Alternative for excess cash savings

T_Flags

Hello all,  I have somewhat belatedly decided to do something about the amount of cash savings I have in light of extremely poor interest rates being available.  (I am aware that rates have been well below inflation for some time).  During a recent pension review with my IFA he suggested a  PruFund Growth Life Fund for a low risk alternative to improve on my cash interest rate.  The initial IFA set up charge is 2% with ongoing total charges of 1.85%.  He made me aware of the quite niche 'smoothing process' to reduce / hide volatility (my interpretation).  Having read this board for some time I wonder if a Vanguard LS20 would be just as suitable with far lower charges.  The sum in question is  £63.5k currently in a cash ISA paying 1.35% and I plan to keep it in an ISA wrapper i.e. transfer in to whichever investment account I decide.  I have about six months salary of cash savings in a Marcus account for any immediate emergency use.  For additional background I am 52, make full employer matched pension contributions and have two non-mortgaged properties.

I would appreciate any thoughts or suggestions.  Thanks in advance.

MaxiRobriguez

The PruFund is more aggressive than LS20, with a larger weighting to equities (about 60% by the looks of it), and despite the fact it's called "growth" the top 50% of the portfolio would appear to be allocated to regions that don't contain many growth assets. Not to trash an IFA, but I don't think I'd be going with that suggestion personally as I don't think that fund is going to beat the 1.85% on going charge by much.

Perhaps what would be better for you is if you worked out what you wanted to achieve, what level of risk you're willing to take and how long your investing horizon is? For example if you're 52 and can leave this money untouched until 67 then you could if you wanted to take a more aggressive stance and push up the equity allocation as you'd have time to ride out any volatility.

Ultimately you need to work out your needs before deciding what to invest in.

*Edit - here's an outfield option you may not have considered yet. What about increasing pension contributions (beyond the match) to get the tax advantage? If you can't afford it due to cash flow limitations, then you could use the £62k here to bridge the gap created.

colsten

1.85% ongoing charge? GULP.

Albermarle

Having read this board for some time I wonder if a Vanguard LS20 would be just as suitable with far lower charges.

You might have also read that the outlook for bonds is not great, and VLS20 is heavy on bonds . It is 4% down ytd .

If you go down this route , I would at least look for something more balanced between equities and bonds . Also have a look at Life strategy alternatives .

https://monevator.com/passive-fund-of-funds-the-rivals/

ChilliBob

There are quite a few funds you could choose to achieve this, with lower fees. The 'classics' mentioned are PNL and CGT.

I actually like the look of some BMO universal sustainable map cautious for something like this, however, it's quite new so I've not invested yet

T_Flags

Thanks to all for your comments. 

@MaxiRobriguez -  I guess initially I see this as short term 3-5  years as I can anticipate car upgrade and larger household repairs / replacements during that time period using some of this pot of money.  It is also to get me away from the mindset of having a (too) large amount of liquid cash if ever I need it.  As well as my current employer matched contributions I am also making monthly contributions to my SIPP to take advantage of tax benefits.  So for this pot I am looking for something low risk but hopefully to beat cash savings rates and inflation after charges.

@Albermarle - thanks, will definitely take a look 

@ChilliBob - Thanks, clearly I need to do some more research.  What are PNL and CGT?
  

csgohan4

might be cheaper to go DIY, even the top achieving funds aren't that high in OCF

ChilliBob

This is all pretty new to me too, cgt =capital gearing Trust (they also have a fund, cg absolute return). Pnl is personal assets Trust.


Both fall into this category called wealth preservation (along with others like Ruffer).

Basically plot them on say Trustnet, ft.com whatever and look in early 2020, alongside say a global equities tracker and you will see these did not dip anything like as much. On the flip side since then they have not gained as much. 

So depends what you want really. 

Albermarle

PNL and CGT , are investment trusts, which are managed with a priority of preserving capital and a secondary aim of some limited growth above inflation . Their cost is around 0.6% + whatever the platform cost is .
You will need to be on an investment platform that offers 'whole of market ' ( means a lot of choice of investments ) . You can not hold/buy them on restricted platforms like robo advisors /Vanguard/personalpensions.

They are a little more complicated to understand and to buy/sell than the multi asset funds, but are perfectly good investments in certain situations .