Replies to post #45371 on A.I.M. Users Bulletin Board (AIMUSERS)

[Toofuzzy]

Hi Clive

Moving from 1x funds to leveraged funds will create tax events.

Better to just start out with leveraged funds to achieve your goal.

Interactive Brokers has the cheapest margin rates available.

As someone who is single, instead of willing my assets directly to charity ( my estate Wil not be big enough to be taxed ) I have thought of leaving it to a friend. If THEY then donate my assets to charity they would get a tax deduction.

Toofuzzy

[Barnhouse]

Hi Clive

I have been kicking an idea like this around for a year or two and have partially adopted it.

Toofuzzy’s point on tax events is very relevant however in my situation I have most financial assets in either a tax deferred account (dc pension) with about a third in tax free accounts (ISA). Due to the evolving tax rules around UK tax deferred accounts (specifically the lifetime allowance) I have moved the whole pension fund to bonds to slow down growth as due to the tax rules if I take say a 3% withdrawal in the future the net amount will be c.1.8% on the marginal increase. Unacceptable to me. Another example of taxflation which will be made worse if inflation ticks up.

However by attempting to shift that growth to tax efficient accounts (ISA)I hope to spend down both current bond holdings and those in the pension when they become available and use variable leverage in the ISA’s to provide the necessary growth to maintain the overall real value of the total portfolio.

Downsides of this approach is additional volatility in the funds I have to live on now, change in leverage costs and potential volatility drag/tracking error. However, I estimate that the taxflation effects should be largely mitigated thereby allowing me to maintain my desired withdrawal rate.

Regards

Nick