Drip feed into a GIA

Bobziz

Hi, I'm looking to drip feed £130k into global trackers in 2 x GIA's over the next 4 months and I'm looking for ideas about where to hold the cash yet to be dripped in. 

Pensions, ISAs and PSA's are or will be maxed out, and I'm aware of what the stats say re drip feeding v's lump sum. 

The options under consideration are:

1. MM fund within GIA with subsequent tax complexities, 
2. Hold in bank savings account and take the 20% tax hit on interest.
3. Hold in premium bonds.

Are there any other options worth considering ? I'm currently leaning towards options 2 &/or 3

Thanks

InvesterJones

If you go premium bonds you won't get anything for 1 out of your 4 months, plus you'll still have 80K to think about outside of PBs. So return even after tax in MM or savings is likely to be higher.

I believe there are some MM constructs that are chargable as capital gains + excess reportable income which might make it a lesser rate overall.

But I'd go for simplicity and a straightfoward MM will probably still be good after tax and no more complex than bank savings.

(instead of drip feeding, you could also split your payment between now and 4 months time, in which case a low coupon gilt maturing january would incur very little tax)

zagfles

InvesterJones said:

If you go premium bonds you won't get anything for 1 out of your 4 months, plus you'll still have 80K to think about outside of PBs. So return even after tax in MM or savings is likely to be higher.

I believe there are some MM constructs that are chargable as capital gains + excess reportable income which might make it a lesser rate overall.

But I'd go for simplicity and a straightfoward MM will probably still be good after tax and no more complex than bank savings.

(instead of drip feeding, you could also split your payment between now and 4 months time, in which case a low coupon gilt maturing january would incur very little tax)

If you time it right you don't lose interest (or rather potential prizes) with PBs, but you'd need to buy at the end of the month and sell at the start of the month. If those timings don't work then PBs probably not a good idea on a short timescale. 

Bobziz

Thanks all, really useful. On closer analysis I've found a spare £400 or so PSA this year, so I shall split the £130k between bank savings, TN25 and the first drip in to a tracker now.

In reality I think the gilt will probably return the same net as the savings account once charges are taken into account, but I've not bought gilts before and this feels like a good learning opportunity.

I hold CHS2 in other accounts and I'm not keen on increasing my exposure.

Thanks again 👍

zagfles

Bobziz said:

Thanks all, really useful. On closer analysis I've found a spare £400 or so PSA this year, so I shall split the £130k between bank savings, TN25 and the first drip in to a tracker now.

In reality I think the gilt will probably return the same net as the savings account once charges are taken into account, but I've not bought gilts before and this feels like a good learning opportunity.

I hold CHS2 in other accounts and I'm not keen on increasing my exposure.

Thanks again 👍

Probably only worth using the gilt for the amount you want to keep the full 4 months, otherwise the buy/sell spread & charges probably won't make it worth it.