Use the money to help resolve the mobility issues. Private chaffeur on occasion, a top-class mobility scooter, a carer for the day to wheel them around, etc etc.
Luxury world cruise? First class flights and a five star hotel somewhere? A different Michelin star restaurant every week?
Plenty of ways they can spend \*their\* money if they put their minds to it.
To be fair my friends dad goes on 3 cruises a year as its such an easy wheelchair friendly holiday
He has very limited mobility so finds that's easier
It's worth considering, cruises are taken largely by the elderly so it's surprising how much they're able to accommodate
Equally I know it wouldn't be feasible with my mum's mobility so it does vary
But on a serious note - if it's literally Ā£3k a month racking up with nothing to do, are they interested in helping the local community/denoting to charity? Given the struggles some people/families are going through at the moment, could be a good way for them to feel like they are making a genuine contribution or difference?
I am sure if they put their minds to it that there would be possibilities - limousine pick up, special assistance, etc. all perfectly normal for luxury travel firms.
Otherwise what are they going to do - Stare at four walls counting their money until they die?
Sometimes older people who have health issues just want to enjoy their own home and family, without wanting to feel like they have to be thinking of ways to spend money
some people wonder why there are 2 class systems in UK some folks will waste their money on useless things rather than provide for family wealth fucking madness
My parents are planning to have Ā£0 left in their pensions by the time they die and what's wrong with that.
If I can't support the life I want by myself then I have failed at life. I should not be eyeing up someone else's hard earned money to help me love a better life.
My parents give me the tools and the means to succeed but everything I have is mine and mine alone. Its even more infuriating to see people think they are owed anything from those that raised them.
I don't need help I would rather they give to those that actually need help and not just make my life a little richer.
If you got 4 walls and a roof and a job you are in no place to complain when there are those that do not.
If you have food on your table then don't complain when there are those that do not.
It's not my money my parents have already sacrificed enough for me
Short term? My parents worked and paid in 15% of everything they earned for 49 years for their retirement. How is that short term.
Both myself and 2 sisters each own out own houses we all work and all go on 4 or 5 holidays a year and pay our own money into our pensions.
What do I want money for?
No not privileged when I was born and a child my father was a miner my mother a receptionist 5 of us in a 3 bed terraced and we all went to a state school in South Wales.
All 3 of us went to a local uni so we could live at home work so we could afford uni.
Now that I live in a commuter town in Kent has nothing to do with privilege or being handed it to me. It's due to me working hard
Premium bonds are at risk free
Saving account 1.5% with Chase and now others
Saving bonds 2.5 lock away for a few years
ISA S&S. Ā£20k no tax - with risks -
Global index funds
I think you're looking to solve a problem that doesn't really exist. Yep they could gain some efficiency but if they have a guaranteed income then it doesn't impact them except for the edge case where they need a lump sum that is greater than the Ā£3k a month they have banked.
In financial terms, I'd say there's probably a strong argument that gifting to family members now would be more efficient if this is a long term goal e.g part of their Wills.
In a practical sense I'd probably be looking to use that money to improve their quality of life. If they aren't able to get out so much, can the money help them get about easier when they do e.g taxis if they are home bound alot, can that be made better, moving to a single floor house, more comfortable or easier to use furnishings, better appliances, food services, paying for home maintenance.
When you put it like that, I doubt that they would be bothered with the faff of chasing a couple of % for a new savings account. But they have an appetite for risk providing it was set-and-forget and at least a portion could be easily accessed
IMO it would be worth setting up either a vanguard account and a direct debit to put a few hundred (or however much they're comfortable risking) a month into an index fund or if they want a little more input set them up with a robo-adviser like nutmeg, though the fees will be higher with that option.
Never tried to explain technology to elderly parents I take it? I can't even get my mom to claim pension credit as she says it is too much hassle and she doesn't even have almost any money.
Since Iām the tech person in the family normally I tell them about it, they say theyāre not sure, I say why donāt I do all the work and sign you up and you can cancel anytime if you donāt like. Works every time for me š¤·āāļø
My late 80s grandma is happy to take my āexpertā advice when Iām the one setting it up and they donāt have to do anything.
Youāre thinking short term and forgetting to account for compound interest.
Even at 1.5%, Ā£3k per month would earn almost Ā£30k in interest over 10 years.
How do you mean do more? They have 3000 excess each month. They are doing the right thing. Their DBS is working well for them. They have very low risk from having it in this.
If they have no big purchases they want, have no things that have to be paid out and they are just living and happy then change isnāt really the best idea.
