Lump sum investment

[Wexfordman]

Hi,

Just a quick query if someone could advise. A relative has a significant cash lump sum that will not be used for the next 2 years. It has been sitting in an aib account earning around 4% for the last 12 months, and when I heard I told her to ring and create a stink and get a better offer. Told her to be angry about not getting better rates, advice, service etc.

Anyway, they offered her 6.5% for a 18month term. Is this reasonable, or is there better offers that she could possibly get before she commits ?

I had looked up the best buys section and seen rabo was offering 5%, but only on sums up to 10000 and 3.5% thereafter. The sum is approx 700,000, and she does not want to risk it.

Hate posting amounts, seems like bragging, but its not my money, so I've got nothing to bragg about (unfortunately).

Thanks
Wexfordman

 

[z108]

Theres no substitute for independent advice from someone not tied to any financial institution.
Why is the money arbitrarily not needed for 2 years?
For a secure investment, theres a range of gilts , bonds etc to choose from but why 2 years ?

 

[CCOVICH]

For a secure investment, theres a range of gilts , bonds etc to choose from but why 2 years ?

Do such instruments make sense for personal investors from a tax point of view?

 

[z108]

Have no idea but there are gilt and bond funds which have a roll over and an exit tax cheaper than the higher rate of tax.

Also from the point of view of security . In a bank not all of that 700K would be guaranteed in the unlikely event of a company failure. Hence gilts suggested.

 

[CCOVICH]

Most funds would be unlikely to be recommended for a 2 year period.

There is a risk that a bank could go bust and deposit account holders could lose a lot of money, but I would suggest that this risk is less than losing money if investing in a fund for a 2 year period-the value of a bond is (generally) only guaranteed if you hold it to maturity.

I would however second the recommendation for independent professional advice.

It may also be worth going to the Private Banking/Wealth Management divisions of banks when the amount involved is significant-not for advice, but for a range of options that wouldn't necessarily offered through the branches.