0:00

Hi, folks. Happy new year and welcome to another

0:02

money Q &A with me, Pete Matthew and me,

0:04

Roger Weeks. Happy New year, Roger. How are

0:06

you doing? Fine. Thanks. Thanks, Pete. Did you have

0:08

a good Christmas? Well, actually, in the scheme

0:10

of things, we did have a good Christmas. We

0:12

had a bit of a flood just before

0:14

Christmas, which wasn't the most ideal time to be

0:16

moving in of our bedroom. And

0:19

various ones of us had colds and

0:21

chest infections, but But yeah, lovely time we

0:23

had. A lot lot of that around.

0:25

Yeah. Yeah, Yeah, it felt like, we had

0:27

last year was strange. It felt like

0:29

was both took forever to finish and also then, but

0:32

you stand at the end of it and you

0:34

think, geez, where did that time go? Yeah, I

0:36

mean, I mean, year we crammed a lot of

0:38

our entertainment in the first few days, so the

0:40

we had family around for Christmas day, we

0:42

around a family in Boxing Day, where the rest

0:44

of my family rent on the day after. Wow,

0:46

three in a row, three in a row. actually,

0:48

we pre -planned lots of the stuff And

0:51

then the children flew the coop after a

0:53

few days and it's like, oh, let's relax.

0:55

Peace and quiet, sounds like a plan. We

0:57

kind of spread it throughout the break. So

0:59

we sort of have a full on couple

1:01

of days and then two, three days off

1:03

and then another couple of days. Very heavy

1:05

New Year's Eve now. was a good fun

1:07

at the rugby club in Penzance. The first

1:09

time we've done anything like that in a

1:11

long. and while 200 people increasingly marry lots

1:13

of fun. But I hope you had a

1:15

good Christmas and new year, folks. It's been

1:17

quite a while since we put a podcast

1:19

out. It's been, there's been a lot going

1:21

on for me here at Jackson's. We've moved

1:23

into new offices, which was just kind of

1:25

all consuming for a few weeks there. So

1:27

thanks for your patience as we've put out

1:29

zero content nearly two months, but it's good

1:32

to be back. And we're back with a

1:34

new, with another Q &A show I'm gonna

1:36

do one this week and next week while

1:38

we just think about. We think probably on

1:40

balance, we're probably going to draw a under

1:42

the helpful basic season and move into

1:44

something else, not 100 sure what yet,

1:46

but that'll be in a couple of

1:48

weeks after a couple of Q &A shows.

1:50

But what should people do if they

1:52

want questions answering, Roger? Right. If you

1:55

want any other questions to answer, please

1:57

send them to hello meaningfulmoney .tv with

1:59

the subject line Pog. question We're getting loads

2:01

through the door the door now we're doing a

2:03

couple of doing a couple the in the

2:05

new year. bat now in the new to have. problem to

2:07

have you know we used to do one

2:09

per show? to do one per show yeah yeah well we've

2:11

got got questions and answers today, but notes

2:13

and links, everything we talk about today

2:15

there at the show notes, which is

2:17

notes .tv slash money dot TV slash QA3 for Q&A episode Let's

2:19

get get in questions. You're gonna do the

2:21

first one, first one over to me.

2:23

over to me It's a a brand new year.

2:25

Let me just and do this now. This one's from

2:27

Steve, so say from Steve, so say good

2:29

morning this in the in the evening I'll say good

2:31

it's a good evening. of all I have to thank

2:33

of all, I have to thank you

2:35

for the many years of enlightening that I've

2:37

enjoyed. it was I thought it was excellent

2:39

when Pete created the content, however it

2:41

only improved, apparently, with the addition of

2:43

of Roger. Smooth. Yeah, yours is by yours is by

2:45

far the best finance podcast that I I

2:47

to to and long it continue. Thank you. Thank you.

2:49

My question revolves around index funds and

2:51

ETFs. Many of the American podcasts cite

2:53

the the of ETFs over traditional index funds

2:55

like funds like unit from what I understand,

2:57

this is due to tax considerations to tax in

3:00

the US and not here. the US and

3:02

not here. you confirm if this is

3:04

the case? is the I use the index

3:06

fund, unit trust, and wish to continue

3:08

doing so. However, I am, am

3:10

I missing out on not using ETFs?

3:12

Thanks again you all that you do

3:14

for us. Your listeners best wishes,

3:16

Steve Horton. you, Steve. Horton. Good question, lovely content.

3:18

In one sense, Steve, you've kind of

3:20

answered your own question because, yes,

3:22

the rules are different. You know, obviously

3:24

the US tax system is different

3:26

from ours, is and here from ours and here really

3:28

a tax difference as to whether you

3:30

own. as to whether you own ETF shares or you mentioned

3:32

unit trusts, there's not that many unit There's not

3:34

that many unit trusts here

3:37

in the UK anymore. The most

3:39

popular in the of Open-ended -ended investment

3:41

company, which which is an oik. You know, it's the

3:43

same know, it's the same is

3:45

just built slightly differently. Built slightly different set of rules, but

3:47

set of rules, but essentially

3:49

for you, the investor, same thing. it's

3:51

the same thing. is So really,

3:53

as far as tax is

3:55

concerned, there's no material difference between

3:58

how ETFs are dealt with. and

4:00

unit trusts or or they are

4:02

different beasts. Yeah they are, it's

4:04

the way they're set up. A

4:06

ETF is effectively a share. Yeah,

4:09

whereas there was OIC a

4:11

unit trust is a collection of

4:13

shares, they are traded very slightly

4:15

differently because unit trusts and

4:17

OICs tend to be advanced priced.

4:19

So priced. if you decide to

4:21

sell today, you get tomorrow's price,

4:23

whereas an ETF is sold

4:25

like a share immediately on the

4:27

market. That's a key difference really.

4:29

They're much more liquid and yeah,

4:32

trading and prices moving throughout the

4:34

day. Couple

4:36

of other differences, all ETFs produce dividends.

