What would be the best option?
Discussion
Scenario:
Couple aged 45 (Mr) and 47 (Mrs) have 100k to invest. They want to invest it for 10 years; are fairly risk averse; and then want to draw an income off the lump sum after 10 years investment time.
Own their own house (no mortgage); he works P-T; she cannot work due to illness. Have one teenage son but no Uni/College fees to pay. Have no loans or debts.
What advice would any IFA or budding amateur suggest
cheers
Couple aged 45 (Mr) and 47 (Mrs) have 100k to invest. They want to invest it for 10 years; are fairly risk averse; and then want to draw an income off the lump sum after 10 years investment time.
Own their own house (no mortgage); he works P-T; she cannot work due to illness. Have one teenage son but no Uni/College fees to pay. Have no loans or debts.
What advice would any IFA or budding amateur suggest
cheers
Yep SIPP would mean that the PT guy could wipe his taxes out. Guaranteed tax free income
For example if he earns £20k if you put £20k in the SIPP you immediately get £4k paid in from the government, this is then used to reduce his taxable income.
Dump another £10k into an ISA and repeat next tax year.
With a guaranteed 20% return (of tax) in the SIPP it should be a no brainer.
As to what to do with the money in the SIPP. Bonds suck these days, so Id think about either an investment trust or an ETF of blue chip divendend payers. Something like EDIN, IUKD etc.
So if you do this it will take 3 years (plus a bit) to get rid of the money. You can go faster and pay in £50k PA in the SIPP but the tax benefits are worth putting it into a high interest on call account and zeroing out his tax bill each year.
Thats what Id do anyway
For example if he earns £20k if you put £20k in the SIPP you immediately get £4k paid in from the government, this is then used to reduce his taxable income.
Dump another £10k into an ISA and repeat next tax year.
With a guaranteed 20% return (of tax) in the SIPP it should be a no brainer.
As to what to do with the money in the SIPP. Bonds suck these days, so Id think about either an investment trust or an ETF of blue chip divendend payers. Something like EDIN, IUKD etc.
So if you do this it will take 3 years (plus a bit) to get rid of the money. You can go faster and pay in £50k PA in the SIPP but the tax benefits are worth putting it into a high interest on call account and zeroing out his tax bill each year.
Thats what Id do anyway
ringram said:
Yep SIPP would mean that the PT guy could wipe his taxes out. Guaranteed tax free income
For example if he earns £20k if you put £20k in the SIPP you immediately get £4k paid in from the government, this is then used to reduce his taxable income.
Dump another £10k into an ISA and repeat next tax year.
With a guaranteed 20% return (of tax) in the SIPP it should be a no brainer.
As to what to do with the money in the SIPP. Bonds suck these days, so Id think about either an investment trust or an ETF of blue chip divendend payers. Something like EDIN, IUKD etc.
So if you do this it will take 3 years (plus a bit) to get rid of the money. You can go faster and pay in £50k PA in the SIPP but the tax benefits are worth putting it into a high interest on call account and zeroing out his tax bill each year.
Thats what Id do anyway
The tax relief part is not that simple - you have to have paid it to get it back and we have no idea of his income level. Tax relief applies up to 100% or earnings or whatever the cap is know. You can put in what you like, just not all of it gets relief.For example if he earns £20k if you put £20k in the SIPP you immediately get £4k paid in from the government, this is then used to reduce his taxable income.
Dump another £10k into an ISA and repeat next tax year.
With a guaranteed 20% return (of tax) in the SIPP it should be a no brainer.
As to what to do with the money in the SIPP. Bonds suck these days, so Id think about either an investment trust or an ETF of blue chip divendend payers. Something like EDIN, IUKD etc.
So if you do this it will take 3 years (plus a bit) to get rid of the money. You can go faster and pay in £50k PA in the SIPP but the tax benefits are worth putting it into a high interest on call account and zeroing out his tax bill each year.
Thats what Id do anyway
AFAIK...
Chap brings home c.1k per month (he is a teacher). She has an income of c1.5k per month from a pension from her (late) first husband, after tax.
I'm not sure that they would be able to manage the SIPP on a day-to-day basis so would probably need something a bit more 'plug and play' IYKWIM....
Thanks so far
Chap brings home c.1k per month (he is a teacher). She has an income of c1.5k per month from a pension from her (late) first husband, after tax.
I'm not sure that they would be able to manage the SIPP on a day-to-day basis so would probably need something a bit more 'plug and play' IYKWIM....
Thanks so far
Toro Rosso said:
The tax relief part is not that simple - you have to have paid it to get it back and we have no idea of his income level. Tax relief applies up to 100% or earnings or whatever the cap is know. You can put in what you like, just not all of it gets relief.
Never said it was. Simply said "could". As you say all tax paid can be wiped out at his now known income level.Another option is to consider seeing what teaching pension deals there are often there are final salary or at least heavily subsidised pension contribs from the DfE. So the person should max that out first and take as much of whats offered as possible. Salary sacrifice with NI payments also heading into the SIPP is a good plan. Then they can live off the £100k they have in lieu of income and redirect his PAYE income into the SIPP.
SIPP does not need daily management. You can set it up to need zero management. They have plenty of sensible tax efficient options. Maxing out tax benefits will easily double (most likely quadruple) their return over a simple dump it in the bank approach.
The person is in an excellent position to get a 100% tax free income over the next 10 years. And retire with a much healthier total. Why throw that away due to lazyness?
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