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Thread: Private banks interest

  1. #1

    Private banks interest

    Just curious if anyone on here has any insight into the banking world

    I wish it applied to me but sadly not, although someone I know.

    If an individual had the sum of 2.5M invested in a private London bank, in a safe investment portfolio, how much return would they expected ?

    Both pre and after tax? Just curious!

    Thank you for any insight

  2. #2
    I think you are mixing two things:
    1. An instant access savings account in a bank where interest rates are basically 0%. Some of them even charge you a membership fee. Private banks like Coutts don't really go in for the "bonus" introductory rates you get at high street banks - Santander etc. 85,000 of your capital is protected by a government scheme, the rest is technically at risk of the bank going bust, but considered unlikely.

    2. A investment portfolio. This is generally shares in companies and the % returns per year depend on the type of company. Most people expect higher returns for riskier, less safe, smaller companies and vice versa. But even the big companies can rise 20% or fall 10% per year. Over historic long periods shares tend to increase in value more than other assets. The FCA currently tells advisers to use a mid case 5% p.a long term forecast growth rate, when predicting pension income etc. No capital protection or certainty over annual returns.

    Tax is complicated because there are various rates and allowances. Your mate should get some proper advice. Something called the Money Advice Service is government run and free. If they can't help they will point them in the right direction.

  3. #3
    Thank you! I assume they have the second as they now just live off the money they have invested.

    They have an investor who handles the portfolio and retains a % of the profit as a fee.
    I was just curious on what kind of returns may be likely.

    Thank you for your input

  4. #4
    Some more numbers for your consideration:
    In 2015 a local charity with an endowment of some 3.5 million received around 175,000 interest. That's a return of about 5%. Funds are managed by an outfit which operates an 'ethical' investment strategy, with a bias towards low risk.

    As for tax on any return, much will depend on how the money is invested - and how close to the avoidance/evasion wind your acquaintance (and their fund manager) wishes to sail.

  5. #5
    By my workings (5/7 X 175,000) it should return around 107,000 a year.

    Thank you you for your input, very helpful

  6. #6
    Often wonder what it would be like to have a sizeable sum to invest. What sort of money would be, for example, where you could give up working.

    If you had a million, didn't spend any of it but invested it, getting perhaps 4% per annum, that would amount to a salary of 40,000 before tax. Would that be enough? A fairly good job would bring that in, so these days, that wouldn't put you in the rich bracket by any means.

    If you had 3 million, used half a million to buy the house you always wanted and whatever luxuries you want, that nice car or whatever, used another half a million to see the kids and any other relatives okay, then you'd have 2 million left, which would then bring yourself a decent income in, it's getting there.

    But, to keep up with inflation you would have to put a percentage of the interest back into the capital, so you could ensure your monthly income keeps up.

    Or you could spend half of it on wine, women and song and waste the rest of it.

    Sorry, getting a bit off topic really, but one likes to dream occasionally.

  7. #7
    Quote Originally Posted by Pedro View Post
    Often wonder what it would be like to have a sizeable sum to invest. What sort of money would be, for example, where you could give up working.

    If you had a million, didn't spend any of it but invested it, getting perhaps 4% per annum, that would amount to a salary of 40,000 before tax. Would that be enough? A fairly good job would bring that in, so these days, that wouldn't put you in the rich bracket by any means.

    If you had 3 million, used half a million to buy the house you always wanted and whatever luxuries you want, that nice car or whatever, used another half a million to see the kids and any other relatives okay, then you'd have 2 million left, which would then bring yourself a decent income in, it's getting there.

    But, to keep up with inflation you would have to put a percentage of the interest back into the capital, so you could ensure your monthly income keeps up.

    Or you could spend half of it on wine, women and song and waste the rest of it.

    Sorry, getting a bit off topic really, but one likes to dream occasionally.
    Many have had that luxury of money and it has ruined their family and happiness. Usually from a lotto win and the break downs start rather quickly. I often wonder how money can cause such family heartache. Not so much of a dream when those realities set in for new found millionaires.

  8. #8
    Quote Originally Posted by Brimfire View Post
    Many have had that luxury of money and it has ruined their family and happiness. Usually from a lotto win and the break downs start rather quickly. I often wonder how money can cause such family heartache. Not so much of a dream when those realities set in for new found millionaires.
    Good point. I wonder what percentage of them do become dysfunctional. I expect that we only hear about the ones that do make a pigs ear of it though.

  9. #9
    Your friend would be best to speak with and Independent Financial Advisor (IFA) as everyone's needs are different to an extent. investment portfolios (not necessarily managed by private banks as such unless they have an investment management arm or affiliation) are tailored to the needs of the client. The Regulatory bodies are very hot on what is called Suitability, i.e. the suitability of the portfolio set-up to meeting the particular needs of the client.

    Returns vary clearly, but if your friend's requirements are for an annual income I would imagine it would be a fairly low risk portfolio and the returns would be a mixture of bond yield, dividends and (hopefully) some capital growth.

    As Muddy says, you are mixing two things mentioning interest and investment return

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