Question Time: Beginner investor: explain the risk? Faulty kitchen: getting money back? Self-employed: how to start a pension?

0:00This BBC podcast is supported by ads outside the UK.

0:29CFO. LinkedIn has a word for that. Bull spend. Now you can invest in what looks good to your CFO. LinkedIn ads generates the highest ROAS of all major ad networks. You'll reach the right buyers because you can target by company, industry, job title, and more. So cut the bull spend. Advertise on LinkedIn. The network that works for you. Spend$250 on your first campaign on LinkedIn ads and get a 250 credit for the next one. Just go to linkedin.com slash broadcast. That's linkedin.com slash broadcast. Terms and conditions apply. Shop the Sherwin-Williams Memorial Day sale and get 30 % off paints and stains May 15th through the 28th.

1:17Whether you're refreshing your interior or exterior, we've got the colors to bring your vision to life. And with delivery, getting everything to your door is easier than ever. Shop online to have it delivered or visit your neighbourhood Sherwin-Williams store. Click the banner to learn more. Retail sales only. Some exclusions apply. See store for details. Delivery available on qualifying orders.

1:44Martin Lewis:Pensions you could go on for hours and hours and hours, but as a where to dip your toe in the water, I hope it gets us there. I should explain sad fact to new listeners. I listen to all the previous podcasts and things like that. It's great. It's really good. That's wonderful to hear. We British particularly, we like certainty. And investing doesn't have certainty. Hello and welcome to the cunningly named The Martin Lewis Podcast. I do wonder what that's going to be about. And this is our Question Time episode, where you, our ESQs, our extra savvy questioners, get to ask me your questions on absolutely anything and everything, open brackets, within reason, close brackets.

2:19And this week, the questions from our ESQs are, I'm self-employed. How do I start a pension? Can I ask for money back on a kitchen if it's faulty after five years? I'm a beginner investor. Can you help me understand exactly what the risk I'm taking is? After that, it's a caller all about his success on making his travel insurance firm pay out after his complaint. Then you ask me what is my biggest money-saving faux pas. And to finish, PPS has a PPS. Play the theme tune.

2:54I gotta pay, so I'm gonna work, work, work, work, every day. I gotta mouth, I gotta feet, so I'm gonna make sure everybody eats.

3:11Hello and welcome to our Question Time edition of the podcast, where you can ask me questions on anything and everything, open brackets, within reason, close brackets.

3:18Martin Lewis:Now, Matt is still away, so I'm delighted. Well, I'm not really delighted. I'm concerned to have in his place from the Big Issues podcast, PPS, podcast producer Simon. And those of you who are into politics will understand my concern here, because it has been a week of turmoil and volatility in the political world. The prime minister's job is under threat. The big top man's job is under threat. By the time you're listening to this on Monday, who knows what will have happened? We're recording on Thursday. and one of the things that sparked that, that sparked the crisis, was the resignation of three PPSs.

3:56Oh yeah, Parliamentary Private Secretary.

3:58Martin Lewis:Now, I don't have three PPSs. I only have podcast producer Simon. But Simon, should I be worried? A coup is underway. Oh no, you and Rosie are taking over. Me and Rosie will have this place. We'll be in charge by Monday. Yeah, it could happen. We've got the numbers. You have? By the time Matt's back. The three of you? Yeah. Oh my word. Simon and Matt doing the podcast. Rosie doing the fact checking let's be honest though Rosie's going to be really busy if you two are answering the questions Rosie is going to be interrupting giving the eyebrow look she gives me when she thinks I've said something slightly wrong but she's going to be doing it her eyebrows are going to be going so fast she could be a helicopter taking off with the amount of errors the two of you have made you know what I'm safe in my position I'm staying let's get on with some questions does that sound a little bit too aggressive no no I thought it was nice Right.

4:50Enough of all that nonsense. Let's do a question. What have you got for me? So Ingrid in Rochford has got in touch. She says, I am 48 and have worked freelance all my life. I have always paid national insurance, but I don't have any other pension as I've never earned enough to pay into one. Am I too late? I'm about to downsize my house and will have some cash. Should I start a pension?

5:10Martin Lewis:Well, I would think so, yes. I mean, I think that's a very obvious thing to do. So first of all, you say you've already paid national insurance and don't have any other pensions, so you're insinuating there quite rightly that you will have a state pension contribution, and by the time you hit state pension age, you will have some money from that. But the state pension is not about giving you a good living once you are into your retirement. It is about giving you a subsistence living and enabling you to, you know, get through it once you're into your retirement. And so it is always good if you can, if you want to live more akin to the style that you've had in your working life, to be putting some money into your pension.

