Share this page:
Stay connected:
Welcome to the Citywire Money Forums, where members share investment ideas and discuss everything to do with their money.

You'll need to log in or set up an account to start new discussions or reply to existing ones. See you inside!

Notification

Icon
Error

Safety of NS&I under labour
Simon Cook
Posted: 23 April 2018 11:34:04(UTC)
#1

Joined: 03/01/2012(UTC)
Posts: 7

Thanks: 10 times
Was thanked: 6 time(s) in 2 post(s)
We are soon to complete the sale on our house which has been rented out for the last two years as we now live in tied accommodation due to my wife’s job.

I have been trying to figure out what to do with the proceeds because we are not keen to buy another property simply to rent it out due to problems we have had with supposedly ‘model’ tenants. We have come to realise that we are not landlord material. Another reason for not buying a property to rent out is that where we live we simply cannot after letting agent fees get the same rate of return as some 3 year fixed rate bond accounts which are risk and also importantly stress free.

The money is large and we do not need to generate an income. Neither do we want to invest the money in stocks and shares as we do not want to take any risks with it (we will have to buy a house in 20 years time and also want to start gifting it to the children in the future). We would rather gently accrue interest on the money for the next 20 years in a risk free environment.

The number of 3 year fixed rate bonds that I could put the proceeds in, which have a 2.25% return or above, is an issue and could result in me having to park some money in an NS&I account (which is guaranteed by the government up to £1m). However, we already have premium bonds and one issue of fixed rate bonds with the NS&I so could have a substantial sum with them. I am reluctant to hold so much in a state-owned bank as I worry what a labour government under Jeremy Corbyn could possibly do.

I would be grateful for members’ views on the safety of NS&I accounts if there were a change of government.
1 user thanked Simon Cook for this post.
dd on 26/05/2018(UTC)
Tim D
Posted: 23 April 2018 12:34:15(UTC)
#2

Joined: 07/06/2017(UTC)
Posts: 492

Thanks: 1781 times
Was thanked: 721 time(s) in 322 post(s)
You're basically asking what the chances are such a government would default on its debts is. That'd be unprecedented for the UK I think (excepting some funny business in 1932 with WWI war bonds) and if there was a realistic chance of it happening I think you'd see the markets far more jittery about UK gilts already.

IMHO, more worrying for someone sitting on a lot of sterling fixed-interest assets is the prospects that election of such a government would immediately crash the pound and consequently pump up inflation. This is something Labour themselves recognize.

I don't envy you your problem; there's no easy solutions. The really paranoid will make noises about gold (or bitcoin!). International exposure is good... I got lucky with the Brexit referendum devaluation by (besides owning a lot of UK mega-caps and global funds) parking spare sterling in a USD bond ETF. Diversify diversify diversify.

Don't know if you've considered reinvesting the proceeds in trusts/funds with exposure to residential property? This might serve you well if you want to use the funds to reenter the housing market one day... some ideas here: http://moneyforums.cityw...ortfolio.aspx#post50445
1 user thanked Tim D for this post.
Simon Cook on 23/04/2018(UTC)
Simon Cook
Posted: 23 April 2018 13:26:13(UTC)
#3

Joined: 03/01/2012(UTC)
Posts: 7

Thanks: 10 times
Was thanked: 6 time(s) in 2 post(s)
Hi Tim, thanks for the reply.

If inflation rose I wouldn't worry so much as we don't need that money to live off as we have SIPPs and ISAs to cover that eventually as well as the state pension. The money would at least be safe and growing to some extent even though it would be less than the level of inflation.

Not sure if labour would ever try and penalise people on the total savings they had, but then I guess if they did that they would also take into account any property so nothing would be safe. But then we would be going down the road of Venezuela and I don't think we'd still be resident!

If labour did get in, the chances of which I think are receding slowly, then I would use some of the money to invest in the likely stock market fall as I did following the Brexit vote.

