My thoughts very similar to yours @huskaris. I posted similar but less articulately on the hoc site, and your targeted tax idea makes a lot of sense to me. Are we missing something or is it simply that the government (and governments in general) don't want to make themselves unpopular by raising taxes?
The Bank of England should have been more aggressive with base rate rises a number of months ago. 0.25% increases don’t shock but 0.5% or 0.75% do. I am not as confident in the current Governor as in previous incumbents.
I am one of the so called "lucky ones" in that my mortgage is paid off and I have savings in the bank. But now the tories have reduced the amount you can earn on interest tax free it means the government get more of the interest paid. I have a good pension that puts me into the 40% tax bracket so after using up ISA allowance and investing in PBs then 40% of any extra interest I "earn" goes straight to Jeremy Hunt...any advice on (legal) ways to invest that doesn't attract UK tax greatly appreciated!
@Rob7Lee@golfaddick. Good tips and yes I'd say I'm currently sitting on a 70% deposit right now. I think it's well within reach, rather than spending it on cars and holidays!
I’m not an economist either, but it seems to me the strategy of raising interest rates to bring down inflation will work best if the inflation is caused by demand outstripping supply causing prices to go up.
That doesn’t look like the route cause of this inflation, which is in a large part being caused by the cost of supply going up and then being passed onto customers. This then becomes a vicious cycle in that those customers are also workers in the economy and their wage demands getting higher pushes the cost of supply up further.
High energy prices, oil prices, a weak pound and limited supply of materials and components all have an effect on the cost of supplying the product to the end user. If these costs could be brought down then that might have an effect on reducing inflation. How that is achieved though is another matter.
Spot on. Interest rates are being used as a blunt tool for supply side issues. The economic management over the past few years has been catastophic. Not even of a GCSE Business Studies level!
I am one of the so called "lucky ones" in that my mortgage is paid off and I have savings in the bank. But now the tories have reduced the amount you can earn on interest tax free it means the government get more of the interest paid. I have a good pension that puts me into the 40% tax bracket so after using up ISA allowance and investing in PBs then 40% of any extra interest I "earn" goes straight to Jeremy Hunt...any advice on (legal) ways to invest that doesn't attract UK tax greatly appreciated!
Your mortgage is paid off, you have pension income that puts you in the 40% tax bracket, you have the income to max your ISA allowance each year, and invest in PBs.
I will be in a similar position come the end of this year when I retire (although my tax bracket is 45%!) and I am more than happy to pay tax on any taxable interest I earn, although I will use my wife's 20% and 40% tax brackets for savings of course.
Not sure you'll get too much sympathy for your situation!
I am one of the so called "lucky ones" in that my mortgage is paid off and I have savings in the bank. But now the tories have reduced the amount you can earn on interest tax free it means the government get more of the interest paid. I have a good pension that puts me into the 40% tax bracket so after using up ISA allowance and investing in PBs then 40% of any extra interest I "earn" goes straight to Jeremy Hunt...any advice on (legal) ways to invest that doesn't attract UK tax greatly appreciated!
Your mortgage is paid off, you have pension income that puts you in the 40% tax bracket, you have the income to max your ISA allowance each year, and invest in PBs.
I will be in a similar position come the end of this year when I retire (although my tax bracket is 45%!) and I am more than happy to pay tax on any taxable interest I earn, although I will use my wife's 20% and 40% tax brackets for savings of course.
Not sure you'll get too much sympathy for your situation!
Rather than offering sympathy, I'm happy to offer you both congratulations.
I am one of the so called "lucky ones" in that my mortgage is paid off and I have savings in the bank. But now the tories have reduced the amount you can earn on interest tax free it means the government get more of the interest paid. I have a good pension that puts me into the 40% tax bracket so after using up ISA allowance and investing in PBs then 40% of any extra interest I "earn" goes straight to Jeremy Hunt...any advice on (legal) ways to invest that doesn't attract UK tax greatly appreciated!
Your mortgage is paid off, you have pension income that puts you in the 40% tax bracket, you have the income to max your ISA allowance each year, and invest in PBs.
I will be in a similar position come the end of this year when I retire (although my tax bracket is 45%!) and I am more than happy to pay tax on any taxable interest I earn, although I will use my wife's 20% and 40% tax brackets for savings of course.
Not sure you'll get too much sympathy for your situation!
Rather than offering sympathy, I'm happy to offer you both congratulations.
Luck, right place, right time, a bit of hard work, and having the great good fortune to only marry once!!
I am one of the so called "lucky ones" in that my mortgage is paid off and I have savings in the bank. But now the tories have reduced the amount you can earn on interest tax free it means the government get more of the interest paid. I have a good pension that puts me into the 40% tax bracket so after using up ISA allowance and investing in PBs then 40% of any extra interest I "earn" goes straight to Jeremy Hunt...any advice on (legal) ways to invest that doesn't attract UK tax greatly appreciated!
The tax on interest is better than it was (£500 tax free if a higher rate tax payer), wasn't that long ago it was just income, so all taxable if you breached the tax free allowance on all your income.
Not sure what type of pension you have, but if you are drawing it and putting yourself in the 40% band only to then save some of it, why not just not draw it if you aren't spending it? Leave in the pension to grow tax free. But then I assume you must have a final salary/defined benefit pension?
It's just standard taxation, it is what it is as they say, many would love to be in your position of having to pay higher rate tax in their retirement!
You could invest in something that attracts capital gains rather than income tax if you aren't using up that allowance. Otherwise enjoy what you have and don't worry. Or as Bob says if you have a spouse make sure you are using up all allowances, I do that now with pension contributions to try and transfer as much to her as possible for retirement rather than me having it all.
