Low risk investments

lmsco

Suggestions welcome please.

Single, rude health, no dependants, not at pension age but retired.
Untouched DB pension which will pay around £25k per annum,  Option to take £110k in tax free lump sum.  State pension also kicks in in 3 years.
300k house with no mortgage. Funeral plan paid. No debts.
£50k in PB, £140k in NSI Income Bonds.  £70k in medium risk private investment.  £20k in ISA, £10k in bank.

Planning a £50k renovation, probably next year sometime. Only other planning for future I really need/want to do is for care should I need it which would preferably be in my own home if circumstances allow. No high maintenance lifestyle but do hope to live to spend a lot of it, tho all the usual retirement extravagances are obviously on hold for now.  
Don't want to take any more risk on as I don't see why I need to given my circumstances.  That said, I'm not comfortable with the current inflation risk to my money and regard cash as dead money with interest rates being so low.

I realise just how fortunate I am to be have this "problem"!

Thanks

EdGasketTheSecond

Gold will do nicely in the current zero interest rate and QE/stimulus environment. It will also protect the value of your investment unlike your NS&I bonds which have a negative return compared to inflation.

Another_Saver

"low risk and investment" followed by "gold will do nicely"  🤣
Q: is your DB pension offering to pay you £25k pa now or at what age? Have you got a quote or calculator for the reduction if you take it early? Do you want/need to take it early?
There's a few on here who are big fans of gold but unlike cash, stocks, bonds and rental property, the return from gold is unknowable, it pays you nothing, you only make money by buying and selling it at the right times, and it has dramatically underperformed stocks since the end of Bretton Woods in 1971.
You have plenty of cash, plenty of DB and SP income which is probably guaranteed or as good as.

I'd keep the £10k in the bank and £50k PB, take the £140k income bonds (and maybe the £70k too but I don't know what it's currently in) on the day the interest rate goes down and stick £20k in a stocks & shares ISA, £3.6k into a SIPP, the remainder in a general (taxable) account and buy a balanced/medium risk multi asset fund like Vanguard Lifestrategy 60, HSBC global balanced etc. Vanguard, iWeb, HL, AJ Bell, interactive investor, would all be fine as a platform choice. I use Vanguard and iWeb.
Every year transfer £20k from the general account into the ISA, same with the SIPP. If your current ISA is cash transfer that to a stocks & shares one too.
Personally I would go for a 100% equity fund and I have quite a big home bias. But your post indicates a more conservative attitude to risk, a balanced global multi asset fund about 60% stocks seems more appropriate. There are worse things you could do than leave it as cash so don't think holding onto the cash would be bad or stupid. But investing in a balanced fund (I suggested two, there are plenty others available) via a good, cheap platform (ditto) will probably generate a return that will at least keep up with inflation over the rest of your life. From a 60% equity, 40% bonds fund, a reasonable return expectation over the next 20-30 years, assuming interest rates are going to have to rise again at some point (see the great demographic reversal) would be around 2% ontop of inflation. It won't make you rich but even being pessimistic you can expect the return to at least cover inflation.
To give an idea of the worst that can happen, in the crash earlier this year VLS60 fell 15% and has already recovered to date. In 2008, it wasn't born yet but it would have fallen around 20%, and almost recovered by the end of 2009.
You could also try giving some to an IFA, buying your own shares, or picking some good active funds or investment trusts if you wanted to try to do better, and good luck finding the ones that will.

As for care costs - your £34k or so combined income from the DB and state pensions may go a long way towards those costs (who knows, we may have a national care service by then if we ever elect a competent government again).
As for the lump sum option, you haven't told us how much income you would sacrifice for the lump sum so I couldn't comment how good of a deal taking it would be.

csgohan4

OP have a look at : https://monevator.com/category/investing/passive-investing-investing/
do some research and think about what strategy will suit you

AnotherJoe

lmsco said:

Suggestions welcome please.

Single, rude health, no dependants, not at pension age but retired.
Untouched DB pension which will pay around £25k per annum,  Option to take £110k in tax free lump sum.  State pension also kicks in in 3 years.
300k house with no mortgage. Funeral plan paid. No debts.
£50k in PB, £140k in NSI Income Bonds.  £70k in medium risk private investment.  £20k in ISA, £10k in bank.

