There I was thinking I’d be well clear of IHT. Could be a factor now, and I think I now have every reason to shift money from pension to ISA because both are covered by IHT but it seems likely that the pension also has income tax if I die after 75.
Still some restrictions, maybe
The details of the pension changes are still surprising me, and it’s still not finalised legally, let alone possibly being reversed if a Labour government comes in.
The latest detail for me to discover is that non-earners who have already triggered the MPAA might be able to put up to £10,000 per year into a pension, BUT they only get tax relief on £3600 gross (£2880 net).
What? No LTA?
Well, yesterday’s budget is a surprise. Anyone can put 10k gross into their pension. And the LTA is gone. Wow. This is of course a total gift for billionaires – for anyone earning over 100k really – and tax top-ups and self-assessment credits could cost HMRC a lot. But from my perspective I can stop worrying about whether I’ll go over the LTA at age 60, and stop calculating carefully for BCE5A at age 75, and start editing this website! Maybe wait a couple of weeks to be sure it’s really true, and save the deleted pages for when the LTA is reintroduced.
Trust charges and some consolidation
After a few months of having Investment Trust rather than Funds, I can clearly see the effect on charges with Hargreaves Lansdown. I’m now paying £3.75×12 = £45 per year for my ISA and £16.66×12 = £199.92 per year for my SIPP/Drawdown, plus any dealing charges which are usually somewhere around £10 each time. Those annual charges are capped at those levels. That makes me very happy. (And it means that for someone holding over £10,000 in an ISA there are lower charges to hold 100% ITs than to hold 100% Funds.)
Previously I’d planned to shift to Interactive Investor, mainly to reduce charges. But with the charges above I can get low charges from HL. I far prefer using HL’s customer service versus ii’s, plus HL have been error free with me (unlike ii). I find the HL interface easier, and perhaps because of that my overall investment return has been a few percentage points higher on both my HL ISA and my HL SIPP. I’ll also have my “pots” of SIPP crystallisations in one place so it will be easier to keep them roughly in proportion in advance of BCE5A at age 75. So I’m in the process of consolidating with HL. The ISA consolidation was quick. The SIPP consolidation is taking weeks, with multiple forms to fill – I think driven by ii protecting themselves from transfers out to bad pension schemes – and the effect is that my impression of ii deteriorates by the week. Ah well, not long now.
Mostly in trusts – gulp!
As trailed in the previous post, I switched funds to trusts, and not just a few. The vast majority of my investments are now in investment trusts rather than in funds. This has slashed my charges. How do I feel about trusts now? At the moment I’m still holding my breath, waiting for discounts on low share values to turn into premiums on higher share values.
Shifting from Funds to Investment Trusts
Now that the investments from my wife’s estate have finally reached my account, I have done my annual review of investments. With the recent decline in equity values, accentuated by the Ukraine war, I’m feeling somewhat poorer than last year and had a good look at investment charges. As a person withdrawing through drawdown, charges are effectively a reduction in each year’s income – if I can save £1000 charges, I have £1000 to spend. I’ve noticed that my online investment platform charges drop dramatically if I use Investment Trusts rather than Funds, and also that the depressed market values have resulted in discounts on many Trusts. So although the range of Trusts seems less than the range of Funds, I’m going to move several Funds over to Trusts, and if I find I like it, I may move almost everything into Trusts over a few years.
Bereavement
I seem to be close to finalising the last things after my wife’s death, so I’ve turned my checklist (that I used to ensure I’d done everything) into a series of pages for this website. I think it’s more comprehensive than anything I could find online, but as usual it’s somewhat personalised to me and hopefully others will find it useful.
Government thinking of cutting the LTA, and more.
I see the government have their eye on cutting the LTA.
Considering how low annuity rates are, reducing the LTA will mean some pretty moderate pensioners will feel incentivised to retire early. Instead people will need to think about having a retirement income made up of state pension, personal pension, AND investments/ISAs. The massive hike in ISA limits a few years ago means that some people might choose not to save into a pension, but instead to be taxed now and put the money into ISAs, though international pressure to harmonise tax laws is always pushing to remove ISAs.
I’m just glad I moved as much as possible out of SIPPs and into drawdown when I hit 55, measured against the LTA at the time.
The “pension relief at marginal rate” principle is a way to put some of your pay aside to be taxed as income later in life. If they start changing that principle, pensions might become very unappealing to some people who will effectively be taxed now AND later.
For the state pension triple lock they could just average over the last 3 years for each of the three measures, but I’ve not heard any mention of that. Though I’ve read that the state pension is relatively low when compared internationally, and the triple lock was partly intended to inflate the state pension so it compares better to other countries.
Long term performance of different portfolios
I happened to see a YouTube video which referred to a website called “PortfolioCharts”. Well, that’s a seriously interesting site. I could lose myself there for a few days at least.
Continue reading “Long term performance of different portfolios”Does my spend pay back?
I was looking at electric cars, then at home batteries, solar panels, air-source heat pumps, etc.. Websites talk about typical savings and hence typical paybacks. I thought I’d consider “what if I invest that money instead” to see what different levels of investment return would do to the payback. The result is certainly food for thought. Solar panels are currently a non-starter. Home batteries (Tesla, Solax, etc.) to enable use of Economy 7 tariff is a far longer payback than I had thought. The cost of solar panels is reducing, and similarly home batteries are becoming more cost-effective, so in a few years I can look again. I suspect that if enough people have electric cars and home batteries, both charging overnight, energy companies won’t be offering such good deals for Economy 7. I’ve done a page to show my spreadsheet model.