28k Investment help

gt568

My mum has inherited about £28k from various ISAs and sole name accounts from my father who passed away late last year....he dealt mainly with the finances....


She wants to know what she should do with the money and I'm no expert...


I guess they wouldn't bring in much interest in a cash ISA, so any suggestions about what she could do with it? She doesn't need immediate cash and has enough income for day to day living, so say a bit of growth but not at the high risk end of investments...


Any thoughts? Cheers.

Linton

Unfortunately there arent a good range of options between cash and investments. For £28K, which is a small sum in the investment world and given her presumed lack of experience of investments perhaps the most appropriate would be to use longer term fixed rate accounts. She could set up a fixed rate ladder, putting £5K into each of a 1 year account, 2year account....5 year account. Then she would have access to £5K + interest each year which she could either use or reinvest in another 5 year account.

gt568

She has 80k in an investment bond w/Aviva.



Would there be value throwing it into that?

gt568

Or just bunging it into a stocks and shares ISA?

Notepad_Phil

gt568 wrote: »

She has 80k in an investment bond w/Aviva.

Would there be value throwing it into that?

gt568 wrote: »

Or just bunging it into a stocks and shares ISA?

Quite possibly - but you've not given enough information for people to say. e.g. what is your mum's attitude to risk, what other savings/investments/pensions/income does she have, what length of time can this money be left alone without needing to get access to it, what long term plans does she have for this money, etc.

Also is she well sorted for her retirement, might this extra money be needed to help her then?

Investments can go down as well as up and should be considered a long term proposition e.g. 10 years is a common view on the minimum length of time before you would consider investing money rather than saving it - how would she feel if she put the money into some fund within a S&S ISA and saw its value fall over the next couple of months, possibly falling 20% to 50% in value over the next year.

Historically provided the investment was sensibly invested then the fund would return to profit - but if your mum had already sold out because she thought that she was about to lose all the money then that's of little use.

gt568

Notepad_Phil wrote: »

Quite possibly - but you've not given enough information for people to say. e.g. what is your mum's attitude to risk, what other savings/investments/pensions/income does she have, what length of time can this money be left alone without needing to get access to it, what long term plans does she have for this money, etc.

Also is she well sorted for her retirement, might this extra money be needed to help her then?

She has a medium attitude to risk, she isn't happy with saving account levels of interest/return.



She has an income of 27k PA. And about 30k in readily accessible funds, 80k in a bond plus other odds and sods. She is 73.


She doesn't have a plan for the money, she just wants to put it somewhere if that makes sense and has no immediate need for it.

Malthusian

gt568 wrote: »

She has 80k in an investment bond w/Aviva.

Would there be value throwing it into that?

Insurance bonds are now a niche option and usually mean paying voluntary tax unless you have very specific circumstances. It is one way to get higher returns at the cost of higher risk, but unlikely to be the best way.

With £80k already in capital-at-risk investments and another £27k she is unwilling to invest in cash it would be worth at least having a phone call with a registered independent financial adviser or two.

Does she have Lasting Powers of Attorney in place?

jaybeetoo

gt568 wrote: »

My mum has inherited about £28k from various ISAs and sole name accounts from my father who passed away late last year....he dealt mainly with the finances.....

Don’t forget that where a person holding an ISA passes away and that person was married or in a civil partnership, the surviving spouse or civil partner is entitled to an extra ISA allowance – which is equal to the value of the ISA(s) held by the deceased (even where the spouse or civil partner does not actually inherit the ISA). This is referred to as the additional permitted subscription (APS) allowance.

MaxiRobriguez

gt568 wrote: »

She has a medium attitude to risk, she isn't happy with saving account levels of interest/return.

Very few people are "happy" with savings account levels of return but their primary purpose are not for gains but for capital protection. You need to turn the question around, would she be happy if her investments dropped 20-50% at any given point? If her answer is no then she has to get accustomed to lower rates of return as the higher rates that come with capital at risk are not suitable for her.

gt568 wrote: »

She has an income of 27k PA. And about 30k in readily accessible funds, 80k in a bond plus other odds and sods. She is 73. She doesn't have a plan for the money, she just wants to put it somewhere if that makes sense and has no immediate need for it.

It's not so much whether it's an immediate need, it's whether it may be need in the next ten years. Under ten years is deemed as a short investing horizon, over ten years is deemed as an acceptable enough timeframe to be able to ride out and recover from any bear markets that happen before the access to money is required.

I think the likely answer here is whether or not she has a plan for potential care requirements in her later years that does not involve the £80+£27k. If the answer is yes, then there's probably no pressing needs for the money for the remainder of her life (presumably receiving pension already!) and she may consider it an inheritance for you at which point it probably can be invested.

If the answer is no you could probably invest the bulk of the money now but you need to be ready to adjust the split between risk and safe allocation after five years if there hasn't been a bear market by then. If there has, let it play out.

But that's based on two minutes reading this thread and two minutes thinking about what your situation might be, and is in no way an absolute suggestion of what you should do, just a means to get the thought process working.

gt568

Malthusian wrote: »

Insurance bonds are now a niche option and usually mean paying voluntary tax unless you have very specific circumstances. It is one way to get higher returns at the cost of higher risk, but unlikely to be the best way.

Can you elaborate?

Malthusian

gt568 wrote: »

Can you elaborate?

Onshore insurance bonds pay tax on income and gains within the bond at the equivalent of basic rate. They get no allowances.

With unwrapped investments you pay tax on income and realised gains but you have the personal allowance, starting rate band and additional allowances for dividends, interest and capital gains. Capital gains are taxed only if realised, and CGT is extinguished on death.

The starting position therefore is that you pay more tax with an onshore bond. Unless your investments generate a major higher rate tax bill (which we know doesn't apply). For onshore bonds to recover and overtake unwrapped investments you need highly specific circumstances.

If someone's old ma has an Aviva onshore bond, probably recommended over a decade ago when the tax system was different, then the chances are good that there aren't any such circumstances.

And this is just unwrapped vs onshore bonds. Stocks and shares ISAs beat them coming and going, albeit entry is restricted. Offshore bonds are another kettle of fish, but as it's an Aviva bond the chances are quite good it's onshore. Correct me if I've guessed wrongly.

Note however that the taxation of insurance bonds is complicated so independent financial advice should be taken before rushing to cash in the bond and reinvest in unwrapped funds / stocks & shares ISA.