£70K to tie up for 5 years with monthly income

Bogof_Babe · 1 May 2009 at 4:11PM

I might have missed the boat for an A&L Bond that closes on 8th May, as I go away early on 6th, and the only person at the branch who deals with such things isn't in until then. She apparently had to go elsewhere this afternoon so failed to keep my appointment :mad:. The Bond was supposedly paying 5%, although I still had to sort out the finer details.

Anyway I now have £70K festering in my current account (I wouldn't have moved it out of Coventry BS if I'd know there would be such a delay), and am looking for a fall-back product that would give me something approaching the 5%, with a monthly income. I don't mind tying it up for five years.

I am over 50 if that opens up any more options. Can anyone suggest anything please, as I am feeling rather stressed and annoyed at the moment.

ray123 · 1 May 2009 at 4:29PM

You could try another branch. Also, you should perhaps spread the money out over three or four different investments... The basic rule of investing is not to put all your eggs in one basket.
Another thing to take into consideration is that the bond is most likely an investment rather than a guarenteed return, this is taken from their website:
Both capital and income values of the Portfolio Bond may go down as well as up and are not guaranteed. You may get back less than you invested and charges may be applied when you cash in the bond.
For this reason, it may be safer to invest in guarenteed bonds paying around 4%?

the_annoyed_customer · 1 May 2009 at 4:41PM

Over 50s accounts are a bit naff at the moment. Anyway one which ties up for 5 years but is very easy to open along as one has between 2K and 9 million is this Halifax Bank of Scotland/Halifax Plc Stepped Income Reserve, which you can set the receive interest monthly. The interest rate is 4.42% so not too bad but as you will noticed its a stepped income reserve meaning that they pay interest like this. The rates quoted are payable in Year 1, in Year 2 the interest rate on £2,000 will be 3.83% Gross, in Year 3 the rate will be 4.31% Gross, in Year 4 the rate will be 4.79% Gross and in Year 5 the rate will be 5.37% Gross. The AER for all 5 years will be 4.42%.
Or appication by post that pays 4.59% is Chesham Building Society
Five Year Fixed Rate Bond and pays interest monthly but you can only put in a maxium of 50K But of course you can always open another account and put the rest in:rotfl:
But if you don't mind sacrificing the monthly interest there are better accounts out there

Bogof_Babe · 1 May 2009 at 4:41PM

Good advice, thank you. I did try to establish whether this was a savings type fixed rate "Bond" rather than an investment one, on our initial discussion, but as we were dealing with other matters on that occasion, I came away a bit confused.

I did think 5% sounded a bit too good to be true in the present climate.

I've discovered that there is a branch in the town I am going to on 6th, so maybe all is not lost, assuming the staff at the other branch have any idea what I'm talking about! I must say A&L seem to be a bit hazy on what they actually offer. The FA I was meant to see today only works at this branch two days a week, and no-one else is au fait with anything beyond normal day-to-day banking. Seem to be short of staff generally.

Bogof_Babe · 1 May 2009 at 4:45PM

Oh that is very useful "annoyed customer" (lol, mind if I share your nickname?). I do need monthly income as it's the only income I have apart from my OH's small works pension which goes into my current account to pay the bills, although he has some investments but I don't want to be beholden to him every time I need to buy something!

I like the sound of the Chesham one. Will investigate further. Thanks so much.

jem16 · 1 May 2009 at 5:34PM

Bogof_Babe wrote: »

Oh that is very useful "annoyed customer" (lol, mind if I share your nickname?). I do need monthly income as it's the only income I have

With this thread and your other investment (http://forums.moneysavingexpert.com/showthread.html?t=1661325) I would really be advising seeing an IFA to look into the whole lot for you.

Bogof_Babe · 1 May 2009 at 5:48PM

I'm beginning to think you're right. I was frightened by the probable cost of these wizards, although I'm sure Dunstonh will put me right, or at least convince me that they are excellent value for money! I don't blame them charging a healthy whack as it must be a minefield trying to sort it all out and keeping up with the changes.

