Help With Mums Money Please.

DAVE1003

Hi,
My Mum Has Just Sold Her House In England & Has A Surplus Of
£130,000 Of Which She Says She Is Taking £25,000 To Spain Where She Has A House.
She Is Renting A Small Cottage Over Here For When She Comes Back & Forth From Spain.
Where Would Be The Best Place For Her To Put Her Money (£100,000) Which She Would Like Pay Her Rent Of About £100 Per Week So The Interest Would Have To Be Paid Monthly But She Doesn't Want To Touch The £100,000.
I Think You Have The Jist Of What She Needs So Any Help Would Be Appreciated.
Thanks.:d

isofa

Is she a tax payer?

3K in her ISA allowance first and foremost.

Then if you aren't looking to invest (funds, stocks/shares etc), but rather save in accounts, you'd probably be looking at any one of the high rate instant access accounts, most operated online, Bradford and Bingley eSaver 6.4%, Icesave 6.3%, etc (all figures are gross).

You should be able to have monthly interest on these accounts, you may have to withdraw it manually if they don't provide the option to pay interest to another account.

You could also lock some or all of the capital away in a fixed rate bond, which will pay nearly 7% at the moment, you could elect to have the interest paid out to another account, but you won't be able to touch the capital for the term of the bond (best rates are currently on one-year bonds).

But remember if you are spending all the interest, effectively the 100K is loosing it's value through inflation.

DAVE1003

sorry forgot to say she's coming up to her 70th birthday so she will have her pension of about £80 per week.

GCH888

isofa wrote: »

But remember if you are spending all the interest, effectively the 100K is loosing it's value through inflation.

If I wanted to take the investment option to generate a monthly income what kind of fund should I be looking at?

For example with £250K a savings account will currently earn £1000 net interest per month, but inflation will mean the £250K will lose value. Is there a type of investment fund which will earn a monthly income and still keep up with inflation?

Obviously I should be speaking with an IFA about this but just want to know what funds are available to get some basic research done.

dunstonh

If I wanted to take the investment option to generate a monthly income what kind of fund should I be looking at?

You wouldnt look at a fund. On 250k you would look at 10-20 and build a spread to suit the risk profile.

EdInvestor

GCH888 wrote: »

If I wanted to take the investment option to generate a monthly income what kind of fund should I be looking at?

Equity income funds, bond funds and property funds will normally pay an income (dividend).Many people will choose a mixture, some higher risk, some lower, to balance out.

If you don't want to get tied down to the minority of funds which pay out income monthly ( usually they pay out quarterly or half yearly, as do direct shareholdings) then just deposit a cash sum equivalent to a year's income in a high interest instant access account, and draw on that for spending money every month

Invest the remainder of the lump sum in the funds and top up the cash account annually with next year's spending money from the accumulated fund dividends.That gets over the irregularity problem and also saves money, as the funds often charge you a fee for providing the monthly income.

jimatko

It's very important to establish the residency for tax purposes for your mother. Many people move to Spain and they 'should' become resident there for tax purposes - but don't.

Have a search on the ex-pat websites of which there are many. They will cover other very important issues such as healthcare etc.

I like Ed's asset split - I fundamentally like income generating investments. I would guess though that your mother is not too keen on investing in assets other than deposits? - ie the comment that she wishes to keep the £100k.

Being a bit brutal, it doesn't matter if her capital does erode!

Money is there to keep us until we die, not after. There's a slight problem with this theory of course - we don't know when we will die Accumulate capital during your earning period and then erode it through your retirement is a good philosophy. That said, if your mother is anything like mine she wants to 'pass something on' to her kids.

Perhaps you should suggest that your mother plays around with a % of her £100k - 25-50% in a portfolio suggested by Ed. I guess the £25k is a buffer that will last a while in any event.

The current yield curve suggests that interest rates will be coming down so if there are good 1 year fixed rates around get into them with a % of the money. There was an interesting (?) article in the FT at the weekend basically saying that loan and savings rates are moving around bank base rate with little correlation to each at the moment. What might be correct today may be wrong tommorrow so don't put all your eggs in one basket.

If you follow Ed's portfolio you may wish to look at property investment trusts. At the moment these are trading at about 25% discount to net asset value, ie if the trust wound up tomorrow you would receive 100p for assets you paid 75p for. What this means for an income investor is that yields are enhanced to about 6%. This is because the yield is based on 100p but the investor has only paid 75p.

Go onto Trustnet for info. The one I have been researching is the Invista Foundation Property Trust (it's listed as Insight Foundation Property Trust on Trustnet) or go onto the Invista site - property managers of the year.

My god, I've blabbed on!! - basically though I think things like healthcare and having knowledge, trust and understanding of the Spanish system is far more important than your mother's cash going down a bit.

Hope she like it there

EdInvestor

DAVE1003 wrote: »

My Mum Has Just Sold Her House In England & Has A Surplus Of £130,000 Of Which She Says She Is Taking £25,000 To Spain Where She Has A House.She Is Renting A Small Cottage Over Here For When She Comes Back & Forth From Spain.

There seems to be an arrangement for people who are living half and half in Spain (more or less ) to be taxed in their home country, ie not necessary to establish residency in Spain..

DAVE1003

she seems to like the idea from isofa of a fixed rate bond (investing seems a bit too complicated for her (& to be honest me as well).
who's doing the best 1 at the moment.?
as you said jimatko it doesn't really matter if in real terms the money erodes due to her using the interest.
also jimatko or anyone else do you know much about the system over in spain as which is the best way for her to pass on her house in spain to myself & brother & 2 sisters.
thanks,

Flex13CMP

Hi,

It seems that with your Mother moving to Spain the best option for her if she doesn't need access to the capital would be to place it in an offshore investment bond. This then negates all the links to the UK IR for tax and the investment would grow free of tax. She could also take withdrawals from the bond on a monthly basis and leave the rest to grow in investments or a high interest offshore deposit account paying approx. 6.5% interest (because the investments in the bond grow tax free this is the net value).

It may be an idea to bat this across to your financial advisor and see what he thinks but personally if she is no longer living in the UK why keep the money in the UK where it can be taxed. This isn't sound advice to me.

Let me know if you would like more details on this as I know a lot of people who have benefitted from investing offshore.

Regards

DAVE1003

she does still live here & commutes back & forth regularly now her business & house are sold she plans on staying here for longer periods of time so more like the winter here spring to early summer there august back here late summer & autumn there. etc.
As her only income now will be her pension will she only be taxed on part of her interest ?
I told her to get 3 grand straight into an isa & open an account with bradford & bingley @ 6.4% which isn't tied in at all.
until anyone comes up with a super high interest rate that is...!!!!!