OAP with more than £200K

fenlander

Thanks to all for your advice . I did think under the bed in cash was the best bet , and I am now certain that is true !!!!!!!!!! I like the idea of tax free Nat Savings Certs, but can one person buy multiples of £15,000 certs ? The local IFAs are all 12 yrs old going on 15, spiked and blinged and I wouldn`t buy a box of matches from them . I am 60 and may last another 20yrs , I don`t have children , a mortgage, loans , a house that needs improving, a passion for clothes ,jewellery, etc, so this is all I have bar a State pension and tiny NHS pension . Do the Premium bonds pay anything or does your money just sit there waiting for an unlikely win ? How much in bulk can you invest ? Would go mad sitting on a cruise ship !!!!! have to be up and at `em !! thanks so much again , will keep watching to see the experts come up with the perfect solution in maybe £50k chunks ? still three working days left before the meeting with the bank manager !!!!

dunstonh

The local IFAs are all 12 yrs old going on 15, spiked and blinged and I wouldn`t buy a box of matches from them

Well that certainly bucks the trend. Most IFAs are grey haired and numbers are on the decline as there are fewer tied sales forces nowadays and that used to the main career path. Had you said that of the local tied agents, I would have agreed. Perhaps you aren't speaking with the right people.

On to Editor....

Don't believe I mentioned OEICS.

No you didnt but as the only comparable solution for this type of investment is OEIC/UT, it is clear you were inferring it.

According to www.fsa.gov.uk/tables ,charges on 10 year investment bonds vary up to 32% of the capital, with most of them falling in the 25% range

Since when has the fsa tables been a reliable place to look at charges. They tend to show the maximums and not what actually applies for the majority of cases. Indeed, the FSA figures to be used on the menu show that average is much lower than that.

Then perhaps we can suggest a way of investing the 150k in the same type of underlying assets and obtaining a similar income without paying 37k for the privilege.

I dont need an interested amateur to suggest alternatives when my research has comparable figures from a range of tax wrappers and providers which clearly point to the bond being best value for money over a 5-10 year period. Copies of which were supplied to the client as I believe all research should (for anyone reading this, you can ask to see the advisors research if it hasnt been offered to you). Also, the product i did was just one of 7 products done at the same time and the packaging was done to utilise a range of tax allowances both now and in the future.

Every product has charges. Even money sitting on deposit has charges indirectly. They may not be explicit but the rate of return is given after costs and profit have been taken into account.

In addition, the 37k you speak is not actual charges but the effect of deductions.

But to humour you, if you do nil commission on an OEIC/UT, the effect of dedections over 10 years on 150k is £45,500. That is a reduction in yield of 2%.

If you do nil commision on the same fund within a bond, the effect of deductions is £7410. That is a reduction in yield of 0.3%. Indeed over 5 years, because the commission not taken enhances the initial allocation there is no reduction in yield but an increase.

So, the charges have nothing to with commission on those. The provider, fund manager and all those involved take a much bigger cut than the advisor.

The investment bond (life) wrapper can be very suitable under certain circumstances and it can be unsuitable on others. Making a blanket statement that people shouldnt do these because they pay financial advisors more is incorrect and misguided.

ReportInvestor

How much up front commission do you take from that single 150K bond investment, dh?

Half of the full 6/7% commission?

dunstonh

Reporter wrote:

How much up front commission do you take from that single 150K bond investment, dh?

Half of the full 6/7% commission?

I took 1.00% initial and 0.5%p.a. fund based.

Also, before anyone starts accusing their IFAs of getting 7%, they may not. The commission terms may be as low as 4% standard upfront commission. Depending on the buying power of that IFA (or their network), they would have negotiated commission terms from the provider would could allow that 4% to be enhanced to 7% at no cost to the client.

So, a single, directly regulated IFA with no network services may get 4% but a network member or large firm can get 7% without costing you anything.

EdInvestor

And what was the bond invested in?

You didn't say.

BigDunc

fenlander wrote:

Do the Premium bonds pay anything or does your money just sit there waiting for an unlikely win ?

Friends have recently invested the maximum £30,000 in Premium Bonds and have had 3 £50 cheques in the first three months. This link http://www.wisebuy.co.uk/natprem.htm suggests that the average rate of return is about 3.25%, so not as good as the better savings accounts but you always have the chance of hitting the jackpot.

EdInvestor

Fenlander

Has it got to all be safe or are you willing to have the capital of some of it bounce about a bit (though the income would be stable?)

If you are willing to see if you can manage a bit of volatility I would tend to try 50k in straight high interest deposits, 50k in commercial property funds/trusts, 50k in a portfolio of blue chip shares paying highish dividends (or an equity income fund)and 50k in some kind of gilts/NS index linked product.

This would give the opportunity of a decent income yield around the 4-5% area with not much tax liability and the potential for capital growth to beat inflation.The overall thrust of such a portfolio would be low-medium risk.If properly set up the charges could be very low- and this is very important. If you were comfortable with the risk/return on the equity investmenbt, you could later switch some of the cash or gilt type money over to that - or vice versa.It's really up to you to determine your own appetite for risk. Keep asking questions - you're on the right track IMHO

dunstonh

Editor wrote:

And what was the bond invested in?

You didn't say.

On the example used for nil commission comparison, i just picked the NU property fund.

On the one I did for real, I used 10 funds spread across the various asset classes. However, as i mentioned, this was just part of the investment portfolio that was put in place that encompassed a number of tax wrappers.

klondyke

"Do the Premium bonds pay anything or does your money just sit there waiting for an unlikely win ? How much in bulk can you invest ? Would go mad sitting on a cruise ship !!!!! have to be up and at `em !!"

£30k max in Premium bonds. Mr k and I are in a race to see who wins most (don't really mind if only one of us gets £1m). We get lean spells, but seem to average about 5% pa return, so looks like we're lucky.

Cruise ships - we thought we never would, but succumbed to Ocean Village last year. Plenty of activities if you want them, none of the captain's table Hyacinth Bucket business. Just telling you, cos I'm feeling guilty - today we booked another trip!

Slinky

BigDunc wrote:

Friends have recently invested the maximum £30,000 in Premium Bonds and have had 3 £50 cheques in the first three months. This link http://www.wisebuy.co.uk/natprem.htm suggests that the average rate of return is about 3.25%, so not as good as the better savings accounts but you always have the chance of hitting the jackpot.

My OH invested £29K 3 months ago, so he's had 2 draws with his new numbers in. So far he's had 8 prizes totalling £450. Long may it continue!