How should I regard situation?

pennine

FLAPJACK wrote: »

...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.

Just thought it may be come uppance .

Another little calculator http://www.math.com/students/calculators/source/compound.htm

FlapJack if you put in 280K and £650 per month @ 2.5% for 7 years you may get a nice surprise !!

FLAPJACK

Hi Pennine...
You have made my day with the calculation!!
I think maybe the consensus is that (regarding my aversion to risk) I have done about all I can do.

I am of the mind that with the Pension coming in (and rising each year) which easily covers the outgoings already if I used it for that... then the lump sum doesn't need to grow massively, as your calculation shows even at 2.5% it will be a nice sum. I am hoping that soon (ish) rates for savers will rise so the return will be even better. The idea when I first got the money was to use the interest generated over the previous year for travelling etc..as we wouldn't be touching "our" money in effect, however as we all know things went pear shaped so for the last couple of years I have only taken out the household outgoings for the year and reinvested the remainder.

So I am now planning on the following : Interest rates rising = spending money......or reinvest until the Pension is firmed up then I know the cornerstone of the future finances are secure.
Not sure if I am being too cautious...but if we needed money in an emergency we always have access to it.

The Bank have been chasing me to use their Private Banking service (apparently I'm a High Net Worth Individual....does that mean I consider myself rich or wealthy!) but I don't really think our lifestyle warrents the services they offer, already got a Premier A/c with them that has useful add-ons anyway.
Thanks again for you input!

(not sure what your comment meant re-come uppance...I'm about as foggy as it is outside this morning!)

getmore4less

If the pension is providing for now the next thing is to check your state pension forcasts as they will provide further income.

I guess one of the grounds for removing the pension is if you get work so this limits where you can generate earned income.

One option is to "work" on investing and spend more time self mamanging some of the money is more speculative options like S&S, I think this needs to be of interest to you to make it work.

Another angle if possible is to work on things that reduce costs like gardening, maybe an allotment(allthough health may make this a non starter).

LOnger term you may be hiiting the age allowance with the pension and the statepension and taxable interest so the ISA may come in handy.

Have you looked at a move to a property suitable for old age especialy if you antisipate mobility issues.

FLAPJACK

Hi getmore4less,

I checked my SP as soon as I realised I was no longer paying NI contributions....thankfully I have enough years to get a full state pension.

The Ill Helath Pension was granted as I had a Stroke and was off work for 6 months, I had a medical review and as a result the company decided to let me go. I have since found out that IHP's are periodically reviewed..this can mean just letter from your Dr to the Trustees or a full medical. I have found the rules of the Local government Pension scheme are fairly similar to my scheme. It explains that there are 3 types of IHP a Tier 1 which means you cannot do any job up to pension age (60 in my case)this pays a full pension as though you had worked for 40 years. Tier 2 which means you may not be able to do your old job but you could do something, this pays the pension earned up to the day you left plus 25% extra pensionalble service and finally Tier 3 which means you are regarded as more than likely to recover enough to resume work in 3 years.
Tiers 1 and 2 are not subject to review only tier 3. The Pension Advisory Service advised me that in my case I would be a Tier 1, and that the review mechanism is for medical cases such as bad backs etc.. in their view a Stroke is a cut and dried issue...once you have had one there is a chance you could have another! They also said that a Medical review is expensive so again it probably won't happen...they couldn't say definately though.
Apparently I should have been made aware of what conditions the Pension was granted at the time it started..all I have is a letter informing me that I will periodically have a "Declaration of Entitlement" sent to me which I need to sign and return..the PAS told me this was standard (just checking you are still alive basically) and that letter would have been the one that would have said that you would also have a periodical review of your pension....so again it looks as though I won't get a review. They backed that up by saying that these type of Pensions are usually reviewed at 18 months 3 years and 5 years, my 5th anniversary is the middle of 2011 so here's hoping!

I'm interested in the comment you make as regards "age allowance" etc...could you shed more light on that aspect..what sort of thing am I to look out for?

When we first got the inheritence we did seriously think about moving, but the more we looked into it the more we realised we are happy here..the only thing we definately checked out was the possible use of stairlifts in the future, we had the stairways looked at and was told there would be no problem in getting them installed...had there been a problem then as you say we would have had to look for something more suitable.

Thanks for your comments..

Jake'sGran

I just want to mention Inheritance Tax FlapJack as due to my success in the stockmarket I suddenly realised a few years ago that it might become an issue for my heirs. Our house is now held as tenants in common and I transferred one of my funds to my husband.

You seem extremely organised with the money you have. I have a feeling that the pension you are getting now is unlikely to be reduced. Presumably you will get a state pension at 65 unless the new rules will apply to you by then?