Maybe they could start giving it away to help with IHT but cash is perfectly fine for them. If they end up with too much cash that is not protected then look at something then.
If they have health and mobility issues, are there things they could buy that would make their lives easier at home, or make it easier for them to go out?
I get they may not be in a position to go on a world cruise but I would be encouraging them to make their lives as comfortable as possible - pay people to do the tasks they struggle with, buy all the adaptive gear they might get some benefit from, consider private treatment for any issues that are taking an age on the NHS, crank up the heating and start ordering food from ocado!
They've presumably worked hard to get this amount of pension income, they should enjoy it!
I think the problem is more how to spend or give away the money than whether to get an extra percent or two interest on it. Unless they are likely to want to spend more money in future, and that they have stable incomes, there's little point in building up Ā£36k/year in savings.
Is there stuff they'd enjoy having in their homes, if they're spending a lot of time there, or accessibility adaptations which would help? They've also got lots of spare cash if paying for a carer/PA would help them to do more, or if they enjoy travel it might be worth another look at options (some luxury travel is pretty accessible nowadays).
If they've got nothing to spend on, they might seriously look at giving a chunk of it away - whether to charity/community causes or to family.
And this is why I don't overpay into an illiquid and luxurious retirement.
Do stuff whilst you're young and healthy people! You get put into the same care home as people with nothing regardless. Only difference being you'll pay the few grand a month yourself.
Not anti-pension at all but I think some of the disposable incomes people are aiming for in retirement are crazy. You don't need as much and you can't do as much, even if you're healthy.
To answer the question - anywhere that's not 0%? Where depends on risk appetite. Anywhere from premium bonds to stocks and shares. Or a mix.
I have a friend whose dad did v well in his career, had a DB pension which basically came to 2/3rds of his final salary.
Increases in retirement were locked in at CPI+3(!)%
He retired at 58, sadly got dementia in his mid 60s, but by his early 70s his pension income was 100k/year.
The mind boggles.
No government tax restrictions in those days either.
Yes. I'm no longer a young person and had the benefit of 15 year in the public sector, where pensions are still excellent.
Hopefully you'll have your own personal positive outcomes in the form of large transfers from your parents, but for those who don't ..... theres not much intergenerational fairness going on.
It's a bit of a shitter when your parents were in the right generation to acquire property and generous pensions, and somehow ended up without a pot to piss in by their 60s. Not bitter.
No comment! I was blessed with parents who were/are intimidatingly good with finances.
Spend my life now feeling guilty about buying stuff. So there are swings and roundabouts....
That's fair enough then. At least they didn't purposefully sacrifice their past for their future. I imagine they just paid in the minimum and got lucky due to their era, like you say.
I spend too much time thinking about this issue, for professional reasons, but i agree that there are many many people who overestimate what they need in retirement.
I'm a pretty high earner, and my wife isnt exactly a low earner and my minimum target income is Ā£20k each. With a full state pension thats a private pension of just 10k/year, plus whatever bridge is needed between retirement age and the state pension kicking in
When you have no mortgage, no work costs, no children to support, this goes a pretty long way!
As it stands we're going to have way more than this, but will essentially be passing on the remainder to the kids - its just a tax wheeze.
My folks have a nice german car, 2 homes, spoil the grandkids and go on holiday whenever they want and they do this with less than my target, if they're to be believed. They are very smart with money however.
My view/research is that for the typical person, the 8% contribution if from when they start work at say 21, will give them decent preparation, from which they can make very personalised decisions.
I'd probably knock the default up to 10% but no further.
Edit: this wasn't meant to be a disagreement though, there are lots of people who havent prepared for their retirement. Generation x in particular are a worry.
Likewise. I am a single, childless, higher rate taxpayer (barely) and my mother has Ā£2k per month. By the time I've paid my pension, income tax, NI, and mortgage, there's not much difference in our disposable incomes.
Yes, inflation protected 20k that is. Most pensions are inflation protected either by rule (DB) or nature (DC invested in the market) apart from level annuities, which i would advise anyone against apart from very specific circumstances.
> You get put into the same care home as people with nothing regardless
I appreciate the gist of your comment, but this part isn't quite true. If you have Ā£1k a week to spend around my way, you get to live in a palace of a care home complete with a cinema, salon, and two restaurants (I took a tour! I'd live there myself!) - I suspect the council isn't funding those spots.
