|
Stocks
Mar 13, 2021 21:45:53 GMT
sd2 likes this
Post by Ace on Mar 13, 2021 21:45:53 GMT
You can contribute to a SIPP until age 75. Not sure what you mean about not being able to withdraw from SIPP. I believe you can still contribute to a SIPP after withdrawing from it. I have heard this but I don't quite understand how you can, add £2880 receive £720 and then take it out? If I could do that I would do it every year. Yes, it seems crazy but appears to be true. There are a few gotchas like: - the lifetime allowance to be mindful of.
- 25% of withdrawals are tax free, but you pay income tax at your marginal rate on the rest (not an issue if you can arrange your affairs so as not to pay income tax).
- Once you withdraw you can't ever contribute more than £4k per year to a pension (not an issue if you never work again).
- Could affect ability to claim some state benefits (I've not researched this as it doesn't affect me, but recall that it was mentioned on the withdrawal paperwork).
I contributed the £2880 to a Vanguard SIPP this year and withdrew the full £3600 (along with some previous year's contributions). I've paid income tax on 75% of the withdrawal at an emergency rate, but will reclaim this via self assessment. My reasons for doing so are too complicated to go into here, but it certainly seems to work. Not advice of course. Do your own DD.
|
|
sd2
Member of DD Central
Posts: 621
Likes: 224
|
Stocks
Mar 13, 2021 22:00:11 GMT
Ace likes this
Post by sd2 on Mar 13, 2021 22:00:11 GMT
I have heard this but I don't quite understand how you can, add £2880 receive £720 and then take it out? If I could do that I would do it every year. Yes, it seems crazy but appears to be true. There are a few gotchas like: - the lifetime allowance to be mindful of.
- 25% of withdrawals are tax free, but you pay income tax at your marginal rate on the rest (not an issue if you can arrange your affairs so as not to pay income tax).
- Once you withdraw you can't ever contribute more than £4k per year to a pension (not an issue if you never work again).
- Could affect ability to claim some state benefits (I've not researched this as it doesn't affect me, but recall that it was mentioned on the withdrawal paperwork).
I contributed the £2880 to a Vanguard SIPP this year and withdrew the full £3600 (along with some previous year's contributions). I've paid income tax on 75% of the withdrawal at an emergency rate, but will reclaim this via self assessment. My reasons for doing so are too complicated to go into here, but it certainly seems to work. Not advice of course. Do your own DD.
Thanks noted and will make use of in the not to distant future!!
|
|
registerme
Member of DD Central
Posts: 6,209
Likes: 6,015
|
Post by registerme on Mar 13, 2021 23:32:04 GMT
Minor nod to the wise - tax regimes can and do change, particularly when the country runs up an enormous amount of debt.
|
|
sd2
Member of DD Central
Posts: 621
Likes: 224
|
Stocks
Mar 14, 2021 11:51:25 GMT
Post by sd2 on Mar 14, 2021 11:51:25 GMT
Minor nod to the wise - tax regimes can and do change, particularly when the country runs up an enormous amount of debt. They do but I doubt they will effect me other than capital gains tax if I decide to sell up. Annoyingly Hargreaves Lansdown site is not clear on the cost of isas. Basically 0.45% of funds and the same for shares.....Arhhh incase of the latter maximum £45. £45 is Dirt cheap insurance if I need/decide to sell up. Very naughty hiding that. I would have opened one during the crash and be up big time. Opened one in December but I will bed and isa some I own in April. Legal and general for one up 74%, chasing Smithson at 78% but with a 10.5% dividend. Very very annoying.
|
|
JamesFrance
Member of DD Central
Port Grimaud 1974
Posts: 1,317
Likes: 893
|
Stocks
Mar 14, 2021 12:23:10 GMT
Post by JamesFrance on Mar 14, 2021 12:23:10 GMT
Perhaps what wallstreet wanted to say is that if you can direct your retirement funds into a save haven that should be given priority, because if you can't and stay invested you have to rely on a good deal of luck. Good if you made made some gains out of the current somewhat unpredictable situation!
Sort of. At the time I was unaware it was people retirement we were talking about. But ultimately what I was talking about was risk, which is something people need to get a grip on throughout their entire investing lifetime.
(What follows is grossly oversimplified)
If you are on the "actually retired" side, then my message is simple. You should not be overestimating your appetite for risk. You should not be investing in risky things, your preference should always err towards the cash and cash-like end of the spectrum. Why ? Simple really, your position in life means you're ability to build back from irrecoverable losses is pretty much non-existent. Harsh but true. Preservation of capital should come first, second, third, fourth and fifth in the list of priorities !
If you are "not yet retired", then how much risk you can take on largely depends on how young you are, because the younger you are, the longer you've got to build back from an irrecoverable loss if you mess up. That said, don't forget about myriad of legal restrictions surrounding putting money into and taking money out of SIPPs... pension investments need to be treated with a different frame of mind.
