Best way to invest 140k?

robledouk

Hi, my mum was recently widowed and has 140k that she wont be needing for now and probably for a good few years at least. What would you recommend investment wise which will allow her a steady income? (as she does not work) She currently banks with Lloyds and obviously they have told her about their Scottish Widows portfolio's but obviously with bias to their product. I think from 120k they said she would get a guaranteed £625 per month at least (Momentum Income : Cautious portfolio)

will speak to an IFA of course but would appreciate your input

Thanks

si1503

Over the year that is 6.25% interest if my maths is right. The problem is if you are taking all the income from it then each year the value of the money will become less, due to inflation, that £625 won't get you as much in 5 years as it will today.

In terms of what I'd suggest I'm not really sure, I'm still relatively inexperienced. If I wanted a regular income I'd personally look into investing into UT income funds, or invest in something known as a HYP (high yield portfolio), however, how suitable these methods are for your Mother, I don't know.

Certainly speaking with an IFA specialising in investment is a good idea!

tom188

Never, ever go to your bank for investment advice, their products are expensive and poor quality.

If you (or your mum) do not feel up to designing her own portfolio, I suggest you go to an untied Investment IFA.

EdInvestor

robledouk wrote:

She currently banks with Lloyds and obviously they have told her about their Scottish Widows portfolio's but obviously with bias to their product. I think from 120k they said she would get a guaranteed £625 per month at least (Momentum Income : Cautious portfolio)

Could you tell us a bit more about this? What funds would the money be invested in? Is there any kind of insurance bond involved?

Also, what is your mother's tax position?

dunstonh

The LTSB Scottish Widows product is a more expensive and cut down version of the IFA Scottish Widows product. You would only go to a bank if you like paying more in charges and want an inferior product.

The 5% they are on about is not guaranteed. It is a fixed withdrawal of capital. A bit like drawing £625 out of the cashpoint each month. If the investment doesnt make £625 each month then it would go down in value.

The investment fund is rubbish and the product recommendation is a mis-sale. It would be no effort for to get that classed as an upheld complaint.

Investing it makes sense because if she sticks it in a savings account and draws the interest then she is losing value in real terms. That £140k would be worth around £98,000 in 10 years time due to inflation. Thats the equivalent of a stockmarket crash every 5 years in real terms. Investing it would involve getting a portfolio built (and not a single fund solution like the cautious managed fund). That sounds grand but its not. The portfolio would be built to match her risk profile and invested with the aim to achieve an average of 5% p.a. for income purposes and a couple of percent on top for growth. This would be an average and subject to investment returns. 5% should be achievable but there are no guarantees.

Actually, there are some guaranteed products but generally they are poor value as guarantees cost money and these products have higher charges (in some cases as much as 3% a year). You would only use these as a last resort.

EdInvestor

You can pretty well guarantee these days that if an older person walks into a bank clutching a lump sum, they will be flogged an expensive, high tax insurance bond.

Instead of wasting money with this rubbish, what Mum needs is a selection of better funds, purchased directly and in her ISA through a discount broker such as https://www.h-l.co.uk - which rebates the charges.

That way she pays lower charges and no tax,unlike what would happen using the bond.

dunstonh

Instead of wasting money with this rubbish, what Mum needs is a selection of better funds, purchased directly and in her ISA through a discount broker such as www.h-l.co.uk - which rebates the charges.

Yes, she can go do it herself and make a right pigs ear of it and have no consumer protection because she did all herself.

The fact she went to the bank for advice makes it clear she hasnt got a clue about investing and going DIY is not the solution for her. Going to the banks salesforce for advice is a bad move but so is going DIY when you dont know what you are doing. She needs an investment specialist IFA (not a mortgage IFA or a GP IFA).

robledouk

EdInvestor wrote:

Could you tell us a bit more about this? What funds would the money be invested in? Is there any kind of insurance bond involved?

Also, what is your mother's tax position?

Hi, my mother didn't pay tax as she did not work (my father was fortunate to have a well paid job) . The only income that she has just started receiving is a widows pension paying approx 5250 per annum which is taxed. The Scottish Widows product is an investment bond. I don't know too much about it as I'd just went to see them for a brief meeting recently just to see what they had on offer. If I go in and see them again I will update the answer with more information when I get it. Thanks again

dunstonh wrote:

Yes, she can go do it herself and make a right pigs ear of it and have no consumer protection because she did all herself.

The fact she went to the bank for advice makes it clear she hasnt got a clue about investing and going DIY is not the solution for her. Going to the banks salesforce for advice is a bad move but so is going DIY when you dont know what you are doing. She needs an investment specialist IFA (not a mortgage IFA or a GP IFA).

Thanks very much for all your replies. We are seeing a Investment specialist IFA soon to get some unbiased advice as we are clueless on how to invest this.

dunstonh

The scottish widows product is not suitable. Any IFA or claims company could get that classed as a mis-sale. Its bad advice.

Primrose

Firstly I'd avoid any banks investment advice with a bargepole as they will only sell their own products. If I were in your mother's position I would also avoid any investments bonds which are usually stock market linked, as these products are usually not transparent and carry all kinds of penalties. (Don't confuse these with Savings Bonds from building societies which are usually straighforward 1, 2 or 3 year investments of amounts paying a fixed rate of interest). I'd be inclined to put a comfortable sum in a high interest rate building society/bank account for emergency money, and then invest the remainder in a selection of equity income unit trusts which will hopefully pay out an income every year, but increase slowly in value (although the stock market can never be guaranteed). Even though your mother is not earning, she might still be well advised to take advantage of her annual £7000 ISA allowance every year as if the stock market market makes huge gains, her investment will be free of capital gains tax. Hargreaves Lansdown, as somebody as already suggested are a reliable organisation, and if you invest in equities through their Vantage scheme, they rebate a loyalty bonus every year linked to the value of your investments.

EdInvestor

In addition to cash and equity income funds, commercial property funds should be considered ands perhaps some bond funds.The percentage split should represent the attitude to risk.

A "cautious" profile would allow something like 60% in equities, 20% in bonds/cash and 20% in property funds.Plenty of suitable funds on the HL site.

BTW the more clued-up you are, the less likely you will be ripped off by advisors of whatever kind. You've made a good start by coming here, keep reading