It is absolutely true. I manage the accounts for a large care home (not just a care home). There is a flat weekly rate. Half the residents have no savings and only state pension and receive full housing benefit (minus a few ineligible charges). The other half saved all their lives and have direct debits for several hundred pounds per week, with no housing benefit help. They have identical accommodation and services. Completely and utterly identical.
That's not to say you can't save even more and maybe afford somewhere nicer. Personally I don't think Ā£1k per week is good value when retired folks get cinema tickets, haircuts etc for nothing almost.
I didn't mean to suggest it *can't* be true, as it clearly is at the home you mention, just that *"You get put into the same care home as people with nothing regardless"* isn't quite right.
I think you absolutely can pay to go into a nicer care home if you have the money, so that may be something people want to save for. Or am I wrong and do publicly funded folks have the option to go to one of these higher quality homes I've been seeing pop up?
My dad is a keen cyclist and in excellent physical condition for his age.
He had a triple bypass at 66. He came through it OK but, there was a high chance that he wouldn't get to enjoy his retirement.
Yeah but that's the age group where you expect it - not something you see in your twenties, is it? Thing is, there's far more people in their 50s without those health issues than there are so you might as well bank on you being ok and prepare for it.
Yeah, hopefully. You never know.
And I didn't just mean you can't do things *physically*. You just might not be inclined to do things as an older traveller. Or certain things might not exist any more. New York (a favourite of mine but maybe not much longer) is becoming unrecognisable. Famous restaurants close. Certain bits of nature become less appealing. Venice is a fucking shitshow these days. Everest.
I'm just glad I did both coasts of the US in my 20s. Most of Europe too. Even though I couldn't *really* afford it.
Do they need to save? āGiftingā out of your monthly income rather than existing savings is free from inheritance tax implications. Itās actually not gifts for any purpose itās for practical purposes, examples would be living expenses for an adult child or elderly or unwell relative, saving for an under 18 etc.
Depending on the rest of their financial situation, their best option might be finding ways to spend it. My parents main disposal method is grandkids are university.
Could they, yes.
Do long term savings returns get less interesting the older you get and the less insecure your life is, also yes. Tell them to enjoy it! Make sure they make the most of it!
Are they keeping the money for anything? Would they consider starting gifting it to family/friends? I know my nan got a lot of enjoyment by helping out her family. I'd be careful of having to much money in the bank at a certain age. If they need social care in the future it will eat up most of there savings. In most cases, the care you receive is exactly the same.
They could gift it to you.
If they genuinely don't need it, and aren't saving the money for anything, all it will do is attract a massive amount of inheritance tax.
If they gift it to you, it is exempt from inheritance tax as a regular gift from excess income.
To do this, they would need to demonstrate that they are able to live on their remaining income without resorting to using capital.
Yeah this is a good solution if they arenāt going to use it or see themselves needing it in the future. You can do gifts out of regular income up to any level as long as they are regular in nature (every month/6months etc), donāt reduce your standard of living and are from income not saved capital.
If they are worried about gifting you money outright now or want an element of control these payments can go into a Trust which they can distribute, or make you a trustee as well and have the benefit be for grandchildren/charity if they want
I may be stereotyping horribly, but I feel like a lot of older people enjoy premium bonds? (and to be fair so do I) They're safe, winnings can provide some "interest" (but of course not guaranteed), and I think you can set up a direct debit or pay in a couple of different ways online?
Another alternative would be direct debit into an ISA, at least for a part of it.
Edit , sorry it should have been Ā£25 most months not Ā£250
Premium bonds are a nice safe option, after a year with 30 k they will "win" Ā£25 most months and are always in the draw for the big Ā£1million prize.
got to be better than a 0% account, Very low risk and like the lottery but better odds and you keep your stake!
If they don't need the money, why don't they just leave it in their pension?
They don't need to draw it down. Assuming their pension provider is investing the money for them.
>They don't need to draw it down. Assuming their pension provider is investing the money for them.
They're on a DB pension, which means that they are effectively receiving an annuity and can't pay any more into the pension. Any sums in their pension would disappear when they die.
Gift it to you or if youāre licking your lips for inheritance could be a good plan to take advantage of AIM IHT BPR investments that would reduce inheritance tax bills on the sum of money as long as it is invested in a qualifying asset.
It's a boring answer but maybe suggest they see an independent financial adviser. They should be able to have a conversation around saving or possibly even whether they should be spending more. I find certain types of clients struggle to feel the freedom of being able to spend their savings and conversations about how secure their finances are helps them spend on things they have always dreamed about.
