Best Option for Cash Lump Sum

DoneWorking

I am looking for the best option for what to do with a lump sum of around £400k as from January

I have a fair pension and very little outgoings and do not need to secure any income from this money

However I do want to protect it from inflation so I can bequeath it to my wife after I pass on which will be probably in ten years time

I do not want to risk the sum being eroded by inflation

Nor eroded by poor investments

What is my best option

My only ever investment was a small pension sum

A friend has a similar sum invested and says his return has been 8 % total over three years

This is not going to beat inflation but he is risk adverse and stuck on a cautious investment plan

Are there any bonds or saving schemes which could net me 3 to 4 % after costs gross

Or is investment my only option

I have seen two IFAs but not been impressed by the costs and the proposed plans

I am keen on ESG focused investments 

eskbanker

DoneWorking said:

Are there any bonds or saving schemes which could net me 3 to 4 % after costs gross

Or is investment my only option

No and yes, respectively!

jimjames

DoneWorking said:

I am looking for the best option for what to do with a lump sum of around £400k as from January

Nor eroded by poor investments

I am keen on ESG focused investments 

Investing will be the only way to get better returns but with the statements above you are already starting to restrict yourself and make potentially poor investment choices.

DoneWorking said:

A friend has a similar sum invested and says his return has been 8 % total over three years

That may well have beaten inflation over the last 3 years but not inflation as predicted over the next 3

GeoffTF

You have to risk your capital being eroded by inflation. The best guarantee you can get is a guaranteed loss against inflation. If you take a risk, you will probably do better, but you could do worse. If you buy equities outside a tax shelter, you will have to pay dividend tax and probably Capital Gains Tax too. Put what you can into an ISA. The simplest plan is to use savings accounts:

https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/

and a global equity tracker:

https://www.vanguardinvestor.co.uk/

60% equities is a common plan, but you can take more or less risk, as you please.

DoneWorking

Thanks Geoff

I like your general idea

Some cash in an ISA

Invest in a basic tracker

Plus possibly set up a bond ladder

Neither of the IFAs mentioned these ideas

Plus they want over £4k to set up a plan then nearly 2% pa to oversee same plan

GeoffTF

DoneWorking said:

Thanks Geoff

I like your general idea

Some cash in an ISA

Invest in a basic tracker

Plus possibly set up a bond ladder

Neither of the IFAs mentioned these ideas

Plus they want over £4k to set up a plan then nearly 2% pa to oversee same plan

I suggest a bond ladder outside the ISA, using the fixed interest accounts in my link. Interest rates are not so good inside an ISA.  Most of the equities will have to be outside the ISA too. The annual ISA allowance is only £20K. 2% p.a. makes no sense. Government bonds pay almost nothing, even before costs, and equity prices are sky high. iWeb is cheaper than Vanguard for your investment size. I suggest that you read this:

https://monevator.com/tag/kroijer/

The income version of the Vanguard Global All Cap Fund will do the job.

Linton

DoneWorking said:

Thanks Geoff

I like your general idea

Some cash in an ISA

Invest in a basic tracker

Plus possibly set up a bond ladder

Neither of the IFAs mentioned these ideas

Plus they want over £4k to set up a plan then nearly 2% pa to oversee same plan

A bond (do you really mean government bonds?) ladder will give you close to zero return at the moment and could even lose  value over the next few years.  Cash in an ISA or even cash in fixed rate savings accounts wont get anywhere near inflation,

Investment is your only option.

2% pa is outrageous for £400K. Oddly that is twice as high as the £4K (ie 1%) to set up the plan.  Are your figures right?  I hope you arent talking to a large national company, best to deal with small local IFAs.

.

GeoffTF

Linton said:

DoneWorking said:

Thanks Geoff

I like your general idea

Some cash in an ISA

Invest in a basic tracker

Plus possibly set up a bond ladder

Neither of the IFAs mentioned these ideas

Plus they want over £4k to set up a plan then nearly 2% pa to oversee same plan

A bond (do you really mean government bonds?) ladder will give you close to zero return at the moment and could even lose  value over the next few years.  Cash in an ISA or even cash in fixed rate savings accounts wont get anywhere near inflation,

Investment is your only option.

2% pa is outrageous for £400K. Oddly that is twice as high as the £4K (ie 1%) to set up the plan.  Are your figures right?  I hope you arent talking to a large national company, best to deal with small local IFAs.

.

No, we are discussing the fixed interest savings accounts ("bonds") recommended by MSE in my link above. The purpose of the bond ladder is to dilute the loss if the tracker falls in value. He can put all his money in the tracker if he wishes, but it will be a bumpy ride, and he could be buying at the beginning of a protracted bear market:

https://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929

DoneWorking

So much to think about

The IFAs I was speaking to charged 1% pa

Plus platform fees etc on top of around 1% pa

So options so far look like

£20 k pa in an ISA

Part of cash in bond ladder

Remainder in investment tracker

The ISA and bond ladder seems simple

I would need help with investment decision

Do I therefore need an IFA

Or can I get tracker provider to help

The plus point of an IFA is they can also advise on tax and inheritance issues

Apodemus

It  may also be worth considering wealth preservation investment trusts such as Personal Assets Trust or Ruffer, which may have a lower downside risk than a tracker.

tebbins

DoneWorking said:

So much to think about

The IFAs I was speaking to charged 1% pa

Plus platform fees etc on top of around 1% pa

So options so far look like

£20 k pa in an ISA

Part of cash in bond ladder

Remainder in investment tracker

The ISA and bond ladder seems simple

I would need help with investment decision

Do I therefore need an IFA

Or can I get tracker provider to help

The plus point of an IFA is they can also advise on tax and inheritance issues

2% pa sounds more like SJP, that's the problem with having a wealth manager (that's supposed to do well for its clients) being publicly owned (supposed to grow its earnings and pay dividends no matter what).
£400k sounds like the kind of amount at which an IFA is perhaps necessary and valuable, especially if you don't know what you're doing and would like/may need help with tax and inheritance planning.
A tracker provider will not help with this and suggest you get independent financial advice.