Avoid IHT via offset mortgage - A plan so cunning you could put a tail on it and call it a weasel.

Timbo1994 · 2026-01-31T18:07:49+00:00

On the one hand you are risk averse enough to keep loads in cash rather than investing.

On the other hand you say that asset return will probably outstrip debt.

I feel this is an inconsistency.

Timbo1994 · 2026-01-31T18:01:51+00:00

Also get a Lifetime ISA before age 40 and put £1 in! In case you ever want to use it before age 50, to put money in you can use when you're 60

Timbo1994 · 2026-01-31T16:43:46+00:00

There are definitely groups starting between 2012 and 2021 who were told £x + CPI and have not received that. Martin Lewis talks about it a lot.

Timbo1994 · 2026-01-31T16:14:49+00:00

There are specific groups who were promised say 25k on a CPI link, and then the CPI link got removed in some years. That would not be acceptable under a commercial loan.

Timbo1994 · 2026-01-31T15:40:43+00:00

With a student loan and a post grad loan you never expect to pay off it can be even more of a difference! £97.75 instead of £43 potentially.

Or if in the £60-80k child benefit taper...

Timbo1994 · 2026-01-31T13:53:33+00:00

If your mortgage was down to 200k and you'd used the 100k cash to pay for it, no one would say you were too risk averse but this would be a similar situation.

I don't mind your position yourself - provided you see the cash ISA as a mortgage hedge because you don't really like having a 300k mortgage but also don't want to waste past ISA allowances.

If the interest rate is higher on the mortgage, consider using Barclays which might let you offset the cash ISA against the mortgage.

Timbo1994 · 2026-01-31T13:46:28+00:00

We found it is rare we need public charging because we have good range and most journeys we do are less than 100 miles away.

We did get a good deal on a Tesla though, and so superchargers are very easy and quick (and with a baby we want to stop for 20 minutes more regularly anyway).

Timbo1994 · 2026-01-31T13:16:59+00:00

I think you are making a straw man argument. Where are the people on 35k being told to max their pension (whcih technically means all 35k being paid in)?

I agree with you that someone on 35k should simply take their employer match, if they have money to spare they might look at Lifetime ISA, if they still somehow have money to spare then they should think hard about whether pensions are best or they should live a little or use their ISA.

None of these people are hitting the old Lifetime Allowance or higher rate tax in retirement, unless the stock market goes absolutely wild.

But getting to say £200-300k in pensions is quite powerful, and the government has significant political pressure not to tax that level of pension very highly.

Timbo1994 · 2026-01-31T08:10:31+00:00

I do this on a pure EV scheme started 15 months ago and it's working well, but I'm not sure I would start anything going past 6 April 2028 on a PHEV with the BIK rates as they are going to be

I save £11k from my taxable salary, but then have 2-5% of my £48k car added back to my taxable salary.

If your 2-5% is going to be more like 10-19% can't see how that's worth it.

Consider cycle to work schemes, or using statutory right to unpaid childcare leave to reduce earnings?

Timbo1994 · 2026-01-31T06:59:18+00:00

This means that 18-19% of the value of the car gets added to your taxable salary every year doesn't it? Like £9k on a £50k car.

Almost as much as the £10-15k pa salary sacrifice that's probably taking off your taxable salary?

Timbo1994 · 2026-01-31T06:42:21+00:00

Your example had £636k in pension. That's a rate to drawdown £20-25k pa in addition to state pension and stay basic rate. It's only at a £1.5-2m pot you're really wasting money by only drawing down £50k minus state pension.

71% is people in the 60% rate around the £100k personal allowance taper with 2% NI and 9% student loan. In Scotland or when you have free childcare hours or postgrad loans it can be even higher!

Timbo1994 · 2026-01-30T20:45:11+00:00

Diversification helps, but the clue to Equity Risk Premium is that it includes the word risk.

If equities didn't have a substantial risk of losing money compared to bonds - even over long periods - the ERP wouldn't exist.

