Where should I look for very cautious investment suggestions that are better than current cash interest rates?

21 July 2021

Question by Lewis

I’m 73 and with uncertain health issues. My wife and I have around pensions to live on and £200k in savings or cash isas. Own our own modest bungalow. Would like to know where to look for very cautious investment suggestions that are better than current cash interest rates.

Answered by

Hi Lewis, thanks for your question.

The first thing I’d ask is do you have any plans for the £200,000? Is it rainy day money, or earmarked for future capital purchases like a new car etc., or do you dip into it to supplement your income on a monthly basis? Or, as with many of my clients, is it there just in case you need Long Term Care in the future, or otherwise a legacy? All of these uses of your money would probably give a slightly different answer.

Firstly, keep an emergency fund to one side, say £5,000 - £10,000 or slightly more if it makes you feel comfortable. Add to that any capital purchases you plan to make in the next five years, plus two years of additional income you normally take from the fund (if any). Keep this in cash or Premium Bonds. For money that you can afford to put away for five years or more, look at the tax wrapper first and then the investment that sits within it. Definitely have your ISAs in the longer term pot rather than using your ISAs for cash. This is because ISAs are free of income tax and capital gains tax. You don’t pay capital gains tax on cash so you’re wasting half the advantage of an ISA by keeping cash in it. You can transfer your cash ISAs into investment ISAs without using up your current year allowance. If you want to be really tax efficient you and your wife (depending on her also being under 75) can both contribute £3,600 each into a Personal Pension each tax year until you’re 75. This will cost you £2,880, and the tax man will put the extra £720 in for you.

When it comes to choosing the fund to invest in, I’m a big advocate of ‘Multi Asset’ funds. These funds will have a bit of everything in cash, bonds and equities (and some might have a bit of commercial property too). They will also split their investments across different geographical areas, meaning that you won’t have to worry about whether it’s time to sell a certain asset class or region based on political events, you have a fund manager who will do that for you. See here for a further explanation of Multi Asset funds https://www.boringmoney.co.uk/learn/investing-guides/product-guides/multi-asset-funds-explained/.

As for which fund is specifically good for you, this isn’t something I can cover off in this format without knowing all your details so have a look at the guide to Robo Advisers they will guide you through the process of how much risk you would like to take and select a fund for you, or if you’d prefer the human touch then please feel free to contact me or one of the other advisers here.