My pension pot has finally moved from a (worthless if I die) guaranteed income for life to a sizeable chunk of cash that the kids can inherit.
That gives me an incentive to survive two years to ensure they don’t end up paying 40% inheritance tax on quite a lot of money.
I then have the issue of beating the odds and surviving to a ripe old age. Forget your inheritance kids, it’ll be long gone in the unlikely event that happens.
My main problem will be inflation eroding the value of the pot. For now it’s invested in a cash fund that returns naff all. With inflation above 2% within four years the cash will have lost around a tenth of its buying power. If I go on and on, living in the shadow of an early death, that buying power gets less and less.
But while the odds are against my longer term health, I need to protect against investment risk. All three of the kids are yet to buy a home. While I quite like the idea of exposing the pot to the vagaries of the markets I could, overnight, lose a third of its buying power.
Recoverable in the long term. But no good if I pop my clogs the day after a big fall in the market and somebody wants to set foot on the housing ladder.
So I choose inflation risk for as long as the numbers say my chances of living four and a half more years are only 14%. If something comes up to improve on those numbers I’ll review my rather benign investment approach.
I hate inflation risk. But it’s a better option than long term investing just now.
1 Pingback