Want monthly income from £20k lump sum

greensea27

My 78 year old father has a £20,000 endowment maturing next month, and he wants to invest it to provide a monthly top-up to his existing small pensions. He is a basic rate tax payer, in good health, and has some other 'rainy day' savings put aside. He is therefore prepared to take a bit of a risk with the £20k to get some income out of it.

Grateful for the thoughts of the clever folk here on how he can make the most of it.

Greensea

sabretoothtigger

Asian income fund has high yield and growth. That'd give like a savings return plus the lump sum should grow.

If you mean like 10% it starts to get iffy as that is not normally possible. One fund I have give 7% allegedly, I think they are good and its not low risk but not unstably high either http://www.morningstar.co.uk/uk/snapshot/snapshot.aspx?id=F000000ILY

Recently shares outgrew bonds quite alot, I think this has meant this fund has not grown at all. Thats not such a bad scenario, it returns income still and I expect growth in future still though it will take 5 years maybe




I dont actually look at these much, but I dont disagree either. Probably a reasonable guide, they review funds, etc

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Linton

If he is only interested in an income rather than leaving any of the £20K to the OP he would find it difficult to beat an annuity. At his age the rates would be very good.

Loughton_Monkey

Assuming he wants to remain 100% 'safe' (and I think I would at that age), then it would be reasonable to assume that he could draw about 10% a year. Maybe put £6K in 'instant access' at about 3%, and the remaining £14K in a 3-year bond (say Barnsley at 4.15%). After 3 years, re-assess and re-distribute depending upon interest rates at the time.

anjb

My own opinion is that he should not take any risk with money at 78!
Completely agree with Loughton Monkey.

sabretoothtigger

Its in the eye of the beholder I think.
If low risk is investing in currency, seeing a negative return after inflation and using up the original capital hoping you will not live to see it run out I'll take my chances on investing in productive industry rather then the leaky bucket which is bank of england promissory notes

Stay liquid of course, healthcare is the largest cost I guess so secure that possible expense is one option

the remaining £14K in a 3-year bond (say Barnsley at 4.15%). After 3 years, re-assess

Per capita the UK printed off more free money then anywhere else in the world.
Fixing a return isnt low risk to me, in 3 years we'll likely see the majority of the 200bn 'new money' circulating being used to buy things other then bonds which means prices will adjust upwards also


I read one younger guy paid up his kids school fees five years in advance, that seemed a fairly smart move

anjb

sabretoothtigger wrote: »

Its in the eye of the beholder I think.

Absolutely all we are conveying here are opinons

sabretoothtigger wrote: »

I'll take my chances on investing in productive industry rather then the leaky bucket which is bank of england promissory notes

Fair enough, but are you 78 in this case...If this was someone in there 30 years younger it's a different story.

Loughton_Monkey

sabretoothtigger wrote: »

I read one younger guy paid up his kids school fees five years in advance, that seemed a fairly smart move

So what are you saying? Is this guy supposed to buy a 'fix' of two years in the care home, in advance, and a pre-paid funeral?

sabretoothtigger

Pre paid health plan sure whatever future costs, I wouldnt know. Most people should secure their mortgages but I assume he is fine so depends what the expenses may be.

Prepayment would be a lower risk and higher return vs inflation then savings which are negative

Loughton_Monkey

There you go, OP.

Forget the Barnsley Bond. Looks like he's got to buy 2 gross jars of Sterident, 180 kg of Rich Tea Biscuits, and lifetime membership of the Derby & Joan.

joerugby

For those who are prepared to accept some capital risk and are looking for a reasonable income plus a good prospect of income growth Equity Income Funds seem to be favourite at the moment.

If you buy 4 or 5 good ones with different payout dates you can get your income spread across the year.