Who Wants to be a ISA Millionaire

Who Wants to be a ISA Millionaire

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Discussion

Phooey

Original Poster:

12,575 posts

168 months

Saturday 19th May 2018
quotequote all
Quite an interesting and eye opening read http://www.moneyobserver.com/our-analysis/beginner...

I've got a wee bit in my 'pot' at the mo - absolutely nowhere near a £mil - but kicking myself now for not starting sooner. I could easily of put more in but it just didn't seem sexy at the time. My advice to anyone with spare cash is get stuck in!

Spidersleg

676 posts

82 months

Saturday 19th May 2018
quotequote all
7%
Really ?
Where am I going wrong with my 1.4%

xeny

4,271 posts

77 months

Saturday 19th May 2018
quotequote all
Spidersleg said:
7%
Really ?
Where am I going wrong with my 1.4%
At a guess, shares rather than a cash ISA.

Spidersleg

676 posts

82 months

Sunday 20th May 2018
quotequote all
xeny said:
At a guess, shares rather than a cash ISA.
Guilty of not reading the full article. After reading more, yes you're right.

HootersGsy

731 posts

135 months

Sunday 20th May 2018
quotequote all
You could do the same with a cash ISA, it just takes longer! Something to leave for the children / grandchildren to complete for you silly



DoubleSix

11,691 posts

175 months

Sunday 20th May 2018
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HootersGsy said:
You could do the same with a cash ISA, it just takes longer! Something to leave for the children / grandchildren to complete for you silly
Fwiw

ISAs form part of the deceased’s estate and are subject to IHT.

Phooey

Original Poster:

12,575 posts

168 months

Sunday 20th May 2018
quotequote all
Spidersleg said:
xeny said:
At a guess, shares rather than a cash ISA.
Guilty of not reading the full article. After reading more, yes you're right.
Yeah you've got to be in a S&S ISA - obviously adds variable risk but it wasn't uncommon to gain 10-15% last year for example. Better being in a cash ISA than nothing though because it's all about the 'pot'. You can transfer that pot into a S&S ISA (important - has to be done through a ISA transfer (if that's what you call it?)


Interesting about IHT - I didn't know that

bitchstewie

50,785 posts

209 months

Sunday 20th May 2018
quotequote all
Put it in Berkshire Hathaway, keep adding, forget about it and let it compound.

(Berkshire is an example but you get the idea, forget about dividends and look at businesses that reinvest spare cash into themselves).

You'll be fking terrified when you look at the balance.

HootersGsy

731 posts

135 months

Sunday 20th May 2018
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DoubleSix said:
Fwiw

ISAs form part of the deceased’s estate and are subject to IHT.
True, but if your estate is large enough that you're worried about IHT there are things you can do to minimise it.

DoubleSix

11,691 posts

175 months

Sunday 20th May 2018
quotequote all
HootersGsy said:
DoubleSix said:
Fwiw

ISAs form part of the deceased’s estate and are subject to IHT.
True, but if your estate is large enough that you're worried about IHT there are things you can do to minimise it.
Correct.

But ISAs do not dovetail with estate planning (trusts, gifting etc). By definition they are belonging to the individual.


DoubleSix

11,691 posts

175 months

Sunday 20th May 2018
quotequote all
Effectively yes, as I stated the tax wrapper is associated to the (deceased) individual.

The exception to the IHT liability are those investments that qualify under BPR rules.

JulianPH

9,912 posts

113 months

Sunday 20th May 2018
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Phooey said:
Interesting about IHT - I didn't know that
Hi mate, another interesting point is that SIPPs are not subject to IHT.

Given you can have as many SIPPs as you like (but can only receive tax relief within the contribution limits) then you could take out a SIPP in your own name for each child/grandchild - naming the relevant one as the death beneficiary for each scheme.

Alternatively you could do this with just one SIPP and provide a more detailed death benefit nomination naming each beneficiary with the percentage of the fund they are to receive.

This way you get exactly the same tax treatment as with an ISA, but full tax relief going in and no IHT when they take the money out.

Remember this all counts towards your own lifetime allowance though.

Another beauty of this is everything is in your name should circumstances change and you need to take money from it for yourself.

HootersGsy

731 posts

135 months

Sunday 20th May 2018
quotequote all
DoubleSix said:
Correct.

But ISAs do not dovetail with estate planning (trusts, gifting etc). By definition they are belonging to the individual.
All getting a bit theoretical but it's easy enough to work around, put other assets into trust to bring the taxable estate down to a manageable level - if you've got close to a million in cash ISAs the chances are you'd have other, more significant assets! Or move out of the UK to a country with no inheritance taxes (and live for long enough to break UK ties), at which point the ISAs become pointless but the IHT savings could be sufficient to justify. Anyway, not a problem that 99% of posters will have or have the means to do anything about!

DoubleSix

11,691 posts

175 months

Sunday 20th May 2018
quotequote all
JulianPH said:
Hi mate, another interesting point is that SIPPs are not subject to IHT.

