Another investment question

[JeffCansell]

I've some money (think £##.### after the taxman takes his/her 28%) from a property sale and I'm looking for a medium / long term low / no risk investment.

I'd always intended that this go into my private pension scheme - however that scheme lost money over the past year so reluctant to put it in there.

Not to keen on paying for advice either after that experience ...

Looked at fixed rates but even over 5 years these are poor and the best rates from little known (to me) organisations so wary of that also.

[Culminator]

I was in exactly the same situation 18 months ago. Decided to gradually invest in shares and funds. Wish I'd taken financial advice as I suspect i would be better off. Some funds have done really well (+20%), some have done badly but overall, I'm just about ahead of the game and have a better return than a savings account. The stock market is incredibly volatile though, especially right now, so it's a huge risk.

Classic car values are on the slide too, so I'd be interested, like you, to hear of some better suggestions.

I would start building up your ISA though and take each years full allowance. I assume you have already paid off your mortgage and any other debts?

[Devonian]

If you want no risk/low risk your returns will be low.

Understanding ‘risk’ is probably the most important part when saving/investing.

[Culminator]

Spot on.

Also, I'd add "accepting" risk to that too

[noTAGlove]

If you are investing in the medium to long term then you should be considering riskier investments like the stock market, as historically the market has always performed over that timescale, even given the whopping great 40% falls of the early 2000s and the 2008.

But given how toppy the market is now, and with the volatility, be prepared for a white knuckle ride.

Good new is that you can easily get 2.5% no risk in the market, as it stands that’s 0.7% above CPI, so (subject the your tax rate) your capital is at least not subject to erosion by inflation.

I’m in the same dilemma as you. Decided not to move into the stock market with all the uncertainty at the moment (Brexit, US -China) so put it in a 2 year savings account paying 2%, but having the flexibility to move it, subject to loss of some interest. At least it’s currently paying more that CPI, so my purchasing power is not being eroded and my capital has no risk.

There are no easy investments at the moment without taking significant risk IMO.

Luckily, I’ve been (and I am still in) in a DB pension scheme for the last 30 years, so do not need to see significant returns on any investments.

As Warren Buffet says, be fearful when people are greedy, and greedy when people are fearful, and he may wait years for it to happen. I’m in that mode now and waiting for the next significant market dip. History tells you that it will happen again.

[IAmATeaf]

Peer to peer lending? Not exactly high rates of return to be honest but relatively low risk if you do your homework. I’ve got around 30k in there, average return rate currently is around 6.25%, used to be around 7% so won’t set the world on fire. There is always a risk, I think I’ve got around 6k of the above with a defaulter at the moment but the company looks after all of that and whilst they have defaulted I still get monthly interest payments.

The above doesn’t answer your tax man query, putting some of the money into a pension fund is probably the best way to avoid paying tax?

[noTAGlove]

Peer to peer lending? Not exactly high rates of return to be honest but relatively low risk if you do your homework. I’ve got around 30k in there, average return rate currently is around 6.25%, used to be around 7% so won’t set the world on fire. There is always a risk, I think I’ve got around 6k of the above with a defaulter at the moment but the company looks after all of that and whilst they have defaulted I still get monthly interest payments.

The above doesn’t answer your tax man query, putting some of the money into a pension fund is probably the best way to avoid paying tax?

As a person with a good credit score, I can get a personal loan at a rate of 2.8%.

I’m a bit sceptical about the low level of risk of people I’d be lending to, if I could get a return of over 6% plus all the overhead costs the management company are taking.

It tells me those people cannot get cheap or even moderately priced high street bank loans, and go down the P2P route. That is not low risk.

[-Ally-]

As a person with a good credit score, I can get a personal loan at a rate of 2.8%.

I’m a bit sceptical about the low level of risk of people I’d be lending to, if I could get a return of over 6% plus all the overhead costs the management company are taking.

It tells me those people cannot get cheap or even moderately priced high street bank loans, and go down the P2P route. That is not low risk.

P2P should be interesting come the next proper economic downturn.

Avoid IMO.

[noTAGlove]

Very true. And with all the uncertainty, risk and journey into the unknown that comes after the 40th day from today, I’d be liquidating my position.

It only takes the loss of a small amount of capital to wipe out several years of returns.

[Strchr03]

As a mortgage adviser in a financial advice company, I’m probably biased, but I’d definitely tell you to take advise. You can then use appropriate tax wrappers, make use of pension allowances, and get the risk right. Also they should explain that when investing long term, you have to expect that there will be bad years even in a good investment. The key is to invest appropriately for your situation and reduce the risk you are exposed to as you get closer to needing the money.


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[noTAGlove]

relatively low risk if you do your homework.

I think I’ve got around 6k of the above with a defaulter at the moment but the company looks after all of that and whilst they have defaulted I still get monthly interest payments.

So 20% of your capital is at risk of loss and you say it’s relatively low risk.

I wouldn’t like to see some of your high risk investments.

[Devonian]

Peer to peer lending? Not exactly high rates of return to be honest but relatively low risk if you do your homework. I’ve got around 30k in there, average return rate currently is around 6.25%, used to be around 7% so won’t set the world on fire. There is always a risk, I think I’ve got around 6k of the above with a defaulter at the moment but the company looks after all of that and whilst they have defaulted I still get monthly interest payments.

The above doesn’t answer your tax man query, putting some of the money into a pension fund is probably the best way to avoid paying tax?

