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£200k to invest

Last post Mon, Jan 16 2012, 9:17 PM by huckster. 34 replies.
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  •  Mon, Jan 16 2012, 9:17 PM

    Re: £200k to invest

    Bit of a silly argument as OP has since not responded and may now be a little confused if they are viewing the thread.

    From what I am able to gather, it is totally legal to take out a life Insurance investment bond and for this not to be included in any means testing for care home costs. However, for this to be the case, you cannot be aware that you will incur any care home costs at the time of taking out the bond. The OP says they are looking at options to avoid such costs, but does not mention that his parents are currently aware of having any care requirements. So I cannot see any problem, BUT the OP's parents should obtain advice from a qualified independent financial advisor about any investment product, so they have full knowledge of risks/returns.

    This forum really is only suitable to give people a general idea of areas they may wish to look into. I think the argument has arisen, because following the OP's post it has been perceived that a poster has given specific advice. I am sure that this was not their intention and that they were simply highlighting a product that the OP's parents may want to consider when speaking to a qualified financial advisor about options.

    • Post Points: 35
  •  Mon, Jan 16 2012, 8:32 PM

    Re: £200k to invest

    To be fair it all makes sense SSAS GURU, we need to remember your trying to suggest an efficient financial planning strategie and how by using certain products you can assign different chunks of money that way it won't be lost to mr tax man and government.

    I think we all understand the very basics of tax avoidance is legal but tax evasion is illegal!!! So same principle with financial planning. Just because you have used a product to avoid it but it's not illegal!
    Max stream, I am sensing that you are digging corners now to find an answer to prove SSAS guru wrong and implying he' suggesting to be a dodger??

    Not sure if it's just me but I feel it
    • Post Points: 20
  •  Mon, Jan 16 2012, 6:14 PM

    Re: £200k to invest

    Why pay £150 per hour for bad advice when you can get it from you for free? However, paying £150 per hour for advice that will ensure your £200,000 is not taken by the local authority seems like good value to me.

    What you are suggesting is completely illegal and I would l have expected better from you.

    I had never forgotten about the means test issue; it’s why the life insurance bond is such a logical solution to their needs. I mentioned it in the very beginning of this thread, which I pointed out in the recent post which you chose to ignore.

    A life insurance bond DOES NOT need to be included in the means test, that's the beauty of it. It is 100% legal. Here’s a link to the Age UK website, please refer to the top of page 5 which clearly states as such.

    http://www.ageuk.org.uk/Documents/EN-GB/Factsheets/FS40_deprivation_of_assets_in_the_means_test_for_care_home_provision_fcs.pdf?dtrk=true

    Perhaps you would like to email them and tell them how dishonest they are for publishing such information; although I think they will probably dismiss your nonsense as I have.

    You may be happy to allow all of your life’s savings to be taken by the local authority and that’s your right comrade, although I believe that others would prefer it to go to their children; I don’t see that as being dishonest.

    The crux of the issue is not to have any prior written evidence, and notes on an internet forum would not count unless the individual were foolish enough to retain them in their files. The bond would be justified by a professional adviser for investment reasons and could not be challenged by the local authority unless it was purchased shortly before the means test.

    Unfortunately, there is no hard and fast rule as to the length of time that will be needed. Although, Steve’s parents are in their early sixties so I would guess that they will not be requiring residential care for some time yet. A yardstick is around 2 years, but as I have stated numerous times this depends on the local authority involved.

    Finally, is there anyone else out there who looks at this thread who can’t quite understand where this is going? I’m getting dizzy from going round and round in circles; it feels like I’m giving Maxstream some free lessons in Financial Planning. Please could you state which of us is making more sense. Cheers.

    • Post Points: 20
  •  Sun, Jan 15 2012, 4:00 PM

    Re: £200k to invest

    Bad advice is still bad advice. Paying £150 an hour wont change that.

    Consider three scenarios.

    Person A hides money under the matress and doesn't tell anyone

    Person B buys an expensive collectable item and pretends that it isn't worth much

    Person C invests in an overseas bond and pretends that it is mainly a life insurance product

    Is it not possible that each person could get away with these items not being included in a means test? However, surely, now that you have remembered about "deprivation of assets", you must say that were it to become evident that the action had been taken to follow advice given on an internet forum about how to avoid having assets included in a means test, then all three items would need to be included? Do you seriously believe that printing off your post and telling the authorities that they "can't class this as relevant property" will change things becase the person who wrote it had a diploma?

    Some assets that can be disregarded in a means test are given in section 5.1.2 on the page I linked in my last post. It is not a complete list but overseas bonds are not there and nor are the many other items that could possibly be excluded if the person concerned were willing to follow your advice and be dishonest.

