switch out of your property investment fund

Thomas_Crown

dunstonh wrote: »

NU reckon that 2008 will see a return to 7-8% p.a. for property funds and this year has seen the end of the silly 15-20% returns that have been in place.

They had been predicting a bad year for a few years. It didnt come when they thought but it arrived finally.

Most posts on this thread seem to be about property funds which invest in property shares. I'm interested in what people think about 'bricks & mortar' property funds & in particular the 'Scottish Widows Property Life' fund.

The SWPL fund has proved to be a good investment over the last 5 years but in the third quarter of 2007 has returned just 1.1%. Having had my investment for 5 years I could apply to cash in my investment without penalty. The thing is, should I cash in my investment now, how much would I actually get per unit (ie.less than the paper value) & where would I invest my money (monthly income needed)?

Just a thought, a temporary home for my money could be the Saga 1 Year Fixed Rate Bond @ 6.99% with monthly income.

Anyone got any suggestions/advice, please?

dunstonh

Most posts on this thread seem to be about property funds which invest in property shares. I'm interested in what people think about 'bricks & mortar' property funds & in particular the 'Scottish Widows Property Life' fund.

The quote of mine was about the NU property fund which is classed as a bricks and mortar fund.

I'm interested in what people think about 'bricks & mortar' property funds & in particular the 'Scottish Widows Property Life' fund.

In line with other bricks and mortar funds.

The SWPL fund has proved to be a good investment over the last 5 years but in the third quarter of 2007 has returned just 1.1%.

As was expected.

Having had my investment for 5 years I could apply to cash in my investment without penalty. The thing is, should I cash in my investment now, how much would I actually get per unit (ie.less than the paper value) & where would I invest my money (monthly income needed)?

The Scot Widows bond offers a range of unit linked funds and now the establishment charge is over, there is no reason to cash it in to move to another wrapper or provider if Scot Wid can offer the funds you want to move into.

Thomas_Crown

dunstonh wrote: »

The Scot Widows bond offers a range of unit linked funds and now the establishment charge is over, there is no reason to cash it in to move to another wrapper or provider if Scot Wid can offer the funds you want to move into.

Scottish Widows do have a large range of funds within their 'Flexible Options Bond' but many of them aren't regarded very highly in the financial press because they perform very poorly.

Trying to find the good funds within the F.O.B. would be like trying to find a needle in a haystack! The only advantage in keeping the bond is that 12 fee free transfers of money can be carried between individual funds each year.

Originally I opted for 100% property & the gamble paid off but financial conditions etc have changed now. I'll have to read the list of available funds & see if anything promising turns up.

dunstonh

Scottish Widows do have a large range of funds within their 'Flexible Options Bond' but many of them aren't regarded very highly in the financial press because they perform very poorly.

I know its by no means the best bond out there but they do offer Inv Perp, Jupiter, Fidelity, New Star, Newton, Schroder funds and others. Certainly enough to find a decent spread. However, if you have the LTSB version, I do believe that they cut that down a bit from the IFA version (as well as making it more expensive).

EdInvestor

Given the changes in the pre Budget it seems unlikely that an investment bond would any longer be the correct choice if it ever was for a basic rate taxpayer..

Thomas_Crown

dunstonh wrote: »

I know its by no means the best bond out there but they do offer Inv Perp, Jupiter, Fidelity, New Star, Newton, Schroder funds and others. Certainly enough to find a decent spread. However, if you have the LTSB version, I do believe that they cut that down a bit from the IFA version (as well as making it more expensive).

I invested in the Scottish Widows Flexible Options Bond on an 'execution only' basis via Chartwell who rebated most of their commission. Some of the commission (up to the S.W. limit) was added to my investment & the rest I received in the form of a cheque.

I have emailed Scot.Wids. this afternoon asking them to send me a list of all the funds within the bond. Once I receive the info I will have to decide what to do.

Thomas_Crown

EdInvestor wrote: »

Given the changes in the pre Budget it seems unlikely that an investment bond would any longer be the correct choice if it ever was for a basic rate taxpayer..

EdInvestor, please can you give a few details of the pre Budget that will affect investment bonds?

Please qualify your second point about investment bonds any longer/if ever being the correct choice for a basic rate taxpayer.

I regard the Scottish Widows Flexible Options Bond (100% Property) as having been an excellent investment. £20,000 + £400-£500 rebated commission invested 5 years ago. Investment peaked at £28,000 a couple of months ago it has now dropped back to £27,000. Also a total of £5,000 taken as monthly income during that period.

So, £20,500 (approx) has made £6,500 + £5,000 = Total £11,500 over 5 years. Obviously the selling price of the bonds would be lower than the paper value.

EdInvestor

Thomas_Crown wrote: »

EdInvestor, please can you give a few details of the pre Budget that will affect investment bonds?

As you probably know the change in CGT to a flat 18% means that you will now pay more by using the bond than by investing directly.

Please qualify your second point about investment bonds any longer/if ever being the correct choice for a basic rate taxpayer.

With an IB you pay (unreclaimable) life company corporation tax of 20% on the gains,whether realised or not, whereas with an equity investment, there is effectively no tax on dividends for a basic rate taxpayer and an annual 9,200 tax free allowance for realised capital gains only, unrealised gains are not taked. Thus direct holdings are a better deal ( most IBs have a lareg equity component).

Five years ago you would not have had the choice of non-life property funds that you do now, so the IB may have been the only way to achieve your aim.

For a future property income investment you might like to check out the offshore bricks and mortar property investment trusts run by the largelife cos which are currently trading at large discounts. They pay a quarterly dividend ( like a share dividend) and are currently yielding around 6-7%. Pop them in your ISA and you won't pay any tax on them at all.

dunstonh

Please qualify your second point about investment bonds any longer/if ever being the correct choice for a basic rate taxpayer.

Ed only gives part an answer. The changes in CGT are a negative but the lower costs of a bond can still offset that and the ability to switch funds without raising a CGT liability can still be beneficial for basic rate taxpayers. Plus, investment bonds do not impact on income so investors close to the higher rate threshold or over 65s close to age allowance reduction can still see a benefit.

In reality, most bonds dont pay 20% anyway as they still benefit from the tax credit in the same way unit trusts do.

mrodent

Hello all, in particular EdInvestor and Cheerfulcat,

I am thinking of switching a largish part of my ISA equity funds to gilts over the next few months, partly because the rhetoric seems to indicate that Bush before he leaves office at the end of 2008 will attack Iran with lots of missiles. I hope I'm wrong but it is a bit like watching a train crash in slow motion at the moment.

I've been trying to understand gilts a bit better. The point about this switch is of course to preserve the tax wrapper status. I just rang the DMO (issuer of gilts) to ask whether it was possible to use their execution-only buying method to buy ISA-wrapped gilts (therefore without incurring annual management charges of a managed gilts fund)... The guy seemed a bit unsure but basically said "no you have to buy through a fund if you want to keep the tax wrapper".

Firstly, is this true? Secondly, what exactly is there to "manage" in a gilts fund? This is what I can't understand very well... don't you just choose your gilt issue and leave the money in there? One of the fund supermarkets I use, Cofunds, has about 20 managed gilts funds... should I just switch into one or two of these? Sorry, I'm a bit stupid, and I find gilts confusing...! I don't want to learn chapter and verse about them, but I'd welcome some advice on how to choose gilts/gilt managed funds...

Thanks
MRodent