Member Info for Cpt.Hornblower

Thanks, I have shares in other countries, which hopefully provide diversification.

Agreed yes for the UK market, my concentration is very high in Legal and General. But I can't find any other shares in the UK market worth buying.

No I don't have any ISA.

I don't live in the UK but I have British citizenship. My logic is that dividends equivalent to the British Pension are not taxed much anyway.

Bought another 5000 shares today. As I said slowly dribbling in to create a position of 50,000 shares to hit the equivalent of the British pension.

26,000 shares now, and just over the 50% mark.

No Pat, this is fine.

Whilst market pricing of guilts (or just bonds as I know them), may have short term pricing ramifications as a result of the budget.

Those guilts/bonds will effectively be priced by UK reserve bank + a street/risk margin.

But the greatest influence will be the UK reserve bank.

With inflation where it is, and UK reserve bank interest rates where they are, there is no risk of reduction in FUTURE UK reserve bank rate reductions, its just a matter of timing in months.

This is good long term policy.

Why should workers cop tax with no increase to the employee income tax scale policies, whilst the owners of capital receive tax reduced dividends.

Thanks strickly bricks, yes theoretically a falling share price is good to acquire additional shares.

But sometimes one also has to reflect on 'what does the market know, that I don't', or what has the market factored into future earnings, or risk, that I am not aware of.

That's why I dribble in positions and not buy the total position in one purchase.

Also for legal and general share price, it can show 'weakness' running into the end of the calander year, only to start rebounding into the new calander year as market participants start focusing on the main dividend of the year payable around an ex-date of April.

And from a risk point of view:

Legal and General is essentially underwriting future pension outflows, using its balance sheet as 'guarantor'. I wonder to what extent Mr Market is reflecting this increased risk into its share market pricing??

I don't have the answers to this, I just believe that Mr Market is cogniant of this issue, and is pricing the securities with risk factored into the share price.

At current dividends, I need less than 10years to get my capital back.

Hence to me this is a calculated risk.

Hence my dribbling in positions until I hit my 50,000 shares.

Another 5000 shares purchased this morning.

21,000 shares so far (42% of the way) to buying 50,000 shares to hold the equivalent of the UK pension.

Average purchase price is 224 pence (low I am marginally underwater already:) )

If nothing else this will be a very interesting exercise for future revue.

Share price entry points seem ok, dividend % is high.

Will this position be able to maintain the UK pension equivalent, what about future capital profits and losses?

Time will tell.

I bought another 5,000 shares today in Legal and General.

That's 16,000 shares holding so far. My goal is 50,000 shares to hold the equivalent of the UK pension.

Another 34,000 shares to go.

Hi Stricklybricks,

I think that is my exact point.

Shouldn't it be price is what you pay, value is what you receive.

Quoting your comments:

"The 1999 dividend was 3.79p, a yield of 1.9%.

Scroll forward to 2024, and the anticipated total dividend is around 21.36p, a yield of 9.6%, i.e. five times greater than in 1999. "

It's not the market's fault that the subsequent 25yrs has only shown capital appreciation of the share price of 10%.

People overpaid for the shares in 1999.

If people over pay for a share, then their future returns are inhibited.

And as you state, it's the future return that counts, not the past. Why do so many people take their que from past performance, instead of focusing on the future?

I don't understand it.

Why is it 'OMG from bad to worse'????

What is bad, and what is worse?

There have been no updated market announcements that effect the fundamentals?

Why is legal and general a 'dog'? Why does it need 'CPR'?

I always thought that price is what you pay, and value is what you receive????

So in conclusion, use high paying dividend stocks like legal and general to generate a maximum income of 50,000 pounds a year.

UK tax rates up to this level is ok.

And above 50,000 pounds a year structure ones investment income separately.

That's sought of my point.

Why slog it out, pay contributions for 30yrs into the 'common pension pot', just to get a final figure of only 11,500 pounds at the end of 30yrs (and given this is a common contribution, does the UK separate out that pension pot money, or is it just consolidated revenue and future liabilities??)

Isn't it smarter to just upfront fund it, its tax free already, no need to slog out and maybe or not, get that future pension.

Strucuture UK income such that one earns a maximum of 50,000 pounds (tax rate of 20% after deducting the tax free component of 12,500) seems ok.

Then focus overseas to increase one's income, using separate legal entities, so the UK government can't grab this additional source of income.

All legal.

And avoid those crippling 40%+ tax

Sorry I am trying to understand what I am missing. This look like sound logic. Everyone only lives once, why live through life paying such a high tax rate as a middle class person

Thanks, I am from overseas (lol I guess many figure that out already). I am guessing the ISA Wrapper is a kind of retirement vehicle., but a quick google search, says that new accounts are closed, and only available to existing accounts.

I notice that the personal income tax bands for the UK kick in with tax of 20% above 12,500 pounds (roughly), which is marginally above the pension.

So I buy legal and general shares, collect my dividend equivalent 11,500 pounds, and pay no tax.

At 50,000 pounds, the tax rate sores to 40%. How can the middle class grow when they get taxed at 40% on income above 50,000 pounds??? 50,000 pounds a year is not much money.

So isn't it better to just have a smaller income in the UK, and generate the rest of your income overseas, but keep that overseas income within separate legal entities?

On this basis I have got my first 20% shares, 11,000 shares purchased.

I wan't to reflect to try my best, that this is correct logic. Another 44,000 shares to go.

Then UK central bank interest rates should fall.

Legal and general future earnings might come back (less earnings), but less impact on their future liabilities.

This looks like a reasonable tails I win, and heads I still win, given L&G capital ratios.

And if legal and general share dividends increase by 2%, and inflation is roughly 2%, then my purchasing parity is maintained..

Is this correct?

You forget the cyclical nature of the FTSE (buy and sell in May and all that). FTSE market index heavily influenced by the timing of the dividends. Dividends come in just before sell in May.

FTSE rises into May and drops off after May, yeah after yeah.

Now is not the time to exit, now is the time to start acquiring (and if you want short term profits, exist before dividend ex-dates), but not sell now!!!

British pension is 220pounds odd a week or 11,500 pounds per year.

Legal and General pays 21 pence per share.

So to receive an equivalent British Pension, I need 11,500/0.21 Legal and General Shares???

So around 55,000 Legal and General shares.

So the cost around 55,000 x 2.24 = 123,000 pounds.

No need to work for 35 years, no need to make 35 yrs of contributions.

Just buy 123,000pounds of Legal and General Shares, and get the equivalent pension.

Looks like a good deal to me.