What would you suggest DM does with this money?(11 Posts)
DM was unexpectedly and sadly widowed last year. DSDad appears not to have had a life insurance policy but had paid into a pension fund which currently sits at around £120k and has passed fully to DM.
DM has been poor her whole life and consequently has no idea what she should do with this money. She rents a nice little house and from her state pension, savings and various other things DSDad put in place, can get by without drawing on this pot (though holidays, Christmas, new car etc would be funded from it) She's 70 now and the worry is that she will either,
a) not spend it and then need to hand it all over for any future care she may need
b) be scammed out of it. AFAIK she's not mentioned it to anyone but she's always been a soft touch and has been taken for a ride more than once before
She flatly refuses to see an IFA without me as she "wouldn't understand him" and seems to view the money as nice to have but maintains that she would "give every penny back if I could have DH back"
A friend with a very elderly mother who went downhill very fast has already advised that we sort out PoA, which DM is happy to do. Aside from that she's just viewing the money as a slightly overwhelming prospect that she'll deal with "in the future"
a) not spend it and then need to hand it all over for any future care she may need. That's shouldn't be a worry having a big pot of money to pay for her care should be a positive shouldn't it??
I would take her to see an independent financial advisor (or even two to compare their advice).
The fact that the money is in a pension complicates things. She may be able to draw out a lump sum or it may be limited to monthly payments. If she wants to use it for a specific thing in the future (house, care home place, whatever) then I may make sense to take out as much lump sum as she can so she has discretion over how to spend it. But it would all depend on the pension rules, tax, investment opportunities etc etc and so you really do need advice from a qualified professional.
If it is a spouses pension, the very worst thing your mum could do is ignore it until 'later'. On your mum's death the pension will almost certainly stop being paid and all remaining monies revert back to the fund provider; if she plans it then she will be able to access the maximum amount of the money and either spend it or pass it on as she wishes.
Get some advice!
That did sound a bit off didn't it?
What I meant is that in the scheme of long term care it's not going to buy her a vast amount. In the meantime she's struggling on with a nine year old car, hasn't visited the places she has always wanted to and so on. I'm not suggesting that she fritter the whole amount away but my worry is that she won't enjoy it (which is 110% what DSDad would have wanted ) and will then lose the whole pot later on anyway.
Sorry, X-posted with happy
As far as I'm aware she can take the whole amount out. I think perhaps it's not a pension as such, more was set up so that DSDad could have a pension when he was older (he was self employed and only 55 when he died so I imagine he felt he wouldn't need it for some time to come)
I'm definitely taking her for advice, it's more a question of suggesting things for her to consider beforehand IYSWIM?
Please do get POA in place, then it is there should you need it. If you leave it until you do need it, it can take some time to put in place.
As SANDBOY above says, it is imperative that you seek advice, preferably from an independent financial advisor. Money does not look after itself.
I am very sorry for your DMs loss. 💐
You are right to be concerned that it could be swallowed by care.
What does she want?
A new car sounds like a great idea. Travel. Eating out with family? £120k is not all that much to cover say another 20yrs so she will need to make a list of priorities. How secure is her rental agreement?
Its a long term rental add but as with all rental properties nothing is ever 100% secure. She's also 250 miles away from us and we are her only family. DSDad is buried up there and she will not countenance a move our way, and a move up there (for her) is off the cards too as the house contains all her memories of him.
She needs to see an IFA, preferably one who is a retirement specialist. If DSDad was aged under 75 when he died, then the benefits can generally be taken tax free, which is a valuable concession. Her future objectives and her own health will need to be considered carefully to help her to work out what is the most suitable way forward. This may mean leaving the money within the pension wrapper or it may mean moving it to, for example, an investment bond. It all depends on what are her most important priorities.
Sorry, just seen he was only 55 when he died. Then it will be an uncrystallised pension pot as he won't have started taking any benefits from it. She could choose to take the whole lot out, tax free. But definitely needs advice.
Difficult to give any concrete advice, but if she only has a state pension, perhaps use some of it to buy an annuity? This would boost her secure income for the rest of her life. £100k would probably buy about £3800 inflation-linked, a year which, although annuity rates are dreadful, might make things a little easier.
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