Stocks n Shares ISA

[Darlo1973]

Lots of disadvantages too such as being able to access it on a whim and leaving yourself without a retirement pot. A big advantage for pensions is you can’t touch so it forces you to keep it for your retirement. A pension is also in a trust so it doesn’t form part of your estate on death which is good for inheritance tax reasons etc.

Which is why having both is the best of both worlds.

Currently I have 2 years worth of living costs in my ISA and the aim is to that that up to 5 years so that there is plenty of money available should I want (or be forced) to finish working early.

 

[Select coaches]

Fair dos

That may be true but you can’t assume a 20% tax on the way out as it doesn’t take into account any personal allowances which this year is £12500 tax free.
So if we assume an annuity rate of 3% would mean you’d need to have a fund above £416k left after the 25% to be paying tax on the income.
Sounds canny

Nobody buys an annuity any more. Draw down is the sensible option.

 

[sexymuffin]

Nobody buys an annuity any more. Draw down is the sensible option.

Exactly you manage in line with your tax allowances to minimise tax so saying you pay 20% of what you take out is nonsense. It’s staggered over years and years to limit the impact.

 

[Select coaches]

Exactly you manage in line with your tax allowances to minimise tax so saying you pay 20% of what you take out is nonsense. It’s staggered over years and years to limit the impact.

But I’m not advocating an isa instead of a pension, I’m saying a mixture of both. I’ve said all along that it assumes basic rate tax on the way in and out, you said it was wrong but it’s not.

 

[sexymuffin]

But I’m not advocating an isa instead of a pension, I’m saying a mixture of both. I’ve said all along that it assumes basic rate tax on the way in and out, you said it was wrong but it’s not.

We both agree on the fact the tax on the way out won’t be 20%

 

[Select coaches]

We both agree on the fact the tax on the way out won’t be 20%

It could be 0% 20% 40% 45% or any other number that they think up. I’ve seen people pay into a pension all there lives getting 20% relief and drawing it all out in one pop getting taxed at 40%. That doesn’t hide the fact that most of your comments have been incorrect.

 

[JJH]

Don't forget with ISA's you are only covered for £85k per institution cash and £50k for other Stock ISA I think

 

[sexymuffin]

It could be 0% 20% 40% 45% or any other number that they think up. I’ve seen people pay into a pension all there lives getting 20% relief and drawing it all out in one pop getting taxed at 40%. That doesn’t hide the fact that most of your comments have been incorrect.

Someone drawing it all out in one hit would be the exception rather than the rule though. I’m sure you agree. As you said it’s sensible to draw it out in line with allowances so the 20% loss of pension pot is an incredibly rare event for anyone

 

[timeforheroes1]

extreme example of pension vs isa for basic rate rate payer

20k into an isa, take it out the next day more than likely 20k

20k into pension, tax relief at source added 5k = 25k , stick it into drawdown, 25% tax free, pay basic rate on the rest = £21,250

£1,250 profit for bugger all ( other than triggering MPAA if your still working and paying into company scheme etc)

 

[Fletch]

had quick look at these vanguard stock n shares ISAs , as say never had one before.

Noticed the lifestrategy funds where you don't need to select the investments yourself , which is good news for people like myself.
they have different options of shares:bonds (I'm assuming bonds are less risk/less reward than shares), starting at a safe mix of 20:80 of shares:bonds , then 40:60, 60:40, 80:20 and going up to 100% shares. With 60:40 (shares:bonds) seemingly in the middle of the range.
this would only be for about 7-8 year then prob need access to it .
If I stuck a lumpa into the 60:40 to open it and then started to pay in a monthly contribution over the next couple years , as get closer to retirement can you then ask for the mix to be changed to a safer one ? unsure how it works , or are you stuck with the 60:40 initial option , or whatever option you choose from the start .

Thanks

extreme example of pension vs isa for basic rate rate payer

20k into an isa, take it out the next day more than likely 20k

20k into pension, tax relief at source added 5k = 25k , stick it into drawdown, 25% tax free, pay basic rate on the rest = £21,250

£1,250 profit for bugger all ( other than triggering MPAA if your still working and paying into company scheme etc)

aye i realise that you lose the tax relief which is massive plus for pensions , If Rishi ever messes with that too much then pensions would become waste time.
However for part time self employed like my missus (no) you can only pay into pension as much as your profit is for that year and she isn''t earning much at moment. so need to look at other avenues.
Also, for myself, if only allowed to contribute small % of salary into company pension (long story) then again need other options

 

[buster]

Baillie Gifford health innovation fund might be worth a look for an isa .

Bought into it through my isa on 22/1/21 up 3.7 % already.

DYOR.

 

[Slatz63]

If I stuck a lumpa into the 60:40 to open it and then started to pay in a monthly contribution over the next couple years , as get closer to retirement can you then ask for the mix to be changed to a safer one ?