5:43Martin Lewis:Now, the truth is, the earlier you start, the better. I often use this hideously scary, rough rule of thumb, which is take your age when you start putting into your pension, and that's the percentage of your salary you want to put in for the rest of your life to have a good retirement. So if you start at 30, it's 15. You start at 40, it's 20. You start at 48, it's 24%. You're not going to do that. I mean, let's all just be honest. You're not going to do that. But saving in a pension is a very efficient way to save for later life because the money effectively, and we won't talk about the mechanism here, is coming from your pre-tax income.

6:21Martin Lewis:So if you are a 20 % taxpayer, it costs you, you lose 80 quid in your pay packet to get£100 in your pension. If you're a higher 40 % rate taxpayer, slightly different in Scotland, but we'll go with it anyway on this basis, then it costs you£60 from your pay packet to put£100 in your pension. If you're a top rate taxpayer it costs you£55 to put£100 in your pension. And you're putting that money in an investment and you're hoping it's going to grow so that would all work. And 48 you've got a long time till retirement. You know there's a long time for that money to be able to grow. Now the only and I'm only putting this caveat in as I doubt it will apply.

6:57Martin Lewis:The only caveat when it can't be worth it is those who are very close to retirement who are only putting a small amount in who wouldn't be entitled to the full state pension and would therefore be entitled to the state pension topic called pension credit if they didn't have other income. And that can be the only time where mathematically, financially, it isn't worth putting money into a pension for you. But at 48, if you're going to put money in now and you're going to put some spare money in afterwards, then that should build you up a decent amount and you're getting the tax relief on it. As for where to do it, well, it depends.

7:29If you want to get into investing, you do it through a self-invested personal pension. which is basically just like an investment fund where you have a huge choice of different investments,

7:37Martin Lewis:you know, whether it's gold funds or commercial property or shares and global trackers and far more. But then you're managing it yourself. If you don't feel comfortable managing it yourself, then on my telly show recently, we had a couple of financial advisors and they suggested much simpler, ready-made portfolios where you answer a few questions about your goals and attitude to risk and you're matched to a portfolio that's managed on your behalf. The ones they highlighted were AJ Bell's Ready Made Pension, which offers three options, Cautious, Pension Builder and Adventurous, and Interactive Investors Managed Portfolio, which matches you to a ranking of one to ten on the level of risk that you're taking.

8:19Martin Lewis:And there's also Vanguard Managed Personal Pension that offers five risk levels from cautious to very adventurous. So really the question when you're doing that is how much input do you want to have? Do you just want to give it a bit and let them do it for you? Or do you want to be in control of your investments? And if you don't know what you're doing, well, you can always start off with them, letting them do it for you. Do your reading over the years. And once you feel confident, you could transfer that into a self-invested personal pension, start managing it for yourself. But from me, yeah, I mean, you're saving that money.

8:48Martin Lewis:You save it from tax-free income. When you get it out, 25 % of it will be tax-free. And the rest of it will be taxed at your marginal rate. And you'll be able to do lots of different things with it. and it's absolutely worth doing. And you can, if you want more help about the specifics, because once you start doing this, you can call up Money Helper, which is funded by a levy on the financial services industry. It's a non-governmental organisation where you can get free one-on-one impartial guidance about your circumstances to help you further through it. I wish you the best. I wish you the best.

9:21Martin Lewis:I hope that gives you... That's a pretty full answer, I think. I think you covered it all. I hope so. Well, I mean, pensions, you could go on for hours and hours and hours, But just as a where to dip your toe in the water, I hope it gets us there. OK, Simon, so we've had one question. Regular listeners will absolutely know we operate on an odd and even system. So if it's an even number, it's generally a caller. So I presume we're going into a caller now, although I should put a caveat because I know people like technical details. It's an odd and even number system, but we normally only have a maximum of two callers.

9:50So if we were to do a week where we had six questions, I would suspect the sixth question would be a read. but I'm probably explaining this and getting rid of the fourth wall. Do you have a fourth wall in radio? Is there a fourth wall in radio? Is there a fourth wall in TV? Is there a fourth wall in radio, Simon? In the world of podcasting, I think there has to be a fourth wall, yeah. Is it a fourth wall or is it a third wall? Because we're only sort of one dimension of voice. Yeah. Could it be a second wall? Anyway, have you got a caller? Luckily, Natalie and Gosport is with us.

