Savings and Investments thread

Thanks to those who responded to my query on Japan 

PragueAddick said:

Thanks for the replies re my niece. I think its clear now from what @Rob7Lee has written. It is a one-off, a kind of thank you to employees so they are free shares- not a preferential share purchase scheme. So she has to expect a tax deduction, but we need to understand the mechanism because if they tax it at 45% in one go she wont have any net income tjis month!

but anyway, and as always, thanks for quick and sound advice.

Are they only taking the tax in her PAYE or are they also paying the share proceeds (I'm assuming she's selling them),

In the past when I've had similar the company say sell £10k of shares and pay that money to you and take 40/45% i.e. 4k or 4.5k in tax and then 2% NI, so she should still get the net and then if needed claim back (if she's a lower rate tax payer they may well sort it out through the months if early in the tax year).

PragueAddick said:

Hi @Rob7Lee she is also looking to me to tell her whether and when to sell. Obviously I think she should sell most, otherwise she’s way overweight in one smallish equity. When, I am less sure. I would suppose the shares dip early on as many employees cash in. Any thoughts?

Depends on the size of company and number of shares in existence, the fact they are on the NASDAQ I assume it's pretty sizeable and therefore unlikely the staff will move the dial.

FWIW almost always I sold as soon as possible, on the basis that I had a lot of eggs in one basket, job and income, the shares, possibly pension etc - therefore if something major happened to the company there's a lot to lose, especially if this makes up a large proportion of her investments - personally I'd sell the lot, especially if she intends to invest the money.

Thanks to @Rob7Lee and @golfaddick. Feedback much appreciated.

I will post the exact fund details when the Aviva site wakes up from its extended maintenance period which will "make my experience even better". 

PragueAddick said:

Hi @Rob7Lee she is also looking to me to tell her whether and when to sell. Obviously I think she should sell most, otherwise she’s way overweight in one smallish equity. When, I am less sure. I would suppose the shares dip early on as many employees cash in. Any thoughts?

Most company share and options schemes, certainly the HMRC approved ones, assume any share or option award is an inducement to employment and taxed as income.  The advantage with the approved schemes is that the tax isn't due until they're sold and the scheme will automatically withhold proceeds to cover any tax due on the sale.

Your niece could then hold on to the shares and be subject to capital gains on any further gain.

Options can be better as the Revenue considers them valueless if they are struck at, or at a small discount to, the current share price.  I.e. you have the right to buy at the price the shares are considered to be worth when awarded.  In lots of early stage private companies it's fairly easy to prove shares aren't worth much but the fact that the Revenue doesn't put a value on the 'time element' of the option - e.g. some you can hold for several years - is potentially worth a lot of money.  When you exercise the option, same rules apply as for shares.  It does rely on the company increasing in value though!

As for Thoughtworks, it's a while since I've had any dealings with them but it used to be a good company.  It really comes down to whether she can see the company growing but once she's paid her tax, my instincts are to put the money into an ISA, spread the risk and protect it from further tax.  Options would be different - if the company were growing strongly, I'd hold on as the leverage can be huge.

So after the great depression of the last couple of months my investments have today  just crept past their peak number. How are others doing ?

stockportaddick said:

Could one of you clever people answer a quite straight forward question for me? I must add that I have absolutely no idea regarding investments apart from the basics. 

If I invested 300k over four to five years, what sort of growth could I expect? Would 12k per year be achievable or is that figure way off the mark?

The money would have to go somewhere safe or very low risk as I would need the initial 300k back intact. This is not spare money that I can afford to lose.

Cheers

Others like Golfy are the professionals but yes I would thought 4% net growth per annum should be achievable 

golfaddick said:

stockportaddick said:

Could one of you clever people answer a quite straight forward question for me? I must add that I have absolutely no idea regarding investments apart from the basics. 

If I invested 300k over four to five years, what sort of growth could I expect? Would 12k per year be achievable or is that figure way off the mark?

The money would have to go somewhere safe or very low risk as I would need the initial 300k back intact. This is not spare money that I can afford to lose.

Cheers

It really depends on your attitude to risk  -  a highly speculative portfolio could give 10%+ pa or a very cautious one 4%. 

If its money you can't afford to lose then investing is not for you. No one can guarantee not to lose your initial capital, although with a 4-5 year time horizon I would say its a decent bet you'd get your money back (and some).

There are a couple of "products" that could give you some degree of certainty  - with-profit Bonds being one and deposit based Structured Products another. But both would really require the services of a Financial Advisor and would probably cost you at least £2k in fees. Clients of mine in said "products" have been getting back c5% over the past 5 years, although past performance is no guide to the future. 

Edit.  Thinking about it, the fees are likely to be much higher than that. I usually charge 3% of the investment amount, although for sizable sums then this can be negotiated down. For fellow Lifers there is a special rate, but saying that I don't think I would do a £300k investment for less than £3k with £5k being the norm. 

