# Advice on investment/financial strategy



## trackdaychamp (12 Feb 2021)

Hi there, any thoughts, advice or suggestions from some the experienced players on AAM is welcome for our situation below.

*Married couple (both 38) with 2 young kids who are not at school age yet

Salary1* €70k Director from our limited company, own 100% of shares
*Salary2* €70k Director from our limited company. *Both Salary figures picked to avoid punitive income taxes while accumulating money inside LTD CO

Mortgage* has 250k left outstanding and house is worth 420k. 2.3% interest rate and hope to move to Avant for 1.95% next year when our fixed term expires

*Savings* €30,000. One of us saves a large % of income. Other is more relaxed

*Pension1 SSAP    (adding 40-50k each year via company contributions only at Max Revenue amount)*
- €300,000 in equities S&P500 low cost vanguard fund paying 0.40% which is 0.1% to vanguard and 0.3% to platform provider
- Residential property owned outright with no finance. Value €250,000 and generating 1,500 per month tax free
- Cash €75k.   I feel a bit of analysis paralysis here. I want to throw it into my equity fund. I have 20 years to ride out any volatility but all I hear is that equities are too hot so any thoughts are welcome here. There will be another €40-50k cash coming in a few months at our financial year end so I need to get cracking
- Pay trustee 1750+vat per year after moving from trustee 2500+vat. I see comments from 2009 on AAM about 1000 per year but was told recently those days are gone

*Pension2 Exec Pension   (adding 40-50k each year via company contributions only at Max Revenue amount)*
- €160k locked into 5-6 year typical insurance company mixed pension funds paying 1% at 103% allocation
- €40-50k in Dimensional 60/40 World fund. Not sure of % fees exactly but we want to tidy up both funds here into 1 SSAP and nice simple vanguard when exit penalties are gone

*Insurance*
Both of us as company Directors have bought everything that is available to us with tax reliefs on Income Protection, Specified Illness and Life Assurance to include Death in Service of 4 times our salary, tax free into the beneficiaries account. I know we are privileged and doing well so I see the risk as coming from health or something else to blindside us. We also set up Section 72 policy. We are a few years into a policy where if we stop paying the annual premium then we don't get any refund. Adviser told us to go at 5k per year but I was worried and said we would be more comfortable at 2.5k per year. If we get 17 years in then we can get out with 70% refund I think of all premiums paid

*Limited Company*
Generating good profits. COVID is a concern but we are getting through it. 800k of cash was sitting in the company. During lockdown 1, I got itchy feet on paying 30k a year in rent to commercial landlord so we used about half the cash to buy a commercial premises that we will move into after refurb. People say commercial is going down the toilet but we had been trying to buy a place for years before signing 5 year lease. An opportunity came up to buy a building in our preferred area so we jumped at it. Maybe I could have bought it in a few years for less but its done now so we are looking forward

*Gift*
We are gifting each of our kids 6k each so 12k in total to 2 kids each year. That is invested into a 60/40 Dimensional World equity/bond fund, same as Pension2

*Kids*
Some additional needs might be a factor at play and we are just at the finding out stage so I am extra sensitive to making sure we are making the right moves now. Our situation is positive but complacency is what I am most concerned about as I have seen a lot of comfortable situations go south


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## Younginvestor93 (12 Feb 2021)

Others will have more advice but my input is the kids should not be in bonds. I would go 100% all world equities for them. They will have plenty of time to ride out any volatility. Bonds are not useful when you have a long term investment in mind.


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## Freelance (12 Feb 2021)

Sounds like you have given this a lot of thought already and understand the benefit of periodic reviews. Given your life stage, current asset profile and income generation capacity, paid for financial advice may be worth considering (and I’d include specialist tax advice in this). Two quick points occur to me. You need to have total clarity around the exit strategy from the limited company given that you are using it to build a cash pile and accumulate property assets - you don’t want to see that shredded by tax as you depart. Second, I appreciate that with very young children you may not want to overdo your pension contributions at this point, but are you sure that the company cannot put further money into your pension fund, e.g by way of a bonus ? Anyway, best of luck with it.


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## time to plan (20 Feb 2021)

I’m asking for myself as much as the OP: will Avant deal with proprietary directors for mortgages?


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## trackdaychamp (23 Feb 2021)

time to plan said:


> I’m asking for myself as much as the OP: will Avant deal with proprietary directors for mortgages?


I hope so. My plan is to contact a broker in a few months time closer to our our expiry out of Fixed Rate period. I'll try to report back but if anybody does so sooner then please let us know here


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## trackdaychamp (23 Feb 2021)

What do people think about my original post above on Equities? I have 75k in cash sitting there and I'm stuck on throwing it into my Vanguard S&P500. I'm not afraid of volatility as I have 20 years and anyway I'll be converting it into an ARF in 20 years time. There is another 40-50k coming soon so I need to get moving. Any alternatives I should consider?


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## Steven Barrett (23 Feb 2021)

Very unusual for a 38 year old to have a Section 72 policy. I would ensure that both of you have loads of life cover, payable to you and not the Revenue. If one of you are the main driver of the business, take out loads of cover on that life as the business will be gone if that person dies. 

Get your cash in your pension working for you as you are being charged 0.65% by Bank of Ireland to have it in your cash account. Are prices too high? Who knows? When you invest, you want the value to go up, so if all goes to plan, you will always be buying at a higher price. One thing for sure, it is costing you to do nothing.

On the second pension, I presume it is with Zurich. They have a Global Equity Index fund run by Blackrock that you can invest in. Dimensional also offer a World Equity fund that may be more suitable. Same with the kids plans. 

If you got the tax break of buying the business premises through the company, you will have to pay tax to get the value of it into your own hands on the way out. More qualified people can explain that to you better than me. 

