Tieing money up for 5yrs

Bogof_Babe

And many thanks to you too Dunstonh for a comprehensive analysis of the situation. There are pitfalls to doing anything without due consideration and expert advice it seems, especially in this sort of environment.

I actually wish we'd never got into this, but 2% in a building society was such a blow after 12 months of 6.5% that we allowed ourselves to be convinced it was the all-singing all-dancing solution.

Just waiting for a call back from A&L now about my other thread. Hope I'm not about to throw good money after bad .

Bogof_Babe

I can tell you what we have, if it helps to determine whether they are good or dubious...

In varying proportions, the highest being £130K:-

M&G High Yield Corporate Bond Fund (that's the £130K one)
M&G Gilt & Fixed Interest Income Fund
Threadneedle Equity & Bond Fund
M&G Strategic Corporate Bond Fund
Invesco Perpetual Corporate Bond Fund

These are all just names to me, so if you are in a position to advise whether they are any good I would be more than grateful.

jem16

Bogof_Babe wrote: »

I can tell you what we have, if it helps to determine whether they are good or dubious...

In varying proportions, the highest being £130K:-

M&G High Yield Corporate Bond Fund (that's the £130K one)

Can't really comment on the funds - I'll leave Dunstonh to comment on them.

However I'd be very concerned at having £130k in just one fund. I have £100k spread in 10 funds.

I don't know what your total investment came to but even with £130k you will get a far better portfolio at a much better cost by seeing an IFA.

Bogof_Babe

This person gave the impression of being a FA, albeit not "I". For tax planning purposes we have half each (i.e. £65K in the biggest one) of each of the investments - again we were just guided by her as we have no educated knowledge of these things.

Obviously if the Corporate Bond goes belly up then we stand to lose just as much in total whether we hold them jointly or individually, but £65K doesn't sound so bad as £130K!

The thing is, when you are a total novice who has only ever had building society savings accounts, it is easy to be convinced that this is the way to go. I am so cross that plummeting interest rates have lead us into this morass of complications.

jem16

Bogof_Babe wrote: »

This person gave the impression of being a FA, albeit not "I". For tax planning purposes we have half each (i.e. £65K in the biggest one) of each of the investments - again we were just guided by her as we have no educated knowledge of these things.

They were technically a financial adviser. However a bank FA is more like a salesman - only able to offer a tied, usually small choice from one provider. They are not able to portfolio plan and it is usually documented that you chose the funds that fitted in with whatever risk profile you chose.

Obviously if the Corporate Bond goes belly up then we stand to lose just as much in total whether we hold them jointly or individually, but £65K doesn't sound so bad as £130K!

It's an awful ot of eggs in one basket regardless of whether it's £65k or £130k.

The thing is, when you are a total novice who has only ever had building society savings accounts, it is easy to be convinced that this is the way to go. I am so cross that plummeting interest rates have lead us into this morass of complications.

Yes it is easy, especially if you go to the bank. However that is what they are trained to do - sell!

Has your investment got a collective name of some sorts or not?

Probably a good idea to tie up your two threads.
http://forums.moneysavingexpert.com/showthread.html?t=1662149

Bogof_Babe

We have a glossy brochure called Portfolio Bond (IPS) with the L&G logo on the front, which lists 18 different "Funds", a couple in the Minimal risk category but the majority in Cautious risk. Our five are all in Cautious risk.

I didn't really view it as putting all eggs in one basket, as within the separate Bonds there are a wide variety of individual businesses. The chances of them all failing at the same time are pretty remote I'd have thought.

Apparently they are continuously reviewed, and we get a monthly update as to how they are doing, and the chance to come out of any we are unhappy with and transfer into a different one.

It sounded pretty foolproof when she explained it all, but then I do speak as the "fool" concerned!

I kept the threads separate as this one hijacked someone else's question, and the other one is more geared towards a savings product than an investment.

jem16

Bogof_Babe wrote: »

We have a glossy brochure called Portfolio Bond (IPS) with the L&G logo on the front, which lists 18 different "Funds", a couple in the Minimal risk category but the majority in Cautious risk. Our five are all in Cautious risk.

So what you have from the sound of it is an investment bond. This will probably have given the A&L a commission of around 7%. Were you given an enhanced initial allocation? I doubt it to be honest.

What were the reasons given for using an investment bond before unit trusts? Was an ISA also recommended? Are you a taxpayer? I'm sure I remember in your other thread reading that this was your only income apart from a small pension so it's fairly likely that an investment bond is not a suitable way for your to invest as an ISA and unit trusts would be better.

