Where to invest

sabelu

I have had 16k in an NPI bond for the past 4 years over that period of time it has given me a regular payout of around £80 pm. However the bond is now performing badly and I have no choice but to move it. I need around £80 pm income from it. On looking around I see I have the option of an instant access with First Direct and other around £80 pm interest and my capital is safe. However a riskier option would be to buy Tesco shares around £15k I have looked at their performance over the past five years and my 15k would have grown by 48% plus given a £4k dividend.
My needs are simple safe capital and a regular £80 pm income.
Any ideas.

EdInvestor

Hi Sabelu

My needs are simple safe capital and a regular £80 pm income

Pretty unlikely I'm afraid : interest rates are about to go down to 4.5% and gilt yields are lower.

You're asking for a 6% return - is that before or after tax? You have no alternative but to take risks with the capital, as you have been doing with the NPI bond, and anyone who tells you different is lying.

Investing the capital in just one share is very risky indeed. Investing it in a diverse portfolio of 15 large blue cap shares (1k each), all paying dividends averaging out at 5-6% net of tax would be much less risky, but your capital would still of course not be safe.Commercial property funds and trusts are another area of low to medium risk which will likely give you a dividend return of 6-7% and capital growth.

Of course the overal returns of such investments (capital growth +divi) could be much higher than 6-7% - or they could be much lower, with an impact on your capital, as you will have found with the NPI bond

I'm afraid there's no free lunch.

sabelu

Any other advice from anyone ?

ReportInvestor

Is your NPI Bond with profits? If so, I fear that it may be worth less than £16K.

dunstonh

Ed has covered the basics and nothing really more to add. ReportInvestor is also correct that if WP, it will likely be hit with a MVR (market value reduction).

Safe investments will not make the money you need, investments that carry risk do have the potential.

sabelu

Report Investor.

The bond was worth 20k surrender value 16k

EdInvestor

Sabelu

You might try a misselling claim on that one if the salesman didn't tell you about the MVR and you thought your capital was safe. IIRC the Ombudsman is approving claims where the sale occurred after company had already imposed an MVR, and I imagine that would have included NPI 4 years ago.

dunstonh

IIRC the Ombudsman is approving claims where the sale occurred after company had already imposed an MVR, and I imagine that would have included NPI 4 years ago.

No. I have sold a coupole of WP bonds which are stil levying MVRs on other policyholders and they have done very nicely. Unitised WP after a crash are not bad investments and the liklihood of MVRs in the future are much reduced.

It all comes down to the documentation.

ReportInvestor

Did you choose the WP Bond yourself, Sabelu? If it was chosen for you by an adviser they should have done better and chosen a fund with a stronger free asset ratio.

EdInvestor

The FOS ruling I mentioned is reported here:

Mail article

sabelu

Report Investor

Chase De Vere advised on this bond.