100k - what's the options?
Discussion
Hello all, first time posting in here so please go gentle. My parents have about 100k in their pension pot. Dad's just about to retire and get a small part time job at a well earned age of 73.
They don't have any assets and rent their flat.
Given the vast experience in here may I ask the collective what you would do with that 100k?
Would you leave it in a pension, or pull it out and invest it somewhere else (I'm aware of the tax disadvantages of that)
My parents know nothing about what to do and I know little more, so any help would be greatly appreciated
They don't have any assets and rent their flat.
Given the vast experience in here may I ask the collective what you would do with that 100k?
Would you leave it in a pension, or pull it out and invest it somewhere else (I'm aware of the tax disadvantages of that)
My parents know nothing about what to do and I know little more, so any help would be greatly appreciated
Not enough information but why would anyone pull money from a pension to invest elsewhere?
What income do they need?
What income are they going to get from Sate pensions and part time jobs?
What is their health like?
What is their attitude to risk?
What are their rental terms?
Etc. etc. etc.
What income do they need?
What income are they going to get from Sate pensions and part time jobs?
What is their health like?
What is their attitude to risk?
What are their rental terms?
Etc. etc. etc.
Russ_16v said:
Would you leave it in a pension, or pull it out and invest it somewhere else (I'm aware of the tax disadvantages of that)
A pension is what is called a "wrapper" - it reduces the amount of tax you pay on an investment. You can hold pretty much any kind of investment in a pension, so as a rule of thumb, only take money out of that wrapper (and potentially incur tax) if you actually want to spend it.
Think we’re going to see quite a few questions like this as many who never had workplace pensions prior to them being enforced in recent years step into retirement.
I suspect there’s no rush to do anything - especially if considering taking the lot out….
They should be able to get some free advice but you could help get them that & get them thinking ahead of any meeting about the questions to get asked & ask.
“Their pension” - but I’m guessing that’s your Dad’s?
It’s their’s to do with as they please, what were they intending doing with it, your dad’s continuing with part time employment & I assume they’ll both be eligible for some state pension if not already claiming so they have an income - is it enough or would they need say an extra 5/10k a year from the pension to replace lost earnings for rent/cost of living etc. Is there a desire to spend some now on a holiday or new car while they consider themselves fit/able to enjoy it. If they spend the pension & your dads not fit to work in the future would they be able to afford to stay where they are without an additional income?
The £100k is a decent support to someone in their 70’s that warrants a bit of thinking
I’d suspect many pots will be smaller (less than £40k) & folk will be blowing those before relying on the state which I kinda get as otherwise they’ll likely have exactly the same quality of life until their smaller pension is exhausted.
It’s for them to figure out - some will see as a reward for years of work to be spent, others some security for them/loved ones. I’d probably encourage some spending if/whilst they’re able too, get/go do something they’ve always fancied (eg at age 73 foreign holidays are quickly running out as an option for many)
I suspect there’s no rush to do anything - especially if considering taking the lot out….
They should be able to get some free advice but you could help get them that & get them thinking ahead of any meeting about the questions to get asked & ask.
“Their pension” - but I’m guessing that’s your Dad’s?
It’s their’s to do with as they please, what were they intending doing with it, your dad’s continuing with part time employment & I assume they’ll both be eligible for some state pension if not already claiming so they have an income - is it enough or would they need say an extra 5/10k a year from the pension to replace lost earnings for rent/cost of living etc. Is there a desire to spend some now on a holiday or new car while they consider themselves fit/able to enjoy it. If they spend the pension & your dads not fit to work in the future would they be able to afford to stay where they are without an additional income?
The £100k is a decent support to someone in their 70’s that warrants a bit of thinking
I’d suspect many pots will be smaller (less than £40k) & folk will be blowing those before relying on the state which I kinda get as otherwise they’ll likely have exactly the same quality of life until their smaller pension is exhausted.
It’s for them to figure out - some will see as a reward for years of work to be spent, others some security for them/loved ones. I’d probably encourage some spending if/whilst they’re able too, get/go do something they’ve always fancied (eg at age 73 foreign holidays are quickly running out as an option for many)
I assume it’s a Defined Contribution (DC) Pension from the current / previous Employer and already is paying out a monthly amount.
Your parents will also already be in receipt of a monthly State Pension presumably.
If the total of those combined covers 100% of their existing needs then perhaps they need to do nothing.
But whether that covers their future needs or wants needs more articulation.
Should something happen to your Dad also needs thinking about in terms of what does then his DC pension provide for your Mum going forward ?
Your parents will also already be in receipt of a monthly State Pension presumably.