I didn't really view it as putting all eggs in one basket, as within the separate Bonds there are a wide variety of individual businesses. The chances of them all failing at the same time are pretty remote I'd have thought.

That's correct. However it's still £130k in one fund.

Apparently they are continuously reviewed, and we get a monthly update as to how they are doing, and the chance to come out of any we are unhappy with and transfer into a different one.

I doubt someone would recommend switches to you. It will be left to you to make that decision.

It sounded pretty foolproof when she explained it all, but then I do speak as the "fool" concerned!

It always does sound foolproof.

However the "advice" could possibly be classed as a missale if you were not advised to use unit trusts or ISA first.

I kept the threads separate as this one hijacked someone else's question, and the other one is more geared towards a savings product than an investment.

Perhaps start a new thread with everything involved from savings to investments.

How much is involved in total?

dunstonh

ISAs are the most tax efficient option. So £7200 (each if married) should be recommended first. Then you have to weigh up whether investment bond or unit trust is the better option. IFAs have software that can help work out which option is best. Often it depends on the asset classes used and the terms of the product and timescale its likely to be there along with your tax position. Sometimes its best to use a bit of both.

If you havent used your ISA allowances then the sale of this bond would almost certainly be a mis-sale.

jamesd

Bogof_Babe, please cancel this purchase. Even if you want exactly the same investments you'll get a better deal from a real IFA. An IFA will typically use some of the initial commission to increase the amount invested in this type of product to over 100% of your capital. A place like A&L is more likely to keep it all.

I's also necessary to justify why to use an investment bond. Since some tax changes a year or two ago these are much less likely to be appropriate than in the past. At a minimum an adviser would be expected to tell you to use 100% of your S&S ISA allowances and if that wasn't done you've reason to be unhappy about the service you received.

Corporate bond funds are likely to be quite a decent place to have your money at the moment, so that isn't unreasonable. But it's still not as good a job of allocating the money as I'd expect from a real pro like dunstonh and others of his qualifications and ability. Even now, you'd want some of the money in other places.

The cash you're talking about in the other discussion is also relevant because it's part of the investment mix and a pro would be using it as the lowest risk portion, to leave freedom to use medium risk for some of the other bits and improve your overall prospects without increasing the average level of risk. Risk here mostly means up and down value variation, not risk of losing it all.

With the amounts you're talking about it seems sure that you'll be better off with an IFA on fee rather than commission basis. The money that would have gone into commission will instead go into the investment or not be deducted form its growth. Don't be surprised by a thousand or two in fees - that's still better than 7% commission.

Bogof_Babe

I'd rather not say exactly how much money is involved in total, but it (or rather the revenue from it) is all we have to live on apart from OH's works pension of about £260 net per month, which goes into my current account towards the bills. We are not old enough for our state pensions, and my works pension is frozen until I turn 65 which is still quite some way off!

To try to explain how we got to this point, OH (to whom the bulk of the money belongs) was worried about the end of his 1 year fixed rate Coventry savings account which was paying 6.5%. He noticed a poster or advert in A&L's window about a Bond (I think) paying around 4% (I think), so we went in to enquire about it. Anyway it turned out that with the amount concerned we could do better than that, so the meeting with the financial adviser was set up. I admit we did get rather swept along in it all, but it sounded like such a good bet at the time. To be honest I still think it has "legs", especially as the market seems to be levelling or even on the up in the last few days.

Now, my own bit of money, the £70K that is looking for a home. That is quite separate from OH's, and I need it to be completely risk free (well I know I'm taking a gamble on 20K of it not being covered by the gov't if the worst happened, but the likelihood of Santander going to the wall is pretty remote).

I pay almost all the household bills for two homes (no I'm not an MP, we have a holiday flat) because I wanted it that way so I know they are seen to! His money pays for extras, going out, holidays, along with his rather expensive hobby of collecting and showing classic cars.

He has agreed to put half of "his" investments in each of our names, although the monthly dividends (if that's what they are called) will go into his current account. This sounds like I get a bit of a raw deal, but it works for us and I have enough for my needs, or I will do if I can get a reasonable rate of monthly interest.

This is why I kept the two threads separate, as the two pots of money are completely separate and it is simply a coincidence that we need to do something with them at the same time. We have had a helluva April trying to deal with all this, and I am determined not to repeat the process next year, hence wanting a tie-in that will just roll on.