Looking for help with advice for my parents

Pipsqueak87

Hello.

I hope I can get some input here on some advice to give my parents.
For some background my mother is retiring next year at 65, my dad is 70 next year but plans to continue working for now (he’s on a 0 hour contract job and brings in around £10,000 per year from that). He works as and when he wants, which suits him.
I left the UK at about 20, and I’ve been gone almost 15 years now, so I’m really not clued up on how pensions etc work over there as it never concerned me. 

My parents live in a relatively low cost of living area, with a paid off house and 2 paid off cars. They estimate their monthly fixed costs to be around £1,500. This includes food, phones, utilities etc. I’m looking into trying to find them cheaper insurance to bring that down (they currently pay £193 per month insurance on two cars and their house - this seems high, or is that the norm now)?

Their estimated annual income come next year when mum retires:

£12,000 dad pension
£12,000 mum pension
£12,000 air bnb income 
£10,000 dads income
£46,000 total

Here’s where my 2 questions come in.
In addition to the above; they have a small emergency fund in a savings account (around £15k I believe). 

1. They also have a cash and stocks ISA with Aberdeen. My dad has written a brief summary out for the past 3 year balances with the ISA (they haven’t touched it). 

In 2022 the cash portion was worth £6800 and in 2025 it’s now worth £5910. The stocks and shares portion was worth £4600 and is now worth £6500. So their £11,400 investment has grown to £12,010. Seems…low in the current climate. What is the best thing to do with this money? I used a compound interest calculator and it looks like they’d have been better off just putting this money in a no fee high interest cash ISA. 

2. My dad has an additional pension with legal and general, worth £77,000. He has been putting off using it as he’s not sure what the best option is in terms of taking it. He can take 15% out tax free, which he was thinking of doing and adding to his ISA…although I’m not sure that is the best option as it doesn’t seem to be doing a whole lot. His current employer is still adding to this pension. 

Both of their children now live in far away countries and have their own children, so my parents need flight money to visit multiple times per year, which increases their yearly spend quite a lot. I want them to make good decisions with their money, but it almost seems too late to do anything meaningful to increase their financial position. They are looking to me for advice on how to best make use of the money, and what options to choose in order to maximise it. 

Any advice hugely appreciated and welcomed! 

Pipsqueak87

And sorry; that should read “their estimated annual income next year when mum retires” 

MallyGirl

Pipsqueak87 said:

And sorry; that should read “their estimated annual income next year when mum retires” 

I have fixed that for you in the original post to avoid the inevitable posts. You can always go back and edit your own posts

stuhse

Are you sure they have no other pensions from previous employment ?  Just one from your Dad with 77000 in it after a life time of working ?

itsthelittlethings

Is your mum able to take her pension aged 65? Is it a DB pension?

Dad is presumably taking his state pension now, mum will be able to take that in a year or two.

Linton

£193/month= £2316/year for 2 cars + house insurance seems very high unless there are some special circumstances..  Worth checking the details and getting other quotes.

1) Cash in an S&S ISA may only get a low rate of interest.  For a higher rate of interest you need a separate cash ISA.  The reduction in cash value could well be due to charges taken by the ISA provider.. The stocks and shares  investment return will be almost entirely due to the specific funds used. The increase of about 40% in 3 years is reasonable for a moderately risky investment and is of course much higher than you could get from cash.

2) You can take out 25% tax free from a pension, has your father already withdrawn some? Pensions can hold much the same investments as an S&S ISA so there probably is nothing to be gained from moving the money.  Though it all depends on what investments are used.  

Also the pension scheme may not permit withdrawing the tax free lump sum, particularly whilst your father's employer is still contributing.  This would need to be checked.

I am assuming the pension is Defined Contribution (based on an investment lump sum) rather than Defined Benefit (based on salary)

Pipsqueak87

stuhse said:

Are you sure they have no other pensions from previous employment ?  Just one from your Dad with 77000 in it after a life time of working ?

Yes, unfortunately they were self employed most of their life, and mums later in life job didn’t make any meaningful pension contributions, and neither did she. 

Pipsqueak87

itsthelittlethings said:

Is your mum able to take her pension aged 65? Is it a DB pension?

Dad is presumably taking his state pension now, mum will be able to take that in a year or two.

My mum only has a state pension. I was talking to her about it and she said as she is born in march, and thus before the cut off, so she can take it next year and won’t have to wait till 67 (she will be 66 in march). 

Pipsqueak87

Linton said:

£193/month= £2316/year for 2 cars + house insurance seems very high unless there are some special circumstances..  Worth checking the details and getting other quotes.

1) Cash in an S&S ISA may only get a low rate of interest.  For a higher rate of interest you need a separate cash ISA.  The reduction in cash value could well be due to charges taken by the ISA provider.. The stocks and shares  investment return will be almost entirely due to the specific funds used. The increase of about 40% in 3 years is reasonable for a moderately risky investment and is of course much higher than you could get from cash.

2) You can take out 25% tax free from a pension, has your father already withdrawn some? Pensions can hold much the same investments as an S&S ISA so there probably is nothing to be gained from moving the money.  Though it all depends on what investments are used.  

Also the pension scheme may not permit withdrawing the tax free lump sum, particularly whilst your father's employer is still contributing.  This would need to be checked.

I am assuming the pension is Defined Contribution (based on an investment lump sum) rather than Defined Benefit (based on salary)

Thanks so much for that detailed response. I live in Canada and we are known for our high insurance rates and they are paying almost the same as us so I thought they might be paying too much! I’ll help them lower that. 

I’ll ask my dad about DC v DB as I’m not sure.

And yes you’re right about 25% (I wrote this post at 4am Canada time on a midnight shift - it’s got a few mistakes in - I will fix that when I work out how to edit my post). He hasn’t taken any as a lump sum at all yet. He showed me a letter he received explaining his options: guaranteed income annuity, fixed income etc, and both list that he can take 25% lump sum so I think he can. But I agree with you, it seems pointless moving the money. 

Regarding the ISA. Due to the high fees he is presumably paying out of the cash portion, which is lowering the total interest gained between the s&s and cash, do you think my advice to liquidate all into a cash isa is wise? Or should he keep as is? Obviously I know there’s no way to know what will happen in the stock market, but I’m constantly being told there’s a crash coming and I feel like if his stocks are slashed he doesn’t likely have long enough left in the market for it to recover. 

Thanks again! 

Bluebell1000

Based on their income is sounds like they'd have around £1500 a month for additional spending such as travel? Does that give them enough for what they hope to do? If so, then that makes things easier, but if there's a shortfall then there's more of a problem...

Pipsqueak87

Bluebell1000 said:

Based on their income is sounds like they'd have around £1500 a month for additional spending such as travel? Does that give them enough for what they hope to do? If so, then that makes things easier, but if there's a shortfall then there's more of a problem...

Yes I think that would cover their travel to see us in Canada, but perhaps not much more. And like you said doesn’t cover emergencies - they have the savings account with an emergency fund. But if they were to deplete that I’m not sure they’d be able to re-fill it for the next emergency. 

I think the main thing my dad is unsure of is what option to take with the legal and general pension. And whether there is a financial advantage of either. 

The letter he received gave him 2 guaranteed income options, and 3 flexible income options. 
I think he is pretty sure the flexible income options aren’t what he wants, but whether to take the annuity or fixed term plan. And then whether to take a tax free lump from either option.