I am one of the so called "lucky ones" in that my mortgage is paid off and I have savings in the bank. But now the tories have reduced the amount you can earn on interest tax free it means the government get more of the interest paid. I have a good pension that puts me into the 40% tax bracket so after using up ISA allowance and investing in PBs then 40% of any extra interest I "earn" goes straight to Jeremy Hunt...any advice on (legal) ways to invest that doesn't attract UK tax greatly appreciated!
Investment Bonds. You can take up to 5% pa without any immediate tax liability. If you have a spouse/partner who is a basic rate taxpayers even better. Also helpful latter as they can be put in Trust or assigned to someone else.
I am one of the so called "lucky ones" in that my mortgage is paid off and I have savings in the bank. But now the tories have reduced the amount you can earn on interest tax free it means the government get more of the interest paid. I have a good pension that puts me into the 40% tax bracket so after using up ISA allowance and investing in PBs then 40% of any extra interest I "earn" goes straight to Jeremy Hunt...any advice on (legal) ways to invest that doesn't attract UK tax greatly appreciated!
Your mortgage is paid off, you have pension income that puts you in the 40% tax bracket, you have the income to max your ISA allowance each year, and invest in PBs.
I will be in a similar position come the end of this year when I retire (although my tax bracket is 45%!) and I am more than happy to pay tax on any taxable interest I earn, although I will use my wife's 20% and 40% tax brackets for savings of course.
Not sure you'll get too much sympathy for your situation!
Rather than offering sympathy, I'm happy to offer you both congratulations.
Luck, right place, right time, a bit of hard work, and having the great good fortune to only marry once!!
I am one of the so called "lucky ones" in that my mortgage is paid off and I have savings in the bank. But now the tories have reduced the amount you can earn on interest tax free it means the government get more of the interest paid. I have a good pension that puts me into the 40% tax bracket so after using up ISA allowance and investing in PBs then 40% of any extra interest I "earn" goes straight to Jeremy Hunt...any advice on (legal) ways to invest that doesn't attract UK tax greatly appreciated!
Investment Bonds. You can take up to 5% pa without any immediate tax liability. If you have a spouse/partner who is a basic rate taxpayers even better. Also helpful latter as they can be put in Trust or assigned to someone else.
Also the 5% pa is cumulative/carry over if not used.
I am one of the so called "lucky ones" in that my mortgage is paid off and I have savings in the bank. But now the tories have reduced the amount you can earn on interest tax free it means the government get more of the interest paid. I have a good pension that puts me into the 40% tax bracket so after using up ISA allowance and investing in PBs then 40% of any extra interest I "earn" goes straight to Jeremy Hunt...any advice on (legal) ways to invest that doesn't attract UK tax greatly appreciated!
Your mortgage is paid off, you have pension income that puts you in the 40% tax bracket, you have the income to max your ISA allowance each year, and invest in PBs.
I will be in a similar position come the end of this year when I retire (although my tax bracket is 45%!) and I am more than happy to pay tax on any taxable interest I earn, although I will use my wife's 20% and 40% tax brackets for savings of course.
Not sure you'll get too much sympathy for your situation!
Rather than offering sympathy, I'm happy to offer you both congratulations.
Luck, right place, right time, a bit of hard work, and having the great good fortune to only marry once!!
But thanks anyway.
Many moons ago I was in a certain nightclub in Bromley and got chatting to a lady as you do. During that conversation she told me that she drove a top of the range Merc so I suggested that she must have done very well for herself. Her response was that she "had married very well and divorced even better". She then informed me her name, Sarah. As in Sarah Cascarino. Tony Cascarino has now been married three times. I think it's fair to say that they have probably cost him a few bob.
Don't be a Tony Cascarino. Be a Bob Munro. But if you have to be a Tony Cascarino make sure you marry someone even wealthier than you are. Or, just keep it in your trousers!
It's something we are talking about at work more and more.
We basically sell a lot of products between £20 and £150 to consumers all over the world, and do about £200k a month through our direct to consumer channels. Our key customer is someone between 45 and 65, but particularly 55-65, so slightly more protected than the average due to probably paying most of their mortgage off/mortgage free.
They've crumbled since March (by around 25%), in both the US and UK and that is persisting.
When discussing yesterday at our board call, I pointed out that as well as tough macro economic conditions, we have the Fed and BoE against us, as this is literally what they're trying to do. Cut down people's spending.
An economist at JP Morgan who advised Jeremy Hunt has actually said the bank may need to trigger a recession...
"They have to create uncertainty and frailty, because it’s only when companies feel nervous about the future that they will think ‘Well, maybe I won’t put through that price rise’, or workers, when they’re a little bit less confident about their job, think ‘Oh, I won’t push my boss for that higher pay’"
Christ....
Interest rate rises are an incredibly blunt tool, and I really feel they don't have the desired impact, and nowhere near fast enough.
This surely should be done through the taxation system, the week it emerged that debt to GDP has topped 100%... Taxing people more won't impact confidence in the market as much either in my opinion, as right now I'm sitting here thinking "we are trying to create a recession" which impacts my confidence in the economy, rather than "the government is upping taxes to cool the economy, in a targeted manner."
To be clear on taxation, it would have to hurt almost everyone, this wouldn't be a "tax the rich" kind of call, it would have to impact almost everyone's ability to spend and would be regressive most likely too (in order to have desired effects). VAT for example, income tax/NI levels. I believe it can be a much more targeted approach than interest rate rises.