I hadn't thought of property trusts but I'll look into it although there is still a risk.
philip gosling
Posted: 23 April 2018 13:50:55(UTC)
#4

Joined: 06/01/2013(UTC)
Posts: 153

Thanks: 35 times
Was thanked: 199 time(s) in 96 post(s)
Simon

".....We would rather gently accrue interest on the money for the next 20 years in a risk free environment...."

Wouldn't we all especially if it was above inflation. Someone mentioned "searching for unicorns" or the 'holy grail - risk free and increasing value .

Perhaps now would be the time to consider transferring assets from yourselves to your children or even better grand children either directly if they are older or in a trust if they are younger. Their horizons for seeking to increase the money would be much longer than yours maybe up to 50-60 years and so the stock market would be a "must" to make most of the time available.


To be out of the housing market for 20 years and then have to buy (as you retire) is from my perspective very high risk especially if you are in South of England and even worse if you were to want to buy in London in 20 years time.Plus owning a property exempts you from capital gains tax if it was your main home or you are one of the categories where you allowed to live in job related homes (service personnel etc) then in 20 years you sell and buy where you will retire to.

Spend extra on a good estate agent, legal expenses (as I did) and rent guarantee insurance (as I do now) they are tax deductible and give you some comfort if it all goes wrong when letting.

The UK is not Venezuela (even though Mr Corbyn seems to admire that Government). If Labour gets in it may be a torrid time for the stock market and the £ plus higher wages for all those extra thousands of Labour workers in the newly nationalised industries will bring some inflation but confiscating people's life savings is unlikely - though increased taxation is a certainty as Corbyn has promised it.


1 user thanked philip gosling for this post.
Simon Cook on 23/04/2018(UTC)
King Lodos
Posted: 23 April 2018 14:00:11(UTC)
#5

Joined: 05/01/2016(UTC)
Posts: 3,055

Thanks: 723 times
Was thanked: 4782 time(s) in 1855 post(s)
I do worry about Corbyn, as it wasn't long ago Greece had the same Debt/GDP ratio as us – and within a few years of them voting in a socialist government, they'd resorted to raiding state pensions to pay off debt.

And what's nuts is people like Corbyn and his supporters still see those Greek and Venezuelan governments as economic models.

I think Corbyn would need an outright majority to do real damage, and I don't think that's likely .. The Greens are as crazy on economics .. A lot of risk would be priced in as soon as a Corbyn government looked like a possibility – so there might not be much point acting after-the-fact .. I think the only way to be really safe would be to own more overseas assets – US treasuries, gold in overseas vaults (or in a safe), share certificates

xcity
Posted: 23 April 2018 14:07:09(UTC)
#8

Joined: 12/04/2015(UTC)
Posts: 489

Thanks: 84 times
Was thanked: 479 time(s) in 255 post(s)
The big risk is that house prices zoom at some point over the next 20 years, making it difficult for you to get back in.

I understand not wanting to go down the letting route.
You could consider the Airbnb/holiday let route.
In both cases, I would advise that any property you bought was very near to the tied property you are living in. I would also occupy it sufficiently for it to count as your main residence for CGT purposes.
If your location, or preferences, mean that you can't consider any of these, then you are stuck with the risk of house prices diverging substantially from the value of your investments.

I don't think the Labour party is likely to attack money in NS&I, although it might well target people with substantial financial assets (houses are less likely target as that would be politically less popular).
1 user thanked xcity for this post.
Simon Cook on 23/04/2018(UTC)
xcity
Posted: 23 April 2018 14:10:17(UTC)
#6

Joined: 12/04/2015(UTC)
Posts: 489

Thanks: 84 times
Was thanked: 479 time(s) in 255 post(s)
King Lodos;61101 wrote:
I think the only way to be really safe would be to own more overseas assets – US treasuries, gold in overseas vaults (or in a safe), share certificates

And to be safe they would need to be insulated from HMRC. So you would need plans to be resident overseas.
MoMoney
Posted: 23 April 2018 14:29:07(UTC)
#9

Joined: 18/08/2016(UTC)
Posts: 18

Thanks: 14 times
Was thanked: 13 time(s) in 7 post(s)
A hard left govt could go after ISAs (eg a forced % of isa invested in GILTs) and or property wealth.
Simon Cook
Posted: 23 April 2018 15:06:37(UTC)
#10

Joined: 03/01/2012(UTC)
Posts: 7

Thanks: 10 times
Was thanked: 6 time(s) in 2 post(s)
Hi all,

Many thanks for the interesting replies.

