‘Help – my Mum’s asked me (aged 23) for pensions advice’


Telegraph.co.uk

For those facing retirement with modest pension pots, the cost of getting help and advice can be prohibitive, leaving many stranded to make potentially life-changing financial decisions alone.

Someone aged 65 can expect to live for 20 years, and the range of options available is constantly expanding.

This presents a frightening challenge for many.

Recent years have seen increased pension flexibility, in part from the launch of pension freedoms in 2015 that means there is no compulsion to buy an annuity and money can remain invested.

This has been matched by growing complexity and a greater risk of making mistakes.

Dismal annuity rates are also pushing many toward self-managing their funds in retirement.

Without any financial expertise, deciphering a course of action is daunting. Professional advice is the answer for many.

But it can easily cost thousands which makes it hard to stomach for those with smaller amounts.

Many instead turn to their friends and family for help – some even hand their cash over to be run for them.

This has created an army of unqualified “financial advisers” across Britain, with varying levels of success.

This is a situation I have found myself in.

My mother and stepfather are approaching retirement and, as someone who writes about money for a living, my mother has asked me for help.

Sheena Prenter, my mother, turns 52 this year and will be semi-retiring at 55.

She has been a nurse for the NHS since she was 18 and can claim a “defined benefit” pension at the age of 55 estimated to pay £15,000 a year, linked to inflation. She will also be able to claim a full state pension.

Her NHS pension comes with a sizeable lump sum upfront, which when combined with cash savings gives them a pot equivalent to two years’ of her current annual salary.

Ross Prenter, my stepfather, is 65 and already receiving his partial state pension. He has been self-employed in property maintenance for the past 20 years, but also receives a £90 monthly pension payment from his time working in a foundry.

When my mother hits 55 they plan to sell their mortgage-free two-bedroom property in Buckinghamshire and move to Ireland where she grew up – and where their money will go a lot further.

Mum will carry on working part-time and my stepfather will enjoy a well-deserved retirement.

Thanks to the defined benefit pension, their income is largely secure. But with my mother in particular facing the prospect of 30 years or more in retirement, making sure their cash savings and pension lump sum don’t get eaten by inflation is crucial.

“The cash is so we can enjoy a good standard of life in Ireland – we don’t need big holidays or anything like that, but want to be comfortable,” she said.

There are places I have been able to help, moving money out of a bank account paying a derisory rate and into the best possible fixed-rate Isas and bonds, and making sure my mother has had the numbers run on numerous pension scenarios.

But it has become apparent that I do not have many of the answers.

With a long time horizon, the stock market makes sense as a home for at least some of their savings – but it’s not something they’ve ever considered.

My first conversation with her about how investing works and the kind of investment funds that might be suitable appeared to go well.

She understood that ups and downs were to be expected, the need for a long-term view and the advantages over cash in the long run.

But a few days later I got a text that sends me into a minor panic, including the line: “There’s an awful lot of small investment firms out there promising high interest rates.”

After making sure she knows that most of these firms cannot be trusted, her response was that they would stick to cash accounts – back to square one.

If they are going to invest, it needs to be their choice.

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This entry was posted by John on Tuesday, June 13th, 2017 at 3:27 pm and is filed under Pension news.