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How to get £30,000 income from £625,000 for 98 year old
busy bee
Posted: 17 December 2012 09:14:49(UTC)
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Ideas please - do we go and get advice on how to invest it - and pay 1% for the priviledge (and be pushed into 'their' unit trusts etc), or do we do a d-i-y approach and take the reasonably obvious route of increasing share holding in VOD, BT, GSK and High Yield IT's/Unit Trusts.

What shares/investment trusts/unit trusts should we go for please - there is only £58,000 available in Isa's (plus another £11,500 in April) - dont ask why so little in ISA's. Aged 98, in a home. Income is need for home care.

The highest holdings are in FGT, LWDB, PNL and HNE, but the rest is a pretty good collection, but only giving £20,000 pa.

Ideas please !!! - CGT is a bit of a problem but can be worked around I am sure
Income Investor
Posted: 17 December 2012 10:51:41(UTC)
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Interesting. On this level of capital getting a 5% return after tax should be a doddle, the key is balancing risk and tax - for a basic DIY guide, see my website, although this will require some time and effort by someone

http://www.the-diy-income-investor.com/

You don't mention existing pensions?

The basics would be:
- take the maximum CGT each year
- age-related income tax allowance means that, with the ISAs, there should be little income tax liability
- keep paying into ISAs (as you plan)
- think about high-yield corporate bonds with a large purchase multiple

The issue of IHT is not mentioned. It may be better to start giving away capital in return for contributions to care costs? It is unlikely that the money would run out.
busy bee
Posted: 17 December 2012 12:13:55(UTC)
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Many thanks - Pensions - only state and included in figures, IHT will just have to be paid but there is a sum outside the estate for this - we would like to do 'gifts out of income' but is there enough income for that, and does the cash deposit in the bank count as 'income' for this purpose ?
alan thorburn
Posted: 18 December 2012 17:29:43(UTC)
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Not a longterm investment then ? !
busy bee
Posted: 18 December 2012 18:24:53(UTC)
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Oh _ perphaps - the home had a lady who lived to 106 - so another 5 years to go- and she may yet set the UK record - so this may not be 'long' long term but its longer than a year !
A Sick SIPP Owner
Posted: 18 December 2012 18:35:55(UTC)
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I may be slightly confused by the lack of detail given, but it seems pretty simple to me!

An annuity seems to be out - Ageism strikes as 98 seems to be 8 years too old - so there's an option to sue most of the insurers offering annuities for age descrimination.
And - compensation should not only be tax free, but also allow the capital to be untouched


For £30K pa from £625K a 2% interest bearing account would do -
Allowing for the £85K limit - that would want about 8 separate banking groups - say £79K in each to allow for an extra accumulated £1600 pa @ 2% interest so 3 years could accumaulate in one, or in all accounts without concern

So - where is the difficulty in getting £30K pa
Roydo
Posted: 18 December 2012 18:58:53(UTC)
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An arminvestors.com member;17238 wrote:
I may be slightly confused by the lack of detail given, but it seems pretty simple to me!

An annuity seems to be out - Ageism strikes as 98 seems to be 8 years too old - so there's an option to sue most of the insurers offering annuities for age descrimination.
And - compensation should not only be tax free, but also allow the capital to be untouched


For £30K pa from £625K a 2% interest bearing account would do -
Allowing for the £85K limit - that would want about 8 separate banking groups - say £79K in each to allow for an extra accumulated £1600 pa @ 2% interest so 3 years could accumaulate in one, or in all accounts without concern

So - where is the difficulty in getting £30K pa


Unless I missed something, the difficulty might be in your maths.

1 user thanked Roydo for this post.
Clive B on 19/12/2012(UTC)
A Sick SIPP Owner
Posted: 18 December 2012 19:13:24(UTC)
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Yes -
I do seem to have got it a bit wrong:
As in it's 5% that's needed and that would be nowhere near as easy to get from a basic savings account.

