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[Finance] Are IFA’s a waste of money for most people ?

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Jul 24, 2007
9,566
Arundel
Taking the tax free cash in isolation doesn’t restrict future contributions (other than if you were to use the tax free cash to make a substantial contribution which isn’t allowed).

It doesn't restrict it but you no longer get the tax benefit on the £40k element, I believe? As you say you couldn't wrap back money you've withdrawn, but equally you can't use earnt income against it either.
 


Driver8

On the road...
Jul 31, 2005
15,362
North Wales
It doesn't restrict it but you no longer get the tax benefit on the £40k element, I believe? As you say you couldn't wrap back money you've withdrawn, but equally you can't use earnt income against it either.

Normal contributions can continue and you will continue to get tax relief on up to £40k pa as long as you are under 75. What you can’t do is use your tax free cash to make a large one off contribution as that falls foul of the “anti tax free cash recycling” regs.

As pointed out above if you withdraw any taxable income from a personal pension your annual allowance reduces to £4k.
 
Jul 24, 2007
9,566
Arundel
Normal contributions can continue and you will continue to get tax relief on up to £40k pa as long as you are under 75. What you can’t do is use your tax free cash to make a large one off contribution as that falls foul of the “anti tax free cash recycling” regs.

As pointed out above if you withdraw any taxable income from a personal pension your annual allowance reduces to £4k.

Yes, this was the element I was highlighting, albeit around the houses, that is the disadvantage
 

Westdene Seagull

aka Cap'n Carl Firecrotch
Oct 27, 2003
20,108
The arse end of Hangleton
Expanding the discussion, the IFA's I worked with and used, also gave mortgage advice/acted as intermediaries with lenders.

I get the impression that fears of being sued for advice on interest-only mortgages back in the day, is also a concern for mortgagors and intermediaries. This would hit the fan when home owners typically get to 65, with a large balance still due and no means of paying it off without selling up. I can see ambulence chasers targeting this, going back to the original advice.

That would be unfair on decent IFAs. Early 80's, aged 23, I wanted to buy my own property and used an IFA. Due to my income he suggested an endowment mortgage. His argument was that it would get me on the property ladder in an affordable way and once my income had increased ( which was very likely as I worked in IT ) I could then switch to a repayment mortgage. He was VERY clear that I shouldn't remain on an endowment mortgage for ever. I think it was the fourth re-mortgage that I switched to repayment. Endowment mortgages have had a bad rap - they are useful but ONLY if you understand and mitigate the risks.
 

Arthritic Toe

Members
Nov 25, 2005
2,272
Swindon
That would be unfair on decent IFAs. Early 80's, aged 23, I wanted to buy my own property and used an IFA. Due to my income he suggested an endowment mortgage. His argument was that it would get me on the property ladder in an affordable way and once my income had increased ( which was very likely as I worked in IT ) I could then switch to a repayment mortgage. He was VERY clear that I shouldn't remain on an endowment mortgage for ever. I think it was the fourth re-mortgage that I switched to repayment. Endowment mortgages have had a bad rap - they are useful but ONLY if you understand and mitigate the risks.

I thought the point was that you couldn't get off an endowment mortgage without big penalties - they basically locked you in for 25 years, so not sure how you managed to switch off it to a repayment. I ended up keeping mine until they matured (for less than loan value).
 

Westdene Seagull

aka Cap'n Carl Firecrotch
Oct 27, 2003
20,108
The arse end of Hangleton
I thought the point was that you couldn't get off an endowment mortgage without big penalties - they basically locked you in for 25 years, so not sure how you managed to switch off it to a repayment. I ended up keeping mine until they matured (for less than loan value).

Mine certainly was set for a two year period and then I could re-mortgage. I needed an investment vehicle, in my case an ISA, to show I was mitigating the risk but every endowment mortgage I took was for a fixed period allowing me to swap, fee free, at the end of the fixed period.
 


Arthritic Toe

Members
Nov 25, 2005
2,272
Swindon
Mine certainly was set for a two year period and then I could re-mortgage. I needed an investment vehicle, in my case an ISA, to show I was mitigating the risk but every endowment mortgage I took was for a fixed period allowing me to swap, fee free, at the end of the fixed period.

My memory is a bit fuzzy - but I thought when you remortgaged, you basically just took out a further endowment to add to the original one, but both had a fixed maturity date. You could keep doing that ad-infinitum, but to switch to repayment would mean terminating the endowments early, incurring the penalties. There were probably various different schemes though.
 

Weststander

Members
Aug 25, 2011
54,015
Withdean area
That would be unfair on decent IFAs. Early 80's, aged 23, I wanted to buy my own property and used an IFA. Due to my income he suggested an endowment mortgage. His argument was that it would get me on the property ladder in an affordable way and once my income had increased ( which was very likely as I worked in IT ) I could then switch to a repayment mortgage. He was VERY clear that I shouldn't remain on an endowment mortgage for ever. I think it was the fourth re-mortgage that I switched to repayment. Endowment mortgages have had a bad rap - they are useful but ONLY if you understand and mitigate the risks.

I was in identical circumstances to you, but in 1987.

The pushy Abbey Life salesman sold endowments to me as "in 25 years time the endowment will not only pay off the capital sum of the mortgage, but the excess will buy you a luxury car and a world cruise".

I was only early 20's but irritatingly for him, well read on financial matters (Which? and Telegraph).

So I took out a repayment mortgage with Barclays, which turned out to be advantageous after I rode out the negative equity storm and cashed everything in 1995. To start all over again.

Back to 1987, the Abbey Life guy called me and said "Who's been getting at you?" :lolol:

I'm all for caveat emptor, but a financial instituton or advisor has responsibilities when dealing with a consumer.

I think they were later sued because the endowments didn't meet the mortgage capital due for repayment.
 

dazzer6666

Members
Mar 27, 2013
44,876
Burgess Hill
My memory is a bit fuzzy - but I thought when you remortgaged, you basically just took out a further endowment to add to the original one, but both had a fixed maturity date. You could keep doing that ad-infinitum, but to switch to repayment would mean terminating the endowments early, incurring the penalties. There were probably various different schemes though.

I was involved in mortgage sales in the late 80s and 90s - the loans and life (endowment) policies, although linked at the time of initial approval, were typically independent products and could be treated separately at a later stage
 

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