Power of Attorney and Investment

DeeCass

Hi All, I'm hoping someone can provide some sound advice. I am Power of Attorney for my mother who is in residential care and unable to make decisions for herself.  Her fees are hefty so I am keen to get the best return on her money but also need to have reasonable access to draw down on it every so often for her care fees.  Her savings accounts are currently offering 0.01% interest so I wondered if the best option would be to invest the maximum amount of £50,000 into premium bonds or if there is anything better out there. I am not allowed to 'gamble' with her money is if there was ever a risk that her investment could go down as opposed staying static or rising, I would not be allowed to move her funds.  I felt with a reasonable amount of bonds, she may stand a chance of a win! Many thanks for your help.

bowlhead99

As attorney you have to act in her best interests. The expected annual return on that amount of PBs (through the expected win-rate of small prizes each month, which according to the odds would be fluctuating around 17x £25 prizes a year on £50k) is likely to be 0.8-0.9% or so - meaning this is a better  expected return than instant access or short notice cash accounts, while as you say, the capital is not at risk, so seems a sensible decision.

However, if her care costs are known / easily projected and there is some portion of the money that definitely won't be needed for over a year, you could get more than the PB rate of return by using a 1 year fixed deposit (the market-leading rates from banks are 0.9%+), which comes with certainty of interest rate as well as capital protection up to £85k.

So it seems quite a rational solution for the money that might (or will definitely) be needed within 1 year... but for the money that  she won't be needing in the next year it does not seem responsible to buy bonds for the hope of a big win, when a better rate of guaranteed return is available through a fixed rate deposit account (presuming the fixed rate deposit accounts are offering to pay more than the amount you would reasonably expect to win from PBs over the course of a year).

Malthusian

DeeCass said:

I am not allowed to 'gamble' with her money is if there was ever a risk that her investment could go down as opposed staying static or rising, I would not be allowed to move her funds.

Is that specified in the power of attorney?

Browntoa

The LPA only uses the words "best interest of the person" there are no definitions of what that is  .

As long as you keep full documentation and can explain your reasoning then anything with an element of risk is possible.

Thrugelmir

DeeCass said:

  Her savings accounts are currently offering 0.01% interest 

Fixed term accounts are available. 

LHW99

Thrugelmir said:

DeeCass said:

  Her savings accounts are currently offering 0.01% interest 

Fixed term accounts are available. 

Also immediate care needs annuities if that would give peace of mind

Malthusian

LHW99 said:

Thrugelmir said:

DeeCass said:

  Her savings accounts are currently offering 0.01% interest 

Fixed term accounts are available. 

Also immediate care needs annuities if that would give peace of mind

If the donor has nixed any kind of capital at risk investment (if they haven't, the OP is under a misapprehension) it's debatable whether an immediate care needs annuity would be allowed, given the significant possibility of substantial loss of capital.

Not saying it couldn't be justified (and the OP would have to take advice anyway), but immediate needs annuities are always a thorny issue and the apparent aversion to capital loss just chucks another thorn into the mix.

NottinghamKnight

Malthusian said:

LHW99 said:

Thrugelmir said:

DeeCass said:

  Her savings accounts are currently offering 0.01% interest 

Fixed term accounts are available. 

Also immediate care needs annuities if that would give peace of mind

If the donor has nixed any kind of capital at risk investment (if they haven't, the OP is under a misapprehension) it's debatable whether an immediate care needs annuity would be allowed, given the significant possibility of substantial loss of capital.

Not saying it couldn't be justified (and the OP would have to take advice anyway), but immediate needs annuities are always a thorny issue and the apparent aversion to capital loss just chucks another thorn into the mix.

An annuity would meet the requirements of the PoA as it would address the immediate requirement of meeting care costs; it could be argued that it is far lower risk than cash as it removes shortfall risk and arguably inflation. It may appear to offer very poor value, and could appear even more expensive if the stay in the home is short but that is just one risk.

Albermarle

A comparison table of savings account - easy access and fixed term is here https://moneyfacts.co.uk/