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Weekend reading: The inspiring success of a fellow UK personal finance blogger

Weekend reading

Good reads from around the Web.

A big congratulations to fellow UK personal finance blogger and sometime Monevator contributor, Retirement Investing Today.

After years of saving hard and investing wisely, RIT – as he is known to his friends and to those with carpal tunnel syndrome – has achieved his goal of financial independence.

The recent stock market rally has pushed his portfolio to the £1,014,000. According to his sums, that makes work optional for the foreseeable future.

Somewhat ironically though, the weak pound that has helped lift his assets has arrived in concert with a host of other post-Brexit imponderables that have made that “foreseeable future” rather less foreseeable.

RIT writes:

You’d think we’d be out celebrating. But in the RIT household this week (and in the run up in recent weeks) there has been calm as I’ve actually been umming and ahing about whether I can actually call myself Financial Independent.

The main reason for this is that over the years I’ve diligently planned for just about every financial situation that I can think of.

However what in hindsight I’ve actually glossed over is the risk of politicians just blatantly changing the rules.

In the past few weeks we’ve seen some of this appear via the Brexit vote, which for somebody who intends to emigrate to an EU country as soon as they FIRE has brought real risk.

One impact is that in UK pound terms, the European-based property that RIT plans to sip fancy foreign beverages in until senility comes knocking is now more expensive.

The pounds thrown off by his investment portfolio won’t stretch as far when buying that booze on the continent, either. Nor his bread, his olives, nor his live-in maid and butler.

(Okay, they’re not in his plan. But if they were…)

RIT is also having to think again about his pension and healthcare entitlements in life after Brexit.

It’s yet another reminder that everything can turn on a dime, which for me makes micro-debates about whether 2.73% or 2.74% is a safe withdrawal rate in retirement rather moot.

Still, it’s great to have such options.

Tribal uncertainties

Brexit will sort itself out in time. Being free at 43-years old, RIT has plenty of that on his side.

And that’s the really inspiring part of his journey, for the likes of you and me.

If he can do it, can we?

Like me, RIT began blogging many years ago when there were barely any UK personal finance blogs around. If I recall correctly he started blind, before discovering how others had blazed a trail to financial independence before him.

When I began Monevator in 2007 I’d read some nascent US blogs – and a few influential financial forum posters – but my own journey to financial freedom was otherwise motivated by a personal epiphany.

You probably always need such a ‘lightbulb moment’ to get started.

But once you have begun, there are nowadays all sorts of sites to help and inspire you. I feature many in the links here every week.

Indeed, the Internet is abundant with role models.

  • Will you do what a 25-year old friend of mine does, and follow a slew of fashion fanatics on Instagram, spend all your money (literally) on shoes and handbags, and then beg others for a pint so you can cry over your penurious plight?
  • Will you work your fingers off and save nearly everything that’s left after food and rent or mortgage payments, in the style of RIT and my co-blogger The Accumulator? (Their patron saint and blogger Jacob also described his methods on Monevator).
  • Will you be a bit slacker like yours truly – saving more than almost anyone you know, but still splashing out strategically on nice clothes, the odd overseas holiday, and making more effort to grow your income than to cut back on every last frothy coffee?
  • Or will you (and the correct answer is “yes, this one!”) roll-your-own plan?

Your choice – but choose carefully.

US financial advisor Tony Isola wrote this week about the downsides of similar minds flocking together on the Internet, before asking:

[What] if we are genetically predisposed to join a tribe?

The answer is: find the right one!

I know I have.

Your tribe, like mine, should consist of people of high character.

Data and evidence should take precedence over emotion. The focus should be on what the tribe can control. Things beyond the tribe’s influence are rightly ignored.

Investment friction, like taxes and high-fee products, along with global diversification, are prime examples of the former; short-term market returns, the latter.

Finally, your tribe should think in probabilities and not certainties, which are non-existent in the markets.

Unfortunately most investors end up in tribes that spend their time throwing coconuts at each other, like our ancestral primates. They worship false investment gods and create cults of personality.

Deal with it; tribes are a major influence upon the choices we make. Joining the right one to manage your investments is a decision you should not take lightly.

