Dad about to retire... what to do with 30k?

gpage2000

Hi to all. I have looked through the many posts on the site (which are very informative!) but am looking for a little help still: my Dad is about to retire at the age of 55, mainly due to back problems - and stress. He has a minimal pension until he's 60 when things will be better income wise.

Until then, he has a 30k lump sum to 'put' somewhere, around 8 to 10k in a CASH ISA and this small ish pension income.

He is going to need to draw on some cash from somewhere, may be the ISA, or the lump sum to supplement the pension until 5 years time. Does anybody know who is paying the best rate on fixed rate bonds, say over the 5 year period? And is this the best option? Or should he draw from the ISA.. or try a part time job!?

Also with the bond, if he takes a bond from a building society for example; will they pay the monthly interest into his current account with his bank?

All comments/suggestions welcome..
a worried son!

McSaver

The last thing your dad should do is draw from the ISA because that pays Interest tax-free, the other 20k or so should be used in a savings account such as Icesave so that can be used if needed and every new tax year the ISA allowance can be transfered to the existing ISA balance.

dunstonh

If he is going to use cash savings accounts to draw interest from to live on then that has a risk. The risk is inflation and current RPI is 4.8%. So, his money will be losing 4.8% a year in real terms. £30k over 10 years would end up with the approx spending power of £21,000.

Now the amounts involved arent going to pay a lot so he may have to take an income and sacrifice some of the capital to get himself to 60 when pension and possibly pension credit kick in. So, the capital needs to be used wisely and his full circumstances and future income need to be taken into account before building a solution to suit his requirements.

Techno

Can he claim sickness benefit (or any other benefit for that matter) I suggest he has a word with the citizens advice people or a benefits advice agency to see what he may be entitled to

mleonard79

I would suggest he get some proper advice on what to do with the £30k (go to an independent financial advisor and not a high street bank who will only try to sell him their own products.) I also agree that using the ISA for an income's the last thing he should do - it should definitely be the part he leaves alone (other than switching it elsewhere if it's not competitive.)

Regards

Michelle

jamesd

One option to consider is a purchased life annuity using some of the 30,000. None of the capital will be returned at the end of the five years, instead it is paid as income and isn't taxable when received, so it'll reduce the tax to pay on the limited income available.

He'd need to use an IFA to purchase one.

gpage2000

Thanks for the tips. Dad is booked in to see an IFA (as opposed to his bank's adviser who seemed quite unhelpful!)

The other thing I forgot to mention was the fact that he has no mortgage so owns his house outright.. he could sell for say £250K (easy) and relocate/downsize as they no longer need a large property, so could buy a really nice detached bungalow in East Anglia for say £150k.. leaving £100k invested in a bond providing a reasonable income on top of the pension, and the 30k 'spare'.

This should give him around £400 net and will still have no mortgage

As for the claiming benefits, he's not 'that' bad; it's more long term damage due to heavy work all his life, and having said that I reckon he'd still retire at 55 back problems or not!

amcluesent

Could you buy a proportion of your father's house (say £50k), giving him some capital use for investment? With joint ownership of the property, it also becomes more difficult for the NHS to force a sale to pay for care, should that come about.

dunstonh

although they could turn round and say you only did it to try to get benefits and it would be hard for you to prove that it was done for any other reason.