stevio
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Post by stevio on Jul 4, 2018 8:36:06 GMT
Wondering and in what %?
Perceived benefits/negative to either?
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archie
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Post by archie on Jul 4, 2018 9:17:11 GMT
70% shares/30% P2P. That's mainly because the latter haven't been around that long.
For the P2P side it's as well to remember that losses in an ISA cannot be offset against income as no tax was incurred.
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IFISAcava
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Post by IFISAcava on Jul 4, 2018 9:36:25 GMT
93% P2P ISA
7% S&S
0% Cash
Tax advantages much better used for P2P IMHO. The inability to offset losses is (to my thinking) largely irrelevant, since all tax has essentially already been offset.
Use capital gains allowance every year for S&S to minimise any eventual CGT (including crystallising losses if needs be)
Tax needs to be paid on dividends but a) dividend yield on S&S is only about a third of yield of P2P portfolio; b) the first £2000 is tax free anyway; and c) tax rate is lower
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aju
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Post by aju on Jul 4, 2018 17:01:45 GMT
100% in P2P relative to S&S ISA
Never bother to ISA my Shares in the past too expensive compared to costs, passed half my shares to Mrs Aju so that the latest £2000/year govt wheeze does not affect. Not likely to sell as the yearly return is very good relative to cash savings and many P2P returns even in the ISA. (Shares cost to returns was heavily discounted when I purchased them as a company discount.)
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aju
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Post by aju on Jul 4, 2018 17:03:18 GMT
70% shares/30% P2P. That's mainly because the latter haven't been around that long. For the P2P side it's as well to remember that losses in an ISA cannot be offset against income as no tax was incurred. Hmmm!, thanks for that snippet, hadn't even consider that one, default losses recovery that is.
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Post by samford71 on Jul 4, 2018 18:42:31 GMT
100% S&S. Given HR/AR income tax is 40/45% vs. CGT at 28%, then conventional wisdom would be that higher yield, income producing assets should be tax wrapped via an ISA, while lower yielding assets with capital gains potential should be left unwrapped. This would favour putting higher yielding P2P into ISAs over say equity or bonds.
I think, however, other factors override this:
1. The value of an ISA is in the gross-roll up. Over the long-term, therefore, ideally I want my highest returning assets inside the wrapper. That almost certainly means US/global equities.
2. Considering just fixed income assets then the advantage of putting P2P inside the ISA is now negated by the ability to offset income tax against losses outside the ISA. Assuming I have the choice between a fixed income asset (total return r) and P2P loans (total return r, a function of the loan coupon minus LGDs) then it's trivial to show that whether you put the fund in the ISA or the P2P in the ISA, the returns are identical. The idea that it is better to put P2P inside the ISA is driven by the assumption that P2P will outperform another fixed income product. That's purely subjective; there is no evidence to suggest P2P outperforms HY bond funds, Em bond funds, direct lending funds or even P2P funds.
3. The S&S ISA is far more flexible. I can switch easily between different asset classes (bonds, equities, property etc), switch investment vehicles (OEICS, ETFs, ITs, single stocks), all via a single platform. With IFISA, I'm held hostage by the platform; I can only invest in their product and I'm subject to the illiquidity of their loan products (likely to be very illiquid when it matters).
4. (Most important) Since I took fixed protection on my pension in 2012 (to protect the £1.8mm LTA that existed at the time), ISAs are now the only "conventional" onshore tax-wrapper I have left. Given also that I've transferred quite a bit of capital from my pension to my ISA over the last 8-9 years, my ISAs are now large. There is no way I would entrust them to a bunch of flaky P2P platforms. That's hugely risky compared to holding my S&S ISA with large institutional platforms.
