Member Info for zac0_4

Retirement - one step at a time. Please explain how my calculations are wrong (VERY WRONG) by miles and we can take it from there.

Retirement - for me it's not about not paying tax. It's about overall nett return. If you'd have put £20k into your isa 5 years ago and invested into LGEN, reinvesting dividends, your investment is today worth £24,870. You can take that tax free.

If you'd have put the same amount into a sipp 5 years ago and invested in the same way, today your investment is worth £31,087. If you're a basic rate tax payer after tax your investment is worth £26,424.

For me making use of a sipp is as critical as making use of your isa allowance.

" . . . That's why an ISA always wins . . . "

No it doesn't. If you are a basic rate taxpayer when you pay into, and withdraw from, a sipp then you're 6.25% better off than an ISA.

Even more so if you pay in as a higher rate tax payer and make withdrawals as a basic rate tax payer.

Not if you're retired and have no earned income other than pensions and investments!

It's all a bit of guesswork at present until we're presented with Labour's initial budget. However, on the basis that I believe cgt will be aligned with income tax I've been doing the following (I'm retirement age and a basic rate tax payer):

I've stopped withdrawing from one of my pension pots so saving the 20% income tax I would have normally paid

I've sold down on a number of my investments sitting outside my isa so will pay cgt at 10% on gains less allowance

The two actions above pretty much balance each other out and allow me to 'start again' with investments

I've added to my sipp to max amount, £3,600, which costs me £2,880 (I do this every year)

We all face different circumstances and who knows if the above is the best route. However, I'm comfortable with it for now as a means to hopefully reduce my exposure to possible changes in cgt without costing me too much in additional tax this year.

That didn't stop the Cameron-Clegg coalition government changing cgt rate mid-year!!

Option 2 for me.

I suspect if they do announce an increase in cgt it will be instantly. I've already started to realise capital gains on a number of my holdings held outside of my ISA. Paying 10% on gains is better than the 20% I fear is on the horizon.

I thought the share buyback programme was £200m not £3.5bn!

Tichtich - " . . . But what does that mean in practice? . . . "

It means exactly what I said! Here's some further context. Out of my portfolio of 20 holdings, at the half year point, 16 are in profit of which 12 have delivered double digit returns. 4 are showing a loss and LGEN sits at 19th out of 20.

It's firmly in the relegation zone!

. . . shows, once again (surprise, surprise!), that my dividend paying holdings continue to be a drag on my overall portfolio performance.

17% of my portfolio by value is in 6 dividend paying holdings. The other 83% is mainly in global equity funds, split 55% managed and 45% tracker funds.

At the half year the total return from the portfolio is +10.8%. Equity funds are at +12.7% whilst dividend paying holdings are at +2.6%. LGEN has delivered a total return ytd of -3.7%.

You can't argue with results!

Gwm121 - as requested here's some further info regarding funds/trusts/etfs held in my portfolio.

As stated approx 45% by value is in managed global equity funds - fundsmith equity, blue whale growth, rathbone global opps, baillie gifford long term global growth (all accumulation versions not income versions)

35% is in a combination of equity tracker funds and etfs. Some global, some sector focussed and some factor focussed. L&G International Index, L&G Global Tech, Vanguard FTSE All Cap, LGGG, IUQF (US Quality Factor) and RSGL (Russell 1000 growth factor)

17% is held in 6 dividend payings trusts / shares

As we approach the half year the year to date total returns are as follows: non-dividend element of portfolio +12.8%, dividend payers +2.7%, total ytd return from portfolio +10.9%.

My only other comment would be that, in my opinion (and that's all it is), it's a mistake to just focus on dividends. Most of my income comes from simply drawing down from capital as and when required or when I think it's appropriate.

Good luck.

Damienmoore - finally got my portfolio to a position I'm comfortable with. 45% in managed global equity funds, 35% in global equity tracker funds, 17% in dividend payers and 3% in a couple of direct US tech stocks.

For your pension if you have any holdings outside of your ISA I'd sell down the equivalent value of your ISA dividend to top up your pension then rebuy the holding inside the ISA with the dividend payment. I try not to take anything out of my ISAs whilst I hold investments outside of the tax wrapper.

Good luck!

I'm not quite sure exactly what you're expecting from the buy back? I'm expecting no impact one way or the other!!

I totally agree. As a new investor before you do anything else set up a monthly direct debit and invest in a global equity tracker fund. At the end of each year increase the value of your monthly investment by a minimum of the rate of inflation. More if you can. Never panic. Never sell. Let time do its stuff. You'll end up with a substantial pot.

Here's 3 I use. Legal & General International Index Trust Acc, Fidelity Index World Acc and Vanguard FTSE All Cap Index Acc.

I aslo use various 'factor' based funds and ETFs. Happy to share if needed.

The longer I hold dividend paying assets the more I realise that, generally speaking, their performance is poor. I'm now down to only 17% of my portfolio by value in dividend payers.

Or maybe it's something to do with the fact that the Pru share price is down -35% over the last year whilst LGEN's sp is steady at +2.5% over the same period!

" . . . Share buybacks are great for increasing the SP . . ."

Well that's news to me!

. . . and once again most of my dividend paying holdings are underperforming the market. Surprise, surprise!

Out of 6 holdings LGEN sits at number 5 with a total ytd return of -4.4%. Thankfully I'm well diversified and my total portfolio has returned +9.75% ytd.

Good old funds!!!

I agree with the comments regarding buybacks being classed as shareholder returns. A 2% dividend increase plus buyback equates, in their eyes, to a shareholder return greater than a 5% dividend increase.

To me it's all smoke and mirrors. I'm only interested in 2 numbers - dividend pa and share price appreciation/depreciation pa. So, total return on an annual basis. That's all that matters to me.

Hitman1a - " . . . Must admit i still think the buy back will push the share price back up to £2.50 eventually . . . "

Why?

It's a neutral transaction in my view. The cash disappears from the balance sheet, therefore the business value is decreased but because the same value of shares are bought and cancelled the share price remains static.

Simon1367 - " . . . If you had held for 5 years, the HL graph indeed says the SP has gone down 15.5%. However it isn't so bad as it looks as that figure excludes dividends . . . "

You are correct. With dividends reinvested you've had a total return of 24.1%. However, that's an average annual total return of c. 4.4% pa. Pretty poor in my view for the risk associated in investing in a single equity.

It's 1 of the reasons why I've been reducing my exposure to dividend paying holdings, which were about 30% of my portfolio, to under 20% now.