Investments

Questions on investments answered by Anna Bowes of Chase de Vere.

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Mr Marchant from Somerset says that as pensioners' bonds are now offering rates below commercial bonds, what should pensioners be looking at as an alternative investment?

He's right that pensioners' bonds from National Savings have gone right down. People who are used to getting 7% when their bonds matured are now getting 4.75%, so you're not going to find many similar things that pay the same sort of rate. There are some fixed interest bank and building society bonds paying just under 6% or corporate bonds, which are slightly higher risk because the capital value can fluctuate, but within an Isa they can be tax-free and can give a better return.

Andy from Clwyd says his dad is taking early retirement and will have £50,000 to invest. He's considering gilts - are they OK?

They are very secure because you get a fixed level of income and you know you're going to get a certain amount back when that gilt matures. And it's the government so it's unlikely they're going to default on you. There's no Capital Gains Tax on them if you manage to sell them when they give you a gain. But you do have to pay full income tax on them, so there are advantages and disadvantages.

Matthew Burke and his wife in Cheltenham have a baby daughter and want to save £40 a month for her. What are the best options?

The obvious choice, if they're happy to take an element of risk, is to get involved in the stock market, probably in a collective investment like an investment trust or a unit trust. Maybe an international fund that will invest all over the place or maybe they could redirect the £40 a month every few years into different trusts each time, to build up a diversified portfolio for their daughter.

Colin and Kate are going travelling for the next three years. They sold their house and have £132,000 to invest. They'll need the money on their return to buy a house, so where should they put it?

Because they are going to need the money in three years' time they need to leave it in a cash-based account. They may be able to put it into a bond that fixes the rate for you but you don't know what's going to happen in three years. With a cash-based account, they'll be able to keep up with inflation, a little bit more perhaps, but not a lot more.

Tina's planning the holiday of a lifetime for her family next year. She has £9,000 to invest. Where should she put the money until she needs it?

She could use a cash Isa with £3,000 a year which would protect it from income tax over the next year but really it has to be kept available so we're looking at cash accounts again.

What's an OEIC?

It's an open-ended investment company. It's like a mixture between an investment trust and a unit trust so it's single priced - you don't have that bid-offer spread - but it works like a unit trust.

Barry wants to know about zeros. What are they and are they a safe investment?

A zero is called a zero dividend preference share. It's part of a split capital investment trust. It will give you back a pre-determined growth over a pre-determined length of time so you can plan what your capital gains are going to be as long as the underlying investment does what it's supposed to do.

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The opinions expressed are those of Anna, not the programme. These answers are not intended to be definitive and should be used for guidance only. Always seek professional advice for your own particular situation.