Help required please from those of you who understand this stuff.
You may remember I declined the services of an IFA last October (I know..I know) and decided to amalgamate my small private pension funds with Aviva into an Aviva SIPP. Seemed sensible and low risk. I chose a low risk managed fund (mostly bonds not equities). All of the of the info is accessible online and my extra contributions are tax deductible (up to usual limits) so all seemed good. I logged on every week or two to see my fund had increased modestly and all was well. Who the hell needs an IFA for this stuff I thought?
Sadly since the start of this year the fund had tanked about 12% of its value. At first I thought this must be a market blip and things would recover but it seems the only way is down.
If that lost cash of mine was in a briefcase and someone I had trusted to look after had set fire to it I would be very upset.
Is this to be expected and if not, any ideas what should I do?
@grumpyaddick - without knowing the exact details of the fund it's hard to tell, but as you've probably noticed there's a war going on and shares and bonds have gone down in the main! That said 12% does seem on the high side.
Looking on AVIVA's website their mixed investment fund (less than 35% shares) is down about 6% this year
FWIW I've never viewed bond or predominantly bond funds that low risk to be honest, very much depends what bonds they invest in.
We may have done this already, but don't know your age, unless you want the monies ASAP don't worry, just keep investing and whether the fund is suitable for your needs only you know that.
Also watch what the charges, both overall and the fund itself. I seem to recall they were very competitive once you get above 500k.
@grumpyaddick - without knowing the exact details of the fund it's hard to tell, but as you've probably noticed there's a war going on and shares and bonds have gone down in the main! That said 12% does seem on the high side.
Looking on AVIVA's website their mixed investment fund (less than 35% shares) is down about 6% this year
FWIW I've never viewed bond or predominantly bond funds that low risk to be honest, very much depends what bonds they invest in.
We may have done this already, but don't know your age, unless you want the monies ASAP don't worry, just keep investing and whether the fund is suitable for your needs only you know that.
Also watch what the charges, both overall and the fund itself. I seem to recall they were very competitive once you get above 500k.
I knew there was a war going on but I didn't know I was funding it.
Seriously though, thanks for that. You make it sound slightly par for the course which puts my mind at rest.
What are the thoughts on Japanese funds. Both my pension and ISAs are very underweight in Japan (in fact virtually nil). From the 80's to about 10 years ago they were abysmal but I notice the last 10 years the Nikkie has almost doubled and been as good as S&P and outperformed Europe and UK. Having said that the index is still below what it was in 1980's. I still have £10k of my shares ISA to invest this year. What are the thoughts on Japan?
Time to invest in my Fidelity ISA, any thoughts on what are good fund areas at the moment, or should I just sit it in cash for the time being. For context, this is pension related, although still working and will double the investment from 20k to 40k. I invested in a wide ranges of fund last year, not followed them till now, looks like most were doing okay until obviously starting to bomb this year, annualised return is 1.86% but I guess that will keep falling.
She works for a company called ThoughtWorks, and happily she is included in a scheme where the company, having successfully floated on the NASDAQ, is rewarding employees with free shares.
However I’m surprised to learn that the company believes – and I’m sure they didn’t just make this up – that these shares, on vesting, are treated as taxable income for the employee. I’m quite surprised by that, it doesn’t seem fair; and I certainly don’t remember this happened to me in a similar situation, albeit in the 80s, when my ad agency was bought by Omnicom. Obviously I understand that when she comes to sell some of the shares she is liable for CGT, but income tax too? That seems a bit much.
They plan to deduct this tax through payroll too, and at the top tax rate even though she doesnt earn that much, but she thinks they will somehow deal with that. But she will still seem to face a big tax deduction for income which is not actually income. Is this the normal and correct way such an event is treated?
What are the thoughts on Japanese funds. Both my pension and ISAs are very underweight in Japan (in fact virtually nil). From the 80's to about 10 years ago they were abysmal but I notice the last 10 years the Nikkie has almost doubled and been as good as S&P and outperformed Europe and UK. Having said that the index is still below what it was in 1980's. I still have £10k of my shares ISA to invest this year. What are the thoughts on Japan?
I have one Japanese ETF that overall has been a good performer. I took some profit out about last September which was a good move since it's slowly dropped since then and is now about 15% down from that peak but still well up on when I bought.
I think it's a good alternative to my US and UK dominated portfolio and whereby most makets tend to follow each other to an extent, it is a little different and doesn't seem quite as volatile. If something major ever occurred in China, however, who knows what might happen.
Personally, and I'm no expert, I'd say give it a go and I think the timing could be good for a long-term investment; who know's what'll happen anywhere in the short term?