Still, the capital itself could be used to provide £30K for over 20 years, and with interest at 2.5% pa it would probably supply £30,000 for about 28 or 29 years depending on the 'take' at start, or end of the interest year.
busy bee
Posted: 18 December 2012 19:26:11(UTC)
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And you have to remember Mr HMRC and tax - that why the ISA is very worthwhile. I just wanted ideas other than putting it into VOD, GSK, or CLIG (and watch the capital go down rather alarmingly) etc - to check if I have missed any good ideas !
Roger Bailey
Posted: 18 December 2012 19:35:20(UTC)
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Joined: 05/02/2010(UTC)
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For a man of this age, not much point in making any drastic changes, just make up any shortfall between income and expense by cashing in some investment./using capital and gains. If existing investments are held there will be no CGT on death but maybe IHT if he doesn't have two nil rate bands that can be claimed.
jim grassick
Posted: 19 December 2012 08:35:06(UTC)
#11

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You need some fixed income investments in your portfolio (debt). To get the yield you require, you will have to look at corporate bonds, or preference shares (higher yield but higher risk). I have a good few of the latter. You can get insurance companies (like RSA and Aviva), yielding close to or above 7%, banks like Lloyds yielding close to 8%.
William T
Posted: 19 December 2012 11:19:02(UTC)
#12

Joined: 19/12/2012(UTC)
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Wow nice...
Income Investor
Posted: 19 December 2012 12:43:08(UTC)
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I'd very much second Jim's comment about fixed-income - my portfolio has 50% in different flavours or this.

In my original answer I suggested some of these that have a high multiple (i.e. you have to buy a lot of them at once) - e.g. £50k in one go.

For ideas, look at FixedIncomeInvestments.com
http://www.fixedincomein...come-stocks-spreadsheet

For example Halifax 12% perp yielding nearly 9% - there are others: look at them carefully before deciding and make sure you understand the risks.
Lawny
Posted: 19 December 2012 18:02:06(UTC)
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98 y.o. with >£600k capital ?

I would suggest spend however much they fancy on booze, loose women (or men) and fast cars then just waste the rest.

john_r
Posted: 19 December 2012 21:04:50(UTC)
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While an investment in high yield bonds may seem attractive remember that we are possibly just at the beginning of in an inflationary period for the UK which could mean you get hit by annually escalating care fees. These situations don't fit perfectly with fixed income investments like bonds. Besides which, the large size of your fund gives some scope to have a more aggresssive approach.

As a starting point suggestion, why not split the fund into 25 units each being a £25K investment with a plan to sell at least one unit each year.
By simply selling off one unit of investment per year it should be fairly straightforward in deriving a rotation plan which avoids capital gains tax.
A possible scenario (and this is just a suggestion for thinking outside of the box) could be .....
a) 4 units permanently in totally safe cash investments (2 to 3% return ) providing an emergency fund of 3 years fees and giving flexibility for the timing of other sales.

b) 7 units in high yielding large cap shares. Sorry, but yes it will be a collection of the usual culprits -Glaxo, Vod etc etc (hopefully a 5 to 6% yield).

c) 14 units in a diversified collection of Investment trusts (hopefully 10%+ return) taking in geographically Emerging Markets( eg Templeton), Asia (eg Schroder Oriental income/ Aberdeen smaller asian companies), Latin America (eg Aberdeen Latin Amer Income ), Eastern Europe as well as a smattering of Sterling based focussed funds such as Smaller Companies, Health funds (eg Standard Life Smaller Co's / Polar Healthcare Capital & Income) and some reliable International funds (eg Murray International / Finsbury Income&Growth).
Note that I always specify Investment Trusts for good reason - Oeics and Unit trusts are not for me. And of course first of all make sure you have a execution only broker such as Sippdeal or First Direct where you can operate a ISA alongside a normal investment account and who doesn't charge you simply for holding equity type investments.
Obviously you can twiddle the unit allocation and find many other well performing trusts after your own research. Remember I am a mere unqualified private investor so please don't take my suggestions as advice.
However I have set up my own pension fund along these lines and sleep well at night despite a sticky period through the credit crunch of 2008. Just remember diversification is important and also try to keep a healthy proportion of sterling based investments as a guard on currency risk.
3 users thanked john_r for this post.
D Roche on 21/12/2012(UTC), Guest on 22/12/2012(UTC), D G Stonebanks on 22/12/2012(UTC)
Hearne
Posted: 22 December 2012 10:08:05(UTC)
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Joined: 22/12/2012(UTC)
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You can double that! A income of £60,000 would last for over 10 years. More than sufficient I would think. CGT is never a problem for the payee.
JonS
Posted: 22 December 2012 12:40:41(UTC)
#17