How do you know you are dealing with one who is genuinely Independent though?

jem16 · 1 May 2009 at 6:16PM

Bogof_Babe wrote: »

I'm beginning to think you're right. I was frightened by the probable cost of these wizards, although I'm sure Dunstonh will put me right, or at least convince me that they are excellent value for money! I don't blame them charging a healthy whack as it must be a minefield trying to sort it all out and keeping up with the changes.

Average commission taken by IFAs is 1.8%. Banks will take the full commission. A fee may be cheaper depending on the amount you are investing.

How do you know you are dealing with one who is genuinely Independent though?

First of all they cannot use the term IFA if they are not independent. Basically any "adviser" from a bank is not independent - they are tied to whatever products the bank use.

An IFA must offer a fee option. However you can agree a fee to be paid from commission if you wish.

Use https://www.unbiased.co.uk to find an IFA in yoyr area. See more than one and compare what they are offering. Avoid the large salesforce (often numbers starting 0870) as they are usually commission driven. Try to deal with a smaller company, especially one where you can work with the owner/director.

dunstonh · 1 May 2009 at 9:09PM

I was frightened by the probable cost of these wizards, although I'm sure Dunstonh will put me right, or at least convince me that they are excellent value for money!

Worst case scenario is that the IFA takes maximum commission and works on the same basis as the A&L sales rep. So effectively, you started at the worst place so it can only be better. How much better will depend on the IFA as we all have different charges or take different commissions depending on which option you choose.

Also, IFAs can get products on discounted terms or with extra features with some providers. For example the L&G product sold through A&L is not as good as the L&G product that IFAs can get.

I would suggest that £70k is cheaper on fee basis than commission basis. If you agree a fee and then have that fee paid out of commission then you dont pay any money by cheque and your investment is enhanced by the commission saved.

EdInvestor · 1 May 2009 at 10:51PM

The limitation of requiring a monthly income can sometimes lead people into a trap.For instance a lot of people were missold an NU fund by advisors at Barclays because apparently it was the only choice of income fund they could offer.(Bank advisors only have a very limited choice of funds.)

http://www.thisismoney.co.uk/investing/article.html?in_article_id=483363&in_page_id=166

There is an easy way of getting round this problem.Simply deduct the amount of income you need from t he initialcapital sum - say it's 3,500 a year in this case, put that money in the bank and then withdraw it in monthly chunks. Then invest the remaining 66,500. You then have the choice of a very wide range of funds(using an IFA) which may be able to generate better returns.Let's say your invested funds make 7%, ie 4655. At the end of the year you cash in a further 3500 of that, put it in the bank to pay your2nd year's income and leave the rest of the fund, now up to 67655,invested.

Another useful aspect is that no tax is payable, as your initial income is coming from your capital and later top-ups will be covered by your annual capital gains tax allowance, now over 10k p.a.

jamesd · 2 May 2009 at 2:17AM

Bogof_Babe, for your problem you should expect that an IFA would suggest a mixture with components in each of these things:

1. Some in a savings account with regular transfers to your current account, to provide you with stable cash flow.
2. Full use of both your cash and stocks and shares ISAs.
3. Possible use of NS&I index-linked issues to protect capital.
4. Corporate bond funds to produce income. A variety are available with different properties.
5. Equity income and similar funds that invest in shares of companies that often pay out dividends, so these can provide a mixture of income and capital growth to help fight inflation.
6. Some pure growth funds, including funds covering different parts of the world.

The IFA would put together a combination that would be unlikely to show a decrease in capital value over the long term. Year by year the value could easily go up and down a bit and your tolerance to such variations even though you don't plan to take all of the money out is one of the key criteria ued in selecting the portions invested in each part.

Bank advisers aren't qualified or permitted, generally, to do this sort of planning.

£70K to tie up for 5 years with monthly income

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