Cash within vanguard 😫

NedS

Sharktail said:

NedS 

If it's a fixed term annuity, it should be straight forward to calculate if current gilt rates can match (or beat) the annuity.

Straight forward Really  ,for an 8 year annuity 220k less 25% tax free I’d receive an extra 24k 0n 165k over an 8 year period whereas I’d receive more by building a bond ladder as I have no need for the tax free element ….I think 

Are you comparing like for like - annuity purchased with £165k versus £165k bond ladder?

If you took the annuity, and didn't need the 25% tax free cash, you could always build a bond/savings ladder from that to run alongside the annuity.

Sharktail

NedS said:

I currently use both Royal London short term money market fund and the CSH2 ETF, both on HL accounts. Fees are 0.45% for the RL fund, but fees are capped at £200/year for ETFs so I'm essentially holding that for free as I'm already at the cap. Most money market funds that aim to track SONIA (3.97%) should currently be returning around that.

Like you, I'm using them to de-risk as I approach retirement. I had large holdings in dividend-paying Investment Trusts yielding 4.75% dividend and asked myself why take the risk for a 4.75% yield with the FTSE100 at all time highs when I can get 4% risk free, so I'm happy to sit on risk free cash at 4% waiting for an opportunity to re-enter markets at a lower price and less risk.

I currently considering transferring to HL to purchase some single gilts & CSH2 if I’m reading this wrong is the pricing capped for these products @200PA ?if so it would trump vanguards fee structure also they offer a sweetener of £1500 for 125k+ in a sipp transfer

NedS

Sharktail said:

NedS said:

I currently use both Royal London short term money market fund and the CSH2 ETF, both on HL accounts. Fees are 0.45% for the RL fund, but fees are capped at £200/year for ETFs so I'm essentially holding that for free as I'm already at the cap. Most money market funds that aim to track SONIA (3.97%) should currently be returning around that.

Like you, I'm using them to de-risk as I approach retirement. I had large holdings in dividend-paying Investment Trusts yielding 4.75% dividend and asked myself why take the risk for a 4.75% yield with the FTSE100 at all time highs when I can get 4% risk free, so I'm happy to sit on risk free cash at 4% waiting for an opportunity to re-enter markets at a lower price and less risk.

I currently considering transferring to HL to purchase some single gilts & CSH2 if I’m reading this wrong is the pricing capped for these products @200PA ?if so it would trump vanguards fee structure also they offer a sweetener of £1500 for 125k+ in a sipp transfer

Yes, the platform fee is 0.45% (which is relatively high), but it is capped at £200 (£16.66/month) for Shares/ITs/ETFs/Gilts etc (does not include funds), so any holdings over around £45k are capped. Individual gilts and CSH2 would both fall under the cap.

mark_cycling00

>>>> Most money market funds that aim to track SONIA (3.97%) should currently be returning around that.

So when I went and looked at "money market" funds, I didn't see performance like this at all. They were more like 1.5% or less.
Can anyone recommend such funds on HL or Vanguard? 

I'm probably not searching for the right thing or perhaps mis-interpreting things.

Many thanks

NedS

mark_cycling00 said:

>>>> Most money market funds that aim to track SONIA (3.97%) should currently be returning around that.

So when I went and looked at "money market" funds, I didn't see performance like this at all. They were more like 1.5% or less.
Can anyone recommend such funds on HL or Vanguard? 

I'm probably not searching for the right thing or perhaps mis-interpreting things.

Many thanks

What performance are you looking at?

Look at this fund for example, Royal London short term money market fund:

https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/r/royal-london-short-term-money-market-class-y-accumulation

If you look at the performance tables for the last 3 months, 6 months, 1Yr etc, you are looking at past performance, and rates have risen sharply in the last 6 months. You could look at the last 3 months from the table at 0.88% and multiply by 4 to get an annualised fugue of 3.52% which largely reflects performance prior to the last 0.5% rate rise when BoE rates were 3.5%. Or look at the chart for the last 2 weeks which has risen about 0.145%, multiply by 26 = 3.77% which more accurately reflects performance now following the most recent rate rise.

You need to annualise the most recent performance since the last BoE base rate rise on 2nd Feb.

mark_cycling00

thanks that makes more sense.

I could see 1.5% on this (for example) https://www.vanguardinvestor.co.uk/investments/vanguard-sterling-short-term-money-market-fund-investor-gbp-income-shares/overview

so it didn't seem to come close to match the 4% figures being talked about

NedS

mark_cycling00 said:

thanks that makes more sense.

I could see 1.5% on this (for example) https://www.vanguardinvestor.co.uk/investments/vanguard-sterling-short-term-money-market-fund-investor-gbp-income-shares/overview

so it didn't seem to come close to match the 4% figures being talked about

Yes, it's looking back at performance over the last 12 months, and the BoE have raised rates 10 times since Dec 2021 when they were set at 0.1%.  If you look again in a year, it will likely show closer to 4%, even if rates are then falling again. It's only ever going to be accurate if rates remain unchanged for long periods, but for now you can assume that short term money market funds should give you close to SONIA less any fees that are charged.

plumb1_2

I have been reading this thread, and checked the vanguard historical rate 1.8%, so I presume it tracks the Sonia rate 3.93% today.
Vanguard says it’s not for long term investment over 5 yrs. with interest rates not likely to fall until next year ( just a guess).
I am close to retirement this year and have £50k in a vanguard sipp sitting as cash getting close to 3% atmo, but dropping to 2.2%
I was thinking of transferring it into a mixture of 70/30 fund maybe gaining 3- 5% if iam lucky who knows? So the short term sterling fund seems appealing. For a 12 month time frame.
whats are folks opinions 

Secret2ndAccount

plumb1_2 said:

I have been reading this thread, and checked the vanguard historical rate 1.8%, so I presume it tracks the Sonia rate 3.93% today.
Vanguard says it’s not for long term investment over 5 yrs. with interest rates not likely to fall until next year ( just a guess).
I am close to retirement this year and have £50k in a vanguard sipp sitting as cash getting close to 3% atmo, but dropping to 2.2%
I was thinking of transferring it into a mixture of 70/30 fund maybe gaining 3- 5% if iam lucky who knows? So the short term sterling fund seems appealing. For a 12 month time frame.
whats are folks opinions 

Yes, use that money market fund. There are serious investors asking themselves why they would be taking any risk when they can get >3.5% with zero risk. Plenty of uncertainty attached to investing right now. The next move in interest rates is probably up, or at least going nowhere, so this fund just gets better.

plumb1_2

Have looked on vanguard site, and not been able to find out the process of withdrawing the dividend or the pot when  needed. Anyone any information on this or a link please.