ISA investment for pension return

safeboy

I have been investing in ISAs for a few years now and have a joint fund with my wife of £36k at present, I am self employed and this is our pension fund. The intention was to continue this for the next 18yrs 3mnths to then have a nest egg of approx £300k but because of falling interest rates the forecast is now nearly £90k less, I understand that providing inflation stays lower then the money i withdraw at retirement will go that much further. I am mortgage free and have no debts so i cant see what else there is i can do to help my money work for me without taking much of an investment risk. I am locked in for 12 mnths at 6.6% but after that i dont know what to do with my investment, can anybody offer any advice for a long term secure move?
Safeboy.

Lokolo

Can I just get this clear - is it an investment or savings? I can't quite tell. I am not sure how you will get £90k less with interest rates falling when you are in a fixed rate?

Robert_Sterling_3

I think he is locked in to an excellent rate in a Cash Isa.
He is concerned about the low rate he will get when the Fixed Rate ends.
He is right to be concerned about it.
However the future is always uncertain.
We have to do the best we can in the present.

Lokolo

Yeh but its not like the rates are going to stay this low for 18 years....

Robert_Sterling_3

The past is not a guide to the future.

dunstonh

true, although given the timescales involved you can assume that there will be many more boom and busts in that period and high and low interest rates. Indeed, it is a sensible assumption to make that there will be good and bad times.

Also, as the OP is self employed, that means lower state pensions. Just the basic £4700 a year. So, its much more important for them to plan.

As the OP is using cash, they have to assume that the rate of return will be at the lower end of the scale as an average. Plus, they are not getting tax relief so the monthly commitment is going to have to be much higher than that which you would use with a pension and/or a spread of other asset classes.

Personally, I think its bad planning to rely 100% on one asset class. In this case cash. You may not have investment risk but you are replacing it with inflation risk and shortfall risk.

safeboy

It is fair to assume then that there is no such thing as no risk just lower risk and to have spread assets gives a greater chance of safeguarding against any possible losses.