Joined: 16/07/2009(UTC)
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Hmmm....why not just spend £30000 per year out of capital. Lets face it if you're 98 it will last until you are at least 118 and you will have the added joy of spending your greedy relatives inheritance. It's a win win!
snoekie
Posted: 22 December 2012 17:09:50(UTC)
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BB, There have been some good suggestions made.

You are already aware of some of the higher yielding shares that are available. And yes there is a risk, some are dropping (e. g. Vodafone) and others are steady, but there is also the 'risk' that they will rise and and give you an IHT 'headache'.

Others have spoken about bonds, but these have their own risks attached. Be sure you can get out easily without the company playing silly buggers when you try to sell, however, it is unlikely you will recover all the capital outlay.

I have this concern about buying into shares at the moment, the market seems to have gone doolally at the moment (too high for all the risks around) and there will be, in my view, a sharpish adjustment. That would be the time to buy in. In such an instance you should be able to buy more than enough to cover your requirement, and here I am talking shares.

Somebody mentioned Lloyds, the bank ain't 'payin nuttin', but there are, perhaps, prospects next year.

I recently bought into BG, even when it dropped quite substantially, only to see it drop further, but then this is a long term punt, and it only pays circa 1.57%.

I think I am more a share man, and with that sort of money and the state pension you should be able to get pretty close, if not exceed your target, and if there is a shortfall you can realise a proportion of the investments to make up the shortfall.

And yes, if you are a novice, the market is probably a scary place. I was initially guided by a broker, who put me into 'safe' stuff, Vadafone, RSA (as it was) RBS (Natwest, as it was) and a few others, and they lost money and are still 'losers' in terms of the original amount invested. Others, HSBC are better. However years on, and my own choices (including the 'dogs') I am about 25% up overall, and income providing a half decent retirement, would have been better but for Brown/Balls, may they rot in Hades, forever.

Invest, say, £600K, keep the £25K, part of it will go in fees of buying, and part be kept to tide you over until the divis roll in and a reserve for any short fall.

If in good companies, then the divis are more likely (no guarantee) to rise to meet rising fees.

The raid on the capital, if needed, should not be of long duration, and with the possibility of growth you may be better off. Being shares, the money is easily accessible, particularly for the tax man's kilo of flesh and gallon of blood when the need arises.

My farthing's worth.
Paul Davies
Posted: 22 December 2012 22:19:24(UTC)
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Please forgive me if I have missed the point.

Very few in retirement homes live to 106. One residential home that I know of in over 30 years has only had 2 residents top 100. It is a smaller home under 20 residents.

Place the amount in as high an interest account as possible. 4 years of life will only take £120,000.00. Pay fees out of capital. It is the residents money I assume, so spend it on them.
snoekie
Posted: 23 December 2012 01:02:29(UTC)
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BTW, if not already done, unless you have an enduring power of attorney, get a lasting power of attorney. It will take several months, the people in the relevant office may understand English but comprehend little.

A power of attorney is usually something needing to be done fairly swiftly, but this crowd seem to want to wait until the donor is dead before they think of doing anything, and then they will apologise. They will also want social services to stick their large incompetent low intelligence people to stick very large probosci into it, even if a doctor has advised.

Suffice it to say months will elapse. Another instance parliament screwing up, totally something that was not broke, a requiring a molehill to be made into a mountain of paperwork (and great expense) so that they could employ more stupid people.
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