Planning a £50k renovation, probably next year sometime. Only other planning for future I really need/want to do is for care should I need it which would preferably be in my own home if circumstances allow. No high maintenance lifestyle but do hope to live to spend a lot of it, tho all the usual retirement extravagances are obviously on hold for now.  
Don't want to take any more risk on as I don't see why I need to given my circumstances.  That said, I'm not comfortable with the current inflation risk to my money and regard cash as dead money with interest rates being so low.

I realise just how fortunate I am to be have this "problem"!

Thanks

Or alternatively you can afford to take more risk since you have getting on for £35k base income soon (DB + SP) plus a boat load of other money.

So why not speculate with some of it.

LHW99

Perhaps start by working out what income you actually want and how much is aready covered by DB / SP?

DiggerUK

Thanks for sharing your first world problem with us. From were I'm sitting your future is sound, no need to lose any sleep.

You don't say if your DBP is based on current value, I'm assuming that's what your figures are based on though. If devalued cash is a worry for you, then don't take the lump sum if you have the option of a larger pension and are intending to spend it anyway.

As suggested you could put the cash in to gold, we here at Digger Mansions have all our retirement savings in gold and our cash in hand in PB's. Very glad we did so.

Apart from our gold we are in much the same position as yourself;....its bucket list time and we are going nowhere fast. We are hoping to die skint as S.K.I.E.R.S. too. 

Best of fortune..._

steampowered

lmsco said:

£50k in PB, £140k in NSI Income Bonds.  £70k in medium risk private investment.  £20k in ISA, £10k in bank.

As you have a DB pension paying £25k per year, presumably on top of your state pension, you are in an extremely fortunate position.

It is important to appreciate that "low risk" means different things. Are we talking about investment risk? Inflation risk? Or both?

As you are looking to the long term (e.g. care costs) which could be several decades away, "inflation risk" is a bigger risk for you than the "investment risk" of stocks and shares - while stocks and shares do go up and down in the short term, the long term trend is very consistent. 

I would do the following:
- Move your money out of premium bonds and income bonds. You have far too much in those - it is just going to be losing value each year to inflation.
- Move most of that money into stocks & shares, ideally into a low cost globally diversified fund such as a Vanguard fund or HSBC All Share fund.
- Check the fees you are paying for your "private investment". People sometimes pay through the nose for private investments, particularly if using advisers like St James Place, which will eat into a big chunk of your returns. If you are paying high fees consider moving your investment into a lower fee arrangement.

Moe_The_Bartender

Go for gold if you fancy your chances. It's more expensive now than it’s ever been. Your more likely to lose money than gain.

msallen

I would pretty much follow what @steampowered suggests unless you have any big ticket items planned over the next 5 or so years (new car, world cruise etc) in which case I'd leave the PBs where they are and earmark them for that.
I wouldn't go anywhere near gold. I see your question has brought our two resident goldbugs out of the woodwork, but I doubt very much you'll see a third such recommendation for it on here.

itwasntme001

How safe is your DB pension?  Over a long enough period, the chances of a company going bust increases.  You may not be skilled enough to assess the risks but there may be a real possibility of your company providing the pension going bust (especially if highly indebted and borrowing costs go up for example).  You are protected by the pension protection fund but this may not cover the full DB pension (the fund is not funded/backed by the taxpayer at all) so you may only get a fraction of the income paid by the fund every year after the company goes bust.

I would look into wealth preservation funds (like cgt or pnl).  Investing a large amount of your cash into a diversified global stock market index is highly risky particularly at current valuations.  You may want to (and probably should) invest some in stocks, but you should aim for diversification especially now at high valuations.  You probably do not need bonds.  Instead, maintaining a relatively high cash amount can make sense.  But if you go for a wealth preservation fund, there is no harm in investing the lot in there as they tend to be very diversified themselves and protect you from inflation much more than stocks will....

You probably should not take on too much risk such as with equity investments if your DB pension provider is considered as a higher risk of defaulting.