What do you do when there is not enough money?

zagfles

atush wrote: »

I am Not adviser nor am I related to one. I do however know what they do. And if its no business of mine pulling you up on innaccuracies, dont post in an anonymous forum for advice?

And you c an find avisers who charge only .5% . Look for one, or be prepareed to be sued by all who you advise if things go wrong.

Advice is a regualted activity. And you are not regulated.

Do you seriously think you need to be regulated to help friends and family with their finances? You only need to be regulated if you give advice "by way of business". Which is defined by the FCA here: https://www.handbook.fca.org.uk/handbook/PERG/8/34.html

atush

yes, given the warnings here on the site not to give 'Advice'. And given th Op appears to be running the finances and prtfolios of numerous people. Who may or may not be paying him in some form be it barter, cash, or services. We dont know, they ahvent said.

I can just see a major crash or correction coming along and all these 'friends' not being so friendly when they've lost a lot of money. AS he may not be able to acertain 'their' true risk level. And invest for them according to his own risk level.

Your friends and family could sue you in those cases.

Linton

atush wrote: »

yes, given the warnings here on the site not to give 'Advice'. And given th Op appears to be running the finances and prtfolios of numerous people. Who may or may not be paying him in some form be it barter, cash, or services. We dont know, they ahvent said.

I can just see a major crash or correction coming along and all these 'friends' not being so friendly when they've lost a lot of money. AS he may not be able to acertain 'their' true risk level. And invest for them according to his own risk level.

Your friends and family could sue you in those cases.

I dont think someone giving unpaid for advice, or managing someone else's finances for free could be successfully sued. However the more general point is well made .....

Running someone else's finances is nevertheless highly risky. If things appear to go wrong, even if there is no actual fault, there is the real danger that friendships and families can be split apart. The point about investing to the appropriate risk level is very valid. A further aspect is one's own feeling of responsibility. How would you feel if the financial well being of a close family member or friend was seriously compromised on your watch?

Personally, I would be unwilling to manage the investment of significant assets for anyone other than a spouse without taking professional advice.

zagfles

atush wrote: »

yes, given the warnings here on the site not to give 'Advice'. And given th Op appears to be running the finances and prtfolios of numerous people. Who may or may not be paying him in some form be it barter, cash, or services. We dont know, they ahvent said.

I can just see a major crash or correction coming along and all these 'friends' not being so friendly when they've lost a lot of money. AS he may not be able to acertain 'their' true risk level. And invest for them according to his own risk level.

Your friends and family could sue you in those cases.

Maybe you can give some examples where this has happened? Or are you just trying to scare the OP while he's is trying to help his dying friend/relative.

I've given the FCA link. Personally I'll believe that.

zagfles

Linton wrote: »

I dont think someone giving unpaid for advice, or managing someone else's finances for free could be successfully sued. However the more general point is well made .....

Running someone else's finances is nevertheless highly risky. If things appear to go wrong, even if there is no actual fault, there is the real danger that friendships and families can be split apart. The point about investing to the appropriate risk level is very valid. A further aspect is one's own feeling of responsibility. How would you feel if the financial well being of a close family member or friend was seriously compromised on your watch?

Personally, I would be unwilling to manage the investment of significant assets for anyone other than a spouse without taking professional advice.

Friends and families give each other advice on all sorts of matters all the time, sometimes over life and death issues not just mere money. I've just been advising someone scared of flying that flying is safe, compared to travelling by car. Maybe they'll die in a plane crash in 3 years and it'd be all my fault.

It'd be a sad world if we all stopped trying to help others in case that help backfired occasionally.

Linton

zagfles wrote: »

Friends and families give each other advice on all sorts of matters all the time, sometimes over life and death issues not just mere money. I've just been advising someone scared of flying that flying is safe, compared to travelling by car. Maybe they'll die in a plane crash in 3 years and it'd be all my fault.

It'd be a sad world if we all stopped trying to help others in case that help backfired occasionally.

