[Finance] Are IFA’s a waste of money for most people ?

[zefarelly]

Russians with their dobermans. Buying up huge Folders and Ockley places, demolishing them, turning them into three large new builds.

Sounds like Shoreham beach, buy a bunglaow with decent gardens, flatten it and build two houses on the plot.

 

[Weststander]

Sounds like Shoreham beach, buy a bunglaow with decent gardens, flatten it and build two houses on the plot.

(Not my address) Withdean Road is the same. And it is wealthy Russians and one of them has a couple of very hungry looking dobermans in the grounds!

 

[nicko31]

tweeking the limit from 1m does seem unnecessary, affects private sector more than public, and probably wouldnt raise much. the real revenue raiser will be to cut the higher rate pension contribution relief. its quite a daft set up where the middle classes earning >50k get a larger relief than those on more modest salaries.

Yes the upper rate relief is pretty generous and pretty costly too. I can see this is more likely to get ditched

 

[dazzer6666]

Slightly off topic but I read today Sunak is considering a tax raid by reducing lifetime SIPP allowance to 8 or 900k.

https://www.thetimes.co.uk/article/sunak-considers-pension-taxes-to-pay-for-covid-recovery-wtgssv2tt

The problem with this is once you start on this road where does it end? You need the public to have confidence in investing in SIPPs, this would be pretty damaging

If they are going to try and raise cash maybe reducing the tax free contribs limit to say £25 or £30k (from present £40k)

That's not just SIPPs, it's the lifetime allowance - applies to any pensions you have (totalled) and impacts the tax you'd pay on withdrawals.

 

[Tim Over Whelmed]

Isn’t someone mixing up the implications of taking the tax free lump sum (none, except that sum’s no longer invested for growth and income) and taking drawdowns from the 75% …. where I mentioned a serious point to be aware of?

Possibly, my point was once you had withdrawn the tax free lump sum you can't then make use of the tax benefits that helped you build the pot, which is a fairly serious implication if you continuing earning and want to maximise the benefit against the tax you pay?

 

[Lower West Stander]

That's not just SIPPs, it's the lifetime allowance - applies to any pensions you have (totalled) and impacts the tax you'd pay on withdrawals.

Yep - I don't get this at all. Surely the idea is to save for your pension not penalise.

Perhaps MPs would like to include their lucrative Final Salary pensions in this as well....

 

[Weststander]

Possibly, my point was once you had withdrawn the tax free lump sum you can't then make use of the tax benefits that helped you build the pot, which is a fairly serious implication if you continuing earning and want to maximise the benefit against the tax you pay?

I can't think of a negative tax implication of taking the 25% tax free lump sum, other than what I said before that, that element of the pot would no longer provide tax free growth and income (dividends).

I know quite a few people who took it at 55 with no regrets to pay off the mortgage, clear debts running at 19% apr interest or finance a house extension.

A compromise can be to take less than the 25%.

 

[Driver8]

I can't think of a negative tax implication of taking the 25% tax free lump sum, other than what I said before that, that element of the pot would no longer provide tax free growth and income (dividends).

It becomes part of your estate for Inheritance Tax, whereas if it stays in a pension it can be paid free of tax if you died before age 75. Obviously depends on your other assets and circumstances as to whether or not that is a consideration.

 

[Driver8]

Possibly, my point was once you had withdrawn the tax free lump sum you can't then make use of the tax benefits that helped you build the pot, which is a fairly serious implication if you continuing earning and want to maximise the benefit against the tax you pay?

Taking the tax free cash in isolation doesn’t restrict future contributions (other than if you were to use the tax free cash to make a substantial contribution which isn’t allowed).

 

[beorhthelm]

Taking the tax free cash in isolation doesn’t restrict future contributions (other than if you were to use the tax free cash to make a substantial contribution which isn’t allowed).

so presumably once you take the lump sum you cant put any more cash into the pension, only from earnings. thats a restriction on contributions.

 

[Weststander]

It becomes part of your estate for Inheritance Tax, whereas if it stays in a pension it can be paid free of tax if you died before age 75. Obviously depends on your other assets and circumstances as to whether or not that is a consideration.

That's an obscure point, affecting those decades past age 55 or 65 when the vast majority have many years still to enjoy life and their money.

The tax free lump sum wouldn't sit in a building society account for 30 years, waiting for IHT. That would be a silly financial choice by anyone.

Instead spent and enjoyed, or used to pay off a wide array of interest bearing debts.

 

[Driver8]

so presumably once you take the lump sum you cant put any more cash into the pension, only from earnings. thats a restriction on contributions.

I’m not sure what you mean. The limit on contributions is the same before and after you take your lump sum.

 

[Driver8]

That's an obscure point, affecting those decades past age 55 when the vast majority have many years still to enjoy life and their money.

The tax free lump sum wouldn't sit in a building society account for 30 years, waiting for IHT. That would be a silly financial choice by anyone.

Instead spent and enjoyed, or used to pay off a wide array of interest bearing debts.

It’s not obscure to my clients. Many don’t need to draw their pension so not taking the lump sum and spending other assets already in their estate makes perfect sense.

 

[Weststander]

so presumably once you take the lump sum you cant put any more cash into the pension, only from earnings. thats a restriction on contributions.

No effect/restrictions on future contribution allowances stemming from taking the 25% lump sum.

 

[El Presidente]

That's an obscure point, affecting those decades past age 55 or 65 when the vast majority have many years still to enjoy life and their money.

The tax free lump sum wouldn't sit in a building society account for 30 years, waiting for IHT. That would be a silly financial choice by anyone.

Instead spent and enjoyed, or used to pay off a wide array of interest bearing debts.

Agree totally, I fully instead to spend mine on cocaine and callgirls, and perhaps fritter away anything remaining (or as it is NSC, remoaning).

 

[Weststander]

It’s not obscure to my clients. Many don’t need to draw their pension so not taking the lump sum and spending other assets already in their estate makes perfect sense.

Age expectancy in the UK for today's 55 to 65 year olds is 84 to 87.

Asking, perhaps you deal with wealthy 55 to 65 year olds, who have no need to touch their pension lump sum, concerning themselves with IHT in decades time over cash now and having very fortunate financial circumstances?

There are large numbers of folk who have many £100,000's or more under wealth management (including under a pension wrapper). Especially in this part of the world.

But below that the hoi polloi struggle to make ends meet, have debts and take everything financial advantage that comes their way. Others who want to scrape by, to help their kids not end up with £50,000 in student loans. I work with a lot of wealthy folk, it's sometime easy to forget how most other people live.

 

[Weststander]

Agree totally, I fully instead to spend mine on cocaine and callgirls, and perhaps fritter away anything remaining (or as it is NSC, remoaning).

Are callboys better value?

 

[WATFORD zero]

Agree totally, I fully instead to spend mine on cocaine and callgirls, and perhaps fritter away anything remaining (or as it is NSC, remoaning).

I always thought that someone with George's talent deserved re-incarnation. But as a dullard ACCOUNTANT

 

[Seagull58]

A good one is worth their weight in gold and a bad one is worth their weight in Bitcoin.

 

[Tim Over Whelmed]

I can't think of a negative tax implication of taking the 25% tax free lump sum, other than what I said before that, that element of the pot would no longer provide tax free growth and income (dividends).

I know quite a few people who took it at 55 with no regrets to pay off the mortgage, clear debts running at 19% apr interest or finance a house extension.

A compromise can be to take less than the 25%.

Maybe I'm misunderstanding your point. My thoughts was IF you drew down your tax free 25% you no longer got the ability to pay in the £40k a year and gain the HR tax relief on it, therefore that was a disadvantage?