No risk £100k investment

dunstonh

justme111 wrote: »

My guess would be sheltered accommodation was arranged not relying on those investments - as she does not understand them she would not have known what they can bring her so doubt would take them into account. Worth checking of course. If it is the case she probably could not care less if they diminish by 20% in 10 years due to inflation and her priority is no stress so explaining about diversification is likely to be not welcome. I looked at vanquis bond - it is basically a savings account -or did I get it wrong ? so surprising it will not be taken into account for means tested benefits

The OP says "spread around a number of investment bonds, term shares and other financial instruments, none of which she understands"

Investment bonds have a small element of life assurance. This gets them classified under the life assurance tax wrapper and appropriate taxation for that. To prevent people from having their life assurance plans (such as investment backed whole of life plans or endowments) from being treated as investments, life assurance plans were excluded from the means test. e.g. if someone had an endowment mortgage then without this exclusion, the endowment value would reduce their benefits compared to someone with a repayment mortgage. The exclusion avoided that issue.

Investment bonds are life assurance plans. Their generic name is single premium, non qualifying, whole of life assurance plans (if open ended) or single premium endowments (if fixed term). So, they do not get included in the means test.

Surrendering the investment bonds will mean that her savings will suddenly increase and this will impact on the means test and result in a reduction or removal of benefits.

The so called vanquis bond is not a bond. It certainly isnt an investment bond. It is a fixed term deposit with bond in the marketing name. (technically, investment bonds are not bonds either but another marketing name that sounded better than single premium whole of life assurance).

If she is not in receipt of benefits and not ever expected to be in future then the means test issues do not exist. However, if there are means tested benefits or the possibility of means tested benefits in future then leaving the investment bonds in place would normally make more sense. Making a change as proposed could turn out to be a costly error.

Malthusian

Thanks all - yes, may rethink the Premium Bonds, but the idea of perhaps having a big win quite appealed to her!

Tell her to put it in the Vanquis bond and spend part of the interest on lottery tickets. Or on a monthly visit to a local casino with £40 in her purse. She will still have the money she would have earned on average from Premium Bonds (guaranteed), the gambling element has a better payout, and it's much more fun.

ericonabike

Linton hits the spot - FOF os capable and resourceful, but 'absence of stress and hassle' is becoming ever more important. She simply wants to understand what capital she has, and the returns she gets is of far less importance. She will be renting the sheltered accom, as for the moment the owner of the block into which she wishes to move has stopped selling them - which may change. The total outgoings for the flat would be around £1000 a month, which is roughly equivalent to her income. Her outgoings above that are minimal - as she says, she is cheap to run! She will be selling her current home, which will around double her capital. And so whilst her savings will probably diminish due to her move, she will have a better quality of life, will be happier and stress-free. Her children are supportive of the move and are not fussed about seeing their inheritance getting smaller. And in writing this I may have argued myself into putting the lot into NS and I as George suggested earlier....

Glen_Clark

Malthusian wrote: »

a monthly visit to a local casino with £40 in her purse .........the gambling element has a better payout, and it's much more fun.

only when you are winning, and the odds are against that

atush

The total outgoings for the flat would be around £1000 a month, which is roughly equivalent to her income. Her outgoings above that are minimal - as she says, she is cheap to run! She will be selling her current home, which will around double her capital. And so whilst her savings will probably diminish due to her move,

This doesnt make sense.

You say her savings will decrease thrut he move yet you say she is selling up and renting so that means capital will Increase?

And if 1K per month covers the house, how much else does she need to live on for food, travel, entertainment etc.

Malthusian

Glen_Clark wrote:

only when you are winning, and the odds are against that

I think you're overlooking that the £40 a month for the casino or the lottery is the excess interest over what she would have earned - on average - from Premium Bonds. The £34 a month she would have earned from PBs (on average) is safely back at home. She literally cannot lose - in the sense of doing worse than PBs.

Naturally it is even better on average to take the excess interest from the deposit account and not gamble it at all. But the OP said her friend liked the possibility of a big win. In which case taking the option of a fixed rate bond and entering the lottery every week is not just better value but possibly more appealing to her. Premium Bonds don't have a TV show based around them.