200K to invest

dunstonh

socrates wrote: »

This is interesting - can you explain further?

£3600 gross contribution costs you £2880. You take back 25% of the £3600 which is £900. So, your net outlay is £1980.

£2700 is in the pension pot and an annuity rate of 6% would give you £162 income.

£162 is 8.18% of your £1980 outlay.

Double that up for a couple and £3960 brings you in £324 a year compared to around £100 if you are lucky in a savings account.

As you get into your mid 60s or older the annuity rate starts to get better and increases at a greater rate

Do this annually with each years allowance (assuming no earned income allowing higher amount) and if married for both of you and it can soon add up and with interest rates as low as they are, it could make enough difference to reduce or remove the requirement to eat into your capital to live.

Thats for the already retired but it also works for those coming up to retirement. You can do it but leave it invested but use cash and/or fixed interest funds in the pensions and leave the commencement until you actually retire. If you are smoker or dont have good health (and that can be as little as high blood pressure and high cholestoral which many have at that age) and you can get annuity rates higher than standard which improves the figures further.

It can also be useful for those that have planned their retirement funding badly by being too heavy in income on one side and very little with the spouse. You can put money into the pension each year in your spouses name but leave it there until you die or hit age 75 whichever is first. It can help rebalance and replace the income that will be lost when you die.

People very often get lost with pensions and the media coverage is often disgraceful scaremongering that fails to take into consideration that there are different types. In reality, a pension is just a tax wrapper in the same as an ISA is. Whatever you can put in an ISA you can put in a pension. The only differences (and they are major ones) are that pension gets tax relief and has a defined maturity process (which may not be suitable for some but not be an issue for others).

DiggerUK

James,

Your mum seems only slightly older than me and Mrs.D.
Her cash pot is a similar amount to ours, so it could help to let you know how we have organised.

We are mortgage free with a plan to buy our final home nearer retirement.
We both have final salary pensions to look forward to, perhaps your mum is not so well placed.
Our savings are to be used as draw down, we have enough and don't need growth.

A big chunk is in NSI Index Linked. We are judging that inflation will go up. More importantly we view them as safe as we need them to be. In an emergency we could use them as instant access, but lose bonus.

We didn't put them all in with one purchase. By investing at intervals we used the 3 and 5 year to give us payments that would come back over a 4 year spread. When they mature we will have the flexibility of options that will be available then, including just rolling them over.

Premium Bonds are rubbished by many. But as an instant access pot they do offer a variable rate of 0% to 100 million percent. Have a flutter.

As your mum has as many years to look forward to as us you should also consider gold. It don't go bankrupt, default or lose you money. Anything that can be put away for 10 or more years would be protected here.
Not to everyone's taste though.

Play safe, your mum don't need growth, only protection. Those are decisions you can make yourselves.

All the best.

lotsadogs

Hi. Im new here so forgive any flounders.

I was fortunate enough to sell my house just before the decline started. And then watching the financial world falla apart, I decided In March to buy some shares.

The way I see it at a very smimplistic level, you only lose with shares if
a) the company goes bust, or
b) You NEED the money at some time in a hurry and have to sell when share prices have dropped.

So I have taken about 30% o fhte money I had sat in the bank earnign hardly any interest, and bought some banking shares (2 banks).

Banks as I understand it CAN NOT or will not be allowed to go bust in this country. They potntially could be privatised and therefore the share prices could go seriously weird. But, given that the majprity of bnaks have survived the worst culmination of events that could have happened to them and that they are still alive, gives me great hope.

Granted, I am an optimist. Granted I have always been very fortunate with money (though Im not loaded), and granted I could afford to be without the money I have invested and still not starve.

But personally I see it as massively low risk investment. To that end, I rathr guiltily report that my returns have thuisfar been about 60% of original investment. I can now totally see how people get to be so rich. A couple of button presses on a keyboard and hey presto, im a lot richer.

As a precaution I have now taken out 1/3 of my origianl investment so that I am only playing with 2/3 the original. Assuming shares continue to rise I will contine to take out up to my capital gains tax ammoun each year.

To oiffset my guilt that I appar to be benefitting from the "credit crunch" where others are not, I have now given away 20% of the money I have made to friends and charities.

I hope thouse thought are of some help and I wish everyone luck with their investments and / or recovering fromt heir financial difficulties.

Good luck . What a great forum! :T

johncolescarr

If your Mum is nearing/in retirement (assuming around 60y/o) then you don't really want too much risk.

In general, if you are young, it is generally considered of more benefit to invest in higher risk as this is most likely to give you the highest return. Also, the longer the investment period, the better the return.

If you want to invest in the stock market, in my opinion you should be looking at a 10-20 years, plus you must be willing to spend a lot of time and effort researching the markets (or paying someone to do it for you)

Personally, I would max out the high savings returns accounts such as cash ISAs and regular savers. Remember that you have the first £50k protected per person per financial institution so I would recomend investing in at least 4 seperate institutions.

dunstonh

Personally, I would max out the high savings returns accounts such as cash ISAs and regular savers. Remember that you have the first £50k protected per person per financial institution so I would recomend investing in at least 4 seperate institutions.

So,lets assume she is around 60 as you have.

The OP has never said how much she wants as income but lets assume 5% of £200k as that is a typical figure. That would give £10k a year. lets also assume that she want to keep that up with inflation and that inflation equals the interest rate payable as it historically has more or less.

On that basis all the money would be gone by year 20 (probably by 15 on a strict calculator as the compound losses increase but chances are she would spend less as she gets older which would string out further). You would guarantee a complete loss of money by putting it all in a savings account in that case. What happens if shes 50 and not 60. She would be out of money by 65-70.

Your solution tries to reduce provider risk and investment risk but leaves itself open to inflation risk and shortfall risk. This is why the comments in the thread state that there is no risk free option. Also, risk is not on/off. It is a sliding scale. You dont have to go gung ho into a high risk area to achieve what is needed.

We dont know enough about the OPs mother so its imposssible to give any solution. They could all be right or all be wrong when nothing is known.