Well, if you all must "invest" in Premium Bonds instead of other ways of making above inflation returns for little or no risk then that's your lookout.
I now buy Premium Bonds instead of lottery tickets. The rationale being that I am taking a gamble with a remote chance of a big prize with both of them. However I can at least get the stake back with Premium Bonds if I wish unlike with the lottery.
I would never view Premium Bonds as 'an investment' they are a gamble in my book with a returnable stake.
Well, if you all must "invest" in Premium Bonds instead of other ways of making above inflation returns for little or no risk then that's your lookout.
I now buy Premium Bonds instead of lottery tickets. The rationale being that I am taking a gamble with a remote chance of a big prize with both of them. However I can at least get the stake back with Premium Bonds if I wish unlike with the lottery.
I would never view Premium Bonds as 'an investment' they are a gamble in my book with a returnable stake.
Thats probably the perfect way of looking at Premium bonds, the lottery with your capital safe.
Well, if you all must "invest" in Premium Bonds instead of other ways of making above inflation returns for little or no risk then that's your lookout.
I think the frustration for me is that NS&I themselves imply an average return of 1.4% and that this is more likely achieved by those with the biggest allowed holdings. If you are at that level for more than a year and only get about 1.0% you are justified in raising an eyebrow.
And as you've just implied Golfie, now is perhaps not the time for modest CL pensioners to stick 50k in equity markets, is it? At least, not in one go, so your cash has to sit somewhere.
@cafc-west and others, you could consider Marcus (which is Goldman Sachs, unfortunately). Paying 1.5% no strings. Won't beat inflation but better than 0.4%
Yes - I have a Marcus account, amongst other savings accounts, fixed rate accounts, equity, ISAs and Bonds. So quite diversified but still enjoy the 'thrill' (I'm easily pleased) of clicking on the app 2 days after the first of the month to see if/what I've won!
I'm getting out of P2P (Assetz capital) as quickly as possible. I think P2P is going to get pretty nasty soon. I think that the asset backed valuations that these loans are secured against are massively inflated and it will just take a few more big defaults in a market that already is under the spotlight for the whole thing to come crashing down.
The secondary market liquidity has reduced and a lot of the loans I am in are suspended at the moment. Going to have to ride a fair few of these out and hope it all goes ok...
Putting the cash into moneyfarm (roboinvesting) and just going to max out ISA allowance.
I know of at least one valuer whom refuses to do property work for P2Ps due to the pressure their staff put on him to meet the number they need to meet to lend despite all the evidence pointing lower. It is a massive accident waiting to happen IMO.
decided to take the 25% allowable tax free from my pension which I will drip feed into my current account on a monthly basis. For our needs should be able to eek it out for five or six years. In the meantime will invest most in fixed term bonds, some in premium Bonds in case we get lucky, some in short term savings as I will need access occasionally. Had a quick look on the net and can get some good returns if savvy. If you open a FirstDirect Current account and also a Regular Saver account they offer 5% on the savings. Pretty good I thought.
decided to take the 25% allowable tax free from my pension which I will drip feed into my current account on a monthly basis. For our needs should be able to eek it out for five or six years. In the meantime will invest most in fixed term bonds, some in premium Bonds in case we get lucky, some in short term savings as I will need access occasionally. Had a quick look on the net and can get some good returns if savvy. If you open a FirstDirect Current account and also a Regular Saver account they offer 5% on the savings. Pretty good I thought.
I'm getting out of P2P (Assetz capital) as quickly as possible. I think P2P is going to get pretty nasty soon. I think that the asset backed valuations that these loans are secured against are massively inflated and it will just take a few more big defaults in a market that already is under the spotlight for the whole thing to come crashing down.
The secondary market liquidity has reduced and a lot of the loans I am in are suspended at the moment. Going to have to ride a fair few of these out and hope it all goes ok...
Putting the cash into moneyfarm (roboinvesting) and just going to max out ISA allowance.
I know of at least one valuer whom refuses to do property work for P2Ps due to the pressure their staff put on him to meet the number they need to meet to lend despite all the evidence pointing lower. It is a massive accident waiting to happen IMO.
People being pressured to value things higher than they are in order to be paid, exactly what happened with Collateralised Debt Obligstions (CDOs) and a key part of the precious economic crash.
decided to take the 25% allowable tax free from my pension which I will drip feed into my current account on a monthly basis. For our needs should be able to eek it out for five or six years. In the meantime will invest most in fixed term bonds, some in premium Bonds in case we get lucky, some in short term savings as I will need access occasionally. Had a quick look on the net and can get some good returns if savvy. If you open a FirstDirect Current account and also a Regular Saver account they offer 5% on the savings. Pretty good I thought.
