Investment for older people

Eco_Miser

dunroving said:

Eco_Miser said:

dunroving said:

I'd largely ask why you are focusing on one investment (VLS60). Remember the importance of diversification.

VLS60 is diversified. It's designed to be the only investment needed.

It contains bonds and equities from around the world.

My point was that it is one fund. If everything is wrapped into one fund, you can't change the balance of your holdings, if you decide you want to. If the OP's parents are happy with the balance of sectors, regions, etc. in the VLS range and are confident that they won't ever want to change the balance, then fine. Two-thirds of VLS60 is invested in 2 countries - some might say that's not sufficiently diversified geographically, for example.

If they decide they want to change the balance, then they can change it. One sale and as many purchases as the new balance requires. It's not like buying an annuity.

Meanwhile, it's a simple diversified cheap solution.

dunroving

Eco_Miser said:

dunroving said:

Eco_Miser said:

dunroving said:

I'd largely ask why you are focusing on one investment (VLS60). Remember the importance of diversification.

VLS60 is diversified. It's designed to be the only investment needed.

It contains bonds and equities from around the world.

My point was that it is one fund. If everything is wrapped into one fund, you can't change the balance of your holdings, if you decide you want to. If the OP's parents are happy with the balance of sectors, regions, etc. in the VLS range and are confident that they won't ever want to change the balance, then fine. Two-thirds of VLS60 is invested in 2 countries - some might say that's not sufficiently diversified geographically, for example.

If they decide they want to change the balance, then they can change it. One sale and as many purchases as the new balance requires. It's not like buying an annuity.

Meanwhile, it's a simple diversified cheap solution.

I don't see anything in what you're saying that changes my point. 

Notepad_Phil

Aged said:

Rollinghome said:

Aged said:

So you can purchase an annuity with cash from savings?

Yes, you can buy an annuity.  If you google you'll find lots of firms anxious to give you a quote, such as https://annuity.uk.com/ . (You might prefer to not give them a genuine email or phone contact to get just an impression of what you might get.)

Whether you should is another question.  At 64, a single life, non-indexed pension would cost something like £500k for £25k pa. depending on your health and other factors.  Indexed-linked on two lives would cost a lot more.

Thanks for that link. I did as you suggested and for £250K they would pay me a fixed annuity of just under £50K a year for 5 years, which is basically just my own money back in 5 instalments! Or I could get £10-11K a year for 25 years or until death. It's made me think though. At my age I want security and peace of mind, and I don't want to be having sleepless nights about how the investments are doing and whether I'll run out of money in my old age.

Fixed annuities may be an okayish solution for you provided that inflation remains low.  So do you feel lucky?

Personally I'd be more worried about the sleepless nights where I was thinking of the higher inflationary days of my youth and what they would do to my fixed income. Mrs Notepad's mother bought some 30 years ago in her sixties and she'd be in trouble now if she didn't also have a large sum invested which has outgrown inflation, as in real terms the annuities are bringing in less than half of what they started at.

I'm not saying that I'll never buy a fixed annuity, but I think it's more likely to be when we're definitely in the last years of our life e.g. mid 80s.

Aged

Notepad_Phil said:

Aged said:

Rollinghome said:

Aged said:

So you can purchase an annuity with cash from savings?

Yes, you can buy an annuity.  If you google you'll find lots of firms anxious to give you a quote, such as https://annuity.uk.com/ . (You might prefer to not give them a genuine email or phone contact to get just an impression of what you might get.)

Whether you should is another question.  At 64, a single life, non-indexed pension would cost something like £500k for £25k pa. depending on your health and other factors.  Indexed-linked on two lives would cost a lot more.

Thanks for that link. I did as you suggested and for £250K they would pay me a fixed annuity of just under £50K a year for 5 years, which is basically just my own money back in 5 instalments! Or I could get £10-11K a year for 25 years or until death. It's made me think though. At my age I want security and peace of mind, and I don't want to be having sleepless nights about how the investments are doing and whether I'll run out of money in my old age.

Fixed annuities may be an okayish solution for you provided that inflation remains low.  So do you feel lucky?

Personally I'd be more worried about the sleepless nights where I was thinking of the higher inflationary days of my youth and what they would do to my fixed income. Mrs Notepad's mother bought some 30 years ago in her sixties and she'd be in trouble now if she didn't also have a large sum invested which has outgrown inflation, as in real terms the annuities are bringing in less than half of what they started at.

I'm not saying that I'll never buy a fixed annuity, but I think it's more likely to be when we're definitely in the last years of our life e.g. mid 80s.

