Where to place investment to secure best rate/stability
Discussion
Hi All
This is for my Dad, he has 93k in a Prudential Fund which is volatile (he hates volatility) from when he retired (lump sum) at the beginning of 2020.
He initially invested 50k minus 1k IFA fee (i did warn him) at a return rate of 5% so he was receiving monthly payouts around £200
He then invested another 50k minus another fee (another fee of £750 - again annoyed me but didnt listen) hoping to receive another £200 pm
The latter didnt happen, fund started to drop in performance so he reverted to not taking the 200 pm to top the gap up.
Anyway currently he has 93k
Ive kept on about this situation and hes finally seeing sense.
Ive said to him to slowly move this 93k out using a mix of NS&I 6.2% (16k so under/around the 1k interest meaning no tax implications) and an ISA at around 5% for a few years. 20k per annum in there.
Im half tempted to tell him instead of slowly pulling 16k+20k in the first year then 20k again on April 6th 2024....to just pull 20k out now into an ISA and the rest to the NS&I and pay the tax on the interest.
Im interested in your thoughts if my logic is sound or the best possible return (protected/guaranteed return) for someone who just doesnt like the ups and downs.
For perspective hes 69, he needs it as an income tool and he would be happy to take £200pm interest payout and the rest to be taken annually. So a mix of a savings/ISA that pays out monthly and one that he can take the interest annually as a lump sum or leave (ie ISA rather than an NS&I where he takes the 1k as it would put him over the 1k interest per annum threshold)
He has the state pension and another pension payout per month which is over his yearly tax allowance
So ive seen Zopa 3yr fixed ISA around 5-5.30% pa
and the 1 year NS&I savings account at 6.2%
Your thoughts and experience are always welcome here.
Thank you in advance
This is for my Dad, he has 93k in a Prudential Fund which is volatile (he hates volatility) from when he retired (lump sum) at the beginning of 2020.
He initially invested 50k minus 1k IFA fee (i did warn him) at a return rate of 5% so he was receiving monthly payouts around £200
He then invested another 50k minus another fee (another fee of £750 - again annoyed me but didnt listen) hoping to receive another £200 pm
The latter didnt happen, fund started to drop in performance so he reverted to not taking the 200 pm to top the gap up.
Anyway currently he has 93k
Ive kept on about this situation and hes finally seeing sense.
Ive said to him to slowly move this 93k out using a mix of NS&I 6.2% (16k so under/around the 1k interest meaning no tax implications) and an ISA at around 5% for a few years. 20k per annum in there.
Im half tempted to tell him instead of slowly pulling 16k+20k in the first year then 20k again on April 6th 2024....to just pull 20k out now into an ISA and the rest to the NS&I and pay the tax on the interest.
Im interested in your thoughts if my logic is sound or the best possible return (protected/guaranteed return) for someone who just doesnt like the ups and downs.
For perspective hes 69, he needs it as an income tool and he would be happy to take £200pm interest payout and the rest to be taken annually. So a mix of a savings/ISA that pays out monthly and one that he can take the interest annually as a lump sum or leave (ie ISA rather than an NS&I where he takes the 1k as it would put him over the 1k interest per annum threshold)
He has the state pension and another pension payout per month which is over his yearly tax allowance
So ive seen Zopa 3yr fixed ISA around 5-5.30% pa
and the 1 year NS&I savings account at 6.2%
Your thoughts and experience are always welcome here.
Thank you in advance
steve_n said:
Hates volatility and wants a regular income, sounds like he needs an annuity.
If you buy a non-pension annuity then the majority of it is deemed to be a return of your original capital and therefore the taxed part is minimal.
Old Skool worrier.If you buy a non-pension annuity then the majority of it is deemed to be a return of your original capital and therefore the taxed part is minimal.
Lump sum used as an income tool is my perspective using fixed interest rate Savings accounts and ISA
Hes technically got an annuity if you see my original post, £770 pm and also State pension pm.
My point was with the 93k whats the best/most stable tax effective solution when investing and moving away from this Prudential Fund which ive calculated has returns 0.75% pa
gotoPzero said:
NS&I 12 month bond is safe and good rate.
Thanks i think its a good bet.Historically on the face of it, NS&I seems a half decent historical place to keep your nest egg
30 August 2023 72nd 6.03% 6.20%
13 July 2023 71st 5.00% 5.12%
1 February 2023 70th 3.90% 3.97%
1 December 2022 69th 3.50% 3.56%
Kingdom35 said:
Old Skool worrier.
Lump sum used as an income tool is my perspective using fixed interest rate Savings accounts and ISA
Hes technically got an annuity if you see my original post, £770 pm and also State pension pm.
My point was with the 93k whats the best/most stable tax effective solution when investing and moving away from this Prudential Fund which ive calculated has returns 0.75% pa
You asked for the best place to secure a stable rate, that's exactly what an annuity is. It also hands over the longevity risk to the provider. Lump sum used as an income tool is my perspective using fixed interest rate Savings accounts and ISA
Hes technically got an annuity if you see my original post, £770 pm and also State pension pm.