10:22so we've got a caller for the next question as is the itinerary as i understand it we're joined by natalie in gosport and you have a question about junior ices hello natalie hello hi thank you for having me on the show pleasure i do have a question please and i'm wondering if you can help me out so i have recently opened a junior stocks and shares isa i have a nine-year-old daughter and And I'm currently investing£30 a month. So I've just done two months at the moment, so I'm going very slow. That's good. And you're doing what's called, you know, that's called drip feeding. Do you know about that?

10:56Yes. Perfect. I do know about it because I've followed you, yeah?

11:00Martin Lewis:OK, good. So I'll explain it to everyone else. So when you're investing and you put money into the markets, you can either, if you've got a chunk of money you want to put in, you can either put it all in at once and then it's all crystallised on that day. So whatever price you're buying the fund at on that particular day, that's the price you buy it and it could go up and down from that point so that's slightly increasing your volatility or you can do what they call dollar cost averaging or here in the UK we'll call it pound cost averaging which is where you say well I'm going to put that same amount of money in but I'm going to do it over a year so therefore I sort of smooth out the vagaries if it goes up and I buy on a high bit and then it comes down well while I might have lose out on the money I put in last month I'm now buying at a cheaper price this month and it's smoothed it all out so great way to start do carry on with your question.

11:44OK, thank you. So I realise with the amount I've got invested at the moment that the value can go up and down. But my question is, if the stocks and shares value goes down, will it impact only my investment percentage or will it impact the total that I've invested, the entire investment? I'm not quite sure I understand your question. Forgive me. Can you explain what you're thinking a bit more? Yeah, absolutely. So if I put in£30 a month for two months, I've got£60 in there at the moment. And I have had a little check and it's up to£63 total, which is fantastic. It's gone up. But as I know, investments can go up and down.

12:29Not only can, they will go up and down on a short term. All right. would I lose the£60 that I've put in or would I potentially lose the entire thing, which could be a whole£63? OK.

12:47Martin Lewis:So once your money goes into a fund, the value of its fund is its value. What you paid for it is irrelevant. So there's no division of the£60 and the£63, if you like. The fact you put£60 in is irrelevant. You now have an asset worth£63. pounds. Now, when you're investing, the value can go up and down. So if you had a single share, if you'd bought a share in one company, let's say, well, that company could go bust. And if it went bust, you would lose all your money. Simple. So the whole 63 pounds would go. Equally, if you bought in a single share, it could suddenly be the next stock market darling and go up 100 times in value so your 63 pounds would suddenly become worth 6 300 pounds but i'm hoping if you've been listening to me as a beginner investor for your child you don't have a share you have a fund oh i do sorry that's my terminology yeah can you tell me what your fund is yeah do you want me to name the uh the provider just just just the types good generally you know So is it?

13:54It's a Vanguard, something Vanguard. Is it a global tracker or a UK tracker? Yes. A global tracker? It's a global one.

14:02Martin Lewis:Perfect. I had a feeling it would be because it sounds like you've listened to the pod. So I'm presuming that you're actually in the MSCI World Index, which was not recommended by me as regulatory reasons, means I can't do that by our independent financial advisor we had on the podcast, which was Ed Marshall. and that has about 1300 constituent firms from around 23 countries though it's heavily weighted in America so you've got that spread that diversity of different shares across the world so while nothing is impossible it is absolutely incredibly unlikely for you to lose all of your the money because you've got 2200 shares in there and what your fund is doing is it's basically giving you a balanced average of what's happened to all of those shares.

14:48Martin Lewis:Now, the advantage of that is, unlike you buy an individual share, the company can go bust. Well, even if one of those companies went bust, you wouldn't lose all your money. And in fact, because it's an index, if one company starts to shrink, as it's measuring the biggest companies, that would just drop out of the index and a new company would go into the index. And it's just computerised trying to manage it. The other side to that is, you're never going to get that sort of tenfold in five weeks stock market darling, everything's gone up type of return. You've done something to spread the risk.

15:18Martin Lewis:So technically, the answer is all of your£63 is at risk because that's just the markets. But because you've got a broad spread of fund, what you've done to mitigate that risk is you've diversified. You've got your lots and lots of tiny little eggs in that basket. And so if one of those broke, it's not such a big deal because you hope some of the others are going to grow anyway. so the technical answer is all the money in there at any point is at risk but risk can also mean growth too so i hope i've explained it are you understanding have i got i've got through the point yes absolutely i i wasn't quite sure but i think the way you've uh laid it out and explained it now has settled in my mind and can i give you another tip your daughter's nine so this is money that you're locking away for at least nine years, which is perfect time period.

