Trying to sort out parent's finances - for retirement

bostonerimus

I know how frustrating it can be when a parent organizes their finances in a way that you think is less than optimal. But it's their money and unless they are doing something really stupid I think you should stay out of their affairs. Anyway they seem to be doing ok; presumably a couple of state pensions coming to supplement the rental income and a nice amount of savings so why would they need to take on more risk?

kidmugsy

Once the endowment matures they should perhaps top up the PBs to £50k each and then they could consider how to invest the rest. Perhaps a good move would be for you to distinguish between the assets to invest in and the mode by which they hold them.

For example, you could encourage them both to make pension contributions, explaining the tax advantages that accrue whatever they decide to invest the pension money in. You could encourage them to open ISAs, whether cash ISAs or S&S ISAs, explaining that in either case there may be real tax advantages for them in the future.

In your shoes I'd go no further.

LHW99

One area that would be useful for them, and you later if you need to be more "hands on" in future would be to help them track down any / all private pensions, know what type they are (DC or DB), get a feel for what income they will provide and at what ages (some DB pensions still have NRA of 60 for women and 65 for men). Check if they would get extra if they don't fraw the pension for a few years after the NRA, because if not they could draw it at that point, and put the money in cash or S&S ISA's. Help them to get an update of their State pension income from
https://www.gov.uk/check-state-pension

You or they can then put that information in a safe place, perhaps with copies for you to keep too so that when it is needed they can go straight to it.

If they do go to an IFA, or even just to Pensionwise for information, knowing the whole of their position is very helpful.
I used to periodically update a list of all the savings / investments / pensions for my mum, and did it for quite a number of years before I actually had to take on any responsibility for running her finances. She seemed to find it reassuring to be able to check the details all in one place.

darkidoe

I guess the way I would approach this is help them figure out their desired income (Monthly/Yearly) and then allocate an appropriate cash buffer emergencies in PBs or easy access interest accounts, planning ahead for the next 2-3 years. The rest can be managed as an investment type portfolio aiming to refill the cash buffer periodically.

In short, figuring out what they need to hold in cash and then the rest manage it as an investment (including the student properties, vanguard funds etc). There is never a right decision to how best to manage the investment bit but I would try to approach it from the point of lowering risk of capital loss and being diversified.

Ray_Singh-Blue

I reckon that premium bonds rarely make sense for financial reasons, but they may sometimes make sense for behavioural or psychological reasons.

Financially, a saver is likely to do less well with premium bonds than with other NS&I saving products, because the expected return is lower. They would get a better rate with a NS&I ISA, with all the same guarantees and safeguards, plus the benefits of the ISA wrapper. And if they like the frission of a moonshot once in a while, they could take some of their higher return and splurge it on lottery tickets, or bitcoins, or the 3.30 at Wincanton.

However people are not all wired the same. Some are attracted, like flies to a light, to a savings vehicle which gives them a chance - just the slimmest chance- of becoming a millionaire overnight. And if this emotional attraction is enough to make them save what they would otherwise fritter, then maybe premium bonds are the right choice for them.

Alexland

My parents gift my young son £100 each birthday and christmas on condition that I save it in premium bonds. So to respect their wishes I end up running his online premium bond account knowing full well the money is being erroded by inflation and it's a complete waste of my time and their money when he already has accounts which pay higher returns.

I wouldn't even want him to win a big prize as I believe in using your skills to earn an honest living and making a contribution to the world.

Still it's their money until he is old enough to spend it on progressing his life then it needs to sit in pointless old premium bonds. Hopefully it will get used early in his adult life for driving lessons to avoid keeping them too long.

I just take a bit more risk in investing the money we gift him in his Junior ISA to offset the low risk saver and premium bond accounts containing gifts from others.

Audaxer

Alexland wrote: »

My parents gift my young son £100 each birthday and christmas on condition that I save it in premium bonds. So to respect their wishes I end up running his online premium bond account knowing full well the money is being erroded by inflation and it's a complete waste of my time and their money when he already has accounts which pay higher returns.

That sounds a bit harsh. It may not make much return or be the best investment, but I think is quite a nice thing for grandparents to do.

darkidoe

Alexland wrote: »

My parents gift my young son £100 each birthday and christmas on condition that I save it in premium bonds. So to respect their wishes I end up running his online premium bond account knowing full well the money is being erroded by inflation and it's a complete waste of my time and their money when he already has accounts which pay higher returns.

I wouldn't even want him to win a big prize as I believe in using your skills to earn an honest living and making a contribution to the world.

Still it's their money until he is old enough to spend it on progressing his life then it needs to sit in pointless old premium bonds. Hopefully it will get used early in his adult life for driving lessons to avoid keeping them too long.

I just take a bit more risk in investing the money we gift him in his Junior ISA to offset the low risk saver and premium bond accounts containing gifts from others.

It doesn't take much effort to run does it? It is interesting how we find it irritating or annoying when we seem to think we know better but can't find it to convince others.

For myself I have a little over £500 in PB, just for the sake of it. The story I tell myself is this: I have a chance of winning, however minuscule the chance is, compared to having no chance at all. Realistically the chance is closer to zero than one but still I can dream.

teddysmum

darkidoe wrote: »

It doesn't take much effort to run does it? It is interesting how we find it irritating or annoying when we seem to think we know better but can't find it to convince others.

For myself I have a little over £500 in PB, just for the sake of it. The story I tell myself is this: I have a chance of winning, however minuscule the chance is, compared to having no chance at all. Realistically the chance is closer to zero than one but still I can dream.

There is no effort required if a request to reinvest winnings is made. They will send a letter stating the win and giving the numbers of bonds, including new ones.


The point about Premium Bonds is that it s like doing a lottery, while not losing your stake money. I quite enjoy logging onto the website to see if my husband or I have won and it's rare that one of us doesn't.


We are older than the OP's parents, but in their position I would sell the student lets (should get a good price for an established business, sold at the right time) and enjoy the money or put it where more accessible. I wouldn't want the hassle of running the business for more than a couple of years, either.

bigadaj

Alexland wrote: »

My parents gift my young son £100 each birthday and christmas on condition that I save it in premium bonds. So to respect their wishes I end up running his online premium bond account knowing full well the money is being erroded by inflation and it's a complete waste of my time and their money when he already has accounts which pay higher returns.

I wouldn't even want him to win a big prize as I believe in using your skills to earn an honest living and making a contribution to the world.

Still it's their money until he is old enough to spend it on progressing his life then it needs to sit in pointless old premium bonds. Hopefully it will get used early in his adult life for driving lessons to avoid keeping them too long.

I just take a bit more risk in investing the money we gift him in his Junior ISA to offset the low risk saver and premium bond accounts containing gifts from others.

The problem is investing, much like property, takes little skill or ability. It certainly produced higher returns than most jobs or abilities, so arguably what might be termed honest living or a real contribution to the world.

I'm not saying that premium bonds or savings are any better, just that they are little worse.