Mum now a widow - suggestions for investing
Discussion
My father passed mid Nov and I ve been sorting my
Mother s affairs.
£130k in ISA
£560k in flagstone account at around 4.5%pa
No mortgage
State pension plus £250 a month from a small SIPP
I m hoping to get her 6% or more which would plug the loss of my father s pension.
Anyone make suggestions please? It feel different to take risk with someone else s money
Mother s affairs.
£130k in ISA
£560k in flagstone account at around 4.5%pa
No mortgage
State pension plus £250 a month from a small SIPP
I m hoping to get her 6% or more which would plug the loss of my father s pension.
Anyone make suggestions please? It feel different to take risk with someone else s money
Edited by Familymad on Sunday 7th December 09:51
Familymad said:
It feel different to tak risk with someone else's money
Sorry about your father.This is exactly what I was going to say.
I'm sure you have and will do this but I would make sure you speak with your mum and try to understand her appetite for risk.
£700K is a decent sum and 6% isn't doable without taking some risk and even small fluctuations (investments go down whilst (if you ignore inflation) savings give the illusion that they don't) might be enough to unsettle or unnerve her if she isn't use to that.
Not to sound rude but 6% of £700K is £42000/year plus the state pension.
There might be a discussion about spending requirements v how much risk is needed to sustain them somewhere in there.
I don't work in finance so I don't know much about annuities but someone will probably mention those.
It is important to know your mother’s age and her attitude to spending any of the capital.
As said above 6% requires an element of risk but can be mitigated as the return requirement is not huge. There are many financial instruments geared to generating income in later life and you should take independent financial advice. For example there are stock market based instruments like unit trusts that focus on company dividend yields, and bond based instruments that deal in high yield corporate bonds. Both limit risk internally by diversifying across countries and industries and may also hold cash, government bonds etc. Of these types some guarantee an income and others not but naturally you pay for that guarantee somehow in either lower return or risk to the principal. Talk to an IFA about what you want and go from there.
As said above 6% requires an element of risk but can be mitigated as the return requirement is not huge. There are many financial instruments geared to generating income in later life and you should take independent financial advice. For example there are stock market based instruments like unit trusts that focus on company dividend yields, and bond based instruments that deal in high yield corporate bonds. Both limit risk internally by diversifying across countries and industries and may also hold cash, government bonds etc. Of these types some guarantee an income and others not but naturally you pay for that guarantee somehow in either lower return or risk to the principal. Talk to an IFA about what you want and go from there.
I suppose the low risk thing to do would be to buy an annuity with at least some of it.
There are funds like this, and also similar investment trusts, but I'd want to spread the money around to reduce the risk that one set of fund managers gets it wrong: https://www.aegonam.com/funds-resources/multi-asse... This fund, on its own, probably holds too high a percentage of equities for her age.
There's also risk of a general stock (and perhaps bond too) crash. Perhaps some money in an annuity would help cover this scenario?
There are funds like this, and also similar investment trusts, but I'd want to spread the money around to reduce the risk that one set of fund managers gets it wrong: https://www.aegonam.com/funds-resources/multi-asse... This fund, on its own, probably holds too high a percentage of equities for her age.
There's also risk of a general stock (and perhaps bond too) crash. Perhaps some money in an annuity would help cover this scenario?
Condolences to you and your family.
I had this when my Father passed away and Mum at that point had literally no idea about money.
They had no mortgage and about £130k in various cash accounts plus some PB’s.
She would have worried daily about Stock market investments and more importantly worried me daily so after looking at income and outgo we “ decided “ that her Pension would cover the latter and so put the cash into a mixture of fixed rate bonds and limited and instant access accounts.
Not the best investment solution by any stretch but the one that suited her.
I had this when my Father passed away and Mum at that point had literally no idea about money.
They had no mortgage and about £130k in various cash accounts plus some PB’s.
She would have worried daily about Stock market investments and more importantly worried me daily so after looking at income and outgo we “ decided “ that her Pension would cover the latter and so put the cash into a mixture of fixed rate bonds and limited and instant access accounts.
Not the best investment solution by any stretch but the one that suited her.
maccboy said:
That was my first thought. My mum (a widow) seems to spend a lot of time trying to work out ways of mitigating the risk of leaving us a large inheritance tax bill!
That's a huge subject on its own. Gifting and 7-year rule is the first thing that comes into my head but others will know more. And discretionary gift/loan trusts but you'll need a specialist for that. I found this which shows how complex the subject is: https://adviserservices.fidelity.co.uk/media/fnw/g...Familymad said:
My father passed mid Nov and I ve been sorting my
Mother s affairs.
£130k in ISA
£560k in flagstone account at around 4.5%pa
No mortgage
State pension plus £250 a month from a small SIPP
I m hoping to get her 6% or more which would plug the loss of my father s pension.
Anyone make suggestions please? It feel different to take risk with someone else s money
Sorry to read about your father.Mother s affairs.
£130k in ISA
£560k in flagstone account at around 4.5%pa
No mortgage
State pension plus £250 a month from a small SIPP
I m hoping to get her 6% or more which would plug the loss of my father s pension.
Anyone make suggestions please? It feel different to take risk with someone else s money
Edited by Familymad on Sunday 7th December 09:51
Roughly how much income will your mum need?
£560k at only 4% offers more than £22k....but will carry a income tax penalty, the cash ISA at the same 4% offers £5200pa, I would be working out income needs and moving as much as allowed from the Flagstone a/c into the ISA and drawing any more income from there, as you could take £29k a year for 20 years....or to age 93.....
Panamax said:
I hope you get it suitably organised, OP. Looks doable.
Yes, £700k is a healthy wedge. The bizarre thing is that with a decent investment and tax strategy these people could have been seriously wealthy.
Cant say that for sure without knowing the background, for example the father might have inherited 500K last year.Yes, £700k is a healthy wedge. The bizarre thing is that with a decent investment and tax strategy these people could have been seriously wealthy.
Simpo Two said:
maccboy said:
That was my first thought. My mum (a widow) seems to spend a lot of time trying to work out ways of mitigating the risk of leaving us a large inheritance tax bill!
That's a huge subject on its own. Gifting and 7-year rule is the first thing that comes into my head but others will know more. And discretionary gift/loan trusts but you'll need a specialist for that. I found this which shows how complex the subject is: https://adviserservices.fidelity.co.uk/media/fnw/g...Panamax said:
I hope you get it suitably organised, OP. Looks doable.
Yes, £700k is a healthy wedge. The bizarre thing is that with a decent investment and tax strategy these people could have been seriously wealthy.
It’s a great point. My folks started with nothing and took some lending risk to end up with two holiday lets in Lakes. They’d just managed to pay off both mortgages and sold them in March, just before my father took ill 4 months later. So they’d done ok, considering both had small incomes through their working life as secretary and printer.Yes, £700k is a healthy wedge. The bizarre thing is that with a decent investment and tax strategy these people could have been seriously wealthy.
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