Investment - Monthly Income

JBmoney

Having recently received a substantial inheritance, I would like this money to provide income on a monthly basis. I have £200,000 to invest. What is the very best option to give me a monthly income from this sum and what should I expect to receive ?

ReportInvestor

Hi JB and congratulations on your good fortune. I hope it wasn't from an untimely death in the family.

Unless you have excluded other investments apart from cash, that's probably not quite the right question to ask.

"Best" is not necessarily the highest monthly income now. Do you need the income to grow with inflation, for instance?

JBmoney

No to the last part. This is an interim measure for perhaps a year or two. I read a post somewhere in this forum from someone investing £90,000 which was providing £490 monthly to him. This ( to my reckoning ) seems very good indeed. As I say, this is an interim measure and I intend to review again before too long.

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In an IceSave acccount (5.08% paid monthly = 5.2% AER) you could get
.04233% interest per month = £846.67pm.

You could get slightly higher (5.13% with Chelsea BS Double Guarantee) but then you'd have to switch your account when you lost the guarantee.

JBmoney

Ta very much for that. I take it that would be pre tax monthly income ?

ReportInvestor

That's right.

If you know you won't do anything for a year, why not invest £190K in the Coventry BS 5.8% Fixed Rate Bond that lasts until January 2008 and put the other £10K into an IceSave savings account to encash for income, month by month, in the meantime?

It could make you nearly an additional 0.6% gross = £1,200 before tax (obviously less if interest rates do start to climb).

Chrismaths

£90,000 which was providing £490 monthly to him

. That's a 6.5% yield. To get this level of income, you'd need to invest in a high yield bond fund, and I'm not aware of many that pay out monthly (Baillie Gifford High Yield maybe?) The problem with this is that there is little possibility for capital growth, and there are risks to capital.

JBmoney

Ta for all posts. Yeah I know that £490 PM does seem VERY VERY good for £90,000 but I definitely did see that figure in a post somewhere in this forum in the past few weeks.
Ta again for all replies.

EdInvestor

I think the OP is referring to the AIG Guaranteed Income Bond - actually an endowment - which guaranteed capital back and a 6% income paid monthly over 4 years. This suited the poster who was on 10% tax.

http://www.aiglife.co.uk/pdf/GIB_App.pdf

Note there is a possible penalty if you try to get the money out early.

I guess you could say this GIB is better than a GEB.

dunstonh

I think the OP is referring to the AIG Guaranteed Income Bond - actually an endowment - which guaranteed capital back and a 6% income paid monthly over 4 years. This suited the poster who was on 10% tax.

Not to be confused with mortgage endowments which many here would immediately think of. Its a generic term for single premium investing in life funds with a specified term. Originally, GEBs and GIBs utilised the life fund tax wrapper but most have moved over to the ISA/OEIC tax wrapper which was not initially available for this style of product. The life fund tax wrapper is not cost efficient with small amounts when compared to OEIC and ISAs where you can have one product covering two tax wrappers.

As it tends to be inexperienced investors who dont realise how poor these products are generally, the amounts invested are relatively small per individual and costs need to reflect that. God forbid anyone would invest £90k into one of these.

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Potentially good news for you. The IceSave AER will go up from 5.2% to 5.45% from November 15th after the Bank of England base rate rise today.

These Icelandic guys look like they want to make a good first impression in the UK and shouldn't mess you around too much in the event of further interest rate changes.

At least not for a while .