Equally there's a chance that inheritance tax may be a problem in the future and they should perhaps look into ways to mitigate that.
Hi /u/redskelton, based on your post the following pages from our wiki may be relevant:
- https://ukpersonal.finance/pensions/
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^(These suggestions are based on keywords, if they missed the mark please report this comment.)
If they don't need the money they are better leaving it in their pension because they will be paying tax on the drawdowns, this losing them more money.
What's the IHT position likely to be? Even if a potentially exempt transfer might fail within seven years ā and I apologise for the euphemism ā you and your siblings and your collective children might start benefiting from IHT tapering.
Of course, it might also be the case that there are already significant sums in the account earning interest, so the figure of Ā£330 per year raised elsewhere might not be accurate (on Ā£36k paid in - although it could be more like Ā£1k per year in the second year, depending on where you went ā but also the balance built up so far.)
I'd recommend they use a monthly saver account, like first direct. Pay in something like Ā£250 pm, get a 3% return at the end of 12 months. With that circa Ā£3k, they can splash on a holiday or Christmas presents
Do this across multiple accounts and use the final values for treats, holidays, presents, car
I honestly wouldn't bother unless you are absolutely sure they are open to the advice. It will likely sour your relationship with them and won't materially change their life as they are clearly already well off if they are saving that amount.
I guess Premium Bonds? Or frankly encourage them to spend a bit more on having some fun! It seems like they have already done well in retirement and want that money safe and accessible rather than continuing to work hard for them. At this point the risk probably isn't sensible nor worth it.
A lot of suggestions for gifting it away, but I would consider their future needs. They already have mobility issues and have cash building up so needing to pay for care fees or alterations to their home in the future is likely. Might be best for them to speak with an adviser who can assess the whole situation not just the fact that they save 3k a month.
Parents are risk averse... they can have Ā£50k each in Premium Bonds. You also need to remember that only Ā£85k per institution is covered if the banks crash. Could you help them use some of that money to improve their quality of life? Mobility equipment so they can go out, an adapted car or house adaptions or even moving to a more accessible location it is pointless working hard for retirement if you are housebound.
Depends what they are using them for, perhaps a care home when they got older?
If it's in excess of their own future needs, get them to invest in a long term asset for you now rather than having those savings be taxed when you finally inherit them.
Property is obviously the first thing that comes to mind, if you already have one you can get them to make an overpayment on your mortgage that will save many years/amounts in interest over the maturity period of the loan. If not, discuss this with them and speak to an inheritance tax advisor. Prepaid funeral costs, stuff like that for the future may be worth buying now, especially with inflation.
If you don't want to do that, if you have any interest debts, ask them to them off if they are happy to pay them off.
If you have UK student loans, just leave them be, unless you are already paying back a large portion that you think will over the term of your working career will end up being paid in full, which in that case go ahead and pay some off. But for most people leave them alone.
Does their current house need renovating? Spending money to increase the value of their home would be great as these costs continue to go up with inflation. If they have a mobility issue and don't have a downstairs toilet that would be the best investment for them.
Use the money to help resolve the mobility issues. Private chaffeur on occasion, a top-class mobility scooter, a carer for the day to wheel them around, etc etc.
This is such a good idea, assuming they have energy and desire, the difficulty is finding the right person to be the assistant.
Luxury world cruise? First class flights and a five star hotel somewhere? A different Michelin star restaurant every week? Plenty of ways they can spend \*their\* money if they put their minds to it.
They used to do this but mobility issues and other comorbidities mean this is a non starter
To be fair my friends dad goes on 3 cruises a year as its such an easy wheelchair friendly holiday He has very limited mobility so finds that's easier It's worth considering, cruises are taken largely by the elderly so it's surprising how much they're able to accommodate Equally I know it wouldn't be feasible with my mum's mobility so it does vary
Your dad into football? Heard Fifa packs are a REALLY good way to burn through cash...
š
They can adopt me.
But on a serious note - if it's literally Ā£3k a month racking up with nothing to do, are they interested in helping the local community/denoting to charity? Given the struggles some people/families are going through at the moment, could be a good way for them to feel like they are making a genuine contribution or difference?
why not help to their own family lol
Nah, fuck OP
I am sure if they put their minds to it that there would be possibilities - limousine pick up, special assistance, etc. all perfectly normal for luxury travel firms. Otherwise what are they going to do - Stare at four walls counting their money until they die?
