How do I become investment literate?
Discussion
BanzaiMan said:
JulianPH said:
and the other is that 'advice' is subject to VAT whilst "Bringing about and arranging investments" is VAT free.
My understanding is that if the adviser undertakes a review for a fee and there is an understanding is that the client will most likely agree to implement the adviser's recommendations, that is free from VAT, even if the client subsequently chooses not to go ahead with the implementation. For what the OP is after I'd be surprised if it were liable for VAT.Advice is subject to VAT. It does not matter if it is financial advice or legal advice.
As far as I am aware it has not been tested whether this remains the case when advice is ancillary to a VAT Exempt activity. My understanding is that the easier route was simply to charge for the VAT exempt element than to test the law in court against HMRC for the potentially VAT Exempt element.
If the client chooses not to go ahead with the recommendation then no fee is paid and so no VAT is payable. Interestingly, if the client goes with the recommendation directly to the provider(s) - without the adviser earning his/her fee - then the adviser can still be held liable for the advice!!!???
In any event, no financial advisers undertake a review for a fee and then walk away (that would be a complete waste of time). They do the review for free and then charge the fund when the client signs to accept their advice.
They would, however, elicit greater trust if they just charged for their time...
NickCQ said:
Julian, if it's not a silly question how did you get the funds into your SIPP? I am trapped by tapering, is there any reason to pay in out of taxed income?
I simply put the funds in out of PAYE earnings, I am not sure why you mention tapering relief as this is not connected (unless I am missing something).Let me know here or PM me. Happy to help.
Harry Flashman said:
Julian (and others) thank you again.
Julian - I don't have a SIPP. I have three pension plans from former and current employers. Can I get some of them into a SIPP?
Harry, a SIPP is identical to a personal pension. The PP at the end of SIPP stands for Personal Pension and the SI at the beginning stands for Self Invested (i.e. you chose, not the pension company).Julian - I don't have a SIPP. I have three pension plans from former and current employers. Can I get some of them into a SIPP?
You may have benefits with your existing pensions that you would want to keep (guaranteed annuities, for example), but these are increasingly rare these days. You should still check though.
- 4. Check and see if your pension(s) have additional benefits. If they don't, then wake up and realise this is your cash and you can move it to another pension (SIPP) provider who will let you invest it as you see fit.
Harry Flashman said:
Julian (and others) thank you again.
Julian - I don't have a SIPP. I have three pension plans from former and current employers. Can I get some of them into a SIPP?
Sorry Harry. That was a one word answer. Yes.Julian - I don't have a SIPP. I have three pension plans from former and current employers. Can I get some of them into a SIPP?
It is your money and you can do what you like with it (within pension rules). If you want to move it all to gain investment access then of course you can (it is your money). But you need to check you won't lose any promises made in writing by the pension company you are leaving.
Right, time to start cooking!
JulianPH said:
NickCQ said:
Julian, if it's not a silly question how did you get the funds into your SIPP? I am trapped by tapering, is there any reason to pay in out of taxed income?
I simply put the funds in out of PAYE earnings, I am not sure why you mention tapering relief as this is not connected (unless I am missing something).Let me know here or PM me. Happy to help.
When you add things like commercial property etc to a SIPP, to make it worthwhile are you not a significant risk of hitting the lifetime allowance? In which case, doesn't that reverse all of the the tax relief, such that you've just tied up a large sum of cash into a pension for no benefit at all?
On getting rid of the rental property, it's real capital appreciation is and will be in the medium term below inflation.
As it is mortgaged, I need to work out if servicing the debt costs me more than the yield after tax. As for the equity, if it is getting me less after tax than sitting in diversified income generating assets, it can't be a great investment I think?
Also, owning it and a house in the same part of London means I am hugely vulnerable to adverse change - labour government and property taxes being the obvious one.
...I think.
As it is mortgaged, I need to work out if servicing the debt costs me more than the yield after tax. As for the equity, if it is getting me less after tax than sitting in diversified income generating assets, it can't be a great investment I think?
Also, owning it and a house in the same part of London means I am hugely vulnerable to adverse change - labour government and property taxes being the obvious one.
...I think.
+1 on Monevator.com its a great resource. Read as much as you can here.
Also Pragcap.com and Vanguard research articles.
IMO NEVER PAY for advice. Just take your time to research and start with the basics on debt reduction.
You will never get rich on investments, they just bank and protect against inflation what you have accumulated elsewhere.
Your best returns will be from your own education. Either directly in your own work life, self employment etc or in terms of saving the leeches from sucking fees out of you.
Also Pragcap.com and Vanguard research articles.
IMO NEVER PAY for advice. Just take your time to research and start with the basics on debt reduction.
You will never get rich on investments, they just bank and protect against inflation what you have accumulated elsewhere.
Your best returns will be from your own education. Either directly in your own work life, self employment etc or in terms of saving the leeches from sucking fees out of you.
will_ said:
JulianPH said:
NickCQ said:
Julian, if it's not a silly question how did you get the funds into your SIPP? I am trapped by tapering, is there any reason to pay in out of taxed income?