The idea of being able to rely on a regular income would be a comfort, but buying an annuity just doesn't seem to make economic sense - far better to hold on to the money and draw down what you need from it yourself. I've used advisers and they never seem to be able to see things from my point of view - what I want is to have a regular monthly amount coming into my current account that is sufficient to meet my needs. 

Eco_Miser

Aged said:

The idea of being able to rely on a regular income would be a comfort, but buying an annuity just doesn't seem to make economic sense - far better to hold on to the money and draw down what you need from it yourself.

It does depend on what rate you can get, but at current rates I agree with you. My suggestion earlier was specifically to meet Mickey666's wish to die more or less penniless.

Aged said:

I've used advisers and they never seem to be able to see things from my point of view - what I want is to have a regular monthly amount coming into my current account that is sufficient to meet my needs. 

Outside of pensions and annuities that is very difficult.

There are Investment Trusts that pay a monthly income, but the amount is not guaranteed, and they depend on high-yielding investments themselves, which can be very volatile.

Three or more Investment Trusts or funds paying dividends quarterly will also give you a monthly income (if chosen to all pay out in different months), though again the amounts will vary.

Or you could do the smoothing yourself, and pay all your income into one bank account, from which you draw your desired regular monthly income into your day to day account.

Alexland

Eco_Miser said:

There are Investment Trusts that pay a monthly income, but the amount is not guaranteed, and they depend on high-yielding investments themselves, which can be very volatile.

If you are willing to accept a slightly lower yield there are investment trusts with a reasonable balance of growth and value providing smoothed income. Some IT portfolios have a beta under 1.00 so less volatile than the overall stock market however the gearing can mean the overall IT share price is still as volatile as the market. While they make no promises that the dividend increases will link to inflation some of them have impressive records of income and capital growth.

Eco_Miser

Alexland said:

Eco_Miser said:

There are Investment Trusts that pay a monthly income, but the amount is not guaranteed, and they depend on high-yielding investments themselves, which can be very volatile.

If you are willing to accept a slightly lower yield there are investment trusts with a reasonable balance of growth and value providing smoothed income. Some IT portfolios have a beta under 1.00 so less volatile than the overall stock market however the gearing can mean the overall IT share price is still as volatile as the market. While they make no promises that the dividend increases will link to inflation some of them have impressive records of income and capital growth.

But do these ITs pay monthly dividends? Otherwise see the rest of my previous post.

Thrugelmir

Notepad_Phil said:

Aged said:

Rollinghome said:

Aged said:

So you can purchase an annuity with cash from savings?

Yes, you can buy an annuity.  If you google you'll find lots of firms anxious to give you a quote, such as https://annuity.uk.com/ . (You might prefer to not give them a genuine email or phone contact to get just an impression of what you might get.)

Whether you should is another question.  At 64, a single life, non-indexed pension would cost something like £500k for £25k pa. depending on your health and other factors.  Indexed-linked on two lives would cost a lot more.

Thanks for that link. I did as you suggested and for £250K they would pay me a fixed annuity of just under £50K a year for 5 years, which is basically just my own money back in 5 instalments! Or I could get £10-11K a year for 25 years or until death. It's made me think though. At my age I want security and peace of mind, and I don't want to be having sleepless nights about how the investments are doing and whether I'll run out of money in my old age.

I'm not saying that I'll never buy a fixed annuity, but I think it's more likely to be when we're definitely in the last years of our life e.g. mid 80s.

Sometimes a mix of products is the answer.  Exposure to markets is all very well. An extended bull market has breed high levels of complacency. Annuities have their place in providing guaranteed fixed income streams at a time when there's little else to speak of.  Added to which there's a variety of annuity options to choose from. 

wmb194

Not a recommendation, do your own research etc. etc. but some strategic bond funds* pay monthly interest whilst others pay quarterly. The general rule is the higher yield the junkier they are. Obviously you could try to reduce the risk by investing in more than one, mix it with equity income investment trusts & OEICs and so on.
https://www.trustnet.com/fund/price-performance/o/ia-unit-trusts?sector=O%253ASTERSRT&tab=fundOverview&sortby=Yield&sortorder=desc&pageSize=50

*Despite the name some also hold some small proportion of equities e.g., Invesco Monthly Income+.

Aged

Eco_Miser said:

There are Investment Trusts that pay a monthly income, but the amount is not guaranteed, and they depend on high-yielding investments themselves, which can be very volatile.

Three or more Investment Trusts or funds paying dividends quarterly will also give you a monthly income (if chosen to all pay out in different months), though again the amounts will vary.

Or you could do the smoothing yourself, and pay all your income into one bank account, from which you draw your desired regular monthly income into your day to day account.

So, is it better to invest in ITs than OEICs after 'retirement'?