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Investments in later life

Many of my clients are well over 75, so are considered to be “vulnerable” by default. As a regulated adviser following the good offices of the Financial Conduct Authority, I need to suggest that my elderly client is accompanied by a younger relative or friend to ensure that they are not sold into the slave trade, bullied into paying for my castle in Spain or sent into penury by dubious advice.


Many older clients take this imposition on their privacy in good heart but others see it as a personal slight on their ability to cope, but it is intended as protection for both them and the adviser. Past complaints settled by the Financial Ombudsman Service suggest that the client themselves is often not the complainant, but that relatives, when the client has passed away, look for ways to fatten up their inheritances!

Moving away from ticklish problems for advisers, older clients have the same concerns as any other investor, but some issues come to the fore as clients get older and the choice of products gets narrower.

Risk & Return

In my personal experience investment risk and likely returns are usually the first expressed concerns of an older client. Over the last few years returns on bank deposit accounts and cash generally have been at or below the inflation rate. The commonly accepted “safe” option of cash on deposit has been losing value, (through inflation), whereas a more risky option has appeared to be a safe pair of hands. There has been a steady(ish) bull market for UK equities for some years now, but at some point it will turn! Putting all of your eggs in one basket will always be a mistake in the long term, so professional advice will help you spread your money and your risk exposure.

Life Expectancy and the term of an investment

Another thing the regulator has been picking up upon is the appropriateness of an investment approach over a savings, (very low or no risk) approach. If the client is unable to commit to an investment period of 5 years or more, then investment will be out of contention and deposits will be the likely option. For a client with a likely life expectancy of less than 5 years, an adviser will be sanctioned if they go with the investment option unless there are other factors involved.

Actuaries tables for life expectancy are quite difficult to interpret and the results that come out can be a little quirky; the anomalies that come up are explainable, so let me illustrate this a little.

Assuming an average male in average health, tables say he has a life expectancy of 86 years, when he is currently 65 year of age. When a similarly average male is 89 years old, life expectancy is 93 years and 7 months and when 95 years old has a life expectancy of 97 years and 11 months. Suitable figures are not available over 95, but I am sure that this will change over time. (http://www.candidmoney.com/calculators/protection_howlonglive.aspx)

To simplify this down to one phrase – living a long time improves your chances of living longer! Practically, once life expectancy is less than 5 years, investments are not an option unless longevity is taken out of the mix, say, by adding a younger relative as an assured life on a joint life bond.

Tax treatment

Tax can be a nasty trap for the older investor – age allowance is withdrawn if you have more than a certain amount of income, so manipulating your taxable income can be a useful strategy. Other issues that need to be addressed are inheritance tax planning and the likely fallout from the death of a partner.


In this new post RDR world, (Retail Distribution Review), there are many fewer barriers against cashing bonds and similar investment assets “early”, but locking money away where you cannot get at it until a certain date can still be an issue. Structured products, like “kick-out” plans are a case in point; once set up you are waiting for either the end of the normal investment period or for the provider to opt to close the plan. The client remains a passive spectator until invited to the ‘wrap party’.

Accessing funds after a death can be a real problem, especially if the estate is of some size and assets are only in the name of the deceased. Until probate, the survivor may have little or nothing to live on, so a mix of assets and some in joint names is very helpful.

I believe that everyone should seek professional financial advice on a systematic basis, the cost is trivial compared to the likely benefit and the benefits are likely to be more than just a bit more investment return or a bit less cost. Having an IFA gives you access to many other bits of useful information on local professionals, social care, tax planning, life skills, dealing with the annoyances of daily life and which website gives you an estimate of your house’s worth and what the neighbours paid!

Contact me with queries

If anyone is looking for general advice, then please write in to the blog and I would be happy to help with anonymous advice posted here. Alternatively, please call us on 0116 253 5600 and ask to speak to an IFA, (Independent Financial Adviser), for a no-obligation discussion.

If you know you need formal advice, have a look at http://bankfield.net/personal/savings-investment/ or ask around for a recommendation, it might even be me.

Categorized: Risk Management , Savings and Investments , Tax Planning
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