4:38

if they throw off any income at

4:40

all, it's in the form of dividends.

4:42

Whereas OIC or unit trusts, if they

4:44

are bond focused, so if they're of,

4:47

I can't remember the exact sort of

4:49

cut percentage, I want to say something

4:51

like 60 or 70. I was gonna

4:53

say 67 cents already. In bonds, then

4:55

the income is deemed to be interest

4:57

rather than dividends. And of course, if

4:59

you're not holding those shares in an

5:01

or a pension, then you're going to

5:03

be taxed on that income and the

5:05

rates are different. from dividends between

5:07

dividends and interest so that's

5:09

a kind of important distinction. ETFs

5:13

very often

5:15

are domiciled essentially

5:18

held overseas, aren't

5:20

they? Yeah, and the problem that causes then

5:22

is there may be some sort of currency

5:24

risk on these things. So

5:27

if you're getting your income in dollars,

5:29

American or Australian dollars or whatever, and it

5:31

has to be converted into sterling, then

5:33

clearly you may have made 5 % on

5:35

the gain, but actually by the time you

5:37

get it converted, it might be different.

5:39

Yeah, it just has another layer of risk,

5:42

doesn't it? I mean, you can get

5:44

ETFs that are hedged, but hedging isn't perfect.

5:46

You know, it's designed to kind of

5:48

smooth that out. Yeah. But isn't

5:50

perfect, know, if the hedging something

5:52

goes wrong within the fund, it

5:54

could make the situation worse. So

5:56

you need to be careful of

5:58

currency. mean, you can have offshore

6:01

domicile. ETS but but they're still sterling

6:03

denominated. But they usually but they usually I

6:05

think But I the most important thing

6:07

when it comes to holding it comes

6:09

reporting status, isn't it? Yes. Because

6:11

that then deems what the taxation

6:13

is going to be. what the a

6:15

funded to be so if a funded class is reporting

6:17

then the gains are treated as

6:20

capital. are treated as capital. Yeah

6:22

gains tax capital the opposite side,

6:24

if if they're not not. reporting

6:26

funds, then the then the gains are as

6:28

income. as income. Yeah So I mean,

6:30

if you've got big holdings got

6:32

you make a big gain,

6:34

suddenly you added to your income suddenly

6:36

that's it's a non tax fund.

6:38

Now, most mainstream funds are, but

6:40

it's definitely worth checking. but You

6:42

know, I've definitely come across

6:44

people who you know at this. So

6:46

come are differences, who Steve. on It's

6:48

not really. differences Steve it's not

6:50

you're holding, if know, holding you

6:52

know a UK fund. fund You can

6:54

can achieve all the same things with

6:57

an ordinary or unit trust that you can

6:59

in you can in an ETF. It It used to

7:01

be the case that ETFs were a

7:03

lot cheaper. a That's less the case

7:05

now. less get really low get really low-cost oics. I

7:07

I would check actually. you You you hold

7:09

a Vanguard index fund, I would give. would

7:11

give good good money to say that as

7:13

an OIC unit trust. trust. But it doesn't really

7:15

matter. But what But what you ask

7:17

is, you you confirm if this

7:19

is the case? case. It there you

7:22

know, are there advantages or is it

7:24

just that they apply in the US and

7:26

you're correct? is fine. Don't worry either is

7:28

fine. Don't worry Hope much. Okay. the question

7:30

that answers the question, Steve. another Here's

7:32

another Steve. Actually, this is Steve Steve

7:34

D. Love podcast. Thank you, Steve. you Steve.

7:36

I'm I'm trying to understand what I can

7:38

pay into my workplace pension. I'm

7:40

close to to ,000 on my my P60 and and

7:42

I have no other income. don't gonna have

7:44

to pause a minute and cough my guts

7:46

up a second. Hang on, a second. seconds,

7:48

everybody. I'd like to talk over that, but

7:50

even talk over that, but I couldn't talk for long enough.

7:53

Bear with back, sorry. back, sorry. You're very

7:55

glad you didn't have to

7:57

hear that. have to hear that. got got

7:59

to to 180 grand. salary, no other income. My

8:02

firm pays 6 % into the pension.

8:04

I then pay 6%, which they

8:06

also match. In addition, I contribute another

8:08

2%. So you add that all

8:10

together, that's 20 % in total. And

8:12

then Steve says approximately 27 ,000

8:15

quid for a pension input period. It

8:17

feels like I have a relatively simple setup

8:19

but I'm worried about breaching any limits

8:21

around the 60 ,000. That's the annual allowance.

8:23

Do I really need advice? Because I feel

8:26

like I should be able to work

8:28

this out myself. Thanks, Steve D. So

8:31

I think the first thing

8:33

to mention, Steve, is that your numbers don't

8:35

add up. There may be plenty of

8:37

reasons for that. It might just be a

8:39

typo or whatever, but 27 ,000 quid isn't

8:41

20 % of 180 grand. So, but this

8:43

is often the case. don't feel bad

8:45

and don't think we're having a go at

8:48

you or anything because people confuse gross

8:50

and net. And when we're talking both employer

8:52

and employee, those are dealt with differently.

8:54

So it might be that it is 27

8:56

,000 quid or it might be that it's

8:58

20%, but it can't be both. No. So,

9:02

I I mean, I've just made

9:04

an assumption here, Steve, that that if

9:06

calculation is slightly wrong or it's

9:08

a typo, then 20 % of

9:10

180 is 36 grand. So technically,

9:12

to get to the £60 ,000, you

9:14

can pay another £24 ,000 in

9:16

personally. Gross. Gross. Which you then

9:18

net down to 19 ,200. So

9:20

you pay that literally, You can

9:22

pay 19 ,200 in the current

9:24

tax year. in that theory and that

9:26

which we get grossed up. up. to the

9:28

£24 ,000 and then because

9:30

of your level of your

9:32

salary you'll then get additional

9:34

relief through that the additional

9:36

tax. high rate tax benefit

9:39

through your self assessment. if you do

9:41

one. That's right, yeah. So you're an additional

9:43

rate tax payer at that sort of

9:45

level, so yeah, you need to claim the

9:47

extra tax relief through your tax return,

9:49

particularly if it's personal contribution into a SIP,

9:51

say. But

9:53

because you've got so much headroom in

9:55

your salary, if you've got 180 ,000 quid

9:57

salary, you could potentially unused

10:00

allowance from the previous three years under

10:02

a system called called carry forward. So essentially is

10:04

the same. We need to work out

10:06

exactly what the what the was in the

10:08

three previous tax years and you know take it from 60

10:10

grand it from 60 grand your that your

10:12

income was north of that in each

10:14

of those three years and you know that's the gross

10:16

the gross figure that you could contribute

10:19

in each of those years and you

10:21

can carry that forward to this year.