Finally, my general point about "cash" vs "investible cash". Frankly people like sd2 ignore what I am saying there at their peril.
You should always have cash in the bank. Ideally this should be equivalent to one year's salary.
I don't give a toss if that cash is earning you no interest, and neither should you. That's not the point.
The point is you have cash available in a form where preservation of capital is absolute.
You can rely on it being there if you loose your job and need to spend a few months trying to get a new one.
You can rely on it being there if an emergency happens for which you need to cough up out of your own pocket because it is an event for which you don't have / can't get insurance or the insurance company is playing funny buggers.
You NEVER EVER invest that cash because doing so breaks the number one rule of "do not invest what you cannot afford to loose".
If you loose your emergency cash (or a chunk of it) then there is a serious risk of you being up the smelly creek without a paddle.
Any spare cash you accumulate above your emergency cash, that is your "investible cash". And you can invest as much of that as you are willing to consider loosing if you mess up.
The reality of the investing game is simple.
Its not about finding the "next big thing".
Its not about "the bank's not paying me interest, but this unusually friendly P2P company is promising to pay me 8% out of the goodness of their heart ... bless their cotton socks".
Its about risk. Understanding the concept, understanding how risky the various investments available to you are, and being able to keep your head screwed on about it and not fall into the usual psychological areas of greed and gluttony.
Risk FIRST. Not "how much can I make" !
Something like that anyway.... Having been retired for 25 years, I would have been very much poorer had I followed advice such as this. My investment income would also be considerably lower and at 83 years I continue to be invested rather than sitting on cash with no return. Financial advisors only waste our money and after being caught in the past I wouldn't entertain employing one ever again.
|
|
JamesFrance
Member of DD Central
Port Grimaud 1974
Posts: 1,317
Likes: 893
|
Stocks
Mar 14, 2021 12:41:30 GMT
Post by JamesFrance on Mar 14, 2021 12:41:30 GMT
Having been retired for 25 years, I would have been very much poorer had I followed advice such as this. My investment income would also be considerably lower and at 83 years I continue to be invested rather than sitting on cash with no return. Financial advisors only waste our money and after being caught in the past I wouldn't entertain employing one ever again.
Hang on a minute old bean. Don't think you're going to pull the wool over my eyes that easily.
"Retired for 25 years" you say ? "At 83 years" you say ?
83 - 25 = 58
So, you retired at 58 ?
You're not exactly the sort of person I was talking about.
I think you know that very well, but you just wanted some excuse to rant nonsense about the financial sector.
Yes, having been self employed I decided to retire at 58. Then I chose to invest mainly in equity income trusts whose dividends have mostly increased every year. Lots of other things since including a few thousand made from P2P, but not the UK variety which will show an overall loss because of COL.
|
|
|
Post by Deleted on Mar 14, 2021 13:47:27 GMT
I think there are horses for courses and IFAs can be good or bad. I've sacked one and I have one now. I was lucky and retired early but I had plans to make a lot of money on the markets, luckily they have mainly, so far, have gone well. My IFA wants me to have rainy-day cash and that I have but like James, if I had put a lot of cash into that game 11 years ago else I would not have the pile I have now.
Equally, pre lockdown I was at a 60 years old party and I was discussing life with guys I've known off and on all my adult life. The flash guy who just sold his business for a $20m and bought a Tuscan castle, the quiet guy who just designed electronics all his life and others in between. Their appetite for risk and their opportunity to partake in risk were all different and after 60 years on the planet pretty much set in stone. One guy surprised me with the phrase "do you think, that at my time of life, I should be gambling on the stock market?" it taught me a lot, my unvoiced answer was "you are only 60 so why not invest" but you cannot change the monkey you (or he) carry in your (his) head so I kept quiet.
Equally, members of my own family like winning money but hate losing it, until you can overcome those emotions you are not in control of your money, it is in control of you.
So you have to do two things, 1) work out if you really have the stomach for the risk and 2) work out if you have the ability to make money at this game. Remember, on the last day of your life, at some point, you will be broke.
|
|
keitha
Member of DD Central
2024, hopefully the year I get out of P2P
Posts: 3,875
Likes: 2,313
|
Stocks
Mar 15, 2021 10:11:53 GMT
Post by keitha on Mar 15, 2021 10:11:53 GMT
I think too many don't realise the rules can change.
How many complained bitterly when FC changed withdrawal rules that they had put money in they expected to be able to get at in a week or 10 days, not as many are now heading for in excess of 2 years. The pandemic changed things significantly, the dividends some relied on for income are reduced or stopped. interest rates are so low that people are looking to be different. someone I know has remortgaged his house at 3% to invest in the stock market. Another friend has taken his Mortgage holiday and invested the money in stocks.
