100K to invest, need monthly income

jamesd

michael1983!!, sticking it in a savings is the way to ensure a poorer old age or a lower income. Say you find a savings account paying 7% and inflation is 5%. That means you can take just 2% as income if you want the value to be the same next year. The investments can prudently deliver three times that income and still provide the long term inflation protection.

If you don't care about leaving an inheritance you can also do things like taking 7% instead of 6% as income from investments that could return a sustained 6% income, knowing that the money will run out in 40 years if you do that, but accepting the risk of living longer than that or having to take a lower income after a few years.

For predictability there's also the option of buying an annuity with all or some of the money and that's not a bad idea at all for the income it takes to get to assure a fairly comfortable living standard.

dunstonh

For predictability there's also the option of buying an annuity with all or some of the money and that's not a bad idea at all for the income it takes to get to assure a fairly comfortable living standard.

There is also the option of an immediate commencement personal pension. That would provide around 9% income against cost. You wont find any savings accounts guaranteed for 9% for life. Doing a bit of that may allow less income to be taken from the rest of the money allowing some growth.

Primrose

if you are prepared to invest it for more than five years I think you could do worse than invest in some good equity income funds, taking monthly interest, as these invest in companies which normally pay good dividends, so the value of your savings will keep place and hopefully move ahead of inflation. But you can only invest £7000 per tax year in these via a Maxi ISA which would pay the income tax free. So I'd make use of this year's £7K allowance, and put the remainder in an account like Icesave or opt for one of the high interest paying One Year Building Society Bonds which are currently available as many of them have the option of taking monthly interest. But having a lot of money in cash savings investments is not a good way of keeping up with inflation although you need some liquid cash for emergencies. If you don't feel confident enough to invest on your own judgement, seek the advice of a good Independent Financial Advisor. (But avoid the advice of Banks like the plague. They only recommend their own products which are often either highly unsuitable or very poor value).

Aegis

Primrose wrote: »

if you are prepared to invest it for more than five years I think you could do worse than invest in some good equity income funds, taking monthly interest, as these invest in companies which normally pay good dividends, so the value of your savings will keep place and hopefully move ahead of inflation.

Possibly an option, but remember that the OP is asking for ways of generating a supplementary income for her retirement, which might make fixed-interest investments a necessary part of the portfolio before equities. Gilts and Bonds might be a better place to start than equities, but it entirely depends on her whole financial situation, her attitude to risk, etc. Seeing a financial adviser at this stage would probably be a very good idea.

But you can only invest £7000 per tax year in these via a Maxi ISA which would pay the income tax free.

This is where your facts start to go a little wrong, in my opinion. There is no difference in terms of income tax between investing in equities through a standard fund account and investing within an ISA until you get to the higher rate of income tax (unlikely based on what we already know). As such your recommendation below is a little odd.

So I'd make use of this year's £7K allowance, and put the remainder in an account like Icesave or opt for one of the high interest paying One Year Building Society Bonds which are currently available as many of them have the option of taking monthly interest.

£93k of the £100K mentioned in the first post going into cash savings wouldn't even start to pay enough interest to meet the OP's needs. There should be some cash savings, sure, but the majority of this amount would probably be best put into some sort of income-bearing investment straight away.

But having a lot of money in cash savings investments is not a good way of keeping up with inflation although you need some liquid cash for emergencies. If you don't feel confident enough to invest on your own judgement, seek the advice of a good Independent Financial Advisor. (But avoid the advice of Banks like the plague. They only recommend their own products which are often either highly unsuitable or very poor value).

Fully agree with all of this.

dunstonh

This is where your facts start to go a little wrong, in my opinion. There is no difference in terms of income tax between investing in equities through a standard fund account and investing within an ISA until you get to the higher rate of income tax (unlikely based on what we already know). As such your recommendation below is a little odd.

If you use uk other bonds and other fixed interest funds in there, then they can still claim back the tax credit. So, whilst the gain on equities may not be as much, it can be for those.