If the total of those combined covers 100% of their existing needs then perhaps they need to do nothing.
But whether that covers their future needs or wants needs more articulation.
Should something happen to your Dad also needs thinking about in terms of what does then his DC pension provide for your Mum going forward ?
This probably needs a bit more information but based on some assumptions.
I would be thinking that this is a DC pension that has not been touched yet, i.e. the question could be - should they take the 25% out and leave the rest either in drawdown, or buy an annuity with it?
I'd assume there are two state pensions being received and that these cover living costs including that rent etc
But I'd want to be thinking what happens when one departs - then there'd only be one state pension in receipt - is that enough to still cover living costs ? - probably not quite.
In which case, I'd be thinking don't touch the pension yet, leave it in an investment that you are comfortable with, and wait until draw down from it is needed to top up covering for the living costs ?
I would be thinking that this is a DC pension that has not been touched yet, i.e. the question could be - should they take the 25% out and leave the rest either in drawdown, or buy an annuity with it?
I'd assume there are two state pensions being received and that these cover living costs including that rent etc
But I'd want to be thinking what happens when one departs - then there'd only be one state pension in receipt - is that enough to still cover living costs ? - probably not quite.
In which case, I'd be thinking don't touch the pension yet, leave it in an investment that you are comfortable with, and wait until draw down from it is needed to top up covering for the living costs ?
All this advice based on assumptions.
Until the OP comes back with more details it is absolutely pointless giving advice based on assumptions.
OP without any further info get them to contact
https://www.moneyhelper.org.uk/en/pensions-and-ret...
If you want some guidance for them here then please supply some more information.
Until the OP comes back with more details it is absolutely pointless giving advice based on assumptions.
OP without any further info get them to contact
https://www.moneyhelper.org.uk/en/pensions-and-ret...
If you want some guidance for them here then please supply some more information.
Firstly, thank you all. As mentioned, I have no clue on this so happy to provide further information. Craig, I will also contact that link you sent - thank you.
Dad is 73, mum is 71. Both in what I would call good health.
Dad will be looking at a part time job.
Mum and dad both draw a state pension - this is not quite enough to live on.
Dad has 3 pensions:
One is an annuity and pays circa £550 pcm.
One has circa 65k in and is no longer paying into that. They also have taken the 25% allowance from this one some years ago.
The other - which is through his current employer - has around 35k in and he has not taken the 25% allowance from that.
They have asked me if I think they should remove all the funds left and invest in a small rental property. As mentioned, they do not own their current home and have no other equity. So their thinking is if they can invest in a small flat (somewhere near the coast) they can use it for short breaks and rent it out the remaining time.
Mum loves this idea as it means they will own something physical again, and if rent becomes too much they will at least have somewhere they can live. Dad is unsure as he doesn't want stress (however one of his pensions lost 6k last year so he is stressing about losing more).
In my opinion I think their combined state pensions plus Dad's annuity pension 'should' be enough to live on where they are for the moment. Their landlord is fantastic however I am aware he could be making at least £150 pcm more, given the rental prices where we live. So if/when either the rent goes up/he decides to sell the flat things may change.
I'm sitting down with them this coming weekend and while I am certainly not expecting anyone to give any concrete answers I would be interested to hear what you all would do in a similar situation.
Dad is 73, mum is 71. Both in what I would call good health.
Dad will be looking at a part time job.
Mum and dad both draw a state pension - this is not quite enough to live on.
Dad has 3 pensions:
One is an annuity and pays circa £550 pcm.
One has circa 65k in and is no longer paying into that. They also have taken the 25% allowance from this one some years ago.
The other - which is through his current employer - has around 35k in and he has not taken the 25% allowance from that.
They have asked me if I think they should remove all the funds left and invest in a small rental property. As mentioned, they do not own their current home and have no other equity. So their thinking is if they can invest in a small flat (somewhere near the coast) they can use it for short breaks and rent it out the remaining time.
Mum loves this idea as it means they will own something physical again, and if rent becomes too much they will at least have somewhere they can live. Dad is unsure as he doesn't want stress (however one of his pensions lost 6k last year so he is stressing about losing more).
In my opinion I think their combined state pensions plus Dad's annuity pension 'should' be enough to live on where they are for the moment. Their landlord is fantastic however I am aware he could be making at least £150 pcm more, given the rental prices where we live. So if/when either the rent goes up/he decides to sell the flat things may change.
I'm sitting down with them this coming weekend and while I am certainly not expecting anyone to give any concrete answers I would be interested to hear what you all would do in a similar situation.