As it stands you can have two neighbours, one who is absolutely fucked and has to sell their house because they had a high LTV when it comes to remortgage, and another who is loving it because their mortgage is paid, and now they're richer than ever getting 5% on savings and spending it up. You can argue about whether some people have been responsible/irresponsible (a lot of it will just be down to age, someone buying their first home at a high LTV during COVID on a 2 year fix (me) is in big trouble for example) but that won't change the inflation figures. Changing income tax/CGT/corporation tax however would have that desired impact and much faster. I suppose that the issue with that is that you'd need other countries to join in otherwise you'll have some pretty big currency shocks when they start increasing their rates.
If we did this, and the Fed for example kept increasing interest rates instead, the pound would presumably lose a lot of value against the dollar which would be pretty catastrophic for an import economy, and lead to... Inflation!. Although I suppose you could use a combo of rates and tax, but much less on rates than we are currently seeing.
On top of that, supply side stimulus (despite injecting more cash into the economy) has to be something that is considered in an inflationary environment, surely?
Sorry I just realised how long I went on for there, but macro/micro economics fascinates me. It's not often I get the opportunity to spend ages at work talking macro economics either as it's almost entirely out of our control so people lose interest. That's a big mistake in a situation like this.
Just on the particular highlighted point, whilst 100% agree with what you say, it is the reverse of the last 15+ years where the borrower has been able to borrow at ridiculously low rates, which in turn has negatively effected the saver who's money hasn't kept up.
The bigger problem I have is that whilst the borrowing rate broadly follows the BOE, that never seems to get fully passed onto savers and therefore the banks margin and profit increases.
I agree that VAT is a good tool right now rather than interest rates, you could also via NS&I issue a bumper savings product to attract saving rather than spending. Those two would have far greater effect far quicker than the interest rate rises by the BoE.
I hate to hark on, but I've been saying the storm has been coming for well over 9 months, mostly in the HoC but refuse to frequent that place anymore!
Where you can it's time to batten down the hatches, housing issues unless something drastic is done are going to be like we've never seen before in 12-18 months time, renters too will be massively effected.
It's something we are talking about at work more and more.
We basically sell a lot of products between £20 and £150 to consumers all over the world, and do about £200k a month through our direct to consumer channels. Our key customer is someone between 45 and 65, but particularly 55-65, so slightly more protected than the average due to probably paying most of their mortgage off/mortgage free.
They've crumbled since March (by around 25%), in both the US and UK and that is persisting.
When discussing yesterday at our board call, I pointed out that as well as tough macro economic conditions, we have the Fed and BoE against us, as this is literally what they're trying to do. Cut down people's spending.
An economist at JP Morgan who advised Jeremy Hunt has actually said the bank may need to trigger a recession...
"They have to create uncertainty and frailty, because it’s only when companies feel nervous about the future that they will think ‘Well, maybe I won’t put through that price rise’, or workers, when they’re a little bit less confident about their job, think ‘Oh, I won’t push my boss for that higher pay’"
Christ....
Interest rate rises are an incredibly blunt tool, and I really feel they don't have the desired impact, and nowhere near fast enough.
This surely should be done through the taxation system, the week it emerged that debt to GDP has topped 100%... Taxing people more won't impact confidence in the market as much either in my opinion, as right now I'm sitting here thinking "we are trying to create a recession" which impacts my confidence in the economy, rather than "the government is upping taxes to cool the economy, in a targeted manner."
To be clear on taxation, it would have to hurt almost everyone, this wouldn't be a "tax the rich" kind of call, it would have to impact almost everyone's ability to spend and would be regressive most likely too (in order to have desired effects). VAT for example, income tax/NI levels. I believe it can be a much more targeted approach than interest rate rises.
As it stands you can have two neighbours, one who is absolutely fucked and has to sell their house because they had a high LTV when it comes to remortgage, and another who is loving it because their mortgage is paid, and now they're richer than ever getting 5% on savings and spending it up. You can argue about whether some people have been responsible/irresponsible (a lot of it will just be down to age, someone buying their first home at a high LTV during COVID on a 2 year fix (me) is in big trouble for example) but that won't change the inflation figures. Changing income tax/CGT/corporation tax however would have that desired impact and much faster. I suppose that the issue with that is that you'd need other countries to join in otherwise you'll have some pretty big currency shocks when they start increasing their rates.
If we did this, and the Fed for example kept increasing interest rates instead, the pound would presumably lose a lot of value against the dollar which would be pretty catastrophic for an import economy, and lead to... Inflation!. Although I suppose you could use a combo of rates and tax, but much less on rates than we are currently seeing.
On top of that, supply side stimulus (despite injecting more cash into the economy) has to be something that is considered in an inflationary environment, surely?
Sorry I just realised how long I went on for there, but macro/micro economics fascinates me. It's not often I get the opportunity to spend ages at work talking macro economics either as it's almost entirely out of our control so people lose interest. That's a big mistake in a situation like this.
Just on the particular highlighted point, whilst 100% agree with what you say, it is the reverse of the last 15+ years where the borrower has been able to borrow at ridiculously low rates, which in turn has negatively effected the saver who's money hasn't kept up.
The bigger problem I have is that whilst the borrowing rate broadly follows the BOE, that never seems to get fully passed onto savers and therefore the banks margin and profit increases.
I agree that VAT is a good tool right now rather than interest rates, you could also via NS&I issue a bumper savings product to attract saving rather than spending. Those two would have far greater effect far quicker than the interest rate rises by the BoE.
I hate to hark on, but I've been saying the storm has been coming for well over 9 months, mostly in the HoC but refuse to frequent that place anymore!
Where you can it's time to batten down the hatches, housing issues unless something drastic is done are going to be like we've never seen before in 12-18 months time, renters too will be massively effected.
Agreed on the NS&I - and I think I made a similar point some time ago.
