What to do with divorce settlement

JF1

Hi everyone, I am posting this on behalf of my mother. She is 60 years old and has recently been through a divorce. She now has a relatively sizable amount of money available to her, but has no idea how to make it work for her. I don't know the exact amount, but it is approximately 200-250K.

I only have basic financial knowledge myself, so this is a bit of a fact finding mission. Her original plan was to purchase a flat for my younger brother, she could then live off the rental payments made to her. This in itself seems like a good idea to me, but it would still leave a large chunk of money sitting in the bank. I don't have any knowledge on investments, or how feasible that is for a 60 year old. She also has a small pension and a relatively simple lifestyle.

I am basically asking for advice and ideas, and I can provide more details if required. If the advice is - go see a financial adviser - then I'll advise her to do that.

Cheers.

dawyldthing

If it was me id put it in the highest interest account (might get 1.5% or so with the amount, which would make £3750 if £250k) and then use some of the capital as although you'll get less interest as you use the capital even if you use £8k a year it will still give you 30 years money

dawyldthing

https://forums.moneysavingexpert.com/discussion/5704489
Like this, would still give you £3500 interest so that would cover most of your basic bills then just whatever else

kidmugsy

At 60 she could reasonably expect to live for at least another thirty years, unless she has objective reason to expect otherwise. So some of her money should probably be put into long term assets that can defend her from inflation, which usually means stocks-and-shares. She would be wise to start the ball rolling by opening tax shelters e.g. an S&S ISA and a personal pension of some kind. Inside or outside of these tax shelters, the assets bought should probably include what are called "passive" or "tracker" investments, where her money is cheaply spread over the shares of many different companies, probably in many different countries.

If she is inexperienced and unconfident then she might be wise to seek the advice of an IFA, with the emphasis on the "I" i.e. an independent adviser, not a "tied" advisor who is essentially a salesman for one company or another.

By the way, does she own her own house?

BLB53

I don't have any knowledge on investments, or how feasible that is for a 60 year old. She also has a small pension and a relatively simple lifestyle.

The best plan would be some sort of investment as I guess it would be for the next 20 yrs+. A financial adviser may be expensive for the residue after the flat purchase so you may want to explore whether a DIY plan is feasible.

Maybe have a read of 'DIY Simple Investing' by Edwards and see if you think it could be a possiblity. If not then it may be possibly to invest via one of the robo advisers such as Moneyfarm or Nutmeg.

Leaving it mostly in cash savings runs the risk of the value being eroded by inflation.

justme111

there are pitfalls in buying a flat and renting it to the child.
- lease and leasehold payments
-flats do not appreciate in value the same as houses
-transaction costs
- potential for a fallout with a child - no other relationship seems to be
as prone to resentment as landlord- tenant one
-what if the child buys his own or relocates- would she be happy renting to strangers?
By all means she has to do the numbers for different options.

coyrls

justme111 wrote: »

-flats do not appreciate in value the same as houses

Really? Why do you say that?

See for example: https://www.telegraph.co.uk/property/house-prices/revealed-areas-price-flat-outstripping-everything-else/

Voyager2002

Personally I think that property prices are at their peak, and so would suggest stocks and shares. Specifically, the Vanguard Life Strategy, often discussed on this board. She should just make sure that as much as possible is within an ISA and/or SIPP to maximise tax benefits and limit her tax liabilities.

gingercordial

She will need to bear in mind that she will need to declare the rent received to HMRC and pay income tax on it, even if it is received from a family member.

She will also have to comply with all of the legal requirements of being a landlord, such as gas safety checks etc.

She should read the excellent and very detailed thread with advice for potential/new landlords here: http://forums.moneysavingexpert.com/showpost.php?p=67759929&postcount=7

xylophone

Has your mother obtained a new state pension statement?

https://www.gov.uk/check-state-pension

Does she own her home? If so, is it mortgage free?

Does she still work/contribute to a pension?

Thrugelmir

Impossible to comment without knowing your mother's broader financial situation.