save at 3% or re-invest? 25 February 2012 at 2:59PM in Over 50s MoneySaving 18 replies 1.6K views

Newly_retired

I have chosen this board as it suits my context better than general savings and investments.

I have £40K invested which is about to mature ie reach the end of its tie-in period.
My IFA wants me to re-invest it. [Well he would, wouldn't he?] It's money I would actually want to keep long term. He is proposing an investment with a tie-in period of 5 yrs.
I am a cautious investor, and can only invest because I do have other cash savings.
My inclination is to take the cash now, whilst the going is good. I would get back more than I invested. Who knows whether it will be worth as much later on if I need it?
I do of course realise that savings rates are struggling to get above 3% for instant access.
Who is right here? My inclination for caution and certainty - or his professional advice?
What is the point of having an IFA if I do not take his advice?

blossomhill_2

What rate would you be reinvesting at?

zygurat789

Are you looking at savings ie a deposit account of sorts paying interest or an investment paying a dividend out of profits and a capital gain?

Newly_retired

My preference is to withdraw this money and put it in cash deposit. The risk is that the interest rate is not enough to match or beat inflation, but I can access it, move it around, feel more in control.
The IFA recommends putting into a Prufund Growth fund which will probably do well, but there are of course charges to consider and the 5 yr tie-in ( withdrawals before then would result in exit fees).

blossomhill_2

It sounds like you would like to do both; is there an option for reinvesting part of it and taking remainder as cash to invest at 3% or higher?

zygurat789

Have you used your ISA allowance, do you have a spouce. ISA rates are usually better than ordinary savings.
You can also achieve higher rates by tying your money up for longer, maybe with an occasional withdrawal.
Generally savings rates are currently below inflation.
In times of inflation ordinary shares generally tend to fare better than deposits
but are more risky.
Don't put all your eggs in one basket

margaretclare

What is the investment that it is 'tied-in' to?

I think I'd be inclined to stick it into a s&s ISA - you can do that easily before 6th April this year. You've said it is for long-term.

I think £40K is enough to diversify it a bit. You don't need to have it all in one fund. I know nothing about Prufund but here they are: http://www.pru.co.uk/investments/bonds/investment_bond_fund_range/pmg_multiasset_funds/prufund/

Have a look: http://www.hl.co.uk/funds/master-portfolios

This is what I like. http://www.hl.co.uk/investment-services/isa

HTH

PS: The reason I've chosen to DIY and not have an IFA do it for me is that I started originally with ethical funds and I've done pretty well considering I started with zilch. I don't invest in any funds with stocks in tobacco, gambling or pornography. I couldn't guarantee that if I had someone doing it for me.

scotsbob

Newly_retired wrote: »

but there are of course charges to consider and the 5 yr tie-in ( withdrawals before then would result in exit fees).

That would put me against it.

As to the question of take the capital or reinvest, you should perhaps ask are you going to spend it all now? If not then investing does seem the more prudent option.

It seems to me that first you have to decide if you want to reinvest, if the answer to that is yes, then you decide how you will do it.

Newly_retired

Thanks for all your replies.
My IFA tells me that I should always keep a decent proportion of my portfolio in investments and long term he is probably right. But recent years have not been good ones as we all know. Unfortunately I began investing in 2007 not long before the credit crunch.
Yes I already have cash ISAs and other savings but have not fully funded my S & S ISA this year. That would be a more accessible alternative.
It's just that I wanted to keep as flexible and accessible as possible for the next 12 months pending potential house move. Once that is done, and relevant expenditure dealt with, I might consider investing again for the long term eg for care fees or for my children to inherit if there is any left.

Newly_retired

[ The reason I've chosen to DIY and not have an IFA do it for me is that I started originally with ethical funds and I've done pretty well considering I started with zilch. I don't invest in any funds with stocks in tobacco, gambling or pornography. I couldn't guarantee that if I had someone doing it for me.[/QUOTE]

This interests me. Would you care to elaborate please, margaret clare? Which funds have done well for you?

margaretclare

Newly_retired wrote: »

[ The reason I've chosen to DIY and not have an IFA do it for me is that I started originally with ethical funds and I've done pretty well considering I started with zilch. I don't invest in any funds with stocks in tobacco, gambling or pornography. I couldn't guarantee that if I had someone doing it for me.

This interests me. Would you care to elaborate please, margaret clare? Which funds have done well for you?[/QUOTE]

I started with Friends Provident, built up in a stakeholder and transferred that to a SIPP. I can do annual drawdown on that, or leave it alone. At present I don't need any more income, so I leave it.

At present I have Jupiter Ecology which is global and also Kames Ethical Equity UK all companies. These are part of my S&S ISA portfolio with Hargreaves Lansdown. HL have what they call their 'Wealth 150' list, 150 funds which they think will do best.