16:13Martin Lewis:So it's money you can afford to lose, not that I hope you do. And it's money that you're locking away for at least nine years. I wouldn't be looking at the price that often. There lies madness, right? Because as I always say with investing, there are only four things that matter. The price you buy at, any income it gives you, and that type of global return, you'll probably get some income each year. It'll put those and they'll be reinvested and it'll buy you more shares. the price you sell at, and inflation. So if you look day by day, and this is what I said earlier, it will drop in price. There will be days it drops in price.

16:46Martin Lewis:There will be months it drops in price. But what you're looking at is over this near 10-year period, if we track this back over the last 10 years, well, if you'd put that money in 10 years ago, you would have three times what you put in now. And what we're hoping is you'll have something similar over the next 10 years. But that during specific months of that, you may end up with less money than you did the previous month. And so you sort of, that can play on your mind a little bit. This is a long-term thing. You're putting in£30 a month. It's money you can afford to lose, not that I hope you will.

17:19Martin Lewis:And therefore, there's a bit of just close your eyes for a while, if you know what I mean. Yes, I know. I'm going to revisit the temptation to look anymore. I mean, listen, hopefully things will be good and it will go up, but there's no guarantees. And of course, you know, I talked about this on my TV show recently, and it is an important point. If the markets crashed, right? Well, first of all, because of the way you're drip feeding in, it's only the money that you'd got in that would drop. And any future money you put in, you'd then be buying at another level, a low 11. It could go up. But if the markets crashed, in the short run, it would look horrible.

17:53Martin Lewis:But if the markets then recover, which we hope over a 10 year period and over most 10 year periods they would have done, then at the end you will still be better off. and it's all that never any guarantees and it's all that this is when people and I love the fact you've done this because you sound like someone who was nervous about investing and has gone for it hearing that actually for a long period I should be having a little bit of a risk but it makes you nervous doesn't it it certainly does which is why I'm starting off with such a dare I say a low amount at the moment but that's fine I get my confidence with more yeah but the thing is we in life and we British particularly, we like certainty and investing doesn't have certainty and that puts people off.

18:36Martin Lewis:And I think it is not necessarily for all of your money, depending on your attitude to risk, but some exposure to risk can be very helpful. And it sounds like you've started the perfect way. Congratulations on your investing journey. My fingers are crossed for you because that's all I can do because there's no guarantees that this will work out really well. And thank you for calling. Thank you very much for your help. And although Natalie Martin says don't look at the investments every day, you can look at your email signature now, which I hope says Natalie in Gosport, Esquire. Yes, you're now an Esquire and you're going to get your badge, Natalie, once we've made the badges.

19:08We haven't made the badges yet. I have heard about these badges and I'm looking forward to it, yeah. Simon, I'm just checking. You are making a list while Matt's away. Yeah, yeah, I've got a Word document that I'm going to send over to him. So, yeah, if you send me your... Because let's just be honest, Corley, this dereliction of duty by Professor Sir Dr Matthew Burnham Esquire

19:26Martin Lewis:in the Question Time podcast. I mean, just as we announce that our callers are now called ESQs, Esquires, extremely savvy questioners, and that they're going to get a badge, then he goes off on holiday without having ordered the badges, as far as I'm aware. So I think, you know, this is putting a huge delay on when the badges will come in. Words will be had when he returns. Much like investments, faith in Matthew Burnham can go up as well as Darren, can't it? Quite right, I love it. past performance is no indicator of future brilliant thank you so much for calling thank you then bye cheers you nailed that Natalie you were great Natalie thank you well done are you still listening?

20:06we are we've got you honestly I know you're going to hear this all the time but you are fantastic really fantastic and anything you want to say to Martin? yeah and what I can probably say now it's not I'm getting so much braver with what I'm doing I wish I'd done it years before I really do I realise how quickly time goes

20:30Martin Lewis:and I think oh I could have had all those extra years You've done it and I'm delighted to hear it and I'm so pleased to know that I've helped that is genuinely why I keep doing this I listen to all the previous podcasts and things like that it's great, it really is That's wonderful to hear, thank you Take care, bye bye Bye Are you sitting there thinking, oh, I know what I wanted to ask him? Well, this is your opportunity. If you've got a question, then just send them in to martinlewispodcast at bbc.co.uk. And please do start them, dear Martin. No, dear Matt. Dear Martin. Or Simon. Maybe Simon.