The regular savers pay a good rate (although used to be 6%) but are restrictive as to how much you can put in, FD is £300 a month so you'll make about £84 in the year. Still the same as putting it all in an account earning 2.33% so you can't really beat it.
Have a look at the Credit Cards/Balance Transfers as you'll be sitting on cash. Time for a bit of Stoozing.
On spending Barclaycard give 27 months interest free. You can get around 20 months for balance transfer (without a fee).
If you can load up £10k on one of those and pay the minimum you can earn interest on the difference each month. There are money mule cards as well if you get into it such as Halifax clarity.
I'm getting out of P2P (Assetz capital) as quickly as possible. I think P2P is going to get pretty nasty soon. I think that the asset backed valuations that these loans are secured against are massively inflated and it will just take a few more big defaults in a market that already is under the spotlight for the whole thing to come crashing down.
The secondary market liquidity has reduced and a lot of the loans I am in are suspended at the moment. Going to have to ride a fair few of these out and hope it all goes ok...
Putting the cash into moneyfarm (roboinvesting) and just going to max out ISA allowance.
I fear you are right. I've been getting out of Funding Circle, in chunks for most of this year, and it takes that long because each chunk has taken longer than the last to sell. Looks pretty bad to me. I see the FT has noticed this as well. Fortunately when I get this latest chunk I should be down to about 1k with them, and will get shot of that too. That said, it was the 4th Way website which alerted me to Funding Circle changing their practice to be less transparent; I dont think all P2Ps are the same. When I sold a bit from Ratesetter i got the money on the second working day after. I'm going to get fully out of Funding Circle asap, out of Zopa bit by bit, which will leave me with something in RateSetter, Growth Street, and Lending Works.
I fear you are right. I've been getting out of Funding Circle, in chunks for most of this year, and it takes that long because each chunk has taken longer than the last to sell. Looks pretty bad to me. I see the FT has noticed this as well. Fortunately when I get this latest chunk I should be down to about 1k with them, and will get shot of that too. That said, it was the 4th Way website which alerted me to Funding Circle changing their practice to be less transparent; I dont think all P2Ps are the same. When I sold a bit from Ratesetter i got the money on the second working day after. I'm going to get fully out of Funding Circle asap, out of Zopa bit by bit, which will leave me with something in RateSetter, Growth Street, and Lending Works.
I'm interested as to why you're getting out of Zopa. I ask because I've put money into them because I didn't want all my eggs to be in Ratesetter. I've also got out of Funding Circle, but I'm now considering Growth Street, who I only heard of today.
I fear you are right. I've been getting out of Funding Circle, in chunks for most of this year, and it takes that long because each chunk has taken longer than the last to sell. Looks pretty bad to me. I see the FT has noticed this as well. Fortunately when I get this latest chunk I should be down to about 1k with them, and will get shot of that too. That said, it was the 4th Way website which alerted me to Funding Circle changing their practice to be less transparent; I dont think all P2Ps are the same. When I sold a bit from Ratesetter i got the money on the second working day after. I'm going to get fully out of Funding Circle asap, out of Zopa bit by bit, which will leave me with something in RateSetter, Growth Street, and Lending Works.
I'm interested as to why you're getting out of Zopa. I ask because I've put money into them because I didn't want all my eggs to be in Ratesetter. I've also got out of Funding Circle, but I'm now considering Growth Street, who I only heard of today.
To be honest nothing concrete, but when I first invested they had Safeguard, and I wasn't impressed with their reason for dropping it. I think that with the P2P guys, and in the lack of any more concrete means of scrutiny, it may pay to judge them on how transparent they are with their customers.
Although using different providers might help reduce risk somewhat, I would be very careful about having a large amount of your cash in P2P as an industry (something I massively misjudged, put almost everything in P2P and now struggling to reduce exposure, and I will be left holding some loans which are very poor and high risk, and as a consequence incredibly illiquid.
One of the loans I am part of is £7.4 million and has just had receivers appointed, that's pretty big... Must be one of the biggest to default?
New rules from the FCA will prevent most new investors from putting more than 10% of investible cash into P2P (obviously there are ways round this, but the point is about the fact they see it necessary to regulate). I was sitting at about 85% but I've reduced it to about 50% hopefully down to 10% by September. Difficult though.