    • Post Points: 20
  •  Sat, Jan 14 2012, 8:03 PM

    Re: £200k to invest

    Hi Maxstream, glad to see you're still with us.

    Regarding your quite correct comments concerning deprevation of assets, perhaps you would be so kind as to refer to an earlier post of mine in this thread, which read:

    '2. As an Investment Bond has an element of life cover (this is minimal but there to qualify as a life insurance product) the local inspector of taxes can't class this as relevant property when determining your parents assets when they are being assessed prior to moving into a residential care. A note of wraning though; this must be done WELL in advnace of them needing residential care and there must be no evidence of prior panning of the wheeze (this would be classed as a deliberate deprivaion of assets and they would include the bond anyway (so this message will self-destruct in 10 seconds......)'

    Kerching. I thank you. So, unlike you I already knew about this and had dealt with it 'head-on'. Perhaps you would be so kind as to deal with my direct questions, as you say, 'head-on' as you still have not answered either:

    1. I could not care less what qualifications you have, although I would invite you to state these to anyone thinking of taking your advice know how qualified you are to give this advice. Personally, I would rather urinate in my own eye than take any investment advive from you as I have seen through you and know that you google your information and have no experience of how to use it in context. You have attacked my integrity, honesty, capability and knowledge and I stil do not know why you have taken such a dislike to me as I have been trying to give someone information for free that would usualy cost £150 per hour.

    2. I still wait for the list of assets that would be classed as a disregarded asset when it comes to means testing for residential care.

    Over to you.

    • Post Points: 20
  •  Sat, Jan 14 2012, 11:31 AM

    Re: £200k to invest

    SSAS Guru:

    Please list all of those investments which will be treated as a disregarded asset for means testing, as per one of the 3 main criteria Steve listed as being important.

    If you were indeed knowledgeable enough to give good advice on this subject you would be aware of what is meant by "deprivation of assets". There is some information here.

    http://www.lawsociety.org.uk/productsandservices/practicenotes/giftsofassets/3182.article#5_1_3

    I would suggest that for any transaction, if it is made to try and avoid savings being means tested and, particularly, if there was correspondence similar to your posts here, Mr Guru, advising that a transaction should be made for the purpose of making the assets disregarded for means testing, it would mean that the authority concerned could use its right to assess the person on the basis that the transaction had not been made.

    I would also suggest that, were you right in stating that putting funds into an offshore bond would avoid those funds being means tested, then it would surely be possible to simply write to an authority to obtain confirmation?

    Perhaps you could address this very important and very relevant issue head-on and not try to derail the issue into a debate about who has the better qualifications. If you believe that I have no qualifications, it does not bother me in the slightest.

    • Post Points: 50
  •  Tue, Jan 10 2012, 11:01 AM

    Re: £200k to invest

    I am still a paraplanner not an adivser. yawn.

    My diploma is provided by the Chartered Insurance Institue, right here in the UK. You are avoiding listing your relevant qualifications as you don't have any I assume. The diploma is the yardstick that the FSA have included in the RDR, which comes into play next January; any adviser who does not have this qualification, or equivalent, will not be able to provide advice from 1st January 2013 so making sure that you get an adviser with this qualification will ensure they will be around next year to review the client and continue to service them, rather than just selling a product and leaving the client to their own devices. Not rocket science really and again most poeple would agree as a sound piece of advice. Most people, not you though I expect.

    And again, you have ignored a direct querstion. So I will continue to ask it until you answer, as it is a key point:

    Please list all of those investments which will be treated as a disregarded asset for means testing, as per one of the 3 main criteria Steve listed as being important. Go and google that, and I wait with baited breath for your response. Professional advisers match solutions to client needs, not the other way round.

    • Post Points: 20
  •  Tue, Jan 10 2012, 10:13 AM

    Re: £200k to invest

    SSAS Guru:

    Hi Miss Red,

    I think he only has eyes for me at the moment!

    To be frank, I would be happy not to see your posts again, Mr Guru. In your last post you asked for a list of investments that did not have income tax deducted at source on growth and you suggested that this would be a very short list. I stated that you are wrong, started a long list and I stated that investments that "grow free from income tax at source" are uncommon (apart from, obviously, in workplaces that deal extensively in specialist bonds). If you believe me to be incorrect, then I invite you to produce a list to support your claim. Perhaps you could also support your claim that, apart from comments in quotes, there is "More stuff copied from a website". Or are you just going to say that you must be right because you believe that your overseas diploma trumps my qualifications?

    The issue I raised about qualifications seems to have gone over your head, Mr Guru. I raised the issue as, in a very early post, you advised that the original poster should choose a financial adviser with a diploma. Then, with no great surprise here, you infer that you yourself are actually a financial adviser with a diploma. The issue would be the same whatever the qualification and that is that you are promoting self-interests before giving good advice.

