Inv101 wrote:To answer some of the qs and add some perspective, although it will probably sound crazy that I don't have professional advice given the numbers ....
I have aprrox £10m in cash + £1.25m in SIPP + Isas and a substantial mortgage free home. I have already made provision for my offspring, so am not too worried about them.
This is all on the back of having had, to all intents and purposes, minimal investment income and no capital gains (apart from the house) and trusting nobody's advice, but being able to sleep at night and get on with the day job, because I am not worrying about gyrating markets or fund managers ripping me off.
I am very reluctant - even now and even with those numbers - to spend any capital, so was thinking to invest (say) £6m in 10 yr corp bonds to give me a guaranteed income of approx £350k until my late 70's and a more variable income from the £4m that I would probably keep on deposit.
This probably sounds bonkers, but ....
How much do you spend each year? It's all very well having £10m in cash, but there are plenty of activities that would allow you to burn through that quite quickly
You have not mentioned how the SIPP and ISAs are invested - cash or near cash too?
As I see it your current risks are 1) Default risk; 2) Inflation. Do you have more than £85k deposited in a bank? If so the excess is at risk. Should the bank fail your deposit would rank alongside other unsecured creditors. Anyone very risk averse should be cognisant of FSCS protection. You can use NS&I to shelter £1m per person in income bonds. A less risky home than banks for large amounts of cash are gilts. Hold relatively short dated gilts to maturity and you will guarantee a nominal gain. Some of these gilts have very low coupons as well (0.125%), so the return on the gilts will mostly be via a tax exempt capital gain.
To mitigate inflation risk, you could build a ladder of linkers with some of the cash. For a short period recently it was possible to buy linkers that gave a real return. This is still possible with longer dated (14y+) linkers, but shorter than that will mean locking in small real losses if you hold to maturity. The main downside of building a ladder of linkers is that should you want/need to cash in a bond before maturity you would have to accept the market price at the time and that may mean taking a real loss when you sell. As long as you pick the linkers with low coupons you will lose very little tax on the return.
You could go for a portfolio of corporate bonds. Many high quality bonds are now offering a reasonable spread over gilts. I would question whether these would be appropriate for someone very risk averse though as individual corporate bonds can exhibit significant price swings and there will always be non-zero default risk. Buying a corporate bond ETF, such as SLXX, might be a better approach for you as it will hide individual unpleasentness whilst diversifying your risk across a large number of issuers.
Alternatively, go for a combination of gilts/linkers and a small allocation to a global equities tracker, then avoid looking at the performance of the fund! Historically there are few 20 year periods where a global equities tracker, with dividends reinvested, would have lost money in real terms.