Also, come 65, with state pensions and own pensions, there may be a concern over age allowance reduction. Any income paid out by ISAs doesnt count as income for tax purposes and therefore wont impact on the £20,900 figure (as it currently stands) where your age allowance begins to be reduced.

EdInvestor

Aegis wrote: »

. Gilts and Bonds might be a better place to start than equities, but it entirely depends on her whole financial situation, her attitude to risk, etc.

IMHO the gains from fixed interest investments (even in an ISA) over cash do not compendsate for the increased risk ( as many people have lately discovered).

£93k of the £100K mentioned in the first post going into cash savings wouldn't even start to pay enough interest to meet the OP's needs.

The OP should be looking for a net return of around 5% which can be obtained via equity dividends directly or in an ISA, quite a few cash accounts (especially N&SI index linked tax free certificates, recommended) plus bond and commercial property funds in an ISA.

passion8

jem16 wrote: »

Dunstonh has answered all of your questions and I would certainly go along with what he is saying.

I would certainly advise shopping round until you can find an IFA who is working on NMA basis as you will find they are more likely to offer ongoing servicing and be much more interested in how your investment is doing.

jem16

Although one IFA looks promising, we're still in the process of finding the right IFA, and have made appointments with at least two - and will stick to dunstanh's guidelines, or as near to.

I just need to ask another question, that I'd rather ask here as I'm still embarrassed at being so money-ignorant.

1) What sort of questions will an IFA ask us?
2) Will they need documentary proof of, for example, pension plans, ISA's & savings, mortgage and endowments etc?

Or are initial meetings just to discuss rates and commissions based on our finances?

Thanks in advance.

EdInvestor

snowball3 wrote: »

I have £100k to invest but I need a monthly income from it to live on. I was thinking about splitting up into high interest accounts that give monthly interest and withdrawing the interest every month.

Just a suggestion to resolve the need for regular monthly income, which can sometimes lead to missing out on good accounts or other investments because they don't provide this facility.

You can easily pay yourself a monthly income simply by taking the annual amount required, transferring it to an instant access high interest account and then withdrawing it in 12 monthly installments.

Let's say you want 400 pounds a month, total 4,800 for the year. Transfer the 4,800 to a high interest account and then just take out 400 a month .

The other 95,200 can be invested in the best accounts available (including tying it up for a year if necessary) to get the best rates.At the end of the year, simply top up what's left over in the instant access account (from the interest payable on the initial but diminishing 4,800) to its original level from the interest paid on your other accounts and start again.[You would have to transfer in 4,944 if you wanted a 3% rise in your monthly income to match inflation.]

The Nationwide Flex account/Esaver is quite a good package for this kind of cash management arrangement,with a decent rate of 5.8% on the instant access savings account.It also offers their useful no-load credit and debit cards for use overseas.

jem16

passion8 wrote: »

jem16

Although one IFA looks promising, we're still in the process of finding the right IFA, and have made appointments with at least two - and will stick to dunstanh's guidelines, or as near to.

I just need to ask another question, that I'd rather ask here as I'm still embarrassed at being so money-ignorant.

1) What sort of questions will an IFA ask us?

I saw two IFAs when i was looking to invest. Both asked a series of questions ( called a factfind) to gather information. From memory it was the usual name & address etc, details of all financial incomings and outgoings, any dependendents, is there a will, value of house. One IFA also had questions about attitude to risk.

2) Will they need documentary proof of, for example, pension plans, ISA's & savings, mortgage and endowments etc?

I was never asked for any proof. I assume they take your word for it as it would be silly of you not to give the whole information. All your answers go into their file if you become a client.

Or are initial meetings just to discuss rates and commissions based on our finances?

Thanks in advance.

This would be part of it. However it may vary from IFA to IFA as to how much they do on the first visit.

snowball3

I just wanted to say thank you for all the advise. I will look in to each one and find myself a good financial adviser that deals with investment.