Couple that with the idea just most of these are property asset backed, with a recession round the corner, and people could be taking a huge haircut soon when these assets are worth a fraction of what they were valued at.
At least if you invest on the stock market and there's a recession, the businesses in general go on and recover, in P2P these companies go under and you get pennies in the pound.
Although I think P2P might serve a purpose and have a future, be aware of crazy returns (in any situation let alone P2P) and crazy asset valuations.
Oof, @Huskaris mate, i think you can count yourself lucky there, I don't think any of us who have been pro P2P would ever have recommended going in large like that. Timely posts, though.
decided to take the 25% allowable tax free from my pension which I will drip feed into my current account on a monthly basis. For our needs should be able to eek it out for five or six years. In the meantime will invest most in fixed term bonds, some in premium Bonds in case we get lucky, some in short term savings as I will need access occasionally. Had a quick look on the net and can get some good returns if savvy. If you open a FirstDirect Current account and also a Regular Saver account they offer 5% on the savings. Pretty good I thought.
If a person does not need cash to splash out on a car or a cruise of pay off a mortgage, or expect to die soon, there is a logical argument against surrendering a guaranteed lifetime pension - effectively a guaranteed return for life - for a cash sum. If invested to provide income until it runs out, the capital needs to be protected and an investment return will result that's less than the internal rate of return implicit in the surrendered pension value.
The counter logic is that the income for six years will be higher than the income for say 20 years so preferred option if you want to maximise short term income or have an emergency cash reserve.
I hope that like many other fine threads on CL this one will be a place where Lifers can share both knowledge and experience to help others. It isn't for "rich" Lifers. It's the way of the modern world that all of us have to try and save for old age. And it is not the place for politics, even though politics affects our decisions.
I think the best way to get this going will be if people post some questions about things they are contemplating, puzzled about, scared of. Hopefully some Lifers with the relevant knowledge and experience will reply. So I will start, in the next post
In that spirit, I wonder if any lifers are aware of an American Fidelity investment fund that has quadrupled in value since President Trump took office, having stagnated in the Obama years preceding it. Does anyone know the name of such fund?
I hope that like many other fine threads on CL this one will be a place where Lifers can share both knowledge and experience to help others. It isn't for "rich" Lifers. It's the way of the modern world that all of us have to try and save for old age. And it is not the place for politics, even though politics affects our decisions.
I think the best way to get this going will be if people post some questions about things they are contemplating, puzzled about, scared of. Hopefully some Lifers with the relevant knowledge and experience will reply. So I will start, in the next post
In that spirit, I wonder if any lifers are aware of an American Fidelity investment fund that has quadrupled in value since President Trump took office, having stagnated in the Obama years preceding it. Does anyone know the name of such fund?
Yes - I believe you are referring to the American Infidelity BS Fund. Wasn't easy to get in to and I only know of one person who was successful.
The Tax-free cash (or to give it its proper name, Pension Commencement lump sum) enigma is a tough one. It used to be the case that on taking your pension at retirement you would always take the lump sum because...
1) it was tax free & probably the largest amount of money you ever had all in one go.
2) the pension (annuity) was taxable & so by taking the lump sum you reduced the income & therefore paid less tax overall.
3) By taking an annuity you "lost" your pension fund for good. It didnt grow anymore & you simply swapped your pension fund for an income for life
4) it was the done thing as there weren't really any other options.
The thing is, since pension freedoms came in & you can have a flexible retirement plan, a lot of people will go into "drawdown" & so wont buy an annuity (certainly not before age 75). You can therefore withdraw a level of "income" from your pension that will keep you below the Personal Allowance & thus not pay tax. This may include an element of your tax free cash or not. Initially it may also be all your TFC, split over a number of years.....as some of my clients are currently doing. The rest of your pension fund stays invested & hopefully grows over time.
The FCA are quite hot on this & any advisor giving pension advice has to show an actual "need" for the lump sum, otherwise it could he shown as "bad advice" to simply take out 25% of a fund that is still invested & therefore growing tax efficiently to be put into a very poor returning bank account, that ultimately could be taxed. I even had my Compliance team question whether my client could take out a loan for the brand new car he was planning on buying with his tax-free cash..... !!
As an aside. Its interesting that HMRC changed the terminology a few years ago, replacing "tax-free cash" with Pension Commencment lump sum. Noting that the word "tax-free" now doesn't exist.......
I have just received my Enhanced Transfer Value offer related to my final salary scheme pension which closed some years ago due to it being in deficit. Quite a lot of my pals had theirs too. The enhanced minimum increase was 10% but in my case it is virtually 30%. I am bound to take free legal advice from Origen prior to my decision.
