Money markets

Notepad_Phil

Pat38493 said:

...
These could become even more popular given that the current talk about reducing the annual ISA limit for cash ISA, seems to assume that nobody has ever heard of short term money market funds in the S&S ISA.
...

My understanding is that back in the day a S&S ISA was not allowed to hold funds etc that paid interest. Whether that Is true or not, it seems likely to me that a quick change to what's allowed in a S&S ISA could easily restrict their use if anyone thought that necessary.

dont_use_vistaprint

QrizB said:

LHW99 said:

dont_use_vistaprint said:

MetaPhysical said:

They're good to park cash into in an ISA or SIPP for diversification rather than just leaving it in real cash as a balance in your account.  Still carries a small risk though.   Also they're no good for a GIA though if you have to pay 40/45% tax.  That's where low coupon gilts come into their own.

Or treasury bills that pay zero coupon are even better 

How would you buy those in the UK? (genuine question)

US Treasury bills would not get the CGT benefits that gilts receive.

I think the closest UK equivalent would be "Treasury strip" but they aren't treated quite like gilts either? See:

https://forums.moneysavingexpert.com/discussion/6423301/treasury-strip

No there are UK Treasury bills auctioned  by the government periodically to fund investment in infrastructure projects they pay zero coupon and 4 to 5% growth,I.e they sell back at 100p typically an auction sell for 96p , popular with highest rate tax payers and those exempt from CGT.


from AI:

UK Treasury bills are short-term, zero-coupon debt instruments issued by the UK government to finance its operations. Investors purchase them at a discount, and the profit comes from the difference between the purchase price and the face value received at maturity, which is typically a few months. They are considered very low-risk due to the government backing and are considered highly liquid

QrizB

dont_use_vistaprint said:

QrizB said:

LHW99 said:

dont_use_vistaprint said:

MetaPhysical said:

They're good to park cash into in an ISA or SIPP for diversification rather than just leaving it in real cash as a balance in your account.  Still carries a small risk though.   Also they're no good for a GIA though if you have to pay 40/45% tax.  That's where low coupon gilts come into their own.

Or treasury bills that pay zero coupon are even better 

How would you buy those in the UK? (genuine question)

US Treasury bills would not get the CGT benefits that gilts receive.

I think the closest UK equivalent would be "Treasury strip" but they aren't treated quite like gilts either? See:

https://forums.moneysavingexpert.com/discussion/6423301/treasury-strip

No there are UK Treasury bills auctioned  by the government periodically to fund investment in infrastructure projects they pay zero coupon and 4 to 5% growth,I.e they sell back at 100p typically an auction sell for 96p , popular with highest rate tax payers and those exempt from CGT.
from AI:

From II (more trustworthy than AI):

https://www.ii.co.uk/analysis-commentary/gilts-or-uk-treasury-bills-which-should-you-choose-ii531451

This means that any gains from UK Treasury Bills are taxed as income, rather than capital gains. This differs to gilts, where capital gains are tax-free but coupons are taxed as income. 

So, rather like Treasury strip, if held in a GIA you'll be paying income tax on any gains.

What advantage were you thinking UK Treasury bills to offer that makes them even better than low-coupon gilts? And why would they be popular with highest rate taxpayers and those exempt from CGT?

BoxerfanUK

dont_use_vistaprint said:

How do people use these like the Royal London short-term money market which looks like it’s been paying 4.6% though I guess going forward, it’s gonna be more like 3 1/2 to 4% ?

do you use them as an alternative to ISA savings, or for the short term between changes in your investments while you are waiting for a favourable price? Or long-term super low risk with the tax benefits of a SIPP?

i’m interested to know why and when people would use these as part of an investment strategy 

also, are there any differences between the Royal London and the Vanguard short terms? and what is an example of a medium term money market ? I cannot find any on interactive investor.

My OH has just under 500K in Royal London STMMF since transferring her pensions into a new SIPP with ii 18 months ago!  Not taken PCLS other than 25% of each drawdown.  

The original intention was to have it there temporarily, pending a long term decision on where to put it.  Did consider HSBC Global strategy 'Balanced' but rightly or wrongly we haven't done it and its still in the MMF, mainly due to the continued speculation about potential market crashes has caused us lots of hesitation.

Currently just drawing down the £16,760 via FAD until reaching state pension age in 3 years.  Appreciate the HSBC fund has grown greater than the MMF but YTD still +4.6% and MMF is still growing more than drawdown is taking out.  Are we trying not to be greedy or just being stupid..... IJDK!!!

Albermarle

BoxerfanUK said:

dont_use_vistaprint said:

How do people use these like the Royal London short-term money market which looks like it’s been paying 4.6% though I guess going forward, it’s gonna be more like 3 1/2 to 4% ?

do you use them as an alternative to ISA savings, or for the short term between changes in your investments while you are waiting for a favourable price? Or long-term super low risk with the tax benefits of a SIPP?

i’m interested to know why and when people would use these as part of an investment strategy 

also, are there any differences between the Royal London and the Vanguard short terms? and what is an example of a medium term money market ? I cannot find any on interactive investor.

My OH has just under 500K in Royal London STMMF since transferring her pensions into a new SIPP with ii 18 months ago!  Not taken PCLS other than 25% of each drawdown.  

The original intention was to have it there temporarily, pending a long term decision on where to put it.  Did consider HSBC Global strategy 'Balanced' but rightly or wrongly we haven't done it and its still in the MMF, mainly due to the continued speculation about potential market crashes has caused us lots of hesitation.

Currently just drawing down the £16,760 via FAD until reaching state pension age in 3 years.  Appreciate the HSBC fund has grown greater than the MMF but YTD still +4.6% and MMF is still growing more than drawdown is taking out.  Are we trying not to be greedy or just being stupid..... IJDK!!!