10:23

this year. So you can can definitely do

10:25

the don't I don't think you need

10:27

advice for this. There will be calculators

10:29

online, I imagine. I'll have a

10:31

look for one a a link in

10:33

the the nose. But it's not it's not rocket

10:35

science, it's simple maths. for you, for you,

10:37

it's easy because you've got the

10:39

salary headroom. And the nice thing is

10:41

because you've got the salary headroom, if

10:43

you did that, say you if you

10:45

years worth of allowance you the same

10:47

as this year's. worth of this year's first

10:49

of all, that's the same as this year's, then

10:51

go back another three years, first years

10:53

all, that's 24,000 pounds, you can then away if you

10:55

had the available cash another three years not only

10:57

would you pay the net amount of that

10:59

which I'm not gonna do on the

11:02

fly now good job cash you'll

11:04

also get the higher rate or only

11:06

would you pay the net of it as well

11:08

that, which you look forward to you

11:10

could max that out now, tax year Yes,

11:12

exactly Yeah you can you can only go

11:14

back three tax years. So after April

11:16

the 21-22 tax year will you know be year will to

11:19

you so be unavailable to you so. before tax

11:21

doing the maths question year. Great question, It's

11:23

good job. next, it's not Steve next,

11:25

it's Stuart. There's still begins with S,

11:27

this is Stuart. is Stuart. So says, am

11:29

38 and years ago ago a large

11:32

sum of money, sum of pounds. That's a a

11:34

nice bit of money. money. My wife and

11:36

wife and I were in decent shape

11:38

with a manageable mortgage, life CIA insurance,

11:40

decent pension balances. I I opted not

11:42

to employ a financial advisor because I

11:44

was I of fees. of fees. I'm no I'm

11:46

now questioning my decision. have I have

11:48

slowly been putting the money into

11:50

my and ISA, keeping the rest the rest GIA, invested in

11:52

a in a global index through Vanguard,

11:54

paying the paying the tax on dividends and

11:56

with time capital gains. Also been using my using

11:59

my wife's allowance. My question is this,

12:01

question is this, to employ I selling

12:03

not to employ a financial there have been an

12:05

Would there have been an way of -risky

12:07

way of protecting the from from the

12:09

man, which would have paid paid for the

12:11

financial advisor many times over. saving into

12:13

still saving into the GIA with

12:15

regular monthly direct debits, although modest

12:17

amounts. Love your your podcast, YouTube output, which

12:19

I feel have made me a

12:21

better citizen. More relaxed because

12:23

I'm sure that my finances are unlikely

12:25

to have any nasty surprises. Keep

12:27

up the good work. Thank you, Keep up

12:29

lovely work. Thank you, Stuart. Yeah, lovely comments. Better I

12:32

shall expect my nighthood any day now.

12:34

Right. my knighthood any day now. Right. So, I think

12:36

the first thing I would say, say, Stuart, is

12:38

don't spend too much time questioning past

12:40

decisions. Right? What's done is

12:42

done. is done. You can't go You can't go done.

12:44

back and change it. So question to

12:46

question to ask is, an you need

12:48

to an employer, advisor now going forward? You forward? of

12:50

immediately follow up, you say, was of immediately to employ a

12:52

say, was I silly not to employ a

12:54

financial advisor? And then your immediate next

12:57

question is, would there have been an obvious

12:59

non -risky way of protecting the GIA balance

13:01

the the tax man, which would have paid

13:03

for the the many times over? times over? That's

13:05

a simple no. no. a simple a simple no. No.

13:07

The GIA is the the the taxation on

13:09

it on it would not make a difference you you upon

13:11

it. upon it or a advisor did. advisor did.

13:14

I mean it sounds to me, Rog,

13:16

me, Roger Stewart's Pretty much done everything right, he's

13:18

using his right. He's using you know, He's,

13:20

you know, Maxine to SIP and ISA,

13:22

everything that he everything that he can't put

13:24

into those things is keeping GIA, shifting things things every

13:26

year. not So he's not really doing anything

13:28

there that we wouldn't, he? he. No, not not at

13:31

all. mean, mean, you've taken straight line of line of

13:33

keeping it simple in some respects. The question

13:35

does jump into my head. And I don't

13:37

need to know the answer is whether you

13:39

repaid your mortgage at that time to win

13:41

for at that time to win you said it was you

13:43

said it you may still be paying that mortgage

13:45

you may the paying is fine. in fine. which

13:47

you know, fine. Fine. You know, there's plenty of

13:49

stuff put out put out on there. You drew about decision

13:52

to overpay or invest with interest rates

13:54

where they are now. It's less. are now. It's

13:56

less clear cut, but but generally speaking it's

13:58

not so much a a decision. it's a

14:01

sort of heart, emotional, psychological decision

14:03

really, whether being mortgage -free is

14:05

worth more to you than

14:07

the possible higher returns you might

14:09

get from investing the money.

