Transferring PEPS

capricorn36

About 9 years ago I invested £7,000 in a PEPS. I have received approximately £120 per quarter in dividends since then. I now realise that the initial investment is only worth roughly £6,000 and wish to transfer this money to another more lucrative account which still preserves its tax free status.

Since my original investment it has changed from a PEPS to an OEIC. The current fund is JPMorgan Global High Yield Bond Fund.

Any advice would be welcome.

dunstonh

a PEP is not an account. It is a tax wrapper which contain your investments. Also, are you sure you invested £7000? The PEP had a maximum of £6000 per tax year. It was ISAs that were £7000.

The JPM Global High Yield bond account is fine and there is no reason to change it. It has a good yield and relatively stable unit price which has suffered a bit in the last 18 months or so but that is down to market conditions which didnt favour it. However, going forward looks like a good time to be going into fixed interest.

Your yield is 8.14% which is very high and its a fund that I have utilised in recommendations and see no reason why that should change. Although I wouldnt have put all the money in one fund but used a few variants to ensure diversification.

capricorn36

dunstonh wrote: »

a PEP is not an account. It is a tax wrapper which contain your investments. Also, are you sure you invested £7000? The PEP had a maximum of £6000 per tax year. It was ISAs that were £7000.

The JPM Global High Yield bond account is fine and there is no reason to change it. It has a good yield and relatively stable unit price which has suffered a bit in the last 18 months or so but that is down to market conditions which didnt favour it. However, going forward looks like a good time to be going into fixed interest.

Your yield is 8.14% which is very high and its a fund that I have utilised in recommendations and see no reason why that should change. Although I wouldnt have put all the money in one fund but used a few variants to ensure diversification.

Thank you very much for this information.

You are right, my initial investment was £6,000 in April 1996. At that time it was with Save and Prosper. My husband also has a similar amount. What is worrying us is that we were advised by an IFO that we could expect our investment to grow by about 10% + per year, and that we would be able to withdraw 5% pa and the other 5% would increase the investment and hedge against inflation. (Of course we were aware that it may not do that).

I have rechecked my figures and the £6,000 original investment is worth £6,845 today; having said that, a few years ago, it was worth about £9,000!

Last April it was worth £7,209, so in 8 months, it has lost £364, which is more than I received in dividends in May, August and November last year.

I do not understand how "Yield" is calculated. I thought the unit loss would be part of the calculation. If "Yield" is dividend only that I can agree that 8.14% is very good; but if the unit loss were to be built into this calculation, then last year's return is virtually nothing since April.

I would really appreciate how I should be looking at this to help me to decide how good it is. It is very nice to receive this dividend 4 times a year, but I don't like to see the original investment only being £800 more now than it was 12 years ago and wonder if this is normal and to be expected with this type of Plan.

Am I right in thinking that you would be inclined to "Leave well alone", or are you suggesting that we should still diversify and if so, what would you suggest please?

dunstonh

I have rechecked my figures and the £6,000 original investment is worth £6,845 today; having said that, a few years ago, it was worth about £9,000!

Thats about right for the sector its in. It is not a capital guaranteed investment and fixed interest funds, in particular high yield funds, have had a couple of bad years. This is mainly due to rising interest rates. However, they have topped out now and outlook is downwards and the potential for this type of fund is good.

You are never going to get large capital growth on this. Especially if you are taking all the distributions. It may have been a better option to have the income reinvested and take a fixed amount equating to 5%. That way they yield of 8.14% currently would see it buy more units each month and at a time when the unit price has gone down. When the unit price goes up again then you would have seen better growth.

I do not understand how "Yield" is calculated. I thought the unit loss would be part of the calculation. If "Yield" is dividend only that I can agree that 8.14% is very good; but if the unit loss were to be built into this calculation, then last year's return is virtually nothing since April.

Its basically and in very simple terms the income in relation to the unit price. As the unit price has gone down, the yield has gone up. When the yields get too low, its worth pulling out or reducing exposure to these types of funds as they tend to go in a cycle of up and down.

I would really appreciate how I should be looking at this to help me to decide how good it is. It is very nice to receive this dividend 4 times a year, but I don't like to see the original investment only being £800 more now than it was 12 years ago and wonder if this is normal and to be expected with this type of Plan.

