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Investment advice on behalf of a family member - do you?

Including Financial Independence and Retiring Early (FIRE)
hiriskpaul
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Re: Investment advice on behalf of a family member - do you?

#495197

Postby hiriskpaul » April 19th, 2022, 1:37 pm

Dod101 wrote:
hiriskpaul wrote:I look after investments for a couple of relatives. Being cognisant of the risk of underperforming the market from choosing actively managed funds and investments I might otherwise pick for myself, I invest in cheap trackers. Global developed/Global emerging in the ratio 9:1. That way I cannot be accused of picking poor investments. I also endeavour to keep investment costs as low as possible and keep track of where they hold their cash deposits, to advise when they should switch.

In your situation I would definitely switch away from SJP as soon as possible, but taking care to avoid CGT.

Given the age and circumstances of your relative it seems likely that she will need to spend increasing amounts on care, so a large proportion of equities is highly inappropriate. I would suggest 60% at most. LifeStrategy funds are not a bad option. I don't like the overweighting of UK equities and DIY equivalents can be run more cheaply, but those are minor niggles. LS funds would be far more suitable than anything SJP have to offer.

Later on you might want to consider things like immediate needs annuities and you should definitely seek advice on this. These types of products are difficult to acquire without advice anyway.


And how are the cheap trackers results doing in relation to your presumably more risky investments over say the last five years?

Dod

Some investments are more risky, some I regard as less, but it depends which risks your are talking about. SWDA is an accumulating MSCI World tracker ETF, up about 70% over the last 5 years or about 11.3% per year. One of my safer investments over the whole period has been Co-op Group 11% Final Repayment Subordinated Notes 20/12/25, with a 5 year internal rate of return of about 8.0%. I think my best performer has been Manchester Building Society 8% PIBS, bought in December 2019 at an average price of 19.6 and currently trading at about 100. So a five fold increase in price plus a 4% interest payment and another payable soon.

The point is though, I would not have bought either investment with someone else's money. Although I would have considered the Co-op Group bond to have been much safer than a World equity tracker it still carries high specific risk, it could have gone to zero, but a World tracker is very unlikely to do that.

Charlottesquare
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Re: Investment advice on behalf of a family member - do you?

#495223

Postby Charlottesquare » April 19th, 2022, 3:27 pm

How close to 75?
Reason £80k pension fund is not touched but other savings are?
Presume also a house, are there accordingly IHT considerations , has she inherited a late spouse's nil rate bands etc?

I might look at whether depleting the pension fund and leaving the other investments alone meantime might be an idea, especially once she reaches 75, or instead say aiming the pension funds at grandchildren who will hopefully suffer lower marginal IT rates than their parents might.

Before considering what investments ought to be made I would first consider the wrappers and their suitability.

(For instance I intend to loot my pensions to the utmost before I am 75 and recycle into other wrappers (ISAs) because I do not want to risk the IT charges that might arise to my family re funds post 75 , I think I may mainly be able to body swerve IHT and I do not trust HMG possibly in future fiddling with pension rules)

Catch is everyone's goals/aims are different so what may work for me may not be suitable for your MIL.

https://www.fidelity.co.uk/approaching- ... nning/#iht

Dod101
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Re: Investment advice on behalf of a family member - do you?

#495232

Postby Dod101 » April 19th, 2022, 3:56 pm

Charlottesquare wrote:How close to 75?
Reason £80k pension fund is not touched but other savings are?
Presume also a house, are there accordingly IHT considerations , has she inherited a late spouse's nil rate bands etc?

I might look at whether depleting the pension fund and leaving the other investments alone meantime might be an idea, especially once she reaches 75, or instead say aiming the pension funds at grandchildren who will hopefully suffer lower marginal IT rates than their parents might.

Before considering what investments ought to be made I would first consider the wrappers and their suitability.

(For instance I intend to loot my pensions to the utmost before I am 75 and recycle into other wrappers (ISAs) because I do not want to risk the IT charges that might arise to my family re funds post 75 , I think I may mainly be able to body swerve IHT and I do not trust HMG possibly in future fiddling with pension rules)

Catch is everyone's goals/aims are different so what may work for me may not be suitable for your MIL.

https://www.fidelity.co.uk/approaching- ... nning/#iht


Well I do not think that the Government can or will attempt to do much with the ownership of pensions which seems to be what you are suggesting. After all pension assets have been legally owned by pension trustees for a long while and that is why they are outside of one's estate (as I have no doubt you know) Thus it seems to me to be a bit unwise to run down pension assets considering that they can be passed on free of IHT. Tax in the hands of the beneficiary is a matter outside of your hands. So by looting your pensions and transferring the assets to an ISA what you seem to be advocating is looting the pension assets, paying income tax at your marginal rate on the way, and transferring the net assets from an IHT free environment into a smaller pot with a guaranteed charge, assuming your estate will be liable for IHT in the first place.