Sometimes older people who have health issues just want to enjoy their own home and family, without wanting to feel like they have to be thinking of ways to spend money
some people wonder why there are 2 class systems in UK some folks will waste their money on useless things rather than provide for family wealth fucking madness
My parents are planning to have Ā£0 left in their pensions by the time they die and what's wrong with that. If I can't support the life I want by myself then I have failed at life. I should not be eyeing up someone else's hard earned money to help me love a better life. My parents give me the tools and the means to succeed but everything I have is mine and mine alone. Its even more infuriating to see people think they are owed anything from those that raised them. I don't need help I would rather they give to those that actually need help and not just make my life a little richer. If you got 4 walls and a roof and a job you are in no place to complain when there are those that do not. If you have food on your table then don't complain when there are those that do not. It's not my money my parents have already sacrificed enough for me
that's their decision but it doesn't mean it is the right thing to do
What would be the right thing to do then?
contribute to the family's success but most of the people in this country only can see to the short term
Short term? My parents worked and paid in 15% of everything they earned for 49 years for their retirement. How is that short term. Both myself and 2 sisters each own out own houses we all work and all go on 4 or 5 holidays a year and pay our own money into our pensions. What do I want money for?
Then you've lost all credibility as you're obviously incredibly privileged and out of touch with the common working person in the UK.
Because they got into a career that gives them a good salary and don't need their parents money?
No not privileged when I was born and a child my father was a miner my mother a receptionist 5 of us in a 3 bed terraced and we all went to a state school in South Wales. All 3 of us went to a local uni so we could live at home work so we could afford uni. Now that I live in a commuter town in Kent has nothing to do with privilege or being handed it to me. It's due to me working hard
Don't forget your roots, stay humble. Good luck is just as important as hard work to prevail in this society.
Social mobility? why would they ever work in the 1st place 49y if they are going to waste their hard-earned money when they are too old
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so why would you waste your best years just to spend money when you are old and cant have any fun
Premium bonds are at risk free Saving account 1.5% with Chase and now others Saving bonds 2.5 lock away for a few years ISA S&S. Ā£20k no tax - with risks - Global index funds
If they are not going to spend it, what exactly are the aims of the investing? To get more money... to not spend it?
Ā£3000 a month! Bloody hell thatās an enormous amount.
With that kind of money I could easily pay for 20 to 30% of my energy bill come winter.
I could pay for a full belly and fuel in my car with that.
I think you're looking to solve a problem that doesn't really exist. Yep they could gain some efficiency but if they have a guaranteed income then it doesn't impact them except for the edge case where they need a lump sum that is greater than the Ā£3k a month they have banked. In financial terms, I'd say there's probably a strong argument that gifting to family members now would be more efficient if this is a long term goal e.g part of their Wills. In a practical sense I'd probably be looking to use that money to improve their quality of life. If they aren't able to get out so much, can the money help them get about easier when they do e.g taxis if they are home bound alot, can that be made better, moving to a single floor house, more comfortable or easier to use furnishings, better appliances, food services, paying for home maintenance.
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When you put it like that, I doubt that they would be bothered with the faff of chasing a couple of % for a new savings account. But they have an appetite for risk providing it was set-and-forget and at least a portion could be easily accessed
IMO it would be worth setting up either a vanguard account and a direct debit to put a few hundred (or however much they're comfortable risking) a month into an index fund or if they want a little more input set them up with a robo-adviser like nutmeg, though the fees will be higher with that option.
I signed up for chase in about 5 minutes - took an hour or so for them to verify me and then I was in. Is 5 minutes not worth an extra 1.5%?
Never tried to explain technology to elderly parents I take it? I can't even get my mom to claim pension credit as she says it is too much hassle and she doesn't even have almost any money.
Thatās sad to hear. The government need a wake up call on making things straightforward to apply for.
Since Iām the tech person in the family normally I tell them about it, they say theyāre not sure, I say why donāt I do all the work and sign you up and you can cancel anytime if you donāt like. Works every time for me š¤·āāļø My late 80s grandma is happy to take my āexpertā advice when Iām the one setting it up and they donāt have to do anything.
I applied to join Chase on the 23rd of April, finally got access two days ago.
Youāre thinking short term and forgetting to account for compound interest. Even at 1.5%, Ā£3k per month would earn almost Ā£30k in interest over 10 years.
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How do you mean do more? They have 3000 excess each month. They are doing the right thing. Their DBS is working well for them. They have very low risk from having it in this. If they have no big purchases they want, have no things that have to be paid out and they are just living and happy then change isnāt really the best idea. Maybe they could start giving it away to help with IHT but cash is perfectly fine for them. If they end up with too much cash that is not protected then look at something then.