I've had 2 offers to invest in businesses run by friends, in both cases I may have lost friends ( they are both indignant I won't invest ), but I won't be losing money which my reading of the books suggested I would.
|
|
|
Post by Deleted on Mar 15, 2021 10:28:31 GMT
Tell me about it, I had a relation come to me to borrow some money a month ago for his sure-fire thing, "you know how to make money, so why not invest in this?" being the core discussion. Being family it moves onto 1) Do you think I would not make a success of it? 2) Do you think the plan is wrong?
I work on a rule. If they want money I can give money. If they want an investment I cannot lend money to lose money. Goodness knows if it works.
Our local theatre, like most, is on its knees and I went to find the Chairman (strangly unblocking a loo) to ask how I could help. The theatre needs to change and develop so I gave them enough seed money to start the development. Ring fenced, it cannot be used to run the place, only develop the place. Tricky stuff, money.
|
|
|
Post by Deleted on Mar 15, 2021 12:00:14 GMT
Certainly a very risky option. I've always assumed that my house is worthless as I have to have a house. It clears my mind when looking for assets to invest. Maybe, for others, it is less important.
|
|
adrianc
Member of DD Central
Posts: 9,010
Likes: 4,821
|
Stocks
Mar 15, 2021 12:19:15 GMT
Post by adrianc on Mar 15, 2021 12:19:15 GMT
Certainly a very risky option. I've always assumed that my house is worthless as I have to have a house. It clears my mind when looking for assets to invest. Maybe, for others, it is less important. You have to have a home. It does not necessarily have to be a house you own. It does not necessarily have to be a house of the same value as your current one. But that's more a question aimed at those looking to relocate from a very high-house-price area to a lower-price one... (which was the very best financial decision we ever made.)I'd certainly agree that mortgaging your home to invest is... <shakes head sadly>
|
|
|
Post by Deleted on Mar 15, 2021 13:39:36 GMT
Certainly a very risky option. I've always assumed that my house is worthless as I have to have a house. It clears my mind when looking for assets to invest. Maybe, for others, it is less important. You have to have a home. It does not necessarily have to be a house you own. It does not necessarily have to be a house of the same value as your current one. But that's more a question aimed at those looking to relocate from a very high-house-price area to a lower-price one... (which was the very best financial decision we ever made.)I'd certainly agree that mortgaging your home to invest is... <shakes head sadly> Ah, you are confusing practicality with my emotional state but I think we agree on the core issue.
|
|
sd2
Member of DD Central
Posts: 621
Likes: 224
|
Stocks
Mar 15, 2021 19:50:37 GMT
via mobile
Post by sd2 on Mar 15, 2021 19:50:37 GMT
Certainly a very risky option. I've always assumed that my house is worthless as I have to have a house. It clears my mind when looking for assets to invest. Maybe, for others, it is less important. You have to have a home. It does not necessarily have to be a house you own. It does not necessarily have to be a house of the same value as your current one. But that's more a question aimed at those looking to relocate from a very high-house-price area to a lower-price one... (which was the very best financial decision we ever made.)I'd certainly agree that mortgaging your home to invest is... <shakes head sadly> Depends. I have taken out an equity release £30,000. Invested in investment trusts with good dividend reserves. Will pay the £717 interest every year out of the dividends. £1385 2020 dividends from trusts. All appear to be increasing there dividends this year. I doubt by a significant amount. Can't see anything wrong with that as as investment.it is in essence mortgage. Oops forgot 2.36% interest. Fee and my solicitors charges £1175
|
|
adrianc
Member of DD Central
Posts: 9,010
Likes: 4,821
|
Stocks
Mar 15, 2021 20:16:47 GMT
Post by adrianc on Mar 15, 2021 20:16:47 GMT
Is that equity release repayable with £30k, so long as the interest is taken care of? If so, then - yes - it is essentially an interest-only mortgage.
Or is it repayable with X% of the property, as well as the interest?
|
|
sd2
Member of DD Central
Posts: 621
Likes: 224
|
Stocks
Mar 15, 2021 21:47:43 GMT
Post by sd2 on Mar 15, 2021 21:47:43 GMT
Is that equity release repayable with £30k, so long as the interest is taken care of? If so, then - yes - it is essentially an interest-only mortgage. Or is it repayable with X% of the property, as well as the interest? Options Pay nothing back and I would owe £49,9?? after 21 years Pay upto 10% back each year and no extra charges. (only 1 payment a year) Early repayment fees 10% year 1, 9% year 2 etc. No early repayment fees after 10 years. Ignoring the dividends i would be hard put not to be in profit after 10 years. Specially as I am using investment trusts only. I am planning to pay the interest which is £717. Spend the remaining dividends on beer. If there is a significant share price gain at some point in time, remove some of it and buy more beer. "Or is it repayable with X% of the property , as well as the interest?" No, just the £30,000 if I pay the interest.
|
|