St James's Place Income Distribution Bond

jaybee

Someone has suggested to me that a good place to put some money for both capital growth and income is St James's Place Income Distribution Bond. Does anyone know anything about it? How risky is it? What else should I know?

Many thanks!

dunstonh

They are tied advisors and its a tied salesforce product. Basically, St James Place is the new name for Allied Dunbar.

Everything will be glossy and smart from a presentation point of view. They will have some of the slickest salesmen out there who could sell sand to Saudia Arabia and make Labour look amateurs on spin.

Product is easily beaten.

jaybee

Many thanks for your reply. I didn't realise the connection with Allied Dunbar!

May I ask what you think it is 'easily beaten' by?

dunstonh

May I ask what you think it is 'easily beaten' by?

Too long a list to roll off here and it would probably breach board rules if I did.

However, if you need the life investment bond tax wrapper, then there at least 15 mainstream providers offering a better fund range with lower charges. (I'm sure more if I was to really compare like for like). If you need the ISA or Unit trust/Oeic tax wrappers then any fund supermarket could give a better range of funds to build a far superior portfolio.

I assume you had a reason for being recommended a bond and what was the elimination of unit trust/OEIC? Tied agents (or any low knowledge advisors) are notorious for selling investment bonds when an OEIC/Unit trust would be better. Bonds are still good for higher rate tax payers who will be basic rate tax payers in the future or where trusts need to be utilised but where someone is a basic rate (or lower) tax payer and no trusts are being used, then OEICs/UTs are usually better. There is an exception with a couple of bond providers currently that have such low charges and a mini fund supermarket style fund range that they could be used justifiably. However, that certainly wouldnt apply with St James place.

jaybee

Again, many thanks for your reply.

I haven't ruled out any way of investing. At the moment I am trying to understand my options and find the best way to go. My mother died a few months ago and I should have a large sum to 'do something with' by the middle of April and I really want to get it right. People on MSE are so helpful and offer unbiased advice - I feel more comfortable accepting advice on here than from the bank etc!

dunstonh

I was just wondering why you were looking at bonds (or why they had been recommended).

Remember, bonds, oeics, ISAs and pensions can all invest in the same funds nowadays. The main difference in those wrappers are the charges and the taxation. So, once you know what areas you want to invest in, you then look to to the tax wrapper that is most appropriate. A bond can be tax efficient for some but less so for others.

jaybee

Yet again, many thanks to you!

I was recommended the St James's Bond because the person who suggested it thought it was good (he has had good Capitol Gains and receives and income from it every 3 months). He knows that I am looking for / needing an income to supplement what I am already getting and thought that would be the best way to go. I'm not so sure - maybe I'm just too cynical about financial advisors (no offence meant!!). Currently I'm not sure what will be happening re tax. I'm receiving the State Pension plus a couple of (very small) other pensions. The amount I should be looking to invest will be around £200,000 (from the sale of my mother's house.

dunstonh

I was recommended the St James's Bond because the person who suggested it thought it was good (he has had good Capitol Gains and receives and income from it every 3 months).

Anything over the last 3-4 years has made money. That hasnt been difficult. It doesnt make it good. Distribution funds are lazy investments.

. He knows that I am looking for / needing an income to supplement what I am already getting and thought that would be the best way to go. I'm not so sure - maybe I'm just too cynical about financial advisors (no offence meant!!).

Financial advisor is a term that covers someone that passed the exams yesterday or a tied agent who has 15 products available but cannot recommend investment funds (which includes St James Place) or an IFA who dabbles in all things but is a specialist in none. There are also highly qualified advisors who specialise in certain areas. All have the tag "financial advisor".

Assuming you are not a higher rate taxpayer and the your income, including savings, isnt taking you over the age allowance limits, then a bond would only be useful in helping reduce an IHT liability. That is for those few exceptions were a bond can be very cheap (which isnt St James Place).

Although you should be rightly careful of any advice you get. If you ask to see the research and why other things have been eliminated (such as OEICs, UTs, ITs) and the advice seems suitable, then everything is good. If they refuse to show the research or cannot justify why the alternative tax wrappers are not being used then move on.

So just be on guard, your friend has bought a product that is doing alright but could have done a lot better without any more effort really. He may be happy with it but if he was aware of the alternatives, he wouldn't be.

jaybee

Thank you so much (again!). I understand it all a lot more now that you have spelt it out for me (not very good when it comes to these things and it's important that I get it right).

Thanks again for you you time and trouble in replying.

EdInvestor

Hello jaybee

I should take your time investing this money, after all you've got the whole of the rest of your life to get it right, so there's no rush.

Here are a few things to look out if you want income:

#High yield shares (big blue chips that pay good dividends: dividends are tax free to basic rate taxpayers, very important 5% income possible
#Equity income funds ( these are funds which invest in the high yield shares as above - they will pay out a lower income, as the charges also have to be paid) 3.5%-4% income
#Commercial property funds (these funds are run by the big insurers. They are low-med risk, very popular with retired people) 5-7% income
#Corporate bond funds (varying degrees of risk, the higher the income the higher the risk) 3.5%-6% income
#Cash - no risk but inflation eats away at the value of the capital and interest rates are both low and taxed. But you probably should have around 30% of the money in safe cash (or perhaps gilts/bonds/property)

"Asset allocation" is the key to reducing risk while also getting a growing income over time to beat inflation.

Try this calculator which shows what they recommend for different ages and attitudes to risk.

jaybee

Hi EdInvestor - many thanks for your reply. I shall take my time and hopefully get a few options going. I don't really want to put the whole lot into just one place. Plenty to think about!