Please help me sort out my mum's finances: all assets and no income

[sleeplessbunny]

My mum got a large divorce settlement 2 years ago. She is 66 so this is in lieu of a private pension, and needs to last for the rest of her life. SHe does get state pension but otherwise has no income.

She is pretty overwhelmed by the whole thing, and after years of never having access to her own money (DF was a control freak, abusive, etc, a whole other thread there...) doesn't really have a clue how to manage it.

To say she is risk averse is an understatement: she currently has it all spread across about 7 different cash savings accounts (some ISAs, some not) and it is just languishing. She is scared of it running out and so is living like a pauper, which is heart breaking to watch as a quick mental calculation tells me it would last her about 60 yrs at her current rate of spend. (I have told her that but it hasn't really helped)

I have been trying to nudge her in the direction of investing perhaps just a small proportion of it, but she is very scared of it and i am worried she just thinks I'm being a bit of a bully.

I have suggested she buys an annuity with half of it, as a last resort really, they are about as safe as she can get, but it is kind of gut-wrenching because they such atrocious value for money. My hope is that, if she sees a monthly income that covers her bills and food, she might be less worried and more able to enjoy her retirement.

The other problem is that she won't go and see an IFA, as she doesn't trust them (long back story) and the IFAs I have spoken to won't give me any advice without her present (understandable)

Does anyone have any ideas, for investments/income products or just advice on how to talk to my mum about it without stressing her out?

Investing in shares/collectives would give her an income, possibly in the region of 3-4% with the possibility of capital growth too. Of course, investing in the stock market is dependent on her level of risk, and importantly how she would feel if she lost some of her capital. I would not attempt to do this yourself and you should seek professional management and advice from an investment firm.

I feel from what you have said that the stock market is not an option, however you have to bear in mind that simply keeping everything in cash is a bad idea in the long term because inflation will erode the value.

Annuities are also poor value because historic yields are very low at present.

For something leas risky, banks usually sell fixed term bonds, though I'm not sure what the rates are these days.

It is very difficult at the moment to know what to do for the best, but I really would keep trying to encourage her to see an IFA, you can go with her if if would reassure her.

Try doing a cashflow forecast with her. This will help show her how her costs and her income measure up. Any IFA will be able to do this for her, but if you PM me I'll send you my spreadsheet. You'll need to tweak it for her situation, but it helps to put things down in black and white.

One thing you might consider are some structured products (deposit based), but you'll need and IFA.

If it would last 60 years we're presumably looking at several hundred thousand.

My mum is less scared by investments but was very worried about managing a decent sum she inherited. We suggested that she put it with a management company. The fees probably eat up any extra return that they might obtain, but it gives her peace of mind and all she has to worry about is spending the income.

Woah, Vanessa - AssetzCapital (always mistrust a company which can't spell its own name) leaves lenders at risk of bad debts, i.e. loss of capital. Not exactly low risk.

OP - my mum was really worried about it all, and we just mentioned it a few times, persuaded her that it was worth a meeting with an IFA, realised that the IFA would charge money but add no value, suggested she went direct to the "wealth management" company (a big one) and then she took her own decision. What made the difference, really, is that she has an account manager there who she trusts. If your mum sees everyone involved in finance as out to fleece her it will be hard, but maybe you can take gradual steps over the next couple of years to help her increase her income without putting the capital at risk (which is probably a huge concern for her - it might last her 60 yrs but I bet she doesn't want to spend a penny of the capital!).

relaxed what do you think a wealth management company is? .... it's an IFA company with a posh name . Well actually some of them aren't even independent, but that's another matter.

Therapy? I'm not being flippant - if her ex has terrified her then taking some control emotionally is surely the way to taking control financially.

Ideally, she needs to find a high yielding investment, equities or bonds, suitable for her ability to take and tolerance towards, risk. There are plenty of price comparisons sites which analyse the fees, income performance etc so do shop around. She is not obliged to go through an adviser if she feels uncomfortable with them.

I agree that annuities are expensive (too low a yield) and leaving it as cash will dwindle the capital and will not protect against inflation.

Buy a flat in an area she understands and rent it out with some of it??

Quick post - but if certain factors apply you can get increased annuity - called impaired annuity. Basically if you are likely to die earlier due to eg smoking or previous employment. These are bought through IFAs.