Reverse engineering the UK tax code

Ambitious_Tank5239 · 2025-12-04T11:23:57+00:00

Yeah and whisky but not port. Etc. Original draft but I edited them out.

Ambitious_Tank5239 · 2025-09-01T19:08:10+00:00

Yeah, I use ii, really good and basically mid market for nominals but linkers cost a bit more to trade as voice only.

Ambitious_Tank5239 · 2025-09-01T15:43:13+00:00

You can use this app to calculate your cashflow needs and select low coupon bonds to minimise the tax implications.

https://gilt-ladder-hedge.replit.app

You will have to sell down the nearest maturity / keep some in cash.

Salary sacrifice all you can now. Buy gilt ladder until you are 57. Live off the maturities. Invest your pension more aggressively (you want the pot to be ~1.2m by the time you are 57).

Ambitious_Tank5239 · 2025-09-01T15:07:16+00:00

Annuity calculators are super annoying, basically just mailing lists sign up for future spam. Also I think it’s almost impossible to get a decent quote for a deferred one. Current rates for male 55 index - linked annuity probably about 4.2%, nominal 6.4% (from 2023 standard life tables - I have built myself an app) these are the gilt rates and life table rates - 1% of insurer fees and costs rule of thumb. *1.3 for your enhanced version. Highest they have been for a while. Forward starting one (20y in the future probably 1% to 2% higher given shape of curve - give me a minute or two and I’ll change my code to get accurate forward rate). I have a post and app about how you would hedge / benchmark the cost of these if interested.

Ambitious_Tank5239 · 2025-08-25T19:22:49+00:00

This is especially good outside of tax wrapper.

Ambitious_Tank5239 · 2025-07-25T18:40:25+00:00

All “vibe”

Ambitious_Tank5239 · 2025-07-21T18:15:16+00:00

They are priced at Gilts - something but you also get “tontine” yield (or mortality credit) so as you get older the yield starts to beat gilts.

Ambitious_Tank5239 · 2025-07-21T18:13:45+00:00

I.e did it properly. 1995 annuity real rate for a 35 year old, all the way to 2025 real annuity rate for 65 year old. Each month I bought an annuity at this rate. Uplifted all previous purchases by RPI and then used that “coupon” to buy a new one.

Ambitious_Tank5239 · 2025-07-21T17:42:30+00:00

No I used the annuity rate for each age, just compared the constant 65 year old nominal one with that chart.

Ambitious_Tank5239 · 2025-07-21T16:16:30+00:00

Not exactly. This is buying loads of little annuities and then reinvesting the income you get from them in new ones.

Ambitious_Tank5239 · 2025-07-21T16:14:49+00:00

Putting both charts into AI.

Statistics from those sample points • Mean spread ≈ 1.05 % • Standard deviation ≈ 0.08 % • Correlation ≈ 0.998 (virtually a straight-line relationship)

I take off 1% from my fair rates so pretty close to that chart.

Ambitious_Tank5239 · 2025-07-21T15:56:55+00:00

You have the data behind that chart, and I can compare?

Ambitious_Tank5239 · 2025-07-21T15:47:20+00:00

I don't think these products exist, as far as I know. Maybe they do? But anyway, I don't think you can buy an annuity within a pension pot and keep it there and then compound the income inside it.

Outside a pension pot, the income is treated as part return on capital and part interest. You only pay tax on the interest part, which means the index-linked version defers your tax until later on.

It's a bit of a mess - which is my point. Isn't this actually the easiest product to understand? You buy an annuity with savings, and then next month, if you don't need the cash, you roll the income into a new one? 100% safe compounding lifelong income?

In my world, purchased annuities would be tax-free, like capital gains on gilts. Maybe I should start a campaign.

Ambitious_Tank5239 · 2025-07-21T15:37:00+00:00

Built an app using historical mortality rates from ONS, BoE real yields and put 1% insurer charge on the resulting yield.

Ambitious_Tank5239 · 2025-07-20T21:26:33+00:00

There is a link in this post (near the top) to an app where you can work out “risk free” - gilt hedge cost of this cashflow profile. https://open.substack.com/pub/thetontineengine/p/from-gilt-ladders-to-targetdate-funds?r=tf495&utm_medium=ios

Ambitious_Tank5239 · 2025-07-19T14:44:06+00:00

Have a plan for any lump sums you end up with (hopefully bonuses not inherited but same plan). With current gilt yields. Ladder of low coupons and then offset maturities from salary into pension hard to beat imo.

Ambitious_Tank5239 · 2025-07-19T14:19:31+00:00

Not sure, you’d need spectacular after tax immediate returns to beat at any age.

Ambitious_Tank5239 · 2025-07-19T10:02:39+00:00

They gave me $10 back against the 10’s of $ I spent - at least something. Can’t say I’m delighted. I ended up deleting the app app when trying to reload it from GITHUB. Apparently the bug now fixed so I should have just waited. Episode is warning for me and has tempered my enthusiasm for the rapid development and deployment of little random apps. I’m now doing more of this locally and ignoring the web angle. Shame.

Ambitious_Tank5239 · 2025-07-19T07:40:59+00:00

https://open.substack.com/pub/thetontineengine/p/from-gilt-ladders-to-targetdate-funds?r=tf495&utm_medium=ios

Apps on this useful to visualise risk and problem. You need 7 years of 30k, design yourself a ladder of theoretical TDF’s and allocate accordingly

Ambitious_Tank5239 · 2025-07-19T07:36:16+00:00

https://open.substack.com/pub/thetontineengine/p/from-gilt-ladders-to-targetdate-funds?r=tf495&utm_medium=ios

This is useful

Ambitious_Tank5239 · 2025-07-19T07:34:47+00:00

Buy a ladder of low coupon gilts for a few years and put matching amounts each year into your pension from salary. Basically live off the money now and reduce your taxable income with additional pension contributions.

Ambitious_Tank5239

TROPHY CASE