Wealth Check: 'How best should I invest my £200,000?'
Saturday 29 March 2008
Helen Gibson, 70, a retired teacher from Bishop's Stortford, doesn't want to worry about money as she gets older. Helen recently sold her family home to move into sheltered accommodation, and has given away some of the proceeds to her family. She has paid off her children's mortgages and has placed £5,000 in tax-free savings plans for each of her four grandchildren, making the most of inheritance tax gift allowances.
But Helen also wants to invest the proceeds from the sale to ensure her own wellbeing. "My pension gives me £1,200 a month, which is sufficient to live on," she says. "I want the £200,000 from my house sale to grow as an investment but also give me a cushion if I need care later."
Three financial advisers gave Helen advice this week: Ben Yearsley from Hargreaves Lansdown, Darius McDermott from Chelsea Financial Services and Chris Wicks from N Trust.
Case notes: Helen Gibson, 70, retired teacher
Income: Helen gets £1,200 a month from her pension.
Monthly outgoings: Her basic living costs come to around £550 per month.
Savings and investments: Helen has recently received £200,000 from the proceeds of her house sale. She also has £3,000 in an ISA and a bond with Credit Suisse worth £12,000.
Mortgage: Helen has no mortgage or personal debts.
Helen has an enviable financial position, but has little room to manoeuvre in terms of investment risk.
"Helen could place £100,000 of the £200,000 proceeds from the house sale in fixed-term deposit accounts," says McDermott. "If Helen is concerned about the state of the banks, this could be made up with £35,000 in a number of accounts as that amount is guaranteed by the Financial Services Compensation Scheme if the bank or building society fails."
He recommends Anglo Irish's one-year bond with a fixed rate of 6.75 per cent or Icesave's 6.50 per cent for three years. McDermott also suggests Helen places £25,000 into an instant-access account so she has some liquid cash if necessary, and Manchester Building Society has an account at 6.31 per cent.
But McDermott also feels Helen should invest in equities if she wants to grow her income. "Helen should begin her equity investments by using her ISA allowance before the end of the year to invest in stocks and shares," he says. "Then she should take up her new ISA allowance after 6 April for the same purpose."
He says a multi-asset fund will provide a decent return but with low volatility, he recommends Newton Phoenix and Insight DTR funds.
Yearsley says Helen should keep hold of her emergency cash: "An internet bank provides a good starting point for an instant-access account for emergency cash," he says. "But use a UK company, as they provide better protection than an overseas operation. I would start with £10,000."
Long-term care planning
If Helen's priority is her long-term care, Chris Wicks suggests an alternative solution. "If Helen needs to go into a nursing home, she will probably have to pay those fees herself, given the current value of her assets," he says. "This would substantially reduce her estate, but because local authorities are difficult to predict, it is difficult to plan for that."
But he adds that, in general, the surrender value of life-assurance contracts is not taken into account as part of these assessments. "This means that Helen could wrap her investments in an investment bond, benefit from the gross roll-up of interest, and it would not be counted towards her estate in this case."
"An off-shore bond is subject to tax at your normal rate, but only when you make a substantial withdrawal. She can also withdraw 5 per cent of the value of the bond for 20 years without paying tax at the time," Wicks adds. Because this is an investment wrapper, Helen can decide on her level of risk and distribute investments between equities in the UK and overseas as well as fixed interest, property and cash, he adds.
Yearsley says Helen has done the right thing by putting power of attorney candidates in place should she become unable to manage her money. "It makes life much easier should the need arise," he says. "And because she has taken advantage of inheritance tax allowances, there should be no IHT to pay on her death."
To find an independent financial adviser in your area, visit www.unbiased.co.uk
For a free financial check-up, write to Wealth Check, 'The Independent', 191 Marsh Wall, London E14 9RS, or e-mail firstname.lastname@example.org
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
- 1 Richard Dawkins on babies with Down Syndrome: 'Abort it and try again – it would be immoral to bring it into the world'
- 2 ALS ice bucket challenge co-founder Corey Griffin drowns, aged 27
- 3 Paul Scholes: Manchester United need five experienced players who can turn round a desperate situation
- 4 Nicki Minaj 'Anaconda': Singer finally releases predictable video
- 5 James Foley 'beheading': Met police warn public watching murder video could be criminal offence
Scottish independence: English people overwhelmingly want Scotland to stay in the UK
Isis threat: Cameron wants an alliance with Iran
Richard Dawkins on babies with Down Syndrome: 'Abort it and try again – it would be immoral to bring it into the world'
Crisis? What crisis? A visiting US doctor gives the NHS a rave review
Michael Brown shooting: Chaos erupts on the streets of Ferguson after autopsy shows teenager was shot six times – twice in the head
Scottish Independence Referendum: Salmond described as 'arrogant, ambitious and dishonest' by Scottish women
iJobs Money & Business
£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...
£40000 - £55000 per annum: Harrington Starr: A Global Financial Service Organi...
£375 - £400 per day: Orgtel: Access / Teradata Developer - Banking - Bristol -...
£45000 per annum: Harrington Starr: Quantitative Analyst (Financial Services, ...
Day In a Page
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony