Saturday, 13 June 2015

Cashing In

At the beginning of the month I bit the bullet and sold the last of our CIS UK Funds.

With that job done we went away for a week in Babbacombe. We had great weather, consumed far too much good food and drink and made a valiant attempt to mitigate the effects by hiking up and down chunks of the South West Coast Path. We're back home now and the cash (around £10,000) is sitting in our current account. The question is what should I do with it?

The likelihood is that it will be needed late Autumn/Spring in instalments to fund my son's living costs when he returns to full time education. However this is by no means certain as he has still to secure a place on the course. He may even have to delay his plans till next year if he isn't successful this time around, in which case our whole financial situation may have changed if I do get VR/early retirement next April.

The most sensible thing to do would probably be to open another Santander 123 current account. Our joint one is (or will shortly be) maxed out. However it is possible to open individual ones as well so this option is a strong contender and would be the one that would probably produce the highest guaranteed interest. However, I'm already managing 5 current accounts and can't really be bothered with yet another set of direct debits and monthly money shuffles.

None of my existing banks offer interest rates worth having on their instant access accounts so I'm currently tending to favour Premium Bonds. I've done some reading on the subject, Monevator is (as always) an excellent resource with an additional useful link to a recent Guardian article, so I know the odds of winning big are very slim but in the absence of anything better to do with the cash I think I'm going to set up an account and see how things go. The MSE Forum thread makes interesting reading so I've been working my way through that but I'd be interested to hear about any experience/winnings in the comments.

Whilst we're on the subject of cash I have a slightly thornier problem around what to do with a big chunk of it which will be landing in my SIPP when I transfer my old CIS FSAVC in at some point soon. I've been delaying doing this because the pension has been doing OK (8% in 2014 and 5.78% so far this year) but I think the time has now come to make a move.

I'm hopeful that the transfer into my Fidelity SIPP will be straightforward and I have been assured by Fidelity that there shouldn't be a problem, but it is an old "with profits" fund with a Guaranteed Annuity Rate of 6% so I'm wondering if I might be asked to take advice before transferring out. Hopefully not. It forms a big chunk of the money that will see me through before I take my LGPS pension at 60 (if I don't get early retirement before then) and I don't really want to have to fork any of it out in advisor fees before I'm allowed to move it somewhere I can get at it in drawdown. (The transfer value on my last statement as of March 2015 was £19,270.)

In preparation for the move I've been considering the options for it in my SIPP. I could just leave it in cash which is probably the way I'll go as there's a strong chance it will be needed in 1 - 3 years time. I've yet to completely bottom out Fidelity's drawdown but the options look pretty flexible and I'm hopeful of being able to fit them around whichever scenario pans out as far as my retirement goes over the next few years. So, cash would probably do fine for the transfer in and then I'll sell the additional £15,000 worth of funds I have in there - sooner rather than later to try to avoid a big loss.

(Incidentally I did notice that Fidelity have a "Cash Fund" which I'm struggling to see the advantage of. It has total costs inside a SIPP of 0.55% and has made 0.25% max going back to 2011. Can anyone help me out by explaining why someone would use this?)


  1. hi Cerridwen, were the funds in an ISA? Is the cash still in an ISA? If so, you should be able to transfer it into a cash ISA- but this would need to be done after opening the cash ISa and applying through that provider for a transfer in.
    I do hold premium bonds, the prizes are tax free, so far I've only won £25 prizes and on two people holding the maximum amount I am probably running at slightly less than 1% per year return. we're higher rate taxpayers so that counts for something, but I think if I was not, I'd probably just go for a national savings direct saver which pays 1.1% taxable! or thereabouts. Btwi I am posting as anonymous because I can't work out how to give myself a nickname...

    1. When you comment, choose name/URL and give yourself a pseudonym. I recommend "Hopalong Cassidy". or, depending on your politics, maybe "Milibyebye".

    2. Thanks. The funds were in our S&S's ISA's. If I'd had this option on my list I realise that I should really have done this as a transfer. Can you transfer out cash from a S&S ISA into another cash ISA provider? but I'm just aware that it is a very short term "home" I need (and also that my transfer into Interactive Investor took 6 months). In any case it doesn't really matter as it could go back into a cash ISA. We're not going to be in a position to pay anything else in this year so won't be hitting the limit even if we start from scratch with this. I'll have a think. Thanks again. (Unfortunately I'm battling the gambler in me with this though :-))

    3. And thanks dearieme. I have often wondered about the origins of your own nom de plume. :-)

    4. Dearie me, isn't it obvious?

  2. Bixbetterthanbop13 June 2015 at 10:34

    While inflation is so low I see nowt wrong with using Premium Bonds as a stopgap. Remember the old wisdom:

    "What would you do if you won a thousand pounds?"

