In laws best return on money?
Discussion
Ok read a bit on here so have a few ideas for my in laws.
My in laws are going to downsize their property. Looking to sell for £1.4 million and buy somewhere for around £1million. They owe around £80k to family.
Say £100k in other bits and bobs worst case so should have minimum of £200k to invest.
They don’t have any pension scheme and as far as I know no other savings.
I was thinking they should open 2 ISAs so £40k tax free then £160k which I guess tax would be paid on the interest earned and put it in something like a vanguard fund?
They are not financially savvy at all and I’m not an expert but what would be lowish risk that pays say 5-10% a year but they can have easy access to?
I was going to suggest a second property and rent it out but as they are 83 & 74 they probably don’t want the hassle.
To add there plan is to just have the money sat in an account and spend it.
Any other ideas much appreciated.
My in laws are going to downsize their property. Looking to sell for £1.4 million and buy somewhere for around £1million. They owe around £80k to family.
Say £100k in other bits and bobs worst case so should have minimum of £200k to invest.
They don’t have any pension scheme and as far as I know no other savings.
I was thinking they should open 2 ISAs so £40k tax free then £160k which I guess tax would be paid on the interest earned and put it in something like a vanguard fund?
They are not financially savvy at all and I’m not an expert but what would be lowish risk that pays say 5-10% a year but they can have easy access to?
I was going to suggest a second property and rent it out but as they are 83 & 74 they probably don’t want the hassle.
To add there plan is to just have the money sat in an account and spend it.
Any other ideas much appreciated.
Sheepshanks said:
For clarity; they're living in a £1.4M house and surviving on state pension and borrowing from family?
Well it’s a £1.4M 4 bed flat in London. They want to downsize to a 2 bed flat. We have tried to convince them to move to a house outside London but they want a flat which comes with service charge etc. Father in law doesn’t get state pension as he worked in Qatar for most of his life. I know my mother in law worked in U.K. for 25 years but not sure if she is claiming state pension. Honestly they are in quite a pickle and we have had to bank roll them with £70k the last few years. I didn’t know they were in quite a mess until recently.
hstewie said:Aiminghigh123 said:
Well it’s a £1.4M 4 bed flat in London. They want to downsize to a 2 bed flat. We have tried to convince them to move to a house outside London but they want a flat which comes with service charge etc. Father in law doesn’t get state pension as he worked in Qatar for most of his life. I know my mother in law worked in U.K. for 25 years but not sure if she is claiming state pension.
Honestly they are in quite a pickle and we have had to bank roll them with £70k the last few years. I didn’t know they were in quite a mess until recently.
The first thing you need to do is sit down & work out a budget; how much a month do they need to live on?Honestly they are in quite a pickle and we have had to bank roll them with £70k the last few years. I didn’t know they were in quite a mess until recently.
Investing £200k for income would produce something like £10,000 a year if they drew out 5%, however that's the safe rate to not deplete the capital too much. Given their age maybe capital preservation isn't quite so important so they could push that a bit, but it gives a clue as to the level of income that could be generated. You should also check any state pension entitlements wiht the Pension Service:
https://www.gov.uk/check-state-pension
Another future problem is if they are sitting in a £1m flat with no financial planning someone is going to have a massive IHT bill.
The obvious issue is that they can't afford to live a £1m flat so a reality check is needed. There are plenty of nice flats outside London.
red_slr said:
Are they sure they will get 1.4 for their flat?
What about stamp duty and other fees on the 1m place?
I would be buying a nice place for 4-500k in a nice leafy town somewhere and living off the rest.
Well it was valued at £1.6M and they have it up for £1.5M and would accept £1.4M. What about stamp duty and other fees on the 1m place?
I would be buying a nice place for 4-500k in a nice leafy town somewhere and living off the rest.
£1.4M sell. Owe us £70K Brother in law a bit. £1 million to buy somewhere. (There figure which we are trying to get down to get them to be more realistic) £200k to invest. £100k for solicitors stamp duty etc if I’ve done my rough sums right.