There is a difference between a short word of advice to someone able to make their own decisions and taking responsibility for the details of an important aspect of someone's life.

zagfles

Linton wrote: »

There is a difference between a short word of advice to someone able to make their own decisions and taking responsibility for the details of an important aspect of someone's life.

A wrong "short word of advice" can have worse or even devastating consequences. Consider the wrong advice to this: "I've just been cold called by someone who says my pension in underperforming and it'd be better invested in Cape Verde holiday apartments and airport car parking spaces, what do you reckon"?

jamesd

They are actually in a pretty good position and the target income seems achievable without working but I'll start out by mentioning some of the available major mistakes that should be avoided.

1. Buying an annuity that includes him, particularly one that doesn't allow for his health. Forget the scheme's annuity, it's a horrible buy.

2. She's too young for annuities in her name to offer good value for money. The normal lifetime annuities also don't match her income need, which is high initial drawing then reduced after state pension starts.

3. A person whose doctors say they have a life expectancy of under a year can take the whole of a pension pot as a tax free lump sum, not just 25%. This"serious ill health lump sum" doesn't have the age 55 restriction. But if it was all taken benefits would stop and cost about £12k in lost benefits. Bad move but taking periodic lump sums up to their benefit savings limit might be helpful. Not regular, which would be treated as income.

Linton

jamesd wrote: »

They are actually in a pretty good position and the target income seems achievable without working but I'll start out by mentioning some of the available major mistakes that should be avoided.
......

Please could you explain how you come to that conclusion when they would appear not to have the cash reserves to go for a higher drawdown rate strategy.

jamesd

Now, on to more potentially useful things.

1. A "beneficiary pension". This is a new feature of the pension freedoms from 2015. A person who dies can leave their pot by "expression of wishes" to as many people as they like. If death is before age 75 anything up to the whole amount can be taken tax free at any time, as lumps or regular payments. 100%, not 25% tax free. There is no age restriction for taking money out, can be done for a toddler. In effect it's an immediately funded super-ISA.

So the first easy good move is to ensure that the current place offers a beneficiary pension and set up an expression of wishes, or move to a place which does. That gets her a completely tax free £180k pot of money.

2. Try to preserve her entitlement to benefits after his death. Unfortunately the document Pension flexibilities and DWP benefits doesn't specifically mention beneficiary pensions and I don't know how they are treated. Since she has immediate access it's possible that it would all be treated as hers immediately. You need to check.

If normal rules apply she could take periodic, irregular tax free lump sums up to the lowest benefit savings limit which affects her. This would preserve all of her working age benefits entitlements. When she reaches her state pension and pension credit age this would cease and it would all count.

3. Investment income. I put together a lowish risk combination of P2P lending that could be expected to pay about 7% interest. So £12,600 a year. More is possible, I recon on around 10% for the sort of mixture I use. Some of those options require ongoing work by a person who understands investments, asking her to evaluate individual loan proposals is unlikely to work. This would eliminate her entitlement to benefits but she could also deliberately draw down the capital and take perhaps £18,000 a year of combined capital and interest as income. All tax free courtesy of the personal allowance, savings allowance and starting rate for savings. Would also be good to use her ISA allowance either for P2P or other things.

You'd probably be more comfortable with other things if you haven't yet used P2P but her needs may not be compatible with what you're familiar with today. I didn't provide for inflation protection so at least some use of equities for that may be useful, depends on how you strike the balance between drawing and preserving capital.

4. The family home also has some potential even at £160k value. She might be fine in a smaller place or cheaper area and there's the potential for income from lodgers.

5. State pension deferral can provide her with guaranteed inflation-linked income for life and it's probably a really good move for her.

6. Some regular periodic buying of annuities as she gets older would probably also be a good move, in part to reduce her dependence on you and simplify her financial affairs.

Overall I think there's potential for at least £18k a year of income here and if desired it could be started soon using the serious ill health lump sum option that I initially cautioned against.