With his blog – and the completion of his first goal – RIT has surely inspired many people climbing towards financial independence.

Not a bad tribe to belong to.

Still crazy after all of these years

RIT tends to update his blog on Saturdays – and often after I’ve done my Weekend Reading links.

This means he actually achieved financial independence a week ago. By now he might have spent it all on fast cars and even faster women!

It’s okay, stand down – I just checked and everything’s good. Rather than withdrawing his cash to head to a casino, RIT is predictably blogging about safe withdrawal rates.

Old habits die hard.

Let’s make sure we have the right habits.

From the blogs

Making good use of the things that we find…

Passive investing

Active investing

Other articles

Product of the week: The cost of 10-year mortgages continue to fall, which like the weaker currency could take some of the sting out of Brexit. ThisIsMoney reports that the new 10-year fix from the Yorkshire Building Society charges 2.89% – not the very cheapest, but the lowest available for those with just a 25% deposit to bring to the party.

Mainstream media money

Some links are Google search results – in PC/desktop view these enable you to click through to read the piece without being a paid subscriber of that site.1

Passive investing

Active investing

  • Buffett deputy Ted Weschler makes his mark – Institutional Investor
  • This bull market is powered by your indifference – Bloomberg
  • Brexit puts UK companies in the bargain basement [Search result]FT
  • Four trends rocking the hedge fund industry – Business Insider

A word from a broker

Other stuff worth reading

  • Britain’s economy wilting fast after Brexit vote – Reuters
  • Brexit and the pound, property prices, and more [Search result]FT
  • Santander’s new 1-2-3 ‘Lite’ account pays no interest – Telegraph
  • How Pokémon Go will make you spend more [Search result]FT
  • New chancellor has to wean us off high house prices – ThisIsMoney
  • Property market hit by Brexit, warns leading agent – ThisIsMoney
  • Housel: The power of asking, “Compared to what?”Motley Fool US
  • Capitalism is reducing inequality, on a global scale – Quartz
  • Financial stress can cause physical pain – Scientific American
  • Robert Shiller: Why US land has been a poor investment – NYT
  • How exercise shapes you, far beyond the gym – NYT

Book of the week: In the late 1990s, former Wired editor Kevin Kelly wrote a soon much-mocked book called New Rules for The New Economy that basically foresaw the Internet revolution we’re living through. True the dotcom bust made Kelly look like a nelly for a few years, but many of his then-radical pronouncements are now truisms. Having got the big picture right, with The Inevitables Kelly digs into the detail to consider how everything from AI to Uber can be understood as arising from a handful of massive forces of change. (Personally, I believe this is the stuff that’s really making the world richer and more bountiful – yet also angrier and more unequal.) Extra irony points if you buy the hardcover dead-tree edition, instead of getting it on Kindle.

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  1. Note some articles can only be accessed through the search results if you’re using PC/desktop view (from mobile/tablet view they bring up the firewall/subscription page). To circumvent, switch your mobile browser to use the desktop view. On Chrome for Android: press the menu button followed by “Request Desktop Site”. []

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{ 74 comments… add one }
  • 51 John B July 25, 2016, 9:27 pm

    @gadgetmind yes pensions are hard to re-allocate. You need to over withdraw up to HRT and pump her pension up to max(her income, 3600) if you can so her later withdrawls use her allowance.

  • 52 BShnady July 25, 2016, 9:40 pm

    While I’m sure there’s someone out there somewhere who on their deathbed was heard to exclaim “if only I’d spent longer working rather than leading a life of leisure and pursuing my own interests”, I’ve yet to hear of them…

    For those of independent means who continue to clock-in because “it’s their passion”, I say, really, honestly? I’d love to know what roles these people perform! If a true passion, you’d as happily be doing it for nothing (or more likely spending money to do it), just as you do for your true interests.

    More likely they’re doing a job still because they need something from it: perhaps the money, perhaps bolstering their self regard or validating their perceived status, perhaps filling the vacuum in their imaginations even, whatever. Sounds to me more like a theoretical “independence” rather than actual!

    So, what are these roles people are so passion about and just cannot bear to stop?