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IFISAcava
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Post by IFISAcava on Jul 4, 2018 21:56:13 GMT
100% S&S. Given HR/AR income tax is 40/45% vs. CGT at 28%, then conventional wisdom would be that higher yield, income producing assets should be tax wrapped via an ISA, while lower yielding assets with capital gains potential should be left unwrapped. This would favour putting higher yielding P2P into ISAs over say equity or bonds. I think, however, other factors override this: 1. T he value of an ISA is in the gross-roll up. Over the long-term, therefore, ideally I want my highest returning assets inside the wrapper. That almost certainly means US/global equities. 2. Considering just fixed income assets then the advantage of putting P2P inside the ISA is now negated by the ability to offset income tax against losses outside the ISA. Assuming I have the choice between a fixed income asset (total return r) and P2P loans (total return r, a function of the loan coupon minus LGDs) then it's trivial to show that whether you put the fund in the ISA or the P2P in the ISA, the returns are identical. The idea that it is better to put P2P inside the ISA is driven by the assumption that P2P will outperform another fixed income product. That's purely subjective; there is no evidence to suggest P2P outperforms HY bond funds, Em bond funds, direct lending funds or even P2P funds. 3. The S&S ISA is far more flexible. I can switch easily between different asset classes (bonds, equities, property etc), switch investment vehicles (OEICS, ETFs, ITs, single stocks), all via a single platform. With IFISA, I'm held hostage by the platform; I can only invest in their product and I'm subject to the illiquidity of their loan products (likely to be very illiquid when it matters). 4. (Most important) Since I took fixed protection on my pension in 2012 (to protect the £1.8mm LTA that existed at the time), ISAs are now the only "conventional" onshore tax-wrapper I have left. Given also that I've transferred quite a bit of capital from my pension to my ISA over the last 8-9 years, my ISAs are now large. There is no way I would entrust them to a bunch of flaky P2P platforms. That's hugely risky compared to holding my S&S ISA with large institutional platforms. Not sure this is necessarily the case - over the 20 years to end 2017, S&P CAGR is 7.2%, over 10 years it's 8.5% (http://www.moneychimp.com/features/market_cagr.htm) including dividends. And since most will have not just invested in the US returns will be less (can argue whether one should put all eggs in US basket or not, but very few will have or will do) - not to mention that most people's returns because of fund charges and attempts at stock picking underperform the market as a whole. P2P ought to compare reasonably well with this (within an ISA). And you can still get those stock market returns outside an ISA (for most of us who aren't exceeding the CGT allowance between us and partners very often if ever) and have the flexibility you mention to switch vehicles. So - I still say concentrate P2P inside the ISA, if you are going to do P2P at all.
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IFISAcava
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Post by IFISAcava on Jul 4, 2018 22:03:06 GMT
100% S&S. Given HR/AR income tax is 40/45% vs. CGT at 28%, then conventional wisdom would be that higher yield, income producing assets should be tax wrapped via an ISA, while lower yielding assets with capital gains potential should be left unwrapped. This would favour putting higher yielding P2P into ISAs over say equity or bonds. I think, however, other factors override this: 1. T he value of an ISA is in the gross-roll up. Over the long-term, therefore, ideally I want my highest returning assets inside the wrapper. That almost certainly means US/global equities. 2. Considering just fixed income assets then the advantage of putting P2P inside the ISA is now negated by the ability to offset income tax against losses outside the ISA. Assuming I have the choice between a fixed income asset (total return r) and P2P loans (total return r, a function of the loan coupon minus LGDs) then it's trivial to show that whether you put the fund in the ISA or the P2P in the ISA, the returns are identical. The idea that it is better to put P2P inside the ISA is driven by the assumption that P2P will outperform another fixed income product. That's purely subjective; there is no evidence to suggest P2P outperforms HY bond funds, Em bond funds, direct lending funds or even P2P funds. 3. The S&S ISA is far more flexible. I can switch easily between different asset classes (bonds, equities, property etc), switch investment vehicles (OEICS, ETFs, ITs, single stocks), all via a single platform. With IFISA, I'm held hostage by the platform; I can only invest in their product and I'm subject to the illiquidity of their loan products (likely to be very illiquid when it matters). 4. (Most important) Since I took fixed protection on my pension in 2012 (to protect the £1.8mm LTA that existed at the time), ISAs are now the only "conventional" onshore tax-wrapper I have left. Given also that I've transferred quite a bit of capital from my pension to my ISA over the last 8-9 years, my ISAs are now large. There is no way I would entrust them to a bunch of flaky P2P platforms. That's hugely risky compared to holding my S&S ISA with large institutional platforms. I'd argue that the annual CGT allowance and the £2000 tax free dividend allowance are also essentially a tax-free wrapper. Most people waste it. And you're bloody lucky you got the £1.8 million - that's almost double what the rest of us have got.