It is human nature to hesitate investing Half a Million Pounds, even though I presume it was invested in the previous pension. So logically she would be only reinvesting, rather than new investing, but the mind is not always logical!

BoxerfanUK

Albermarle said:

BoxerfanUK said:

dont_use_vistaprint said:

How do people use these like the Royal London short-term money market which looks like it’s been paying 4.6% though I guess going forward, it’s gonna be more like 3 1/2 to 4% ?

do you use them as an alternative to ISA savings, or for the short term between changes in your investments while you are waiting for a favourable price? Or long-term super low risk with the tax benefits of a SIPP?

i’m interested to know why and when people would use these as part of an investment strategy 

also, are there any differences between the Royal London and the Vanguard short terms? and what is an example of a medium term money market ? I cannot find any on interactive investor.

My OH has just under 500K in Royal London STMMF since transferring her pensions into a new SIPP with ii 18 months ago!  Not taken PCLS other than 25% of each drawdown.  

The original intention was to have it there temporarily, pending a long term decision on where to put it.  Did consider HSBC Global strategy 'Balanced' but rightly or wrongly we haven't done it and its still in the MMF, mainly due to the continued speculation about potential market crashes has caused us lots of hesitation.

Currently just drawing down the £16,760 via FAD until reaching state pension age in 3 years.  Appreciate the HSBC fund has grown greater than the MMF but YTD still +4.6% and MMF is still growing more than drawdown is taking out.  Are we trying not to be greedy or just being stupid..... IJDK!!!

It is human nature to hesitate investing Half a Million Pounds, even though I presume it was invested in the previous pension. So logically she would be only reinvesting, rather than new investing, but the mind is not always logical!

Yes I totally get what you’re saying.  when she retired, she combined her three workplace pensions into a SIPP, but I guess when she was working she had no input into her pensions. They just did their own thing but now it’s in her own SIPP I guess you see it more as your own money, if that makes sense, so we’re a lot more hesitant and indecisive about what to do with it!

bjorn_toby_wilde

BoxerfanUK said:

dont_use_vistaprint said:

How do people use these like the Royal London short-term money market which looks like it’s been paying 4.6% though I guess going forward, it’s gonna be more like 3 1/2 to 4% ?

do you use them as an alternative to ISA savings, or for the short term between changes in your investments while you are waiting for a favourable price? Or long-term super low risk with the tax benefits of a SIPP?

i’m interested to know why and when people would use these as part of an investment strategy 

also, are there any differences between the Royal London and the Vanguard short terms? and what is an example of a medium term money market ? I cannot find any on interactive investor.

My OH has just under 500K in Royal London STMMF since transferring her pensions into a new SIPP with ii 18 months ago!  Not taken PCLS other than 25% of each drawdown.  

The original intention was to have it there temporarily, pending a long term decision on where to put it.  Did consider HSBC Global strategy 'Balanced' but rightly or wrongly we haven't done it and its still in the MMF, mainly due to the continued speculation about potential market crashes has caused us lots of hesitation.

Currently just drawing down the £16,760 via FAD until reaching state pension age in 3 years.  Appreciate the HSBC fund has grown greater than the MMF but YTD still +4.6% and MMF is still growing more than drawdown is taking out.  Are we trying not to be greedy or just being stupid..... IJDK!!!

I don’t think you could be accused of either greed or stupidity, but maybe an excess of caution.

You’re drawing down only 1/30th of the total each year so you can certainly afford to be more adventurous with most of the pension
pot.

QrizB

BoxerfanUK said:

Did consider HSBC Global strategy 'Balanced' but rightly or wrongly we haven't done it and its still in the MMF, mainly due to the continued speculation about potential market crashes has caused us lots of hesitation.

If you don't want to go all-in, maybe you could put £20k a month into the Balanced fund for the next 20-odd months? If the market crashes during that time you'll have the satisfaction of buying at a cheaper price afterwards, and if it doesn't then you won't have completely missed out on 2 years of investment growth?

MeteredOut

BoxerfanUK said:

dont_use_vistaprint said:

How do people use these like the Royal London short-term money market which looks like it’s been paying 4.6% though I guess going forward, it’s gonna be more like 3 1/2 to 4% ?

do you use them as an alternative to ISA savings, or for the short term between changes in your investments while you are waiting for a favourable price? Or long-term super low risk with the tax benefits of a SIPP?

i’m interested to know why and when people would use these as part of an investment strategy 

also, are there any differences between the Royal London and the Vanguard short terms? and what is an example of a medium term money market ? I cannot find any on interactive investor.

My OH has just under 500K in Royal London STMMF since transferring her pensions into a new SIPP with ii 18 months ago!  Not taken PCLS other than 25% of each drawdown.  

The original intention was to have it there temporarily, pending a long term decision on where to put it.  Did consider HSBC Global strategy 'Balanced' but rightly or wrongly we haven't done it and its still in the MMF, mainly due to the continued speculation about potential market crashes has caused us lots of hesitation.

Currently just drawing down the £16,760 via FAD until reaching state pension age in 3 years.  Appreciate the HSBC fund has grown greater than the MMF but YTD still +4.6% and MMF is still growing more than drawdown is taking out.  Are we trying not to be greedy or just being stupid..... IJDK!!!

Not greedy or stupid, but definitely a cautionary tale for others who might try to time the market. There have been a few posts on these boards recently where people have suggested moving their investments into MMF due to the "AI bubble" articles they've read, and then buy back in at a lower price.

As stated, as soon as it is your money and your investment decision, it cab be more difficult to push the button on such a large investment, especially if one is naturally risk averse.

I like the idea above of dripping the funds in over x months.