Trying to work out interest when retired..

jamesd

Ian, definitely go with the IFA route. unbiased.co.uk to find one, check until you find one you're comfortable with and feel free to come back for a second opinion on what you're told.

There are a variety of ways to avoid tax on income. One is to use funds that produce capital growth instead of interest or dividends. Then you can sell some of the growth and use the 9600 capital gains tax allowance to get that much income tax free. A couple of funds worth looking at, in conjunction with an IFA, are:

BlackRock UK Absolute Alpha
Cru Investment Portfolio

You might also look at preference shares and PIBs since those can provide a higher income than savings accounts, at higher risk, though a typical IFA is probably prohibited from advising you to use them due to lack of the necessary authorisation.

Using only interest is a very poor long term approach because it only lets you take 1-2% of the capital as income once you allow for inflation, if you want to fully preserve the capital. You need some equity fund involvement in the mixture.

1echidna

jamesd wrote: »

Ian, definitely go with the IFA route. unbiased.co.uk to find one, check until you find one you're comfortable with and feel free to come back for a second opinion on what you're told.

There are a variety of ways to avoid tax on income. One is to use funds that produce capital growth instead of interest or dividends. Then you can sell some of the growth and use the 9600 capital gains tax allowance to get that much income tax free. A couple of funds worth looking at, in conjunction with an IFA, are:

BlackRock UK Absolute Alpha
Cru Investment Portfolio

You might also look at preference shares and PIBs since those can provide a higher income than savings accounts, at higher risk, though a typical IFA is probably prohibited from advising you to use them due to lack of the necessary authorisation.

Using only interest is a very poor long term approach because it only lets you take 1-2% of the capital as income once you allow for inflation, if you want to fully preserve the capital. You need some equity fund involvement in the mixture.

I can understand why the IFA route is the official advice but there is certainly no guarantee that you will preserve your capital if per chance you buy at a high point in the economic cycle. The FTSE 100 has still not reached levels prior to the dotcom crash and perhaps we will be watching the effects of the credit crunch and the oil and food price inflation working their way through the system for years (not being already discounted as some on here like to propound). For some analysis of booms and busts see http://news.bbc.co.uk/1/hi/business/7202412.stm I could of course be totally wrong about this and that there was a bubble within the market prior to the dotcom crisis which does not match the present situation. I have seen it said here that it is best to invest all you money at once and that five years (a long time to wait before throwing a brick through your IFA's window) will almost certainly sort out the fluctuations in your favour (and putting all your money in at once is most certainly, for most IFA's charging basis, in the IFA's favour). You might consider drip feeding into funds over a number of years. A subsidiary advantage might be that over some years you could learn about investing and dispense with the IFA and his fees all together.

dunstonh

I can understand why the IFA route is the official advice but there is certainly no guarantee that you will preserve your capital if per chance you buy at a high point in the economic cycle.

There is if you buy a guaranteed product. However, the cost of guarantees can often be more than the guarantee is worth when you analyse it correctly.

The FTSE 100 has still not reached levels prior to the dotcom crash

Yet, balanced portfolios invested just prior to that crash have gone on to nearly double or more. Of course, those who invested 100% into the FTSE would only have small gains now but single fund investing is old fashioned and poor quality investing and you are almost guaranteeing to end up with lower returns in the long run.

And, investing doesnt have to mean stockmarket. You have no stockmarket investments such as fixed interest/bond funds which have very good yields at the moment and some are very attractive. For income provision you would typically find those making up a higher content in a portfolio.

You might consider drip feeding into funds over a number of years

There are pros and cons to doing that. It was good to do that in the last 12 months but the 5 years previous would have seen you get less.

purch

It was good to do that in the last 12 months but the 5 years previous would have seen you get less

Careful dunstonh............you'll have the 'Pound Cost Averaging' Police :eek: after you if you dare question the 'olde wives tale'

I can feel them 'cuttin and pastin' stuff from wikiguesspedia and incademy as we speak

1echidna

dunstonh wrote: »

There is if you buy a guaranteed product. However, the cost of guarantees can often be more than the guarantee is worth when you analyse it correctly.



Yet, balanced portfolios invested just prior to that crash have gone on to nearly double or more. Of course, those who invested 100% into the FTSE would only have small gains now but single fund investing is old fashioned and poor quality investing and you are almost guaranteeing to end up with lower returns in the long run.

And, investing doesnt have to mean stockmarket. You have no stockmarket investments such as fixed interest/bond funds which have very good yields at the moment and some are very attractive. For income provision you would typically find those making up a higher content in a portfolio.



There are pros and cons to doing that. It was good to do that in the last 12 months but the 5 years previous would have seen you get less.

Look no-one has a crystal ball. The wisdom of hindsight is great to say some funds have doubled and it is poor investing not to have picked them. What tools do people have in picking them : past performance (no guide to the future perhaps) and the record of the fund manager plus some analysis of basic forces driving underlying economics of particular markets perhaps (although markets may well be irrational at times) and a personal attitude to risk. If predicting future winners reliably was possible, albeit complicated and difficult, the money would all be in the winning funds and we wouldn't have hundreds as the tipsters would have established a record and a monopoly on hiring out their services. As it is we have what appears to be analogous to paying for a tipster's guide to a day at the races at quite considerable expense. Plenty of free advice is available if bewildering in its scope and complexity and we are warned rightly about fashion investing (as if IFAs don't go in for that). I guess all I'm saying is that my personal preference is not to pass most of my money over to an IFA for whom I have no way of checking his real investment skills and at some expense. I prefer to go in in myself gradually and if I make some mistakes so be it. End of rant.

dunstonh

The wisdom of hindsight is great to say some funds have doubled and it is poor investing not to have picked them.

That isnt what I said. Indeed, even if you just got sector average in a portfolio that was following a sector/asset allocation strategy or a high yield strategy with both matching a typical cautious or medium risk profile then you would have outperformed the FTSE over that period. Its nothing to do with picking best funds but not putting all your eggs in one basket which is what you suggested from your earlier post when you just mentioned the FTSE100.

Plenty of free advice is available if bewildering in its scope and complexity and we are warned rightly about fashion investing (as if IFAs don't go in for that).

You are only a new board member but regulars will know the phrase fashion investing very well and I have warned of it many many times in the past.

I guess all I'm saying is that my personal preference is not to pass most of my money over to an IFA for whom I have no way of checking his real investment skills and at some expense. I prefer to go in in myself gradually and if I make some mistakes so be it. End of rant.

Thats your choice. It doesnt bother me in the slightest.

1echidna

Some further thoughts on dunstonh post above. I think I have read somewhere that FTSE 100 trackers have outperformed the vast majority of funds but no matter. Once stockbrokers were flavour of the month now IFAs are. My prediction is that in five or six years time they will be regarded in the same light as endowment policy salesmen from a a decade or so ago are. No doubt they have learnt from these events involving blatant mis selling and now always give the appropriate caveats but I doubt if official advice (eg FSA) will still include using them.

chesky369

And you base your prediction on ?

jem16

1echidna wrote: »

Some further thoughts on dunstonh post above. I think I have read somewhere that FTSE 100 trackers have outperformed the vast majority of funds but no matter.

Perhaps you had better read somewhere more useful. FTSE 100 trackers have been the worst performing funds for the last 14 years approx.

1echidna

A prolonged Japanese style slump with an angry backlash from people who invested and lost. (credit crunch, property slump, high oil, food, commodity prices, unemployment, company losses - deep and prolonged.)