Handling savings for elderly parents

LifeAfterForty

My parents (76, stage 3 ca; 74, mobility problems) have asked me to manage/look after their savings. They will be arranging financial POA, but still currently have capacity. They just want a trusted person to take the responsibility off their hands. The savings largely originate from my late brother and they want to be careful with it. I believe they want to 'make it last' so that it can be passed on in their estates, but clearly, that money needs to be available for any arising care needs in the interim. Care needs are currently zero but that is likely to change in 5 years and definitely within 10-15.

It's approx. £350k. We all have a fairly low appetite for risk. They are basic rate taxpayers but one already has full holding PBs separate to this amount. How would you approach spreading this money to keep it safe, hopefully keeping pace with inflation (or better, obviously), and with easy access to a portion of it?

Many of the podcasts I listen to forecast market crashes and potential downgrading of the currency in the near future. I just want to help them make the right decisions. Thank you all :)

eskbanker

We all have a fairly low appetite for risk

It's important to emphasise that it's their appetite for risk that matters, not yours.

The simplest answer is likely to be to put the money into other NS&I savings products, beyond the PBs, as this avoids any FSCS limit issues, but if targeting matching or beating inflation then significantly more work would be involved, such as managing a string of market-leading savings accounts and/or investing in low-risk vehicles such as gilts or short term money market funds.

However, don't underestimate the amount of hassle in opening accounts when acting as attorney…

LifeAfterForty

Thank you. Yes, it is their money and they are reluctant to be involved in handling it. It is fortuitous that our risk appetites are aligned because I have no personal experience of high-risk investments. If I oversee them setting up other NS&I products whilst they still have capacity, would it then be a relatively simple matter to set up POA and 'keep an eye' on everything from then on?

masonic

What does "downgrading of the currency" mean? Do you mean devaluation? That would be a bad thing for anyone holding cash savings and make it quite a risky thing to have all your eggs in.

eskbanker

https://forums.moneysavingexpert.com/discussion/comment/82088546#Comment_82088546

At least theoretically, yes, but their rating for customer service isn't fantastic in the listing in this article (or on other threads on here):

https://www.moneysavingexpert.com/banking/best-banks-for-power-of-attorney/

LifeAfterForty

https://forums.moneysavingexpert.com/discussion/comment/82088559#Comment_82088559

Yes, sorry, I did mean devaluation. It's all just speculation about the economy being in the toilet, the national debt burden, and what might happen if we needed a bail-out. Indeed, it would make cash savings a poor choice. On the other hand, they probably don't have the timeframe to make investments work?

I'm quite new to the problem of managing money. All of my own savings are currently cash, NHS pension, and a SIPP. I need to learn all about S&S ISAs before next April comes around.

LifeAfterForty

Thanks @eskbanker I will have a good read. NS&I does at least have the benefit that my parents will be comfortable with the name.

masonic

https://forums.moneysavingexpert.com/discussion/comment/82088567#Comment_82088567

Well that sounds rather sensationalist, but the standard low risk way to protect against currency devaluation is using index linked gilts bought and then held to maturity. This will give a guaranteed above-inflation return and might be worth considering for a portion of the money if inflation is a concern.

LifeAfterForty

@masonic Thank you for your comment. I can't imagine the cost of care will ever go down, so preserving their buying power would match their best interests. I will have to read up about gilts and present this as a possible option to them.

NanookOfTheNorth

350k is a fair amount of money, if sticking with NS&I you may want to lock some of it up for a varied number of years perhaps, or stick with 1 year, as well as easy access. There's plenty of other well known banks/brands your parents might be happy with

https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/

Currently NS&I has 1 year fixed at 4.72%, or 5 year at 4.75% - or MBNA (part of Lloyds bank) has 4.85% for 1 year.

How would your parents feel about money (FSCS protected) with the names that dont appear on the Money Saving Expert page above, such Tesco Bank (4.40% 1 year), Skipton BS (4.51% for 18 months) etc.

As well as the fixed rate accounts to perhaps put in some money, keep some back as instant access

lr1277

The following may or may not apply in your parents’ situation.

Prior to my dad’s death, both parents completed tax returns but my mum paid no taxes as her income didn’t cross the tax payable threshold. After my dad died my mum had to start paying tax because there was only one person’s tax free allowance and not two. She also got most of dad’s income.

This was because:

Mum started getting dad’s employer’s pension for widows. This income alone put her into tax paying territory.
She also got dad’s state pension, again taxable. All the banks gave her ownership of his bank accounts. That means any interest earned was now her income. These were standard accounts and not those in an ISA.

In terms of savings, very little was within an ISA because till after dad died interest rates were very low. Also for the last 4-5 years of dad’s life, he was ill so finances and tax positions were not at the forefront of our minds.

So in your parents’ position, I would advise them to put as much into cash ISA’s as possible if they have not done so. Also they might consider premium bonds if they have not already done so and if they are comfortable with the risk.

I don’t know if your parents complete tax returns currently but I believe from these forums, if somebody earns more than 10k a year in taxable savings interest that person has to complete a tax return. The savings interest on £350k could easily generate more than £10k in interest. It just depends if that interest is within an ISA or not.