help to review my mum's inherited pension

rosyposyjm

My dad passed away in 2013, leaving a private pension for my mum.
It is managed by a financial advisor who want us to go in to see her to review it.
I don't know a lot about pensions so would appreciate some advice about what to expect.
Here are some figures:
In Aug 2013 it was worth £116,071.
She draws £7625 pa.
leaving £100,820.
The current value on the "wrap platform" is £108,934.
They say that assuming a mid growth rate of 4%, her existing income should sustain her to age of 87.
They say she could increase her income up to 9532 (which would only last until she's 81.

She is quite happy with current amount so wouldn't want to increase it.

She currently has a "lower to medium" risk portfolio.

she has turned down the option of buying an annuity.

My mum is 68 and very fit and healthy.

I'm not sure what the meeting is about, but assume they may ask if she wants to change the risk level or if she wants an annuity. Can anyone advise as to what she should do - leave it as it is?

My mum also seems to think that the advisor is keen to "get hands on" the rest of her money! This is invested in fixed rate bonds and isa. So I think that this money should stay where it is.
Thanks in advance for any advice or enlightenment

dunstonh

It is managed by a financial advisor who want us to go in to see her to review it.

That makes sense as income drawdown normally sees periodic reviews taking place.

I'm not sure what the meeting is about

Basically to verify no change of circumstances, the current income rate is sustainable, how much it could go to, compare it to other options to put your mum in an informed position and check investments are still suitable.

Can anyone advise as to what she should do - leave it as it is?

The adviser can advise which is why you have an adviser and why she is paying for an adviser.

My mum also seems to think that the advisor is keen to "get hands on" the rest of her money! This is invested in fixed rate bonds and isa. So I think that this money should stay where it is.

Its possible that the adviser may feel that some of that money should be invested. its possible they wont. Its a case of finding balance.

atush

If your mother's fixed rate bonds and ISA aren't paying well, she'd be wise to review them with the adviser (or read up here- has she looked at the current accts paying 3-5%?).

How much cash is she holding? At her age holding 2 years worth of expenses is a good idea, but not holding many thousands if she is getting just 1%?

rosyposyjm

She has several thousand in each of about four accounts I think. The financial adviser already charges over £500 for managing the pension alone and I don't think she wants to spend any more.
When the bonds mature I could look on here to see what is best.

kidmugsy

The advantage of an annuity is that there's no need to guess how long she'll live - the asset matches the liability. The disadvantage is that annuity rates are rather low at the moment by historical standards. If your mother is drawing her State Retirement Pension then the best way to do the equivalent of buying an annuity is by suspending (they call it "deferring") that pension. That pays an extra pension of 10.4% of her current pension for each year of deferral - miles better than commercial annuities. (Which is why the 10.4% will fall to 5.8% for new style pensions - the current cost is far too high for the taxpayers to continue to fund it.)

rosyposyjm

The advisor suggests that she keeps the pension fund as it is as this money Cannot be used for care home bills should the need arise and to instead use some of her savings for day to day living, there by reducing the amount available for health care costs.
Would you agree with this (or is the adviser thinking of her .75%fee diminishing as my mum draws her pension...)
Thanks

xylophone

as this money Cannot be used for care home bills should the need arise

I'm not sure that I follow this?
http://www.ageuk.org.uk/Documents/EN-GB/Factsheets/FS10_Paying_for_permanent_residential_care_fcs.pdf?dtrk=true

Does your mother own her home?

rosyposyjm

Hmmm - looking at the fact sheet, it says (p24) that 50% of a private pension would be disregarded in the means test.

The financial advisor implied that the whole pension fund would remain untouched. Could that be anything to do with the fact that my mum inherited it from my dad or has she got her facts wrong?

My mum does own her home, but we are going to put 50% of it in my name, which is what the solicitor suggested we do a while back.

I don't think my mum will need "care" any time in the near future, but we just want to safeguard the assets that my dad spent his whole life building.
Thanks again

dunstonh

rosyposyjm wrote: »

The advisor suggests that she keeps the pension fund as it is as this money Cannot be used for care home bills should the need arise and to instead use some of her savings for day to day living, there by reducing the amount available for health care costs.
Would you agree with this (or is the adviser thinking of her .75%fee diminishing as my mum draws her pension...)
Thanks

The adviser is correct in that the capital value of the pension fund is not used in the means test. However, they can use the amount of income it could generate if it was being paid. As she is drawing an income, that is the figure they would use in the means test.

My mum does own her home, but we are going to put 50% of it in my name, which is what the solicitor suggested we do a while back.

Although that would likely be viewed as deprivation of assets. It would also create a capital gains tax issue for you and does not avoid inheritance tax.

rosyposyjm

We wouldn't pay inheritance tax as her estate is not big enough. It would be purely to ensure that, should she need to go into a home at a later date, some of her assets will be secure.

dunstonh

rosyposyjm wrote: »

We wouldn't pay inheritance tax as her estate is not big enough. It would be purely to ensure that, should she need to go into a home at a later date, some of her assets will be secure.

Putting you down as part owner would not achieve that and just create a capital gains tax liability as you would not be able to use private residence relief.