Investor Views: I Use Shares for Inheritance Planning

Retired investor Peter Charles is hoping his SIPP portfolio will help provide a nest egg for his children and grandchildren

Emma Simon 3 April, 2019 | 11:35AM
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Retirement nest eggs

Peter Charles, who retired eight years ago, says his main investment goal is now to supplement a small company pension, while also ensuring there are sufficient funds to leave an inheritance to his two daughters.

Charles who has a SIPP, a stocks and shares ISA and a dealing account with AJ Bell says: “I want to make sure that in the event of my demise my wife has enough money to live comfortably.

“I’d also like to leave an inheritance to my daughters. In the past I have transferred some of my shareholdings to them, taking advantage of the seven-year rule.” This stipulates that qualifying gifts are free of IHT provided the donor lives for a further seven years.

Charles says his SIPP is earmarked for his children, as he currently does not draw an income from this. He adds: “I am also aiming to create a fund for my two grandchildren to cover general expenses and school fees.”

Charles has been a keen investor for many years, and this has enabled him and his wife to build decent savings and investment portfolio. He keeps a reasonable sum in cash, for emergencies. Alongside this are his longer-term investments. 

He prefers to invest in individual shares, rather than funds. He says: “This is a personal decision borne out by past experience of a poor performing pension fund.

“My approach to investing is simple: if my money may be at risk – or lost – through a poor investment choice, then I would prefer to be responsible for it myself, rather than pay someone to do it for me.

“I recall the words of a senior partner of a firm of stockbrokers who said that buying quality will always reward. However, patience is often needed as sometimes the rewards are only apparent after many years.”

FTSE 100 Blue-Chips as Core Holdings

When it comes to his investments, Charles says that a number of larger UK blue chips have been core holdings in his portfolio. He says: “Companies like Unilever (ULVR), Royal Dutch Shell (RDSB), and Legal & General (LGEN) have, over the years, been kind to investors, including myself.”

Unilever has a three-star rating from Morningstar. The Anglo-Dutch conglomerate manufactures and distributes many well-known brands (including Ben & Jerry’s ice cream, Lipton tea, Dove soaps and shampoos and Marmite).

Morningstar points out that this “broad portfolio of products across multiple categories” gives the company the price advantage derived from economies of scale, and an entrenchment in the supply chain of retailers. For this reason it deems the company to have a wide economic moat.

Morningstar director Phillip Gorhan says: “Amid fragmentation in consumer profiles and retail and marketing channels, most consumer staples multinationals are fighting strong organic growth headwinds.”

But he points out that the companies broad portfolio of product range, supply chain advantages and economies of scale mean Unilever “has a better chance than most of its peer group of reigniting growth in the medium term, in our opinion.”

Shareholders in Unilever has seen steady returns in recent years. The company has delivered annualised total return of between 13.9% and 14.9% over three, five and 10 years - according to Morningstar data.

Meanwhile, Royal Dutch Shell has a four-star rating from Morningstar. The company’s share price has risen strongly over the last two years, after a significant dip in 2016.

Allen Good, sector strategist at Morningstar says: “With the restoration of its cash dividend, Shell has demonstrated that it has taken the necessary steps to remain competitive in a world of $60/barrel oil. Like the rest of the integrated group, Shell has reduced its cost base, which had become bloated, in part by reducing headcount and improving its supply chain.”

He adds: “Shell closed out 2018 by reporting better-than-expected fourth-quarter results, including strong earnings and cash flow growth.

Insurance and savings giant Legal & General has delivered strong returns for shareholders over the longer term. According to Morningstar figures it has delivered annualised total returns of 23.45% over the past 10 years.

Aside from these larger FTSE 100 companies, Charles says he has also dabbled in some smaller mid-sized companies, in the hope that they will “mature” into larger players, delivering decent returns for patient shareholders.

This includes companies such as DS Smith (SMDS), Hiscox (HSX) and Homeserve (HSV).

Instinct Fund

Alongside this Charles allows himself a small fixed amount in which to buy shares that are more of a gamble.

He looks at a number of factors before deciding to invest in a company. He says: “Sometimes it is almost like backing a hunch or a gut feel.  I tend to look at a company’s dividend record, for example, and the quality of a particular company to see if I want to pursue an investment.”

He adds: “What can be unnerving though is subsequent political or economic changes, which can cause major price fluctuations. These are rarely  apparent when doing this research prior to purchasing.”

Despite this though, Charles says that he doesn’t worry too much about future economic or political problems.

“If I thought about all the problems nationally and internationally, even placing cash under the mattress would give me sleepless nights!”

He has always found that investing delivers better returns, over the longer term at least, than playing it safe and keeping savings in cash.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Hiscox Ltd1,132.00 GBX0.71
Legal & General Group PLC226.80 GBX-0.35
Smith (DS) PLC350.40 GBX0.92
Unilever PLC4,438.00 GBX0.09Rating

About Author

Emma Simon

Emma Simon  is a financial journalist, specialising in investment and consumer issues, writing for

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