Overall, you are in a very good place and doing the right things. Just keep doing what you are doing and things will be fine. 

Steven
www.bluewaterfp.ie


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## time to plan (23 Feb 2021)

trackdaychamp said:


> I hope so. My plan is to contact a broker in a few months time closer to our our expiry out of Fixed Rate period. I'll try to report back but if anybody does so sooner then please let us know here


It looks like you're right (at least in theory). 2 years accounts are needed according to [broken link removed]. I wonder if in practice they are taking on self-employed / proprietary director customers.


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## cremeegg (23 Feb 2021)

The OP has a very successful business, that is where his wealth generation should come from. Everything else is tax efficiency and maintaining your wealth.


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## trackdaychamp (23 Feb 2021)

Thanks Steven. Section 72 was pushed by a paid financial adviser. I was nervous about committing to 5k a year so reduced it to 2.5 per year. The fear is always that paid adviser was pushing that decision for a commission but hard to know where to draw the line on paranoia versus trusting your selected adviser. Adviser wanted to protect against 600k inheritance bill for kids if we both died and he said the policy will only get more expensive if we wait longer. I can see his point but I don't like commitment of 2.5k or 5k a year for 17 years before I have any palatable exit option.

 I needed a nudge on allocating the cash sitting in my SSAP to equities. I will do it. Analysis paralysis is a problem for me


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## trackdaychamp (23 Feb 2021)

Freelance said:


> Sounds like you have given this a lot of thought already and understand the benefit of periodic reviews. Given your life stage, current asset profile and income generation capacity, paid for financial advice may be worth considering (and I’d include specialist tax advice in this). Two quick points occur to me. You need to have total clarity around the exit strategy from the limited company given that you are using it to build a cash pile and accumulate property assets - you don’t want to see that shredded by tax as you depart. Second, I appreciate that with very young children you may not want to overdo your pension contributions at this point, but are you sure that the company cannot put further money into your pension fund, e.g by way of a bonus ? Anyway, best of luck with it.


Thanks Freelance. I'm very impressed with some of your other posts as I get more familiar with this forum. I've gotten paid advice and received the plan showing date of financial independence which was a lot sooner than I had ever expected. I'm trying to put that to the back of my mind as I'm not quite sitting on the beach yet. I changed my pension trustees in last year and the last guys assured me that I was maxing Revenue limits but I'll explore same again this year. Obviously I don't want to put anything in unless I'm getting full 40% relief. I was allowed some overpayments in my first 5 years but I believe I've used up most/all now unless the new trustees tell me otherwise. I think a lot about the Retirement Relief on business exit as I've watched my parents use this effectively and I'm also aware of the Entrepreneur Relief. A tax adviser has told me that buying the commercial property inside a limited company might not have been a wise move as I should be more focused on cash accumulation for exit. I see his point BUT I reckon I'm going to be in there for a long enough time for the zero rent payments & rental income from the surplus space to be a wise move. Hopefully I'm right on that one as I'm about to plough some more cash into the new building


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## Steven Barrett (25 Feb 2021)

trackdaychamp said:


> Thanks Steven. Section 72 was pushed by a paid financial adviser. I was nervous about committing to 5k a year so reduced it to 2.5 per year. The fear is always that paid adviser was pushing that decision for a commission but hard to know where to draw the line on paranoia versus trusting your selected adviser. Adviser wanted to protect against 600k inheritance bill for kids if we both died and he said the policy will only get more expensive if we wait longer. I can see his point but I don't like commitment of 2.5k or 5k a year for 17 years before I have any palatable exit option.
> 
> I needed a nudge on allocating the cash sitting in my SSAP to equities. I will do it. Analysis paralysis is a problem for me



Yes, it will get more expensive as you get older but then if you take it out 10 years later, will it cost you an additional €25,000 in premiums that you will have currently spent. In my opinion it is over insurance at this stage of your life. 


trackdaychamp said:


> Thanks Freelance. I'm very impressed with some of your other posts as I get more familiar with this forum. I've gotten paid advice and received the plan showing date of financial independence which was a lot sooner than I had ever expected. I'm trying to put that to the back of my mind as I'm not quite sitting on the beach yet. I changed my pension trustees in last year and the last guys assured me that I was maxing Revenue limits but I'll explore same again this year. Obviously I don't want to put anything in *unless I'm getting full 40% relief.* I was allowed some overpayments in my first 5 years but I believe I've used up most/all now unless the new trustees tell me otherwise. I think a lot about the Retirement Relief on business exit as I've watched my parents use this effectively and I'm also aware of the Entrepreneur Relief. A tax adviser has told me that buying the commercial property inside a limited company might not have been a wise move as I should be more focused on cash accumulation for exit. I see his point BUT I reckon I'm going to be in there for a long enough time for the zero rent payments & rental income from the surplus space to be a wise move. Hopefully I'm right on that one as I'm about to plough some more cash into the new building



 I hope you are not getting 40% relief on any pension contributions and all of it is coming from your business which is getting 12.5% relief. 


Steven
www.bluewaterfp.ie


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## trackdaychamp (1 Mar 2021)

What do people think about stopping paying my €2.5k section 72 policy now? We are 38. I think I've already paid 2x years so €5k would be gone. If we pay for 17 years then we get 70% back if we exit. Sometimes it's hard not to be cynical/sceptical when adviser is pushing a product. I paid for the advice so expect impartial advice but realise adviser will still get commission on each product sold

You are spot on Steven. Our limited company is paying all pension contributions so it's the 12.5% we are saving on Corporation Tax. My mention of 40% is probably in my head as the alternative would be to take it out as salary and pay 40% tax. Sorry if that was misleading


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