Investment advice for Power of Attorney please

he aunt has sufficient pension and benefits not to need a monthly income and we believe the best way to maximise her capital without risk would be to invest this money in long term bonds

Can you define what you mean by bonds?

I am also going to assume that her aunt is over 65. Your proposals will wipe out the age allowance so that will cause an increased tax bill over £700 a year (rising to £1000 with a few years).

So when you look at that 7.10% return you need to deduct 1.42% for basic rate tax and a further 0.7% for age allowance reduction. That will make the net return 4.98%. Not very good and just about in pace with RPI (and likely to fall behind RPI in the near future).

I have assumed she will remain a basic rate taxpayer but will the interest keep here at basic rate or take her into higher rate?

You also have to consider something unpleasant but realistic. What is her Aunt's life expectancy? If this money has to last a long time and if it has to be called on later to provide an income what will the amounts be?

Are we on the right lines - what are people's suggestions.

Based on very very limited info.... I think you are being very paranoid about risk and going a bit over the top in focusing on cash which probably wont keep up with inflation. Meaning the money is losing value in real terms. You also appear to be creating a tax liability I am not sure you are aware of.

How is the money deployed now?

Does she live in her own home? Is she likely to need residential care in future?

This is likely to be a lot more complex than you may have realised when you took it on.

Aunty is 79 and a standard rate tax player.

Ok, so the age allowance reduction will be £1000 a year then. So knock off 0.7% on any returns you look which are not wrapped tax efficiently.

Ironically, this may be an occassion where investment bonds could apply. Especially if local authority care isnt needed in the forseeable future (investment bonds are not included in the means test for funding. although they dont have capital security. Plus they dont reduce the age allowance so that could save £1000 a year as well).

There is also the issue of if residential care will be needed. Annuity purchase may be a requirement then and that may impact on planning now.

I agree with the above posters. This is a complex situation indeed!

I have had experience of power of attorney (the old fashioned one) and it worked quite well. I think DH has a point about Investment Bonds in this instance, although I would stay well clear of them usually.

To be brutal, I think you should keep away from locking her capital for any period. My experience has been that things can change VERY rapidly, so keep things as flexible as possible.

You also mention her "mental condition". Should you now think about placing her under the "Court of Protection"? http://www.publicguardian.gov.uk/about/court-of-protection.htm

Sorry if this all sounds a bit negative, it's not supposed to be. I found that, if you always try to act in their best interests, then you will always come through and can defend your actions against other relatives who suddenly appear on the scene whilst having been no help when you needed it!

Best of luck!

I think you're getting off the main point regarding her condition (as it happens my wife is an expert in this area - Approved Social Worker, sits on Mental Health Review Tribunal and so on).

No. You are missing the point that any financial decisions will depend on now and what may occur in the future.

We just want a simple risk-free way of investing her money to get the best return for her.

What you class as risk free is going to increase her tax liability and require a self assessment notification to HMRC each year (due to removal of age allowance). The risk free nature could also see the money lose value in real terms due to inflation and by not utilising the right tax wrapper you may end up finding that the risks you didn't want to take now were wasted when the money starts to go down if care costs are required.

The decisions you need to make are integrated to what is mostly going to be needed. It may be that an offshore investment bond invested in savings accounts is the most efficient option. However, you are looking at things at a basic level by focusing on the gross interest rate and that isnt the most important thing.

You also seem to be saying you want the best way to invest but have focused purely on savings.

Sorry if this all sounds a bit negative, it's not supposed to be. I found that, if you always try to act in their best interests, then you will always come through and can defend your actions against other relatives who suddenly appear on the scene whilst having been no help when you needed it!

Too true. The trustees have a legal liability to do what is best for the beneficiary. Doing what you think is best and what is actually best are two different things and if relatives think you are doing it wrong then you could face years of hassle. You have to be seen to be doing what is best as well as doing what is best. Especially in this day of compensation culture.