The enhancement in and of itself is six figures so it is quite tempting tbh. I shall need a cool head and some good advice.
Random question . Is 4% average return on investments say over five years optimistic , pessimistic or reasonable
I have just received my Enhanced Transfer Value offer related to my final salary scheme pension which closed some years ago due to it being in deficit. Quite a lot of my pals had theirs too. The enhanced minimum increase was 10% but in my case it is virtually 30%. I am bound to take free legal advice from Origen prior to my decision.
The enhancement in and of itself is six figures so it is quite tempting tbh. I shall need a cool head and some good advice.
Random question . Is 4% average return on investments say over five years optimistic , pessimistic or reasonable
Depends where it is invested. 100% in equities then pessimistic. 100% in cash & bonds then about slightly optimistic.For a low/medium risk investor I usually say an average of around 5%-6% over a 5-10 year period. Medium risk over that period then 6%-8%.
I have just received my Enhanced Transfer Value offer related to my final salary scheme pension which closed some years ago due to it being in deficit. Quite a lot of my pals had theirs too. The enhanced minimum increase was 10% but in my case it is virtually 30%. I am bound to take free legal advice from Origen prior to my decision.
The enhancement in and of itself is six figures so it is quite tempting tbh. I shall need a cool head and some good advice.
Random question . Is 4% average return on investments say over five years optimistic , pessimistic or reasonable
Who are Origen and why are you bound to take their advice? Surely you should take independent advice? Unless I am misunderstanding this?
I have just received my Enhanced Transfer Value offer related to my final salary scheme pension which closed some years ago due to it being in deficit. Quite a lot of my pals had theirs too. The enhanced minimum increase was 10% but in my case it is virtually 30%. I am bound to take free legal advice from Origen prior to my decision.
The enhancement in and of itself is six figures so it is quite tempting tbh. I shall need a cool head and some good advice.
Random question . Is 4% average return on investments say over five years optimistic , pessimistic or reasonable
You will be required to certify that you have taken advice before the transfer out of a final salary scheme, but it's your choice where you go for advice. The more likely narrative is that the company is probably paying the cost if you use Origo and the communications may not have made this entirely clear.
The 4% figure you have been given will represent the investment return which someone has calculated is the sum needed to fund your accrued pension from today without any new contributions. You need to ask if that is 4% absolute or 4% real return (above assumed inflation).
The scheme will always be using a projected real return which could be as low as 2% above gilt yields because the law requires them to hold low risk assets. If your transfer value was based on the same rate of return your transfer value would be very much higher and would reflect the cash the company have to underwrite to fully fund your pension.
An enhanced transfer value is a win win for both company and employee if it is the right rate. If the transfer value is £100k based on a 4% discount rate but the internal investment rate of the scheme is based on a 2% discount rate, the company will in effect be getting rid of a debt on its balance sheet of say £200k for a cash transfer value payment of say £100k. You only need a 4% return on £100k of capital to match what the company needed £200k to fund. But you might make 6% and be better off, and the company has halved its balance sheet liability.
Whether 4% is achievable as Golfie has said, depends where you invest it, but unless you were over aggressive or over cautious there is a reasonable chance of matching your final salary pension, but you yourself will be taking on the risk of living too long - instead of the scheme. Unfortunately, unless you are prepared to get your head around basic risk and probabilities and ask your adviser to explain it all, you will be driving blind.
The flexibilities you have as to investment choice, how much and when you start drawing an income are an added bonus and can help mitigate the investment and mortality risks you will be taking on. The 5 years is a red herring unless that's when you expect to die or intend to buy an annuity, you will hopefully be looking at a 20+ year investment horizon.
Worthwhile advice starts with asking the right questions. If you don't understand the free advice go somewhere else.
looking for somewhere to park a fair bit of money for a year or two, don't want ANY risk but after a decent return. Best I can find is Fixed Rate at about 2% for two years. Anyone know anything better?
Comments
I would never view Premium Bonds as 'an investment' they are a gamble in my book with a returnable stake.
6x £25
Talk about conflict of interest... Naughty.
Have a look at the Credit Cards/Balance Transfers as you'll be sitting on cash. Time for a bit of Stoozing.
On spending Barclaycard give 27 months interest free. You can get around 20 months for balance transfer (without a fee).
If you can load up £10k on one of those and pay the minimum you can earn interest on the difference each month. There are money mule cards as well if you get into it such as Halifax clarity.