On the banks' margins - I believe this is where government intervention is required. For example, if a bank has a SVR of x% then they must have a readily accessible savings product (perhaps a 90 day notice) that pays x-y% where y = maybe 1 or 1.5 - not sure what a reasonable margin should be.
It's something we are talking about at work more and more.
We basically sell a lot of products between £20 and £150 to consumers all over the world, and do about £200k a month through our direct to consumer channels. Our key customer is someone between 45 and 65, but particularly 55-65, so slightly more protected than the average due to probably paying most of their mortgage off/mortgage free.
They've crumbled since March (by around 25%), in both the US and UK and that is persisting.
When discussing yesterday at our board call, I pointed out that as well as tough macro economic conditions, we have the Fed and BoE against us, as this is literally what they're trying to do. Cut down people's spending.
An economist at JP Morgan who advised Jeremy Hunt has actually said the bank may need to trigger a recession...
"They have to create uncertainty and frailty, because it’s only when companies feel nervous about the future that they will think ‘Well, maybe I won’t put through that price rise’, or workers, when they’re a little bit less confident about their job, think ‘Oh, I won’t push my boss for that higher pay’"
Christ....
Interest rate rises are an incredibly blunt tool, and I really feel they don't have the desired impact, and nowhere near fast enough.
This surely should be done through the taxation system, the week it emerged that debt to GDP has topped 100%... Taxing people more won't impact confidence in the market as much either in my opinion, as right now I'm sitting here thinking "we are trying to create a recession" which impacts my confidence in the economy, rather than "the government is upping taxes to cool the economy, in a targeted manner."
To be clear on taxation, it would have to hurt almost everyone, this wouldn't be a "tax the rich" kind of call, it would have to impact almost everyone's ability to spend and would be regressive most likely too (in order to have desired effects). VAT for example, income tax/NI levels. I believe it can be a much more targeted approach than interest rate rises.
As it stands you can have two neighbours, one who is absolutely fucked and has to sell their house because they had a high LTV when it comes to remortgage, and another who is loving it because their mortgage is paid, and now they're richer than ever getting 5% on savings and spending it up. You can argue about whether some people have been responsible/irresponsible (a lot of it will just be down to age, someone buying their first home at a high LTV during COVID on a 2 year fix (me) is in big trouble for example) but that won't change the inflation figures. Changing income tax/CGT/corporation tax however would have that desired impact and much faster. I suppose that the issue with that is that you'd need other countries to join in otherwise you'll have some pretty big currency shocks when they start increasing their rates.
If we did this, and the Fed for example kept increasing interest rates instead, the pound would presumably lose a lot of value against the dollar which would be pretty catastrophic for an import economy, and lead to... Inflation!. Although I suppose you could use a combo of rates and tax, but much less on rates than we are currently seeing.
On top of that, supply side stimulus (despite injecting more cash into the economy) has to be something that is considered in an inflationary environment, surely?
Sorry I just realised how long I went on for there, but macro/micro economics fascinates me. It's not often I get the opportunity to spend ages at work talking macro economics either as it's almost entirely out of our control so people lose interest. That's a big mistake in a situation like this.
Just on the particular highlighted point, whilst 100% agree with what you say, it is the reverse of the last 15+ years where the borrower has been able to borrow at ridiculously low rates, which in turn has negatively effected the saver who's money hasn't kept up.
The bigger problem I have is that whilst the borrowing rate broadly follows the BOE, that never seems to get fully passed onto savers and therefore the banks margin and profit increases.
I agree that VAT is a good tool right now rather than interest rates, you could also via NS&I issue a bumper savings product to attract saving rather than spending. Those two would have far greater effect far quicker than the interest rate rises by the BoE.
I hate to hark on, but I've been saying the storm has been coming for well over 9 months, mostly in the HoC but refuse to frequent that place anymore!
Where you can it's time to batten down the hatches, housing issues unless something drastic is done are going to be like we've never seen before in 12-18 months time, renters too will be massively effected.
Agreed on the NS&I - and I think I made a similar point some time ago.
On the banks' margins - I believe this is where government intervention is required. For example, if a bank has a SVR of x% then they must have a readily accessible savings product (perhaps a 90 day notice) that pays x-y% where y = maybe 1 or 1.5 - not sure what a reasonable margin should be.
Going back many years, but when I worked at the Woolwich we looked at a 0.75-1% margin, that was when rates were much higher than now.
Nationwide's SVR (or BMR as they call it) is 6.25%, the best 2 year mortgage they do is 5.74% Savings ranges from 2.5% for pure instant access to about 4.1% for a 1 year. Longer term members can get 4.75%.
So at the very best they are 1.5% higher on their BMR to their very best savings rate. The best market 90 day is around 4.85%.
Therein lies the issue (or at least one of).
Anyone with a mortgage and savings may do well to look at what Offset options are available when it comes to remortgage time.
Re the NS&I solution, I’d imagine that one like some 20 years ago which was for 5 years, interest linked to RPI year on year rises, would be wildly popular if it launched now.
But I have a question, how do institutions fund such a bond? I wonder what happens if inflation surges way beyond expectations at launch? Does it incur heavy losses for, in this case NS&I
Just thinking out loud - the issue on the demand side of the economy isn't younger families with bigger mortgages, struggling to make ends meet. Unsecured spending on credit cards, personal loans and car finance is much more of an issue on the demand side, (even if you accept that the issue is demand rather than supply) so why can't there be a cap on existing mortgage rates (I don't know - let's say 4%) with banks having access to funds at or below that rate from the BoE for new mortgages, AND ONLY MORTGAGES. They can get it back via unsecured rates.