I am obviously missing something because I cannot believe that that is what you mean.

Dod

Charlottesquare
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Re: Investment advice on behalf of a family member - do you?

#495409

Postby Charlottesquare » April 20th, 2022, 1:22 pm

Dod101 wrote:
Charlottesquare wrote:How close to 75?
Reason £80k pension fund is not touched but other savings are?
Presume also a house, are there accordingly IHT considerations , has she inherited a late spouse's nil rate bands etc?

I might look at whether depleting the pension fund and leaving the other investments alone meantime might be an idea, especially once she reaches 75, or instead say aiming the pension funds at grandchildren who will hopefully suffer lower marginal IT rates than their parents might.

Before considering what investments ought to be made I would first consider the wrappers and their suitability.

(For instance I intend to loot my pensions to the utmost before I am 75 and recycle into other wrappers (ISAs) because I do not want to risk the IT charges that might arise to my family re funds post 75 , I think I may mainly be able to body swerve IHT and I do not trust HMG possibly in future fiddling with pension rules)

Catch is everyone's goals/aims are different so what may work for me may not be suitable for your MIL.

https://www.fidelity.co.uk/approaching- ... nning/#iht


Well I do not think that the Government can or will attempt to do much with the ownership of pensions which seems to be what you are suggesting. After all pension assets have been legally owned by pension trustees for a long while and that is why they are outside of one's estate (as I have no doubt you know) Thus it seems to me to be a bit unwise to run down pension assets considering that they can be passed on free of IHT. Tax in the hands of the beneficiary is a matter outside of your hands. So by looting your pensions and transferring the assets to an ISA what you seem to be advocating is looting the pension assets, paying income tax at your marginal rate on the way, and transferring the net assets from an IHT free environment into a smaller pot with a guaranteed charge, assuming your estate will be liable for IHT in the first place.

I am obviously missing something because I cannot believe that that is what you mean.

Dod


I believe that pension fund assets on death post age 75 are taxed as income on the " beneficaries withdrawing "at their marginal income tax rates, hence why I was suggesting that they take a look at the global picture with all the facts as we have no idea re marginal income tax rates of the MIL or her potential pool of "beneficiaries re the pension" and their marginal IT rates, nor for that matter MIL's age. All ths information might inform choices, as I suggested..

https://techzone.abrdn.com/anon/public/ ... h#anchor_5

Re governments and interference, I would never be confident the 25% tax free advantage will never be touched by a future government and they already make a regular habit of varying how funds are distributed on death and the tax implications re same (most recent circa 2015) so the longer funds are in pension funds the higher possibility of adverse changes impacting planning.

What I actually said was not to do x or y it was to look at the particular circumstances bespoke for the individual and family and plan once fully informed.

Dod101
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Re: Investment advice on behalf of a family member - do you?

#495426

Postby Dod101 » April 20th, 2022, 3:04 pm

Charlottesquare wrote:
Dod101 wrote:
Charlottesquare wrote:How close to 75?
Reason £80k pension fund is not touched but other savings are?
Presume also a house, are there accordingly IHT considerations , has she inherited a late spouse's nil rate bands etc?

I might look at whether depleting the pension fund and leaving the other investments alone meantime might be an idea, especially once she reaches 75, or instead say aiming the pension funds at grandchildren who will hopefully suffer lower marginal IT rates than their parents might.

Before considering what investments ought to be made I would first consider the wrappers and their suitability.