Its a low risk investment. When you look at what you have got, its outperformed cash savings. You could consider it a half way house between cash and stockmarket. a bit of risk but not a lot.

What is worrying us is that we were advised by an IFO that we could expect our investment to grow by about 10% + per year, and that we would be able to withdraw 5% pa and the other 5% would increase the investment and hedge against inflation. (Of course we were aware that it may not do that).

Without seeing your contract its hard to know if this is happening. Older contracts tending not to have a fixed regular withdrawal on them but would pay out the natural income. If that is the case, then 5% withdrawn with 2-5% growth as an average would have been closer to the mark. If you are taking all the natural income (and £120 p.q. does suggest that), then you would expect 1-3% p.a. average over the long term.

With no income taken but reinvested, these funds have been exceeding 10% p.a. average over the long term.

Am I right in thinking that you would be inclined to "Leave well alone", or are you suggesting that we should still diversify and if so, what would you suggest please?

I cannot give advice on the forums as it breaches FSA rules. That stops me being specific. However, in general, I would diversify it a little but not change the overall concept a lot. Perhaps look at spreading the funds and look to reduce the yield that you take. There are other fixed interest funds that have a lower yield but have better potential for unit price growth. A little bit of mix and matching would see you take home a little less in distributions but would see a little bit of capital growth. Maybe (depending on your risk) bring in some stockmarket funds. That doenst mean jumping in gung ho right at the top end of the risk scale but looking at the lower end of the stockmarket risk scale. Perhaps the higher yield share funds. Maybe only for £1000 or £1500 of it just so you dip your toes into the water. They would have offered you greater potential for growth. However, if you look at the last 12 years you would have seen greater volatility had you done that. i.e. you would have seen greater growth upto 2001 but then seen a bigger drop during the crash but then a very good increase from 2002-2007. You would have ended up with a higher value than you have now. Although at times the drops on the 6 month statements during the bad periods would have been greater (but the increases would have been too).

As I said, not advice but a few different concepts and ideas for you to consider and investigate. I wouldnt look to pull out altogether though as its the time to be looking to go in if anything as the yields are now attractive.

capricorn36

Thank you so much for taking your time to give me such an informative answer.

As you rightly say we are getting a good return and we like that.

Whilst it would have been nice to increase our initial investment, I think that perhaps we will just stick tight - we are both in our seventies and really prefer to consolidate than have lots of different accounts to think about; particularly bearing in mind your final sentence, which has cheered us up no end.:D

I really am very grateful to you - once again thanks.

dunstonh

One thing to consider is that the original IFA that set this up is still being paid 0.5% commission p.a. If you are not getting any servicing (even if its the odd letter, phone call or email) then you may wish to consider reappointing a new IFA.

Another thing which may or may not change your mind is that if your holding was re-registered with a fund supermarket, it wouldnt matter if you had 1 fund or 6 funds as you would still only have one account and one statement. Fund supermarkets are a little cheaper then going direct and give you the ability to have that diversification without having multiple accounts. Back when you did your investment, that wasnt possible and diversification would have meant 6 different accounts and statements.

Its just something to consider but if you end up staying as you are you are fine.

capricorn36

dunstonh wrote: »

One thing to consider is that the original IFA that set this up is still being paid 0.5% commission p.a. If you are not getting any servicing (even if its the odd letter, phone call or email) then you may wish to consider reappointing a new IFA.

Another thing which may or may not change your mind is that if your holding was re-registered with a fund supermarket, it wouldnt matter if you had 1 fund or 6 funds as you would still only have one account and one statement. Fund supermarkets are a little cheaper then going direct and give you the ability to have that diversification without having multiple accounts. Back when you did your investment, that wasnt possible and diversification would have meant 6 different accounts and statements.

Its just something to consider but if you end up staying as you are you are fine.

Well, we stayed as we were, but now wish to invest some more money which is barely making anything where it is.

We are thinking of putting another £1680 in JPM Global High Yield Bonds and £9000 into JPM Multi-Asset Income Fund.

We were thinking of doing this through a Fund Supermarket as you suggested. I googled and found Skipton Financial Services Limited (SFS) and have spoken to them and they seemed helpful.

I could also find these funds on their website and to invest through SFS didn't appear to cost anything (0%) whereas through JPM it was 4.5% for the Multi-Asset Income Fund and a bit less for the Global High Yield Bonds.

