with profits ISA - not sure what to do

c'est_moi

I have £60K currently in a cash ISA with a 1.1% interest rate.

I have been looking at moving it into a with profits ISA with Wesleyan with a view to leaving it invested for six or seven years.

I have a very low tolerance of risk (which is why the money is currently sitting in a cash ISA). Does moving it to the with profits scheme make sense or am I risking my life savings?! I realise that there are other options available that might potentially offer a better return, but I don't have the nerve to also risk losing money.

Any advice gratefully received! Thanks

dunstonh

I have been looking at moving it into a with profits ISA with Wesleyan with a view to leaving it invested for six or seven years.

Those are words that nobody would expect to see in 2019.

I have a very low tolerance of risk (which is why the money is currently sitting in a cash ISA).

Being too heavy in cash can actually increase risks. It may not suffer investment risk but you bring in shortfall risk and inflation risk. Taking too little investment risk can actually be riskier than taking sensible investment risk.

Does moving it to the with profits scheme make sense or am I risking my life savings?!

It is a very strange choice and not one many here would consider ideal.

but I don't have the nerve to also risk losing money.

With profit funds still go down as well as up.

Risk is not on/off. it is a sliding scale. You dont have to jump right up the risk scale to invest. You can take a sensible measured level.

Alexland

Either make a longer term Cash ISA commitement to get a better interest rate or accept investment risk with an appropriate asset allocation. Taking out a second rate expensive product isn't the answer.

c'est_moi

OK thanks for the responses - so no one seems to have anything positive to say about 'with profits' - I must admit when I heard the term it made me think back to the old days of endowment mortgages, prompting me to look here for more information.

I am rethinking now. I still am very, very cautious!! I have looked at something like Vanguard ISAs which allow you to invest in a portfolio where a greater proportion of the fund is in bonds rather than equities. I know that investments can go up ans well as down and also that if the returns on this would probably be lower than one invested in more equities, but then the risks are also lower too.

Does that seem more sensible for someone who worries hugely about risk? I am also thinking maybe to put in half of the savings - so £30K and not the whole £60K. In a sense dipping a toe into the water.

I just don't know! A better option than 'with profits' or just stressing out for little actual different results???

c'est_moi

Also - looking at a better cash ISA - the best one at the moment seems to be the Virgin, I think 2 year lock in - I had already considered moving my current cash ISA to that.

lpgm

c'est_moi wrote: »

I am also thinking maybe to put in half of the savings - so £30K and not the whole £60K. In a sense dipping a toe into the water.

Instead of thinking about it as 'dipping a toe in the water', it could be a way to invest some of the money in near-enough 100% equities, and have plenty of cash on standby as a safety net. Or couldn't you stand to see any part of your portfolio showing a paper loss even if you didn't need to sell? It really depends on how much money you need to get your hands on and when. What's happening in six or seven years?

Albermarle

Does that seem more sensible for someone who worries hugely about risk? I am also thinking maybe to put in half of the savings - so £30K and not the whole £60K. In a sense dipping a toe into the water.

The normal advice on this forum for novice investors with worries about risk , is to invest in a low cost multi asset fund , like the one you mention , within an ISA.
So multi asset fund with 80% shares /equities would potentially be too volatile for you . On the other hand or one with only 20% equities you have to think whether it is wortwhile and you could well get a similar return from a long terms savings account . A 60:40 ( 60% equities) is bog standard or 40:60 for the cautious types/nearing retirement.
You could add £10K at a time, but note max contribution to any ISA, or combination of ISA's in a tax year is £20K .
As well as Vanguard you could look at Legal and General Multi index funds : Blackrock Consensus & Fidelity multi asset allocator.

Tammer

Hi,
It might be good to read up on different types of tax free saving and investing in the UK before taking any action, and reappraising what you mean by being "cautious".

Sometimes, when trying to be cautious and avoid a short term decrease in investment values, people don't realise that they are actually already losing money due to substantial other risks (as DunstonH mentions above).

c'est_moi

OK - so, some more things to think about there.

The six to seven years time frame is to fit in with retirement plans. As already mentioned by previous posters I am aware that letting the money sit in the bank as a cash deposit is really losing money due to inflation.

The ISA I was looking at was 40% equity 60% bonds. I would be planning on leaving it in there for 6 or 7 years but I don't know if that would be considered long enough.

I am aware of the annual ISA allowance, but as the money is currently in a cash ISA could I transfer £30K out of cash into a stocks and shares ISA in one go without using up any of the annual ISA allowance.

Yes, as you can see I am a complete novice at this!