(For instance I intend to loot my pensions to the utmost before I am 75 and recycle into other wrappers (ISAs) because I do not want to risk the IT charges that might arise to my family re funds post 75 , I think I may mainly be able to body swerve IHT and I do not trust HMG possibly in future fiddling with pension rules)

Catch is everyone's goals/aims are different so what may work for me may not be suitable for your MIL.

https://www.fidelity.co.uk/approaching- ... nning/#iht


Well I do not think that the Government can or will attempt to do much with the ownership of pensions which seems to be what you are suggesting. After all pension assets have been legally owned by pension trustees for a long while and that is why they are outside of one's estate (as I have no doubt you know) Thus it seems to me to be a bit unwise to run down pension assets considering that they can be passed on free of IHT. Tax in the hands of the beneficiary is a matter outside of your hands. So by looting your pensions and transferring the assets to an ISA what you seem to be advocating is looting the pension assets, paying income tax at your marginal rate on the way, and transferring the net assets from an IHT free environment into a smaller pot with a guaranteed charge, assuming your estate will be liable for IHT in the first place.

I am obviously missing something because I cannot believe that that is what you mean.

Dod


I believe that pension fund assets on death post age 75 are taxed as income on the " beneficaries withdrawing "at their marginal income tax rates, hence why I was suggesting that they take a look at the global picture with all the facts as we have no idea re marginal income tax rates of the MIL or her potential pool of "beneficiaries re the pension" and their marginal IT rates, nor for that matter MIL's age. All ths information might inform choices, as I suggested..

https://techzone.abrdn.com/anon/public/ ... h#anchor_5

Re governments and interference, I would never be confident the 25% tax free advantage will never be touched by a future government and they already make a regular habit of varying how funds are distributed on death and the tax implications re same (most recent circa 2015) so the longer funds are in pension funds the higher possibility of adverse changes impacting planning.

What I actually said was not to do x or y it was to look at the particular circumstances bespoke for the individual and family and plan once fully informed.


I was actually thinking of what you said about your pension. I responded because I too have looked at what you are suggesting but decided against doing much with my SIPP because of the obvious advantage of IHT relief. The beneficiaries can do what they like with the SIPP, such as maintaining it until their own marginal rate of tax is such that they pay as little tax as possible on the proceeds. The SIPP is intended to provide an income so it is not unreasonable that it be taxed, but by the same token there is no requirement to take that income and they could even pass the SIPP on to their children if they wanted to. That seems all quite attractive against the alternative which is to run it down and feed the proceeds into an ISA at a relatively modest £20,000 pa, having paid tax at your marginal rate in extracting the funds from the SIPP. Of course, taking the 25% tax free seems a no brainer and I did that long since.

Dod

scrumpyjack
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Re: Investment advice on behalf of a family member - do you?

#495436

Postby scrumpyjack » April 20th, 2022, 4:50 pm

It is also worth noting the if the beneficiaries inherit the pension fund, that does not form part of their LTA. It is in addition to their LTA, which may be a considerable advantage.

Charlottesquare
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Re: Investment advice on behalf of a family member - do you?

#495439

Postby Charlottesquare » April 20th, 2022, 5:11 pm

Dod101 wrote:
Charlottesquare wrote:
Dod101 wrote:
Charlottesquare wrote:How close to 75?
Reason £80k pension fund is not touched but other savings are?
Presume also a house, are there accordingly IHT considerations , has she inherited a late spouse's nil rate bands etc?

I might look at whether depleting the pension fund and leaving the other investments alone meantime might be an idea, especially once she reaches 75, or instead say aiming the pension funds at grandchildren who will hopefully suffer lower marginal IT rates than their parents might.

Before considering what investments ought to be made I would first consider the wrappers and their suitability.

(For instance I intend to loot my pensions to the utmost before I am 75 and recycle into other wrappers (ISAs) because I do not want to risk the IT charges that might arise to my family re funds post 75 , I think I may mainly be able to body swerve IHT and I do not trust HMG possibly in future fiddling with pension rules)

Catch is everyone's goals/aims are different so what may work for me may not be suitable for your MIL.

https://www.fidelity.co.uk/approaching- ... nning/#iht


Well I do not think that the Government can or will attempt to do much with the ownership of pensions which seems to be what you are suggesting. After all pension assets have been legally owned by pension trustees for a long while and that is why they are outside of one's estate (as I have no doubt you know) Thus it seems to me to be a bit unwise to run down pension assets considering that they can be passed on free of IHT. Tax in the hands of the beneficiary is a matter outside of your hands. So by looting your pensions and transferring the assets to an ISA what you seem to be advocating is looting the pension assets, paying income tax at your marginal rate on the way, and transferring the net assets from an IHT free environment into a smaller pot with a guaranteed charge, assuming your estate will be liable for IHT in the first place.

I am obviously missing something because I cannot believe that that is what you mean.

