where would you put it?

frugal90

Have £78000 sitting currently in cash. Looking to draw this down from age 55 until final salary pension kicks in when I am 60, I am currently nearly 49. So I need somewhere to stick this money to ensure it will retain it's value plus possibly a little growth. With inflation picking up I am worried about it loosing value, happy to wait for any pull back/correction in the market .

thanks for any sugestions

ade1982

Best you can do at the moment is fix it for 5 years at 2.25% with Paragon, so you will have no decision to make until you are 54. You will pay tax on approx 628 quid though, assuming you are a basic rate tax payer

Marine_life

frugal90 wrote: »

With inflation picking up I am worried about it losing value

Then you need a return in excess of 3% which implies some exposure to risk. Are you happy to accept some capital loss in the short term?

frugal90 wrote: »

happy to wait for any pull back/correction in the market

....and what if there isn't one - what if the market goes up by another 10%?

Suffolk_lass

In cash you say, so you are looking to make your cash pot of £78,000 last five years. I am assuming it is not in a SIPP or an ISA wrapper (pot).

Personally, as it is not my area of expertise and I don't have time to follow the stock market closely enough to invest directly in shares, I would look to put the majority of it in two-three well-established funds that are currently accumulator (rather than income), and via stocks and shares ISA or SIPP. £20k per annum ISA limit currently.

Very popular are the Vanguard Life Strategy funds. They are low cost tracker funds, rather than dependent on an active manager for whom you will pay more in fees and charges. They have just launched their own direct to customer platform so you could reduce your costs a bit more by going direct. Depending on your appetite for dips and rises, maybe VLS 40 or 60 (the number refers to the amount in shares, with the remainder in more conservative, lower risk investments), given your time frame (my son is in his twenties and is in VLS 80 but might switch to 100 now his employment is a bit more secure. Most of the funds offer an income option as well as acc. Maybe later, something like the Woodford fund that was launched in March, designed for income of approximately 5%.

I presume you are looking at depleting your capital over those five years but you might not need to exhaust it if you are frugal and choose well. I tracked the funds histories and used the financial sections in the newspapers to identify what I wanted before going for it. My first attempt was £10k in a S&S ISA with Fidelity. In 5 years it has grown by 25% so far.

bigadaj

One of the slightly odd things to consider is that for the risk averse the best solution is often to spread risk around different assets, you won't make massive returns but in average you won't actually miss out either.

So as teh sums you are talking about are fairly significant, then maybe looking at keeping a third in cash, with soem effort you can play the current account and regular saver game to get maybe 3% on around £30k which would fit into your savings allowance and so not be taxed.

Another third could go into a multi asset equity and bond fund, which would provide inflation protection and probably a better yield than cash. The most popular options might include vanguard lifestratgey, black rock consensus or legal and general multi index.

Equities could hold a lot more but there are nominally higher risk alternatives that might return a lot more as well for a percentage, p2p has risk but you can easily get 1% per month with asset security, or look at vct which immediately gives you 30% tax relief, and tax free dividends though you have to hold for at least five years.

At your age then increasing pension contributions could probably be the most lucrative option, 20% or more immediate gain and only locked away for a few years, though that doesn't solve the problem of what to invest in, could be cash, bonds, property, equities etc

atush

With 6 years you could afford to take some investment risk, but perhaps not too much?

Will you be adding to DC pensions in this period of 6 years? I would if you havent planned to? Do this from income, each month.

I would put 28K into cash deposits, and 50K invested (perhaps thru your S&S isla allowances? Or put some into a Sipp or PP). I would look at a global index tracker, and some good income paying investment trusts.

If values go down just before withdrawal time, use the 28K cash first while allowing the others to recover.

Does your FS pension come with a cash lump sum? Or would you have to commute?

kidmugsy

frugal90 wrote: »

Have £78000 sitting currently in cash. Looking to draw this down from age 55 until final salary pension kicks in when I am 60, I am currently nearly 49.

Pension contributions: you'll get a 25% tax relief boost on the way in, and if you draw down gradually between 55 and 60 there will be no tax to pay on the way out. So your first move should be to work out how much you can contribute in tax year 17/18.

Be sure to keep some back, though, as an emergency cash fund. Put that into high interest current accounts and regular savers.

What to invest it in within the pension? Lord knows: a mix of cash-like (e.g. short dated bonds) up to, say, 50%; a spot of gold and silver (maybe 10%); some equities and longer-dated index-linked bonds, perhaps US TIPS. Maybe Vanguard funds are the low-hassle, diversified way to do equities and longer-dated bonds. The point is that you are investing for a time horizon of 11 years at the longest and 5 years at the shortest, so investing lots into equities probably isn't a wise move.

Or maybe just hold a "ladder" of Gilts, each maturing at about the time you'll want to do a drawdown.

Alternatively have a look at those investment trusts/investment companies that specialise in preserving the value of your capital e.g. Personal Assets Trust and Ruffer Investment Company. They hold a mixture of gold, equities, index-linked bonds, cash, and so forth.

https://www.patplc.co.uk/sites/default/files/documents/83.pdf


http://www.ruffer.co.uk/cmsfiles/investmentreviews/2017_Q1_Ruffer_investment_review.pdf

http://www.ruffer.co.uk/cmsfiles/reports/RIC_Monthly_report.pdf