What do you do when there is not enough money?

Joey_Soap

Thank you very much for the helpful comments. I think it is pretty self evident that there isn't much that I have missed or it would have been pointed out already. The reason for keeping the capital inside a pension wrapper is that it does not affect the benefits whilst it remains in the pension untouched. This couple have negligible savings and live off benefits. In order to preserve the only asset they really have, the pension pot, it seems sensible to maximise to the fullest extent the benefits they are entitled to at this awful time.

Thank you again for those who have made a positive contribution to this thread. It is appreciated.

Joey_Soap

zagfles wrote: »

Useful but doesn't totally clear up the question as to whether an "inherited" pension would count as capital (while under SPA).

I suspect not, the legislation (for UC) does state rights in any pension scheme are disregarded as capital. https://www.legislation.gov.uk/ukdsi/2013/9780111531938/schedule/10

Actually taking income would almost certainly count as income for the purposes of benefits though, even if not taxable.

Indeed, even though the pot of money is accessible right now tax free due to terminal illness. Were that to happen the majority of benefit would be withdrawn as a consequence. That is why I said it is important to keep the capital untouched inside a pension wrapper right up the point where there is no option other than start to draw it.

Of course another option entirely would be for the surviving person to work full-time for the next 11 years. However, given that person's track record of casual work over the last three decades this outcome is unlikely to happen even if it were the best all round option.

greatkingrat

If they own their own home then they always have the option of some sort of equity release scheme if they can't make ends meet on their pension.

Joey_Soap

Yes, I had considered it. But at a fairly young age and a property with a pretty low value I am not sure it is a really viable option. Something of a back stop for the long term, maybe. Thanks.

Keep_pedalling

Thrugelmir wrote: »

Initial appearances are important. No need to flaunt when conducting business.

I have no idea what car my IFA uses, he has only visited us at home once and arrived on a bicycle.

Joey_Soap

OK, I have taken on board comments about the intended £70k cash at hand balance to provide £500 a month "income" over the next 11 years. My thoughts are, that against a back drop of increasing interest rates, which now seems very likely indeed - I am not keen on tying up the money for more than one year. The difference between a one year lock in and a five year lock in are minimal in terms of interest. Atom Bank offer an account paying 1.95% on a balance up to £100k, and offer monthly withdrawals. This will work quite well. The first month of "income" on the proposed £70k cash pot will actually contain £113.75p of interest out of the £500 drawn. No tax will be paid as it is < than the £2k annual saving interest allowance. So, the rate of capital depletion is less than I had first thought. Obviously, as each month goes by, the interest component will fall as the balance is depleting. But I think it means that the £70k proposed cash income pot probably has a safety net of about £10k built into it. This reassuring. After the one year term is up, you rinse and repeat, hopefully following interest rates upwards as we go.

That will be a decent, very low risk outcome, I think.

For the proposed £110k investment pot, my thoughts are to keep all this inside a pension wrapper at as low cost as possible and to remain untouched for the 11 years. I see no advantage to taking the 25% lump sum presently, since the person is unlikely to be a tax payer in the foreseeable future. In a SIPP the pot can be inherited tax free were the worst to happen to the surviving relative.

Given the imperative for low risk but some growth in this 11 year period, I think a world wide market tracker is likely the best option for the bulk of the money. With perhaps a portion of the pot in a REIT as a diversification into property and accrual of a pretty high income stream to reinvest over the 11 years.

My thoughts are crystallising now, it isn't quite as bad as I had at first feared. The positive comments here have been very helpful for which I am very grateful indeed.

redpete

Joey_Soap wrote: »

You are an adviser, I presume? Kindly refrain from the insults.

You refer to IFAs as leeches and suggest someone else refrains from insults!

TARDIS

A few other things to consider.

Is the healthy spouse entitled to NI credits as a carer? https://www.gov.uk/carers-credit

If your ill relative has cancer, Macmillan and probably other charities provide financial and benefits guidance which may be helpful: https://www.macmillan.org.uk/information-and-support/organising/benefits-and-financial-support

Have they looked into if they are eligible for fast track PIP? https://www.citizensadvice.org.uk/benefits/sick-or-disabled-people-and-carers/pip/help-with-your-claim/how-to-claim-if-terminally-ill/

I appreciate these things are all about the short term, rather than the long term plans, but may help take some pressure off them at this difficult time.

Joey_Soap

@TARDIS, thank you for good advice, yes we are moving ahead on all those fronts as well. As you say it is important to cover all bases and this is helpful.

LHW99

Also have you considered attendance allowance? There are two levels which are based on medical need not income, and even if assessed initially for the lower level, a new assessment can be made if things deteriorate. However there is no payment for the first 6 weeks (I think) after the claim is accepted, so best to apply as early as possible.