what to do with 200K

sittingcomfortably

Please forgive me if I have put this in a wrong section as I am new to the forum, my wife and myself have got 200k with the ns&i 100k between us in premium bonds and 100k in income bonds. We are aware that its not the best place to have the money regarding the best return, but we don't want to have any risk with where we put the money..  I have never been happy with the return that we get on the 200k with the ns&i, but this morning i get a email which tells me they are cutting interest rates and premium bond prizes ( now definitely not happy with the return ) we have got other money tied up in smaller amounts so as we can get the best non risk interest rates on it ( isa's growth bonds fixed term bonds etc which amount to another 200k )

Can anyone point me in the right direction to where I should be looking to moving our 200k from ns&i to... but is must be no risk, ( my wife is not happy with high risk investments ) if poss.

 basically we are just looking for interest to top our pensions up with and the ns&i interest rate drop is just not doing it for me..

any info to put me on the right track would be useful..

many thanks SC

george4064

It's not possible to take literally 'zero' risk, if you hold it all in cash then you will be exposed to the risk of inflation where inflation will erode the value of your savings. For example, you may be earning 1.0% interest on your cash but inflation might be 2.0%, so in 'real' terms (meaning after the effects of inflation) your return is -1.0%.

For best savings accounts check here: https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/
You will need to decide yourself which accounts you would like to open, depending on your personal preferences and your circumstances.

dunstonh

ut we don't want to have any risk with where we put the money.
you already have risk.   You don't have investment risk but you have replaced it with shortfall risk and inflation risk.

Can anyone point me in the right direction to where I should be looking to moving our 200k from ns&i to... but is must be no risk, ( my wife is not happy with high risk investments ) if poss.
There is no risk free option.   Every option has some risk.    You say your wife is not happy with high risk investments.  That is fair enough. The average UK consumer is cautious to moderate in terms of risk.  Very few are comfortable with high risk.    Risk is a sliding scale.  Not a case of nothing or high risk with nothing in between.

 basically we are just looking for interest to top our pensions up with and the ns&i interest rate drop is just not doing it for me..
In terms of all risks, you are actually taking more risk than someone with investment risk set to a cautious level.  You are almost guaranteeing a loss in real terms which could result in a cycle of capital erosion in later life.
e.g. £200k where you draw the interest to supplement income will be worth around £134,000 in 10 years time in spending power.   It will still say £200k on the statement but it wont buy as much and the interest it provides wont provide enough. Sooner or later you will need to dip into it to start drawing the capital to make up the shortfall.    In turn, less interest is paid and more capital needs to be drawn creating a downward spiral until when all the money runs out.

So, taking a sensible level of risk where you balance ALL risks rather than focus on avoiding one of them is usually the best option.

Albermarle

It's a dilemma many new posters to the forum have .
They want better returns with no risk but it is an impossible dream .
You could switch the NS&I money into bank/building society savings accounts , which will pay a little bit better interest , especially if you tie the money up for a while. This would still be 100% safe, especially of you save no more than £85K with any one institution.
I think even if you are cautious , allocating at least some money to long term medium risk investments would be a good idea.
You mention your pensions - it is almost certain they are mainly invested in the financial markets . Are you aware at what risk level they are invested ?

steampowered

I am afraid it is impossible to have "no risk".

Investments come with "investment risk", which means that the value of things like property or stocks fluctuate up and down over time.

Cash savings and things like premium bonds come with "inflation risk". Over time inflation will erode the value of your money. There is a high probability that inflation will exceed the return you are getting, which eats into the value of your capital over time.

Over the long term - i.e. 10 years plus - inflation risk becomes more of an issue; and investment risk becomes less of a problem. There is statistically very little chance (less than 5%) of making a loss on the stock market if you are invested over a 10 year period; whereas 10 years of inflation is quite a big risk to the value of your capital.

You could consider a low risk investment portfolio (such as what is called an "absolute return" investment fund). This would give you a better return than cash/premium bonds, with a pinch of investment risk, though you are very unlikely to see the kind of value swings that a full stock market investment might. That would be a good half way house between the swings of the stock market and losing value due to inflation. Maybe something like a Blackrock Absolute Return fund (https://www.blackrock.com/uk/individual/products/absolute-return-funds?switchLocale=y&siteEntryPassthrough=true)?

Audaxer

sittingcomfortably said:

Can anyone point me in the right direction to where I should be looking to moving our 200k from ns&i to... but is must be no risk, ( my wife is not happy with high risk investments ) if poss.

 basically we are just looking for interest to top our pensions up with and the ns&i interest rate drop is just not doing it for me..

any info to put me on the right track would be useful..

As all investments aren't high risk, your wife may be more comfortable with a cautious or medium risk portfolio if you explain to her what others have advised about the inflation risk of having such large amounts in savings. As you can't get a decent level of interest from your savings, an alternative might be a fairly cautious to medium risk income portfolio of investments. From that you could get at least 3.5% dividend income each year, even rising with inflation each year. However the capital value of your investments will fluctuate, but should hold value or increase in value over the long term depending on the investments. I know that may be a worry, but if you are just happy taking income and never intended to touch the capital anyway, it could be a possible solution for you and your wife to top up your pensions.

If you are interested in considering an income portfolio, you can learn a lot by searching on this forum and looking at websites such as Monevator.  If you are not confident in setting up your own portfolio, you could also look for an Independent Financial Adviser. You can get free initial meetings with IFAs to compare costs etc. Most people on here would advise not going to Financial Advisers in banks as they are not independent and tend to be a lot more expensive.   

sittingcomfortably

Thanks everybody for the replies, both myself and my wife have read them through and found a lot of good advice which we have taken on board ( and have realised there is a better way of making our money work for us ) so we are are going to arrange to see a IFA... once again many thanks.