Pension Lump Sum - Best options

kassy64

Hi, Will be receiving my pension 'lump sum' when I retire in a few weeks time (its a final salary scheme).
Looking to initially invest £85k (the amount backed by FSA) and wont need to touch it for a few years. With interest rates going up I'm initially think a fixed for 12 months
What are my best options? I'm risk averse so some sort of investment Bond, ideally I would like a monthly income.
Would like it to be with a well known 'name', I see Virgin Money have a 2% fixed Bond (or 2.35% for 2 years) which would give me roughly £140 / £165per month.
Anyone have any better options.
Thanks

dunstonh

Looking to initially invest £85k (the amount backed by FSA) 

Food standards agency? 
It is FSCS.     And FSCS doesn't work the same way with investments as it does deposits.

and wont need to touch it for a few years. 

A few years is probably not enough for investing.  Although it may be for some of it.  Short term money should stick with cash savings and not investments.

With interest rates going up I'm initially think a fixed for 12 months

That will be cash savings and not investing.

What are my best options? I'm risk averse so some sort of investment Bond, ideally I would like a monthly income.

Best option is probably not taking the pension commencement lump sum but increasing the income from the pension scheme.   Although we would need to know the figures to be sure.

Investment bonds are a niche option nowadays.   Stocks & shares ISA and unwrapped investments tend to be more tax efficient in most scenarios.

You say you want a monthly income but are looking at savings account.  That is actually a potentially higher risk than using investments.    Whilst investments give you investment risk, cash savings multiplies your inflation risk and shortfall risk. 

There is no risk free option in respect of income provision.  Other then the defined benefit pension income.

kassy64

dunstonh said:

Looking to initially invest £85k (the amount backed by FSA) 

Food standards agency? 
It is FSCS.     And FSCS doesn't work the same way with investments as it does deposits.

and wont need to touch it for a few years. 

A few years is probably not enough for investing.  Although it may be for some of it.  Short term money should stick with cash savings and not investments.

With interest rates going up I'm initially think a fixed for 12 months

That will be cash savings and not investing.

What are my best options? I'm risk averse so some sort of investment Bond, ideally I would like a monthly income.

Best option is probably not taking the pension commencement lump sum but increasing the income from the pension scheme.   Although we would need to know the figures to be sure.

Investment bonds are a niche option nowadays.   Stocks & shares ISA and unwrapped investments tend to be more tax efficient in most scenarios.

You say you want a monthly income but are looking at savings account.  That is actually a potentially higher risk than using investments.    Whilst investments give you investment risk, cash savings multiplies your inflation risk and shortfall risk. 

There is no risk free option in respect of income provision.  Other then the defined benefit pension income.

Not sure any of that is relevant to me, I thought this forum included 'savings'. So, in a nutshell what is my best option to receive the greatest return I if secure £85k in 'cash' savings. The 'lump sum' is automatic, plus i have commuted some to increase the lump sum which in effect has enabled me to retire early, i will still receive a very nice monthly pension thanks  

Albermarle

Think first, should you actually take the lump sum? Normally there is an option not to take it and have a higher annual pension instead. Sometimes you can do something inbetween, like take a smaller lump sum.
I think most people do take it ( as its there) but it is not always the best decision. It depends to a large extent on your personal situation.

As above you seem a bit confused between 
Savings - safe but paying low amounts of interest, normally not enough to keep up with inflation, so in real terms slowly going down in value.
Investments - some risk but with the possibility of higher returns.

If you are likely to need the money within 5 years, then saving is better. If the time scale is 7 years or more then investing would normally be recommended, for some of it anyway.

dunstonh

The 'lump sum' is automatic, plus i have commuted some to increase the lump sum which in effect has enabled me to retire early,

Usually, taking less lump sum increases the income by more than you can obtain on cash savings.     

 i will still receive a very nice monthly pension thanks  

But not enough if you need an income from the lump sum.

 So, in a nutshell what is my best option to receive the greatest return I if secure £85k in 'cash' savings. 

Probably not using savings is the best option.  Savings is rarely the best option for income provision.      

You say you will not need to touch the money for a few years.  Does that mean you wont be drawing the interest in the early years or do you mean you will use some fo the capital in the near future?  if the latter, that will have a knock on effect with the interest payable and lower your income.