I simply put the funds in out of PAYE earnings, I am not sure why you mention tapering relief as this is not connected (unless I am missing something).Let me know here or PM me. Happy to help.
When you add things like commercial property etc to a SIPP, to make it worthwhile are you not a significant risk of hitting the lifetime allowance? In which case, doesn't that reverse all of the the tax relief, such that you've just tied up a large sum of cash into a pension for no benefit at all?
It is the lifetime allowance that really bugs me though. Why penalise people for successful investment decisions? Sure. put a limit on how much you can put in and gain tax relief on - that is completely understandable - but taxing success is absurd.
The government needs to decide whether it wants to encourage people to save for their retirement or not. Given £162k gross a year gets you into the top 1% of earners in the UK (and the top 1% of earners contribute 27% of the total UK income tax take) then hitting these people too hard (and constantly bashing them) could end up being a very bad move for the country as a whole.
How do people decide how to allocate their savings?
So for example you're left with X disposable that you know you want to save let's say £1000/month.
How are people deciding what proportion of that goes into bulletproof but non-existent return "pure" savings v what goes into a S&S ISA with greater returns but some risk?
Equally how are you deciding whether to drip-feed vs. dump a lump sump every X months?
So for example you're left with X disposable that you know you want to save let's say £1000/month.
How are people deciding what proportion of that goes into bulletproof but non-existent return "pure" savings v what goes into a S&S ISA with greater returns but some risk?
Equally how are you deciding whether to drip-feed vs. dump a lump sump every X months?
This guy is good at explaining things
http://www.efficientfrontier.com/
US centric, but basically comes down to save 15%+ in the most tax efficient way possible, stick to an asset allocation and rebalance, use lowest cost funds.
http://www.efficientfrontier.com/
US centric, but basically comes down to save 15%+ in the most tax efficient way possible, stick to an asset allocation and rebalance, use lowest cost funds.
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hstewie said:
hstewie said: How do people decide how to allocate their savings?
So for example you're left with X disposable that you know you want to save let's say £1000/month.
How are people deciding what proportion of that goes into bulletproof but non-existent return "pure" savings v what goes into a S&S ISA with greater returns but some risk?
Equally how are you deciding whether to drip-feed vs. dump a lump sump every X months?
I save for my pension every month, its a cost on my budget, otherwise i wouldn't, 15% is what i cam afford. Other savings are in cash and more adhoc.So for example you're left with X disposable that you know you want to save let's say £1000/month.
How are people deciding what proportion of that goes into bulletproof but non-existent return "pure" savings v what goes into a S&S ISA with greater returns but some risk?
Equally how are you deciding whether to drip-feed vs. dump a lump sump every X months?
I'm 41 and after 20 years of random workplace pensions etc i pooled them all into one sipp a couple of years ago, I'm currently 90% in equity, 2/4 of that emerging markets and small companies (high risk) the other 1/4 in global trackers, 1/4 in gilt proxy type equity.
The other 10% in bonds and absolute return stuff, some cash
I've got 15 years to go on my strategy which is every years reduce rebalance moving about 4% down the risk chain. So roughly by the time I'm 57 I'll have very little high risk equity and about 60% low risk cash, bonds and absolute return funds and 30% quality income generating equity.
Something like that.
The chances of me retiring in my late 50s are low but at that point i can decide the strategy for the final decade.
bhstewie said:
hstewie said: How are people deciding what proportion of that goes into bulletproof but non-existent return "pure" savings v what goes into a S&S ISA with greater returns but some risk?
Equally how are you deciding whether to drip-feed vs. dump a lump sump every X months?
I aim to have enough in "pure" savings that I can choose when I'd have to take money out of S&S - i.e. enough cash that I can live for x months if my income disappears, or the roof comes off or similar.Equally how are you deciding whether to drip-feed vs. dump a lump sump every X months?
That at least reduces the risk of needing money out of S&S when the market is down. Right now I'm happy with the size of that account so everything goes into S&S or other risk assets When I wasn't happy with the size of that account (e.g. I'd taken on a bigger mortgage so my monthly costs were higher so it wouuldn't have covered me for as many months as I felt I needed) everything went into the savings account. Obviously if I can see a large bill coming in 6 months I'll save for that in a savings account.
With regard to drip-feed vs every X months, if I've got a decent lump, it goes in every month, if I haven't then what I have waits until next month. How big a lump has to be to be worthwile depends at least somewhat on how much trading costs in the ISA you've chosen.
Drip feeding vs lump sum investing from say an inheritance is a rather different question, but I don't think that's what you're asking?
FredClogs said:
and small companies (high risk) the other 1/4 in global trackers
Did you consider this http://www.morningstar.co.uk/uk/funds/snapshot/sna... for small cap or go for individual funds?Which global trackers did you go for?
JulianPH said:
It is the lifetime allowance that really bugs me though. Why penalise people for successful investment decisions? Sure. put a limit on how much you can put in and gain tax relief on - that is completely understandable - but taxing success is absurd.