Philip - We don't have any grandchildren and our kids are only 16 and 17. We plan to help them with university fees and then their first property purchases but that won't be for some time.

Thankfully the tied accommodation doesn't count as our private residence so there would be no CGT implications on the sale of any property we did buy.

XCity - It is impossible for us to purchase a property near to where we live as we move around every 7 years as my wife is a vicar. The likelihood is that we will try and stay in the South West and certainly not go east. I wouldn't want to buy and then not be within an hour or so drive even though we would be paying a letting agent to manage things for us. I also wouldn't want to be buying and selling every 7 years as rental income would be hit by stamp duty costs each time.

I see the issue with house prices spiking over the next 20 years and that is an issue I hadn't thought of. Trouble is we are not of the mind set to invest a large amount of the proceeds into a house that we would simply let out and never live in. We would just worry about what the tenants would be doing to it.

I also wouldn't want to go down the AirBnB route as that would just stress us out too much!

I'll ponder some more!
King Lodos
Posted: 23 April 2018 16:16:38(UTC)
#7

Joined: 05/01/2016(UTC)
Posts: 3,055

Thanks: 723 times
Was thanked: 4782 time(s) in 1855 post(s)
xcity;61104 wrote:
King Lodos;61101 wrote:
I think the only way to be really safe would be to own more overseas assets – US treasuries, gold in overseas vaults (or in a safe), share certificates

And to be safe they would need to be insulated from HMRC. So you would need plans to be resident overseas.



It's very cheap (literally about £20 now I think) to set up a holding company .. and I don't know the costs of setting them up in the Caymans, but there are online services that'll do that (or maybe you'd want somewhere not British overseas territory?).

That's (afaik) the standard way to get money out of the reach of the government .. I'd be interested to know the ins and outs .. Presumably you'd have the bulk of it in the form of share certificates and government bonds? .. I'd be quite paranoid over a certain level of wealth – not only from socialist governments, but miscarriages of justice, being sued, especially as a business owner
Jim S
Posted: 23 April 2018 16:44:42(UTC)
#11

Joined: 08/12/2016(UTC)
Posts: 250

Thanks: 422 times
Was thanked: 307 time(s) in 154 post(s)
Hi Simon

In your situation and with 20 year timeframe, I think it would be a mistake to rule out shares as a proportion of what you'll be saving. Also, you mentioned your children. Pensions are quite efficient ways to pass on to the next generation. I believe they are IHT-free if you pass away before age 75, but taxed at the recipients marginal rate after that. Also, ISAs are handy for taking out large sums, maybe to buy your new home in 20 years. I would make the most of your combined pension and ISA allowances.

To keep volatility/risk lowish, you could look at a cheap partial global tracker like Vanguard LS 40 or 60. Over 20 years, that should give you decent growth. There are also some good global funds which would be worth holding, especially if you are nervous political instability might mean there was a run on the pound. I appreciate you are a bit averse to equities, but maybe you could consider 30-50% of your total savings in them?

Also, Tim's suggestion of investing in something that broadly tracks UK house prices is a very good one. Investment trusts tend to be better than funds for investing in property due to liquidity. Picton Property income might be one to look at, but I would invest in a few ITs rather than one, just to spread your risk.

Something to maybe consider in the next year or two if your kids are likely to go to university is buying something nearby so one or both can live there. There's a lot to think about there and several different ways you could do it (help them buy with deposit, joint ownership, have as you principal residence and 'rent a room' etc), but maybe something to keep in mind.