    "A thousand? I've only budgeted for a million."

    1. See? Dead easy to give yourself a new pseudonym.

  3. Hi Cerridwen

    I think I too would have put the cash in premium bonds as I know how easy it is to convert them back into cash when needed as I've done this in the past.

    I had a £50 win earlier this year but it was my first win in ages so not a great return on my investment! I have less than £2k in bonds but buy some every month, as this represents some of the 'cash' part of my portfolio. Yes, the capital is getting eroded away by inflation but I like the chance to win a prize, plus it's not like I have the bulk of my money in there.

    My boss seems to win all the time, just £25 prizes - he's won 3 times already this year and his holding is only around £500. Some people get all the luck!

    Good luck with your bonds!

    Not too clear on transferring from an S&S ISA to another cash ISA provider, although I would have thought it would be possible, unless you've paid into a cash ISA this year already, in which case you'd be tied to that one until you can switch after the tax year?

    1. I have a form for transferring from an S&S ISA into a Building Society Cash ISA. It looks straightforward.

    2. Thanks weenie. I like the fact that you mention how easy it is to get cash into and out of a Premium Bond account as I suspect we'll need to be pretty flexible with it.

      Good luck with yours too :-)

      @dearieme - Thanks for the info about the ISA transfer. I'll bear that in mind the next time I sell any stock and want to keep the cash inside an ISA but earn a little interest too. It would be great if Interactive Investor offered a cash ISA account alongside their S&S one so that the two could be used in tandem (or paid just a little interest on cash held in the account). I suppose it might come at some point.

  4. Hi Cerridwen

    I notice the feedback in these comments on Premium Bond is mainly not great but still generally positive, so I wonder if this is due to survivorship bias in that people are more likely to report good experiences over bad (people who have never won anything). On the other-hand now I've said this others may be impacted by reverse psychology and report some bad experiences just to prove me wrong!

    Either way, Premium Bonds would not be for me. I'd not know how to spreadsheet & budget something so unpredictable. One can take the overall percentage for payouts and work with that figure, but in practice the income stream is still going to be sporadic. If it were me I'd probably still opt to open another Santander 123 account.

    Good luck with your plans!

  5. Thanks Ric,

    I agree - another Santander account would probably be the most sensible way to go but it's the lure of the "possible" over the safety of the spreadsheets (and also the fact that I only need a short term home for this bit of cash) that's winning me over at the moment. :-)

  6. My Dad wants to put his extra retirement cash into Premium Bonds despite me pointing out that an extra Santander acc would be the better option.

    He's going to give it a year in PB. If winnings aren't better than 3% he'll switch to Santander. Maybe you could do same?

    1. His expected winnings on PBs ("expected" in the statistical sense) are 1.3% p.a.

  7. Thanks Simon@MyRichFuture,

    I understand your Dad's thinking but, as dearieme says, it's not (statistically) likely to happen.

    For my own part I'm prepared to be a little blase about probability as regards this portion of our cash as it's only for a limited period of time. I won't be too worried if the dice don't roll in my favour - it would be very nice if they did though :-)

  8. I'm not a holder of Premium Bonds but have always thought they sounded miserable as an investment. They seem to be a socially acceptable way of preying on the poor people who the National Lottery preys on. Basically they pay out national interest rates. They aren't a productive asset. They have the gambling dynamic to them but there are much better ways to enjoy that buzz.

    How about, instead, a couple of solid high yielding UK stocks such as Vodafone, SSE/Severn Trent, Glaxo/Astra, Centrica, National Grid, or Pearson? Possibly supplemented by £52 of national lottery tickets, £1 a week....

  9. Thanks, but this is money I will need in 6 - 9 months time - not suitable for individual stocks surely? I just need a "holding position", not investment .

    As far as the National Lottery goes I'm not quite sure what you mean about it preying on "poor people"? I do actually indulge occasionally but in the scratch cards which are a far better bet with a 1 in 3.8 chance of winning :-)).

  10. Interesting conundrum as usual with your posts Cerridwen! :)

    I think 123 account or Premium bonds either sound fine as it's so short term it ain't gonna make a great deal will it.

    FireVLondon obviously hasn't bought a lottery ticket for a while, the shrewdie, as they haven't been £1 for a while now :)