I'm not an economist of course (you've likely spotted that already) and the above may be somewhat naive!
The challenge is reducing food costs I think. Some of which (most?) is also linked to fuel costs.
Those are inflationary costs none of us can meaningfully avoid. Government needs to find a way of achieving this.
People will be forced to cut back on any (relative) luxuries they may have - gym memberships, cleaners, holidays, social events, upgrading phones etc to prioritise housing costs and that will in turn hurt those industries of course. But are the steps individuals will (need to) take.
As to Bank's margins - not sure that's where the real problem or solution or lies but I am inclined to arguments I've heard made that we need the market to offer more long term fixed rates 10 / 25 years etc so people have certainty for longer and less impacted by more short term fluctuations on the core & most significant debt people have. That also requires a mindset change for some borrowers who have grown used to chasing short term deals believing the next rate will be even more attractive and not worse.
The challenge is reducing food costs I think. Some of which (most?) is also linked to fuel costs.
Those are inflationary costs none of us can meaningfully avoid. Government needs to find a way of achieving this.
People will be forced to cut back on any (relative) luxuries they may have - gym memberships, cleaners, holidays, social events, upgrading phones etc to prioritise housing costs and that will in turn hurt those industries of course. But are the steps individuals will (need to) take.
As to Bank's margins - not sure that's where the real problem or solution or lies but I am inclined to arguments I've heard made that we need the market to offer more long term fixed rates 10 / 25 years etc so people have certainty for longer and less impacted by more short term fluctuations on the core & most significant debt people have. That also requires a mindset change for some borrowers who have grown used to chasing short term deals believing the next rate will be even more attractive and not worse.
Whilst 25 year fixes are rare, 10 years have been around for ages, but no one wanted them as you indicated! The argument being they weren't competitive enough. They are almost at 5% currently. The best lifetime ones are 6.85%.
I've always been a fan of longer term fixes, but have gambled to a degree as could afford to do so. I think had I ever been in a tighter position I may have gone for the security.
Moved Dec 2021 and whilst I didn't need a mortgage I took one as it was so cheap (sub 1% for 5 year fix) and I knew I'd do better on my savings/investments. 10 years were around 2% I believe then, lifetime about 4%, that seems a bargain now!
I am one of the so called "lucky ones" in that my mortgage is paid off and I have savings in the bank. But now the tories have reduced the amount you can earn on interest tax free it means the government get more of the interest paid. I have a good pension that puts me into the 40% tax bracket so after using up ISA allowance and investing in PBs then 40% of any extra interest I "earn" goes straight to Jeremy Hunt...any advice on (legal) ways to invest that doesn't attract UK tax greatly appreciated!
Your mortgage is paid off, you have pension income that puts you in the 40% tax bracket, you have the income to max your ISA allowance each year, and invest in PBs.
I will be in a similar position come the end of this year when I retire (although my tax bracket is 45%!) and I am more than happy to pay tax on any taxable interest I earn, although I will use my wife's 20% and 40% tax brackets for savings of course.
Not sure you'll get too much sympathy for your situation!
Hi - yes I agree - not much symapathy and understandable. I worked hard for it and am more annoyed that the tax, after returement, is still so high IMO and probably more annoyed with what I see as government wastage. Thank to you, @Rob7Lee and @golfaddick who mentioned Investment Bonds. Hadn't heard of those and googling it seems a possiblity - are there any recommendations??
Just reading everything in here it is so clear that one thing that is lacking in the governments globally is proper creativity and imagination to help solve the problem.
There's a lot of different levers that could be pulled in my opinion.
I am one of the so called "lucky ones" in that my mortgage is paid off and I have savings in the bank. But now the tories have reduced the amount you can earn on interest tax free it means the government get more of the interest paid. I have a good pension that puts me into the 40% tax bracket so after using up ISA allowance and investing in PBs then 40% of any extra interest I "earn" goes straight to Jeremy Hunt...any advice on (legal) ways to invest that doesn't attract UK tax greatly appreciated!
Your mortgage is paid off, you have pension income that puts you in the 40% tax bracket, you have the income to max your ISA allowance each year, and invest in PBs.
I will be in a similar position come the end of this year when I retire (although my tax bracket is 45%!) and I am more than happy to pay tax on any taxable interest I earn, although I will use my wife's 20% and 40% tax brackets for savings of course.
Not sure you'll get too much sympathy for your situation!
Hi - yes I agree - not much symapathy and understandable. I worked hard for it and am more annoyed that the tax, after returement, is still so high IMO and probably more annoyed with what I see as government wastage. Thank to you, @Rob7Lee and @golfaddick who mentioned Investment Bonds. Hadn't heard of those and googling it seems a possiblity - are there any recommendations??
Is your pension Defined benefit?
There's an easy way not to pay tax on interest though........ spend the capital or give some away! I'm not sure of your age, but if you are already retired, drawing pensions and not spending all your income you need to start spending more or drawing less (if a DC in drawdown).
Golfie is probably your man on bonds, just remember bar the 5% you are effectively deferring income tax
EDIT;
Just a thought, but if you aren't spending all your income, and assuming you have children, start giving excess income to them, that's not chargeable for IHT in the future as long as it is truly surplus income (not capital). Let's be honest there's a high probability that come the next general election Labour will likely reduce things like the IHT allowances compared to now.
PS, buy gold sovereigns, legal tender so no tax, income or CGT.
I am one of the so called "lucky ones" in that my mortgage is paid off and I have savings in the bank. But now the tories have reduced the amount you can earn on interest tax free it means the government get more of the interest paid. I have a good pension that puts me into the 40% tax bracket so after using up ISA allowance and investing in PBs then 40% of any extra interest I "earn" goes straight to Jeremy Hunt...any advice on (legal) ways to invest that doesn't attract UK tax greatly appreciated!