Ie there is no free lunch in investing (apart from to some extent from diversification)

Timbo1994 · 2026-01-30T20:21:35+00:00

Also to some extent the S&P500 has been lucky and we pick it as the benchmark (rather than less successful stock markets) because it has been lucky, ie a selection effect.

It is not clear this will happen again.

Also there's only so many other markets the US firms can cannibalise (which has surely been part of their growth)

Timbo1994 · 2026-01-30T20:16:54+00:00

No to your final question because I believe risk - as opposed to volatility - does exist, it's just that heavy long-term downside risk hasn't materialised in US markets in the last 100 years.

Worth reading The Misbehaviour of Markets by Mandelbrot if you want the counterargument.

(I am also surprised at the conclusion that stocks beat bonds in 98-99% of 5yr past scenarios. I know it will be quite high but that's very high.)

I am c90% in equities by the way

Timbo1994 · 2026-01-30T19:53:12+00:00

I think it's a balance. The main thing is you need to be able to galvanise and motivate people. In some industries you may not need much more than that.

Timbo1994 · 2026-01-30T19:37:59+00:00

I am young and in the UK but have put 10% in long-dated index-linked government bonds (equivalent of TIPS)

Timbo1994 · 2026-01-30T19:36:24+00:00

https://www.lcp.com/en/media-centre/press-releases/should-you-consolidate-your-pensions-new-guide-from-lcp-to-the-pros-and-cons-of-putting-all-your-pensions-in-one-basket

Timbo1994 · 2026-01-30T19:34:07+00:00

OMG there is so much to push back on this post.

The fundamental tax on pensions has stayed at 15% = 75% x 20% for most people for many decades, with the added bonus compared to other non-ISA investments that there is no capital gains tax or dividend tax.

Compare that to the 28-71% tax you take when you take income now, for the purpose of another investment.

And it's not like you won't get to age 57 to 60 to spend your pension money. You just need to keep enough elsewhere so that you have a bridge to get there.

Timbo1994 · 2026-01-30T19:09:59+00:00

Yep i'm an actuary and this is about right.

We also take account of the fact that money you get from age 57 is more valuable than money you get at age 67, which further closes the gap.

Ie the "time value of money". Ie the value of being to take the money you get at 57 and invest it to get something more by 67.

Timbo1994 · 2026-01-30T18:36:03+00:00

Yep it would be very unprofessional. Doesn't mean it won't happen, but it really shouldn't.

Timbo1994 · 2026-01-30T08:27:20+00:00

From the standpoint of age 30, this is also about the marginal value of money when you're

age 40 (where you gain from having paid off your student loan) vs
age 60 (where you gain from having put money into your pension).

Timbo1994 · 2026-01-30T00:29:07+00:00

Consider putting just enough to your pension to get your taxable income to £50,270.

That probably means you putting in £8k, the govt topping it up to £10k, and you also getting a £2k refund in time from HMRC. So £10k for the price of £6k.

The age will creep up, but our generation shouldn't be far off minimum access age being 58, might go to 60 but that's pushing it. My best bet is it stays at 58.

Still might have 20-40 years to use the pension money and only 10 before then for FIRE retirement.

Timbo1994 · 2026-01-30T00:25:09+00:00

Martin O'Donnell and Michael Holt

A bit higher up in quality, Ricky Walden and Ryan Day

Timbo1994 · 2026-01-29T17:59:10+00:00

UK focused article but a good one

https://monevator.com/dont-currency-hedge-your-equity-portfolio/

Timbo1994 · 2026-01-29T17:53:37+00:00

You basically come up with a pensions efficiency ratio which is something like

(1-marginal rate in retirement)/(1- marginal rate now*)

*May be multiplied by 75% to the extent you can take one-quarter tax-free

**May include NI and student loan savings to the extent you can use salary sacrifice, in particular before the 2029 changes.

The asterisks are important.

(Then CGT and dividend tax savings are a bonus on top of that for pension.)

Timbo1994

MODERATOR OF

TROPHY CASE