Changes to pensions

atush

She really wants to have all of her investments in safe places (no risk of drop in value). This is non-negotiable on her part so no point in trying to persuade her.

She can invest in cash in her pension too, but both will just mean she runs out of money sooner rather than later. Why? Because inflation means she will be losing money out of her pot each year like a leaky sieve.

atush

She had taken advice from IFAs on a number of occasions several years ago and "invested in something" but she didn't know what the "somethings" were or how much they were worth, or what she was going to do about her retirement other than receive her state pension.

How about, with your help, she pulls up her big girl pants and finds out where this money is, and what it is worth?

dunroving

mgdavid wrote: »

Before you did that did you consider the bank current accounts that pay much better than ISAs?
Santander - 3% on £20k
Nationwide - 5% on £2.5k
TSB - 5% on £2k
etc

Also First Direct Regular Saver - 6% on £300 per month for 1 year.

Thanks, I didn't think of that option - I will look into it. I am familiar with Martin's MSE principle of ditch and switch so will tell her about that, too.

atush

I wasn't thinking about the tax aspects of her estate. She doesn't have any children and she isn't loaded so I think for her, security of the capital is critical, and she just wants to be sure if she has any capital left when she dies that it goes to relatives (hence she doesn't want an annuity). When I explained what happens to an annuity when you die, she was in horror.

So keeping her moneyin a pension would mean any left over could be inherited by the relatives she decides on?

If she takes it out instead, she will pay tax on it, and there could be inheritance tax on it as it would become part of her estate?

dunroving

atush wrote: »

How about, with your help, she pulls up her big girl pants and finds out where this money is, and what it is worth?

Yes, that's what we did when I first met with her and she gave me the drawer full of papers. I'm about 99.9% we (I) found everything she had and where it was.

atush

TFLS is tax free lump sum.

If she has money in a pension, and was happy with the pension before, does she not understand it was invested in equities?

Maybe instead of half baked advice, she needs professional advice?

atush

dunroving wrote: »

Yes, that's what we did when I first met with her and she gave me the drawer full of papers. I'm about 99.9% we (I) found everything she had and where it was.

yet you said you didn't know where it was, and what it was worth?

dunroving

atush wrote: »

So keeping her moneyin a pension would mean any left over could be inherited by the relatives she decides on?

If she takes it out instead, she will pay tax on it, and there could be inheritance tax on it as it would become part of her estate?

Her estate won't be huge (below the threshold)

Her biggest worry (and I mean lying awake at night type worrying) is that her Aegon "bond" and Aviva personal pension are invested in "the stock market"

If there is any way money (I mean cash, or something else that won't go down in value) can be held in a pension wrapper, I'd be grateful for being pointed towards it.

The main concerns for her are (a) not wanting to risk her capital in the stock market - nothing that could go down, and (b) not wanting to take an annuity because she is adamant that she doesn't want to risk dying early and all of her capital that is currently in the pension disappearing in a puff of smoke.

Don't try to figure out her psychology, it is what it is. And with personal finance, I don't think you can/should push people to do something they feel uncomfortable with even if you can see it is a better investment in the long term.

dunroving

atush wrote: »

TFLS is tax free lump sum.

If she has money in a pension, and was happy with the pension before, does she not understand it was invested in equities?

Maybe instead of half baked advice, she needs professional advice?

Yes, she understands that (I told her).

She doesn't trust the professionals to have her best interests at heart, but she trusts me (and I don't think I am giving her half-baked advice). I don't have my own money in all cash, but that is what she is adamant she wants even after I have pointed out to her some of the things others have pointed out on here.

atush wrote: »

yet you said you didn't know where it was, and what it was worth?

No, I didn't say I didn't know, I said until I helped her, she didn't know (see my post below).

dunroving wrote: »

Until I visited her a few months back and she handed me a drawer full of paper, she had no idea what she had, or where.

It's not so much that my questions are driven by the recent changes (although certainly the greater flexibility you refer to fits nicely into her situation) so much as she had a moment of panic when she realised how old she is, that her self-employed income is down to a couple of £k a year and she really didn't know what to do.

She had taken advice from IFAs on a number of occasions several years ago and "invested in something" but she didn't know what the "somethings" were or how much they were worth, or what she was going to do about her retirement other than receive her state pension.

I have been helping her figure out what to do next. We are very old friends and she knows I am not giving her financial advice but she literally doesn't know her ISA from her elbow. Basically I got her to transfer her cash (that was in pitiful ISAs giving about 0.25% interest) into higher-paying ISAs, consolidate other bits and pieces, and start thinking about how she will use her capital in an Aegon bond and an Aviva personal pension to fund her retirement.

dunstonh

Her biggest worry (and I mean lying awake at night type worrying) is that her Aegon "bond" and Aviva personal pension are invested in "the stock market"

Anyone making long term planning should be including some stock market element as the risks of being cash only can actually be higher over the long term. At 63, she is still young enough to have some stockmarket investments. However, these things are rarely 100% stockmarket. They are normally multi-asset. Certainly, both of those providers offer multi-asset options within them.