial equivalent is the order of the day?
But then people lose on those a lot sometimes. In the USA CRE is getting mega haircuts.
So what’s the secret sauce that makes everyone who suggests property a winner?
I’m just saying the global tracker, low fees, wrappering, and using fund value as a proxy for asset appreciation ala property, and dividends as equivalent to rent, shouldn’t see you a million miles away… and the risk is a whole lot lower.
Definitely all a job for an IFA if someone can’t do the tax exposures and stuff in a spreadsheet themselves.
Deffo echo the advice about one-off advice. Unless your circumstances are changing a lot all the time I don’t get the point.
I’m amazed how much people pay for “continuous advice” on large sums.
Don't Invest in the S&P 500. Especially if you're retired. (108-year backtest results) - https://www.youtube.com/watch?v=eIUgjib_fm4
Investing just in the S&P because it has had a great decade or so is rather short sighted.
Investing just in the S&P because it has had a great decade or so is rather short sighted.
Mr Whippy said:
LooneyTunes said:
Mr Whippy said:
My issue with property is CGT and income will always be fully exposed to tax.
Not necessarily the case with that level of upfront cash if it is genuinely a long-term investment and you put in the time and effort to structure.Ie, a Ltd pays corp tax at 19%
Shirley if property is so awesome then a reit or commercial equivalent is the order of the day?
1) Set up an appropriate corporate and/or trust structure;
2) Put the money in in the right way and at the right time;
3) Took the money out in the right way;
4) Was genuinely looking at long term.
For example. If he were to lend money to an entity, the capital element of repayments made would be free of income tax.
Hard to achieve with REITs outside a tax efficient wrapper.
The issue with many forms of equity investment, is that there can be a lack of indexation. You take income, but the value of the capital gets eroded over time.
LooneyTunes said:
Mr Whippy said:
LooneyTunes said:
Mr Whippy said:
My issue with property is CGT and income will always be fully exposed to tax.
Not necessarily the case with that level of upfront cash if it is genuinely a long-term investment and you put in the time and effort to structure.Ie, a Ltd pays corp tax at 19%
Shirley if property is so awesome then a reit or commercial equivalent is the order of the day?
1) Set up an appropriate corporate and/or trust structure;
2) Put the money in in the right way and at the right time;
3) Took the money out in the right way;
4) Was genuinely looking at long term.
For example. If he were to lend money to an entity, the capital element of repayments made would be free of income tax.
Hard to achieve with REITs outside a tax efficient wrapper.
The issue with many forms of equity investment, is that there can be a lack of indexation. You take income, but the value of the capital gets eroded over time.
So you lend money into a Ltd, Ltd trades, repays you your loan to it, you pay no income tax on money received, but which you already held.
You’d have made 5% in the bank, but now the business has to make profit to pay tax and make your repayment, and surely it’d have to pay with interest?
Is that where the supposed spread/margin is, saving on the spread of a loan to the business?
Edited by Mr Whippy on Sunday 5th May 10:16
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