Guaranteed Income Bond maturity

Mossfarr

I have £35K invested in a Guaranteed Income Bond which reaches its 5 year anniversary in October. I don't think it has performed particularly well (approx 4% return) so I am planning to withdraw it to reinvest in something with a better return.
I was considering putting £15K into a S&S ISA and possibly £15K in a cash ISA in my husbands name (the GIB is in joint names) but I know absolutely nothing about them. I am retired with an occupational pension but not yet old enough to claim state pension. i am also a basic rate tax payer.
Any advice will be appreciated.
Mossfarr

dunstonh

Guaranteed income bonds typically pay a fixed rate of income. So, performance shouldnt come into it. It is known at the outset what the terms are.

Mossfarr

Guaranteed income bonds typically pay a fixed rate of income. So, performance shouldnt come into it. It is known at the outset what the terms are.

Well I guess this one wasn't 'typical'. It was NOT a fixed rate of interest so performance IS an issue!

Mossfarr

bowlhead99

Well, the point of a structured product like a guaranteed income bond is to deliver a particular level of return provided certain conditions were met. They are trying to guarantee the income and/or minimise the potential losses. Sometimes the level of income or the terminal value received at the end is linked to the stock market or some other measure.

When you say it did not perform particularly well, what return were you expecting /hoping the product would deliver? Was the 4% the grand total return after 5 years or the annual return each year on average?

Base rates are 0.5% at the moment - as they have been for the last 5 years. So if you are thinking of putting half the proceeds in a cash ISA and you think 4% is a disappointing return, prepare for more disappointment There is certainly no way to get that level of return without risk.

You mentioned you don't know anything about S&S ISAs. They can certainly deliver a better than 4% p.a. return if left long enough. So, one of the things to do would be to read up on investments (there are various books and sites mentioned on threads throughout this forum). If you used to rely on your job for a living, but are now retired from it, you only really have investments to provide you an income. So it is worth learning about investments ASAP if you want that income to be maximised or low risk or a combination both.

If you are looking for something that can grow and provide an income, and are of pension age, a personal pension could be a sensible choice, because it can grow and provide an income and provide a tax free lump sum after giving you some tax relief when you make the investment.

One thing to consider as soon as you reach state pension age, you may be able to improve the state pension if you defer taking it for a while which can be quite lucrative. So you might need an alternative income stream or a pile of cash to help you get through that phase depending on your cashflow needs. If the latter, you might not want to have locked your cash away for too long, depending on the dates relevant to your circumstances which we don't know.

dunstonh

Well I guess this one wasn't 'typical'. It was NOT a fixed rate of interest so performance IS an issue!

Are you sure it was a guaranteed income bond and not some other product. The clue is in the name of the product.... guaranteed income.

Was it a SCARP where conditions were not met or a naff deposit based structured product? It helps us to know what you had to see if it was a product issue or a knowledge issue.

Mossfarr

thanks bowlhead99 and dunstonh for your replies, I'll try and clarify things a bit more (bear with me - I am a total novice when it comes to investments).

The G.I.B. which is maturing is with Legal & General. I was advised by RBS and I insisted on no risk as I had only just retired and was nervous about not being able to manage on my reduced income.
For the first two years I took the profits as monthly income. I then decided I could manage without it so since 2012 it has been reinvested.
As it reaches its 5th anniversary this year I contacted an Independant Financial Advisor to ask if I would be better withdrawing it and investing £15k in a S&S ISA. It was the IFA who told me the G.I.B. was a very bad investment for me and was not performing well enough to keep it.
Both myself & my husband are retired early (ages 57 and 55). We both have reasonable pensions so do not really need the investment to provide additional income but I would like at least half of it to be accessible (in case I have a wedding to pay for)!! At the same time I am risk averse as we have a long time before our state pensions kick in so I really can't afford to lose it!
Mossfarr

dunstonh

The G.I.B. which is maturing is with Legal & General. I was advised by RBS and I insisted on no risk as I had only just retired and was nervous about not being able to manage on my reduced income.
For the first two years I took the profits as monthly income. I then decided I could manage without it so since 2012 it has been reinvested.
As it reaches its 5th anniversary this year I contacted an Independant Financial Advisor to ask if I would be better withdrawing it and investing £15k in a S&S ISA. It was the IFA who told me the G.I.B. was a very bad investment for me and was not performing well enough to keep it.

Most SCARPS retailed via banks are poor value. (this is looking like a SCARP rather than a guaranteed income bond - in the modern sense of the word. Some in the past did incorrectly market SCARPS as guaranteed and were lucky to get away with it)

We both have reasonable pensions so do not really need the investment to provide additional income but I would like at least half of it to be accessible (in case I have a wedding to pay for)!! At the same time I am risk averse as we have a long time before our state pensions kick in so I really can't afford to lose it!

Conflict of information here. You need the investment for income and cannot afford to lose it but you are likely to spend half of it on a wedding. If you need it then how can you afford to spend it on a wedding?

Income has no risk free option. This includes cash savings. £35k in a savings account today with interest drawn to live in will lose nearly half its value in 10 years in real terms. Ultimatly, those in that situation end up drawing the capital to compensate and in turn that produces less interest and the cycle continues until the money is gone.

Cash has shortfall risk and inflation risk. Investments bring in investment risk but reduce shortfall and inflation risk. So, when taking an income, its not about taking no risk it is about taking sensible risk and understanding the risks.

Mossfarr

Hi Dunstonh,
I think you misread my last post - I actually said I do not really need the investment to provide additional income!
I said I might need half of the sum to pay for a wedding -a bit tongue in cheek as my daughter is happily single, but we live in hope! We can probably fund a wedding from other savings if the occasion arises.
I realise that I really need to do some in depth reading and research so be able to make informed decisions - something I have avoided doing since I retired as I was sick of it!
Its either that or pay someone else to choose what is best for me - not necessarily the safest option these days!
Mossfarr

xylophone

You want around £17000 to be accessible - why not just open a few interest paying current accounts?

Two TSB Classic plus for you, two for your husband and two joint set up funding each other on the same day each month takes care of £12000 - then two BOS Vantage accounts funding each other on the same day cover the other £5000.

The other £18000 can be split between two S&S ISA accounts for you and your husband - you could choose accumulation funds for growth?

Mossfarr

Wow Xylophone that sounds complicated, Until I joined this forum yesterday I had never even heard of the high interest current accounts! I am just beginning to get my head around it and even with my minimal knowledge I can see this is a good way for me to go.
I will definitely be reading more on this to get an understanding of how to set them up.
I am still working through the S&S ISA guide so I haven't got my head around the shopping trolleys & shopping bags yet never mind switching what brand of bread I buy in either Tesco's or Sainsburys. lol.
cheers for your advice
Mossfarr

traineepensioner

A Santander 123 account would give you 3% interest on up to £20,000, plus cash back on your utilities bills.
You could fund the account(s) using standing orders from TSB account(s) and get 3% from the TSB while performing this money merry go round:o

Not too exciting but would give you instant access to your money for any wedding.