Personal savings allowance - watch out!

If tax on dividends is a disincentive to invest then PAYE must be a disincentive to work!

It sometimes seems to me that the more money you have, the less inclined you are to pay your share.

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In my view, for what it is worth, spend your money unless there is a savings goal. Money becomes less valuable as annual prices increase.

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Life annuity payment is described as interest, as opposed to earnings.

Does that mean an annuity pension payment is not taxed as earnings, but as interest.

See here.

Life annuities are different from pension annuities. Or so I think, as all this is a mystery to me, having a local government pension. I look forward to the howls of how it’s all terribly unfair and how LGPS pensions are gold plated blah blah blah.

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LGPS is obviously a good good thing to have. But having pension pot/pots can offer greater flexibility, which is also a good thing. :grin:

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A purchased life annuity is not bought from the proceeds of a pension fund and if I remember rightly the capital element is non-taxable whereas the interest element is taxable.

An annuity purchased for a pension fund does not have this element , in the “good old days” if the client wanted to take his fund purely as pension the solution would be to buy a purchased life annuity and a compulsory purchased annuity , so a client could utilise the tax free cash element and buy an annuity that was higher than the compulsory purchased pension

And the IFA would cream commission from both

This ends my return to financial planning 1980s style

They are very different , the LGPS has the backing of the council and its taxpayers - and I suspect a measure of inflation proofing -unmatched by private employers or personal pensions . These days it is matched to average lifetime wages not final salary .

The very best pension scheme is the armed forces (after 22 years ) (I believe)

Not anymore unfortunately :confused:

It’s government backed with a 1/47th accrual of the salary earned plus inflation , it may not be as good* as it was but compared to the majority of people it is still better both from the financial security of the employer and generous accrual

  • My Dad drew his pension at 45 , having done 27 years

Just seen this topic that HH started. In 2017 I started my first investment in venture capital trusts. I was looking to get a decent net return after tax. So far I have been pleased. Although vct’s are seen as risky so far they have paid a regular income to me. The dividend income is tax free with no capital gains tax. 30% of the annual investment is offset against your income tax. The money raised by vct’s has to be invested in UK start up companies which is why the government is so generous with tax relief.
You have to hold your vct investment for 5 years to keep the tax relief.
The returns have dipped in the last year or so. There are some articles by the FT which are worth reading. In the most recent articles the FT is more cautious possibly because of the general dip in the market and difficulty in finding new promising investment start-ups.
I am not recommending investment in vct’s but suggesting that they are worth investigating for their tax free income and the ability to reduce your income tax bill by 30% of any vct investment.

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Hi @Ian2001 You are probably aware that there are now 3 MOD Pension Schemes in operation, AFPS 1975, AFPS 2005 and AFPS 2015. These schemes have been introduced over the years to ensure that MOD pension schemes follow those available to other public bodies as well as private schemes. The latest uses a Career Averaged Revalued Earnings (CARE) model to calculate pension values. There is a link below that describes the scheme as well as a little bit about earlier schemes and links to them as well.
Armed Forces Pensions

2015 Scheme

Probably one of the better schemes around. One does have to be willing to serve to gain access.

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Thanks , I did a bit of hasty research this morning . The MoD scheme benefits from financial security i. e. the employer can raise taxes to make payments and it’s very generous accrual rates

When I was giving pensions advice it was the Gold Plus standard - and not to be tampered with under any circumstances

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The prize rate for Premium Bonds is generally reasonably competitive when compared with instant savings accounts. Currently 4.65% tax free.

Actual returns will of course be higher or lower than that depending on luck.


Not only that but you can take full pension (this is 2015 seemed forces scheme) from age 60 with no actuarial reduction (like the police). The other public sector schemes require you to work to your state pension age to take full pension with no actuarial reduction

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It may be 4.65% headline, but care as when you break it down (as Martin Lewis has articulated), the generalised return for the vast majority is far lower given the weighting of the larger prizes in the calcs.

…and there’s the luck, or lack of it!

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I’m wondering whether the VCT market could get over-crowded soon, as these appear a primary mitigating tool recommended by IFAs, and the impact of the i/rate environment is going to greatly boost declarable incomes. This can happen in cycles of PE, where too much money is sloshing about, chasing too few quality targets/opportunities.

Having read a couple of the prospectuses, IMO, it’s vital that you understand what underlying investments are involved, as I’ve seen large concentrations in tech and tech services with some fruity valuations attached. In theory, while they are tagged ‘higher risk’ (obvious reasons), diversification is your friend.

Generally with my in vct’s roughly 50% of their investments are in AIM companies with the remainder in completely new start-ups.
The spectacular results of the early years of vct’s are certainly over. I was on the tail end of those results but recently results have dipped along with the share price. This does give the opportunity to buy into the vct’s portfolio at a lower cost albeit with a more uncertain future. Last year I bought more Moebus shares at the lower price which gave me a good return. In the past each vct manager would state a target return. So Octopus Titan which is perhaps the least risky vct investment aimed to give a dividend of 5%. This has held steady for the time being at least. Others like Baronsmead have dropped from a dividend of 8% to 5.5%. Also in the past, every few years you would get a bonus dividend so a few years back I received dividends of 10% from Octopus Titan and !20% from Moebus. I suspect it could be a few years, if ever, before these bonus dividends reappear. Of course because of the 5 year rule I cannot sell my vct’s at short notice which is a big downside. On the other hand with the 30% income tax refund even a 5% dividend is really a net 7.14%.

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I won £1,100 in September.

Unfortunately, my wife taxed it. :smiley:


Premium Bonds benefit, by definition, wealthy people. Most of the meaningful prizes are won by people with maximum holdings. The headline return rate is misleading for most people due to the weighting of the big prizes.

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Each bond has the same chance of winning, so the argument that large holdings are more favourable is flawed.

Nearly all forms of gambling involve a skewed payoff where the majority lose a small amount and a minority win large. As long as investors know that they are likely to lose some interest against the headline rate plus a small chance of winning large, then the headline rate is meaningful.

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