Safe investments for elderly relative's savings.

Albermarle

BooJewels said:

pthompson said:

BooJewels said:

LHW99 said:

Use a fixed rate ISA (maybe 2 year) for £20k of the C/A money. Look at which banks / building societies are available / reasonably accessible by the person with PoA.

Many smaller (local) societies can offer passbook accounts (not top interest rates but FSCS covered), although maybe not on fixed rate ISA's, so the rest could go into a non-ISA postal 6 month or one year account, and could be swapped to an ISA after next April.

For an elderly person, I would personally not go with one of the modern providers (Chip, Raisin etc) as the person won't have heard of them, and even with PoA you do have to take account of their preferences if they are in any way capable. A more traditionally accessed account will mean they have paperwork to reassure them the money is being looked after, whenever they feel it necessary to check.

You also need to consider which providers even allow accounts to be managed under an LPA - not all do - and they often have specific opening requirements for PoA managed accounts - such as a paper application, rather than on-line etc.  This is where more mainstream accounts might prove more suitable.

If the chap is reluctant to spend his savings, maybe suggest that he puts the principle of his savings into an account that pays out monthly interest to their usual current account - that would give them some extra spending money each month without reducing the principle. 

For arguments sake, just to illustrate, because I know that Ford Money allow LPA accounts - they've recently added a 2 year fix which pays 4.65% monthly - if they were to put £50k into that - it would pay out just under £200 per month - that could make their life more comfortable as they go along.  If they didn't want to lock away the funds for 2 years, even their flexible saver pays 4.51% monthly and £50k would give rise to just under £190 per month.  If you wanted to keep it all at NS&I as a trusted brand where they're already an account holder, their income bonds (effectively easy access, apart from the last £500) pay 3.59% monthly, so the £50k there would yield £150 / month.

Thanks for your very helpful reply.   
In particular, I had no idea that not all accounts can be managed under an LPA.

You're very welcome.  Having been an active attorney twice recently, I found that just because the LPA makes things possible, it doesn't always make them easy.  Savings accounts in particular seem to be a bit more problematic to operate than say current accounts - which can also vary quite a bit too.  

I had a look for a friend recently and I've now found my scrap of paper where I made notes at the time - Ford, as mentioned allow LPA accounts, as do NS&I - but also Charter Savings Bank - but they say to ring them to discuss, as not all accounts can be - their easy access account is a minimum opening balance of £5k, paying 4.82% monthly (£50k = £200.83/month) and they have 1 year fixes paying a smidge more.  Shawbrook say they allow LPA accounts, but by paper application and I think Hodge Savings Bank might do too, as I think do Vanquis.  There will be others too of course, but those were ones I specifically looked at recently that met other criteria - like paying monthly.  There are also notice accounts too that usually pay a little bit more, but you need to give notice to be able to withdraw funds - Shawbrook offer a 45 days notice account that pays a little over 5% monthly.

You need (or the Attorney will) to read the T&C carefully for each account you're interested in, as the details vary and you'll need to ensure that they meet the required criteria.

Probably worth noting that the first two mentioned ( Ford and Charters) tend to get more positive comments for customer service, ease of use etc.

thenewcomer

pthompson said:

jimjames said:

First thing is to move the current account balance. That could be earning nearly £4000 per year in a savings account like Chip or similar paying over 5%

The Chip savings a/c looks interesting.  Thanks.

same here. not heard of chip until now. looks like it is paying 4.84% pa

Cisco001

Personally would leave £10-15k in easy assess saving account.
Utilise £20k ISA.
The rest would be in various noticed saving account, fixed term saving.
Keep £50k in premium bond to try the luck and they are relatively easy to cash out if needed.

Hal17

I found Halifax very good for allowing on-line access with a LPA in place. Virgin Money only allow postal transactions for LPA accounts.

Bostonerimus1

Why does your elderly relative want to change their finances if they are already working for them. With a sufficient pension there’s no need to take any risk so at most I would open a bank saving account or a cash ISA  to get a bit of interest.

BooJewels

Bostonerimus1 said:

Why does your elderly relative want to change their finances if they are already working for them. With a sufficient pension there’s no need to take any risk so at most I would open a bank saving account or a cash ISA  to get a bit of interest.

If it were a relative of mine and I had an LPA for their affairs and was looking out for them - the one thing I'd strongly recommend would be to move the £75k out of the current account for 2 main reasons - they're throwing away interest (over £300 per month) they could be earning that could make their lives more comfortable for absolutely no extra effort whatsoever. 

Secondly, the security of that money - if someone steals or clones their debit card they could go on a monster spending spree.  Much more secure to have the bulk of their funds in a savings account and just feed - or leave if it's pension payments - what they need for the month, or immediate spending, in the current account.

Sebo027

A few other things jump to mind on this, and points to consider although the may well be null and void for your relative given what you had written. 