Money makes money as they say so I doubt your capital will erode very much especially if you continue to match inflation with your savings a/cs. I started investing in unit trusts in th 80s and many have done very well so it is good that I took advantage of PEPs and ISAs.

If you are fit enough you could treat yourselves to a special holiday. I can't do this now.

FLAPJACK

Hi Jake's Gran,

I will have to look into IHT..thanks for the prod!
Thanks for the pension comment...I just seem to worry if I have nothing to worry about...that's the wife speaking!!
We had our first "treat" when we first got the money .....it was a well needed holiday too after the Stroke and losing my father too. We decided on the Queen Mary to NY....I can highly recommend it!!! We plan to do it again. Also the Orient Express to Venice from London looks nice as well, can't really get used to looking at these things and not worrying about the cost, not sure if I feel guilty of spending what was dad's hard earned.... as my parents had simple tastes and even though they could have afforded it they wouldn't do either of the aforementioned trips.

Thanks for your post.

dunstonh

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.

Of course the IFA has number 1 to think of. Everyone does. I do my job to earn money to provide for my family. Doesn't that apply to most people? If I didnt need to work, I probably wouldnt. It doesnt affect the advice given though.

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.

Safe but subject to inflation risk and shortfall risk (and provider risk).

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.

Trustees dont just make decisions to pay or remove pensions. They act within the rules of the pension scheme. It helps to know and understand the rules so you are not in a position where you think it could be adjusted up or down or completely removed. Rather you should know why it would be adjusted up or down or removed. It is possible that complete removal is only applied on certain events which could be avoided.

You need to look at your situation more holistically and over a longer timescale. You need to consider your spouse as well. It is unlikely that any one option is going to be the best solution. There has been very little mention of your spouse in your posts. You need to look at the joint position, factor in death etc and how that will impact. You need to look long term. The use of the ISA allowance is part of it but even using pensions again could come into play.

At the moment you are looking at solutions without appearing to know what the questions are. Those solutions also dont appear to take in the wider scenario. The posts on this thread in response have been generally helpful but are all based on limited information. Based on what you have posted so far, I couldnt tell you what is best or what you should do.

middlepuss

FLAPJACK wrote: »

Hi Jake's Gran,

I will have to look into IHT..thanks for the prod!

You can each pass on £325K to your heirs with no IHT to pay. When the second spouse dies they can use any IHT allowance their spouse did not use.

For example, if when the first one dies they leave everything to their spouse they do not use up any of their IHT tax free allowance. So when spouse 2 dies they can leave £650K with no IHT to pay.

If the first spouse had left £100K to someone other than their spouse, then when spouse 2 dies they could leave £550K with no IHT to pay.

FLAPJACK

Hi dunstonh,

I take on board as regards using an IFA.....but I have been told twice by two that as you have an aversion to risk then you are doing about all you can in that Fixed Rate Bonds are about as safe as you can get. Hence when the money first arrived it was deposited in sums os £32k (as the safety limit was £35k...I left room for interest) this worked out to 9 accounts varying in time so that we had 2 maturing each year..the maximum length was 3 years.
Since then when maturing they have been deposited in sums of £45k (as the safety limit is now 50%) as you know as from Dec 31st is rises to £85k, next year this means I won't have so many accounts to juggle with.
As regards inflation...surely adding £650 a month is increasing the capital faster than inflation is eroding it....am I missing something?

On the Pension front, the rules state that an Incapacity Pension (as they refer to it) can be awarded on the recommendation of a Company Dr ( independent of the company but acting on behalf of the company) and the agreement of the Trustees. An Incapacity Pension is subject to review at anytime until normal pensionable age (in my case 60) has been reached. Trustees have the authority to reduce or suspend payment of the pension if the member has been found to have recovered to ANY extent.

I know that I haven't recovered to any extent but I'm sure if I were medically reviewed it wouldn't be by the same Dr, so whoever is won't know what I was like 5 years ago.. also in the present climate whos to know that this will be a "cost effective" way of cutting the pension costs for the next 7 years? As Incapacity pensions are the only ones that can be altered once in payment.

As far as my wife, she is covered by the pension scheme in that if I die before 60 then she will receive a lumpsum payment equal to 4 times my final annual salary plus an ongoing survivors pension of 50% of what is paid now plus indexation. The plan at 60 will be for me to get life insurance.....with the cover we have at the moment there is little point in taking it out now. However that would change if my pension was tampered with..it would be the first thing I would do.
She has also a small pension of her own which should she predecease me I will recieve a pension of 50% of what she is paid now..again index linked.

We have mirror will made as well.

Thanks for your comments..

FLAPJACK

Middlepuss,

Thanks for that quick comment...I was about to delve into the wonders of IHT...having coughed up nearly 30k for Mr Brown a few years back!