Investing to make money for a care home fee

[Miababe]

Hi, I have a relative (Power of Attorney) in a Care Home they can pay have their fees with income from bonds and savings, pension and Attendance allowance but with the sale of their house I want to invest their money to have a larger income to cover their costs. I looked at putting into various bonds dividing the money up but someone told me the tax man would take tens of thousands in tax. I have been talking to a Financial Adviser but their fees and using a platform fee for investments is around 11k a year. Would you invest in bonds yourself or pay for a financial company to do it? Will the tax man really take that much if we do it ourselves?

£11k a year adviser and platform fee is ridiculous. You can get much, much cheaper.

Tax on investments is on the interest or growth (and only on realised gains - if a share increases in value but you don't sell it, no tax), not the whole amount invested. So 'tens of thousands' of tax is unlikely unless you're investing a massive amount.

It doesn't sound as if you're an expert investor, so DIY is probably not the best idea. Have you considered a care needs annuity? Much simpler, and once it's set up it's done - no ongoing management that other investments need.

As the previous poster said, tax is only paid on income so unless you're investing millions of pounds you're not going to be generating enough to be paying "tens of thousands in tax". Unless it is a multi-million pound property that is to be sold?

I would be considering:

• The amount of savings, both existing and from the property sale.
• Age of the person in the care home.
• Realistically, how many years might care need to be paid for? 5 years? 20 years?

You need to think about how much money is needed each year (plus a % for increases) and plan how to keep the savings accessible so there's enough to pay for a year's care costs at a time. Eg, there's no point tying everything up in 5 year bonds because you won't be able to access any money in years 1-4.

It's a balancing act: keeping the capital safe but generating a good return (and being tax efficient if possible) and planning ahead to keep different pots accessible when needed.

Personally I wouldn't be looking at stock & shares investments as you risk losing some of the capital (unless you are talking millions of pounds that could last over a decade). For anything else you need to consider whether it has a fixed term and when the money can be accessed.

Onshore investment bonds might be one possibility. They are managed by insurance companies, the most well known being Prudential (so not Government or Corporate bonds).
Because of the way they are structured, they have a number of attractive tax advantages and flexibilities.

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Hopefully this link will work!

www.youtube.com

Be aware with bonds of what happens if the relative dies.

I would consider buying a care annuity to cover the costs of the care home and then invest the remaining money in tax free shelters. £50k In Premium Bonds and £20k a year in cash ISA’s.