Investment Bonds. You can take up to 5% pa without any immediate tax liability. If you have a spouse/partner who is a basic rate taxpayers even better. Also helpful latter as they can be put in Trust or assigned to someone else.
Also the 5% pa is cumulative/carry over if not used.
yes, over a 20 year period. So effectively you can withdraw all of your original investment.
I am one of the so called "lucky ones" in that my mortgage is paid off and I have savings in the bank. But now the tories have reduced the amount you can earn on interest tax free it means the government get more of the interest paid. I have a good pension that puts me into the 40% tax bracket so after using up ISA allowance and investing in PBs then 40% of any extra interest I "earn" goes straight to Jeremy Hunt...any advice on (legal) ways to invest that doesn't attract UK tax greatly appreciated!
Your mortgage is paid off, you have pension income that puts you in the 40% tax bracket, you have the income to max your ISA allowance each year, and invest in PBs.
I will be in a similar position come the end of this year when I retire (although my tax bracket is 45%!) and I am more than happy to pay tax on any taxable interest I earn, although I will use my wife's 20% and 40% tax brackets for savings of course.
Not sure you'll get too much sympathy for your situation!
Hi - yes I agree - not much symapathy and understandable. I worked hard for it and am more annoyed that the tax, after returement, is still so high IMO and probably more annoyed with what I see as government wastage. Thank to you, @Rob7Lee and @golfaddick who mentioned Investment Bonds. Hadn't heard of those and googling it seems a possiblity - are there any recommendations??
Yes, Speak to an IFA
Investment Bonds are simply funds inside a tax wrapper - A single premium life assurance policy. Been around for years & they come in different guises, but there real secret is the funds you invest in.
The challenge is reducing food costs I think. Some of which (most?) is also linked to fuel costs.
Those are inflationary costs none of us can meaningfully avoid. Government needs to find a way of achieving this.
People will be forced to cut back on any (relative) luxuries they may have - gym memberships, cleaners, holidays, social events, upgrading phones etc to prioritise housing costs and that will in turn hurt those industries of course. But are the steps individuals will (need to) take.
As to Bank's margins - not sure that's where the real problem or solution or lies but I am inclined to arguments I've heard made that we need the market to offer more long term fixed rates 10 / 25 years etc so people have certainty for longer and less impacted by more short term fluctuations on the core & most significant debt people have. That also requires a mindset change for some borrowers who have grown used to chasing short term deals believing the next rate will be even more attractive and not worse.
Whilst 25 year fixes are rare, 10 years have been around for ages, but no one wanted them as you indicated! The argument being they weren't competitive enough. They are almost at 5% currently. The best lifetime ones are 6.85%.
I've always been a fan of longer term fixes, but have gambled to a degree as could afford to do so. I think had I ever been in a tighter position I may have gone for the security.
Moved Dec 2021 and whilst I didn't need a mortgage I took one as it was so cheap (sub 1% for 5 year fix) and I knew I'd do better on my savings/investments. 10 years were around 2% I believe then, lifetime about 4%, that seems a bargain now!
I think the suggestion is 10 year fixes are also rarer today as borrowers have favoured 2 years or even less & we perhaps need to move back to 5 years plus as the preferred / less risk option. More lenders might need to be persuaded to make those available.
The challenge is reducing food costs I think. Some of which (most?) is also linked to fuel costs.
Those are inflationary costs none of us can meaningfully avoid. Government needs to find a way of achieving this.
People will be forced to cut back on any (relative) luxuries they may have - gym memberships, cleaners, holidays, social events, upgrading phones etc to prioritise housing costs and that will in turn hurt those industries of course. But are the steps individuals will (need to) take.
As to Bank's margins - not sure that's where the real problem or solution or lies but I am inclined to arguments I've heard made that we need the market to offer more long term fixed rates 10 / 25 years etc so people have certainty for longer and less impacted by more short term fluctuations on the core & most significant debt people have. That also requires a mindset change for some borrowers who have grown used to chasing short term deals believing the next rate will be even more attractive and not worse.
Whilst 25 year fixes are rare, 10 years have been around for ages, but no one wanted them as you indicated! The argument being they weren't competitive enough. They are almost at 5% currently. The best lifetime ones are 6.85%.
I've always been a fan of longer term fixes, but have gambled to a degree as could afford to do so. I think had I ever been in a tighter position I may have gone for the security.
Moved Dec 2021 and whilst I didn't need a mortgage I took one as it was so cheap (sub 1% for 5 year fix) and I knew I'd do better on my savings/investments. 10 years were around 2% I believe then, lifetime about 4%, that seems a bargain now!
I think the suggestion is 10 year fixes are also rarer today as borrowers have favoured 2 years or even less & we perhaps need to move back to 5 years plus as the preferred / less risk option. More lenders might need to be persuaded to make those available.
Problem with a 10 year fixed rate is that 10 years is a bloody long time. I've been married twice & neither got past 9 years !
The early redemption penalties would have to be a lot lower- 5 year ones generally start at 5% and reduce down to 1% for the final year. Santander's (I think) are 5% for all 5 years.
The product guys had better put their thinking caps on.
The challenge is reducing food costs I think. Some of which (most?) is also linked to fuel costs.
Those are inflationary costs none of us can meaningfully avoid. Government needs to find a way of achieving this.
People will be forced to cut back on any (relative) luxuries they may have - gym memberships, cleaners, holidays, social events, upgrading phones etc to prioritise housing costs and that will in turn hurt those industries of course. But are the steps individuals will (need to) take.