That said, it was the 4th Way website which alerted me to Funding Circle changing their practice to be less transparent; I dont think all P2Ps are the same. When I sold a bit from Ratesetter i got the money on the second working day after. I'm going to get fully out of Funding Circle asap, out of Zopa bit by bit, which will leave me with something in RateSetter, Growth Street, and Lending Works.
One of the loans I am part of is £7.4 million and has just had receivers appointed, that's pretty big... Must be one of the biggest to default?
New rules from the FCA will prevent most new investors from putting more than 10% of investible cash into P2P (obviously there are ways round this, but the point is about the fact they see it necessary to regulate). I was sitting at about 85% but I've reduced it to about 50% hopefully down to 10% by September. Difficult though.
Couple that with the idea just most of these are property asset backed, with a recession round the corner, and people could be taking a huge haircut soon when these assets are worth a fraction of what they were valued at.
At least if you invest on the stock market and there's a recession, the businesses in general go on and recover, in P2P these companies go under and you get pennies in the pound.
Although I think P2P might serve a purpose and have a future, be aware of crazy returns (in any situation let alone P2P) and crazy asset valuations.
1) it was tax free & probably the largest amount of money you ever had all in one go.
2) the pension (annuity) was taxable & so by taking the lump sum you reduced the income & therefore paid less tax overall.
3) By taking an annuity you "lost" your pension fund for good. It didnt grow anymore & you simply swapped your pension fund for an income for life
4) it was the done thing as there weren't really any other options.
The thing is, since pension freedoms came in & you can have a flexible retirement plan, a lot of people will go into "drawdown" & so wont buy an annuity (certainly not before age 75). You can therefore withdraw a level of "income" from your pension that will keep you below the Personal Allowance & thus not pay tax. This may include an element of your tax free cash or not. Initially it may also be all your TFC, split over a number of years.....as some of my clients are currently doing. The rest of your pension fund stays invested & hopefully grows over time.
The FCA are quite hot on this & any advisor giving pension advice has to show an actual "need" for the lump sum, otherwise it could he shown as "bad advice" to simply take out 25% of a fund that is still invested & therefore growing tax efficiently to be put into a very poor returning bank account, that ultimately could be taxed. I even had my Compliance team question whether my client could take out a loan for the brand new car he was planning on buying with his tax-free cash..... !!
As an aside. Its interesting that HMRC changed the terminology a few years ago, replacing "tax-free cash" with Pension Commencment lump sum. Noting that the word "tax-free" now doesn't exist.......
Make of that what you may.
I suppose they will soon reduce the prize fund, having already curtailed their bonds.
The enhancement in and of itself is six figures so it is quite tempting tbh. I shall need a cool head and some good advice.
Random question . Is 4% average return on investments say over five years optimistic , pessimistic or reasonable
I'm an IFA by the way....😉
The 4% figure you have been given will represent the investment return which someone has calculated is the sum needed to fund your accrued pension from today without any new contributions. You need to ask if that is 4% absolute or 4% real return (above assumed inflation).
The scheme will always be using a projected real return which could be as low as 2% above gilt yields because the law requires them to hold low risk assets. If your transfer value was based on the same rate of return your transfer value would be very much higher and would reflect the cash the company have to underwrite to fully fund your pension.
An enhanced transfer value is a win win for both company and employee if it is the right rate. If the transfer value is £100k based on a 4% discount rate but the internal investment rate of the scheme is based on a 2% discount rate, the company will in effect be getting rid of a debt on its balance sheet of say £200k for a cash transfer value payment of say £100k. You only need a 4% return on £100k of capital to match what the company needed £200k to fund. But you might make 6% and be better off, and the company has halved its balance sheet liability.
Whether 4% is achievable as Golfie has said, depends where you invest it, but unless you were over aggressive or over cautious there is a reasonable chance of matching your final salary pension, but you yourself will be taking on the risk of living too long - instead of the scheme. Unfortunately, unless you are prepared to get your head around basic risk and probabilities and ask your adviser to explain it all, you will be driving blind.
The flexibilities you have as to investment choice, how much and when you start drawing an income are an added bonus and can help mitigate the investment and mortality risks you will be taking on. The 5 years is a red herring unless that's when you expect to die or intend to buy an annuity, you will hopefully be looking at a 20+ year investment horizon.
Worthwhile advice starts with asking the right questions. If you don't understand the free advice go somewhere else.
https://savings.zenith-bank.co.uk/apply/?pid=5