What to do with R4m inheritance?

RETIRED: 75-YEAR-OLD WOMAN WHO RECEIVES A STATE PENSION NEEDS ADVICE ON A WINDFALL

- Marius Fenwick

Question: I would like to get advice on investing R4 million for a 75-year-old woman who received it as an inheritance. She is currently receiving an old-age pension from the government.

Answer: Various factors must be considered before a 75-year-old pensioner (let's call her "Mrs Pensioner") invests her inheritance. The fact that she currently receives an old-age pension from the government indicates that she does not have many other assets or income streams, as limited assets are a qualifying criterion for such a grant.

Let's consider some criteria that need to be factored in to reach a suitable solution:

1. Income requirement Ultimately, the main driver of the investment selection or portfolio will depend on how much income Mrs Pensioner requires. The higher her income requirement, the more one should rely on a guaranteed income stream like a voluntary life annuity. Given Mrs Pensioner's age, a decent annuity rate that keeps track with inflation will be possible.

That the annuity will be purchased with voluntary funds does have tax benefits, with between 40% and 50% of the monthly income being tax-free.