If she expects to have sufficient income in the next few years she could keep the lump sum on deposit and drip feed it with tax relief into a pension over time. Has she maxed her 2019 relief?
She is currently not working so has no pension relief. She is going to go back to with part-time only, so unlikely to be earning more than 20k, allowing her to put only 5k per year into the pension.Was going to say the same has she maxed her pension relief for 2019 which is 25% of earned income.
Personally I’d wall off a little of it and invest in a few well known companies with good balance sheets and growth potential using a low cost broker like degiro
Save 50k??!Do it yourself in degiro and pay yourself the bonus 50k or more you save for your efforts!
Investing in etfs through degiro yourself for 30 years vs investing through a life insurance company, there should easily be a 50k or more diff in favour of the etfs after 30 years.Save 50k??!
How big is this lump sum that you're investing?
Hi,
My wife has a lump sum to invest and currently has a very small pension and will have no claim to state pension. She recently received redundancy and has a lump sum of ~€100k. She is not working in 2020 so cannot invest in pension or AVCs through payroll tax-free this year. Age 44.
Sorry, you posted to do many threads yesterday about how amazing ETFs are, that I missed the fact this was a specific case.Investing in etfs through degiro yourself for 30 years vs investing through a life insurance company, there should easily be a 50k or more diff in favour of the etfs after 30 years.
Investing in Etfs through Degiro is going to give you low fees so you immediately are better off than any managed life company investments.Sorry, you posted to do many threads yesterday about how amazing ETFs are, that I missed the fact this was a specific case.
Can you explain why investing in ETFs in a good idea for a low rate tax payer, as is the case here?
And nobody mentioned Life company investment, except you.
Both are the wrong answer in my opinion.
It's certainly the first time I heard that tax relieved pension pot 'wins slightly' over investment outside a pension!The figures are complex and I have not run them perfectly but I think the pension wins slightly
Thanks RedOnion, that is actually a very interesting thought. So you are saying that for an investment vehicle outside a pension, investment trusts paying dividends may be more beneficial than Etfs especially if you are in the lower tax band of 20%. Although accumulating Etfs automatically reinvest the dividends which is a benefit to the money compounding.Just remember EFT is not always the answer to every question. In the case of a low rate rate payer, dividends at 20% and CGT at 33% on sale makes a lot more sense than 41% on everything every 8 years.
Have you run the numbers in it?Can you elaborate on your understanding of how an investment trust with higher fees can compete with an accumulating etf with a TER of 0.15 for example?
There's nothing to prevent you reinvesting the net dividends and getting a benefit of compounding.Although accumulating Etfs automatically reinvest the dividends which is a benefit to the money compounding
I have not run the numbers on it. Paddy Delaney from informeddecisions has however in one of his blogs.Have you run the numbers in it?
Because an IT has a small amount of gearing. Over a long investment period it should cancel out the higher charges. It's all down to how efficiently the IT is run, the premium / discount from NAV, and how well it tracks the benchmark.
I haven't bothered checking the calculations, but it's not really relevant to the scenario.Do you disagree with the above calculations?
I wouldn't be an expert on the calculations and breaking it down exactly.I haven't bothered checking the calculations, but it's not really relevant to the scenario.
By the way, if there's a lower TER in the ETF, then the lower the CAGR, the better chance of exit tax winning out. A higher return, and the IT wins.
A large, efficient IT doesn't have a TER anywhere near 2.1%.
You still haven't done back on your assertion that a pension "wins slightly" over an ETF. Don't pick and choose which parts you want to answer if you want an intelligent discussion.
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