Agreed. It leaves pension investors who've "maxed out" with the awkward question - whether to, A) Keep on with normal investment and just suck up the 55% tax charge on anything over the max', or
B) Switch to a lower risk investment strategy for the security of locking-in existing gains.
The beauty of ISA is that once you're in there's no upper limit. ISA run in parallel with pension can deliver a very successful and extremely flexible overall strategy.
I've got 15 years to go on my strategy which is every years reduce rebalance moving about 4% down the risk chain. So roughly by the time I'm 57 I'll have very little high risk equity and about 60% low risk cash, bonds and absolute return funds and 30% quality income generating equity.
[/quote]
Fred, out of interest, what’s your rationale for de-risking as you get towards your desired retirement age? Assuming you have a normal life expectancy and don’t plan on buying an annuity at 57 I would have thought the 30+ years your likely to have in retirement would allow for a portfolio that contains less defensive assets than you are suggesting.
Not a criticism, just see this sort of strategy regularly and it’s often (not always!) based on a historic understanding of what options are available at retirement.
Would also note that if a cautious strategy is likely to give you the lifestyle you want in retirement then all is well. If a higher potential income in retirement would be beneficial I would suggest you likely have the capacity to take higher level of risk to enjoy the higher returns over the longer term.
[/quote]
Fred, out of interest, what’s your rationale for de-risking as you get towards your desired retirement age? Assuming you have a normal life expectancy and don’t plan on buying an annuity at 57 I would have thought the 30+ years your likely to have in retirement would allow for a portfolio that contains less defensive assets than you are suggesting.
Not a criticism, just see this sort of strategy regularly and it’s often (not always!) based on a historic understanding of what options are available at retirement.
Would also note that if a cautious strategy is likely to give you the lifestyle you want in retirement then all is well. If a higher potential income in retirement would be beneficial I would suggest you likely have the capacity to take higher level of risk to enjoy the higher returns over the longer term.
BanzaiMan said:
FredClogs said:
and small companies (high risk) the other 1/4 in global trackers
Did you consider this http://www.morningstar.co.uk/uk/funds/snapshot/sna... for small cap or go for individual funds?Which global trackers did you go for?
Tracking small caps is interesting might take a look at that but i think (maybe wrongly) that small caps is an area where a good picker will get advantage on the index, taking bother look at Woodford patience capital for just that. I have schoders and old mutual dynamic equity for small cap UK and left mason smaller us, baille Gifford Japan small companies and some China domestic market small cap fund
rockin said:
Agreed. It leaves pension investors who've "maxed out" with the awkward question - whether to,
A) Keep on with normal investment and just suck up the 55% tax charge on anything over the max', or
B) Switch to a lower risk investment strategy for the security of locking-in existing gains.
The beauty of ISA is that once you're in there's no upper limit. ISA run in parallel with pension can deliver a very successful and extremely flexible overall strategy.
I would go with B any day as the 55% tax charge wipes off the entire point of using a pension in the first place.A) Keep on with normal investment and just suck up the 55% tax charge on anything over the max', or
B) Switch to a lower risk investment strategy for the security of locking-in existing gains.
The beauty of ISA is that once you're in there's no upper limit. ISA run in parallel with pension can deliver a very successful and extremely flexible overall strategy.
I also agree regarding switching to ISA contributions or running them along side pension contributions.
The only purpose of the pension/SIPP is to benefit from the tax relief, invest tax efficiently particularly when it comes to assets that can't be held within an ISA) and the fact that pension/SIPP assets are now exempt from IHT.
This does make the pension/SIPP the better tax wrapper of the too, but the constant changing of the rules with pensions is off putting to most and ISAs seem to get away with such tinkering (for the moment...).
JulianPH said:
rockin said:
Agreed. It leaves pension investors who've "maxed out" with the awkward question - whether to,
A) Keep on with normal investment and just suck up the 55% tax charge on anything over the max', or
B) Switch to a lower risk investment strategy for the security of locking-in existing gains.
The beauty of ISA is that once you're in there's no upper limit. ISA run in parallel with pension can deliver a very successful and extremely flexible overall strategy.
I would go with B any day as the 55% tax charge wipes off the entire point of using a pension in the first place.A) Keep on with normal investment and just suck up the 55% tax charge on anything over the max', or
B) Switch to a lower risk investment strategy for the security of locking-in existing gains.
The beauty of ISA is that once you're in there's no upper limit. ISA run in parallel with pension can deliver a very successful and extremely flexible overall strategy.
I also agree regarding switching to ISA contributions or running them along side pension contributions.
The only purpose of the pension/SIPP is to benefit from the tax relief, invest tax efficiently particularly when it comes to assets that can't be held within an ISA) and the fact that pension/SIPP assets are now exempt from IHT.
This does make the pension/SIPP the better tax wrapper of the too, but the constant changing of the rules with pensions is off putting to most and ISAs seem to get away with such tinkering (for the moment...).
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