1 year or 2 year fixed rate income bond

DoneWorking

My current bond is maturing soon .
What's your thoughts on 1 year fixed bond or longer 
I can get just over 4% on a 1 year or 2 year fixed bond .

Or do you think I should go for an investment instead 

I'm in my mid 70s and do not like risk 

wmb194

DoneWorking said:

My current bond is maturing soon .
What's your thoughts on 1 year fixed bond or longer 
I can get just over 4% on a 1 year or 2 year fixed bond .

Or do you think I should go for an investment instead 

I'm in my mid 70s and do not like risk 

Why is it one or the other? You could split your money between them. 

If you don't like risk you won't like stockmarket investments.

PhoneBook

I'm in a similar situation, using NS&I savings as my cash buffer alongside ISA and SIPP in mixed equites/bonds. I'll cash mine in and place it in short-duration bonds or money market funds. Reasonable return, easy access whenever I might need it.

Eyeful

DoneWorking said:

My current bond is maturing soon .
What's your thoughts on 1 year fixed bond or longer 
I can get just over 4% on a 1 year or 2 year fixed bond .

Or do you think I should go for an investment instead 

I'm in my mid 70s and do not like risk 

(a) Depends on:
1. Your state of health is like.
2. If you are married, single, only have state pension etc.
3. How much money is in your emergency fund (£1k or £100k)
4. How much risk you can tolerate
5. How much you know about investing
6. What are you intending to invest in.

(b) In your mid 70's & do not like risk.
      No knowledge about investing.
      Have not invested before.

This would suggest you would be happiest to stick to:
 Low risk savings accounts & bonds from Banks & Building Societies which are covered by FSCS Savings Protection.
https://www.fscs.org.uk/check/check-your-money-is-protected/
https://moneyfactscompare.co.uk/savings-accounts/

OldScientist

DoneWorking said:

My current bond is maturing soon .
What's your thoughts on 1 year fixed bond or longer 
I can get just over 4% on a 1 year or 2 year fixed bond .

Or do you think I should go for an investment instead 

I'm in my mid 70s and do not like risk 

One question: Are you likely to need the capital before 2 years are up or not? If the answer is 'possibly', then a 1 year account might be better.

More generally, whether 2 x 1 year accounts or a single 2 year account will provide the most income/return is impossible to say. If the base rate drops further, then securing 4% now will turn out to be the best decision, while if the base rate goes up, then the opposite will be the case.

I note that with cash, the largest risk you are facing is that from inflation which will reduce the value of both income and capital.

With inflation linked bonds held to maturity, the largest risk is deflation

With globally diversified equity index funds, the largest risk is volatility.

DoneWorking

My own thoughts 
The interest on my current 1 year fixed bond has dropped from 5 % to 4 %
since last year 
Hence it may be better to go for a two year fixed bond 
I do not need access to the cash 

Also I doubt if interest is suddenly going to increase over next two years

I like the idea of knowing I will get 4% interest for two years 

I realise I may get a higher return with an investment 
But then again I may not over two years and may in fact get lower return than 4 %

dunstonh

I'm in my mid 70s and do not like risk 

What risks don't you like?
Shortfall risk?  inflation risk? investment risk?

How about purchased life annuities?

But then again I may not over two years and may in fact get lower return than 4 %

But as you are spending the income, the capital value is eroding by inflation anyway.
Cash is not a "no risk" solution when it comes to income provision.

DoneWorking

dunstonh said:

I'm in my mid 70s and do not like risk 

What risks don't you like?
Shortfall risk?  inflation risk? investment risk?

I don't like the risk of an investment losing money due to the fact that I would not want to invest for more than five years.
You know that this can happen .

How about purchased life annuities?

I prefer to stay away from annuities at my age 

But then again I may not over two years and may in fact get lower return than 4 %

But as you are spending the income, the capital value is eroding by inflation anyway.
Cash is not a "no risk" solution when it comes to income provision.

I only use part of my savings for income bonds 
The interest provides a top up to my pension income

Inflation can also affect investment returns 

I prefer to remain with suitable savings accounts including ISAs 

masonic

If memory serves, you thoroughly explored investment options, including DIY and advisory, a few years ago. ESG focus, right? What did you end up doing in the end? As this would inform suggestions of what to do with the maturing cash savings. Probably not worth adding to investments if they already make up half your assets.

DoneWorking

masonic said:

If memory serves, you thoroughly explored investment options, including DIY and advisory, a few years ago. ESG focus, right? What did you end up doing in the end? As this would inform suggestions of what to do with the maturing cash savings. Probably not worth adding to investments if they already make up half your assets.

I did indeed look into investments 
But as the Lockdown kicked in and interest rates started getting higher I asked a couple of IFA about costs and likely returns I could expect based on my risk profile.

The costs were relatively high but the returns they offered was 4 % after costs 
With the possibility of risk of loss.

At this point I made the decision to go with a series of easy access and fixed rate savings accounts 
Plus Fixed Rate ISAs 

Most of these were + 5% for quite a while 
Though these have started to drop and are currently +4%

As mentioned due to my age I am reluctant to start investing while interest rates are still around the 4% mark 

masonic

Odd. As actual returns in the last 5 years following lockdown have been 12% per year after fees (vanilla all world equity fund, your ESG fund would have done almost this well). Though there is always a possibility of loss over a few years.

Inflation risk would remain a concern if you want to avoid risk. Over the last 5 years, it's averaged 5% using the weaker CPIH measure. So savings earning 5% have not gained anything in real terms. Have you considered inflation linked gilts for some of the money, locking in RPI+1% or thereabouts?