    I have not made an issue about my qualifications, and I have no plans to do so. I prefer my posts to be judged by their content.

    • Post Points: 20
  •  Tue, Jan 10 2012, 9:11 AM

    Re: £200k to invest

    Hi Miss Red,

    Many thanks for your message, I don't think he will respond to you as you've also seen through him. Besides, I think he only has eyes for me at the moment!

    I just wanted to try and point Steve in the right direction; I hope he sees a financial adviser.

    Anyway, thanks again for chipping in.

    • Post Points: 20
  •  Tue, Jan 10 2012, 9:08 AM

    Re: £200k to invest

    I see that the original poster has not replied since, which suggests either

    1) They added the post and have viewed it without responding, perhaps confused by the differing options being put forward.

    or

    2) The post was added so that other people could come along to offer specific narrow investment advice to highlight a specialist area.

    Whatever, it does not really matter, as this is a general public forum and not the place to get any proper investment advice. It is up to the person who has the money to seek professional investment advice from someone qualified to provide it, who they can complain about to regulators/ombudsman if they had a problem.

    The only advice I would give at the moment, is that they should not be taking any risk with the money. Given their ages and circumstances described in the original post, I think they should be enjoying the money in a safe way. They don't want it all tied up, so they can't access some of it to meet any needs they might have.

    • Post Points: 35
  •  Tue, Jan 10 2012, 9:04 AM

    Re: £200k to invest

    If you find yourself in a hole it is generally a good idea to stop digging. Put down the spade and walk away Maxstream.

    More stuff copied from a website, taken out of context.

    As I have stated they should get advice, and the advisor would conduct a full fact find. I just happen to know that the ONLY investment which takes care of all aspects of his requirements is a life assurance bond; the parents tax situation would determine whch variant of the bond sould be most suitable.

    Now, you have completely ignored every direct question I have asked you. So I will put two more questions to you:

    1. What experience and qualifications do you hold?

    2. Of all of those investments that you have managed how many would be treated as a disregarded asset by the local council when means testing the parents for residential care?

    Please give 2 straight answers.

    • Post Points: 5
  •  Mon, Jan 09 2012, 11:52 PM

    Re: £200k to invest

    My unfriendly response to your posts, Mr Guru, is because, in response to a brief question about what to do with a large sum of money, your reply was that a product that you happen to work with is the "obvious choice". Without knowing enough to be anything close to certain, you made statements to suggest that this product would be tax efficient. You have incorrectly stated that the tax status of bonds is comparable to ISAs. You have ignored a very basic investment principle about spreading funds between various investments. I could go on. Your replies have been narrow-minded and unprofessional.

    A professional response might have been to firstly ask a few questions about what tax band the parents are in (as "they can live very frugally" they may not even be paying income tax), about their attitude to risk, about their age and health, about their feelings regarding the suggested loan and so on. Only after you had obtained some specific answers to some specific questions might it have been professional to state that one specific type of investment was an (not "the obvious") option and, even then, it should have been suggested as something to put in a portfolio containing other investments.

    SSAS Guru:

    So please enlighten us all as to what these other investments are; please don't forget that they must grow free from income tax at source, such as an offshore investment bond, to be worthwhile: (Ladies and gents this list will be shorter than my patience is with this clown right about now).

    I suspect that a large part of your problem is that because you work with one particular type of investment you see it as the one and only "obvious choice". Offshore bonds are a specialist investment tool that, for most people, are unsuitable.

    Investments where growth is subject to income tax at source are the exception rather than the rule. Capital gains tax is the tax more likely to be applied to capital growth. If you want a list of investments that "grow free from income tax at source" you can look at the thousands of share prices listed in any broadsheet. Antiques, coins, stamps, paintings and property can all be added to the list. There are government schemes which may wish to tax, for example, rental income at source but the capital growth of these investments will not be taxed until there is a chargeable event (like the sale of the property) and then it will usually be capital gains tax that applies.

    As for investments suitable for giving to grandchildren before they start earning, shares are one choice. Dividend income is subject to a 10% tax that cannot be reclaimed so, unless income is a priority, shares and/or funds with low dividends and high growth potential might be considered. A high street savings account will not generate capital growth but the interest can, if appropriate, be paid gross. A rental property can provide both growth and income that is not taxed at source (if appropriate). If the income falls within the nil-rate tax band, income tax need not be paid. One obvious issue with using grandchildrens' nil-rate bands is that the investment goes to the grandchildren and, as you say, "the grandchild can then make a gift back to the grandparents if so desired", but it is the grandchild who decides and any arrangement limiting the grandchild's choice in this would not be worthwhile.