  • 53 Marked July 25, 2016, 9:54 pm

    @BShnady,

    I honestly know a number of people that work for the buzz, the negotiating, etc. My boss for example is plugged in 18 hours a day, doesn’t need to work at all. Seeing a problem a big corporation has, doing the research, building the team to fix it can be a lot of fun.

    However, coming back to me *if* I was financially independent (I’m not!) I’d still work – definately. Just to keep alive. Probably 3 days a week opposed to 5, so it wouldn’t be work, more pleasure I suppose.

    My Father-in-law became FI in his early 40’s and retired at 50. He is perfectly content with his allotment, and in spring/summer is always down there – he has 3 plots! Each to their own I guess.

  • 54 The Rhino July 25, 2016, 10:21 pm

    @BS – tiny tech startup designing/building niche non-civilian electronic equipment – the exact nature of which I shall keep under the old hat.

    For stimulating the little grey cells I currently have nothing else to touch it. Even running the rhino hedge fund doesn’t quite require the same beans.

    But as I mentioned prior – variety in all things. I wouldn’t want to and don’t do it 24-7.

  • 55 Duncurin July 25, 2016, 11:49 pm

    The Seneca quote also appears in Alain de Botton’s ‘The Consolations of Philosophy’, which is well worth reading (if you haven’t already) for the other consolations it offers.

  • 56 BShnady July 26, 2016, 12:01 am

    If of independent means and therefore having no requirement for money, then why not perform these roles for nothing? Being paid means being answerable to others (the customer), and this inevitably compromises your art.

    Is not the reason payment is sought in these circumstances because it serves as a validation token from one’s peers – boosting self-regard/esteem?

    The next step up Maslow’s pyramid has self-respect trumping this desire for respect by others, allowing one’s art to take precedence, rendering payment irrelevant if not polluting even. But few people have the privileged position – or desire – to pursue that.

  • 57 John B July 26, 2016, 6:49 am

    @BShnady artists and authors have always accepted money for their work, and many of the latter think its an important transition from writer to author when their work is published, as it acknowledges the quality of their work. I don’t see why it should be different for electronic engineers.

    But society doesn’t value their endeavours that highly, so few artists/authors can make a living just doing their passion, hence the second jobs and garrets. But being FI doesn’t mean you have to RE, it means the flexibility to do what you want without financial constraints: art, charity, startups, or just pottering in the garden (my preference)

    Working for a company and giving your salary to charity gives both job satisfaction and benefit to society. Not accepting a wage is actually harmful, as it changes the expectations of the role and causes poorer treatment of others, as the intern system shows.

  • 58 The Rhino July 26, 2016, 7:46 am

    @DC de botton s religion for atheists was also a really illuminating read. Definitely a step on from the militant atheism of Dawkins et al.

  • 59 old_eyes July 26, 2016, 9:07 am

    @BShnady – There is a practical reason to charge for your work, particularly if you are in the advice game in any way. It appears sadly that many people value advice and other service work at what they pay for it. One way of not wasting your time, even if you are passionate about the project, is to make sure the people you are working for are paying the going rate. If they have skin in the game they are likely to take it seriously and not mess around.

    It is one of the reasons why many grant schemes for innovation (UK and EU) require the the recipient find part of the money. If it is free they may not strain every sinew to make the idea work (I know, strange, but people are…), if they are carrying some of the cost you get more effort.

    It seems to be some weird feature of human psychology and nothing to do with rationality.

  • 60 BShnady July 26, 2016, 9:12 am

    John B, you’re describing the normal seeking of prestige and peer recognition that shapes people’s lives. I’m describing the potential to step beyond that. Perhaps we’re on different wavelengths here so shall bow out.

  • 61 gadgetmind July 26, 2016, 9:21 am

    We pay interns (one year placement students) around £17k pa, which is more than minimum wage. We then sponsor the good ones during their final year and just today had another come back after this to start full time for us.

    I’m sure some would work for us for free (and many work on open source projects in their spare time) but we just don’t do business that way.

