Tieing money up for 5yrs

Bogof_Babe

Two more replies while I posted the above!

Dunstonh, we have both used our Cash ISA allowances but put nothing into Shares ones. As regards the 7% commission, this was not mentioned (I suppose I am not surprised by that), but even as to how it would affect the returns. We did see another FA in a branch of Skipton BS and he quoted an awful lot more commission, 5% per annum of the capital, which I thought was ridiculous. Thinking about it, the A&L adviser did mention "charges" but they seemed negligible compared with at Skipton.

James I wouldn't know how to go about getting out of the deal now. The cheque has cleared so to all intents and purposes we are up and running.

I'm getting a bit exhausted thinking about all this now, so I will come back to it in the morning. Thanks so much everyone for your input, it has been very helpful.

jem16

Bogof_Babe wrote: »

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,

Sorry I wasn't trying to be nosy.

As regards the 7% commission, this was not mentioned (I suppose I am not surprised by that), but even as to how it would affect the returns.

It should all be mentioned on the key features document. The reduction in yield would also give you an idea of how much it would affect your returns. It's usually near the end and says someting like "Putting it another way, this would have the same effect as bringing the illustrated investment growth from 6.0% down to 4.2% a year."

James I wouldn't know how to go about getting out of the deal now. The cheque has cleared so to all intents and purposes we are up and running.

You should have been sent cancellation forms along with other stuff from L&G.

Bogof_Babe

I didn't mean I thought you were being nosy. Far from it, you've been more than helpful. It's just that already I've given enough info for anyone who knows us in real life to put two and two together, and we Brits are a funny lot about money matters .

We haven't had any paperwork through from L&G. The brochure was given to us by the FA at A&L. We've had nothing personal to us yet. Perhaps it is still to come. The cheque was made out to L&G though, so they obviously have us on their records now. It would be ironic if they deliberately didn't send us the relevant paperwork until the 30 days cooling off period has expired.

Anyway my brain hurts now, so I'm off to bed. Thanks again folks, I will report back when we know what we are doing!

dunstonh

We haven't had any paperwork through from L&G. The brochure was given to us by the FA at A&L.

You should have had two documents. A personal illustration and a key facts document (short brochure highlighting key points). The illustration is the key one for providing figures. It is a mandatory document which should be issued prior to you signing any application. A copy is sent with the cancellation rights as well.

It would be ironic if they deliberately didn't send us the relevant paperwork until the 30 days cooling off period has expired.

Cancellation rights starts from receipt of the notification.

Merrill_Lynch

Having looked long and hard, having listened, read, watched on TV - I MAY have done the wrong thing...BUT yes BUT......

Dunstonh knows the story...but we had lost ( like many ) quite a bit ( 60 k ) and we couldn't live with that...the fear of MORE losses...and so we have liquidated MOST ( crystalised as u say in the trade ) and OK no great deals out there but MOST are at least 4% if not 4.3 %....the latter working out after tax at 3.44% ...but at least we are not losing any more. Many "experts" warn that the gains of March will be shortlived...basically who-ever your consultant is he or she won't or can't give you any idea....it's all about LONG term... this year,next year,sometime, never.
what does that mean....??????? If I put in 100K and leave it in GOOD deals - savings accounts, straight forward bonds ( checking each year re rates ) over say 15-20 years...who is going to win...at the end of the day it depends on WHEN you decide to end the deal and take the dosh.
It you had deposited 50k 25 years ago and then wanted to take it this year.....who would have won....????????????????????? We need answers...my guess is overall, given what some folk might now have ( April 09 ) they may have been BETTER with CASH or certainly NOT far behind. Debate please guys ???

jamesd

For the investment bond tax wrapper 5 can appear in two ways.

First, for investment products in general, 0.5% of the total investment value is the usual default annual commission, paid out to the reseller monthly. That's variable depending on the agreement made with the reseller, a bank would normally take it all; at the sort of level you're at an IFA may be happy to discount it, letting you keep some of the extra value in the investment.

Second, the investment bond wrapper allows withdrawing 5% of the initial capital value each year for 20 years without paying tax on it. I think it's likely that this is the 5 that the Skipton person was referring to. The 20 years isn't a tie-in, just the limit on that 5% tax rule.

L&G would have two overlapping things to do. They would simultaneously be collecting and investing the money (so you could get back more or less than you started with) and handling the required notifications to you. You can proactively contact them yourself if you wish. They would still want the cancellation in writing, I expect, but if the funds haven't been invested then they may take your verbal notification as sufficient to stop them from doing that.

It sounds as though you may want to be taking more than 5%, so for as much as is desired above that, this doesn't seem to be the most appropriate way to provide it.

jamesd

Merrill_Lynch wrote: »

Debate please guys

Wrong topic, best to start a new one. This one is about assisting two people with real investment problems to solve.

However, the answer in general is that over the last 25 years there have been few cases when investments in equities (shares) would not have been profitable over five or ten years and in the exceptions, corporate bonds would have been one of the better alternatives for at least part of the period. The bad times to buy were at the top of peaks, with sales well below a peak. We're not in a peak at the moment, more one of the dips. That makes now a decent time to be buying equities. Maybe not the best, but a good one overall.

It's entirely possible that the rally we have seen since the start of March is temporary. It's also entirely possible that it or most of it will survive for five years. Simply can't tell at this point. Uncertainty is one reason why people often favor corproate bond funds in this sort of time. The money I have in corporate bonds is up about 7.5% over the last 12 months, plus payouts of interest to me over the year.

Bogof_Babe

Just to say thanks again James, Dunstan, EdInvestor, Jem et al. I am reading all your comments on both threads and digesting them a little at a time.

The chap at Skipton when asked about charges did say something like "well of course there are charges, for handling your money. We'd be looking at something like 3-5% of your capital per annum". We did some quick sums and worked out that even if the potential 5-6% growth materialised, after deducting the fees we'd be left with around 4-5%, so might as well stick it in a savings bond instead.

5% per annum income should be adequate for the foreseeable future, i.e. covers our needs plus a little extra to accumulate for inflation, emergencies etc. I have a couple of £15K NS&I Bonds maturing in the next 9 months so that will provide a cushion too. Also we have our Cash ISAs, although obviously that is a last resort.

We don't aim to be stinking rich, just to ensure we have enough to tide us over until our various pensions kick in, and hopefully still retain a reasonable amount of capital to supplement those in our old age. Our problem is finding it all so complicated, and as these threads have demonstrated, the deeper into it you go, the more complicated it becomes.

Everything was hunky dory until they wrecked interest rates .

Middle_Sister

I've just seen an advisor at Nat West who has advised me to take out a Barclays product (thru him) which will guard my capital and give me up to 40% growth if I tie it up for 4 yrs. He also mentioned charges of up to 3% which he said wouldn't come out of my initial £10K investment but would come out of the growth but that I wouldn't even notice it.
I have used up all my ISA allowances.

D1zzy

This is not a guarantee!! - "up to 40% growth" - in other words, 40% is the max. It might be zero growth, and then you have charges on top which presumably would come out of your capital if the growth did not cover them. I assume this is tied into stock market performance, and who knows where that is going in the next 4 years.