5 Ideas For Investing £100,000 For Income & Growth In Retirement
With UK interest rates at record lows the search for income is an ongoing challenge. For investors who are in or who are approaching retirement and who are prepared to take on board some risk to capital, we have outlined 5 ideas for generating a higher income – some of the options provide monthly and quarterly income features.
Investment high income plan offering up to 7.20% or 5.80% pa
With the Investec Defensive Income Plan interest is paid at the end of each quarter provided the FTSE has not fallen by 20% or 40% respectively, below its value at the start of the plan (subject to averaging). If the Index closes below these levels, no income is paid for that quarter.
The plan has a maximum term of 8 years, but also offers the opportunity to receive your initial capital back in full before then, if the FTSE has risen by more than 5% at the end of each year, from year 2 onwards. If the plan does not end early, your initial capital is returned in full provided the FTSE has not fallen by more than 40% at the end of the plan term. If it has fallen below this level, your capital will be reduced by 1% for each 1% fall, so you could lose some or all of your initial investment.
So whether you are defensive, or ‘super defensive’, this plan still offers the opportunity for high interest.
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Looking for monthly interest from your savings? Meteor launch monthly income investment plan
The unexpected increase to the headline rate of inflation earlier this month, is another reminder of just how important it is to get the most from our capital.
The FTSE Monthly Contingent Income Plan from Meteor offers a potential 0.5% interest each month, which is paid provided the FTSE 100 Index has not fallen more than 25% below its level of the start of the plan – that’s the potential for 6.0% interest per year. If the Index does close below this level, no interest is paid for that month.
The plan has a maximum term of 10 years, but also offers the opportunity to receive your initial capital back in full before then if the FTSE has risen 5% or more at the end of each quarter (from year 2 onwards). If the plan does not end early, your initial capital is returned in full provided the FTSE has not fallen by more than 40% at the end of the plan term. If it has fallen below this level, your capital will be reduced by 1% for each 1% fall, so you could lose some or all of your initial investment.
If the plan pays out, the 0.5% per month is over double the best long term fixed rate available from cash at the moment. So if you’re reasonably confident the FTSE will not drop by 25% or more, this plan could offer an attractive mix of high interest and some capital protection against a falling stock market.
Growth Investment Opportunity – Potential 20.5% Return In 2 Years
The Enhanced Kick Out Plan from Investec is our best-selling growth investment, and with the current version offering the potential for double digit returns in as little as 12 months, there’s every chance it will retain this top spot for the foreseeable.
The plan offers 10.25% for each year invested (not compounded), provided the value of the FTSE 100 Index at the end of each year is higher than its value at the start of the plan.
If this happens at the end of year 2, you would receive your initial capital back along with a 20.50% growth return.
Should the FTSE be lower, the investment continues to the next year. If the plan fails to provide a return, your capital is at risk if the FTSE has fallen by more than 40% at the end of the full term. If it has, your initial capital is reduced by 1% for each 1% fall. You could therefore lose some of all of your initial investment.
So if you’re looking for the opportunity for high growth returns, and are prepared to accept your capital is at risk if the FTSE falls by more than 40%, this plan is likely to appeal to a wide range of investors.”
High Income Opportunity – Up To 8.20% per year
Achieving a high income remains a top priority for investors, and so the opportunity for up to 8.20% per year from Hilbert Investment Solutions’ latest plan, might be worth a closer look.
At the start of the plan, the FTSE 100 Index and the EURO STOXX 50 Index (made up of the 50 largest blue chip companies in the Eurozone) is measured. Provided neither Index has fallen by more than 20% at the end of each quarter, investors receive a 2.05% income payment – that’s a potential 8.20% income per year. If either index has fallen more than 20%, no income payment is made for that quarter.
The plan also offers some capital protection against these markets falling, since your initial capital is returned in full at the end of the term, unless either Index has fallen by more than 40%. If they have, your capital is reduced in line with the worst performing Index, and you could therefore lose some or all of your initial investment.
Depending on your views on what might happen to the UK and Eurozone markets in the coming years, this plan might be appealing to those looking for high income opportunities.”
Are you getting 6% from your savings?
You’d be forgiven if you thought you’d misread the headline, as 6% from savings is not a level of interest rate we have been used to seeing for more years than most of us care to remember. But if we take savings to mean the capital that we do not want to put at risk, ideally held with a bank, and preferably with some sort of protection scheme in place such as the UK’s Financial Services Compensation Scheme (FSCS), then you did indeed read correctly, and you might also like to read on…
In addition to the better known savings products such as fixed rate bonds, Investec Bank also offers a range of structured deposits, of which the Deposit Kick Out Plan is one of the most popular. By linking your return to the performance of the FTSE 100 Index, the plan offers a potential 6% per year (not compounded). Although it has a maximum term of six years, it can ‘kick out’ early provided the value of the FTSE 100 Index at the end of each year from year 3 onwards, is higher than its value at the start of the plan – so it only has to rise by a single point. That’s a potential 18% after three years, 24% after four years, etc.
The plan is deposit based and so offers the same FSCS protection as a fixed rate bond, but since the rate is not guaranteed, it should be considered as an alternative to traditional savings products. Although with savings rates and inflation where they are at the moment, perhaps a closer look could be timely…
IMPORTANT RISK INFORMATION
No news, feature article or comment should be seen as a personal recommendation to invest. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular investment. Fair Investment Company does not offer advice and any investment transacted through us in on a non-advised basis. If you are at all unsure of the suitability of a particular investment, both in respect of its objectives and its risk profile, you should seek independent financial advice.
The value of investments and income from them can fall as well as rise and you may not get back the full amount invested. Different types of investment carry different levels of risk and may not be suitable for all investors. The past performance of the FTSE 100 Index is not a guide to their future performance.
Some of the plans mentioned above are structured investment plans that are not capital protected and are not covered by the Financial Services Compensation Scheme (FSCS) for default alone. There is a risk of losing some or all of your initial investment. There is a risk that the company backing the plan or any company associated with the plan may be unable to repay your initial investment and any returns stated. In addition, you may not get back the full amount of your initial investment if the plan is not held for the full term.
Tax treatment of ISAs depends on your individual circumstances and is based on current law which may be subject to change in the future. ISA transfer charges may apply, please check with your provider.
AER stands for Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded once each year.