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

cheerfulcat

Milarky wrote: »

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?)

You've missed something! RPI is currently 3.9%, and the real rate of inflation is considerably higher. And of course interest rates can go down as well as up...in the long term, cash is not a good option.

Stompa

baby_boomer wrote: »

Once you've got a million, capital preservation is important.

Not necessarily, you may want to use up the last penny just before you pop your clogs!

An interesting calculation is to work out how long a given sum (earning a specified interest rate) will last if you withdraw a certain amount (increasing at a specified rate) each year.

For example, starting with a sum of 500k earning interest of 5% net, I could withdraw £20k pa (increasing 3% pa). It would be around 36 years before the pot was empty.

Of course it's a bit of an artificial model as in reality there are many more variables.....

baby_boomer

By all means spend it as you go along. But what you suggest doesn't put the capital at the risk of investment loss, except from inflation. So your idea is a form of capital preservation as there's no danger of suddenly losing £200K in a month.

My post just suggessted ways to invest it, diversify and gain tax advantages - assuming the OP wasn't going to spend it all at once! I didn't mean to imply that it was an imperative to keep £1m + inflation and live off the rest. Although I personally think that's both desirable and possible.

isofa wrote: »

That'd be around 28 separate accounts!

Not quite what my post implied.

Stompa

baby_boomer wrote: »

By all means spend it as you go along. But what you suggest doesn't put the capital at the risk of investment loss, except from inflation. So your idea is a form of capital preservation as there's no danger of suddenly losing £200K in a month.

My post just suggessted ways to invest it, diversify and gain tax advantages - assuming the OP wasn't going to spend it all at once! I didn't mean to imply that it was an imperative to keep £1m + inflation and live off the rest. Although I personally think that's both desirable and possible.

Fair enough, that makes sense.

jon3001

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.

Obviously cash would be no good in the long run. But wouldn't a more active solution (e.g. High Yield Portfolio) be an option (albeit more risky)?

If it works you'd expect to yield 4% (£20K) and have the income keep broadly in pace with inflation.

baby_boomer

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.

isofa wrote: »

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.

Still singing the same tune now, isofa?
:rotfl: :rotfl:

Relevant to this thread is the story in the Telegraph of the businessman and his wife who hade put their £1m of life savings in a NR internet account.

They pitched up at a branch, demanding their money (not allowed by the terms & conditions of their account), and sat cross-legged in the manager's office until the police asked them to move!

djbd1973

As some earlier threads were saying, if you had a million pounds then savings accounts are probably not the best option and the reaction to the Northern Rock situation just adds another dimension to it all.

I suppose appropriate advice is definitely called for with allocating large sums. Aside of the Northern Rock issue, where to put a million would be a good problem to have from my point of view as I currently don't have a million.

dunstonh

Relevant to this thread is the story in the Telegraph of the businessman and his wife who hade put their £1m of life savings in a NR internet account.

They pitched up at a branch, demanding their money (not allowed by the terms & conditions of their account), and sat cross-legged in the manager's office until the police asked them to move!

Makes you wonder how they had the sense to build up £1 mill.

djbd1973

dunstonh wrote: »

Makes you wonder how they had the sense to build up £1 mill.

Nice One!!