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Old 21.12.2020, 20:01
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Third pillar thoughts

Evening all. Bit late in the year to be thinking about it, I know, but there you go....

For the first time in several years, I find myself in a position to put some money into a third pillar account of some sort (but not the full allowance). I've come to some conclusions - but still find myself unclear what best to do, so I thought I'd throw it at the collective.

- I'm 50
- I have a (by EF standards very) small amount in a UBS World 75 3a which is... underwhelming
- I have a currently even smaller amount in Fundsmith but pretty happy with that - def want to add to it when funds allow (after the turn of the year, assuming Brexit chaos will cause a drop in stock markets?)
- I have a (again by EF standards very small) pension in a UK SIPP also invested in Fundsmith
- The vast majority of my "pension" is a property which delivers income right now, is appreciating on paper going by the local market, and will give a lump sum at the time of sale (even allowing for capital gains)

So I guess, somewhat by accident, I've already got a degree of diversity.

Why am I thinking 3a? Basically a) for the income tax deduction and b) as it would come out of savings, reduces the amount there too re wealth tax, which other investments wouldn't. I'm probably asset-rich and comparatively cash-poor so reducing the amount of tax I have to pay out of cash is a Good Thing.
I'm thinking VIAC (and maybe even move my UBS into a second VIAC account). It seems to be about the best and easiest?

My concerns:
- I've read people here say third pillar works best for the young and for those close to retirement. At 50, I'm not really either of those
- Nothing in third pillar delivers anything like the returns of Fundsmith
- The money's tied up; whilst I regard my Fundsmith as untouchable as it's part of my pension, at least if I did need it, it's accessible, especially as my savings aren't as much of a cushion as I would like as I've pretty much had to live off them for the last 3 years and, again, I don't earn enough to add to them greatly
- The huge lists of funds confuse me and I don't have time to research all of them - my natural affinity is for real estate, not stock market


So, in my position, what would you do?
Would you bother with third pillar or simply put the money in Fundsmith? Or go 50/50?
Is age 50 - 14 years' investment horizon - long enough to go for a higher-risk strategy i.e. VIAC 80 or 100? If so, which? I'm not so risk-averse that I can't cope with fluctuations... but I'm also naturally quite cautious.
What haven't I thought of?

Thanks in advance from my state of confusion!
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Old 21.12.2020, 20:18
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Re: Third pillar thoughts

3a Tax deduction is only a delay of taxable income. Upon withdrawal it will be taxed. Basic idea is that it will be taxed at a lower income bracket since retired folks don't earn so much.
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Old 21.12.2020, 20:26
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Re: Third pillar thoughts

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3a Tax deduction is only a delay of taxable income. Upon withdrawal it will be taxed. Basic idea is that it will be taxed at a lower income bracket since retired folks don't earn so much.
It's taxed at a rate that doesn't depend on income bracket, 4-5%, far better than the 30% or so it saved.

Wealth tax is basically nothing unless you are super rich.

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Old 21.12.2020, 21:35
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Re: Third pillar thoughts

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Evening all. Bit late in the year to be thinking about it, I know, but there you go....

For the first time in several years, I find myself in a position to put some money into a third pillar account of some sort (but not the full allowance). I've come to some conclusions - but still find myself unclear what best to do, so I thought I'd throw it at the collective.

- I'm 50
- I have a (by EF standards very) small amount in a UBS World 75 3a which is... underwhelming
- I have a currently even smaller amount in Fundsmith but pretty happy with that - def want to add to it when funds allow (after the turn of the year, assuming Brexit chaos will cause a drop in stock markets?)
- I have a (again by EF standards very small) pension in a UK SIPP also invested in Fundsmith
- The vast majority of my "pension" is a property which delivers income right now, is appreciating on paper going by the local market, and will give a lump sum at the time of sale (even allowing for capital gains)

So I guess, somewhat by accident, I've already got a degree of diversity.

Why am I thinking 3a? Basically a) for the income tax deduction and b) as it would come out of savings, reduces the amount there too re wealth tax, which other investments wouldn't. I'm probably asset-rich and comparatively cash-poor so reducing the amount of tax I have to pay out of cash is a Good Thing.
I'm thinking VIAC (and maybe even move my UBS into a second VIAC account). It seems to be about the best and easiest?

My concerns:
- I've read people here say third pillar works best for the young and for those close to retirement. At 50, I'm not really either of those
- Nothing in third pillar delivers anything like the returns of Fundsmith
- The money's tied up; whilst I regard my Fundsmith as untouchable as it's part of my pension, at least if I did need it, it's accessible, especially as my savings aren't as much of a cushion as I would like as I've pretty much had to live off them for the last 3 years and, again, I don't earn enough to add to them greatly
- The huge lists of funds confuse me and I don't have time to research all of them - my natural affinity is for real estate, not stock market


So, in my position, what would you do?
Would you bother with third pillar or simply put the money in Fundsmith? Or go 50/50?
Is age 50 - 14 years' investment horizon - long enough to go for a higher-risk strategy i.e. VIAC 80 or 100? If so, which? I'm not so risk-averse that I can't cope with fluctuations... but I'm also naturally quite cautious.
What haven't I thought of?

Thanks in advance from my state of confusion!
Some thoughts:

1) Finpension is better than Viac (it's pretty new so older Threads you will have read won't have considered it)

2) If you are 50, looking to retire at 65 I would have thought the probability you will be better off with Fundsmith is pretty high, particularly as you suggest you are lower income (and so would save a lower % by investing in 3a)

3) why not invest in Smithson. It'll likely give a higher return than fundsmith and help diversify and so decrease your risk

4) Around age 60 the maths will flip and it'll become worthwhile investing in 3a

5) Id be amazed if brexit has any noticeable effect on FS. It's mostly US , the only UK based stocks are global companies and so even these have a pretty low uk exposure
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