I did look at Fidelity and another one but couldn't find the above Funds and their sites seemed more complicated.

Does anyone have any thoughts on:

(a) Is Skipton a suitable and trustworthy Fund Supermarket (or can you guide me to others that I might be able to manage?)

(b) As we we would like to receive as much dividend as possible, whilst still maintaining if possible our capital, does what we intend to do seem ok?

As I explained a couple of years ago this investment was originally made in 1996 with Save and Prosper and we haven't moved it, it is just that the company has changed names and then the name of the Fund has changed but we are still receiving better dividends than we could possibly get in interest in ISA's or similar. Also, the current unit price is quite a lot less now than when we originally bought the stock in 1996. We originally bought at 47.92p and now they are 40.43p (ish). Of course we are still running at a loss with out original investment, but it appears to be creeping back and the yield is good.

Another thought is, that if our original IFA is still receiving 0.5% commission, would he receive it on our new investment into the same Fund, even if it were through a Fund Supermarket and/or if we withdrew our existing funds from JPM Global High Yield Bonds and reinvested through a Fund Supermarket, would their be any advantage to us, or would we lose because of the move?

dunstonh

I could also find these funds on their website and to invest through SFS didn't appear to cost anything (0%) whereas through JPM it was 4.5% for the Multi-Asset Income Fund and a bit less for the Global Yield Bond.

That would be the same for most IFAs. Nowadays, virtually no funds via an IFA have an initial charge on them. The only addition to the initial charge is what you agree for cost of advice.

I did look at Fidelity and another one but couldn't find the above Funds and their sites seemed more complicated.

They are on the Fidelity platform but Fidelity is looking long in the tooth nowadays compared to others.

(a) Is Skipton a suitable and trustworthy Fund Supermarket (or can you guide me to others that I might be able to manage?)

Skiption do not have a platform. They use Cofunds. Cofunds used to be very good. It still is for smaller values but if it doesnt update its options soon, then its going to fall behind. Cofunds is one of the biggest platforms in the UK but it is designed to be used via IFAs more than anything else. Skipton keep the trail commission that an IFA would be paid. So again, you would be paying for something that you are not getting.

b) As we we would like to receive at much dividend as possible, whilst still maintaining if possible our capital, does what we intend to do seem ok?

The theory is fine. I'm not sure about the fund choice though to achieve it.

Another thought is, that if our original IFA is still receiving 0.5% commission, would he receive it on our new investment into the same Fund, even if it were through a Fund Supermarket?

No. Skipton would be paid the 0.5% instead.

If you dont want to use an IFA then you are better off using a DIY platform like Hargreaves Lansdown.

Sparky47

Another fund supermarket you could look at is Hargreaves Lansdown which is recommended by a lot of users on here. www.h-l.co.uk
They have a large selection of funds to choose from including the ones you are interested in.

You could open an account with them to invest new money and then if you are happy, transfer your existing funds to them at a later date.

capricorn36

I opened a Hargreaves Lansdown for my husband and he bought £5000 JPM Multi-Asset Income Fund and £5680 JPM Global High Yield Bond Income.

I now wish to open an account with them for myself. I am a non-taxpayer. I already have this year's ISA allowance invested in Nationwides 3.1% E-ISA.

I have closed my AA account as the bonus time had almost expired.

We can manage on our pensions unless we go really mad on holidays. My husband is 78 and I am 75.

I have £25,000 to invest and would like to achieve the following:

1 Would like to keep pace with inflation plus.

2 Would like to receive interest, 5% minimum if possible. We have been achieving more than this with our JPM Global High Yield Bonds, but I don't know where to look for something similar. Can you point me in the right direction?

3 Would like to maintain capital. If interest was more than 5% would possibly reinvest in same Fund if it were possible.

Any advice would be gratefully received.

dunstonh

2 Would like to receive interest, 5% minimum if possible. We have been achieving more than this with our JPM Global High Yield Bonds, but I don't know where to look for something similar. Can you point me in the right direction?

You are aware of the loss potential of such funds and its only fixed interest sector funds that pay interest?

3 Would like to maintain capital. If interest was more than 5% would possibly reinvest in same Fund if it were possible.

Do you want to use savings or investments? At the moment you are using and looking at capital-at-risk investments.