Defining a Timeline: What age is he? Depending on the chart you look at, a man of typical health who is 70 years of age today can expect on average to life until 84. That's 14 years from now. Every individual's circumstances are different, of course, and this should be carefully considered.

Plans for the Money: You've written your relative is particularly frugal, lives on his pension and does not spend any of the money he has saved. Does he have plans for it and what are they, or are they likely to change in the next 10 years? Are there any risks to be aware of - i.e. expensive repairs to his property or car running on it's last legs? Maybe a care home? 

Risk Tolerance: From what you've written, I get the impression that your relative has limited knowledge or experience investing money or the associated risks. Therefore, while investing some of the money in a suitable investment may make sense numerically and statistically, a big part of whether it's right for someone is their understanding of it and their response, emotionally, when they see a stock market dip. Many people - especially in their younger years - want to invest money, invest money, see a dip, panic, sell, lose money. Or, it keeps them up at night worrying about it.

It wouldn't be uncommon for a retiree to have an element of their private pension invested in the stock market beyond retirement, with a high ratio of bonds to equities. 

A typical restructure for your relatives money may look like this:

• Premium bonds: £50k
• High interest savings account: £40k
• Current account: £7k
• 60/40 bonds/equities investment: £100k

To give an idea of numbers, a £100k investment in a 60/40 bonds/equities tracker (LifeStrategy® 60% Equity Fund - Accumulation (vanguardinvestor.co.uk) in March 2014 would today be worth £192,310. Yes, there were dips along they way where the value of the investment has dropped below £100k, but over a 10 year period the overall trajectory is up. And while past gains are not a guarantee of future returns, every piece of data supports the theory that the chances of a positive return in this type of investment increases the longer you hold the investment. 

cloud_dog

Albermarle said:

BooJewels said:

pthompson said:

BooJewels said:

LHW99 said:

Use a fixed rate ISA (maybe 2 year) for £20k of the C/A money. Look at which banks / building societies are available / reasonably accessible by the person with PoA.

Many smaller (local) societies can offer passbook accounts (not top interest rates but FSCS covered), although maybe not on fixed rate ISA's, so the rest could go into a non-ISA postal 6 month or one year account, and could be swapped to an ISA after next April.

For an elderly person, I would personally not go with one of the modern providers (Chip, Raisin etc) as the person won't have heard of them, and even with PoA you do have to take account of their preferences if they are in any way capable. A more traditionally accessed account will mean they have paperwork to reassure them the money is being looked after, whenever they feel it necessary to check.

You also need to consider which providers even allow accounts to be managed under an LPA - not all do - and they often have specific opening requirements for PoA managed accounts - such as a paper application, rather than on-line etc.  This is where more mainstream accounts might prove more suitable.

If the chap is reluctant to spend his savings, maybe suggest that he puts the principle of his savings into an account that pays out monthly interest to their usual current account - that would give them some extra spending money each month without reducing the principle. 

For arguments sake, just to illustrate, because I know that Ford Money allow LPA accounts - they've recently added a 2 year fix which pays 4.65% monthly - if they were to put £50k into that - it would pay out just under £200 per month - that could make their life more comfortable as they go along.  If they didn't want to lock away the funds for 2 years, even their flexible saver pays 4.51% monthly and £50k would give rise to just under £190 per month.  If you wanted to keep it all at NS&I as a trusted brand where they're already an account holder, their income bonds (effectively easy access, apart from the last £500) pay 3.59% monthly, so the £50k there would yield £150 / month.

Thanks for your very helpful reply.   
In particular, I had no idea that not all accounts can be managed under an LPA.

You're very welcome.  Having been an active attorney twice recently, I found that just because the LPA makes things possible, it doesn't always make them easy.  Savings accounts in particular seem to be a bit more problematic to operate than say current accounts - which can also vary quite a bit too.  

I had a look for a friend recently and I've now found my scrap of paper where I made notes at the time - Ford, as mentioned allow LPA accounts, as do NS&I - but also Charter Savings Bank - but they say to ring them to discuss, as not all accounts can be - their easy access account is a minimum opening balance of £5k, paying 4.82% monthly (£50k = £200.83/month) and they have 1 year fixes paying a smidge more.  Shawbrook say they allow LPA accounts, but by paper application and I think Hodge Savings Bank might do too, as I think do Vanquis.  There will be others too of course, but those were ones I specifically looked at recently that met other criteria - like paying monthly.  There are also notice accounts too that usually pay a little bit more, but you need to give notice to be able to withdraw funds - Shawbrook offer a 45 days notice account that pays a little over 5% monthly.

You need (or the Attorney will) to read the T&C carefully for each account you're interested in, as the details vary and you'll need to ensure that they meet the required criteria.

Probably worth noting that the first two mentioned ( Ford and Charters) tend to get more positive comments for customer service, ease of use etc.

@pthompson, just a comment that the Ford account has a useful feature whereby it allows you to set up a recurring withdrawal from the savings account.  Quite useful for someone looking after or ensuring the individual concerned has some money deposited in to the current account each month (if required).