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Sofa Awards – Lump sum investment

Barry is 53 and has recently retired from the main board of a clearing bank. His wife Julia, who is eight years his junior, is in the process of selling her interior design business, ready to share retirement with Barry.

The couple are both higher-rate taxpayers and likely to remain so for the rest of their days. Their annual capital gains tax exemptions are spoken for until at least 2006, as the two of them are gradually liquidating shareholdings in Barry&#39s former employer.

They already have a broadly spread investment portfolio worth about £1.2m, managed by the private client arm of Barry&#39s ex-employer.

Barry and Julia are in need of investment advice:

Barry has £350,000 of cash to invest, thanks to a combination of his pension scheme lump sum and his handsome terminal bonus. He wants to set this aside for long-term growth and would like to be actively involved in the management of his money, at least at a strategic level.

He is quite happy to invest in equities and is ready to put about 20 per cent of the capital in high-risk areas. He does not want the bank to handle the money.

Julia will have a net £200,000 to invest from the disposal of her business. She is anxious to generate a high level of income for the next five years until she can start drawing her pension. She is prepared to accept equity risk, but does not want to be involved in the management of what she very much sees as her money.

In his role as a trustee of an accumulation and maintenance trust set up by his late father, Barry will also have £250,000 to invest in August. At that time, the trust&#39s current sole investment, a three-year fixed rate deposit, will mature.

The trust&#39s beneficiaries are Barry&#39s twin nieces, who are starting their university courses in October 2001. So far, the trust has been paying the interest earned from the deposit to the girls&#39 parents for maintenance and education. From October, Barry wants to pay income direct to his nieces.

For each of the three investment situations:

1: Advise on the relative advantages and disadvantages of using onshore and offshore investment bonds.

2: What would be the benefits and drawbacks of using zero coupon preference shares?

3: Recommend, with justifications, which type of unit trust/Oeic would be suitable.

4: What would be the relative merits of using a directly invested portfolio rather than collective funds? 


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