If you had a million pounds would you put it with Cahoot at 6.35% instant access and

mindovermatter

live off the interest.....That's what would do if I won the Premium Bonds!
seems like a great scheme!
here's dreaming...............
I would like instant access to allow me to dip in and out as much as I wanted and 6.35% AER on a monthly rate allows me to watch my savings grow every month into my next million.

dunstonh

500k isnt enough to live on unless you are at retirement.

You would lose £150k in the first 10 years in real terms if you just lived off the interest.

Milarky

dunstonh wrote: »

500k isnt enough to live on unless you are at retirement.

You would lose £150k in the first 10 years in real terms if you just lived off the interest.

I don't think so dunstonh. Mind you you don't state assumptions used

If 'inflation' really is 2.5% then after 10 years £1,000,000 is worth about £780,000 in real terms (a drop of 230k)

But ten year's interest takes it positive again. If tax allowances also go up at 2.5% (etc) then you'd get a 'real' £63,500 gross income of which about £16,200 is tax - leaving £47k.

So if you only spend £24K pa, I make that your £1m retains its 'real' value - 2.4% real return using just this account (or have I missed something?)

beedmcfc

some people are far too clever for me lol

dunstonh

for some reason I had £500k in my head when i responded. I used 70% on 500k. 70% on 1 mill is closer to your figure

1 mill is closer to the mark where you could be comfortable. Although you would have to plan better than just a savings account to avoid the higher rate tax and give yourself some future proofing.

djbd1973

mindovermatter wrote: »

live off the interest.....That's what would do if I won the Premium Bonds!
seems like a great scheme!
here's dreaming...............
I would like instant access to allow me to dip in and out as much as I wanted and 6.35% AER on a monthly rate allows me to watch my savings grow every month into my next million.

If you won it on premium bonds I am sure you would be offered professional advice as to what to do with with the winnings so that you could keep up with inflation.

Besides it wouldn't matter what I would do.... how would I keep track of my better half as she supports the local economy with her retail therapy!!

Hereward

djbd1973 wrote: »

If you won it on premium bonds I am sure you would be offered professional advice as to what to do with with the winnings so that you could keep up with inflation.

Besides it wouldn't matter what I would do.... how would I keep track of my better half as she supports the local economy with her retail therapy!!

That's easy, don't tell her you're loaded...

djbd1973

Hereward wrote: »

That's easy, don't tell her you're loaded...

She would know before I did!

baby_boomer

Once you've got a million, capital preservation is important. So it would make sense to spread the cash money around different institutions in £35K batches to get the protection of the FSA protection scheme.

But it would also make sense to diversify into different investments.

My first port of call would be £15K in 5 Year Indexed Linked Certificates (1.35% above inflation). When they mature you can reinvest and also add £15K new money.

Max out your ISAs each year. Cash ISAs could also beat inflation. And other ISA money could be invested in tax free income generating assets like corporate bonds and / or PIBs.

Then ensure that some of your portfolio is invested in shares a) to take advantage of growth in the world economy and b) as an anti-inflation measure. And you could drip feed in some of this investment in order to protect against any sudden stock market correction.

isofa

baby_boomer wrote: »

Once you've got a million, capital preservation is important. So it would make sense to spread the cash money around different institutions in £35K batches to get the protection of the FSA protection scheme.<snip>

That'd be around 28 separate accounts! And you'd loose the advantage of having a high balance, many top rated accounts pay more or larger balances, so that is completely false economy as far as I can see.

Everyone seems very worried about this risk and discussing the protection on various threads. The reality is that the likelihood of a well known bank or building society going bust is extremely remote, and for ones holding personal accounts, virtually unheard of. Split it up into a few accounts, by all means but worrying about the 35K FSA protection is crazy in my opinion.

If I had a mil. I'd be taking professional advice!

emphatiC_hanK

If you were clearing £63.5k p.a. in interest, wouldn't that automatically make you a higher rate tax payer, ensuring that you only actually cleared 60% of the amount (£38k or so) after the 40% tax was deducted?