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aju
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Post by aju on Jul 4, 2018 23:08:45 GMT
100% S&S. Given HR/AR income tax is 40/45% vs. CGT at 28%, then conventional wisdom would be that higher yield, income producing assets should be tax wrapped via an ISA, while lower yielding assets with capital gains potential should be left unwrapped. This would favour putting higher yielding P2P into ISAs over say equity or bonds. I think, however, other factors override this: 1. T he value of an ISA is in the gross-roll up. Over the long-term, therefore, ideally I want my highest returning assets inside the wrapper. That almost certainly means US/global equities. 2. Considering just fixed income assets then the advantage of putting P2P inside the ISA is now negated by the ability to offset income tax against losses outside the ISA. Assuming I have the choice between a fixed income asset (total return r) and P2P loans (total return r, a function of the loan coupon minus LGDs) then it's trivial to show that whether you put the fund in the ISA or the P2P in the ISA, the returns are identical. The idea that it is better to put P2P inside the ISA is driven by the assumption that P2P will outperform another fixed income product. That's purely subjective; there is no evidence to suggest P2P outperforms HY bond funds, Em bond funds, direct lending funds or even P2P funds. 3. The S&S ISA is far more flexible. I can switch easily between different asset classes (bonds, equities, property etc), switch investment vehicles (OEICS, ETFs, ITs, single stocks), all via a single platform. With IFISA, I'm held hostage by the platform; I can only invest in their product and I'm subject to the illiquidity of their loan products (likely to be very illiquid when it matters). 4. (Most important) Since I took fixed protection on my pension in 2012 (to protect the £1.8mm LTA that existed at the time), ISAs are now the only "conventional" onshore tax-wrapper I have left. Given also that I've transferred quite a bit of capital from my pension to my ISA over the last 8-9 years, my ISAs are now large. There is no way I would entrust them to a bunch of flaky P2P platforms. That's hugely risky compared to holding my S&S ISA with large institutional platforms. I'd argue that the annual CGT allowance and the £2000 tax free dividend allowance are also essentially a tax-free wrapper. Most people waste it. And you're bloody lucky you got the £1.8 million - that's almost double what the rest of us have got. Even having half what he's suggesting would be nice, i'd be lucky to hit 3/400k but to be fair it's really hard to gauge what an FS pension is really worth, one thing I do know is i'd never swap it for cash. It has its benefits of Inflation increases, albeit CPI now the Gov switched from RPI for most of us. I took mine slightly early as well, but did have the company shares at a good discount to fall back on. I don't plan to sell them soon but If I did I would use all the allowances rather than sell all at once.
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macq
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Post by macq on Jul 5, 2018 0:03:11 GMT
one thing to maybe consider when mentioning using the highest earning asset in a wrapper is history.The 10 & 20 year figures were quoted for the S&P and i think many funds/It's would compere with that return.And while a stock market crash will occur at some point past performance while not guaranteed would suggest over a decent time a recovery to the same sort of annualised return. It could be P2P as it grows more mainstream with the need for company profit,listings on the stock market,and probably starting to make IFISA more instant access style with pooled funds to make it appeal to the person on the high street etc may start to cut rates although there will probably still be some higher risk products .At the moment i keep nearly all my ISA for S&S as i can't see the returns from my IT's being beaten by P2P and it also seems to make sense to get as much under the wrapper now due to any changes by a govt. in the future of divs etc
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Post by samford71 on Jul 5, 2018 0:05:49 GMT
IFISAcava . I've headed up fixed income quant strategy for a major US investment bank. So I've looked at the risk-return characteristics of every fixed income credit product there is (from HY bonds, EM debt, consumer loans, secured loans, ABS etc). Now, there is clear place for fixed income in any portfolio (especially if leveraged and considered in risk-adjusted terms). There is no evidence over the long term, however, that fixed income will outperform equities in total return terms. Given P2P is just a bunch of loans in terms of raw material, I can't see any case for it to buck that trend. I wish it wasn't the case, since I much more comfortable in fixed income products than equities. As being "bloody lucky you got the £1.8 million" for my LTA. Where was the luck? Anyone else could have done that. You didn't need to have any specific amount in your pension. You just needed to decide whether your pension might exceed £1.8mm at the point where you crystalize. Given I was less than 40 at the time, with a likely pensionable age of anything between 58-70, that meant discounting back £1.8mm for say 20-30 years. At a 5-7% discount rate, that would imply anyone with a pension pot as low as £250k should have considered locking in fixed protection in 2012. Anyone with say £400-600k would have been foolish not to. I simply traded a higher LTA in return for not being able to make any further pension contributions ever. It's just a calculated risk. Finally, I suppose it depends on your risk tolerance. Our ISAs are comparable or larger than our SIPPs at this point. Counterparty risk is a important as returns. Given the choice of that being held by say JPMorgan, a bank with a fortress balance sheet, that made a profit in 2008 and is sitting on $2trillion in liquidity or a P2P company - in many case just a small SME (or even micro enterprise), marginally solvent, with a few years track record and who could literally go into liquidation overnight (say hi Collateral ...). That's not really a choice.
