Stephen asks: “I have £250 000 in the UK and would like to invest it for income. What is the best investment?”
Maya replies:
Unfortunately at the moment interest income in the UK is extremely low. Due to the financial crisis most governments have slashed interest rates and this policy has really hurt savers. In addition, the pound is weak at the moment not only because of the UK recession, but also the debt crisis that is engulfing Europe. So the reality is that if you need to live off the income you would be better off with the investment in rands, where not only would you get higher interest rates, but you are also not taking any currency risk as your expenses are also in rands. It is also more tax efficient to invest in rands.
That said, you may have good reasons to leave the money abroad, not least of all the potential longer-term weakness of the rand. Raymond Goss of Investec Securities says the best place to look for income abroad would be through dividend income from quality shares, although remember this will be taxed, unlike South African dividends. Goss says there is still some opportunity to buy corporate bonds and certain government bonds (not Greece obviously!). Listed property is also another option through REITs (Real Estate Investment Trust). Goss warns, however, that all of these investments do come with volatility and some capital risk, so it is best to have the portfolio managed professionally.
Ideally you want to deal with a company that has a South African connection as they will then be aware of the tax and reporting requirements in South Africa. Large asset managers like Allan Gray, Coronation and Investec all have offshore asset-management companies.
Alternatively you could go with a private client brokerage firm, which would tailor-make a portfolio for needs, for example Rensburg Sheppards in London, which is owned by Investec.
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