residual allocation

shiredeon

The remainder of my fund after taking the tax free cash will be about,80kthis will go to h.l.for drawdown,(but take no payments yet) can i invest this in a hyp? or is this not available.

dunstonh

It is available but there are charges involved. Have you investigated the different investment strategies as well as HYP? Its better to make the choice knowing all the options and not just pick one you have heard about on the internet. For example a sector allocated portfolio would have outperformed HYP achieving only sector average returns. You can actually utilise HYP within a sector allocated portfolio as well so you get a bit of both.

Are you happy with the level of volatility you can have with investments (and not just HYP)?

shiredeon

To be honset dunstonh i really don't care that much, i've got to put it somewhere and i doubt i'll monitor it, rather take a look in a few years and be pleased or horrified so any suggestions gratfully recieved, i guess i'll only take one shot at it so i'm trying to do a bit of homework first, so if anyone has done something similar and doesn't mind me copying great.

dunstonh

Ok, I would say that HYP isnt suitable for you then. Indeed, its quite possible that drawdown isnt suitable for you either. That requires monitoring.

Either you need to do the work or you need to get someone to do it. DIY doesnt mean you just do the initial bit. It means doing the ongoing bit as well.

My biggest concern was that you have read a few things, think they are the only or best option and are going with that without knowing the consequences or potential events of your actions.

How much tolerance to loss have you got?

http://finance.yahoo.com/q/bc?s=LLOY.L&t=5y&l=on&z=m&q=l&c=

That is a typical stock you would hold in a HYP. If you had £80,000 in 2002, you would have dropped to £35,000 at the low point and seen a very very slow improvement to £54,000 now. Would you accept that level of capital decline?

There would have been dividends but you would be drawing those so they can be ignored.

So, if that scenario was to occur (and that is a real example of what can occur) would you shrug it off as something that happens or would you pull out and change it to something more appropriate to your risk level?

shiredeon

Sorry perhaps i should have given more info, i was under the impression that once the remainder of my fund was transfered into a plan for drawdown it would be invested and left to grow untill such time as i wanted to take an income, i'm not adverse to risk, just want to do a little bit of homework before i decided, i certainly won't lose any sleep over it once it's done, i just hoped someone could give a bit of advice so save doing my head in which isn't on top form at the moment, cheers.

dunstonh

i'm not adverse to risk,

What level of risk? Look at the graph and say whether that sort of performance would be acceptable or not? Would you accept a drop like that (and ultimately a lower income when you do start) or would you prefer something less volatile or even more volatile?

Everyone has different risk views. What is right for one person is different to another. I use 10 different sector allocations to suit different risk profiles. There is little point us suggesting a risk 10 profile for you if you are more in line with a risk 4. That would be of no benefit to you whatsoever.

Looking at like this, you have asked us to recommend a vehicle to without knowing what you want from it. One person could say a peddle bike, another could say a helicopter, another could say a motorbike.

shiredeon

ok, i would like to be able to drawdown say 5%, it would be good if the fund could hold it's own or even grow a little, or is that a tad optimistic. with regard to risk id say sh*t happens(coz it invariably does) and get on with.

jamesd

dunstonh, what charges do you think a competitive IFA might make for setup and management of the various funds that shiredon has discussed here?

It looks to me as though that's really what shiredeon should be looking at.

EdInvestor

SD

IFAs are not allowed to advise on share investments like HYPs so they don't really know much about this sort of thing. You do need to do a bit of work at the beginning to get your HYP set up, at least so you understand how it works, but it's really easy.

Have a look at these articles which are simple to read so you understand how to go about it

After you've picked your 15 shares you can just leave the portfolio and take your income into your bank account, should be about 4.7% at present.

You can have an HYP at Hargreaves Lansdown, no problem (MSE poster Cheerful Cat has an HYP there IIRC) . You can have another one at Seltrade as well if you like,indeed maybe that's the easiest thing to do, set up two that are the same, one for the drawdown fund and one for the tax free cash account.

(Note to others: SD has another 500k to invest later and also has a letting property, so no need to worry at this point about attitude to risk matters, he isn;t even half way there yet with equities.)

dunstonh

NMA basis would be 1% plus 0.5% p.a.
Most common basis would be 3% plus 0.5%
More expensive would be 3 plus 1% (or higher)

HL is 0% plus 0.5% so an NMA adviser would cost only a 1% one off more.

ok, i would like to be able to drawdown say 5%, it would be good if the fund could hold it's own or even grow a little, or is that a tad optimistic. with regard to risk id say sh*t happens(coz it invariably does) and get on with.

I would put you lower than the risk profile needed for a HYP then although there are some conflicts in your comments which would need a bit or ironing out to make sure. The issue you have to remember with drawdown is that at 75 you will be purchasing an annuity. Forget ASP for now as we dont know if that will exist or will be penalised to death (which is quite probable).

So, back on that graph, if your 80k dropped to 35k and you hit 75 before it can recover, you are stuffed. So medium risk for a long term investor is different to medium risk for a drawdown individual. Staged movement towards safer holdings as you get closer to 75 would need to occur as well.

IFAs are not allowed to advise on share investments like HYPs so they don't really know much about this sort of thing.

Ridiculous.

so no need to worry at this point about attitude to risk matters

Even more so.

You need to consider risk. Property market crashes (possible/probable/maybe) followed by a stockmarket crash and maybe even a bad tenant that doesnt pay and trashes the place. Whenever you invest, you need to consider risk and reward, regardless of the investment type or your other assets. Larger amounts may allow for a higher risk to be taken with some of the money but you still have to consider the consequences.

shiredeon

hmm, with regard to drawdown is it possible to take most of the fund before 75 ? leaving little to purchase an anuity or are you limited to taking a certain amount,
i bought the flat in manchester off plan so property would have to fall dramatically, and i intend to sell my uk house next year hopefully before it falls anyway,
It seems nobody really knows what the future holds i guess if they did they'd be millionaires, i was considering putting my next couple of years wages into a sip as i would get tax relief at 40% and probably only pax tax at the basic rate later, but this will depend if i'm forced to buy an anuity or not.
I would like to avoid charges with the investments and also leave it somewhat unmonitored,
i remember when i had a charles schwab account and i had any dividends reinvested, trouble was that the charges for reinvestment outweighed the dividends untill i noticed it. it's going to take a big effort to resolve this and my hearts not in it but i know i must for my dependents, thanks anyway.