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IFISAcava
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Post by IFISAcava on Jul 5, 2018 0:59:33 GMT
IFISAcava . I've headed up fixed income quant strategy for a major US investment bank. So I've looked at the risk-return characteristics of every fixed income credit product there is (from HY bonds, EM debt, consumer loans, secured loans, ABS etc). Now, there is clear place for fixed income in any portfolio (especially if leveraged and considered in risk-adjusted terms). There is no evidence over the long term, however, that fixed income will outperform equities in total return terms. Given P2P is just a bunch of loans in terms of raw material, I can't see any case for it to buck that trend. I wish it wasn't the case, since I much more comfortable in fixed income products than equities. As being "bloody lucky you got the £1.8 million" for my LTA. Where was the luck? Anyone else could have done that. You didn't need to have any specific amount in your pension. You just needed to decide whether your pension might exceed £1.8mm at the point where you crystalize. Given I was less than 40 at the time, with a likely pensionable age of anything between 58-70, that meant discounting back £1.8mm for say 20-30 years. At a 5-7% discount rate, that would imply anyone with a pension pot as low as £250k should have considered locking in fixed protection in 2012. Anyone with say £400-600k would have been foolish not to. I simply traded a higher LTA in return for not being able to make any further pension contributions ever. It's just a calculated risk. Finally, I suppose it depends on your risk tolerance. Our ISAs are comparable or larger than our SIPPs at this point. Counterparty risk is a important as returns. Given the choice of that being held by say JPMorgan, a bank with a fortress balance sheet, that made a profit in 2008 and is sitting on $2trillion in liquidity or a P2P company - in many case just a small SME (or even micro enterprise), marginally solvent, with a few years track record and who could literally go into liquidation overnight (say hi Collateral ...). That's not really a choice. No one is saying they will. The question is whether, if you are going to invest in P2P (taking into account all your caveats, which apply inside or outside an ISA), you should put that P2P in ISAs rather than putting S&S in ISAs. I think you should as long as you have CGT and dividend allowances to use for your S&S investments (and probably even after that because of lower taxation of capital gains). I think you're in a different league financially to most people.
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aju
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Post by aju on Jul 5, 2018 7:56:33 GMT
IFISAcava . "The first principle is that you must not fool yourself — and you are the easiest person to fool. (R. Feynman)" Oh how true that tag line is, I've lost count how many times I've fooled myself. The difference between RPI and CPI was the worst experience ever till I got the spreadsheets correct, I think!
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bigfoot12
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Post by bigfoot12 on Jul 5, 2018 8:01:53 GMT
I'm 100% S&S:-
1. When the P2P ISA was finally introduced (at least by companies I might have considered) I was reducing P2P exposure not increasing it.
2. My S&S portfolio isn't large enough to employ someone to calculate the tax for me, and with corporate actions (takeovers, scrip dividends, rights issues, splits) tax can get complicated quite quickly. I am pleased I don't have to think about these when I sell. Especially as I tend to hold for a long time.
3. Somewhat similar to 2, many of the cheaper funds and ETFs are accumulation units which have units increasing in value rather than paying a dividend, but this increase needs to be declared as income tax. I am pleased that these along with those paying dividends in a non GBP currency are in my SIPP or ISA.
4. Sometimes shares spike higher for reasons I don't believe; whilst I generally buy with the intention of holding for the longer term it is nice to be able to sell when I like without having to consider CGT.
5. I am worried that some of the P2P are borderline incompetent and might loose my wrapper status especially in an insolvency.
6. I value my ability to cut an run in P2P, which with very sudden changes to P2P platforms over the last few years I have used many times.
Edit:- Bad grammar.
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aju
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Post by aju on Jul 5, 2018 23:03:10 GMT
Absolutely with those who say 100% S&S and much for the same reasons. Predominantly due to the highly negative side of P2P, namely the counterparty risk, the broader risk profile and it’s highly illiquid nature (which rapidly turns to “illiquid swamp quagmire” when borrowers start defaulting). The benefits of S&S isa (or other tax wrapper) are numerous, not only in terms of taxation and CGT, but also there can be an benefit on dividends received ( I will leave that one as an exercise to the reader) There is also the rather more practical issue of an ISA only being 20k per year. And thus if you are being sensible in your S&S portfolio construction, you should be investing a meaningful amount in your selections (i.e investing paltry sums like 500 or 1k here and there is a rather pointless excercise). but hey, this is a P2P forum, so like the other 100% S&S peeps, I fully expect to be shot down in flames by people without the experience to even present a decent counterargument ! That's what I like - each side to come out fighting - may the best man person win. Marquis of Queensbury, please!. I personally have a mix/blend of many different investments not just S&S or P2P but hey each to their own I guess. I like to think i've got it right but sadly its sometimes feels a bit like sports you can't win them all. Well that's my experience anyway.
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