    The idea that small withdrawals from capital are not subject to income tax is not that appealing when you consider that with any holding of assets some of the assets can be sold at any time and no tax will be payable unless the gains attributable to those assets (not the value of the assets themselves) is more than £10,600 in a year. With many investments, withdrawals from capital are not limited. As I previously stated, the parents could, if they wished, put the money in the bank and then withdraw and spend the whole sum without paying any income tax.

    • Post Points: 35
  •  Mon, Jan 09 2012, 11:34 PM

    Re: £200k to invest

    Hello,

    seems like I joined in the middle of a heated and fiery conversation.

    SSAS GURU I do agree with most of what you are saying.


    Maxstream i just think you have something against SSAS GURU and not really sure why you turned this into such a big problem... and just reading what you have written I can tell you don't work in the industry and what you know is taken from direct.gov websites and googled.



    Steve (original poster) only needed some suggestions! why the big fuss Max stream?

    • Post Points: 20
  •  Mon, Jan 09 2012, 2:26 PM

    Re: £200k to invest

    Oh for pity's sake.

    It's not magic, it's fact. Tax is not paid at source on offshore bonds. Tax is paid at source on onshore bonds. Can you get your head round this?

    Why can't you understand that what I'm saying is correct and you need to look at the nonsense you are spouting which contains half-truths which are being taken out of context? This is the very definition of a little knowledge being a dangerous thing.

    Bonds, no matter whether onshore or offshore, are not subject to capital Gains tax; ever. They are within the income tax field, so gains could potentially be subject to income tax not capital gains tax. This is why using other people's personal allowances, when they are not going to be using any of it themselves, works so well. Hence the grandparent and minor grandchild exercise.

    You wrote 'The idea of passing assets to grandchildren so that they can receive funds to use up their tax allowance without tax being paid is not, as you inferred, special to offshore bonds. It is available to all assets and it can be done without involving an IFA and without learning any "insurance company speak".'

    So please enlighten us all as to what these other investments are; please don't forget that they must grow free from income tax at source, such as an offshore investment bond, to be worthwhile: (Ladies and gents this list will be shorter than my patience is with this clown right about now).

    You also stated 'I've already highlighted a couple of statements that you've made as clearly incorrect. You stated that offshore bonds provide tax free income, you stated Offshore bondsd [sic] grow in a similar tax free scenario as ISAs.'

    You are wrong yet again. This is getting monotonous.

    1. Offshore bonds provide an 'income' up to 5% of the original investment each year, which is actually known as capital return allowance and this is not subject to income tax and will also be ignored for income purposes when calculating someone's personal tax allowance (people over 65 will get their person allowance reduced by £1 for every £2 they receive as income over £24,000 until it reverts to the pre 65 level).

    2. Offshore bonds, as I think we have ascertained, grow free from the 20% tax on the life fund. There can be a small amount of local withholding tax, mainly when invested in cash rather than funds, which not dissimilar to the 10% dividend tax credit that ISAs pay.

    I think that you have proved to all and sundry that you have no idea what you are talking about and just google things and have no idea how to use the information in context. I hope that people reading this can see through your vitriolic nonsense and see the value of getting advice from soneone who is qualified to provide it.

    For the record, please state your experience and qulifications to back up the statements you have made, as I have freely done already.

    • Post Points: 35
  •  Mon, Jan 09 2012, 1:50 PM

    Re: £200k to invest

    SSAS Guru:

    I've also listed the taxes that an offshore bond could be subject to, and how the majority can be legally avoided, so again what on earth is you point?

    .... as tax would have already been paid at source.

    You seem to be putting offshore bonds forward as some sort of magic way to avoid tax. When tax is paid at source on these bonds, it cannot be avoided and, if overpaid, the tax usually cannot be reclaimed. These bonds may be useful in some special cases but if, for example, the parents' income was such that they did not pay tax, your advice would be inappropriate and giving such specific advice without finding out such details is extremely unprofessional.

    The idea of passing assets to grandchildren so that they can receive funds to use up their tax allowance without tax being paid is not, as you inferred, special to offshore bonds. It is available to all assets and it can be done without involving an IFA and without learning any "insurance company speak".

    I've already highlighted a couple of statements that you've made as clearly incorrect. You stated that offshore bonds provide tax free income, you stated Offshore bondsd [sic] grow in a similar tax free scenario as ISAs.

    The original poster is likely to have lost interest in this thread some time ago but anyone landing here and looking to confirm the tax rules cannot do better than using government web sites, like the one I linked to previously. Here is one that states that most assets are liable to capital gains tax "whether they're in the UK or overseas".

    http://www.hmrc.gov.uk/cgt/intro/when-to-pay.htm

    We are not allowed to post contact details on the forum but I have no objection to the details being passed to you by moneysupermarket.com. I would suggest that you formally contact them if you are indeed considering legal action. I suspect that the idea is just more hot air.

    • Post Points: 20
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