  • 62 The Rhino July 26, 2016, 10:08 am

    @BS I think your right in as much as a giant leap is taken when you start to seek self approval and value that far more highly than the approval of others. Others call it keeping your own scorecard, or getting intrinsically rather than extrinsically motivated. You have to be disciplined though – its not just a means of dropping standards because you’re doing the marking. If anything its the point at which you step it up a gear in that respect. Your not going to get very far if you rely on others for self-worth. Recipe for long-term unhappiness.

  • 63 JonWB July 27, 2016, 2:00 pm

    @zxspectrum48k ISAs and SIPPs are not marginal even if aiming for £5M – £10M. Right now, for 2 (working) adults and 2 children, it’s nearly £140K per tax year that can be added into tax wrapped accounts for the family (if both adults have good salaries). Compound that at 7% and you get to £5M from a standing start in 19 years.

    We are a family of 4, adults both 40 who work in London and commute from just outside M25 from a modest house, both work full time(ish), children in state primary schools, never had a nanny (we could afford one, but purposefully didn’t get one, it then forces us to work less and see the children more), never had grandparents closeby to help with childcare. No DB pension, no inheritence, no property windfall as such (we bought in 2006, have equity in the house, but haven’t had to use it to subscribe to tax wrappers).

    We tend to spend on experiences as a family. We’ve been to Bali, Cape Town, West Coast USA and Sardinia in the past year, but I put time and effort in to make it cheap/good value even though we are constrained to school holidays. We don’t acquire much stuff – nothing done on the house in 10 years, car is 10 years old, one car back door doesn’t lock properly (that is a bonus, impossible to lock the keys in the car!).

    It’s a challenge to generate the cash to fill all of the tax wrappers each year (especially as the ISAs have been bumped up a lot from the £7K threshold which is where they were for a long time). But we have managed it with good jobs in London. It will get much harder though, for those that follow. Things like student loans, much higher housing costs, loss of child benefit all make a big difference. For many there will be a lower increase in earnings as well.

    At times we’ve had to get creative, such as a strategic redundancy to release a windfall, borrowing 0% on credit cards to timeshift capital to meet end of tax year deadlines, some work on a side business during maternity leave etc.

    If we continue on this path, I fully expect to reach the £5M – £10M range in tax wrapped accounts by 50, having started 10 years ago from a very low base. We are well into 7 figures in tax wrapped accounts already. I invest actively and it’s very concentrated/specialised but unrelated to my professional work, something I stumbled across by accident.

    For the past 6 years, tax wrapped investment returns have exceeded combined post tax salaries in each year for us. Every year, I say it can’t continue, but somehow it has. Whether this is luck, judgement or skill, or a mix of all three, I do not really know (or care). Whilst it was extraordinary to hit this to begin with – less than four years from starting – the reality is it will only take a 5% return this year to beat our combined post tax salaries.

    Whether we will choose to continue living this life for another 10 years is an entirely different question. At various stages we have been at the absolute limit of what works and had to readjust in various ways (but we know this is also the reality for lots of families with young children, regardless of FIRE or not). We could, quite easily, keep our current life minus employment since we have high ISA balances as well as high SIPP balances.

    However, like others have alluded to, I’m not sure that is what we would want to do. The option to quit at any stage is great and the best insurance policy against being given s*it from an employer. Once they know you have capital and are not dependent on the salary they provide, in my experience, things change quite a lot. You can say no when others feel they can’t.

    We definitely feel the extra 10 years of age in terms of tiredness now we are 40. There will definitely be more emphasis on managing our health and wellbeing in the next 10 years. I suspect we may settle into working 3 days per week and be very particular about what work we do and when.

    This journey for FIRE (not that I knew it was called that at the time) started in 2006. It came about because I was worried about what I would do if I didn’t like working for my employer (or I was made redundant etc.). At the time I was getting married and we were planning to have children. As it turns out, I still like working (and in fact, probably more now than 10 years ago – especially now promotion is off the agenda as it just doesn’t matter, the last thing I want is more responsibilty at work).

    Whilst I had doubts that both my wife and I would be able to continue working in London and commuting with children and no grandparents to help, with good decisions on where we live and actively managing our employers, it was possible for us.

    I suspect you hear less about those with young children going for FIRE as they are possibly more time constrained than others. The bit where they inform the FIRE community about what they are up to is likely a task they never get to on their to do list.

