Question Time: Is having a pension worth it? Why has my home insurance doubled? And Martin's Mick Jagger history!

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0:37Hello and welcome to the cunningly named The Martin Lewis Podcast. I do wonder what that's going to be about. And this is our weekly question time edition, in which I answer your questions about absolutely anything and everything within reason. In this week's question time, you ask me, Is a pension worth it? Why has my home insurance price doubled? How does paying off a credit card in full actually work? Should a newly married woman keep her first-time buyer status for a future lysa or get put on the house's deeds? Can you put a personal loan into a cash ISA? And bizarrely, you ask me about Mick Jagger and I reveal my secret Jagger history.

1:21Play the theme tune. I got bills I gotta pay So I'm gonna work Work, work, work I gotta mouth I gotta feed So I'm gonna make sure Everybody eats Right, Matt, I hope you've got a great selection of potpourri of questions for me this week. Podcast producer Matt, for those who aren't regular listeners, is the person who collates and compiles the questions and puts them to me in a hopefully not too challenging way, Matt. What have you got? Of course, potpourri smells very fragrant in here with all these lovely questions. Thankfully, we're not in the same studio, so I can't comment on whether you smell fragrant or not.

2:00I would like to kick off with Kay. She is saying, Hi, how can I get a power of attorney for a loved one who hasn't got capacity? I'm afraid that's a very simple answer. You can't. Lasting power of attorney, I presume you're talking about, which is the main one, is something that needs to be set up while someone has capacity. And this is the great problem. And please do have a listen to the full podcast that I did on wills of power of attorney a week ago. You'll be able to download it and it goes into detail. This is the reason I'm so passionate about people getting power of attorney while they can.

2:32Because if somebody doesn't have capacity, the way that you can take over their finances for them is you have to apply to the Court of Protection. I'm assuming you're in England. You have to apply for the Court of Protection. I'm afraid it's expensive, it takes time and it's administratively draining and people find it very difficult and it can leave someone's finances in limbo while you apply. And that's what you have to do. I mean, I think you're sort of asking that if they don't have capacity to take over their finances, to be able to look after their money and also health and well-being. That's what you will have to do.

3:06This is why I always suggest people get power of attorney in advance while they have capacity. and I have a power of attorney in place, even though I have no foreseeability of losing mental capacity, so that in the event I were to lose mental capacity, someone could very easily, my trusted nominated person, could very easily take over my finances and make health and welfare decisions for me. But the strict answer to your question, Kay, I'm so sorry, is you can't get power of attorney. You're going to have to apply to the Court of Protection to get the equivalent powers now, and it's far more difficult.

3:36I'm sorry. There's no easy answer there. Callers of the Week Oh, that's difficult Shall we move on? I've got a caller for you, Martin Right, Peter is in Otringham Hello, Peter Hello Hi, Peter What can I do for you? Hello Well, thank you, Martin Firstly, thank you for all your campaigning and advice and help of making me look like a personal finance whiz with my family and friends Oh, I like to hear that You take the advice, you make it yours I love it Nice I normally give you credit Okay But anyway, my question is about Lysas. So my son, let's call him John, as I don't want the fame that comes from this to turn his head.

4:18He bought his first and current house with help from his financial product, BOMAD, which is his bank of mum and dad. And also his Lysa. The house is in his name alone. He got married earlier this year, so we'll call her Janet. OK, Janet and John, I like it. I see where you're going with this. Yeah, yeah. She's lovely and a great new audience for my dad jokes. She moved in with him when they married, but John is due to remortgage before December. I'd like to put the mortgage and the house in both their names. But I was wondering, does this remove Janet's ability to use a lisa later when Janet and John planter by another house in the next two to five years?

5:01Would it be better for him to keep it in his own name alone until the next move? Simple answer, yes, it does. It does remove her ability to use a Lysa. I should be more correct, and as I'm talking to someone who I can tell, and I say this in the right way, is a nerd. I'd say that with all the compliments that it is meant to be, because, of course, a lifetime ice can also be used for retirement savings, so it wouldn't prevent that. But the rule on a lifetime ice is simple. If you have owned or part-owned a house anywhere in the world before, even if you've inherited one for a brief time and then it was sold, you cannot get a lifetime ISA.

