Advice for my parents please

karen_newcastle

My parents have £50000 lump sum from my fathers pension to invest. They don't need instant access to the capital but need the interest paid monthly to supplement their income.

It's currently in a LloydsTSB savings account fixed for a year and they will be able to move it soon.

Would you suggest putting some of this in an ISA? My father for some strange reason seems to think his money is not safe in a ISA even though I've tried to explain they are tax free! Are there any good products out there that would suit them?

Lokolo

Ha don't worry about it. ISAs are the same as savings accounts but a differnt type, run by banks etc. etc. But there is a limit to how much you can put it in each year (£3600 from April 6th).

Also do you wish to invest or save? Investments aren't really good for monthly supplments as they are longterm savings for a bulk at the very end. Saving you can get monthly interested accredited accounts.

karen_newcastle

They need the monthly income from the £50,000 - that's the most important thing at the moment. My father left his job unexpectedly last June after a heart attack so they need the monthly income to help them get by.

i just think they aren't making this money work hard enough for them

Aegis

Lokolo wrote: »

Ha don't worry about it. ISAs are the same as savings accounts but a differnt type, run by banks etc. etc. But there is a limit to how much you can put it in each year (£3600 from April 6th).

True, and both parents should use their allowances if they want the money in savings accounts. Tax free income is all good, and tying up the money in an ISA wrapper means that it doesn't count as savings when working out certain benefits and tax allowances, so they'll hopefully benefit even more.

Also do you wish to invest or save? Investments aren't really good for monthly supplments as they are longterm savings for a bulk at the very end. Saving you can get monthly interested accredited accounts.

This isn't true. Investing in something like gilts or bonds is a perfectly acceptable way to supplement income, as they offer fixed rates of return despite the fact that the capital value might fluctuate. Admittedly without a growth portion of the portfolio, the value of the income will eventually be eroded away by inflation, but that's another matter entirely.

Even investing in equities can provide additional income, but the rate tends to be a lot more variable with those, so fixed-interest investments are probably going to be more suitable.

They might want to go and talk to an IFA about making the pension work as hard as possible for them. I'm assuming that the total amount they have in the pot is £200000 if they've taken the full 25% as a lump sum, and a chat with an IFA would definitely be a good idea to ensure that this works for them for the rest f their lives.

karen_newcastle

Thanks Aegis - I've suggested they contact a IFA rather than just seeing their bank manager which is all they've done so far. This is the most money they have ever had to invest (by a long shot) and I think they need good advice.

I spoke to my father again about ISAs and he is adamant that he will lose all his capital if he goes down that route!!!!! I can only explain so many times before I got blue in the face LOL!!!

Parents eh?

Aegis

Well, it sounds like he's pretty risk averse at the moment, but even if he is the IFA can advise him as to how to get an annuity at the best rate if your parents haven't already done so.

Certainly an IFA is a much better option than a bank manager, who will only be able to give very basic advice (if any!) on his own bank products. An IFA will be able to find the best solution from all providers, and will have a lot more knowledge on how to explain financial products to highlight their risk (or lack of) than me

CLAPTON

surely you can explain to your father that there are two types of ISAs

a cash ISA run by savings institutions (Building Societies and Banks etc) which are simply tax free savings a/c and carry no risk to their capital

and

stocks and shares ISAs which invest in stocks and shares etc and are risky.


Also bear in mind that if they 'live' on the interest of this money then they should consider the effects of inflation....

karen_newcastle

Thanks Clapton - I've tried to explain the difference but he is pretty stubborn. I am sure he will start to do his own research over the next few days and realise what I am trying to tell him. I just think he is stubborn proud old man who doesn't like to think his daughter knows more than him!

kazwookie

Karen

Re the ISA's can you print off information from the net to show him? or pick up some leaflets from local banks etc for him?

IFA is the way to go.

But if they are like my parents they are stubborn and in my day............

karen_newcastle

I actually made this site his home page on his laptop!! So with a bit of luck his curiousity will get the better of him

He is 61 and wont even apply for a free bus pass as he thinks it's not for him!

SKIPPY

My goodness someone else who has a father like mine!!!!!! I have managed to pursuade him to have an ISA now though so there is light at the end of the tunnel. Good Luck!