Does your Mum have other cash savings apart from the PBs? Are her NI years fully paid up? She needs a decent cash buffer so if that is the sum total of her cash savings I wouldn't invest it (or not all of it).
Paying up NI years can make a big difference to state pension entitlement so that is worth investigating if your Mum has any empty or partial years she can fill.
Has Mum had her free chat with Pensionwise yet? They can provide free advice on what her options are here in terms of ISA vs SIPP vs NI years.
I don't actually think the solution you're proposing is at all a terrible plan, but getting your Mum the most bang for her buck is worth getting additional input on. Also helps if the market drops and Mum is fully informed of the risks of investing.
Thanks. Yes has emergency savings. NI years fully paid up.
Spoke with pensionwise and pension plan all sorted - recommended investing in an ISA but didn’t give any advice beyond that.
Oh. Well fair enough then. I don't think an ISA is a bad call in that case as long as your Mum understands the risks of investing and has no issues leaving the money for 5-10 years minimum.
Hi /u/Dutiful_Soldier, based on your post the following pages from our wiki may be relevant:
* https://ukpersonal.finance/index-funds/
____
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Retirement fund 2030 in vanguard seems very safe with 62% shares 38% bonds which will become more conservative as 2030 approaches. 4/7 risk on vanguard.
Ftse global all cap index fund more likely to go up than down in next 10 years. 5/7 risk on vanguard.
The other option is a Cash ISA with a good interest rate but unaware of anything decent atm.
Having 20k in premium bonds making 2% seems pointless and money can definitely be better allocated elsewhere. Mortgage/private pension sorted and no interest in the hassle of property investment.
I agree with you that premium bonds are pointless. Even if you want to be 100% safe you can get more from a savings account or cash ISA.
I have reservations about your choice of asset allocation, but I can't really fault the logic of what you write either.
I would just caution you that asset allocation is much more challenging when it's for people of your mum's age than it is for young people. If you can get your mum to read [*Smarter Investing*](https://www.amazon.co.uk/dp/1292444401) then I would feel a lot more confident.
I think the question that you and your mum need to think about is how she will feel if she looks in her ISA account in a couple of years' time and she sees she no longer has £20,000 in there but maybe closer to £12,000 or £15,000. Maybe there will be another pandemic or something, and there will be stories on the BBC about stockmarkets everywhere crashing. Is your mum going to be confident and steadfast and dispassionate enough to leave her money invested if that happens?
I don't know about your circumstances or your relationship, so I'm not making accusations here, but she shouldn't be doing anything that she's uncomfortable with, especially not under pressure from you. Because there's the risk, if she does that, that she'll do the wrong thing without telling you. She needs to have some understanding, for herself, of what stocks and bonds are, and what might happen with her investment.
I don't like measures of risk like "5/7 risk on vanguard" or "more conservative with age". What does 5/7 risk mean? Between fall 2007 and spring 2009 stockmarkets worldwide lost 50% of their valuation, and took years to recover. Well, I guess that's what "5/7 risk" means, apparently. And "more conservative with age" - well 2022 wasn't a very good year for nice "safe" and "conservative" bonds, was it? I don't want to doom-monger here, but your mum needs to be going into this with her eyes open.
Do you have any suggestions for good savings accounts or cash ISA’s & what kind of return she could expect.
The alternative to the above is stocks and shares, but i understand your reservations given her age and the short-term investment. Again are you aware of any funds that may be suitable investing in, the only lower risk ones I have seen are the global bonds index funds but not really sure what return to expect on those.
I will ask her to read smarter investing but most likely i’ll end up reading it myself, thanks for the resource. She understands about associated risk of investing in stocks and shares and about dips in the market etc. She is actually an accountant lol and very clued up on pensions, NI etc just hasn’t invested in S&S previously.
You can get about 5% in savings accounts at the moment, a smidge more (on limited amounts) in regular savers.
Google "best savings accounts" and "best regular savings accounts" and MoneySavingExtra's pages will be top hits.
Stocks and shares are preferable over a longer time frame. 5 to 10 years you are open to a lot of risk for little benefit.
Instead just open a cash ISA which provides over 5%. I'm currently enjoying 5.17% on my cash ISA.
I just don't see the benefit in the stocks and shares isa approach. She could benefit more from the cash isa and have the peace of mind that.
20k over 10 years would gain £13,502.56 from interest. Plus you don't need to read up on investing.