14:11

course, paying off your mortgage is

14:13

a guaranteed return, whereas investing

14:15

it is not guaranteed. But generally

14:17

speaking, you're doing a lot

14:19

of things right here. sometimes, it

14:22

might actually be worth incurring some capital

14:24

gains tax. So you used an example

14:26

just before we hit record, Roger. Like

14:28

somebody It says,

14:31

well, I can only realize,

14:33

say, $6 ,000 or $10 ,000

14:35

from GIA without incurring capital

14:37

gains tax. Therefore, that's... I'm

14:39

only going to put that into my eyes

14:41

because I don't want to pay capital gains tax,

14:43

whereas actually, that might not be the best

14:45

move. Well, sometimes it's better to pay the tax

14:47

now than not in the future. So this

14:50

example, Stuart, you could say, okay,

14:52

if I liquidated £10 ,000, that triggers my

14:54

£3 ,000 capital gain and I'll put

14:56

that £10 ,000 into my ISA. Well,

14:58

you've got a £20 ,000 allowance, so

15:01

sometimes it might be saying, okay,

15:03

well, I cashed in. 25 ,000 pounds

15:05

of GIA. I'll pay bit of tax on

15:07

that, but I can actually fulfill my

15:09

ISO allowance in this current tax year. if

15:11

you've got your wife's allowance, that's 40

15:13

grand a year. So sometimes, and then from

15:15

then on, that growth is tax -free. So

15:19

is it better to take a hit on

15:21

the income tax now, What is smaller

15:23

balance than a later balance? Yeah, it's

15:25

important things to think about. I think sometimes

15:27

dealing with an advisor you know,

15:29

might just trigger some questions

15:31

like that that you might not consider yourself

15:33

that you know That's just because we think

15:35

about this stuff all day every day Not

15:38

that we're sort of smarter or understand sort

15:40

of angles that you can't it's just sometimes

15:42

that's the way We're sort of trained to

15:44

think you know have you considered x y

15:46

or z which you might not have done

15:48

yourself So sounds to me, so you're like

15:50

you're doing a lot right and I wouldn't

15:52

be overthinking this to much. actually use Use

15:55

that exact example P. We often in the

15:57

past if clients walk in saying, Hemp's gonna

15:59

into it. into an or how to I invest?

16:01

it's ,000. Well it's like, well how much have

16:03

you got? Well, I've got 100

16:05

,000, but obviously I could leave the £80 ,000 in my

16:07

bank account because I can't put any more than that

16:09

in the ISA. and it's like, well, hold on. You

16:11

could do a GIA, and there might be some taxation

16:13

off the back of it, but you're going

16:15

to get far, far better growth potentially. Yeah, exactly.

16:17

So, you know, of the questions that you wouldn't

16:20

naturally think of because you've not seen a financial

16:22

advisor. Yeah. you don't know

16:24

what you don't know is It's a I'm

16:26

alive I had to quit times and suddenly said

16:28

those words to me so hope that's helpful

16:30

Stuart, going don't overthink it. all right next one

16:32

is from Nigel I've been listening to your

16:34

great podcast for years and have a simple question

16:36

for you both thank God for that It's

16:38

a nice job. That's my simple question. I

16:41

retired with no earnings and

16:43

I'm taking money from my drawdown

16:45

Can I still contribute 2

16:47

net into a pension and get

16:49

the 720 pounds tax off

16:51

the government can I do this

16:53

if I might not even be paying tax. And

16:56

the answer is, yes, you

16:58

can. Yes. Yes. Yeah, it's

17:00

one of those lovely quirks

17:02

that no matter what you

17:04

don't earn, you can still

17:06

fund a pension. up to the

17:09

full £3 ,600 and get the full tax leave

17:11

on it. I I had a client who

17:13

was a farmer and he retired using years

17:15

ago and he said, well, why wouldn't I

17:17

keep doing that till I'm 75, Rog? It's

17:19

a 20 % uplift. Although not going to

17:21

get that in the Bank of Buildings Society

17:23

anywhere. need it. It used to be actually

17:26

be kind of branded products. Well, the CIS,

17:28

no, it must have been after that. They

17:30

don't think you've got think immediate vesting personal pension.

17:32

Oh, yes. Yeah. IVPP, so literally you would

17:34

put your 2 ,880 in, the tax would

17:36

go in, go up to 360, and then

17:38

they'd immediately crystallize it and take the tax

17:40

cash. Take tax -free cash. So, effectively you getting

17:42

back what the tax relief was, ultimately. Near

17:44

enough, anyway. Only the financial services industry would

17:47

package that up into a thing, because you

17:49

can do that with any It's like, this

17:51

is a sale, so you can do this.

17:53

And course, you can do it with anything.

17:55

But yeah. So the magic thing

17:57

there, Rizroch just said, Nigel is

17:59

there. you can can get tax

18:01

relief, but but only until that

18:03

you don't don't. But, you know, prior to the

18:05

know prior to the budget

18:08

this in early 2025, this in early

18:10

2025 your estate still, are outside cease

18:12

to be but they will cease

18:14

to be outside your estate from

18:16

April, and prior to that change, we would always have

18:18

said, prior to that change, we would always

18:20

have said, do you know what, even without

18:22

It's cash, a advantage, yeah, just get that Yeah, your money to

18:24

get that money outside your state. It's like

18:26

an an extra gifting allowance, isn't it? to it. Obviously

18:28

that's not going to be the case now.

18:30

So be the case how old you are. on

18:33

how old probably wouldn't necessarily rush to do

18:35

it for that reason wish to probably look

18:37

at spending it now I'd probably it directly.