As to Bank's margins - not sure that's where the real problem or solution or lies but I am inclined to arguments I've heard made that we need the market to offer more long term fixed rates 10 / 25 years etc so people have certainty for longer and less impacted by more short term fluctuations on the core & most significant debt people have. That also requires a mindset change for some borrowers who have grown used to chasing short term deals believing the next rate will be even more attractive and not worse.
Whilst 25 year fixes are rare, 10 years have been around for ages, but no one wanted them as you indicated! The argument being they weren't competitive enough. They are almost at 5% currently. The best lifetime ones are 6.85%.
I've always been a fan of longer term fixes, but have gambled to a degree as could afford to do so. I think had I ever been in a tighter position I may have gone for the security.
Moved Dec 2021 and whilst I didn't need a mortgage I took one as it was so cheap (sub 1% for 5 year fix) and I knew I'd do better on my savings/investments. 10 years were around 2% I believe then, lifetime about 4%, that seems a bargain now!
I think the suggestion is 10 year fixes are also rarer today as borrowers have favoured 2 years or even less & we perhaps need to move back to 5 years plus as the preferred / less risk option. More lenders might need to be persuaded to make those available.
All the mainstream lenders (and many others) do 10 years and have done for some while. Whole term/lifetime is much rarer.
They just aren't popular with the buying public as only in very rare times (and we may be in one) would it have paid to have had one.
Just had an email through regarding a Deposit-based Structured Product & has the usual £85k protection. Based on the level of the FTSE in 5 years time it pays 40% (8%pa) if the FTSE is at least level with its starting point or 35% (7%pa) if the FTSE is at least 90% of its starting point. 2nd option seems very tempting - but obviously these are taxable in line with usual savings accounts, although are ISA-able so can put £20k for tax-free returns.
So you are just 'risking' not getting additional upside if the FTSE does better than 8% per annum?
Yep.... thats about the long & short of it.
Obviously there are other implications such as tax (income tax in a Deposit based SP structure) compared to CGT if you invest in the FTSE directly and also the fixed time frames involved
Just thought it was worth pointing out to those trying to get a good return on their cash deposits.
Ps
Obviously this is not a solicitation to buy or a financial promotion advertisement.
Thanks - what is the product to learn some more?
Its called a "Structured Product" and as @Rob7Lee says its really just a bet against an Index. Generally for UK investors the Indices used are the FTSE100, S&P500 and the EuroStox50. There are 2 types of Structured products; Deposit and Investment. Deposit ones are usually Capital Protected (up to the £85k FSCS limit) and means that your initial investment is safe & returned on maturity. Investment based ones are not protected & you can lose your initial capital (usually after a certain barrier has been breached so will give you some protection (usually 40%) ). The main other difference between the 2 is that Deposit ones are taxed as income whereas Investment based ones use CGT. Over the past 15 years I've generally advised Investment based ones as my clients are mostly higher rate taxpayers & so paying 40% tax on returns wasn't worth it. Also, most clients don't use their annual CGT allowance so this was a good way of mitigating any tax that would become due.
However, with the reduction in the CGT allowance I find the Investment based SP's are now almost redundant, and with the rising interest rate Deposit based ones are having to fight with Banks for peoples' money and (as can be seen) are producing some decent returns.
So currently the one I mentioned closes on July 21st. A reading of the FTSE100 is then taken and that is the Initial Level which the returns are measured against. Option 1 will pay 40% (8%pa over the 5 year term) should the FTSE100's level on 21st July 2028 be at least 1 point higher than the Initial level (so lets say 7600 points now - it has to be 7601 in 5 years time). If that is the case you will get back your initial investment plus 40%. Option 2 will pay 35% as long as the FTSE100 is more than 90% from its Initial Level - so 7600x90%=6840. If the FTSE100 is at 6841 in 5 years time you'll get back your initial investment plus 35%.
In essence, the FTSE100 falls 10% over the next 5 years & you get a 35% gain. If it falls 11% over that time period you only get your money back.
However (2) - these are not for everyone and really only for people who annually use their ISA allowance, have "spare" money and are prepared to lock their money up for 3,4,5 or 6 years.
Oh.........and as @Rob7Lee also says - you generally have to go through an IFA to invest in one, certainly if its your first "dabble" in them.
Structured products offered to the public, are generally made up like this:
- capital goes to buy a bond, matching the tenure of the product (e.g. 3-year, 5-year) - the coupons from the bond are then used to buy a strip (succession over time) of equity index options, e.g. FTSE 100 calls
Hence, you get the 'capital protected' element from the capital return of the bond, the upside from the options.
The limit in the upside in this case will be because they are buying bull spreads - i.e selling calls further up to keep the premium cost of the calls down, hence forgoing additional upside.
With the 90% ones, they use a bit of the bond's capital to buy additional calls, that's all.
There are two main risks:
- as with any other bond product, if you need the money early, you may find it is worth considerably less than you paid for it - the bond and the options are under-written by counter-parties and you therefore potentially have counterparty credit risk. For a retail product - Golfie will know - it may be that the issuer under-writes this separately but I would check.
Comments
I will be in a similar position come the end of this year when I retire (although my tax bracket is 45%!) and I am more than happy to pay tax on any taxable interest I earn, although I will use my wife's 20% and 40% tax brackets for savings of course.
Not sure you'll get too much sympathy for your situation!
But thanks anyway.
Not sure what type of pension you have, but if you are drawing it and putting yourself in the 40% band only to then save some of it, why not just not draw it if you aren't spending it? Leave in the pension to grow tax free. But then I assume you must have a final salary/defined benefit pension?
It's just standard taxation, it is what it is as they say, many would love to be in your position of having to pay higher rate tax in their retirement!
