Long term savings advice please

lesley_jane

New to this but need some help and you all seem to know about savings etc. I have £56k to invest over the next five years and have been to see Santander who I bank with, they suggest a stocks and shares bond but there is a risk that i could loose some of my original investment which would break my heart as this is my divorce settlement! any suggestions as to what would work best?

Jonbvn

I'm an engineer. Would you come to see me to have your teeth fixed?

Why go to Santander for financial advice? IMHO a rubbish product from a rubbish bank.

lesley_jane

Well as far as finances go i am a novice at all this, have spent the last 20 years in the red! so savings and investments is a new area for me so perhaps an idiot I am!

Any advise where i should go then?

cos69

savings decisions are difficult at the moment because there is an expectation of interest rate rises. So don't lock your money away for more than a year or 2 at the most.

If you pay tax, then its worth putting £5100 into an ISA now and another £5100 in April.

One of the better paying instant access accounts is Lloyds TSB Vantage - check out the threads on this. Open 2 accounts, putting £7000 into each and set up a standing orders to move £1000 from 1 to other and back each month for 4% interest. You can open 3 accounts so could save £21,000 here

You could put the rest into a Lloyds TSB incentive saver for the next few months getting 2.78% until you maybe find a decent fixed rate bond for it

lesley_jane

I currently have a loyalty tracker bond with santander that is givng 3.25 over a year, and I have a cash Isa with them too at the moment, there advisor said that to have all your money in Cash accounts wouldnt be making my money work for me because of the rate of inflation. Not sure that I could get out of the tracker bond if I was going to bank it elsewhere!

luvpump

Put in a newcastle Building society bond, they have a clause that allows a 3 month withdraw.. Your risk averse, this is you best option imo ..And i have the bulk of my savings with them ..

http://www.newcastle.co.uk/savings/Five-Year-Bond-4

lisyloo

there advisor said that to have all your money in Cash accounts wouldnt be making my money work for me because of the rate of inflation

He is correct because with inflation at 4% your money is actually going down in real terms.
What that means is the numbers aren't going down but what you can buy with your money is less in effect it's going down.

Ideally you should be looking at investing some in stocks & shares for a higher return but the problem is that if you refuse to take ANY risk then you are stuck with cash.
Any advisor should first ask you questions and seek to find out your goals and attitude to risk before making a recommendation.

I woudl suggest you see an IFA and get recommendations from friends, colleagues family etc.
If you can't get any recommendations then do you have any advisors at work via your works pension scheme?
My own personal experience is that those running a company pension scheme do not want to get a bad reputation so tend to treat you fairly.
They should however always listen to what you want and explain things to you in terms you understand.
Have Santander done that? I don't think they have.
One issue with getting advice from Santander is that they will only offer you their products whereas an IFA (independent) can offer you products from the whole of the market.

But not taking any risk with any of your money is very limiting and means your money may go down in real terms.
I am not saying you should change our mind, but it's certainly something you should be aware of.
If you therefore had any purchasing plans (e.g. new car) it might make sense to bering them forward as you'll be able to buy more now than when your money has deflated.
Obviously that purchasing decision needs to fit in with your plans in a sensible way, but if (for exmaple) you needed a new car or boiler then it might make sense to do it now as your money will probably not even keep its' avlue.

BFM

i guess we are all assuming you've paid off all your debts and are no longer in the red. generally next to impossible to beat the interest rates your debts will be charged in investment income.

also, do you have your mortgage cleared, as depending on the interest rate of that, may be the best return as its tax free...

dunstonh

I have £56k to invest over the next five years

That is short term. Not long term.

have been to see Santander who I bank with, they suggest a stocks and shares bond but there is a risk that i could loose some of my original investment which would break my heart as this is my divorce settlement!

Clearly Santander are pushing a product rather than giving advice. They should measure your risk profile first and then recommend. Not the other way round. But that is banks for you.

any suggestions as to what would work best?

We can tell you in 5 years time as investing doesnt give you any certainties.

there advisor said that to have all your money in Cash accounts wouldnt be making my money work for me because of the rate of inflation.

That is correct. There is no nil risk option available. Every option has some risk. The type of risk and the degree of that risk varies depending on the option. The three risks that cash savings has are provider risk (easily avoided), shortfall risk (it returns little so hitting objectives is harder or near impossible) and inflation risk (if you are getting 3% and inflation is 4% then you are losing money in real terms).

Investments have investment risk so your value can zig zag but they have a greater chance of avoiding shortfall risk and inflation risk but there are no guarantees.

So, in reality, its a case of going with sensible options with a balanced view being taken.

You say the timescale is 5 years for the money. What do you intend purchasing in 5 years that will see the money gone at that point? If the money is important to you then are you not going to have it for a longer period than that? If the money is important to you then what is the purpose of it?

At the moment you are jumping to the end result and asking people to give answers to a question that hasnt been asked. You are asking for a product that will be best without us knowing what is required. Effectively you have said so far that you have 56k now and are spending it all in 5 years time. Is that correct?

calypso_rhapsody

Yes, take a step back and ask the question again ... you have £56k from your divorce settlement and are not sure what to do with it.

In order to get some good advice (other than that Santander's suggestion is probably not the best idea!) you really need to talk about what your objectives for this money are. How old are you? are you a tax payer (basic/40%/50%)? do you need to money to pay your living costs - to provide for your retirement - to buy a house once the kids have grown ???? I suspect that this 5 years you have talked about is a timescale planted in your mind by the Santander 'advisor' and does not really reflect your own thoughts .... i may be wrong though!!

lesley_jane

Thank you to all of you. Just to clarifiy. Yes I have paid off all my debts. I do not have a mortgage but Im renting a flat. My kids are grown although still need a handout more often then not. I am nearly 50. I want to invest the money so i dont keep dipping into it, I dont have enough to buy a flat of my own and my previous mortgage and credit rating is not good so unlikely to get one (not good rates anyway).

I have no real plans as i dont know what life will throw at me over the next few years, the five year was a suggestion from Santander or at least to think of investing for the long term not short term. I want the best return on it as i have done 20 years hard labour to end up divorced! haha I dont mind taking a risk but i certainly dont want to loose it all! So i guess the money would be to put away for a rainy day, retirement, to keep me if i lost my job etc.

Im in a great postition for the first time in years and want to stay that way. x