The thing about structured products is that the capital is only really guaranteed if you leave the money to the full term of the product (e.g. 4 or 5 years).   That's because the 'guarantee' comes from an underlying bond, which is only guaranteed to be worth the same as you pay for it when it matures.  

So, if there's any reason why you might want to access it before that, it's not a good idea, IMO, particularly with expected inflation, which is very bad for bonds.  Of course, you can chop it up and lock up some proportion and/or for shorter term periods.

golfaddick said:

WishIdStayedinthePub said:

golfaddick said:

stockportaddick said:

Could one of you clever people answer a quite straight forward question for me? I must add that I have absolutely no idea regarding investments apart from the basics. 

If I invested 300k over four to five years, what sort of growth could I expect? Would 12k per year be achievable or is that figure way off the mark?

The money would have to go somewhere safe or very low risk as I would need the initial 300k back intact. This is not spare money that I can afford to lose.

Cheers

It really depends on your attitude to risk  -  a highly speculative portfolio could give 10%+ pa or a very cautious one 4%. 

If its money you can't afford to lose then investing is not for you. No one can guarantee not to lose your initial capital, although with a 4-5 year time horizon I would say its a decent bet you'd get your money back (and some).

There are a couple of "products" that could give you some degree of certainty  - with-profit Bonds being one and deposit based Structured Products another. But both would really require the services of a Financial Advisor and would probably cost you at least £2k in fees. Clients of mine in said "products" have been getting back c5% over the past 5 years, although past performance is no guide to the future. 

Edit.  Thinking about it, the fees are likely to be much higher than that. I usually charge 3% of the investment amount, although for sizable sums then this can be negotiated down. For fellow Lifers there is a special rate, but saying that I don't think I would do a £300k investment for less than £3k with £5k being the norm. 

The thing about structured products is that the capital is only really guaranteed if you leave the money to the full term of the product (e.g. 4 or 5 years).   That's because the 'guarantee' comes from an underlying bond, which is only guaranteed to be worth the same as you pay for it when it matures.  

So, if there's any reason why you might want to access it before that, it's not a good idea, IMO, particularly with expected inflation, which is very bad for bonds.  Of course, you can chop it up and lock up some proportion and/or for shorter term periods.

Quite  - but I wasn't giving personalised advice merely stating that there are products/ investments that can have a capital guarantee. If a client came to me saying that they wanted x,y or z then I would tailor my advice accordingly. 

and I'm very much looking forward to my Structured product kicking out in June fingers crossed!

golfaddick said:

WishIdStayedinthePub said:

golfaddick said:

stockportaddick said:

Could one of you clever people answer a quite straight forward question for me? I must add that I have absolutely no idea regarding investments apart from the basics. 

If I invested 300k over four to five years, what sort of growth could I expect? Would 12k per year be achievable or is that figure way off the mark?

The money would have to go somewhere safe or very low risk as I would need the initial 300k back intact. This is not spare money that I can afford to lose.

Cheers

It really depends on your attitude to risk  -  a highly speculative portfolio could give 10%+ pa or a very cautious one 4%. 

If its money you can't afford to lose then investing is not for you. No one can guarantee not to lose your initial capital, although with a 4-5 year time horizon I would say its a decent bet you'd get your money back (and some).

There are a couple of "products" that could give you some degree of certainty  - with-profit Bonds being one and deposit based Structured Products another. But both would really require the services of a Financial Advisor and would probably cost you at least £2k in fees. Clients of mine in said "products" have been getting back c5% over the past 5 years, although past performance is no guide to the future. 

Edit.  Thinking about it, the fees are likely to be much higher than that. I usually charge 3% of the investment amount, although for sizable sums then this can be negotiated down. For fellow Lifers there is a special rate, but saying that I don't think I would do a £300k investment for less than £3k with £5k being the norm. 

The thing about structured products is that the capital is only really guaranteed if you leave the money to the full term of the product (e.g. 4 or 5 years).   That's because the 'guarantee' comes from an underlying bond, which is only guaranteed to be worth the same as you pay for it when it matures.  

So, if there's any reason why you might want to access it before that, it's not a good idea, IMO, particularly with expected inflation, which is very bad for bonds.  Of course, you can chop it up and lock up some proportion and/or for shorter term periods.

Quite  - but I wasn't giving personalised advice merely stating that there are products/ investments that can have a capital guarantee. If a client came to me saying that they wanted x,y or z then I would tailor my advice accordingly. 

The only structured product I ever invested in, which was supposed to have intial capital guaranteed, ended up losing me a lot of money. I don't know if they all are, but this one included a derivative (which effectively underwrote the guarantee). However linked within the derivative structure was Leman's. Need I say more! So beware and only invest in a structured product if you FULLY understand the mechanics and the risks YOURSELF.