Client is seeking advice on whether to repay a student loan. Without going into the facts of the case, is this the realms of investment advice? I ask because it is so crystal ball, but that's the case with a lot of tax planning.
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I’d refer them to the Martin Lewis site and offer no advice whatsoever.
https://www.moneysavingexpert.com/students/repay-post-2012-student-loan/
https://www.moneysavingexpert.com/students/student-loans-tuition-fees-ch...
Thanks David, these are really helpful. I'll send them to the client and keep them in mind for when I'm next asked.
"Client is seeking advice on whether to repay a student loan" ... the key words are 'advice on whether' (i.e. 'should I or should I not').
There is nothing wrong in telling client the factual consequences of any action he/she proposes ... but if, as is so often the case, they want to know the pros & cons of each potential action and even to be given a recommended 'solution' ... then that's outside your remit (as it involves making assumptions about variables).
Of course they may not want to pay you anything anyway (let alone for answers not recommendations) ... which is where David's response comes into its own.
"Client is seeking advice on whether to repay a student loan" ... the key words are 'advice on whether' (i.e. 'should I or should I not').
There is nothing wrong in telling client the factual consequences of any action he/she proposes.....
Absolutely.
Facts are not advice.
One of the big differences between student loans and ordinary, everyday loans is that you may never need to repay them.
+1 to DavidEx's recommendation to go to MSE. You won't find better guidance on this subject.
You can state "here is what you'll pay if your income remains the same, here is what you have to pay as your income goes up, here is how much you'll be charged if you string the loan out. If you took the money it would cost to settle it right away, you'd need to be using it to earn more than x% in order to come out ahead of paying it now."
None of that is advice but it lays things out in a way that enables them to make a decision. You're essentially taking the guidance already provided and slotting in the facts you have about their position which will help them apply it themselves, just avoid actually telling them yay or nay.
This is not investment advice;but if there is a good chance the loan will be written off,why bother.
Repaying is paying now to save some money that could either be payable 20 to 30 years time or possibly never
So is it investment advice?
I could understand the first five responses in the context of the question. The last two (yours and Michael's) make no sense to me in that same context.
Simple
The payments of 9% tax on income do not reduce now for making some repayment now, unless the entire balance is cleared.
9% is on income, not a % of the loan balance
Think of it as being all the interest is the bit you pay last
After 30 years the balance is wiped clean anyway
This may be just a version of reply one that takes less time to read
May be a good idea if Dad is paying, but the same money as a house deposit is what I would prefer
Reduced to its essentials, Client is considering making a gift to defray family member's liability
So in answer to the direct question in the OP, "is this investment advice?", (presumably in the sense of regulated advice), I vote no.
I'd vote likewise, in that case.
But I had assumed the student loan was the client's. If so, it's less clear (to me).
But I had assumed the student loan was the client's.
Not like you to assume.
But it does raise potential IHT issues as well as those already considered.
Not like you to assume.
Maybe the student will be a beneficiary drawn at random from a list of 1,799 applicants. Paul has assumed it's a family member. I assumed it was the client.
Entia non sunt multiplicanda praeter necessitatem.
What's in a name? That which we call a rose
By any other name would smell as sweet
The loan isn't a loan but a lifetime cap on a tax on income disingenuously called student loan repayments. In a couple of year's time graduates will find themselves paying four taxes on their pay: IT, primary class 1 NIC, SLR and the health and social care levy. You can make that five taxes if you assume the employer takes into account the secondary NIC charge in setting pay rates. (Perhaps this post should be a response to the question about the tax burden.)
Returning to the question asked:
For those whose income is likely to be sufficient for the cap to be reached before the w/o point the question becomes 'do I volunteer to pay some tax now rather than later and by doing so pay slightly less, as the interest component of the cap will have reduced effect.
For those with more modest incomes, especially those whose incomes will rarely exceed the starting point for SLR, the question becomes "Do I make a voluntary payment of tax?
I can see how the first question might be considered to be a request for investment advice (but as has been said you can just set out the effect of the options), but I can't see how answering the second question with 'don't be daft' amounts to investment advice.
NPV calculations of the possible approaches (To repay or not repay, that is the question) based on various assumptions like whether loan likely to be fully repaid, ever and what would funds otherwise earn (or mitigate as opportunity costs etc) if deployed otherwise.
Effectively investment appraisals with quite a lot of variables.
So for instance in my son's case given what he earns, the earnings on his savings and limited value of loans he had, dead simple, all repaid in his 20s, in my daughter's case not sure that will be the correct approach given her current earnings and her projected future earnings, funds in her case likely better as an extra house deposit.(And that is before even considering possibility that if she say eventually has kids they may blight her future earnings- I know we are not still in the 90s but children do still disrupt women's careers more than men's)