She works for a company called ThoughtWorks, and happily she is included in a scheme where the company, having successfully floated on the NASDAQ, is rewarding employees with free shares.
However I’m surprised to learn that the company believes – and I’m sure they didn’t just make this up – that these shares, on vesting, are treated as taxable income for the employee. I’m quite surprised by that, it doesn’t seem fair; and I certainly don’t remember this happened to me in a similar situation, albeit in the 80s, when my ad agency was bought by Omnicom. Obviously I understand that when she comes to sell some of the shares she is liable for CGT, but income tax too? That seems a bit much.
They plan to deduct this tax through payroll too, and at the top tax rate even though she doesnt earn that much, but she thinks they will somehow deal with that. But she will still seem to face a big tax deduction for income which is not actually income. Is this the normal and correct way such an event is treated?
Completely normal, If you simply receive shares as part of your employment for free then yes they are subject to NI and Income tax. If you didn't every exec would get tax free income by simply taking most of their 'package' as shares.
If it's part of a share incentive plan then no, not usually taxable, but quiet tight limits on that from memory, think it's £3,600 per annum free, other limits for matching or partnership shares.
Don't look a gift horse in the mouth, as a lower rate taxpayer she's still getting circa 80% of the value for free!
She works for a company called ThoughtWorks, and happily she is included in a scheme where the company, having successfully floated on the NASDAQ, is rewarding employees with free shares.
However I’m surprised to learn that the company believes – and I’m sure they didn’t just make this up – that these shares, on vesting, are treated as taxable income for the employee. I’m quite surprised by that, it doesn’t seem fair; and I certainly don’t remember this happened to me in a similar situation, albeit in the 80s, when my ad agency was bought by Omnicom. Obviously I understand that when she comes to sell some of the shares she is liable for CGT, but income tax too? That seems a bit much.
They plan to deduct this tax through payroll too, and at the top tax rate even though she doesnt earn that much, but she thinks they will somehow deal with that. But she will still seem to face a big tax deduction for income which is not actually income. Is this the normal and correct way such an event is treated?
Where does she live/get paid? Certainly here in the US any benefit is taxable as it’s most definitely income. Our company scheme always had an option where they would sell some of your shares to pay the tax bill.
But that’s the US. Different rules applied for folks in other countries. She appears to be describing the US rules, her local rules may be different.
She works for a company called ThoughtWorks, and happily she is included in a scheme where the company, having successfully floated on the NASDAQ, is rewarding employees with free shares.
However I’m surprised to learn that the company believes – and I’m sure they didn’t just make this up – that these shares, on vesting, are treated as taxable income for the employee. I’m quite surprised by that, it doesn’t seem fair; and I certainly don’t remember this happened to me in a similar situation, albeit in the 80s, when my ad agency was bought by Omnicom. Obviously I understand that when she comes to sell some of the shares she is liable for CGT, but income tax too? That seems a bit much.
They plan to deduct this tax through payroll too, and at the top tax rate even though she doesnt earn that much, but she thinks they will somehow deal with that. But she will still seem to face a big tax deduction for income which is not actually income. Is this the normal and correct way such an event is treated?
Could the "free" shares be part of her employment package or a bonus. I know a few clients who are "given" shares (or share options) as part of their contract. If so I would expect they would be taxed as income.
Also, I was part of my employers "share award" scheme with the expectation that when the Company was sold then we would get a pay out. The Company said that any tax implications would be for us as individuals to get advice on.
Help required please from those of you who understand this stuff.
You may remember I declined the services of an IFA last October (I know..I know) and decided to amalgamate my small private pension funds with Aviva into an Aviva SIPP. Seemed sensible and low risk. I chose a low risk managed fund (mostly bonds not equities). All of the of the info is accessible online and my extra contributions are tax deductible (up to usual limits) so all seemed good. I logged on every week or two to see my fund had increased modestly and all was well. Who the hell needs an IFA for this stuff I thought?
Sadly since the start of this year the fund had tanked about 12% of its value. At first I thought this must be a market blip and things would recover but it seems the only way is down.
If that lost cash of mine was in a briefcase and someone I had trusted to look after had set fire to it I would be very upset.
Is this to be expected and if not, any ideas what should I do?
Many thanks
Can't help some people can we. Wouldn't touch Aviva funds with a barge pole so can't comment on the merits (or not) of your particular fund. However, Bonds have fallen along with equities since November & most client portfolios are down 8%-10%, although have picked up this week with the FTSE rising around 3.5% and the US and Europe over 4%.
I've been looking at some alternatives to Bonds atm as they are losing money instead of being the 'safe' part of a portfolio. I hate to say it but even holding Cash might be a better bet.
