How should I regard situation?

FLAPJACK

Hello there,

To me my situation isn't too bad, I need the views of others to see if I have done all I can though.....here goes!

I was retired through ill health 5 years ago with an enhanced Pension, 3 years ago I was left an inheritence of £320k (net ).

I have no mortgage, the only loan I have is for a car (36 months) which is easily covered.

I am 53 and married, we are both retired.

Here are the facts.

The Pension I have £13,500pa is not guaranteed..until I reach 60 as it can be reviewed which means it could be left alone,reduced or even suspended if the Trustees so decided.
As a result of this cloud I have been careful as what to do with the inheritence...which now stands at approx £280k as we decided we would payoff the mortgage (£40k) and refurbish the house for our retirement...this at the time knocked another £25k off the total.
The rest I put into Fixed rate Bonds ..then at 7.22% for 3 years and the lowest was around 5.5% for a year.
I invested £32k in each account, most have matured now and the last will next July...I have re-invested back into FRB's (albeit with lower rates).
Happily the matured bonds paid for most of the house refurbishment so the total is now at approx £280k

Last year I worked out the Annual costs of running the home and drew this figure out of a maturing bond and each month I pay a 12th of this into the bank to cover D/D's. This leaves me putting £650 into savings each month (£7800 saved pa).

Now obviously with inflation no account is "making" money but with the pension increasing by RPI it will be going up around £500 pa.

How do you view the plan of action...I have ISA'a (cash/stocks) as does the wife and our attitude to risk is very low hence the FRB's, I have some shares that I inherited....so have I missed anything.

Whats worrying me is will £280k+ last into our oldage? even though I am adding to it monthly, I will be a little happier once I know I have a "Guarenteed" income from the Pension ...but it's a while until that comes into being.

I have 4 Vantage A/cs with Lloyds (7k each @4%: part of the original inhertance) Regular saver A/c (£250pm @5%).

Your thoughts would be helpful..thanks.

Flap Jack

greenface

YOU SEEM TO HAVE YOUR HEAD SCREWED on with regards to your income and outgoings so your doing well you can do better by increasing your risk but also your stress profile with wouldnt suit you.If your fairly happy go with your own thoughts and have a little tweek when you see a good oppertunity to suit you and your family. Nearly 300k and a paid up house is a nice position to be in

middlepuss

I am wondering if it might be worth a chat with an IFA.

53 is quite young to have almost all your eggs in one basket - cash. The risk is that your cash pot is eroded by inflation so the real income is actually declining. Whether it would be wise to spread your risk by putting some of the money into stock market related investments I do not know. Maybe not if it is something that would worry you.

But you say you have some stocks in your ISAs, which I assume means stock market investments, so that does hedge your bets if there's a worthwhile amount in shares etc.

Of course you can always buy an annuity later in life - but that would mean that that cash could not be left to family. Which may or may not be a concern to you.

I don't know what the answers are, but £280K sounds a lot now but how much will that be worth in real terms when you're 90 if it remains in cash?

FLAPJACK

Thank you GREENFACE!
Just needed an "unbaised" view...been to a few IFA's but in the back of my mind (unfairly I admit) I think maybe they have number 1 to think of.
My answer to their repeated comments vis-a-vie inflation is that "interest rates are not keeping up" so invest in the stockmarket....I agree that the rates are rubbish at the moment but this money I have is only here once..it can't be replaced. As far as I can see the stocks and shares ISA I and the wife have can go up and down, the stocks I have have been left to me, they too can fluctuate (they are sentimental to me so as far as I'm concerned they are behind glass saying "break in an emergency").
But at least the bulk of our savings are safe ...albeit earning peanuts at the moment...but they are added to by £650 a month.

There is also this unexpected feeling of "feeling safe" with the inheritance....plus I have never been in a situation where money isn't a worry..it is... now but in a completely different sense! Thank goodness for this forum though in that it's already bought into focus my position thanks again "greenface"......

So if I can keep saving £650 a month ....I can't see the investments I have dropping that much on a monthly basis so I must be beating inflation surely?

FLAPJACK

Hi middlepuss

If I didn't have my pension (index linked I would be worried) the ISA is has risen to £25k from £22 in 3 years.....I have recently enquired about an Annuity but even being 53 and retired under ill health it wouldn't be a goer at this point in time.....but I was advised (as you have done) to maybe approasch it again in later life. Of course that means making sure the capital is still there in later life also. Leaving cash to family is not a problem....we are just regarded as "tight wads"....who just so happened to furnish them with £10k when I got the inheritence plus 1k more for their moving expenses and a new chest freezer this xmas....what have we got.?..not even an xmas card.

middlepuss

When it comes to the shares you hold inside and outside of ISAs I would say don't get too hung up about whether their value bobs up or down in any given year.

If a stock market investment is well spread, via diversified unit trusts or investment trusts, they will broadly move up and down in line with whatever stock markets they are invested in. (UK, worldwide, or whatever.)

What matters really is the income these investments produce. The thing to consider is whether that income will rise and how fast. In any given year the capital value of your investments might go down but if the income does not go down - so what? Over many years the value of a well spread investment will bob up and down but the income should rise. Though nobody can guarantee that will be the case. But then noboday can guarantee that your cash investments won't lose a significant proportion of their real value over the next 25 years.

I certainly would not suggest that you plunge headlong and put all your cash into the markets in one go! But I do wonder whether, over time, dripping a little of that cash into a few big, boring, low charge funds might not be a bad idea given how young you are.

FLAPJACK

Hi middlepuss

Yep take on board absolutely what you say regarding drip feeding into a fund....the thing is I am happy if the pension will keep the wolf away from the door "guarenteed" forever..As regards the lump sum, if it meant that we would always have a nice sum behind us which I can add to then great.... as far as I'm concerned the major sum can grow or decrease as we spend it on trips etc. As the wife has Rheumatioid Arthritis then I am happy on cutting into the major sum for stair lifts ...medication etc. The thought of risking it all on the stock market doesn't come in the picture as the risk of the sum growing is too high....if it was lost I would not forgive myself.
At the end of it all if we spend all we have we will still have the pension coming in, plus hopefully a sum behind us...as we are not extravacant

pennine

The money only needs to last you 7 years until your pension is guaranteed, if you became pensionless tomorrow I should think you could still afford to pull about £3600 a month from the capital until it runs out. Have a ball with
it.
Something that may interest you or maybe others. http://www.bankrate.com/calculators/savings/savings-income-calculator.aspx

middlepuss

pennine wrote: »

...I should think you could still afford to pull about £3600 a month from the capital until it runs out.

How did you work that out!

pennine

Click on the calculator. Put in 280000 @ 2.5% and 7 years.

middlepuss

pennine wrote: »

Click on the calculator. Put in 280000 @ 2.5% and 7 years.

Gotcha - but I don't think FLAPJACK is looking to blow his inheritance over the next 7 years!