Good luck whatever you decide!
2 users thanked Jim S for this post.
Tim D on 23/04/2018(UTC), Simon Cook on 23/04/2018(UTC)
Dennis .
Posted: 22 May 2018 08:13:14(UTC)
#12

Joined: 26/12/2007(UTC)
Posts: 361

Thanks: 25 times
Was thanked: 210 time(s) in 88 post(s)
My, you must be very risk averse.
Unfortunately that means that your pot of money will almost certainly lose value through inflation over time. I am at the other end of the spectrum and aged 70 I have around £600k invested in various shares and funds and growing at around 20%/annum. I have no cash apart from a couple of £k in my current account but I do have a good DB pension which means that I could afford to lose the lot.
You need to put at least some of your cash into something like Fundsmith or LIndsell Train Global Equity
Simon Cook
Posted: 22 May 2018 09:41:05(UTC)
#13

Joined: 03/01/2012(UTC)
Posts: 7

Thanks: 10 times
Was thanked: 6 time(s) in 2 post(s)
Hi Dennis,
I'm not particularly risk averse as my wife and I have around £600k tied up in pensions and ISAs already (in Fundsmith, LTG and others). We also have investments such as NS&I and other fixed rate bonds for the short term. The pensions and ISAs are obviously earning well above inflation.

At some point we will have to buy a house, either sooner to generate some rental income (which we would then invest) or 20 years down the line when we reach retirement and have identified where we want to live. We have not decided which yet, especially after the tenants we have had. If we do buy something to rent out, then we would only use around 50% of the sale proceeds so it would be a question of what to do with the rest. I will probably take some and pop it into our ISAs but the rest will be used in the short to medium term to help pay off any university debt or help with a first house purchase. This I would probably put into NS&I bonds which would take our amount in them quite high hence my original question.
Mr Helpful
Posted: 22 May 2018 10:00:01(UTC)
#14

Joined: 04/11/2016(UTC)
Posts: 681

Thanks: 769 times
Was thanked: 923 time(s) in 428 post(s)
Simon Cook;62654 wrote:
At some point we will have to buy a house, either sooner to generate some rental income (which we would then invest) or 20 years down the line when we reach retirement and have identified where we want to live. We have not decided which yet, especially after the tenants we have had. If we do buy something to rent out, then we would only use around 50% of the sale proceeds so it would be a question of what to do with the rest. I will probably take some and pop it into our ISAs but the rest will be used in the short to medium term to help pay off any university debt or help with a first house purchase. This I would probably put into NS&I bonds which would take our amount in them quite high hence my original question.


Would second the suggestions to never step off the housing ladder/escalator.
Think of it as a kind of insurance policy, bad tenants et al.

We don't know clearly how the rest of the portfolio looks, so it is difficult to comment about Stocks or other elements.
Maybe think in terms of a structured portfolio, while shoving as much as possible into tax shelters.
+ Real Estate
+ Stocks ( = Risk/Growth)
+ Bonds/Alternatives ( = Defence)
+ Cash
The Cash more than sufficient to meet those expected needs.

The fears about NS&I under Labour to this investor seem perhaps overdone.
Labour would have control of the printing press as much as any other party, thereby to print off as much money as necessary (which raises another more significant inflation issue, general and housing).
Tom Mozy
Posted: 22 May 2018 14:16:07(UTC)
#15

Joined: 09/07/2013(UTC)
Posts: 141

Thanks: 8 times
Was thanked: 213 time(s) in 82 post(s)
I would never lend the government anything.
Alan Selwood
Posted: 22 May 2018 15:17:17(UTC)
#16

Joined: 17/12/2011(UTC)
Posts: 2,735

Thanks: 561 times
Was thanked: 4570 time(s) in 1643 post(s)
Tom Mozy;62664 wrote:
I would never lend the government anything.


I think the original heading meant rather that they might snatch it, rather than that you are unwilling to lend it to them! ;
Mr J
Posted: 22 May 2018 19:39:12(UTC)
#18

Joined: 30/09/2014(UTC)
Posts: 70

Thanks: 40 times
Was thanked: 120 time(s) in 38 post(s)
...to help pay off any university debt...

