What is low risk free way of getting 6-7% I/C from a £470k SIPP?

averageguy11

Purch I agree with yur comment re 'that sector' but then its always the case of 'not all yur eggs in one basket'..my point was that gilts r paying 4ish% wheras the 'blue chips' r 5ish..enuff of a difference to go the bond route

purch

100 basis points.......yes

Looking at Tesco who yield 50-55 basis points over Gilt edged for 2 years, 85-90 basis points for 3 years, right out to 135-140 basis points for 10 years

Are they are good enough risk ??

Looking at that company's market position, cash reserves and land bank, to me personally
thenswer is YES, but the further out on the curve you go the risk has to increase, so that needs to be compensated by yield, as it is.

Researching and buying a Bond needs to be as thorough as you would be before buying an Ordinary Share.......in fact the question has to be 'Would I invest in that company ?'

averageguy11

Purch...any chance of explaining y these 2 bonds from barclays seem so different...they r both 'perpetaul'

ebc8
eb15

the ask is virtually the same but yet the yields are quite different.

Also, what do u understand by the term 'yield to worst'..worse case scenario?

purch

I'm not too familiar with this paper, but

I think EBC8 must have a Call date, and probably by the look of the pricing quite soon ( unless the price is wrong )will mean it's not Perpetual

Yield to Worst basically means Yield to Call

Some Bonds and PIB's have Call dates where the issuer can re-pay the Bond (at their discretion) Therefore you need to calculate the yield to the time the 'Call' may be exercised, rather than it's maturity date, or as perpetual.

In the case of EBC8 the coupon is over 9%, and if it does have a call date soon and the issuer feels they can raise money on a Bond with a lower coupon then they might re-pay (Call) the Bond and issue a new one. Thus the yield needs to be calculated to that 'call' date rather than perpetuity.

averageguy11

Thanks purch that makes sense

averageguy11

Purch mind me aksing what index linked gilt u went for and y?

purch

I am the proud holder of the 2035 2% Index Linked jobbie (actually held in the wife's name)

Bought at issue

Not held in my SIPP

Bought for the Capital Gain (which is not taxable)

P.S. There was no great in-depth thought behind the investment other than the thought that RPI will increase as the decade progresses (a partially correct assumption so far)

averageguy11

Well thts my thinking...i jus want some exposure in my sipp on tht side

newby52

After thinking that I would take charge of managing my SIPP I see that Bestinvest runs a managed SIPP - does anyone have any experience with them ?