I don't see much advantage in getting into the holiday lettings market in your 70s with a limited budget and low appetite for stress. Sounds like they're broadly on the right track.
Sorry to be a big grim but my parents are a few years ahead so I'm speaking from experience. I'd be encouraging them to work out what they really want to do over the next few years as the reality is they have a limited window to enjoy themselves. If they fancy a big holiday or a cruise or something then now is the time.
Sorry to be a big grim but my parents are a few years ahead so I'm speaking from experience. I'd be encouraging them to work out what they really want to do over the next few years as the reality is they have a limited window to enjoy themselves. If they fancy a big holiday or a cruise or something then now is the time.
I don't work in finance so treat this as just a random opinion but I don't get the attraction of property.
If your parents do that what does their "emergency fund" look like?
i.e. if you have a leak or need a car repair in a hurry you can't just sell/realise a bit of property overnight the way you can other savings or investments.
If your parents do that what does their "emergency fund" look like?
i.e. if you have a leak or need a car repair in a hurry you can't just sell/realise a bit of property overnight the way you can other savings or investments.
b
hstewie said:
hstewie said: I don't work in finance so treat this as just a random opinion but I don't get the attraction of property.
If your parents do that what does their "emergency fund" look like?
i.e. if you have a leak or need a car repair in a hurry you can't just sell/realise a bit of property overnight the way you can other savings or investments.
I am not a fan of property (an accident landlord myself) as the return doesn't warrant the required effort from my experience. Probably a business that require scaling up to make financial sense. As you rightly point out, you can't just sell a spare bedroom to partially release your capital, and the transaction cost to buy/exit is fairly lumpy too. If I was 70, I would be very reluctant to dump my life saving in a BTL (effectively taking on a part time job) and rely on the rental income to support my retirement days.If your parents do that what does their "emergency fund" look like?
i.e. if you have a leak or need a car repair in a hurry you can't just sell/realise a bit of property overnight the way you can other savings or investments.
bhstewie said:
hstewie said: I don't work in finance so treat this as just a random opinion but I don't get the attraction of property.
If your parents do that what does their "emergency fund" look like?
i.e. if you have a leak or need a car repair in a hurry you can't just sell/realise a bit of property overnight the way you can other savings or investments.
Property is very obvious. I'm in my 40s and already regret not buying more younger when I see houses that have more than doubled in my adult life. It's easier to ignore stocks or indices that have performed similarly for less trouble.If your parents do that what does their "emergency fund" look like?
i.e. if you have a leak or need a car repair in a hurry you can't just sell/realise a bit of property overnight the way you can other savings or investments.
JuanCarlosFandango said:
Property is very obvious. I'm in my 40s and already regret not buying more younger when I see houses that have more than doubled in my adult life. It's easier to ignore stocks or indices that have performed similarly for less trouble.
I am the same age as your dad, probably in a better financial position. Property is probably the last thing I would be looking to invest in. The pension wrapper is a perfect vehicle for them.Actuarily, your dad is likely to live another 12.5-years and your mother another 16-years. If they leave it in the pension and draw out about £5,000p.a., indexed-linked, it should help improve their quality of life now and possibly cover the risk of them living into their 90s. There might even be a little left in the pot at the end.
It is great that they are both in good health today, but that can change quite quickly as they get older, so having something that they can get their hands on quickly (liquidity) is a good idea, and that is the problem with property. My thinking was the opposite when I was in my 40s.
bhstewie said:
hstewie said: I don't work in finance so treat this as just a random opinion but I don't get the attraction of property.
I have a friend who loves it.He's never done any analysis of profit/loss, looked blankly at me when I pointed out it was a leveraged investment which added risk, but finds it very reassuring that it is a tangible asset - literally, he likes that he can walk past and see what he is invested in.
leef44 said:
You need to have a careful look at where the pensions are currently invested if they manage to lose 10-20% in a year when the global market rose 20%.
The markets are all over though.A month ago global sans USA was standing still.
The USA has done all that lifting and with very little breadth.
A quite sensible portfolio might have missed out on a lot of that exposure… to what end do you go chasing narrow breadth gains?
I'd be looking at a 100% joint life, level annuity. Probably get a 7.5-8% rate, money keeps rolling in until the second is gone and no risk. Simples. Take the 25% tax free cash and tuck it away in a decent savings account for a rainy day/unexpected expense/just spend it on something fun.
Do your own quotes here: https://www.hl.co.uk/retirement/annuities/best-buy...
Do your own quotes here: https://www.hl.co.uk/retirement/annuities/best-buy...
Gassing Station | Finance | Top of Page | What's New | My Stuff