INvesting Pension Lump sums

Marhaba_Man

I am 60 this year no other real investments pension will be about 200 a week

dunstonh

£200 means no pension credit so that rules out the need to invest before age 60.

To be honest, with £100k you ought to be getting advice from an investment specialist. There are tens of thousands of things you can do and you need some concept and ideas discussions going so you can see what you like and dont like before recommendations can be made.

EdInvestor

Have a look at this for some of the money:

High yield share portfolio

Share divis will give you around 5% income, no tax to pay.

Then for the cash chunk, National Savings index linked certificates pay a good rate and are tax free.You can put 30k a year in them.

Perhaps a bit more in a high interest account for spending/emergency fund?

Max out your ISA every year from now on, @7k.You could buy some property trusts with that, tax free income at present should be around 5% .

Overall should be able to get tax free income in the 4.5-5% range.

jamesd

EdInvestor wrote: »

Share divis will give you around 5% income

EdInvestor, please don't misrepresent the yield of the HYP by claiming it's 5% when even its main promoter has only been able to achieve 4.1%.

HYP1			
Year	Value	Div	Yield%
2001	75414	3451	4.58
2002	66180	3474	5.25
2003	72177	3197	4.43
2004	80450	3205	3.98
2005	98367	3546	3.60
2006	127330	4131	3.24
		Mean	4.18
			
HYP2			
2004	95322	4564	4.79
2005	106104	4347	4.10
2006	144893	5008	3.46
		Mean	4.11

EdInvestor

I agree it's very interesting to see that after 5 years the value of the HYP has gone from 75k to 127k (+68%) while the dividend income has increased from 3451 p.a. to 4131 p.a. an inflation-beating rise of almost 20%.

That's the beauty of the HYP concept - even over the period of the worst stockmarket crash in a generation, both the capital and the income goes up.:)

The return on the original capital invested in year 5 is 5.5%, compared with 4.6% in year one.The initial yield depends on the state of the stockmarket at the time you buy the shares.Right now, around 5% is achievable.

jamesd

Yes, HYP 1 did really well. Just 4% less well than simply buying the Invesco Perpetual High Income fund. Lots of extra work and concentration of risk for nothing.

Here are some comparisons between HYP 1 and Invesco Perpetual Higher Income, which outperformed it by 4% over the period 2002-2006, after annual charges for the fund, ignoring all costs for the HYP.

Annual value change first, two versions for HYP, one with income reinvested at the end of each year, the other the raw one without reinvestment:

Year	IPHIncome	HYP 1 reinv	HYP 1 raw
2002	-10.8		-7.6		-12.2
2003	21.5		13.7		9.1
2004	21		15.5		11.5
2005	27		26.2		22.3
2006	27.3		33.0		29.4

Next, start of year values, with reinvestment:

Year	IP HIncome	HYP 1
2002	75414		75414
2003	67269		69687
2004	81732		79226
2005	98896		91542
2006	125598		115502
2007	159886		153590

Finally the full data set, just for completeness:

Invesco Perpetual Higher Income			HYP 1, dividends reinvested at end of year	HYP no reinvestment			
	Start	Change	Yield	End		Start	Change	Yield	End	Change		Start	Change	Yield	End
2002	75414	-10.8	0	67269		75414	-12.2	3474	69687	-7.59		75414	-12.2	3474	66213
2003	67269	21.5	0	81732		69687	9.1	3197	79226	13.69		66213	9.1	3197	72239
2004	81732	21	0	98896		79226	11.5	3205	91542	15.55		72239	11.5	3205	80546
2005	98896	27	0	125598		91542	22.3	3546	115502	26.17		80546	22.3	3546	98508
2006	125598	27.3	0	159886		115502	29.4	4131	153590	32.98		98508	29.4	4131	127470
2007	159886					153590						127470

HYP1 did really well for a set of shares, but with more concentration of risk than Invesco Perpetual Higher Income, and somewhat lower performance. The fund beats it for those reasons and the flexibility of being able to invest any amount at any time.

I didn't have figures for the yield of the fund, so I just used the ones including them and pretended the yield was 0. It was really a bit over 3%.