Investing for income...help needed

betlarge

Hello all, I am looking for some ideas/guidance regarding investment preferably to produce a monthly/yearly income.

I am 43 years old and unfortunately am in the latter stages of kidney failure. This means an immediate future (within the next 3-4 months) of becoming a dialysis patient. This will permanently restrict my self-employed work to virtually hobby status and I would only expect to earn around £750 per month. I am a lower rate tax payer.

Without sounding unduly pessimistic, I am not spending a great deal of time worrying about extensive old-age provision!

I have £170k invested in a Halifax Managed Income fund, providing me with around £500 per month and hopefully some capital growth. This is generally exposed to a mixture of commercial property, bonds and gilts and is reasonably low-risk. I own my own property, valued at around 250k with no mortgage. I have about 20k in various equities and about 4k in a Building Society ISA. I have not used my ISA allowance for 2006/7.

I do pay a nominal £50 per month into a private pension plan which is some fifteen years old and pay £65 per month into a Standard Life endowment which is some twelve years old. I am now selling an unmortgaged second property (was recently my PPR so no CGT) and would expect to bank around around 195k.

Any ideas on investing all this, including thoughts on what to get out of or stay in, would be hugely appreciated. I am looking for a clear investment strategy with specific goals of providing at least 500.00 per month income and hopefully some capital growth/inflation protection, rather than just chucking the money into all sorts, which has been the case in the last 25 years!

Thanks.

gt94sss2

Can I suggest you read the High Yield Portfolio board on the Motley Fool (and some of the related articles)

Its a popular method of generating an income from a capital sum by using the dividends from shares as income.

Over time, dividends tend to increase more than inflation and you should also get some capital growth as share prices increase.

Best of Luck.

Regards
Sunil

EdInvestor

Two main suggestions:

1. Equity income funds - invested in blue chip shares which pay high dividends (no tax for those on basic rate). And/ora diversified portfolio of shares, DIY version of an Equity Income fund, benefits from virtually no charges, very low maintenance, long term capital and income growth to beat inflation

2.Commercial property funds/investment trusts, again paying an income around the 4.5-5% range ( but taxable, so use your 2 ISAs for these in the next few months ).

Allow a return of 4-5% on capital for a sustainable income long term.

In general: investing in one fund especially one run by a bank is not a good idea. Choose a selection.

Always invest via a discount broker: have a look at this site for fund ideas:
https://www.h-l.co.uk

Avoid all salesmen suggesting insurance investment bonds.

Do you have a cash fund?Is there much point in choosing bonds in preference to cash?

Re your endowment, posts some figures about it as it may well be better to surrender and reinvest elsewhere

Guaranteed sum assured
Declared bonuses
Surrender value
Maturity date
Maturity forecasts

Sad to say there seems little point to contributing more to the pension which won't be accessible until you are 55 ( unless your situation becomes very serious in which case you can ask for it to be paid out in full).

Your financial goal seems easily achievable, here's hoping the health situation is not as bad as it looks, good luck.

dunstonh

The halifax option is poor quality and it needs reviewing.

You can use the HYP option above or you can go with a sector allocated portfolio that matches your risk profile. The Halifax fund is not low risk although it is lower risk than the HYP.

Avoid all salesmen suggesting insurance investment bonds.

Avoid all internet sites that post comments like that. You havent been here long but a couple of months back Ed told someone not to use the investment bond despite it's use saving up to £200,000 in inheritance tax. It's a 10% product. i.e. Its good for around 10% of the market (higher rate taxpayers, those with low pension income, but large savings/investments who could get pension credits from 60, those wishing to avoid their assets being included in long term care means testing, inheritance tax planning and avoiding your age allowance being reduced). It can also be good value for those that are terminally ill as the charges can be significantly lower than the other options over the short term.

£500 pm net should be easy achievable on that amount.

cheerfulcat

Hi, betlarge,

I would second Sunil's suggestion that you look at the MF HYP board and articles. If you do go down the route of holding individual shares, you should be aware that they can be much more volatile than funds so if the thought of seeing your capital values fluctuate makes you queasy you might prefer funds ( though the income from the HYP is better than that from an equivalent fund and of course fund values fluctuate too ).

You might find the Investment Strategies board of interest as well, and the Retirement Investing board has had similar discussions; just search for " investing for income ".

betlarge

Thanks for all your comments.

Dunstonh 'The halifax option is poor quality and it needs reviewing.' Why is this? Is there a more preferable 'off-the-shelf' option?

I'm not about to fall off my perch just yet, so I'm not sure about my pension, but I will be looking to cash in & reinvest my unnecessary endowment.

Did post this on TMF a few day's ago and like the look of HYP and will take that further.

Is it worth a few hours with an IFA?

dunstonh

Dunstonh 'The halifax option is poor quality and it needs reviewing.' Why is this? Is there a more preferable 'off-the-shelf' option?

Banks and building societies have a track record of poor quality investments giving substandard returns. Usually at a higher cost as well. There are loads of alternatives.

Did post this on TMF a few day's ago and like the look of HYP and will take that further.

Its one solution but not the only one. HYP is very much focused in one area and that area has been the place to be for the last 8 or so years. That may not be the case going forward. It is also higher risk than you current investment.

Is it worth a few hours with an IFA?

An investment specialist IFA, yes. A mortgage or GP IFA, no.

Unless you know what products are available and what investment solution is best for you, then going DIY can end up being costly.