Not sure any of that is relevant to me, I thought this forum included 'savings'.

i was going by your 1st post which said investments.

kassy64

I'Albermarle said:

Think first, should you actually take the lump sum? Normally there is an option not to take it and have a higher annual pension instead. Sometimes you can do something inbetween, like take a smaller lump sum.
I think most people do take it ( as its there) but it is not always the best decision. It depends to a large extent on your personal situation.

As above you seem a bit confused between 
Savings - safe but paying low amounts of interest, normally not enough to keep up with inflation, so in real terms slowly going down in value.
Investments - some risk but with the possibility of higher returns.

If you are likely to need the money within 5 years, then saving is better. If the time scale is 7 years or more then investing would normally be recommended, for some of it anyway.

Thanks, I'm basically looking for the best return on £85k with 0 'zero' risk, any interest will just basically be a top up on my monthly pension. My pension comes with automatic lump sum of 3 x my annual pension. I have also commuted this to increase the lump sum which is tax free, and gives me the option to live my life to the full for next 10-15 years. I wont need the extra when im in my 70-80's plus the state pension. I also have 900k in property capital which we will downsize in a few years and benefit from the excess. I was just hoping for some bank/building society recommendations for great savings rates that others are using.

dunstonh

Thanks, I'm basically looking for the best return on £85k with 0 'zero' risk, 

No such product exists for your objective.

I was just hoping for some bank/building society recommendations for great savings rates that others are using.

use the tables on this site.

I have also commuted this to increase the lump sum which is tax free, and gives me the option to live my life to the full for next 10-15 years.

That part doesn't make sense.   You have taken reduced income on the pension to get a larger lump sum to allow you to put in a savings account to draw the interest which will almost certainly result in a lower income than had you not taken the higher lump sum on the pension.

coyrls

kassy64 said:

I'Albermarle said:

Think first, should you actually take the lump sum? Normally there is an option not to take it and have a higher annual pension instead. Sometimes you can do something inbetween, like take a smaller lump sum.
I think most people do take it ( as its there) but it is not always the best decision. It depends to a large extent on your personal situation.

As above you seem a bit confused between 
Savings - safe but paying low amounts of interest, normally not enough to keep up with inflation, so in real terms slowly going down in value.
Investments - some risk but with the possibility of higher returns.

If you are likely to need the money within 5 years, then saving is better. If the time scale is 7 years or more then investing would normally be recommended, for some of it anyway.

I was just hoping for some bank/building society recommendations for great savings rates that others are using.

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

newatc

The option not to take the lump sum but increase your pension would seem to the best option but it sounds like that is not available to you. Given that you have a "nice monthly pension", I would consider putting 50k into Premium Bonds with on average is likely to give you something like 1.2% per annum on a monthly basis. The capital will be safe and there's always a chance (small) of winning a big prize. The remainder can be put in the best one year savings bond you can find (currently Charter 2.83%), rates are going up of course but I'd be inclined to get the best when money is available for a period of no more than a year. 

kassy64

dunstonh said:

Thanks, I'm basically looking for the best return on £85k with 0 'zero' risk, 

No such product exists for your objective.

I was just hoping for some bank/building society recommendations for great savings rates that others are using.

use the tables on this site.

I have also commuted this to increase the lump sum which is tax free, and gives me the option to live my life to the full for next 10-15 years.

That part doesn't make sense.   You have taken reduced income on the pension to get a larger lump sum to allow you to put in a savings account to draw the interest which will almost certainly result in a lower income than had you not taken the higher income on the pension.

Ok, I will use the tables, maybe was just looking for recommendations, other than that I'm not after any financial advice thanks. As I mentioned earlier it is short term (12 months) so does make sense and without knowing my full circumstances and pension details you shouldn't be making comments about what does and doesn't make sense.

kassy64

newatc said:

The option not to take the lump sum but increase your pension would seem to the best option but it sounds like that is not available to you. Given that you have a "nice monthly pension", I would consider putting 50k into Premium Bonds with on average is likely to give you something like 1.2% per annum on a monthly basis. The capital will be safe and there's always a chance (small) of winning a big prize. The remainder can be put in the best one year savings bond you can find (currently Charter 2.83%), rates are going up of course but I'd be inclined to get the best when money is available for a period of no more than a year. 

Thanks, that's the sort of sensible advice I am after !!!