Given you can have as many SIPPs as you like (but can only receive tax relief within the contribution limits) then you could take out a SIPP in your own name for each child/grandchild - naming the relevant one as the death beneficiary for each scheme.

Alternatively you could do this with just one SIPP and provide a more detailed death benefit nomination naming each beneficiary with the percentage of the fund they are to receive.

This way you get exactly the same tax treatment as with an ISA, but full tax relief going in and no IHT when they take the money out.

Remember this all counts towards your own lifetime allowance though.

Another beauty of this is everything is in your name should circumstances change and you need to take money from it for yourself.
Mostly correct, however the tax treatment of a SIPP is not “exactly the same” as an ISA.



Edited by DoubleSix on Sunday 20th May 09:34

The Mad Monk

10,474 posts

116 months

Sunday 20th May 2018
quotequote all
HootersGsy said:
You could do the same with a cash ISA, it just takes longer! Something to leave for the children / grandchildren to complete for you silly
I don't feel that we were put on this earth(see note 1.) to save money for our children, or grandchildren.

Because, logically, those children and grandchildren will have to save that money - and add to it - to pass on to their children and grandchildren and so it will go on and on. Nobody will ever spend the money, it will simply be passed on to our successors. What is the point in that?

Note 1. I don't know why we were put on this earth - do you have any idea?

DoubleSix

11,691 posts

175 months

Sunday 20th May 2018
quotequote all
The Mad Monk said:
I don't feel that we were put on this earth(see note 1.) to save money for our children, or grandchildren.

Because, logically, those children and grandchildren will have to save that money - and add to it - to pass on to their children and grandchildren and so it will go on and on. Nobody will ever spend the money, it will simply be passed on to our successors. What is the point in that?

Note 1. I don't know why we were put on this earth - do you have any idea?
I think the idea is that each generation contributes and grows the family wealth whilst also enjoying the benefits.

The point being it’s bloody hard to do that if you start with FA.

Dr Mike Oxgreen

4,101 posts

164 months

Sunday 20th May 2018
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HootersGsy said:
You could do the same with a cash ISA
No you can't. Not with interest rates less than inflation, as they currently are (and probably will be for some time to come). Putting money into a cash ISA is not currently a way to make yourself rich in real terms, even over the ultra-long term.

Okay, numerically you could make yourself a "millionaire", but by the time you get there your million will be worth the square-root of fk-all. wink

JulianPH

9,912 posts

113 months

Sunday 20th May 2018
quotequote all
DoubleSix said:
JulianPH said:
Hi mate, another interesting point is that SIPPs are not subject to IHT.

Given you can have as many SIPPs as you like (but can only receive tax relief within the contribution limits) then you could take out a SIPP in your own name for each child/grandchild - naming the relevant one as the death beneficiary for each scheme.

Alternatively you could do this with just one SIPP and provide a more detailed death benefit nomination naming each beneficiary with the percentage of the fund they are to receive.

This way you get exactly the same tax treatment as with an ISA, but full tax relief going in and no IHT when they take the money out.

Remember this all counts towards your own lifetime allowance though.

Another beauty of this is everything is in your name should circumstances change and you need to take money from it for yourself.
Mostly correct, however the tax treatment of a SIPP is not “exactly the same” as an ISA.



Edited by DoubleSix on Sunday 20th May 09:34
Please enlighten us as to the difference in tax treatment in the example I outlined above.

HootersGsy

731 posts

135 months

Sunday 20th May 2018
quotequote all
Dr Mike Oxgreen said:
No you can't. Not with interest rates less than inflation, as they currently are (and probably will be for some time to come). Putting money into a cash ISA is not currently a way to make yourself rich in real terms, even over the ultra-long term.

Okay, numerically you could make yourself a "millionaire", but by the time you get there your million will be worth the square-root of fk-all. wink
Absolutely, but the same thing applies to the article - it took 22 years at 7% in their example to get to a million. Inflation over that period is going to take a fair dent out of that. My own retirement planning and inflation assumptions mean the capital at retirement is worth about half of its face value in today's money - getting good returns is absolutely essential if you want a comfortable retirement.

The Mad Monk

10,474 posts

116 months

Sunday 20th May 2018
quotequote all
HootersGsy said:
Dr Mike Oxgreen said:
No you can't. Not with interest rates less than inflation, as they currently are (and probably will be for some time to come). Putting money into a cash ISA is not currently a way to make yourself rich in real terms, even over the ultra-long term.

Okay, numerically you could make yourself a "millionaire", but by the time you get there your million will be worth the square-root of fk-all. wink
Absolutely, but the same thing applies to the article - it took 22 years at 7% in their example to get to a million. Inflation over that period is going to take a fair dent out of that. My own retirement planning and inflation assumptions mean the capital at retirement is worth about half of its face value in today's money - getting good returns is absolutely essential if you want a comfortable retirement.
I may be wrong - I regularly am - but I think the "Rule Of 72" applies:-

https://www.investopedia.com/ask/answers/what-is-t...

An investment returning 7% per annum will take 10 years to double its value.