    There are some very good wealth planners who charge by the hour (not that I have used any). There are probably more families filling up their tax wrappers each year than you might expect (so working towards FIRE, without being part of the community as such or knowing what it is). I was surprised at the conversations down the pub when our employer started a new salary sacrifice pension arrangement last year. There were more than I would have expected having high levels of SIPP contributions.

    Who knows, in time, we may just decide to switch it all to invest passively. There is certainly a lot to be said for generating market returns (whatever they are) for next to no effort, then using the time saved for something else. I’m not sure I’d ever entrust someone else to invest actively on my behalf. Possibly as a tactical play, or something active with a huge discount on net asset value. I might stretch to active investment via a partnership I was part of.

  • 64 grislybear July 27, 2016, 3:18 pm

    @ TA 666,000 at 3% withdrawl rate 20k pa. Great in theoty and devilshy nice. I read a lot of proposals like yours but I cant find anyone who has actually put it into practice for say 20 years and can provide actual figures for each year. Im not interested in the millions funds its funds like yours that interest me for my own situation. All the best for your future,

  • 65 The Investor July 27, 2016, 3:20 pm

    @JohnB — Great comment, thanks for sharing the detail (and congratulations!)

    I expect your euphemistically “good London salaries” put you outside the scope of a majority of readers, but equally into a large minority of London-based readers.

    That’s one of the downsides of a forum such as this, where so many people are discussing effectively the same thing from such varied positions of strength/weakness, responsibilities, and expectations. One persons challenging sum to find to fill tax wrappers is another person’s outlandish fantasy salary. 🙂 So people can easily talk at cross purposes.

    On the flipside, it’s also a great way for people to mix with people at different ages/stages and in different places in life/careers/financial journeys. Real-life is more segregated, at least when it comes to actually talking about money stuff in the UK I feel. (e.g. Family members might be all sorts, but tricky to discuss without alienating or envy or whatever, depending on where you and they are coming from.)

  • 66 gadgetmind July 27, 2016, 3:54 pm

    @JonWB – Sadly the ever-shrinking Life Time Allowance for pensions is likely to become a serious problem for you. I could easily hit my head on it myself in 2018 and am considering dropping my Salary Sacrifice down to give myself room to manoeuvre and using VCTs to address the nasty tax problems this will cause. If I don’t do this, then I might need to apply for individual protection and stop even employer contributions!

    The other alternative is to up sticks and move elsewhere so you can contribute under a pension system other than the UK one.

  • 67 JonWB July 27, 2016, 7:34 pm

    @TI – I am hoping @zxspectrum48k sees my comment and it motivates them to give it a go (if @zxspectrum48k wants to shoot for £5M – £10M, that is). RE: “good London salaries”, I would expect your comment to be spot on.

    @gadgetmind – I am becoming more sanguine about the Lifetime Allowance (LTA).

    I can’t see it surviving 35 years, which is when I’m forced to take the 55% hit (under the current rules). I don’t think I’ll need to draw on it (over the LTA, whatever it is set at) because of the ISA balances we have. So, bizarrely, the LTA might be a very good thing for us. I suspect it is doing the job (if rather bluntly) in terms of stopping contributions into pensions for nearly everyone else with large pensions balances, but I’m looking beyond it on a longer time horizon. If I’m right, my gut feeling is that it will be quietly dropped within 10 years of the higher rate relief going. If not, I’ll gladly cough up 55% above whatever the threshold is at the time. I’ve had close to 55% up front relief through salary sacrifice and the tax free compounding is a real benefit.

    I’d like to see some really bold initiatives from the government, rather than tinkering at the edges. We need stuff that will make a meaningful fiscal difference and not just on those that are entering the workplace. My two favourites are:

    Capital Gains Tax falls due on an annual accruals basis for residential property. Staggered catch-up. Only exemption is principal primary residence, where some deferment is allowed, those with multiple properties have to cough up or sell – their choice.

    State Pension changes to a loan on the same terms as Student Loans. Interest accrues at RPI + 3%, written off after 30 years, pensioners pay 9% over £21K of earnings. Debt is repaid in full out of your estate if you die within 30 years before you pass on inheritence, exemption for rollover on the death of the first spouse.