You could invest in something that attracts capital gains rather than income tax if you aren't using up that allowance. Otherwise enjoy what you have and don't worry. Or as Bob says if you have a spouse make sure you are using up all allowances, I do that now with pension contributions to try and transfer as much to her as possible for retirement rather than me having it all.
I wanted to like and Lol that
Many moons ago I was in a certain nightclub in Bromley and got chatting to a lady as you do. During that conversation she told me that she drove a top of the range Merc so I suggested that she must have done very well for herself. Her response was that she "had married very well and divorced even better". She then informed me her name, Sarah. As in Sarah Cascarino. Tony Cascarino has now been married three times. I think it's fair to say that they have probably cost him a few bob.
Don't be a Tony Cascarino. Be a Bob Munro. But if you have to be a Tony Cascarino make sure you marry someone even wealthier than you are. Or, just keep it in your trousers!
The bigger problem I have is that whilst the borrowing rate broadly follows the BOE, that never seems to get fully passed onto savers and therefore the banks margin and profit increases.
I agree that VAT is a good tool right now rather than interest rates, you could also via NS&I issue a bumper savings product to attract saving rather than spending. Those two would have far greater effect far quicker than the interest rate rises by the BoE.
I hate to hark on, but I've been saying the storm has been coming for well over 9 months, mostly in the HoC but refuse to frequent that place anymore!
Where you can it's time to batten down the hatches, housing issues unless something drastic is done are going to be like we've never seen before in 12-18 months time, renters too will be massively effected.
On the banks' margins - I believe this is where government intervention is required. For example, if a bank has a SVR of x% then they must have a readily accessible savings product (perhaps a 90 day notice) that pays x-y% where y = maybe 1 or 1.5 - not sure what a reasonable margin should be.
Nationwide's SVR (or BMR as they call it) is 6.25%, the best 2 year mortgage they do is 5.74%
Savings ranges from 2.5% for pure instant access to about 4.1% for a 1 year. Longer term members can get 4.75%.
So at the very best they are 1.5% higher on their BMR to their very best savings rate. The best market 90 day is around 4.85%.
Therein lies the issue (or at least one of).
Anyone with a mortgage and savings may do well to look at what Offset options are available when it comes to remortgage time.
But I have a question, how do institutions fund such a bond? I wonder what happens if inflation surges way beyond expectations at launch? Does it incur heavy losses for, in this case NS&I
I'm not an economist of course (you've likely spotted that already) and the above may be somewhat naive!
Those are inflationary costs none of us can meaningfully avoid. Government needs to find a way of achieving this.
People will be forced to cut back on any (relative) luxuries they may have - gym memberships, cleaners, holidays, social events, upgrading phones etc to prioritise housing costs and that will in turn hurt those industries of course. But are the steps individuals will (need to) take.
As to Bank's margins - not sure that's where the real problem or solution or lies but I am inclined to arguments I've heard made that we need the market to offer more long term fixed rates 10 / 25 years etc so people have certainty for longer and less impacted by more short term fluctuations on the core & most significant debt people have. That also requires a mindset change for some borrowers who have grown used to chasing short term deals believing the next rate will be even more attractive and not worse.
I've always been a fan of longer term fixes, but have gambled to a degree as could afford to do so. I think had I ever been in a tighter position I may have gone for the security.
Moved Dec 2021 and whilst I didn't need a mortgage I took one as it was so cheap (sub 1% for 5 year fix) and I knew I'd do better on my savings/investments. 10 years were around 2% I believe then, lifetime about 4%, that seems a bargain now!
There's a lot of different levers that could be pulled in my opinion.
There's an easy way not to pay tax on interest though........ spend the capital or give some away! I'm not sure of your age, but if you are already retired, drawing pensions and not spending all your income you need to start spending more or drawing less (if a DC in drawdown).
Golfie is probably your man on bonds, just remember bar the 5% you are effectively deferring income tax
EDIT;
Just a thought, but if you aren't spending all your income, and assuming you have children, start giving excess income to them, that's not chargeable for IHT in the future as long as it is truly surplus income (not capital). Let's be honest there's a high probability that come the next general election Labour will likely reduce things like the IHT allowances compared to now.
PS, buy gold sovereigns, legal tender so no tax, income or CGT.
Investment Bonds are simply funds inside a tax wrapper - A single premium life assurance policy. Been around for years & they come in different guises, but there real secret is the funds you invest in.
The early redemption penalties would have to be a lot lower- 5 year ones generally start at 5% and reduce down to 1% for the final year. Santander's (I think) are 5% for all 5 years.
The product guys had better put their thinking caps on.
All the mainstream lenders (and many others) do 10 years and have done for some while. Whole term/lifetime is much rarer.
They just aren't popular with the buying public as only in very rare times (and we may be in one) would it have paid to have had one.
Structured products offered to the public, are generally made up like this:
- capital goes to buy a bond, matching the tenure of the product (e.g. 3-year, 5-year)
- the coupons from the bond are then used to buy a strip (succession over time) of equity index options, e.g. FTSE 100 calls
Hence, you get the 'capital protected' element from the capital return of the bond, the upside from the options.
The limit in the upside in this case will be because they are buying bull spreads - i.e selling calls further up to keep the premium cost of the calls down, hence forgoing additional upside.
With the 90% ones, they use a bit of the bond's capital to buy additional calls, that's all.
There are two main risks:
- as with any other bond product, if you need the money early, you may find it is worth considerably less than you paid for it
- the bond and the options are under-written by counter-parties and you therefore potentially have counterparty credit risk. For a retail product - Golfie will know - it may be that the issuer under-writes this separately but I would check.