18:39

Yeah. it. Yeah it comes to this 75

18:41

year old age rule, and when I will

18:43

put a little bit of a rule I

18:45

on this and say, bit of might read

18:47

somewhere that you can continue to pay

18:49

into a pension after to pay into a the

18:51

tax relief. without the tax relief. Now now the the change

18:53

in the law of inheritance tax in in 2027 is

18:55

like there's no benefit in doing that. that, But you'll

18:57

have a hard job to find a pension

18:59

company taking the money after taking the money after set

19:01

up to do it without tax relief. aren't set up

19:03

mean, sometimes I get grief for saying, you know,

19:05

that's I the actual limit. I You the put what

19:08

you want into a pension, you just can't

19:10

get tax relief. It's like, yeah, grief find me saying,

19:12

do it. Yeah, exactly. Because I don't know

19:14

of any provider you can they always ask you. a

19:16

pension, the phone, can't know, or relief, or do

19:18

you have do you have sufficient annual

19:20

allowance? Yeah. And if the no, they don't let

19:22

you do it. So I mean, if anybody knows I a

19:25

provider that lets you contribute to a pension in excess

19:27

of your annual allowance. to a

19:29

let me know. excess of a challenge. I

19:31

don't see it happening. let me know. That's a

19:33

challenge. I don't see this Question happening. No. not 5. This

19:35

is an LC, not LC. I'm 57, I'm 57, self

19:37

no so no employer contribution for me

19:39

and have a SIP and stocks shares shares ISA. I'm

19:41

I'm a rate taxpayer. I I plan to

19:43

start drawing from these in a

19:45

few years a few years' I'm wondering, as

19:47

there aren't going to be many years

19:49

for the compounding, the whether it's still

19:51

worth adding to my SIP. adding to my

19:53

I'll get the tax uplift uplift, put

19:55

my SIP, but then but to four. to

19:57

four, quarters. quarters. Three I'd say to four

19:59

years. years. Three quarters will then become taxable,

20:01

but I don't think there will

20:03

be enough time to make the gain

20:05

large enough to offset the tax make

20:07

will then pay. enough I just bung

20:09

everything into my I will then Have I

20:11

missed something? Thanks very much into able

20:13

to answer my question. something? Thanks We

20:15

are much if you're able to answer my question. Best it's

20:17

a good question And it's a comes up

20:19

quite a bit One that comes up quite a bit, actually.

20:22

The first thing I think I'm gonna

20:24

say. to say... I I mean, as we just mentioned

20:26

in the previous question for Nigel, for you

20:28

you can get to actually you a pension up

20:30

to age 75. So you might not be

20:32

planning to pay into a pension be you

20:34

know, once you to pay but you can, if you

20:37

if you want. you retire but other thing is that

20:39

retirement is not a retirement is used to be

20:41

edge in the day, but your question question here

20:43

seems to be about time. going know, is there

20:45

going to be enough time to make a

20:47

gain large enough to offset the that you'll

20:49

pay? pay. Well, pensions are incredibly flexible now. So

20:51

you can so you can to a certain

20:53

degree at least, at least time the tax the

20:55

tax that you pay. maybe if know, maybe if you

20:57

retire at before your before your state pension kicks in,

20:59

or 63 63 or something, you might have a few

21:02

years where you can quite a bit out of

21:04

your pension you without paying any income tax at

21:06

all. your pension actually But

21:08

even so, income tax at all. You're

21:10

57 now, you know, 57

21:12

you know the fair wind could still

21:15

be alive at at 97 or 87 certainly

21:17

and so well that's so well, that's 30

21:19

years for that money to compound. Well, and

21:21

if you've been paying in for

21:23

several decades already, already, let's play devil's advocate, say

21:25

you've got 300 got pounds in your

21:27

pension pot in you need to draw

21:29

15 grand a year. to draw 15 grand a

21:31

year. Yeah, the money you put in

21:34

now is not going touched for another

21:36

20 years. for another 20 years. Sure. So don't think

21:38

of the money that I'm going to put in

21:40

now to drawn in three years drawn in the first

21:42

hours. time. So last in first to draw in three years time

21:44

or four years time, whatever it's going to be,

21:46

you're going to going to be the money I've already

21:48

got in there. The money I put in before it.

21:50

chances are Pete said, you could be

21:52

still here still here late late early 90s.

21:54

You may not actually touch that

21:56

money for 30 years. You've got plenty

21:58

of time, potentially. to get the

22:00

growth to pay the to pay the tax. you might

22:02

have heard us talk about cash a cash flow which

22:05

is a structure that we use. that we use

22:07

to kind of, it of, it doesn't

22:09

sort of protect, but it goes

22:11

some way towards avoiding dipping

22:13

into a retirement portfolio, whether it's

22:15

pensions, or whatever, when when markets

22:17

are distressed, It right? doesn't work

22:19

perfectly, but it's just a mechanism

22:21

to sort of reduce the

22:24

likelihood of having to dip into

22:26

your portfolio when it's down. it's

22:28

down. And of And of course that

22:30

means, it's likely to be likely to be

22:32

able to left in place dips. We be

22:34

able to recover from any dips buffer for

22:36

a about how of a cash buffer

22:38

for a couple of years So really

22:40

you should think about that anyway, if

22:42

even if 57 you're you don't retire till

22:44

53 when you do when you do retire cash

22:46

cash for a couple of years well,

22:48

you know, you know, that's sort of

22:50

eight years before you even start drawing

22:52

on this notwithstanding what Roger about you know,

22:54

it's all all big big pot and if you've

22:56

been you've been contributing for

22:58

a while then the money you take money

23:00

you take out just think of it as

23:02

sort of first of first in first out the early amount

23:05

of money that you that you sort of

23:07

take out first or whatever out first or whatever

23:09

it's it's this is not really a kind of

23:11

a of question. It's really

23:13

just a sort of perception of perception again

23:15

if I had a parent if I had a

23:17

parent for every time somebody said well pension

23:19

tax not all that because you just pay

23:22

it back when you retire. pay it like you

23:24

had the growth on the free money,

23:26

on the tax relief. on the tax and

23:28

you only pay tax on a thirds

23:30

of it. So you're definitely better

23:32

off. Yeah, better off. Yeah Darren right you suppose

23:34

the only thing the wary of

23:36

is to be aware of is might buy an

23:38

annuity buy an annuity your pension fund there may

23:40

be a cliff be a but these days so

23:42

few people buy an annuity that that cliff

23:44

edge is gone. cliff edge is gone. So I think

23:46

it comes down to down to... How might I I

23:48

draw the income? It depends on what other

23:51

income streams you might have at that

23:53

point in time. point it's definitely gonna be

23:55

an annuity, then the then slightly different. slightly different.

