£340k to invest

newhit

Iam 55 and out of work but have got £340k to invest from an offshore account. After surfing the various money websites and this excellent portal I have settled on a Prudential flexible investment 20 year plan with profits (I think that's what it's called). I plan to have the fund in joint names with my wife so that if one of us pops their clogs then the the other can continue. I was going to use £300k in the plan and keep 40K in a high interest bank account for easy access.

I hope to realise an income per annum of about 14K-16K from the fund.

Does this sound reasonable? What are the pitfalls (apart from market forces) of what I want to do? What tax implications have I missed?
If I cash in after 5 years do I get hit hard for costs and, maybe capital losses?

Iam not sure what my best route is but just putting the whole lot in a high interest bank account does not seem the best plan.

Any help greatly appreciated.

jem16

Most of the investment bonds are really only suitable to a select number of people such as higher rate taxpayers which you don't appear to be. Is there a reason for choosing an investment bond?

I'd seriously suggest seeing an investment specialist IFA to organise an investment for this amount of money.

Captain_Mainwaring_2

I would expect that you could do much better with a simple offshore savings account, depending on your tax status. I would tend to split it up a bit.

newhit

Thanx for the replies.

Unfortunately Iam a bit more confused. First, I thought that the plan I described is an investment plan using bonds for less risk. I have spoken to an IFA who is sorting the Prudential plan out for me. Secondly, and please bear with me, but is it that simple to just move the account into a high interest offshore savings account and draw so much a month off it as an income?

Once again, any further help greatly appreciated as it must be clear now that I am not a financial guru.

newhit

Forgot to add............Would the offshore savings account give me as much interest as the Prudential plan, assuming good growth of course.

Captain_Mainwaring_2

Nearly 7% for on demand, and you get a debit card. It's the tax free status that really makes it worth while though.

cheerfulcat

Captain_Mainwaring wrote: »

Nearly 7% for on demand, and you get a debit card. It's the tax free status that really makes it worth while though.

What tax free status would that be?

jamesd

Red flags on this one:

1. No mention of stocks and shares ISA use
2. No mention of unit trust/ OEIC use outside a tax wrapper
3. The income doesn't come to 5% of the capital and that's the standard for income from the investment bond tax wrapper.
4. No mention of an allocation above 100% that is commonly available from competitive resellers.
5. With profits. Almost universally discredited.

You've apparently only mentioned one investment, a with profits fund. Is the IFA really planning to use just one investment inside the wrapper?

What are your pension plans? Do you have one for both you and your wife?

Is the person an IFA? That is, does their title specifically say that they are an independent financial adviser, that independent word being vital to you for you to get the proper protection from bad advice? Check the firm and the adviser in the FSA Register and see what each is authorised to do.

Some unscrupulous advisers may sell bonds to get the high commissions that are available from some of them. This isn't always the case but from the limited description you've given I'm concerned that it may be the case for you.

Bonds is a word that has many meanings in investment:
A. The bonds that banks and building societies sell that are really fixed term savings accounts.
B. The bonds that are corporate or government bonds, typically low risk investments that can be held in a wide range of tax wrappers or outside them.
C. Investment bonds, a convenience wrapper that is typically inappropriate today but can be useful in some situations. If used the adviser needs to be explaining in detail why ISA and unit trust/OEIC investments aren't being used instead.

You need to be getting responses from your IFA on these points to explain why the obvious and usually more efficient approaches aren't being used. If they haven't provided you with a "reasons why" document, ask for one - it's supposed to be provided to explain why they believe that this investment wrapper and the investments within it are suitable for you and why those I've mentioned above aren't.

A savings account is entirely unsuitable, onshore or offshore, for this long term income provision - after allowing for inflation you'd only be able to take 1-2% of the lump sum as income without seeing the capital value and income roughly halve every ten years due to inflation. Investments are required and part of those investments can be corporate or government bonds inside a tax wrapper of some sort.

newhit

WOW!

Jamesd, that has set me thinking. Many thanx.

I'm off to check the register.

jem16

Jamesd has outlined all the things to look for very well and why you should be wary.

The Prudential Investment Plan seems to only list 2 with-profits funds and that would be a disaster to put £340k into just two funds.

Have you discovered if it was an IFA you saw?

chesky369

I think any IFA worth their salt would not be encouraging you to put all your eggs in one basket like this and as Jamesd says where's the ISAs and other, really basic investments? I'd be really worried by this, as it's not exactly a well-rounded portfolio.