Why would you want to do that ?
Student Finance Loans are really a graduate tax rather than a loan. Unless you know your kids will be earning megabucks, trying to pay off a student ‘loan’ that will be automaticallly cancelled after 30 years is madness.

The whole student finance thing is a mad government Ponzi scheme of course. The vast majority of ‘loans’ will never be repaid - everyone knows that but the government loves the pretence that they are loaning money rather than spending it. Keeps the deficit down by lying.

The whole university education system is now an utter disaster, a system that has run out-of-control like topsy because there have been no checks and balances - all the stakeholders just want to pump the university bubble ever bigger...
Politicians - want to claim they are delivering better educated people
Parents - want their little johnny & Janet to get a degree even if he/she thinks calculus is a disease
Universities - want more funded students to inflate their academic salaries
Youngsters - want to believe the ‘you can do anything you want to do’ bullshit they get fed and are all convinced as soon as they get that degree they will become rich professional people.

Meanwhile the scaffolder, the plumber, the builder, and the electricians laugh their heads off as they drive around in their 4*4s buying burgers from the graduates working as McDonald’s.

(Sorry, wild rant but had to get that off my chest again for now)
14 users thanked Mr J for this post.
Sara G on 22/05/2018(UTC), Luca Brasi on 22/05/2018(UTC), Rishan on 22/05/2018(UTC), Alan Selwood on 22/05/2018(UTC), Vince. on 22/05/2018(UTC), Mr Helpful on 23/05/2018(UTC), PaulSh on 23/05/2018(UTC), Tim D on 23/05/2018(UTC), J Thomas on 23/05/2018(UTC), Martina on 23/05/2018(UTC), King Lodos on 23/05/2018(UTC), Stephen Lockie on 23/05/2018(UTC), Reorganising my Portfolio on 24/05/2018(UTC), Mostly Retired on 25/05/2018(UTC)
PaulSh
Posted: 23 May 2018 14:35:33(UTC)
#19

Joined: 02/12/2014(UTC)
Posts: 106

Thanks: 23 times
Was thanked: 147 time(s) in 81 post(s)
Mr J;62699 wrote:
Meanwhile the scaffolder, the plumber, the builder, and the electricians laugh their heads off as they drive around in their 4*4s buying burgers from the graduates working as McDonald’s.

Good luck to them though for being in the right place at the right time and not being conned into getting a junk degree (how many psychologists does this country need anyway?). My daughter is a professional musician, but even she's considered retraining as a plumber.
Tom Mozy
Posted: 23 May 2018 15:06:59(UTC)
#17

Joined: 09/07/2013(UTC)
Posts: 141

Thanks: 8 times
Was thanked: 213 time(s) in 82 post(s)
Alan Selwood;62670 wrote:
Tom Mozy;62664 wrote:
I would never lend the government anything.


I think the original heading meant rather that they might snatch it, rather than that you are unwilling to lend it to them! ;


Indeed, so what you dont lend, they cant snatch.
King Lodos
Posted: 23 May 2018 16:41:30(UTC)
#20

Joined: 05/01/2016(UTC)
Posts: 3,055

Thanks: 723 times
Was thanked: 4782 time(s) in 1855 post(s)
Psychology should be one of the better things to have a degree in .. It's one of the jobs least likely to be replaced by automation; and there's a demand for councillors/therapists that's likely to grow (not least due to fewer people being in work).

I was very critical of Labour and the Democrats when they tried to make University 'inclusive' .. When I was in school, a degree was a path for academics .. It meant a serious interest and above average intelligence .. Trade schools and apprenticeships were a viable alternative.

By the mid-90s they were rolling out 'Mickey Mouse' degrees, like Popular Music .. I visited a Popular Music class once, and it was just kids banging bongos and listening to Jungle music in an empty hall .. The teachers were no older than 20 themselves.


As said, now the whole system's broken – the likes of Real Peer Review (on Twitter) monitor what passes for PHD dissertations these days.

You can get a doctorate in 'Beyonce studies' .. It's not even considered a music degree – it's social constructionism and race/gender theory now.
2 Pages12Next page
+ Reply to discussion

Markets

Other markets