Poor PEP needs new home

GiraffePC

Right, bit beyond me this is

I have a PEP with Scottish Widdows; it's in Coprorate Bonds and not doing well due to the rising interest rates. The sum is about £12k.
If I encash it I can get 6%+ but would have to start paying tax on savings income - not a good idea!

Is there any way that I can keep this money away from tax and transfer it to something that doesn't rely on the stock market etc?

Thanks,

Peter.

McSaver

GiraffePC wrote: »

Right, bit beyond me this is

I have a PEP with Scottish Widdows; it's in Coprorate Bonds and not doing well due to the rising interest rates. The sum is about £12k.
If I encash it I can get 6%+ but would have to start paying tax on savings income - not a good idea!

Is there any way that I can keep this money away from tax and transfer it to something that doesn't rely on the stock market etc?

Thanks,

Peter.

Transfer 3K a year (3,600 from next tax year) into a cash mini ISA at NS&I that pays 6.3%. That should do it!!!

dunstonh

Why take it out of the tax wrapper? You can look to higher yielding fixed interest funds, property funds, equity and bond funds or equity income. Indeed, you could go higher up the scale or diversify the investments more fully.

I know you said no stockmarket but you can mix and match. Maybe 20% stockmarket, 80% none.

Stockmarket is not one risk level but a sliding scale. Some fixed interest funds are higher risk than some stockmarket funds.

GiraffePC

I've got a norrible feeling that it's all or nothing - and then I can't put cash in to an ISA.
I considered NS&I's index-linked scheme, but there are 2 drawbacks:

need 5 years to make it worthwhile (and I might need the cash before then)
and
with interest rates rising, inflation might fall (oink oink, flap flap).

Peter.

GiraffePC

Right, thanks, I didn't know that there were so many options.

I do have some resentment to 2 things:

a return that's less than bank or BS and carries risk
being charged for negative (<base rate+).

Peter.

dunstonh

charges are on everything. Your savings account will have charges. However, they are not explicit but implicit. They have been taken into account before they set the interest rate.

Investments have charges that are taken regardless and you will get bad years as well as good but the aim is to achieve higher returns over the long term. If you had gone in 100% into a stocmarket investment before the last crash (so worst time) you would expect to be double your money now. It would have dropped in value for a while and you would still have paid charges. However, its the end result that matters.

Savings accounts just 3 years ago were paying an interest rate that was lower than inflation. So, you were losing money on those.

So, you have to look at everything in the big picture and not focus on certain areas in isolation. I do think you need to review your investments as 100% into a corporate bond fund isnt good investing but you may wish to review your risk profile and understanding of investments. Such as not putting all your eggs in one basket.

Coops10

Giraffe, why did you invest in a "Personal EQUITY Plan" in the first instance if you were risk adverse? Corporate Bonds do carry risk, especially in today's climate. I would maintain the PEP wrapper so it keeps it's tax efficient status, but seek a wider range of funds to hold it (possibly with Scottish Widows - possibly elsewhere). Spreading risk through a variety of funds mitigates some of the risk that is there, whilst giving it a chance to give you better returns than what a bank can provide.

GiraffePC

Coops10 wrote: »

Giraffe, why did you invest in a "Personal EQUITY Plan" in the first instance if you were risk adverse? Corporate Bonds do carry risk, especially in today's climate. I would maintain the PEP wrapper so it keeps it's tax efficient status, but seek a wider range of funds to hold it (possibly with Scottish Widows - possibly elsewhere). Spreading risk through a variety of funds mitigates some of the risk that is there, whilst giving it a chance to give you better returns than what a bank can provide.

Now, bit difficult to recall, but I'd had a fixed-term PEP that matured so I just rolled it over into a new one.
I wasn't always quite so cynical about such things - did quite well - but now I can live comfortably on the interest that is just under the Personal Allowance and a bit of capital. I have investments that mature when I'm 65 (60 now), so not too worried about a lot of growth.
Basically, if I'm to have investments, I do want some return:rolleyes:

Perhaps I'd better have a word with Scottish Widows again, so what's available. I really don't know what sort of thing would just pay a reasonable rate and have some chance of growth. I mean, what happens to all the interest from the companies that have borrowed from me?

Thanks,

Peter.

GiraffePC

dunstonh wrote: »

charges are on everything. Your savings account will have charges. However, they are not explicit but implicit. They have been taken into account before they set the interest rate.

Yes, I realise that. If a current a/c is paing 10% of Base Rate I take the charges to be 90%.

<snip>

So, you have to look at everything in the big picture and not focus on certain areas in isolation. I do think you need to review your investments as 100% into a corporate bond fund isnt good investing but you may wish to review your risk profile and understanding of investments. Such as not putting all your eggs in one basket.

It's only this bit that's in CBs (about 5% of the total), so I'm not that bad:D
I'd just like to do something better with the money. Even getting the cash, putting it in my current a/c and not transferring any from savings for a year or so would be better!

Peter.