Time to invest in my Fidelity ISA, any thoughts on what are good fund areas at the moment, or should I just sit it in cash for the time being. For context, this is pension related, although still working and will double the investment from 20k to 40k. I invested in a wide ranges of fund last year, not followed them till now, looks like most were doing okay until obviously starting to bomb this year, annualised return is 1.86% but I guess that will keep falling.
As per my above post you should have invested a week or 2 ago as markets have gained close to 5% this week. As long as you are in for the next 5+ years then now is better than 6 months ago to be investing. No point missing out on your ISA allowance - as long as you intend to use it every year that is.
What are the thoughts on Japanese funds. Both my pension and ISAs are very underweight in Japan (in fact virtually nil). From the 80's to about 10 years ago they were abysmal but I notice the last 10 years the Nikkie has almost doubled and been as good as S&P and outperformed Europe and UK. Having said that the index is still below what it was in 1980's. I still have £10k of my shares ISA to invest this year. What are the thoughts on Japan?
You should always have some exposure to Japan, but probably no more than 3%. My current favourite fund is MAN GLG Japan Core.
@grumpyaddick - without knowing the exact details of the fund it's hard to tell, but as you've probably noticed there's a war going on and shares and bonds have gone down in the main! That said 12% does seem on the high side.
Looking on AVIVA's website their mixed investment fund (less than 35% shares) is down about 6% this year
FWIW I've never viewed bond or predominantly bond funds that low risk to be honest, very much depends what bonds they invest in.
We may have done this already, but don't know your age, unless you want the monies ASAP don't worry, just keep investing and whether the fund is suitable for your needs only you know that.
Also watch what the charges, both overall and the fund itself. I seem to recall they were very competitive once you get above 500k.
I knew there was a war going on but I didn't know I was funding it.
Seriously though, thanks for that. You make it sound slightly par for the course which puts my mind at rest.
Yes par for the course over the last couple of months to see funds drop in value, but you may or may not be invested in a poor performing fund/funds, I don't know, but like Golfie says if in one of Aviva's funds they are generally lower percentile performers. You should have seen the last couple of weeks you take back 2/3rds of the paper loss, I broadly have on mine, I'm about 2-3% down now.
Post up exactly what you are invested in so we can take an informed view. From memory (I had an Aviva pension at a company about 10 years ago) they do more than just their own funds.
A go to fund manager for novices are often the Vanguard one's as fairly steady performers (not earth shattering) and fee's tend to be quite low as are L&G funds.
What are the thoughts on Japanese funds. Both my pension and ISAs are very underweight in Japan (in fact virtually nil). From the 80's to about 10 years ago they were abysmal but I notice the last 10 years the Nikkie has almost doubled and been as good as S&P and outperformed Europe and UK. Having said that the index is still below what it was in 1980's. I still have £10k of my shares ISA to invest this year. What are the thoughts on Japan?
Having just checked I have 5.34% of my SIPP portfolio in Japan. Around 13% overall in Asia. 48% in America's and the rest UK & Europe (UK being about 28%). My company pension (less than 15% of the overall pension pot as only been going 18 months) is almost all in UK (about 80%) with the rest in America's which brings the overall Japanese exposure down a bit.
My America's % keeps increasing! I've been putting most of my monthly input into an S&P500 ETF in my SIPP for the last couple of years which has been a great performer, it is down a bit in 2022 (about 5%) but the prior two years were 14% and 32%. I've sacrificed some of my bonus this year so that will further dilute the Japanese exposure although maybe not quite down to Golfie's 3% or less but not far off.
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.
@PragueAddick The only thing I would add to those who answered your query on taxation of vesting shares is that many of these schemes allow a person to time when the shares vest. For example a grant 2018 could vest 2021 to 2028. This allows the recipient to chose and maybe spread the vesting so they can minimise their tax. Also many schemes actually build the scheme actually selling some shares to meet the tax bill eg 1,000 shares vesting, 410 sold to meet tax and NI so recipient only receives 590.
@PragueAddick The only thing I would add to those who answered your query on taxation of vesting shares is that many of these schemes allow a person to time when the shares vest. For example a grant 2018 could vest 2021 to 2028. This allows the recipient to chose and maybe spread the vesting so they can minimise their tax. Also many schemes actually build the scheme actually selling some shares to meet the tax bill eg 1,000 shares vesting, 410 sold to meet tax and NI so recient only receives 590.
Thanks. I’ve seen the explainer from the company and unfortunately they havent pursued those options. There was talk if vesting half, but for some reason rowed back from that.
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).
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?
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.
I'd echo @Rob7Lee, but for the fact the shares should be treated like income or a bonus - have it in cash asap & then it's yours to do with it what you want.
