Best Option for Cash Lump Sum

DoneWorking

dunstonh said:

DoneWorking said:

DoneWorking said:

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 

I have had a new quote from an IFAs

Based on cautious risk ESG investment portfolio based on my wife and I 
Based on a Unit Trust

Based on £325 k

1% Initial Report

0.5% ongoing IFA fee pa

Platform/Fund 0.75 pa

They feel they can protect my funds from inflation over the long term and there will be volatility in the short to medium term period

Do these charges look ok

This is a smallish company

What may happen if the owner retires or sells the business

Does the claim to match inflation seem ok based on a cautious fund

 

With the 0.75% being platform and funds then its not bad for an ESG solution.   As mentioned you expect to pay more for ESG over conventional investing.

Most IFAs are small localised companies. What happens when the owners retire is unknown but you are free to stay with the new owners or move to a different IFA.  Moving between IFAs is very simple.

You would expect cautious to keep up with inflation over the long term but not much else.  You certainly shouldn't expect the next 10 years to be anything like the last 10 years in respect of defensive, conservative or cautious portfolios or even medium risk.   Those good days are gone for a cycle now.

Update on my thoughts about  IFA Option with ESG Investment for my funds against the savings option

I am concerned that too cautious a risk profile for any investments will not generate a sufficient return  to protect against inflation

But worried about setting too high a risk profile 

I have been advised that over the long term an investment would be better than using cash savings accounts

But there is obviously the risk of  volatility causing a largish drop in the value of my investment which could be worse than the effects of inflation on simple cash savings accounts

I am also concerned about a failure of fund holder leading to loss of funds

What protection is usually provided for this eventuality

Going with  a combination of savings and Global Tracker also pose risks

Lowish returns failing to beat inflation

Higher risk profile on a Global Tracker

In summary with inflation likely to remain high in the short to medium term I am concerned that my cash will slowly lose real value over time if I do not invest it

However there would be no risk to the capital over time other than the effects of inflation

With investment I could make a higher return and possibly beat or come closer to matching inflation over the long term

But run the risk of losing my fund much quicker due to a drop in the market 

This issue is causing me a lot of grief

I'd appreciate any final thoughts before I make my decision

GeoffTF

You do not have to use a bog standard global tracker. You can use an ESG global tracker. There are plenty for you to choose from. That is likely to reduce returns and increase risk, but that is your choice. The more restrictive you are, the more you are likely to reduce returns and increase risk.

If you use an IFA you will reduce your returns after costs.

You have to decide for yourself, how much you are willing to risk. I have suggested 50 : 50, but you do not have to go with that.

CheekyMikey

DoneWorking said:

dunstonh said:

DoneWorking said:

DoneWorking said:

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 

I have had a new quote from an IFAs

Based on cautious risk ESG investment portfolio based on my wife and I 
Based on a Unit Trust

Based on £325 k

1% Initial Report

0.5% ongoing IFA fee pa

Platform/Fund 0.75 pa

They feel they can protect my funds from inflation over the long term and there will be volatility in the short to medium term period

Do these charges look ok

This is a smallish company

What may happen if the owner retires or sells the business

Does the claim to match inflation seem ok based on a cautious fund

 

With the 0.75% being platform and funds then its not bad for an ESG solution.   As mentioned you expect to pay more for ESG over conventional investing.

Most IFAs are small localised companies. What happens when the owners retire is unknown but you are free to stay with the new owners or move to a different IFA.  Moving between IFAs is very simple.

You would expect cautious to keep up with inflation over the long term but not much else.  You certainly shouldn't expect the next 10 years to be anything like the last 10 years in respect of defensive, conservative or cautious portfolios or even medium risk.   Those good days are gone for a cycle now.

Update on my thoughts about  IFA Option with ESG Investment for my funds against the savings option

I am concerned that too cautious a risk profile for any investments will not generate a sufficient return  to protect against inflation

But worried about setting too high a risk profile 

I have been advised that over the long term an investment would be better than using cash savings accounts

But there is obviously the risk of  volatility causing a largish drop in the value of my investment which could be worse than the effects of inflation on simple cash savings accounts

I am also concerned about a failure of fund holder leading to loss of funds

What protection is usually provided for this eventuality

Going with  a combination of savings and Global Tracker also pose risks

Lowish returns failing to beat inflation

Higher risk profile on a Global Tracker

In summary with inflation likely to remain high in the short to medium term I am concerned that my cash will slowly lose real value over time if I do not invest it

However there would be no risk to the capital over time other than the effects of inflation

With investment I could make a higher return and possibly beat or come closer to matching inflation over the long term

But run the risk of losing my fund much quicker due to a drop in the market 

This issue is causing me a lot of grief

I'd appreciate any final thoughts before I make my decision

I haven’t read the whole thread here so apologies if you’ve already provided more info, but without knowing what annual income you ideally require and what pension income you might be getting, it’s hard to offer a definite suggestion. If you’re just looking to protect this lump sum and ensure it’s still there plus inflation after 10 years then the 50:50 suggestion sounds sensible. Your worries are simply the eternal dilemma facing us all, but on balance of probabilities, you’re unlikely to lose on a global tracker over 10 years. Unless you think you might need a large sum of cash in the next few years, personally I’d put less in cash deposits, maybe £100k at most, but that is based on my own risk profile. I have just taken £100k pension lump sum myself and am currently loading it into Chase purely as a holding bay for now. I have much more already in various equity trackers and am not rushing to put in more just yet, plus I’m probably going to use this lump sum to augment my pension income so will probably do a bond ladder with most of it. Another area you could consider in terms of preserving your wealth might be investment trusts such as Capital Gearing Trust or Personal Assets Trust which are a reasonable compromise between cash bonds and equities, but add another level of complexity if you’re looking for simple.

DoneWorking

I have already arranged my pension

I'm simply looking to try to protect my fund from ravages of inflation

Where can I get up to speed on

Global Trackers

Investment Trusts

CheekyMikey

There are a myriad of both…Google those two ITs I suggested, go to their websites and read in-depth about their objectives and holdings, you can find plenty of performance data on HargreavesLansdown or Trustnet. There are many others but those two have good reputations, their fees are much higher than trackers those. Someone already suggested HSBC World Index which is good (and cheap) or you won’t go far wrong with something from the Vanguard stable, I like their FTSE developed world excl UK but they have others which can provide a bit of UK exposure should you wish.

ColdIron

DoneWorking said:

Where can I get up to speed on

Global Trackers

Investment Trusts

Once you are more or less up to speed with how they work, The AIC is a decent resource for comparing Investment Trust Companies
https://www.theaic.co.uk/

GeoffTF

Here is a fun article with some relevance, "Sinful Investing: Is It for You?":

https://www.investopedia.com/articles/01/040401.asp

GeoffTF

Equity investment trusts have higher costs than the cheapest equity global trackers, and have less diversification and higher risk as a result. You do not need to complicate matters.