  • 68 zxspectrum48k July 27, 2016, 9:52 pm

    @JohnB. I admit that prior to getting married, the management of our personal finances was non-existent (no ISAs, no AVCs, no Sipps etc).

    Since 2009, however, we’ve fully utilized tax wrapped accounts. Of our £3.5mm portfolio (excluding an unencumbered primary residence), 60-65% is tax wrapped. The problem is that further pension contributions are not available or useful to us. I felt it necessary to take LTA fixed protection at £1.5mm on my larger pot. With 15 years before access is available, annual returns of 5% would now take me above the cap. Meanwhile, my wife meanwhile hasn’t worked since we had children 5 years ago. Contributions to her more limited pension pot would provide essentially 20% tax relief given her investment income. I’m marginal on adding to a pension for 20% tax relief since the gross-roll up would have to outweigh the risk that distributions might be taxed later at higher rates.

    We’re using offshore life insurance bonds to create another tax-wrapper but this product costs 40-50bp in fees. I’m fearful of adding further to it simply because I think the HMRC will eventually come after them. I also note that PF/FIRE websites never mention them which is worrying. This leaves only ISAs available to us, which at £40k (2xISA+2xJISA) is only really 1% of the current portfolio. Hence my use of the word “marginal”.

  • 69 The Rhino July 27, 2016, 9:54 pm

    ‘tax free compounding is a real benefit’ – is that mathematically sound? I’m not sure it is.. I remember discussions about this subject re: ISAs vs SIPPs, i.e. pre and post taxation and TA showed that it made no difference assuming your not getting some arbitrage on marginal tax rates..

  • 70 The Rhino July 27, 2016, 10:34 pm

    ah rereading perhaps you weren’t talking SIPPs v ISAs, rather wrapped v unwrapped?

  • 71 JonWB July 28, 2016, 8:27 am

    @The Rhino – Yes, I’m coming at it from wrapped vs unwrapped and not ISA vs SIPP. Sorry, I should have made that clear.

    @zxspectrum48k – Not much encouragement needed, it would seem, you are doing great!

    A few things that might be of interest.

    I take the LTA charge of 55% (or any tax rate on whichever part of the pension in terms of tax on the way out) and recalculate that as an annual capital tax. I just find that easier to get my head around. If I’m 40, then if forced to take the 55% tax at 75, this is identical to an annual capital tax of 1.26% on whatever contributions are going into the SIPP that year at 40 (since 1.26% compounded tax free for 35 years is 55%). That is a worst case scenario (big assumption that the LTA doesn’t go down again, of course). I can also do it factoring in the up front tax relief, which clearly reduces that further (or at various points, such as the £100K – £122K 62% marginal tax zone, actually provides a benefit even when 55% tax charge is applied coming out the other end).

    For your wife, say it is 20% relief on the way in and 55% tax on the way out (unlikely it will be above the LTA, but still, useful as an example). Over 15 years, that is an annual wealth tax of 2.02%. However, if it was over 30 years (because it isn’t touched until 70), then it is 1.00% which is much better. So, it isn’t just the difference in tax rates on the way in and way out, the big factor is how long there is until it comes out of the pension. Whether that 1% annual wealth tax (worst case scenario) would be worth paying for the tax free roll up probably depends on how you are investing, what the outlook for returns is and how much (pension change) risk you want to take on and whether in your circumstances, access to that money really isn’t needed. If it’s index investing and rebalancing, then probably not worth it, but if it is active stock picking and holding for typically 2-3 years at a time, then it probably is. I just find that this is a much more useful way of evaluating whether to contribute to a pension or just stop, than looking at say 20% up front relief, 40% tax on the way out. It’s also why I think everyone needs to consider ISAs and SIPPs in the round. I wouldn’t be locking money up in a SIPP now unless I had the large ISA balances already. Having the large ISAs mitigates the compulsory lockup periods in the SIPPs.

