OAP with more than £200K

fenlander

Thanks Editor and Deemy , own home, no mortgage, no debts, loans ,cr cards, have £450 permonth state and NHS pensions . Am very tempted to go with the bank, but would still like to know more about the Pensioner bonds so may try to find a local IFA . But I hope this thread has been of interest , I doubt very much that I am the only person of my age with this sort of anxiety about making sure I have enough to last me for the rest of my life without risking any of it !!!! Thanks very much for all your past advices , I have enjoyed it , and will keep popping in to see what you are up to !!! thanks again

EdInvestor

Fenlander

deemy2004 wrote:

Crikey 200k !!!

With £200k best bet would probably some sort of fixed bond... derbyshire do 5.05%
Cahoot instant access is 5.1%
Hmmm, I think liverpool do 5.2% ?

Here are 3 suggestions better than the bank for a start.(Not sure what Deemy means by Liverpool...)

ING does 5%.

Spread the money around. Then check out your tax situation and claim back as much as possible. Every year put as much as poss in an ISA.

What will bite you in the bum eventually is inflation, because you've probably got 30 years to go, being a woman It's good that your pensions will cover the basics and are both index linked - you'll need that.Also good that you own the home outright - trading down/equity release/lodgers can also provide income.

After a while you may find yourself thinking some of the 200k should go into investments which will produce a 5% net income, (like the bank/BS in an ISA) but also have the potential to grow in value to match inflation. Inflation will halve the value and spending power of your 200k in 20 years, even at current low rates, and unlike a man, you can expect to be still around.

Actually the property you've just sold is one such investment: over a long period the capital value of a house usually rises, and if rented out, so does the income as rents normally rise over the long term with wages. If you are used to managing property, and a cheap property is obtainable in your area in future with a good rental yield (10%) you might like to put a bit of the 200k (under half, beware of locking up too much money) in that.

Alternatively, commercial property funds and equity income funds (both via a discount broker like Cavendish) will provide a decent income yield along with the potential for capital growth.

Such investments will involve some risk - but this can be managed. Feel free to come back and ask how to do so. Start small, and proceed with caution, so as you know what you can handle comfortably. There's no clear solution to longevity and inflation for anyone with less than about a million quid stashed away, so it's a matter of investigating which risk is the least worrying for each individual.

dunstonh

With 200k, a portfolio of investment areas weighted towards the individual risk profile should be built. All in one area would be wasteful (if on deposit) or risky (if on investment).

EdInvestor

dunstonh wrote:

With 200k, a portfolio of investment areas weighted towards the individual risk profile should be built. All in one area would be wasteful (if on deposit) or risky (if on investment).

Fenlander clearly is a lot more risk-averse, so IMHO she should take any risk investments step by step so she doesn't get any nasty surprises.

If I was in her position I would allot 10k of the 200k for "risk management studies" at this stage.

I would put a chunk of it in an equity income fund.These funds invest in big blue chip household name companies which pay good dividends.The funds pay out an income.

List of equity income funds

No 39, the Invesco Perpetual Higher Income fund, run by Neil Woodford for 25 years (!) and with an excellent performance record, would be my choice.Note that the majority of these funds survived the stockmarket crash more or less unscathed

The rest of the 10k I would put in a commercial property fund, perhaps you have some thoughts on that DH?

I would buy the funds through a discount broker like Cavendish to cut the charges and I would put the equity income one in an ISA so there would be no tax to pay on income or capital gains.

Then I would observe the performance of these two funds for a while, particularly seeing if it bothered me that the value might go up and down (though the dividend yield usually will be stable).

It's quite normal for fluctuation in the capital - that's how the stockmarket behaves - over the long term it has usually gone up, like property.

But there's no doubt that it makes some people worry and gives them sleepless nights: and if Fenlander is like that, then she might as well not bother as she'll just have a miserable retirement worrying about money.

Other people find they quite quickly get used to this wobbling about - as with sailing or riding a bike - and are quite relaxed about it, just keeping an eye on the investments now and then, which is all that's really necessary.

oceanblue_3

One or two points to consider:

1) UK Equity Income funds do not always tend to invest in Blue Chip companies. This fund has no obligation to do so. In fact, international equities, investment trusts, and financial instruments are often utilised.

2) The gross yield of this fund is usually less than 3.5%, and this fact has to be compared with the gross yield from risk-free deposit accounts.

2) Neil Woodford has run the fund since October 1988, which is nearly 17 years, not 30 years.

3) The fund suffered siignificant capital loss during 2002. Admittedly, it performed better than most of its peers, but investors would still have lost about 30% of their initial investment.

4) The fund invests heavily in tobacco companies - some of my clients find this intolerable.

EdInvestor

OB

Indeed you are right Woodford has been in the saddle for 17 years, not the 25 I said - the latter is of course Anthony Bolton at the famous Fidelity Special Situations fund, the most popular in Britain of the "performing" funds.I don't think anyone has a 30 year record of any quality as yet.....

No doubt any losses in 2002 were recouped in the following year with the "Baghdad bounce" - we're looking at long-term investment here.BTW don't you think net yields are more appropriate in this case? It would take Fenlander 70 years to get her 200k on a tax free basis in cash

Speaking personally I invest directly for income in a portfolio of around 20 shares paying an average dividend of more than 5% (tax free) - it's a better way of doing it because you pay no charges IMHO. But if I suggested that to a very risk averse investor like Fenlander I'd probably be attacked on the alleged basis that investing in shares is "more risky" than in funds: while this can be so, the reverse can also be so.It depends on what shares and what funds.

For investors with ethical concerns the F&C stewardship income fund may be worth a look, No 12 on this list:

Ethical funds

oceanblue_3

Editor says "No doubt any losses in 2002 were recouped in the following year with the "Baghdad bounce" - we're looking at long-term investment here.BTW don't you think net yields are more appropriate in this case? It would take Fenlander 70 years to get her 200k on a tax free basis in cash"

No, you're wrong. Assuming an investment had been made in the middle of 2002, it would have taken nearly two years for the capital value to have been restored - look at the graph on Trustnet. This excludes recurring charges, by the way.

The point you make about net yields is not clear: gross yields versus gross yields is a perfectly acceptable comparator.

It would appear that your approach to investment planning is somewhat glib and naive...........I remember a comedy sketch many years ago - it was a spoof of Blue Peter. The presenter, pretending to be John Noakes, demonstrated how to play a guitar. "Well, you hold it at one end, and strum the strings at the other. That's how you play a guitar! Next week we'll be showing you how to make a thermo-nuclear device!"

Sounds familiar..............