23:57

it depends when you do that when you if you And

23:59

if you... If you're not sure about

24:01

that, I think in this

24:03

run into retirement LC, there is

24:05

no better time to work

24:07

with a decent financial planner who

24:09

can really help you structure

24:11

things properly, find out what it

24:13

is your ideal retirement scenario

24:15

looks like, and help you construct

24:18

things accordingly. But I bet

24:20

you any money that the financial

24:22

advisor, whichever one you work

24:24

with, will be telling you definitely

24:26

benefit from pension tax relief for

24:28

as long as you can. and

24:30

because annuities and drawdown can be

24:32

split across the whole of a

24:34

fund, you might use Most

24:36

of you are existing fund by an annuity but the new

24:38

money goes in might be a drawdown fund at some

24:40

point in the future So It's really

24:42

difficult to say what you should do, but the

24:45

vast majority of people are not drawing their pension in

24:47

one go means generally, we

24:49

tend to lean towards keep putting the money into the

24:51

pension, get the tax relief Because you

24:53

don't know the tax rates are going to be in the future. Exactly.

24:57

Pensions are flexible, so yeah, keep

24:59

your options open. I would suggest

25:01

it might be smart to work with an advisor.

25:04

Um Go to the meaningful

25:06

money page and click the work with

25:08

Pete option at the top to get in

25:10

touch with us here at Jackson's. And

25:12

we'll see if we can help you, you

25:14

know, but any advisor worth their will

25:16

be able to sort of help you navigate

25:18

this stuff as you sort of head

25:20

towards retirement. But good luck, LC. All right.

25:22

Question number six is from Mark with

25:24

a C. I made a mistake when starting

25:27

my investment journey. but we

25:29

all make mistakes when we started our

25:31

investment journey, so don't beat yourself up

25:33

about that. But I made a mistake

25:35

by choosing a platform recommended funds, which

25:37

are currently not performing well. I have

25:39

had them for three years. Is it

25:41

best to cut my losses and invest

25:43

into my choice of global multi asset

25:45

fund, which I've had for two years

25:47

that has been performing well? Thanks. Mark.

25:51

Oh, Yeah. A few things to talk about here.

25:53

It's a lot to unpack here. I think

25:55

one of the main things, Mark, is that you

25:57

started your investment journey. Absolutely. You know, that's

25:59

what that... As Pete said in a previous

26:01

answer, what's done is done in

26:03

the past, it's what you do for

26:05

the future that's important. So choosing

26:07

platform recommended funds, there are thousands and

26:09

thousands of people do that. because

26:12

it's sort of built for you.

26:14

someone's done all the hard work

26:17

But you're currently not performing well

26:19

for that fund is in relation

26:21

to what? Yeah, defined, But not

26:23

performing well. I mean obviously it

26:25

seems to me that you're comparing your

26:28

platform recommended funds to your

26:30

choice of the global multi asset

26:33

fund. So we need firstly

26:35

to ask, we comparing apples and

26:37

apples here? know, are they

26:39

similar? equity Bond Split

26:42

You know, are they invested similarly under

26:44

the bonnet? Cause if you're going

26:46

to compare like a 60 40, the

26:48

equity bond fund with 100 percent

26:51

equity funds, you know, that there's a

26:53

completely different animals, they're to behave

26:55

differently. So the better question is, are

26:57

your chosen funds performing well relative

26:59

to their peers? But the very fact

27:01

that you're asking the question suggests

27:03

you're not happy. So Now,

27:05

what do we do about it? You

27:07

ask, is it best to cut my losses,

27:09

okay? Have you actually made any losses?

27:12

Yeah. It's an important question. And does it

27:14

really matter? depends how old you are.

27:16

know, Actually, I take that back. It matter

27:18

how old you are, because we don't

27:20

worry about the past, we look forward. And

27:22

if you have made losses, you're not

27:24

really realizing them, if you just make a

27:26

switch from one fund into another, you

27:28

only realize them if you take the money

27:30

into cash and spend it. Yeah. So

27:33

if you can make an easy switch into

27:35

your global multi -asset fund then just get on

27:37

and do it I've kind of gone assume that

27:39

you're in a pension or an ISA, so

27:41

there's no tax implications of doing that You don't

27:43

want to throw tax away unnecessarily. So if

27:45

you've got a large amount in

27:48

a GIA. so not tax

27:50

-wrapped you want to switch into

27:52

your multi asset fund. well,

27:54

they'll pay tax unnecessarily, maybe do that

27:56

over time. So

27:58

a couple of things here.

28:00

We tend to counsel against sort tend to

28:03

counsel against sort of knee

28:05

-jerk reactions. sort of consideration

28:07

being intentional. But I

28:09

sort of consideration done intentional

28:11

here. Every time you look at you've already

28:14

done the thinking here look time you look at

28:16

your you know, you log in

28:18

and look at your going just going to be

28:20

annoyed. So make the change. Yeah, change. what you've also done is looked

28:22

also done is looked at two completely different

28:24

terms. One's been in for three, two been in

28:26

for two years. the last the last two years

28:28

have been good. good, but the first

28:30

year of your recommended, platform recommended fund was shitty.

28:32

You know, the two You know, the two

28:35

are gonna look different. So that first

28:37

year have made all the difference. And

28:39

it's such a small time scale. It's

28:41

difficult to say to say, crappy and

28:43

that's good. good. You're going to make me lose

28:45

my clean clean rating. It's fine. I fine. I

28:47

my think we'll get away with that.