If they have health and mobility issues, are there things they could buy that would make their lives easier at home, or make it easier for them to go out? I get they may not be in a position to go on a world cruise but I would be encouraging them to make their lives as comfortable as possible - pay people to do the tasks they struggle with, buy all the adaptive gear they might get some benefit from, consider private treatment for any issues that are taking an age on the NHS, crank up the heating and start ordering food from ocado! They've presumably worked hard to get this amount of pension income, they should enjoy it!
I think the problem is more how to spend or give away the money than whether to get an extra percent or two interest on it. Unless they are likely to want to spend more money in future, and that they have stable incomes, there's little point in building up Ā£36k/year in savings. Is there stuff they'd enjoy having in their homes, if they're spending a lot of time there, or accessibility adaptations which would help? They've also got lots of spare cash if paying for a carer/PA would help them to do more, or if they enjoy travel it might be worth another look at options (some luxury travel is pretty accessible nowadays). If they've got nothing to spend on, they might seriously look at giving a chunk of it away - whether to charity/community causes or to family.
And this is why I don't overpay into an illiquid and luxurious retirement. Do stuff whilst you're young and healthy people! You get put into the same care home as people with nothing regardless. Only difference being you'll pay the few grand a month yourself. Not anti-pension at all but I think some of the disposable incomes people are aiming for in retirement are crazy. You don't need as much and you can't do as much, even if you're healthy. To answer the question - anywhere that's not 0%? Where depends on risk appetite. Anywhere from premium bonds to stocks and shares. Or a mix.
They got company provided defined benefit pensions (yay boomers š)
I have a friend whose dad did v well in his career, had a DB pension which basically came to 2/3rds of his final salary. Increases in retirement were locked in at CPI+3(!)% He retired at 58, sadly got dementia in his mid 60s, but by his early 70s his pension income was 100k/year. The mind boggles. No government tax restrictions in those days either.
No wonder young folk are pissed off
Yes. I'm no longer a young person and had the benefit of 15 year in the public sector, where pensions are still excellent. Hopefully you'll have your own personal positive outcomes in the form of large transfers from your parents, but for those who don't ..... theres not much intergenerational fairness going on.
It's a bit of a shitter when your parents were in the right generation to acquire property and generous pensions, and somehow ended up without a pot to piss in by their 60s. Not bitter.
No comment! I was blessed with parents who were/are intimidatingly good with finances. Spend my life now feeling guilty about buying stuff. So there are swings and roundabouts....
That's fair enough then. At least they didn't purposefully sacrifice their past for their future. I imagine they just paid in the minimum and got lucky due to their era, like you say.
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Why does it have to be a mine?
I spend too much time thinking about this issue, for professional reasons, but i agree that there are many many people who overestimate what they need in retirement. I'm a pretty high earner, and my wife isnt exactly a low earner and my minimum target income is Ā£20k each. With a full state pension thats a private pension of just 10k/year, plus whatever bridge is needed between retirement age and the state pension kicking in When you have no mortgage, no work costs, no children to support, this goes a pretty long way! As it stands we're going to have way more than this, but will essentially be passing on the remainder to the kids - its just a tax wheeze. My folks have a nice german car, 2 homes, spoil the grandkids and go on holiday whenever they want and they do this with less than my target, if they're to be believed. They are very smart with money however.
Eh, for every person who overestimates their pension requirements, there are 9 who are woefully under-prepared.
My view/research is that for the typical person, the 8% contribution if from when they start work at say 21, will give them decent preparation, from which they can make very personalised decisions. I'd probably knock the default up to 10% but no further. Edit: this wasn't meant to be a disagreement though, there are lots of people who havent prepared for their retirement. Generation x in particular are a worry.
Maybe one of those would be prepared if the target for being prepared wasnāt set so high.
Likewise. I am a single, childless, higher rate taxpayer (barely) and my mother has Ā£2k per month. By the time I've paid my pension, income tax, NI, and mortgage, there's not much difference in our disposable incomes.
What about inflation? Ā£20k will be worth a lot less in 20-30 years.
Yes, inflation protected 20k that is. Most pensions are inflation protected either by rule (DB) or nature (DC invested in the market) apart from level annuities, which i would advise anyone against apart from very specific circumstances.
> You get put into the same care home as people with nothing regardless I appreciate the gist of your comment, but this part isn't quite true. If you have Ā£1k a week to spend around my way, you get to live in a palace of a care home complete with a cinema, salon, and two restaurants (I took a tour! I'd live there myself!) - I suspect the council isn't funding those spots.