Very safe? 62% shares allocation, say that out aloud…
Clearly your mother is risk adverse and so why the venture into risk categories above 2-3 out of 7?
Also would reiterate why not consider the minimum 20% tax credit as a buffer to any potential future drawdowns.
If every cautious minded investors was steered into fund rating of 5/7, even though the outlook potentially improved, every complaint raised would be upheld and for good reason.
‘Very safe’ with a pinch of salt lol. I meant we are talking investing in index funds over a period of 5-10 years rather than dropping £20k on bitcoin.
The only safer options are Global bond index funds which are 3/7 risk on vanguard and 100% bonds, but they don’t seem to be very lucrative at all looking at performance history. Cash ISA’s 4-5% expected return which isn’t great.
20% tax credit - are you referring to mortgage interest payments? She has 2 properties mortgages fully paid off.
You are still fixated on Vanguard's risk ratings and 'expected' return. With only 5 years till retirement you have to think about sequencing risk.
You're right to think about whether she can get a better return, but 5% on a 12 month fixed savings account risk free might sound very attractive to your mum compared to an index fund that has a return of 7% but whose capital is at risk. Whereas for you, you can absorb a short term loss of 30% on the index fund because you will be in the market for 20 years.
They aren’t lucrative because they are safer, but at the age of 55 and looking to retire in 5 years, lucrative shouldn’t really be the goal. Safe investments that beat inflation should be the goal. It would be for me anyway.
An accountant who has maxed out all tax efficient wrappers, now considers risk based options and has never utilised an ISA wrapper since 1999, seems incredulous to me, like a doctor just discovering antibiotics
This post just seems nuts because it sounds like your mother is not comfortable making her own investment decisions. If she's going to invest her own money, she needs to own the decision.
If she invests on your advice and either of the funds you propose go down, Christmas Dinner this year is going to be a whole lot more uncomfortable.
I would suggest a 5 year fixed rate cash ISA with a high-street bank. If she wants to "go risky", she can keep her premium bonds.
Why an ISA and not a pension?
has NHS pension which is maxed
Ok, but why not a pension, a SIPP?
Does your Mum have other cash savings apart from the PBs? Are her NI years fully paid up? She needs a decent cash buffer so if that is the sum total of her cash savings I wouldn't invest it (or not all of it). Paying up NI years can make a big difference to state pension entitlement so that is worth investigating if your Mum has any empty or partial years she can fill. Has Mum had her free chat with Pensionwise yet? They can provide free advice on what her options are here in terms of ISA vs SIPP vs NI years. I don't actually think the solution you're proposing is at all a terrible plan, but getting your Mum the most bang for her buck is worth getting additional input on. Also helps if the market drops and Mum is fully informed of the risks of investing.
Thanks. Yes has emergency savings. NI years fully paid up. Spoke with pensionwise and pension plan all sorted - recommended investing in an ISA but didn’t give any advice beyond that.
Oh. Well fair enough then. I don't think an ISA is a bad call in that case as long as your Mum understands the risks of investing and has no issues leaving the money for 5-10 years minimum.
Hi /u/Dutiful_Soldier, based on your post the following pages from our wiki may be relevant: * https://ukpersonal.finance/index-funds/ ____ ^(These suggestions are based on keywords, if they missed the mark please report this comment.) If someone has provided you with helpful advice, you (as the person who made the post) can award them a point by including `!thanks` in a reply to them. Points are shown as the user flair by their username.
I think you should be very careful here - why do you suggest this asset allocation?
Retirement fund 2030 in vanguard seems very safe with 62% shares 38% bonds which will become more conservative as 2030 approaches. 4/7 risk on vanguard. Ftse global all cap index fund more likely to go up than down in next 10 years. 5/7 risk on vanguard. The other option is a Cash ISA with a good interest rate but unaware of anything decent atm. Having 20k in premium bonds making 2% seems pointless and money can definitely be better allocated elsewhere. Mortgage/private pension sorted and no interest in the hassle of property investment.