My point was with the 93k whats the best/most stable tax effective solution when investing and moving away from this Prudential Fund which ive calculated has returns 0.75% pa
Right now you could achieve over 5% for a single 69yr old and that's locked in for life, not just a few years whilst interest rates are up again. Try and buy an annuity when rates have fallen and you'll see they have fallen too.
It is the best answer to the question you posed. And it's tax effective.
Edited by steve_n on Thursday 5th October 15:28
steve_n said:
You asked for the best place to secure a stable rate, that's exactly what an annuity is. It also hands over the longevity risk to the provider.
Right now you could achieve over 5% for a single 69yr old and that's locked in for life, not just a few years whilst interest rates are up again. Try and buy an annuity when rates have fallen and you'll see they have fallen too.
It is the best answer to the question you posed. And it's tax effective.
HiRight now you could achieve over 5% for a single 69yr old and that's locked in for life, not just a few years whilst interest rates are up again. Try and buy an annuity when rates have fallen and you'll see they have fallen too.
It is the best answer to the question you posed. And it's tax effective.
Edited by steve_n on Thursday 5th October 15:28
Ok do you have to currently be at the end of of your pension in the sense, its the maturity or is it as simple as stating ive got £93k whats the best annuity you can offer me?!
Im a newbie on the annuity front
I assume we're talking about £93k outside of a pension wrapper here?
There are two providers left who will offer an annuity bought from cash. One is Aviva and the other is Canada Life but invariably Aviva have the better rates.
In exchange for the £93k purchase price you receive an income for life, there is no more capital as such. However, it allows you to safely spend at a rate faster than just the income/interest. You're also spending your capital but it won't run out, no matter how long you live. That's how you can get more than 5%.
You decide what options the annuity has. Single life only pays one person and then the income stops when they die. Joint life can continue for another person if they live longer, either 50%, 66% or 100%. It can be level in payment and not increase, or start much lower and escalate by a fixed percentage of your choice over time. You can also opt for a minimum payment period or value protection to ensure a minimum level of return if you die unexpectedly early.
There are two providers left who will offer an annuity bought from cash. One is Aviva and the other is Canada Life but invariably Aviva have the better rates.
In exchange for the £93k purchase price you receive an income for life, there is no more capital as such. However, it allows you to safely spend at a rate faster than just the income/interest. You're also spending your capital but it won't run out, no matter how long you live. That's how you can get more than 5%.
You decide what options the annuity has. Single life only pays one person and then the income stops when they die. Joint life can continue for another person if they live longer, either 50%, 66% or 100%. It can be level in payment and not increase, or start much lower and escalate by a fixed percentage of your choice over time. You can also opt for a minimum payment period or value protection to ensure a minimum level of return if you die unexpectedly early.
steve_n said:
I assume we're talking about £93k outside of a pension wrapper here?
There are two providers left who will offer an annuity bought from cash. One is Aviva and the other is Canada Life but invariably Aviva have the better rates.
In exchange for the £93k purchase price you receive an income for life, there is no more capital as such. However, it allows you to safely spend at a rate faster than just the income/interest. You're also spending your capital but it won't run out, no matter how long you live. That's how you can get more than 5%.
You decide what options the annuity has. Single life only pays one person and then the income stops when they die. Joint life can continue for another person if they live longer, either 50%, 66% or 100%. It can be level in payment and not increase, or start much lower and escalate by a fixed percentage of your choice over time. You can also opt for a minimum payment period or value protection to ensure a minimum level of return if you die unexpectedly early.
This is the problem i think the Prudential Fund is inside a Pension Wrapper.There are two providers left who will offer an annuity bought from cash. One is Aviva and the other is Canada Life but invariably Aviva have the better rates.
In exchange for the £93k purchase price you receive an income for life, there is no more capital as such. However, it allows you to safely spend at a rate faster than just the income/interest. You're also spending your capital but it won't run out, no matter how long you live. That's how you can get more than 5%.
You decide what options the annuity has. Single life only pays one person and then the income stops when they die. Joint life can continue for another person if they live longer, either 50%, 66% or 100%. It can be level in payment and not increase, or start much lower and escalate by a fixed percentage of your choice over time. You can also opt for a minimum payment period or value protection to ensure a minimum level of return if you die unexpectedly early.
But sounds interesting and il confirm exactly the situation
Thanks for your help all
There's more provider choice with a pension annuity and the rates are a bit higher. That's offset by the income tax you have to pay though. Can also get an enhanced rate if there's any medical issues.
As an example, a 70yr old single life, level pension annuity is currently around 8.3% or 8.2% with a 5yr guarantee period. Can guarantee up to 30yrs, but that only benefits someone else after death. First and foremost it's a lifetime income for your dad.
As an example, a 70yr old single life, level pension annuity is currently around 8.3% or 8.2% with a 5yr guarantee period. Can guarantee up to 30yrs, but that only benefits someone else after death. First and foremost it's a lifetime income for your dad.
Edited by steve_n on Thursday 5th October 16:19
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