Also, for myself, if only allowed to contribute small % of salary into company pension (long story) then again need other options

Yes, you can chop and change the Vanguard Lifestyle percentage as often as you like, may incur costs thoough.

Whilst you may be limited on what percentage you put into company scheme, you can put as much as you like into a Self Invested Pension and still get the tax relief on it. Every time I add to my AJ Bell SIPP, Rishi chucks in an extra 20%.

DYOR

 

[42]

had quick look at these vanguard stock n shares ISAs , as say never had one before.

Noticed the lifestrategy funds where you don't need to select the investments yourself , which is good news for people like myself.
they have different options of shares:bonds (I'm assuming bonds are less risk/less reward than shares), starting at a safe mix of 20:80 of shares:bonds , then 40:60, 60:40, 80:20 and going up to 100% shares. With 60:40 (shares:bonds) seemingly in the middle of the range.
this would only be for about 7-8 year then prob need access to it .
If I stuck a lumpa into the 60:40 to open it and then started to pay in a monthly contribution over the next couple years , as get closer to retirement can you then ask for the mix to be changed to a safer one ? unsure how it works , or are you stuck with the 60:40 initial option , or whatever option you choose from the start .

Thanks

aye i realise that you lose the tax relief which is massive plus for pensions , If Rishi ever messes with that too much then pensions would become waste time.
However for part time self employed like my missus (no) you can only pay into pension as much as your profit is for that year and she isn''t earning much at moment. so need to look at other avenues.
Also, for myself, if only allowed to contribute small % of salary into company pension (long story) then again need other options

They also do target retirement funds, which automatically reduce risk the closer you get to retirement

 

[Boris Bear]

So if someone has 30k to invest for the next 7 years or so.

Where would people put their money?

Fundsmith

 

[slightburns]

So if someone has 30k to invest for the next 7 years or so.

Where would people put their money?

if u had put it in bitcoin 7 years ago. you would have 150million now.

 

[Deleted member 26533]

if u had put it in bitcoin 7 years ago. you would have 150million now.

Hypothetically. However given human emotion and the volatility, most would probably cash out well well before that

While the same human behaviours apply to shares and such, you've got more metrics to determine whether the price increase is proportional to the value of the asset

 

[ReidysLeftLug]

Hypothetically. However given human emotion and the volatility, most would probably cash out well well before that

While the same human behaviours apply to shares and such, you've got more metrics to determine whether the price increase is proportional to the value of the asset

Emotions are the biggest factor which is why I don't recommend paper-trading. I'm no expert but using real money is entirely different to a demo account. Stay away from social media charlatan traders

 

[cosmicchris00]

Baillie Gifford health innovation fund might be worth a look for an isa .

Bought into it through my isa on 22/1/21 up 3.7 % already.

DYOR.

Baillie Gifford are the hot fund management company at present.

Their European and US funds are top performers this FY.

Take care chasing performance as the inevitable market corrections combined with entry fees can blunt performance.

Fundsmith

Enormous fund which poses interesting challenges for Terry and the lads.

 

[Longy]

If you are a basic rate tax payer when you contribute and when you withdraw the difference is not that great. You basically get tax relief on the 25% lump sum, therefore 20% of 25% so 5%. As you say a mixture of both to suit your circumstances is best.

You need at also take into account the personal allowance too. People could get another £3k(ish) tax free per year from their pension on top of their state pension. Then you’ve got to think when will the state pension kick in for the individual. There could be 10yrs worth of tax free drawdown before state pension comes into play, assuming they’re eligible & getting thd

There’s too many presumptions on this thread around peoples individual circumstances to broadly say what % of tax relief is best. The tax tax relief into the pension means the growth might be substantially bigger & depending on how you draw it, not be taxed. The pension might be legacy planning & not necessarily for income.

if you're self employed low earner , as some are especially women who often part time, then you can only pay into the pension as much as you earn for each year

I’m assuming from what you’ve said the person is a sole trader & not a ltd co taking a low PAYE income topped up with dividends? Third party payments can go above the individuals earnings. So a Ltd Co can pay in more as a pension contribution & save on Corporation Tax.

Good analysis

It’s not technically wrong, but everybody’s circumstances are different. You can only relate these principles to your individual (and your wife’s) circumstances & plan from there.

 

[Select coaches]

It’s not technically wrong, but everybody’s circumstances are different. You can only relate these principles to your individual (and your wife’s) circumstances & plan from there.

It’s not wrong in any way I’ve said numerous times it’s based on basic rate taxpayer on the way in and the way out. I never advocated an isa instead of a pension, but alongside a pension it’s much more flexible if you want to retire or semi-retire before you are 57/58 or whatever the pension age is when you get there.