Investment advice, Tax and SIPP re Power of Attorney,

bring_back_threepenny_bit

Hi,
I have Lasting Power of Attorney for my Mum aged 94. She recently sold a second home which after CGT leaves her with over 500k which is needed to pay for her live-in care in her main residence. 
I have arranged an initial meeting with an IFA and one thing they mentioned on the phone was Business Relief which would be exempt from IHT after 2 years. I doubt that this would be in my mother's best interests regardless of the IHT benefit, as she cannot take a long-term view on investment and would certainly want to avoid higher risk investments.
More generally, let's say I keep 80k back cash to pay for a year's care, should I put the rest in Bonds/Unit Trusts with the possibility of some growth, or with cash rates at 5%+, should I opt for that certainty? I gan get 5.7% in Earl Shilton BS at present, I can't see any share-based fund guaranteeing that in the next year especially if I turn over the money to a wealth manager who wants to skim off 1.5% at the outset.
However I would also prefer to avoid her becoming a higher rate taxpayer, so need to keep cash interest earnings below say 20k. Presumably I can do this by using longer-term fixes or share-based options. She already has 50k in Premium Bonds and a 20k ISA this year. Is a SIPP viable for someone her age?

QrizB

bring_back_threepenny_bit said:

Hi,
I have Lasting Power of Attorney for my Mum aged 94. ... Is a SIPP viable for someone her age?

At an age of 94, your mum will receive no tax relief when contributing to a SIPP but will be taxed on withdrawals from it. It seems unlikely that this will be to her advantage.

IanManc

bring_back_threepenny_bit said:

Hi,
I have Lasting Power of Attorney for my Mum aged 94. She recently sold a second home which after CGT leaves her with over 500k which is needed to pay for her live-in care in her main residence. 
I have arranged an initial meeting with an IFA and one thing they mentioned on the phone was Business Relief which would be exempt from IHT after 2 years. I doubt that this would be in my mother's best interests regardless of the IHT benefit, as she cannot take a long-term view on investment and would certainly want to avoid higher risk investments.
More generally, let's say I keep 80k back cash to pay for a year's care, should I put the rest in Bonds/Unit Trusts with the possibility of some growth, or with cash rates at 5%+, should I opt for that certainty? I gan get 5.7% in Earl Shilton BS at present, I can't see any share-based fund guaranteeing that in the next year especially if I turn over the money to a wealth manager who wants to skim off 1.5% at the outset.
However I would also prefer to avoid her becoming a higher rate taxpayer, so need to keep cash interest earnings below say 20k. Presumably I can do this by using longer-term fixes or share-based options. She already has 50k in Premium Bonds and a 20k ISA this year. Is a SIPP viable for someone her age?

At 94 your mother doesn't have the long term horizon in front of her to make investing viable or appropriate. She has immediate requirements for high levels of spending to fund her care.

Her best interests would be served by you keeping the money in cash, at the highest rate available to you which ensures access as and when it needs to be spent.

Pursuing inappropriate investments in order to avoid higher rate tax is not in her best interests and is letting the tax tail wag the dog.

Giving a "wealth manager" - which is not the same thing as an IFA which you mention in your first paragraph -  1.5% of her money isn't in her best interests either. Cancel the meeting and look for the highest interest rates you can get which fit in with the need for access to pay for her expected care costs.

wjr4

How much of her estate is liable to IHT?

Albermarle

 I gan get 5.7% in Earl Shilton BS at present, I can't see any share-based fund guaranteeing that in the next year

No risk based investment ( like shares) can ever guarantee a return, in one year or ten years. All we know/hope is that the longer you keep them the more chance they will produce a positive return. The usual minimum recommended investment period is 5 years, ideally more than 10 years.
So savings accounts are the only real answer here ( apart from Premium Bonds will be OK).
It is likely that savings rates will start to drop ( in fact they are already past their peak), so could make sense to split the money into easy access ( which PB's are as well) then some in a one year fixed rate, two year fixed rate etc.,  in line with when the money will be needed.
One of these can be a new £20K ISA based account after April 6th .

Keep_pedalling

I would not bother with an IFA, and stick with holding in cash. Some in instant access, some in fixed term cash accounts. 

bring_back_threepenny_bit

wjr4 said:

How much of her estate is liable to IHT?

She has 264k nil rate band inherited from my late father, plus her own NRB. Current home is worth c750k. The rest of her estate - whatever cash is left after care costs - would be liable to IHT

LHW99

There is an additional IHY allowance if her main home is left to a child / grandchild I believe, making a total exemption of £1m. Is it likely that there would be much above this if she needs a few years of care?