Yep tell me about it, £400-£500k is the figure my wife and I are trying to push them towards. They are being a bit stubborn so worst case £200k to play with.
They live in Kensington love the area but it’s just too expensive. They do need to be realistic but if not £200k I think is worst case they would have.
Edited by Aiminghigh123 on Sunday 13th September 18:28
Sten. said:
Aiminghigh123 said:
To add there plan is to just have the money sat in an account and spend it.
At 83, it's what I'd do. The best (least bad) cash savings account and enjoy/spend the money.Same here although I'd rent not buy and bank all the cash then set up a standing order to give a monthly income till the youngest benefactor turns 100. Careful though, big money doesn't work the same as little money and you may benefit from talking to a consultant on future safety issues or conflict of interest stuff.
If they were flexible on downsizing to a property in the region if £800k (inc. stamp duty and buying fees), they’d have a pot (after settling debts) of £500k, right? That would get them an annuity paying in the region of £80k per year gross of tax over a 15 year term (see money advice service), with no residual cash left over. That’s in line with their objective of spending it all. They should speak to a financial advisor about this. I would think they’d struggle to get anywhere near the level of yearly income an annuity would provide by investing the £500k themselves.
Another option is not buying a new place, investing the £1.4m cash and drawing down 6% per annum (£84k) and renting somewhere. This is a nice option as they could rent somewhere and stay but could instead go live in the countryside one year, an island the next, etc. This could be a little above the drawdown amount which would preserve capital but on the other hand, could be invested significantly more aggressively, e.g. in an equity index tracker or passive balanced fund (they can bear the volatility with £1.4m in capital as they will always have the ability to pay out the 6% a year). This would mean they leave an estate worth around the original £1.4m, perhaps slightly more. Under the first option, they would ‘only’ leave the house. There’s always a possibility an £800k property would appreciate to £1.4m in 15 years, too.
Speak to an advisor, they’ll have a much better knowledge of the specific products available to suit your in-laws’ needs.
Another option is not buying a new place, investing the £1.4m cash and drawing down 6% per annum (£84k) and renting somewhere. This is a nice option as they could rent somewhere and stay but could instead go live in the countryside one year, an island the next, etc. This could be a little above the drawdown amount which would preserve capital but on the other hand, could be invested significantly more aggressively, e.g. in an equity index tracker or passive balanced fund (they can bear the volatility with £1.4m in capital as they will always have the ability to pay out the 6% a year). This would mean they leave an estate worth around the original £1.4m, perhaps slightly more. Under the first option, they would ‘only’ leave the house. There’s always a possibility an £800k property would appreciate to £1.4m in 15 years, too.
Speak to an advisor, they’ll have a much better knowledge of the specific products available to suit your in-laws’ needs.
NickCQ said:
Mr Pointy said:
The obvious issue is that they can't afford to live a £1m flat so a reality check is needed. There are plenty of nice flats outside London.
Agreed, at 83 they could live another 15 years (with 3-4 expensive ones at the end)This is just a perfect demonstration on how to blow your money on IHT, care costs and taxes.
But, its their money so what ever makes them happy I guess!
My grandparents lived in a 2 up 2 down, went on coach holidays and grew their own food. Left a sizeable inheritance to their kids, I didn't see the point but it made them happy so be it.
red_slr said:
Are they sure they will get 1.4 for their flat?
What about stamp duty and other fees on the 1m place?
I would be buying a nice place for 4-500k in a nice leafy town somewhere and living off the rest.
Completely agree. No way will anyone save anything worthwhile by "downsizing" from £1.4 to £1.0 - especially if the new place has a hefty service charge. If it's what they want to do then go for it, but don't expect any financial advantage. What about stamp duty and other fees on the 1m place?
I would be buying a nice place for 4-500k in a nice leafy town somewhere and living off the rest.
To my mind it's a bit like the main PH forum where people hope to save money by buying a new car - it's virtually impossible, unless they go from a 5-series to a Micra.
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