Dod


I believe that pension fund assets on death post age 75 are taxed as income on the " beneficaries withdrawing "at their marginal income tax rates, hence why I was suggesting that they take a look at the global picture with all the facts as we have no idea re marginal income tax rates of the MIL or her potential pool of "beneficiaries re the pension" and their marginal IT rates, nor for that matter MIL's age. All ths information might inform choices, as I suggested..

https://techzone.abrdn.com/anon/public/ ... h#anchor_5

Re governments and interference, I would never be confident the 25% tax free advantage will never be touched by a future government and they already make a regular habit of varying how funds are distributed on death and the tax implications re same (most recent circa 2015) so the longer funds are in pension funds the higher possibility of adverse changes impacting planning.

What I actually said was not to do x or y it was to look at the particular circumstances bespoke for the individual and family and plan once fully informed.


I was actually thinking of what you said about your pension. I responded because I too have looked at what you are suggesting but decided against doing much with my SIPP because of the obvious advantage of IHT relief. The beneficiaries can do what they like with the SIPP, such as maintaining it until their own marginal rate of tax is such that they pay as little tax as possible on the proceeds. The SIPP is intended to provide an income so it is not unreasonable that it be taxed, but by the same token there is no requirement to take that income and they could even pass the SIPP on to their children if they wanted to. That seems all quite attractive against the alternative which is to run it down and feed the proceeds into an ISA at a relatively modest £20,000 pa, having paid tax at your marginal rate in extracting the funds from the SIPP. Of course, taking the 25% tax free seems a no brainer and I did that long since.

Dod


We will feed into ISAs at £34k pa whilst we both survive, I have to wait until I stop work so I get my basic rate band back, so roughly state pension £10k, SIPP £30k, Tax Free sum £10k, live on spouse's final salary and our two state pensions and dump circa £34k per annum into the ISAs.

I never trust HMG, when we were all advised to contract back in I would not because I really did not trust HMG re SERPS/SSP2 etc, that mistrust has worked out fine given the subsequent pension reforms, I get my full new pension and all the rebates are safely in the SIPP, effectively with HMG the bird in the hand imho is worth far more than the future one in the bush.

hiriskpaul
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Re: Investment advice on behalf of a family member - do you?

#495443

Postby hiriskpaul » April 20th, 2022, 5:45 pm

Charlottesquare wrote:
Dod101 wrote:
Charlottesquare wrote:
Dod101 wrote:
Charlottesquare wrote:How close to 75?
Reason £80k pension fund is not touched but other savings are?
Presume also a house, are there accordingly IHT considerations , has she inherited a late spouse's nil rate bands etc?

I might look at whether depleting the pension fund and leaving the other investments alone meantime might be an idea, especially once she reaches 75, or instead say aiming the pension funds at grandchildren who will hopefully suffer lower marginal IT rates than their parents might.

Before considering what investments ought to be made I would first consider the wrappers and their suitability.

(For instance I intend to loot my pensions to the utmost before I am 75 and recycle into other wrappers (ISAs) because I do not want to risk the IT charges that might arise to my family re funds post 75 , I think I may mainly be able to body swerve IHT and I do not trust HMG possibly in future fiddling with pension rules)

Catch is everyone's goals/aims are different so what may work for me may not be suitable for your MIL.

https://www.fidelity.co.uk/approaching- ... nning/#iht


Well I do not think that the Government can or will attempt to do much with the ownership of pensions which seems to be what you are suggesting. After all pension assets have been legally owned by pension trustees for a long while and that is why they are outside of one's estate (as I have no doubt you know) Thus it seems to me to be a bit unwise to run down pension assets considering that they can be passed on free of IHT. Tax in the hands of the beneficiary is a matter outside of your hands. So by looting your pensions and transferring the assets to an ISA what you seem to be advocating is looting the pension assets, paying income tax at your marginal rate on the way, and transferring the net assets from an IHT free environment into a smaller pot with a guaranteed charge, assuming your estate will be liable for IHT in the first place.

I am obviously missing something because I cannot believe that that is what you mean.

Dod


I believe that pension fund assets on death post age 75 are taxed as income on the " beneficaries withdrawing "at their marginal income tax rates, hence why I was suggesting that they take a look at the global picture with all the facts as we have no idea re marginal income tax rates of the MIL or her potential pool of "beneficiaries re the pension" and their marginal IT rates, nor for that matter MIL's age. All ths information might inform choices, as I suggested..

https://techzone.abrdn.com/anon/public/ ... h#anchor_5

Re governments and interference, I would never be confident the 25% tax free advantage will never be touched by a future government and they already make a regular habit of varying how funds are distributed on death and the tax implications re same (most recent circa 2015) so the longer funds are in pension funds the higher possibility of adverse changes impacting planning.