    I’m clearly taking a big calculated risk in allowing the LTA to drop to £1M (and potentially further), but I’ve gone into it with my eyes open. Ironically, I probably would have stopped and taken Fixed Protection if I thought most others with high balances would carry on contributing and ignore the LTA. It’s the fact that I’m confident that I’m in a minority and the LTA and Fixed Protections are an effective deterrent (if rather blunt), coupled with a 35 year window for it to be dropped in my situation (or some other change in my favour to come along that I have the option to exercise) that emboldened me. Who knows, they may change the tax from 55% to say 75% above the LTA, in which case, I’ll be a big, big loser in deciding to continue contributing. Likewise, the loss of higher rate relief, following just a few years from the precipitous drop in the LTA, is again an issue which changes the picture. Maybe I can escape that as I contribute it all through Salary Sacrifice, maybe I can’t.

    There is a product called the sunlife family SIPP supplied by AXA. It provides you with a family SIPP account, where the apportionment of gains can be applied independently of the individuals assets. So any contributions/transfers are anchored to the individual, but gains from that individuals assets in the family SIPP can miraculously appear in another individuals account within the family SIPP. To me, it sounds like a prime candidate for HMRC to come knocking in years to come with a demand for a hefty tax payment. For many (including me), I’m not sure it passes the smell test. Even so, worth a mention, but in no way a recommendation.

    There is QROPS. You can crystallise against the LTA now at 40, then it rolls up tax free as the LTA isn’t retested once it is offshore.

    It sounds like a family investment company might be useful for you. The idea behind this is you setup a ltd company, different share classes for yourself and your spouse. You then loan money to the company. Company makes investments with the loans. Broadly speaking, everything is chargeable to Corporation Tax (18%), but then you can pay a salary to your spouse, can take income from the loan to the company in your wifes name, pay dividends etc as you see fit, make direct pension contributions if your spouse is an employee. It’s use has been limited somewhat by the recent changes to dividend taxation, but even so, I like being able to separate my personal tax affairs (which is just salary) from my investment tax affairs. After the mainstream tax wrappers (and I don’t use VCTs), this is possibly the next best available option.

    I’ve not looked at offshore life insurance bonds (although I am aware of them). I suspect that the reason PF/FIRE community in general doesn’t cover offshore life insurance bonds is because you have to go a long way down the list to get to them, having filled everything else. For the masses, ISAs and pensions (and then possibly EIS, SEIS and VCTs) covers the job lot.

  • 72 MyNamesEccles July 30, 2016, 4:57 pm

    Reading all the comments above it is obvious that the range of personal circumstances, spending habits, retirement aspirations etc. is huge. Having said that, anecdotal evidence of just what amount of retirement cash is needed has some value.
    I am 72, retired so therefore have no mortgage, children commitments, etc. We live in one of the most expensive places on the planet: Hong Kong.
    We nevertheless live very modestly not counting about 3 good holidays a year and dining out a couple of times a week. We rarely buy “stuff” because of lack of interest. Our total expenditure over the last year has averaged £46,000, well within our income. With a much lower cost of living in the UK, London property excepted, our expenditure would be significantly less than £40,000 which would be a reasonable gross dividend income from £1 million. Allowing for a safety fund, etc., I would envisage having no difficulty in living off a £1m fund in my native small town Scotland……….. but we are all different.

  • 73 Anon August 15, 2016, 4:22 pm

    I am a little amused at the £1M pots that people are talking about needing.

    To give you some context, I retired 3 years ago. I had my house paid off and £280k worth of investments that yield an income of £9,800 a year. Today the same investments with minor tweaking is now worth £360k and is providing an income of £12,200. Without dipping into any capital, my wife and I have managed to raise 2 children, run a car, eat well, and take a foreign holiday without any other income. Naturally, things were tight in the early days, but we always got by. When your income is tax sheltered (thanks to the ISA) and you don’t have a mortgage (we retired to a cheap part of England), it’s amazing how little you can live on.

  • 74 gadgetmind August 15, 2016, 4:39 pm

    Fair enough, but imagine someone who’d tried the same in 2008. Their capital values would have plummeted, income would have dropped drastically as dividends were slashed, and “tight” would have turned into “too tight to mention”.

    Well done on the frugal living, but not everyone wants to be quite so frugal, and we all need a buffer to cover the bad times.

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