Help me help my Mum

jcuurthht

Hello everyone.

Last November my Dad died, and has left my Mum in the following state of finance:

House: approx. 300k (unvalued) mortgage paid off
Private pension: 150k. No transfer allowed. Will be paid to my Mum in cash
Premium bonds: 40k in his name, 40k in her name. 80k total
Life insurance: 50k Already paid out

Totals:
Cash: 280,000
Assets: 300k

Income:
State pension: 600 GBP p/m

Outgoings
1200 GBP

Info:
67 years
Retired
Lives alone with pets

Health
Diabetes managed by insulin
Crohn's
A little artheritus
Spinal fusion 10 years ago
Slight cataracts

Now I really don't know much about pensions and investments. And I don't know what her options are as someone with a lot of cash and already retired.

I was hoping someone could point me in the right direction for information.

Linton

For that amount of money, given your and her limited financial knowledge, I think Mum should be consulting an IFA. Put together a short list of local ones, possibly those recommended by friends and family. You and Mum can fix up an appointment for an initial free discussion with say 3 of them and go with one who expresses themselves in a way you both can understand and whio you feel can best help.


Note you should be looking for someone advertised as an IFA. The I for Independent is important. Dont use an FA or your bank.

GunJack

I'd also be looking at trying to get the outgoings down....£1200 a month with no mortgage seems high.

kidmugsy

jcuurthht wrote: »

Last November my Dad died, and has left my Mum in the following state of finance:
Totals:
Cash: 280,000
Assets: 300k

Income:
State pension: 600 GBP p/m

Outgoings
1200 GBP

Info:
67 years
Retired
Lives alone with pets

I agree with Linton. But first: where is all this money? Her own £40k in Premium Bonds is safely with ns&i. As the rest gets paid she would be wise to bung it into a suitable ns&i savings account.
For example: https://www.nsandi.com/income-bonds

That's because cash at banks and building societies is guaranteed against fraud or collapse only up to £85k. ns&i has a much bigger guarantee from HM Treasury.

Secondly, it might be worth scribbling down a checklist of questions for the IFAs. For example, given your mother's health, could purchase of an annuity make sense for part of the capital? (The tax treatment of Purchased Life Annuities seems to be particularly kind at the moment.)

What is the IFA's policy on scattering capital across several providers of investment platforms, as a defence against fraud? (At the moment the guarantee per provider is only £50k; that will increase to £85k in April. However some schemes offered by insurance companies have 100% protection.)

Roughly what sort of split would the IFA recommend between investing in equities, investing in bonds, and saving as cash?

Does the IFA encourage you and your mother to manage her cash actively, seeking out best interest rates, while he manages her investments?

You also need to be very careful about fees: they can really eat into your mother's future income.

LHW99

Also, the IFA should at least consider whether deferring your mother's state pension would make sense - it looks as if she retired pre 2016, so that would give something like a 10% increase for life if she deferred for a year. She could use some savings to live on for that year.
https://www.gov.uk/deferring-state-pension/what-you-get

It would depend on how much her health affects her life expectancy and a lot of other things, but worth including in the questions.

kidmugsy

Yes: I think a good IFA should be able to weigh up the advantages of the following three investments: (i) a Purchased Life Annuity on superior terms because of her health (very low risk indeed), (ii) "purchase" of extra State Pension by 'deferral' (i.e. by suspending payment for a year or two), also very low risk indeed, (iii) bonds - e.g. gilts - within the investment portfolio: usually viewed as low risk compared to equities but perhaps less so than usual because of the prevailing low interest rates.

The noted American retirement researcher Wade Pfau would probably be attracted in principle more to (i) or (ii) rather than (iii). Note that (i) typically wouldn't have inflation-protection, so that although the payment would be secure it would carry inflation risk. (ii) carries full protection against CPI inflation.

Your IFA mighty have a different view than mine on the wisdom of investing much in equities at the moment. Fair enough. We neither have a crystal ball.

xylophone

Your mother might wish to take advice from an Independent Financial Adviser.

https://adviserbook.co.uk/

https://societyoflaterlifeadvisers.co.uk/

https://directory.moneyadviceservice.org.uk/en

tacpot12

Given the value of the house, and the loss of her husband (your Dad), would downsizing now make sense for her? She might be able to move closer to you, purchase a property with minimal or no maintenance requirements and free up some additional cash to purchase an income with.