Retired - Asset 'rich' - Inflation Worries - Advice please

JayBrun

Having raised a couple of general posts I thought it might be better if I spell out my circumstances in detail in the hope that advice might be easier to give.

I'm 65, single with no dependants, retired with an 'Index Linked' Company Pension worth £17.5K per year.
I'm also in receipt of a State Pension of £5K per year.

I have cash ie bank savings etc of around £380K including approx £53K in cash ISA's.
My portfolio of shares is worth around £140K.
Approx £520K in total with no debts.
The portfolio is doubtlessly not well balanced although £90K is in Managed Funds much of it in two general Investment Trusts.

I have a property worth approx £135K with no mortgage.
I stopped buying shares a number of years ago because I felt I didn't need to take the risk - health also came into it - but I forgot about recessions and inflation.

For the previous 12 months the pensions, dividends and interest provided an income of around £34K although with current low interest rates this may reduce in the immediate future.
I typically spend around £20K per year.
I don't normally therefore spend all my income which is one reason why the cash and total capital continues to grow - probably not for much longer

A while back this seemed more than enough and I settled down for a quiet life but with inflation beckoning I'm getting concerned that much of it could disappear rather quickly.

IIRC in the seventies inflation got out of control and along with others one year my pay rise was around 30%.
If inflation remains high or gets worse I suspect my Company Idex Lnked pension may no longer be Index Linked and the real value of the state pension could drop.
Much of what I have spent my working life accumulating could disappear.

I'd rather not take excessive risks but would also prefer to retain significant finances in reserve in case needed - my nieces would appreciate it too.

Any advice including specific recommendations would be appreciated.

mike88

At your age and your circumstances you cannot afford to take too many risks as you have no way of getting back any monies lost on shares or risky investments. However you could look at diversifying your exisiting holdings in the two Investment Trusts you hold into either something that will generate an income with capital growth or pure growth unit or investment trusts. With £140k in 2 Investment Trusts that is a bit too risky in my view. Why not spread this amount over 8 to 10 Trusts to spread risk?

As it happens equity income funds have not done that well in the past few years but many think that there is plenty of scope for steady growth in these funds as dividends are likely to increase. I would not invest further cash in shares; just play around with what you already have invested. Funds such as Blackrock Income, Neptune Income, Invesco Perpetual High Income, Artemis Income are all popular choices and to balance things up why not something like Newton Real return in the Absolute Return sector that has outperformed most unit trusts in the Equity Income and UK Growth sectors over the last 5 years.

Some might say you should gamble on emerging market, technology and coomodoties but this would be gambling with your future. Once its gone its gone.

Shimrod

JayBrun wrote: »

Any advice including specific recommendations would be appreciated.

You will only get suggestions and information rather than advice. The recommendation would be to talk to an IFA to review and rebalance your portfolio.

To counter inflation I would be looking at various bond funds and index linked gilts. You may choose to have a small percentage (10%?) in equities depending on your risk attitude.

Given your current income level and expenditure, you probably don't need to be too worried. Your company pension will be remain index linked however there are statutory caps on the indexing - between 1997 and 2005 the pension does not need to increase by more than 5%, and from 2005 just 2.5%. Prior to 1997, pensions did not have to increase in payment at all, although most do. Pension trustees have discretion to increase the pension by more than this, although it would have to be a very well funded pension to do so.

You would do well to ask this question again on the pensions board where you will get a lot more help and are less likely to encounter the attitude of someone like Stubod.

blinko

I think the problem here is you have too much money and it doesnt seem to be organised in any fashion

overall if you manage your assets

eg cash 10%
shares 30%
property 30%
other (bonds/savings etc) 30%

and breakdown sectors into
20% high risk assets eg small caps
30% medium - large cap
50% large cap

for your shares folio

you should be fine

I think you just need to organise your assets a bit better,

you dont seem to have targets ?

you seem to be unsure of your current investments with the information provided I dont think you have stayed informed about your current investments (we all hate doing it but it allowed me to sell my infia and africa funds at the top of the spike) plus it gives me the peace of mind that I am aware of what is happening


other than that go and see an IFA
good luck

JayBrun

With £140k in 2 Investment Trusts that is a bit too risky in my view. Why not spread this amount over 8 to 10 Trusts to spread risk?

The total is £140 of which £66K is in the two trusts but I take your point.

........I would not invest further cash in shares; just play around with what you already have invested. Funds such as Blackrock Income......

Some might say you should gamble on emerging market, technology and coomodoties but this would be gambling with your future. Once its gone its gone.

Thsnk you

You will only get suggestions and information rather than advice. The recommendation would be to talk to an IFA to review and rebalance your portfolio....

To counter inflation I would be looking at various bond funds and index linked gilts......

You would do well to ask this question again on the pensions board where you will get a lot more
help and are less likely............

I hesitated for a few days before making this detailed post.
Other recent postings detailing rather more favourable circumstances than mine only received reasoned responses.
The opportunity was perhaps inevitably too much for some to resist.

Thanks for the advice - at the risk of upsetting the mods I've posted in the Pensions Section.

With respect - those who may be genuinely interested

http://forums.moneysavingexpert.com/showthread.php?p=41592326#post41592326

p.s i notice you have 9 posts please try and post more and give something back tot he forum thanks

My relative inexperience discouraged me from offering too much advice and the sort of simple common sense I could offer would doubtlessly not go down well with some.

Thanks for replying - I'll certainly do what I can in that respect.

I dont think you have stayed informed about your current investments

I use Financial Software and can account for 99% of them including where all my spending goes.
Given my circumstances until recently I wasn't too concerned about targets but we live in difficult times.

getmore4less

I think my first priority would be housing.

Decide where and what sort of place you want to live in and get that set up now.

Think about deteriorating health so make it managable low maintanence handy for things etc.

You currently have pensions that cover your expences

These will cover the essentials unless inflation roars away.

Ok the rest is £500k .

At 5% inflation with £1k pm drawdown and a 3% return that will last 30years

If you can't find things to spend the extra £1k per month on I think you will be all right.

Another benchmark you could use is an annuity let some one else take on the risk.


If you can just keep the investment return at inflation levels then with a 35y target(100) you can drawdown even more a month.

Shame you were not using the index linked NS to stash the cash.