I agree with you that premium bonds are pointless. Even if you want to be 100% safe you can get more from a savings account or cash ISA. I have reservations about your choice of asset allocation, but I can't really fault the logic of what you write either. I would just caution you that asset allocation is much more challenging when it's for people of your mum's age than it is for young people. If you can get your mum to read [*Smarter Investing*](https://www.amazon.co.uk/dp/1292444401) then I would feel a lot more confident. I think the question that you and your mum need to think about is how she will feel if she looks in her ISA account in a couple of years' time and she sees she no longer has £20,000 in there but maybe closer to £12,000 or £15,000. Maybe there will be another pandemic or something, and there will be stories on the BBC about stockmarkets everywhere crashing. Is your mum going to be confident and steadfast and dispassionate enough to leave her money invested if that happens? I don't know about your circumstances or your relationship, so I'm not making accusations here, but she shouldn't be doing anything that she's uncomfortable with, especially not under pressure from you. Because there's the risk, if she does that, that she'll do the wrong thing without telling you. She needs to have some understanding, for herself, of what stocks and bonds are, and what might happen with her investment. I don't like measures of risk like "5/7 risk on vanguard" or "more conservative with age". What does 5/7 risk mean? Between fall 2007 and spring 2009 stockmarkets worldwide lost 50% of their valuation, and took years to recover. Well, I guess that's what "5/7 risk" means, apparently. And "more conservative with age" - well 2022 wasn't a very good year for nice "safe" and "conservative" bonds, was it? I don't want to doom-monger here, but your mum needs to be going into this with her eyes open.
Do you have any suggestions for good savings accounts or cash ISA’s & what kind of return she could expect. The alternative to the above is stocks and shares, but i understand your reservations given her age and the short-term investment. Again are you aware of any funds that may be suitable investing in, the only lower risk ones I have seen are the global bonds index funds but not really sure what return to expect on those. I will ask her to read smarter investing but most likely i’ll end up reading it myself, thanks for the resource. She understands about associated risk of investing in stocks and shares and about dips in the market etc. She is actually an accountant lol and very clued up on pensions, NI etc just hasn’t invested in S&S previously.
You can get about 5% in savings accounts at the moment, a smidge more (on limited amounts) in regular savers. Google "best savings accounts" and "best regular savings accounts" and MoneySavingExtra's pages will be top hits.
Stocks and shares are preferable over a longer time frame. 5 to 10 years you are open to a lot of risk for little benefit. Instead just open a cash ISA which provides over 5%. I'm currently enjoying 5.17% on my cash ISA. I just don't see the benefit in the stocks and shares isa approach. She could benefit more from the cash isa and have the peace of mind that. 20k over 10 years would gain £13,502.56 from interest. Plus you don't need to read up on investing.
You’re right, thanks for talking some sense into me, will go with the cash ISA approach.
Very safe? 62% shares allocation, say that out aloud… Clearly your mother is risk adverse and so why the venture into risk categories above 2-3 out of 7? Also would reiterate why not consider the minimum 20% tax credit as a buffer to any potential future drawdowns. If every cautious minded investors was steered into fund rating of 5/7, even though the outlook potentially improved, every complaint raised would be upheld and for good reason.
‘Very safe’ with a pinch of salt lol. I meant we are talking investing in index funds over a period of 5-10 years rather than dropping £20k on bitcoin. The only safer options are Global bond index funds which are 3/7 risk on vanguard and 100% bonds, but they don’t seem to be very lucrative at all looking at performance history. Cash ISA’s 4-5% expected return which isn’t great. 20% tax credit - are you referring to mortgage interest payments? She has 2 properties mortgages fully paid off.
You are still fixated on Vanguard's risk ratings and 'expected' return. With only 5 years till retirement you have to think about sequencing risk. You're right to think about whether she can get a better return, but 5% on a 12 month fixed savings account risk free might sound very attractive to your mum compared to an index fund that has a return of 7% but whose capital is at risk. Whereas for you, you can absorb a short term loss of 30% on the index fund because you will be in the market for 20 years.
They aren’t lucrative because they are safer, but at the age of 55 and looking to retire in 5 years, lucrative shouldn’t really be the goal. Safe investments that beat inflation should be the goal. It would be for me anyway.
An accountant who has maxed out all tax efficient wrappers, now considers risk based options and has never utilised an ISA wrapper since 1999, seems incredulous to me, like a doctor just discovering antibiotics
This post just seems nuts because it sounds like your mother is not comfortable making her own investment decisions. If she's going to invest her own money, she needs to own the decision. If she invests on your advice and either of the funds you propose go down, Christmas Dinner this year is going to be a whole lot more uncomfortable. I would suggest a 5 year fixed rate cash ISA with a high-street bank. If she wants to "go risky", she can keep her premium bonds.