£25K to invest for my mum

cheggers

My mum has got £25K she wants to invest for her retirement. She's in her late 50's, and does not want to invest the cash into her pension.

I have look at the following bonds:

West Brom E Bond 7 - 5.65 Gross
Derbyshire 1 year bond - 5.6% Gross
Derbyshire 2 year bond- 5.55%
Skipton 3 year bond - 5.55
Birmingham Midshires - 5.62

And a Derbyshire over 55's Cash ISA 5.15

Don't want all the cash in one place, any other or better places she can invest the money. She is not a gambler so she is not want high risk investments, she may put £500 into Premium Bonds as well.

She is going to put £5K in Aberdeen Property Share unit trust/ISA

dunstonh

points to note is that you say she wants to invest and you mention savings accounts, with a list and say she doesnt want high risk but then say she is going to put 5k in a very high risk fund (on the 1-10 scale, its risk 10).

Are you aware that this isnt a low risk property fund but a high risk one?

Chrismaths

I wouldn't say it's a 10, maybe an 8, as there isn't any liquidity risk, or gearing over and above that of the component companies, and the companies do have signficant assets - but it's certainly not a fund which invests in bricks and mortar - it's a sector specific fund investing in equities - a bit like a tech or healthcare fund. It's essentially a FTSE 350 Real Estate index tracker (with holdings capped at 10% by unit trust rules). But Dh is right that if you are looking for something one or two notches above cash, you're in the wrong place.

dunstonh

I just looked it up on one of the research providers we use and they have it as a 9. So, I was one out on the guess. However, any scale is relative to other entries and they have UK equity income funds coming out between 6-7 and schroder mid 250 tracker at 8. So, on that basis 9 seems fine. Another had it at 10 but lowered it to 9 some time back when they re-did their spread. I think they had got to the point where newer launched funds were high risk and they had run out of numbers and rather than introduce 11-15 or something, they regraded funds on that 1-10 basis. Its why I usually say its a crude 1-10 scale.

cheggers

Might tell her to invest less in the Aberdeen Property Share fund. She is also interested in Standard Life Select Property ISA instead of the Aberdeen.

Plus its only going to be £4K she invests now in the ISA, as £3K will be in the cash ISA.

chesky369

I stand to be corrected but I don't think she can invest in both Aberdeen and Standard Life ISAs in the same year.

dunstonh

chesky369 wrote:

I stand to be corrected but I don't think she can invest in both Aberdeen and Standard Life ISAs in the same year.

She can if she uses a fund supermarket. Which is why most investments now go down that route (at least on the advised front).

si1503

A cash ISA would only allow her to save upto £3k of savings, which if used, would only allow for a stocks and shares mini ISA of up to £4k. The only way she could stick £5k into a stocks and shares ISA would be if she went the maxi ISA route (upto £7k) but this would not allow her to open a cash ISA as well for that tax year.

If she did decide to invest she would be better off investing through a fund supermarket as mentioned above, and investing in a range of funds to balance out risk; not putting all your eggs in one basket so to speak.

Jake'sGran

I think it might be a good idea for her to use her full ISA allowance this year, £3000 in a one year bond with a good rate like the ones you list. It's widely reported that interest rates are likely to go up so one year would be my maximum. I'd put the rest £4000 in an Equity Income Isa such as Invesco Perpetual High Income or Income, both are good (look at the league tables over 5 yrs). I would have the income reinvested i.e. not paid out although with some there is a charge for doing this. I'd then put the balance of her £25,000 in a high interest easy access account like the Birmingham Midshires one paying 5.2% (there are two others recommended for good rates with easy access). Then, next year, I would use the full ISA allowance again and so on.

Chrismaths

I would have the income reinvested i.e. not paid out although with some there is a charge for doing this.

Buy the "Acc" Units (accumulation). Income is automatically reinvested (without ever being paid out).