I wouldn’t agree with ‘relatively low risk if you do your homework’. Yes so far it’s been fairly smooth for investors but I wouldn’t be surprised if there’s about to be some defaults announced quite soon . . . .

Anyone that needs to borrow on the high rates of interest charged means they can’t get it elsewhere, which in turns means they are higher risk. Not just slightly higher either, it’s because no one else will lend to them. Of course many of them will be success stories, but in a recession it’s generally the higher risk businesses that fail first.

This type of investment has a place if firstly you understand the downsides and secondly it’s say 5% of your portfolio maybe.

[Ivan Drago]

Bang it on City to win the league.

[watchstudent]

I obviously, as I started the other investment thread, have limited knowledge and even more limited experience.

I have dabbled in the stock market for 2 years now, very volatile but out on top but probably withdrawing while i am up as I don’t want the short term risk at the moment. If I didn’t want access to the money then I would wait for the next significant dip and invest maybe half my cash and then drip money in to ride out waves. But that is if I didn’t want to touch the money for at least 10 years.

If you are looking for a long term investment and want some kind of return above inflation you probably do have to accept some risk. But being as it is a long term investment you should be able to ride out the ups and downs, or so that has been the case in the past.

To be honest I am a bit peeved that I wasn’t in my position 10-20 years ago and just pissed off greedy buggers rogered it all up for me now!

Good luck


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[noTAGlove]

To be honest I am a bit peeved that I wasn’t in my position 10-20 years ago and just pissed off greedy buggers rogered it all up for me now!

You’re bang on here.

Us baby boomers have had;

- Free university educations plus maintenance grants (not loans). I was paid to go to university!

- Defined Benefit Pensions

- Ability to buy houses (example) in leafy parts of London for <£200k

And still the baby boomers moan.

Given we fooked it up for the youth of this country, I’m surprised how passive they are.

I genuinely fear for the prosperity of my children.

[watchstudent]

You’re bang on here.

Us baby boomers have had;

- Free university educations plus maintenance grants (not loans). I was paid to go to university!

- Defined Benefit Pensions

- Ability to buy houses (example) in leafy parts of London for <£200k

And still the baby boomers moan.

Given we fooked it up for the youth of this country, I’m surprised how passive they are.

I genuinely fear for the prosperity of my children.

Haha yep. I mean don’t get me wrong, these are lovely “problems” to have. But with 6 years at uni, plus the government trying to destroy the NHS I work in plus basically stealing from me with new contracts I have no choice but to accept...

I guess i should shut up and just be thankful to own 20% of the roof over my head...


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[JeffCansell]

Thanks for the replies.

My aversion to paying for advice is that two lots of such advice have resulted the value of the pension scheme I mentioned drop by around 10% (that includes the fees for the advice) in the past 3 years.

Fortunately I've other pension schemes plus property in addition to that which I've just sold.

As I'm contributing to a company pension presumably there's no other tax relief for putting some of this into one of my schemes?

Also as I'll be paying CGT on the overall 'profit' of the sale (I've put that money aside already) I don't want to be taxed again on the remaining capital - only the growth going forward.

Current thinking is 20% = 6 month emergency fund / 40% = 1 or 2 year fixed rate accounts / 40% = don't know yet but would like to do something more active with it

[Mr Pointy]

Thanks for the replies.

My aversion to paying for advice is that two lots of such advice have resulted the value of the pension scheme I mentioned drop by around 10% (that includes the fees for the advice) in the past 3 years.

Fortunately I've other pension schemes plus property in addition to that which I've just sold.

As I'm contributing to a company pension presumably there's no other tax relief for putting some of this into one of my schemes?

Also as I'll be paying CGT on the overall 'profit' of the sale (I've put that money aside already) I don't want to be taxed again on the remaining capital - only the growth going forward.

Current thinking is 20% = 6 month emergency fund / 40% = 1 or 2 year fixed rate accounts / 40% = don't know yet but would like to do something more active with it

You can contribute up to £40,000 per year to a pension (provided you earned that much) so yes, it is possible that you can make payments into your existing pensions & receive tax relief at your highest rate on these payments. You can also carry back 3 years if you have unused allowances in those years. If you cannot make pension payments then consider an ISA as at least the income/gain in those is tax-free. You could put it into a Vanguard Lifestrategy plan (direct, not through an IFA) for 0.15% a year. Don't forget if your'e not making 2% net of charges then you're losing money due to inflation.

Almost everyone has lost money over the last 6 months & it's a gamble what will hapen over the next 6 months but 10% down over 3 years is unfortunate. Why don't you move ithose pensions out & stop paying IFA charges (if you are)?

[David_D]

As I'm contributing to a company pension presumably there's no other tax relief for putting some of this into one of my schemes?

You may have capacity to make additional contributions - either to your company scheme or a standalone arrangement. Unfortunately, the rules for calculating how much of your Annual Allowance and Lifetime Allowance are available can be rather obscure.

I'd speak to someone in your company scheme first to see what they can offer in terms of guidance.

[David_D]

You can contribute up to £40,000 per year to a pension (provided you earned that much) ...

Probably worth making the point that the £40,000 includes any contributions that your employer makes (or is deemed to make if it's a defined benefit scheme).

You can also carry back 3 years if you have unused allowances in those years.

Again, for clarification, the way it works is that any unused relief can be used in the following year. You can't make a contribution this year and set it off against a previous year's earnings (which I think you could years ago before the major pensions changes in the mid 2000s).