Might be different if it was part of a share portfolio but as part of a remuneration package I'd take the cash.
What are the thoughts on Japanese funds. Both my pension and ISAs are very underweight in Japan (in fact virtually nil). From the 80's to about 10 years ago they were abysmal but I notice the last 10 years the Nikkie has almost doubled and been as good as S&P and outperformed Europe and UK. Having said that the index is still below what it was in 1980's. I still have £10k of my shares ISA to invest this year. What are the thoughts on Japan?
I think Japan has some upside coming, having pulled back a bit recently. I've been in and out of Baillie Gifford Shinnon investment trust (went back in two weeks ago). Don't usually hold more than 5%.
India is worth a look as well (e.g. JII) but with rising dollar rates, some Emerging Markets might struggle in the coming couple of years.
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.
Price Earnings is high in this market, particularly for a services-only company and already taken a bit of a hit since floatation. Has (just) hit its numbers on first couple of results. Does have some reasonable institutional holders. One bad set of results and these will get hammered given that PE.
Not a great time to be selling, though, given market conditions. My instinct would be to wait for the market to recover and maybe sell before the next results.
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.
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
Comments
You may remember I declined the services of an IFA last October (I know..I know) and decided to amalgamate my small private pension funds with Aviva into an Aviva SIPP. Seemed sensible and low risk. I chose a low risk managed fund (mostly bonds not equities). All of the of the info is accessible online and my extra contributions are tax deductible (up to usual limits) so all seemed good. I logged on every week or two to see my fund had increased modestly and all was well. Who the hell needs an IFA for this stuff I thought?
Sadly since the start of this year the fund had tanked about 12% of its value. At first I thought this must be a market blip and things would recover but it seems the only way is down.
If that lost cash of mine was in a briefcase and someone I had trusted to look after had set fire to it I would be very upset.
Is this to be expected and if not, any ideas what should I do?
Many thanks
Looking on AVIVA's website their mixed investment fund (less than 35% shares) is down about 6% this year
FWIW I've never viewed bond or predominantly bond funds that low risk to be honest, very much depends what bonds they invest in.
We may have done this already, but don't know your age, unless you want the monies ASAP don't worry, just keep investing and whether the fund is suitable for your needs only you know that.
Also watch what the charges, both overall and the fund itself. I seem to recall they were very competitive once you get above 500k.
Seriously though, thanks for that. You make it sound slightly par for the course which puts my mind at rest.
For context, this is pension related, although still working and will double the investment from 20k to 40k.
I invested in a wide ranges of fund last year, not followed them till now, looks like most were doing okay until obviously starting to bomb this year, annualised return is 1.86% but I guess that will keep falling.
She works for a company called ThoughtWorks, and happily she is included in a scheme where the company, having successfully floated on the NASDAQ, is rewarding employees with free shares.
If it's part of a share incentive plan then no, not usually taxable, but quiet tight limits on that from memory, think it's £3,600 per annum free, other limits for matching or partnership shares.
Don't look a gift horse in the mouth, as a lower rate taxpayer she's still getting circa 80% of the value for free!
Also, I was part of my employers "share award" scheme with the expectation that when the Company was sold then we would get a pay out. The Company said that any tax implications would be for us as individuals to get advice on.
I've been looking at some alternatives to Bonds atm as they are losing money instead of being the 'safe' part of a portfolio. I hate to say it but even holding Cash might be a better bet.
But you didnt hear that from me.....right 😉
Post up exactly what you are invested in so we can take an informed view. From memory (I had an Aviva pension at a company about 10 years ago) they do more than just their own funds.
A go to fund manager for novices are often the Vanguard one's as fairly steady performers (not earth shattering) and fee's tend to be quite low as are L&G funds.
My America's % keeps increasing! I've been putting most of my monthly input into an S&P500 ETF in my SIPP for the last couple of years which has been a great performer, it is down a bit in 2022 (about 5%) but the prior two years were 14% and 32%. I've sacrificed some of my bonus this year so that will further dilute the Japanese exposure although maybe not quite down to Golfie's 3% or less but not far off.
but anyway, and as always, thanks for quick and sound advice.
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).
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.
Might be different if it was part of a share portfolio but as part of a remuneration package I'd take the cash.
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".
India is worth a look as well (e.g. JII) but with rising dollar rates, some Emerging Markets might struggle in the coming couple of years.
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.
Price Earnings is high in this market, particularly for a services-only company and already taken a bit of a hit since floatation. Has (just) hit its numbers on first couple of results. Does have some reasonable institutional holders. One bad set of results and these will get hammered given that PE.
Not a great time to be selling, though, given market conditions. My instinct would be to wait for the market to recover and maybe sell before the next results.
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