How to invest £20,000 in something that is 'No-Risk'.

PeggyLuXXX

Hi there,

I know little about Stocks, Shares and Bonds, etc.. But I am going to be receiving money to the tune of £20,000 from Family Inheritance soon that I want to invest into something that is 'No-Risk' that will provide me with an 'Income' (Per Month).

I am currently on Benefits and am wanting to come off of them when I get this £20,000. The Benefits I get are Incapacity Benefit and Disability Living Allowance from which I receive £370 a month for Mental Illness. I will always continue to get this (Hopefully, given the new Government changes).

I know of an Elderly lady that had a £10,000 Bond that gave her £179 (Per Month) so what sort of rate would she have been on? Would that have been 17.9% (Per Annum)?

What sort of % Rate would I be looking for (Per Annum) at 'No-Risk' Bond? I am not interested in touching the money for at least 25 years. All I want is an 'Income' from it.

When I have this money in my bank what is my best option to do? Go and pay to see a Financial Advisor? How much would they charge approx? Or is it something I can research out myself?

Please can you explain to me what I should be looking for and where I should be looking? Any advice, Links, etc.. Are GREATLY appreciated.

I desperately want to get off of Benefits and live off of my own means because I am by no means a scrounger.

Thanks guys!

Lin. xXx

dunstonh

I want to invest into something that is 'No-Risk' that will provide me with an 'Income' (Per Month).

There is no such thing.

Everything has risks. The main risks are investment risk, shortfall risk, inflation risk, provider risk and legislative risk. The first three are the main focus on an amount of £20k

In your case, if you go with something with no investment risk then you will be replacing that with shortfall risk and inflation risk.

I know of an Elderly lady that had a £10,000 Bond that gave her £179 (Per Month) so what sort of rate would she have been on? Would that have been 17.9% (Per Annum)?

Only "bond" that could have been would have been an investment bond where she was either drawing more than it was making or she was withdrawing the investment growth for that particular year. However, I suspect what is more likely is that you have the figures wrong as there is no way that is sustainable.

What sort of % Rate would I be looking for (Per Annum) at 'No-Risk' Bond? I am not interested in touching the money for at least 25 years. All I want is an 'Income' from it.

If you go with cash deposit options (no investment risk) then you will get around 3-4% p.a. However, your £20k will be losing money in real terms. 10 years from now it will be worth around £13k and 20 years it will be worth around £8500 in real terms. The income paid will be lower in real terms as well. This usually leads to you drawing some of the capital to make up for it and you then start the downward spiral that sees all the money gone.

You need to consider the different risks and what you are looking to achieve. Not be fixated on just one risk.

oldtoolie

Perhaps the most important thing you need to know is 'will having this money impact on my benefits.' Would Citizens Advice or MIND help with that? This is not a question that many financial advisors could answer.

Do you have any debts? You should probably pay those off first. In your situation, a savings account is probably your best option. The MoneySaving Expert website provides much advice on this.

No matter how you save or invest your inheritance, it is unlikely to yield more than £1000 per year in income. This won't be enough to change your life. Which is why it is important to understand the impact on your benefits.

Please do not feel like you are a scrounger if you are receiving benefits because you are ill and unable to work. Focus on regaining your health and rebuilding your confidence that you can work so you can take advantage of opportunities when you are able.

Annisele

You could try posting on the Benefits board as to the effect that your £20k will have on your benefits.

I'm afraid I agree with Dunstonh as to your elderly friend's bond. £179 per month would be £2148 per year. Ignoring tax, that would be a return of 21% - which is not sustainable. Are you sure her bond wasn't £100,000 rather than £10,000?

Newly_retired

I think you already know that you will not lose your DLA as it is not means -tested. IB is means-tested. In any case, it will shortly change to ESA ( employment support allowance).
You will not be able to earn enough interest/income from your inheritance to make a huge difference to your life but it will be assessed as capital for your benefits. If you spend it in certain ways it will be seen as deprivation of capital. Try and get an assessment of your position and potential changes ahead, from the CAB or DIAL or other welfare benefits officer.

jimjames

If you don't want to touch the money for 25 years then does the value in the meantime and whether it drops a bit really matter? You'll get a better income from a share based fund and although the value will vary from day to day over that time it should increase along with the income.

dboswell

my bank often interchanges the words "investment" and "saving"

dunstonh

dboswell wrote: »

my bank often interchanges the words "investment" and "saving"

Its a bank. Enough said.

jamesd

You can get 0.5% a year plus inflation from NS&I, paid at the end of the term, using their index linked savings certificates. That's close to the lowest risk there is. 0.5% isn't going to be enough to live on even if you could get it regularly instead of at the end. It's just £100 a year.

You should seek advice on your benefits and consider the option of seeking a deed of variation on the will to place the money into a discretionary trust that could protect it from means tests. There is a limit of savings that will be disregarded, I forget how much it is.