Re-structuring parent's savings for income

[DaveDawesKK]

My parents' health is starting to decline and I'm a bit worried about what might happen if they need care. They have a fairly large number of OEICS with Hargreves Landsdown, St James Place and others, and and even more numerous collection of cash and fixed interest accounts (including some ISAs) that are all getting very low interest. One of these (Investec) has well over £100K at no interest at all, from what I can tell. The total charges on their OEICS holdings are running at roughly 1.8% too.

None of their investments are in draw-down or other income mode. Living costs are met by my father's final-salary pension (which I think must be in the order of £40K but I've not asked) and a bit of rent from a buy-to-let they have.

If both of them were to go into care, I'm assuming they'd need about £60-80K per year to cover that, for what might be several years. So I'd like to suggest to them that they re-structure their savings and investments for income to help defray those costs.

I'm thinking they should consolidate to one or two providers, and look to get a yield of about 5% from it all, which they could use at first to re-invest for growth in the next few years before drawing down if need once the care home comes into the picture.

What I'm less sure on is the actual investments to go for though. Looking about these boards for high-yield suggestions looks like this collection might work?



Any opinions welcome!

[DaveDawesKK]

I assume no news is good news on this then

[Alaric]

What I'm less sure on is the actual investments to go for though. Looking about these boards for high-yield suggestions looks like this collection might work?

You are spoilt for choice. If sticking to "funds", any collection of generally based highish income ITs, ETFs and OEICs is potentially suitable.

Perhaps the first job is to get all the investments consolidated in one or two places. CGT may be a potential problem if there's a lot of stuff outside ISAs.

[thebarns]

If it were me,

i’d put a chunk of the cash into VT RM Alternative income - I hold directly a good number of the constituent holdings.

Go on their website for some good commentary and breakdown of the fund - it has done and should do something a bit different to normal share funds.

[Backache]

Always difficult to know what to do in this kind of situation but unless you are very confident that a combination of the existing income plus future income will cover likely care expenses you may well have to use some capital .
If this is the case you may not want all the capital exposed to the fluctuations of the stock market and have to sell in a down turn and may want a more balanced portfolio rather than one concentrated in higher yielding equities.

[TUK020]

My IT basket is built around a core of CTY,
Add HFEL & MYI for geographic diversity.
Also have HICL to add infrastructure.
Also have smaller stakes in MRCH & LWDB for some variation.
Toying with the idea of adding JETI for European coverage, but hoping for the Brexit car crash to settle down, and sterling to rise against the Euro before going for this

For growth rather than yield, I have some FCIT, and also an ETF: L&G Global100. These both are for long term bets on the global economy

[Avantegarde]

The single biggest improvement you can make is to cut the outrageous charges being levied on some of your parents' accounts. In your position I would consolidate at least half the investments into an ultra cheap world tracker fund (costing about 0.1% a year) and spread the rest among 3 or 4 investment trusts that provide a higher dividend income. But beware. Many ITs that profess to do this fail to raise their dividends faster than inflation, or provide poor capital growth, or both. Use the AIC statistics to help you to make a decent choice. And use the tracker fund as your benchmark. I am invested in the Bankers, F&C and Finsbury Growth and Income trusts. Although their dividend yields are modest all three have provided a good rate of annual increase in their dividends, plus decent capital growth.

[DaveDawesKK]

... unless you are very confident that a combination of the existing income plus future income will cover likely care expenses you may well have to use some capital .
If this is the case you may not want all the capital exposed to the fluctuations of the stock market and have to sell in a down turn and may want a more balanced portfolio rather than one concentrated in higher yielding equities.

Very good points. Dipping into the capital at some point probably won't be a problem (they are both in their early 80's after all), but hedging against a downturn is prudent and I'd not considered that properly. I don't know much about corporate bonds, but noticed that Ishares GB Corp Bond Ex-Financials (ISFX) looked possible. Seems to have a TER of 0.2% as well.

[DaveDawesKK]

If it were me,

i’d put a chunk of the cash into VT RM Alternative income - I hold directly a good number of the constituent holdings.

Go on their website for some good commentary and breakdown of the fund - it has done and should do something a bit different to normal share funds.

Thanks - very interesting!

[PaulBullet]

My two questions

1. How much is in ISA's and what is your plan to get it all in ISA's?

2. Have you considered immediate needs annuities should they need care?

regards

Paul

[JoyofBricks8]

I wish you well with your stewardship. Those costs are too high. I would consider a fairly conservative asset allocation given the limited time to compound away any losses and the possible need for care costs.

While doing this housekeeping of their affairs it might be prudent to ask where their wills are kept. Organising and systematically filing all financial paperwork carefully and logically now while they are compos mentis and able to help is a lot easier than attempting to untangle it as an executor after they have passed away.

Also consider asking them if they wish to register a lasting power of attorney for both health and financial matters while they are of sound mind. You seem to have taken on some of the running of their financial affairs, and an LPA will facilitate that should there be any decline in their faculties.

Good luck, and may your parents be blessed with good health.

[DaveDawesKK]

My two questions

1. How much is in ISA's and what is your plan to get it all in ISA's?

2. Have you considered immediate needs annuities should they need care?

On 1: roughly half. So a potentially hefty CGT exposure on the rest were they to consolidate. Not sure what to do about that.

On 2: didn't know about that. I'll read up on it - thanks!

[midgesgalore]

I wish you well with your stewardship.
...
Also consider asking them if they wish to register a lasting power of attorney for both health and financial matters while they are of sound mind. You seem to have taken on some of the running of their financial affairs, and an LPA will facilitate that should there be any decline in their faculties.

Good luck, and may your parents be blessed with good health.

Also include the ability to communicate well.

Having been through all that for my wife I can assure you if the lawyers felt my wife was being coerced or trying to remember a script, in any way, the LPOA would not have been granted. They told me so.
This is something more urgent than managing the actual investments - I hope not off topic on this thread.

Your health
midgesgalore

[Wuffle]

Keep on side with your sister.
A 'jointly and severally' LPA can be awkward if you don't.
I haven't.
She needed putting in her place but the future is now murkier than it could be.

Wuffle.