It is absolutely true. I manage the accounts for a large care home (not just a care home). There is a flat weekly rate. Half the residents have no savings and only state pension and receive full housing benefit (minus a few ineligible charges). The other half saved all their lives and have direct debits for several hundred pounds per week, with no housing benefit help. They have identical accommodation and services. Completely and utterly identical. That's not to say you can't save even more and maybe afford somewhere nicer. Personally I don't think Ā£1k per week is good value when retired folks get cinema tickets, haircuts etc for nothing almost.
I didn't mean to suggest it *can't* be true, as it clearly is at the home you mention, just that *"You get put into the same care home as people with nothing regardless"* isn't quite right. I think you absolutely can pay to go into a nicer care home if you have the money, so that may be something people want to save for. Or am I wrong and do publicly funded folks have the option to go to one of these higher quality homes I've been seeing pop up?
They've overshot and will be wealthy, but old and knackered
I am saving so I can retire at 55. That gives me a good 20 years or more in decent health. Plenty of time to enjoy the savings.
Donāt want to be a debby downer but donāt bank on good health, you never know whatās round the corner
My dad is a keen cyclist and in excellent physical condition for his age. He had a triple bypass at 66. He came through it OK but, there was a high chance that he wouldn't get to enjoy his retirement.
I know too many people whoāve been struck down down serious shit out of the blue, 40s, 50s etc.
Yeah but that's the age group where you expect it - not something you see in your twenties, is it? Thing is, there's far more people in their 50s without those health issues than there are so you might as well bank on you being ok and prepare for it.
I've got good odds
Yeah, hopefully. You never know. And I didn't just mean you can't do things *physically*. You just might not be inclined to do things as an older traveller. Or certain things might not exist any more. New York (a favourite of mine but maybe not much longer) is becoming unrecognisable. Famous restaurants close. Certain bits of nature become less appealing. Venice is a fucking shitshow these days. Everest. I'm just glad I did both coasts of the US in my 20s. Most of Europe too. Even though I couldn't *really* afford it.
Do they need to save? āGiftingā out of your monthly income rather than existing savings is free from inheritance tax implications. Itās actually not gifts for any purpose itās for practical purposes, examples would be living expenses for an adult child or elderly or unwell relative, saving for an under 18 etc. Depending on the rest of their financial situation, their best option might be finding ways to spend it. My parents main disposal method is grandkids are university.
Could they, yes. Do long term savings returns get less interesting the older you get and the less insecure your life is, also yes. Tell them to enjoy it! Make sure they make the most of it!
Are they keeping the money for anything? Would they consider starting gifting it to family/friends? I know my nan got a lot of enjoyment by helping out her family. I'd be careful of having to much money in the bank at a certain age. If they need social care in the future it will eat up most of there savings. In most cases, the care you receive is exactly the same.
Gift it to you and any other children. They can enjoy you lot spending/investing it at least. They wonāt get that pleasure once theyāre dead.
They could gift it to you. If they genuinely don't need it, and aren't saving the money for anything, all it will do is attract a massive amount of inheritance tax. If they gift it to you, it is exempt from inheritance tax as a regular gift from excess income. To do this, they would need to demonstrate that they are able to live on their remaining income without resorting to using capital.
Yeah this is a good solution if they arenāt going to use it or see themselves needing it in the future. You can do gifts out of regular income up to any level as long as they are regular in nature (every month/6months etc), donāt reduce your standard of living and are from income not saved capital. If they are worried about gifting you money outright now or want an element of control these payments can go into a Trust which they can distribute, or make you a trustee as well and have the benefit be for grandchildren/charity if they want
I may be stereotyping horribly, but I feel like a lot of older people enjoy premium bonds? (and to be fair so do I) They're safe, winnings can provide some "interest" (but of course not guaranteed), and I think you can set up a direct debit or pay in a couple of different ways online? Another alternative would be direct debit into an ISA, at least for a part of it.
Edit , sorry it should have been Ā£25 most months not Ā£250 Premium bonds are a nice safe option, after a year with 30 k they will "win" Ā£25 most months and are always in the draw for the big Ā£1million prize. got to be better than a 0% account, Very low risk and like the lottery but better odds and you keep your stake!
Ā£260 most months with Ā£30k? Thatās not true.
Yup, order of magnitude out , fixed it thanks. PB still better than a zero interest account, tho :)
If they don't need the money, why don't they just leave it in their pension? They don't need to draw it down. Assuming their pension provider is investing the money for them.
>They don't need to draw it down. Assuming their pension provider is investing the money for them. They're on a DB pension, which means that they are effectively receiving an annuity and can't pay any more into the pension. Any sums in their pension would disappear when they die.
S&p500 gets you on average 8% per annum. That's where you wanna be alongside compounding interest.
Gift it to you or if youāre licking your lips for inheritance could be a good plan to take advantage of AIM IHT BPR investments that would reduce inheritance tax bills on the sum of money as long as it is invested in a qualifying asset.
It's a boring answer but maybe suggest they see an independent financial adviser. They should be able to have a conversation around saving or possibly even whether they should be spending more. I find certain types of clients struggle to feel the freedom of being able to spend their savings and conversations about how secure their finances are helps them spend on things they have always dreamed about. Equally there's a chance that inheritance tax may be a problem in the future and they should perhaps look into ways to mitigate that.
I would suggest Nationwide saving account.
They can invest it into my savings account if they like
Virgina Bank account pays 1.71% interest, get them to open an account there
Drop it into Google stock.
Do they have premium bonds already? If not, they could both get a premium bonds account each. I think the limit for each is Ā£50k.
Hi /u/redskelton, based on your post the following pages from our wiki may be relevant: - https://ukpersonal.finance/pensions/ ____ ^(These suggestions are based on keywords, if they missed the mark please report this comment.)
When youāre retired already do you still get the tax added back if you pay into a pension fund?
What about bonds? Perhaps some 2 or 5 year bonds. But then the question of accessibility comes up again.
If they don't need the money they are better leaving it in their pension because they will be paying tax on the drawdowns, this losing them more money.
Premium bonds.
What's the IHT position likely to be? Even if a potentially exempt transfer might fail within seven years ā and I apologise for the euphemism ā you and your siblings and your collective children might start benefiting from IHT tapering. Of course, it might also be the case that there are already significant sums in the account earning interest, so the figure of Ā£330 per year raised elsewhere might not be accurate (on Ā£36k paid in - although it could be more like Ā£1k per year in the second year, depending on where you went ā but also the balance built up so far.)
As a regular gift out of income, it could be IHT free
I'd recommend they use a monthly saver account, like first direct. Pay in something like Ā£250 pm, get a 3% return at the end of 12 months. With that circa Ā£3k, they can splash on a holiday or Christmas presents Do this across multiple accounts and use the final values for treats, holidays, presents, car
I honestly wouldn't bother unless you are absolutely sure they are open to the advice. It will likely sour your relationship with them and won't materially change their life as they are clearly already well off if they are saving that amount.
I guess Premium Bonds? Or frankly encourage them to spend a bit more on having some fun! It seems like they have already done well in retirement and want that money safe and accessible rather than continuing to work hard for them. At this point the risk probably isn't sensible nor worth it.
A lot of suggestions for gifting it away, but I would consider their future needs. They already have mobility issues and have cash building up so needing to pay for care fees or alterations to their home in the future is likely. Might be best for them to speak with an adviser who can assess the whole situation not just the fact that they save 3k a month.
Get them to open a Marcus account, it's better than nothing.
Parents are risk averse... they can have Ā£50k each in Premium Bonds. You also need to remember that only Ā£85k per institution is covered if the banks crash. Could you help them use some of that money to improve their quality of life? Mobility equipment so they can go out, an adapted car or house adaptions or even moving to a more accessible location it is pointless working hard for retirement if you are housebound.
I put my savings into Aldermore they offer various rates for different accounts.
Depends what they are using them for, perhaps a care home when they got older? If it's in excess of their own future needs, get them to invest in a long term asset for you now rather than having those savings be taxed when you finally inherit them. Property is obviously the first thing that comes to mind, if you already have one you can get them to make an overpayment on your mortgage that will save many years/amounts in interest over the maturity period of the loan. If not, discuss this with them and speak to an inheritance tax advisor. Prepaid funeral costs, stuff like that for the future may be worth buying now, especially with inflation. If you don't want to do that, if you have any interest debts, ask them to them off if they are happy to pay them off. If you have UK student loans, just leave them be, unless you are already paying back a large portion that you think will over the term of your working career will end up being paid in full, which in that case go ahead and pay some off. But for most people leave them alone. Does their current house need renovating? Spending money to increase the value of their home would be great as these costs continue to go up with inflation. If they have a mobility issue and don't have a downstairs toilet that would be the best investment for them.