28:50

that. But yeah, you know, that, you you know, got to

28:52

compare like for like, to compare like for

28:54

like my, Roger said it right the beginning, the beginning

28:56

the fact that you're invested invested. He's

28:58

like 95% of the game, of the game, right? want

29:00

to you obviously want to I would just think, you

29:02

but I would just think. looking

29:04

at you're obviously looking at this, you're not happy,

29:06

just make the switch, get on with it it go

29:09

forward from here. from here and spend more time, I more

29:11

time, I think. on the stuff on the

29:13

stuff that will really make a difference like like,

29:15

can you you start to invest more each month if you

29:17

get a pay rise you get a pay rise

29:19

something? How much of your pay rise can something, how much

29:21

of your pay rise can you get

29:23

into this fund? really that's the thing

29:25

that will really move the needle. The

29:27

choice of funds, yes, it'll have an

29:29

impact, impact but know it's the the amount and

29:31

the regularity of your investment that will

29:33

really matter. really matter a will great question. question you

29:35

know there's no again we never we never want

29:37

to sort of belittle people's questions. That's not why we're

29:39

here, but it's important for us to challenge for

29:42

us to stuff. And I think you just

29:44

need to get on with it. Yeah, to

29:46

fact you're Yeah, the game is really, really

29:48

good. game is really really more. absolutely you've made more of

29:50

three years ago than not going at all. ago

29:52

if you're still sort of to decide on

29:54

what if to buy trying to buy fun to buy. you know,

29:56

three years worth of growth growth actually so yeah well

29:58

done for investing. Keep going. make the switch,

30:00

you'll be fine. And last one for today,

30:02

right? The last question in, actually. They're

30:04

not doing too bad away at all. Rattling

30:06

through them. This is from Matthew, which

30:08

I guess is not my Matthew. So number

30:10

one, my wife and I are selling

30:12

both our homes, which we bought before we

30:14

were together, and moving into a rental

30:16

for one to two years in a new

30:18

area before we buy. Very wise. Understand

30:20

that? Yeah. We will have 500 ,000 pounds

30:22

in cash for one to two years. Are

30:24

we best investing in government bonds, premium

30:26

bonds, high interest savings accounts? We're both top

30:29

rate taxpayers. and have no other assets. And

30:32

then number two part of this question is

30:34

my NHS salary will soon go up

30:36

over a hundred thousand pounds and we're starting

30:38

a family You speak a lot about

30:40

overpaying pension for tax reasons and it also

30:42

helps keep the twenty thousand pounds childcare

30:44

loans. I don't think I can overpay an

30:46

NHS pension or can I? Others seem

30:48

to be getting cars on lease to avoid

30:51

it any ideas. Okay two very distinct

30:53

parts to that so let's Um 310,

30:56

your alarms off I did Not

30:59

your alarm, though. No no. Nobody's

31:01

going to ring you. That's my medical You're

31:04

not having a coronary, are you? No. I got

31:06

to remember take my statins at this time

31:08

of day. It comes to us all. Okay, so

31:10

the first part of your question, Matthew, is first

31:12

is, you know, to keep this cash? Very

31:14

wise, move to a brand new area, rent for

31:16

a bit, get a sense of where you

31:18

really want to be. And of course you're sitting

31:20

on a big chunk of cash so hopefully

31:23

you can swoop and be in a good position

31:25

to buy when you work out what the

31:27

right place is and where the right house is.

31:29

So to do with the money in the

31:31

meantime? It should not be invested. So

31:33

you say, are we best investing in government

31:35

bonds? The problem with the word bond

31:37

is it means lots of different things. Government

31:39

bonds are colloquially called guilts. You don't to

31:41

invest in them because that's an investment,

31:43

right? It's really hard, if not impossible these

31:45

days, to buy them direct from the government.

31:47

So you're buying them on the open

31:49

market, which means they move the values of

31:51

the moves. And you don't want to invest

31:54

this money for such a short time period.

31:56

Premium bonds, not a bad idea, but

31:58

you can't put 500 grand in. No, can't.

32:00

with them and high interest savings accounts.

32:02

Yeah, there's probably a decent way to go

32:04

these days. You'll pay some income tax

32:07

on it. But then again, if you want

32:09

to keep it flexible and available, you've

32:11

got to have it there. Yeah, you get

32:13

a temporary high balances limit under the

32:15

financial services compensation scheme. So you're normally only

32:17

covered up to 85 ,000 per person per

32:19

bank. But when you sell property or

32:21

there's a couple of other reasons as well,

32:23

you get something called the temporary high

32:25

balances, which is a million quid for the

32:27

first six months. But if you invest

32:29

with national savings and investments, and

32:31

SNI. NSNI, there

32:33

are savings accounts there and they are

32:35

covered all the time. They're fully backed

32:37

by the UK government. So the conversation

32:39

scheme doesn't apply. So we tend generally

32:41

tend to say. you know, look

32:43

at national savings. You might give up a bit on

32:46

the interest rate. You could probably get a higher rate.

32:48

but you got that 100 % protection.

32:50

And for such a big amount of money.

32:52

that's worth about. Don't lock it up either, even

32:54

though you're thinking it's one to two years. you

32:57

know, life moves pretty quick. that turns up in

33:00

eight months time. He's like, oh, I've got to

33:02

have that one. I was like, oh, that's unfortunate.

33:04

Now I've got to pay a penalty on my

33:06

money. So, you know, keep it flexible, reasonably easy

33:08

access certainly within a month or two. It's

33:11

an insurance premium. Yeah. before you

33:13

the interest rate for the, as an

33:15

insurance premium, really. For the accessibility the extra

33:17

cover. Yeah, the good, good point. So number

33:19

two, NHS salary doesn't, Matthew doesn't think

33:21

he can overpay his NHS pension, but there's

33:23

a reason why he might want to

33:25

do that because he's going to go over

33:27

a hundred grand, starts losing his personal

33:29

allowance, childcare allowance and stuff like that. So

33:31

you can't actually overpay into the main

33:34

NHS scheme. The main NHS scheme is a

33:36

DP scheme, but it is what it

33:38

is. There is an NHS AVC scheme, which

33:40

which sits around the outside. Additional voluntary

33:42

contribution scheme. Yes, it it's long the outside. just

33:44

a DC pension isn't it It sits it The

33:46

proof still used to be I if it still

33:48

is. don't know No, I've been at the business

33:50

for so long. No Three and a a half

33:52

years So, So,

33:54

you know, or you can have a

33:56

separate you you know a separate personal

33:58

pension that you can paying to the

34:00

net result is the same Matthew. know

34:02

if you want to if your salary

34:04

goes up 205 you can pay the

34:06

five in to the pension and bring

34:09

your salary back below well the nice

34:11

thing is you pay four grand in

34:13

yes it's growth to five so it's

34:15

a win win really so yeah you

34:17

also mentioned he said others seem to

34:19

be getting cars on lease to avoid

34:21

it um If if they're getting cars on

34:23

lease through their

34:25

company. there's benefiting kind tax on

34:27

that. I wonder if you might be

34:29

thinking about the EV sacrifice scheme.

