Investment advice for elderly - approx £300k

albert100

Hi guys,

Advice request please.

My MIL is 81 YO and in middle-to-poor health and in a care home.

She has major pension income, which covers approx 50% of her total living costs incl care home. She also has a managed care annuity, which rises by 5% pa, matching the rise in care home fees, as agreed with her care home - and the income from this covers the other 50% of her total costs.

As such, she is now income-outgoings neutral - her income matches her costs. This will gradually change over time as her pension income growth will be outmatched by care home rises (i.e. though the annuity rises by 5% pa, her pension income will not).

She has £300k cash, currently in an NS&I account earning 0.8% while we figure out what to do with it. She has done all the pensioner bonds stuff she can.

So... what to do with it?

We aim to preserve capital. We have no idea how long she will need it for, and as stated above, if she lives a long time she will need more of it. I appreciate this closes off investment options, but this money is hers, and we need to operate in what is in her best interests, not the next generation. But there may be others here in a similar boat who have a perspective here.

All advice gratefully received.

Albert

xylophone

I would not say that it closes off investment options, or certainly not for all of the £300,000.

Do you have Power of Attorney?

jimjames

albert100 wrote: »

So... what to do with it?

We aim to preserve capital. We have no idea how long she will need it for, and as stated above, if she lives a long time she will need more of it.

Not sure why investment options are closed off. Obviously you need to keep a portion in readily accessible cash but I can't see why you couldn't invest say £100k or £150k to give a better income and the chance of capital growth. Your MIL has sufficient income to cover current needs and investments would provide an income to cover any future shortfall. Compared to NSI at 0.8% you'd probably be able to get between 3% and 4% income with investments. Yes the capital value will vary but that doesn't seem to be too relevant if the income is maintained.

albert100

Thanks

Yes we have POA. Thanks for the idea. I guess then we move onto a 'how much can be risked?' type conversation. Perhaps half?

More thoughts welcome.

Linton

I would be very wary about investing as a POA. If you do, for that amount of money I believe that you should get documented professional advice for your own protection.

The point is this - as a POA your absolute duty is to act in the interests of the donor. I find it difficult to see how risking the assets of an 81YO (a) whose income matches her expenditure, which broadly can be expected to continue into the future and (b) who has a large amount of savings more than enough to meet any likely need can possibly be in her best interests. It may be in the interests of her beneficiaries but it is definitely not your duty to act in their interest. So I would say that unless a professional advises you otherwise the money should be kept in the NSI account which will earn some interest but more importantly be as safe as it is possible to be.

HappyHarry

Linton wrote: »

I would be very wary about investing as a POA. If you do, for that amount of money I believe that you should get documented professional advice for your own protection.

The point is this - as a POA your absolute duty is to act in the interests of the donor. I find it difficult to see how risking the assets of an 81YO (a) whose income matches her expenditure, which broadly can be expected to continue into the future and (b) who has a large amount of savings more than enough to meet any likely need can possibly be in her best interests. It may be in the interests of her beneficiaries but it is definitely not your duty to act in their interest. So I would say that unless a professional advises you otherwise the money should be kept in the NSI account which will earn some interest but more importantly be as safe as it is possible to be.

I can see what you're driving at Linton, but I would disagree with you as to what would be in the MIL's best interests.

For an 81 year old with full capacity, whose income needs were covered and had £300,000, it would be unusual to recommend only cash deposits. Therefore, the recommendation wouldn't be any different for the OP in their role as Attorney.

However, as you said, getting a professional to advise (and have that advice on record) can clearly demonstrate that the OP is acting in their MIL's best interest.

EDIT: Sorry - just realised OP said MIL was not in good health. If health is poor and life expectancy low then generally cash deposits would be ideal. Sorry Linton!

Linton

HappyHarry wrote: »

I can see what you're driving at Linton, but I would disagree with you as to what would be in the MIL's best interests.

For an 81 year old with full capacity, whose income needs were covered and had £300,000, it would be unusual to recommend only cash deposits. Therefore, the recommendation wouldn't be any different for the OP in their role as Attorney.

However, as you said, getting a professional to advise (and have that advice on record) can clearly demonstrate that the OP is acting in their MIL's best interest.

mmm - interesting argument. On the side of urging extreme caution here I would put as evidence that whilst MIL had full capacity she seems to have chosen not to invest the money. If she was previously an investor I agree that there may be a reasonable case for keeping her investments running. Otherwise, perhaps otherwise. You have to balance this with the risk that any true investment could lose capital. If this happens the OP in theory could be held to account for his actions. If the donor doesnt show evidence of acceptance of risk I find it difficult to see how a POA can accept the risk on the donors behalf.

HappyHarry

Linton wrote: »

mmm - interesting argument. On the side of urging extreme caution here I would put as evidence that whilst MIL had full capacity she seems to have chosen not to invest the money. If she was previously an investor I agree that there may be a reasonable case for keeping her investments running. Otherwise, perhaps otherwise. You have to balance this with the risk that any true investment could lose capital. If this happens the OP in theory could be held to account for his actions. If the donor doesnt show evidence of acceptance of risk I find it difficult to see how a POA can accept the risk on the donors behalf.

Moving into general discussion now, noting that this might not apply to OP's MIL due to health.

The POA is there to act in the best interests of the donor. Just because a donor hasn't invested before, that does not make it in their best interest to never invest.

The POA can not be held responsible for losing money in investments, unless it can be shown that it was done by the POA not acting in the donor's best interests.

xylophone

Nearly three years ago someone of my acquaintance (now in her 95th year) moved into a care home.

Prior to that, (and for a number of years) she had suffered from heart failure, hypertension and (progressively) arthritis - this after having knee replacement, hip replacement after broken hip, and breaking both left and right wrists. She still suffers from those conditions.

However, she shows no signs of shuffling off this mortal coil.....

The OP mentions "medium to poor health" - but how would you describe the health of my acquaintance?

It is near impossible to predict exactly when death will occur?

jimjames

xylophone wrote: »

The OP mentions "medium to poor health" - but how would you describe the health of my acquaintance?
It is near impossible to predict exactly when death will occur?

The OP also states "We have no idea how long she will need it for, and as stated above, if she lives a long time she will need more of it."

So it sounds like there is a distinct possibility that it could be a long time or at least no obvious reason that it might be a short time.

LHW99

If the money , or a reasonable part of it remains in NSI, there would be the option to take out a further care needs annuity, when she is older / more frail to cover any gap that opens up between incomings and outgoings. You would probably find that less capital would be expended in buying more income as time went on.