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retirement income
sgjhaghsdg
Posted: 14 June 2011 15:18:54(UTC)
#11

Joined: 07/01/2011(UTC)
Posts: 227

I purchased NWBD at closer to a quid, so I'm on an even better yield, which is nice. However, no bank share is without risk (to say the least!) as the 80p in the £1 haircut to BOI senior bond holders shows. Oh, and they gave a haircut to the senior bond holders and left more junior debt (such as ordinary shares) untouched. (Note, I didn't buy any Irish bonds, so may have got a few details wrong.)

Obviously I don't expect this to happen to NWBD or LLPC (I wouldn't have bought a few grands worth of each if I did!) but I really wouldn't like to recommend someone go this route with more than (say) 5% of their portfolio.

PhilB
Posted: 14 June 2011 16:14:07(UTC)
#12

Joined: 24/06/2010(UTC)
Posts: 25

Congratulations alex1490 you have spotted the single biggest argument against IFA-recommended insurance bonds - they make others wealthy at your expense. Don't for one moment believe that the figures in the commission disclosure are the end of the charges - inside the bond you will be paying 3+% pa for the privilege of keeping your money there! Those same funds outside the bond will probably cost nearer 1.5%, but if you buy the equivalent investment trusts through any broker, nearer 1% pa.

The argument in favour of insurance bonds is that they are a "tax friendly" environment - but the truth is that they DEFER taxation to a later date. In a few years time you might decide to cash in the bond substantially or entirely - at that point you discover that your capital gain (we hope!) on your bond is going to be taxed as if it were INCOME, according to some utterly inexplicable tax rules.

There is a great alternative, as other respondents have outlined for you. Invest it yourself via online stockbroker with low charges, preferably one who will allow both funds and shares in the same account. I did it that way for a total investment cost of under 1% and annual charges of roughly 1%pa (I have mainly IT's and Unit Trusts).

If you place £10,680 into an ISA this year and the max. allowed annually over 10 years you will have a virtually tax-free fund with extremely low charges. To understand how to set up a balanced (for you) portfolio I recommend reading "The Intelligent Asset Allocator" by William Bernstein and then make your selections from Citywire's recommendations - they are usually pretty good. And no, I have no connection with either party!
Darrener
Posted: 14 June 2011 16:15:24(UTC)
#13

Joined: 13/10/2009(UTC)
Posts: 13

Good points, sig. I thought that your earlier comment was indicating something dire was abnout to happen to NWBD, which I have held since 83p and represents 2.8pc of my portfolio.
alex1490
Posted: 14 June 2011 18:33:57(UTC)
#14

Joined: 10/06/2011(UTC)
Posts: 4

Thank you so much everybody, the response to my question has been amazing. I am now seeing things in a new light!!!
sgjhaghsdg
Posted: 14 June 2011 18:56:04(UTC)
#15

Joined: 07/01/2011(UTC)
Posts: 227

@alex1490 - I hope to see you on the Motley Fool boards. Loads of the guys there have decades of investing experience, both for growth assets while young, and reliable boring stuff in their dotage, so there are many wise views. Of course, said views don't always agree, but that's life!

David booth
Posted: 14 June 2011 20:57:59(UTC)
#16

Joined: 06/12/2009(UTC)
Posts: 1

Alex, put your annual allowance into a building society ISA, I have just taken a risk by transferring cash ISAs into Birmingham Midshires 5 year fix at 5%. The economy is so weak I cannot see interest rates going up by very much in the medium term. Secondly put you annual maximum into Share ISAs through investment trusts. There are plenty of ITs with long term growth of value and income. Rothschilds Capital Partners, British Empire I.T. Murray International, Henderson Far Eat Income, Perpetual Income & Growth, just do your own research get a good spread. RITCP virtually pays no dividend so you do not need to ISA it as capital gains can be offset against your annual allowance. Don't trust IFAs or insurance companies.
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