DIY Investor Magazine
/
March 2014
17
In both cases the ongoing tax can be lower than in a
drawdown account where all capital and profits will
ultimately be taxed as income. In doing so we look to
maximise the amounts they accumulate in ISAs to avoid
future tax and give access to tax free capital. And then
to set up their spending withdrawals from their general
investment accounts where the amounts withdrawn will
not be subject to tax.
On the second point investors with irreplaceable capital
and needing to make regular withdrawals need different
investment disciplines to those who are accumulating
capital and regularly saving.
These later investors can exploit market corrections,
which are hugely damaging to those steadily
withdrawing funds. We advise these type of investors to:
• Limit equity exposure to lower volatility and protect
capital.
• Focus on higher yielding equities and bonds where
the secure income yield is ahead of inflation after
fees.
• Hedge a portion of the portfolio against market
down turns and rises in interest rates.
If these two disciplines of tax efficiency and prudent
appropriate investing are maintained pension
drawdown accounts can deliver significantly higher
life time pay-outs than annuities without the high
costs of guarantees and without gambling with how
long you will live.
COLLAPSING PENSIONS AS QUICKLY AS IS TAX
EFFICIENT TO INVEST IN ISAS AND USE PERSONAL
ALLOWANCES, PARTICULARLY TO CAPITAL GAINS
TAX WILL BE A RISK FREE WAY OF LOWERING
YOUR FUTURE TAX BURDEN.
ABOUT TIDEWAY
Tideway Investment Partners
are advisers and investment
managers specialising in
generating income and delivering
consistent and lower volatility
returns.
Tideway manages the Global Navigator Fund, an
absolute return fixed income fund which has delivered
11.2% p.a. return since launch in September 2011
(FETrustnet 19.6.2014)
ON THE FIRST POINT WE ARE NOW
ADVISING OUR CLIENTS TO WITHDRAW
FROM THEIR PENSIONS THE MOST TAX
EFFICIENT WITHDRAWALS, RATHER THAN
SIMPLY WHAT THEY NEED TO SPEND.