What I actually said was not to do x or y it was to look at the particular circumstances bespoke for the individual and family and plan once fully informed.


I was actually thinking of what you said about your pension. I responded because I too have looked at what you are suggesting but decided against doing much with my SIPP because of the obvious advantage of IHT relief. The beneficiaries can do what they like with the SIPP, such as maintaining it until their own marginal rate of tax is such that they pay as little tax as possible on the proceeds. The SIPP is intended to provide an income so it is not unreasonable that it be taxed, but by the same token there is no requirement to take that income and they could even pass the SIPP on to their children if they wanted to. That seems all quite attractive against the alternative which is to run it down and feed the proceeds into an ISA at a relatively modest £20,000 pa, having paid tax at your marginal rate in extracting the funds from the SIPP. Of course, taking the 25% tax free seems a no brainer and I did that long since.

Dod


We will feed into ISAs at £34k pa whilst we both survive, I have to wait until I stop work so I get my basic rate band back, so roughly state pension £10k, SIPP £30k, Tax Free sum £10k, live on spouse's final salary and our two state pensions and dump circa £34k per annum into the ISAs.

I never trust HMG, when we were all advised to contract back in I would not because I really did not trust HMG re SERPS/SSP2 etc, that mistrust has worked out fine given the subsequent pension reforms, I get my full new pension and all the rebates are safely in the SIPP, effectively with HMG the bird in the hand imho is worth far more than the future one in the bush.

There is no guarantee that ISAs will be maintained in their current form. Best to hedge your bets IMHO and hold both ISAs and SIPPs.

Dod101
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Re: Investment advice on behalf of a family member - do you?

#495455

Postby Dod101 » April 20th, 2022, 7:46 pm

hiriskpaul wrote:There is no guarantee that ISAs will be maintained in their current form. Best to hedge your bets IMHO and hold both ISAs and SIPPs.


My SIPP is very small in relation to my two ISAs, but I agree with you that there surely must come a time when the ISAs will be reined in. Having just put another £20,000 into my ISA from certificated shares in Legal & General, I reckon my unprotected dividends will be probably no more than about £3,000, that is just over the tax free limit and I will pay very little tax indeed.

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Re: Investment advice on behalf of a family member - do you?

#496298

Postby Charlottesquare » April 25th, 2022, 10:55 am

hiriskpaul wrote:
There is no guarantee that ISAs will be maintained in their current form. Best to hedge your bets IMHO and hold both ISAs and SIPPs.


I think there is a fair chance (like PEPS to ISAs) that existing ISA structures will carry through relatively intact to any replacement entities, though no guarantees I would certainly bet less interference that with pensions.

I do have another motive which is personal to me, if I leave SIPPs to be inherited by my kids my son by then will have the complication of having a SIPP interest which the IRS in the USA may not recognise as sheltered and may accordingly tax him on income arising within same (He is due to move to the USA once her gets his spousal work visa, hopefully later this year), however if I leave them ISAs they just gets encashed on my/ my wife's demise and he gets 50% of the proceeds post any IHT.

Dod101
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Re: Investment advice on behalf of a family member - do you?

#496312

Postby Dod101 » April 25th, 2022, 11:39 am

Charlottesquare wrote:
hiriskpaul wrote:
There is no guarantee that ISAs will be maintained in their current form. Best to hedge your bets IMHO and hold both ISAs and SIPPs.


I think there is a fair chance (like PEPS to ISAs) that existing ISA structures will carry through relatively intact to any replacement entities, though no guarantees I would certainly bet less interference that with pensions.

I do have another motive which is personal to me, if I leave SIPPs to be inherited by my kids my son by then will have the complication of having a SIPP interest which the IRS in the USA may not recognise as sheltered and may accordingly tax him on income arising within same (He is due to move to the USA once her gets his spousal work visa, hopefully later this year), however if I leave them ISAs they just gets encashed on my/ my wife's demise and he gets 50% of the proceeds post any IHT.


Frankly that might have been worth mentioning earlier because it is a circumstance peculiar to yourself. I think in general terms my comments re the possible benefits of maintaining a SIPP are probably more generally applicable.

Dod


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