34:31

electric vehicles. there is a

34:33

salary sacrifice scheme. I confess, I don't know

34:35

loads and loads about it. but

34:38

it's a salary sacrifice scheme.

34:40

So you're essentially giving

34:42

up salary in return for

34:44

a car and the

34:46

employer essentially buys a car

34:48

for you instead. So

34:50

they're paying for it. So it brings your

34:52

salary down. They're still benefiting kind tax. I

34:54

believe probably should have checked that, but it's

34:57

very low. It's gonna be very low anyway.

34:59

Because rates. So I would look into that,

35:01

but it's not just an ordinary vehicle leasing.

35:03

That can't be right. No, it can't be

35:05

right. Because if you forego some of your

35:07

salary for that, it's still a class that's

35:09

benefiting kind. Yeah. I don't believe you can

35:11

salary sacrifice for an ordinary car. No,

35:14

I wouldn't have thought so. never heard of that anyway, So

35:16

I'm prepared to be wrong on that Matthew, but

35:18

I think that's, I think probably what you're thinking

35:20

about is the electric vehicle salary sacrifice scheme. Yeah,

35:22

or you you forego some of your salary, they

35:24

give you a car allowance instead. So it's a

35:26

different name, but it under the same guys. It's

35:28

still money through your door really. Yeah. Yeah. So

35:31

Hope that answers the question, Matthew. NS

35:34

an I, premium bonds, yes. I

35:36

suppose the awkward thing with the pension is, what's

35:38

the pension input for the NHS scheme? So

35:40

it comes to how much extra you can place

35:42

in somewhere. It's really hard to find. Yeah,

35:44

I think you've probably got to base it

35:46

around how much your salary might trip over the

35:48

£100 ,000. and then look to do the

35:51

minimum you can do, perhaps? Yeah. it's

35:53

not an easy calculation very often you

35:55

don't find out what the pension input

35:57

was until after the tax. Exactly. So

35:59

it makes it. They're difficult to make

36:01

up, to make up but probably I

36:03

I mean you talk to the pension department

36:05

they may talk to the pension department, they may

36:07

be able to help you, but they just sort of of

36:09

say, we we can't give advice and you end

36:11

up having to work with an having to work with an

36:13

just deal on a single issue like this.

36:15

No, and I suppose you could look at what

36:17

your pension input was last year, and if

36:19

your salary hasn't changed could in the meantime, you pension

36:21

a rough stab at it year and make sure

36:24

you don't go over the top. changed if you're

36:26

thinking about paying into a pension, could you can

36:28

do that, just don't. it. Overpay into into

36:30

a pension and end up falling foul

36:32

of the annual allowance. So there

36:34

is some potential Matthew, but You know, I wouldn't worry about

36:36

it too much at a You know, I wouldn't worry

36:38

about it too much. At 100 grand salary, you'd probably

36:40

only just a little bit tip over that and you just

36:43

pay you only just in over little bit tip

36:45

over that and you just pay the extra You

36:47

keep your into a pension, you keep your childcare

36:49

allowance, you keep your personal allowance, that's

36:51

what we would be doing. Yeah, and

36:53

you've probably got some unused from previous years,

36:55

you could carry for it anyway. years you could carry

36:57

for it anyway. Yeah, so Yeah yeah, you shouldn't have

36:59

too much of a problem if you if you

37:01

just go over go over the hundred thousand pounds. goes over

37:03

by 100 ,000. it goes yeah, a a 200 ,000

37:06

Well yeah and then that's very different. two Might

37:08

be worth you buying a couple of

37:10

hours very different. Might be worth probably would be,

37:12

actually. of hours least accountant. them to

37:14

do the maths for you, be actually at

37:16

least initially so to do the maths for you. Okay

37:18

nice so that was a nice a nice Yeah, back yeah.

37:20

It felt like groove back into it, Roger.

37:22

a couple of months we of months

37:24

of the different room Saturday, know. completely?

37:26

incoming tour the next few weeks. few

37:28

weeks. Yeah, we're in a we're in of of

37:31

temporary. Well, it's not the room is not not the

37:33

room's not temporary. We're in my new office

37:35

now, but we're not going to be doing

37:37

the podcast here and definitely bigger plans for

37:39

that. that. tuned. so, which I Which I just told

37:41

you about on the way. on the way in quite

37:43

frightening quite frightening really. not paying for it. You

37:45

don't need to be frightened. No, but we

37:47

might be filmed. No, but we that is true. I

37:49

need to lose some weight. I need to lose my

37:51

hair. have to cut my hair. new wardrobe. I pay pay

37:54

for it, Roger. Anyway, hope hope those answers were

37:56

helpful folks. Yeah, I keep them, please

37:58

come, keep coming in in to have. Hello

38:00

meaningful money. .tv line as we said as we podcast questions so it so

38:02

it gets earmarked properly for us. Yeah that's it for

38:04

That's it for this session of the money question and

38:06

answer show. week but again links that week, but for

38:08

any links that we've talked about, go to the

38:10

show TV slash .tv it good to be back thank you you enjoyed

38:12

it, folks. Good to be back. Thank you so

38:14

much for listening on your kind words on the

38:17

questions. Thank your you, will talk problem, Pete. week will

38:19

talk to you next week. I'm going to I

38:21

put some music in. I feel like we

38:23

need music at the end. music I think we

38:25

do. talk you Here we go. week I will.