5:40So if she became an owner of this property, then she would not be able to get a lifetime ISA in future or would not be able to get the bonus on a lifetime ISA as a first-time buyer as she wouldn't count as a first-time buyer. So if that is your intent and they want to use that money, then in purely financial terms as opposed to relationship terms and everything else, then keeping her off the deeds for now would work because she would then be able to save towards a lifetime ISA and use it when they bought a property together later. Right. I would just be, I'm just trying to think what else I would do.

6:16Funnily enough, we're just talking on the prior caller about power of attorney. And I would think that I would, in those circumstances, she's not on the deeds. So they're more financially separate than a married couple. Maybe I'd be making sure there was a power of attorney in place. Heaven forbid, you know, the last thing I want, I want to waste your money by them getting a power of attorney that they will never need. Right. Because nothing's going to happen to John's mental capacity. I'd also make sure a will is properly drafted. Remember, when you get married, your prior will is invalid. I'm hoping all of these things are complete waste of money for you.

6:47But I'd still want you to do them anyway because, you know, these eventualities won't happen. You understand the point I'm making. I do. No, that's that's really helpful. Thank you very much. So, yeah. So off the top of my head, I would think it sounds like if you're going to work it that way, she's better to keep her independence and then they can buy together and she will be able to use her lifetime ISA that way. Great. Well, thank you very much for that. My pleasure. Thank you so much. Yes. You do dad jokes and you're into finance. I mean, basically, we're clones. Thank you for calling. Mini Martin Lewis there.

7:18I'm not going to make maybe Maxie. Who knows? Cheers. Thank you for calling. All right. Thank you. Bye bye. I've got a question for you, Martin. Western at Westerner. He's asking, are pensions really worth it? Just a small question then. Short answer, yes, really worth it. Let's do the longer answer. Now, the first thing is, in a way, there's a bit of a misunderstanding about what a pension is. I could almost go back in history, and I'll keep this pretty simple. Back in the probably 90s, it was, when people got a mortgage, they got a mortgage and they got this with profits investment, which is a complicated wrapped up product, which is slightly vague, that was called an endowment to pay off their mortgages.

8:02And endowments performed pretty poorly and there was a big mis-selling scandal. And what happened is because they called them mortgage endowments, people were like, endowments are really awful. They didn't say mortgages were awful. I mean, no one wants a debt. They said endowments were awful. Now, when it came to pensions, you effectively had a very similar type of investment in the 1990s. It was a pensions with profits fund. But we didn't call them pension endowments. We called them pensions. And because those endowments didn't do very well and weren't transparent, just like they didn't in mortgages, people used to say pensions are terrible.

8:38And the sort of point I'm making, why I'm starting going back into history and for those people in their 20s and 30s is going, well, why is he doing ancient history? Is because that really tarnished the reputation of pensions. Now, all a pension is, a pension is a tax treatment on a form of savings or investments. And it's a tax treatment that says you can put money into a pension from pre-tax income and you then have to hold it until you're, you know, age 57. And then you can take 25 % out as a tax-free lump sum and the rest will be taxed. And that's what a pension is. What you put in your pension is up to you.

9:15And certainly in this modern age where we have self-invested personal pensions, where you can, you know, play the stock market if you chose to, I'm not suggesting you do, or it's long term is always better. Play the stock market if you chose to within your pension, or you could invest in property funds within your pension. The idea that we have to move away from is a pension is a type of investment. It's not. A pension is just a wrapper that wraps around it. And it has some magnificent benefits. You know, it is an incredibly effective way to save for your old age. Such an effective way that the alternative product, the lifetime ISA that was put out that was for retirement saving, Many providers and banks didn't put lifetime ices out because they didn't want people to put money in and then get done that they'd been missold them because they should have put money in a pension because a pension is generally so much better.

10:04Pensions aren't perfect. So let's just talk about what the benefits of a pension are. The big one is that pre-tax income benefit. So if you are a basic rate taxpayer, you can put money in your pension from your pre-tax income. So let's imagine for simple numbers, you put£1 ,000 into your pension. It comes from your pre-tax income. So you would only lose£800 in your pay packet to put£1 ,000 in your pension because your take-home pay is taxed, but the pension's coming off before that. If you were a higher 40 % rate taxpayer to put£1 ,000 in, it would only cost you£600. if you're a top 45 % rate taxpayer to put£1 ,000 in, would only cost you£550.

10:54So you are getting more investment than it costs you. There's an instant head start. And even if you don't work for an employer, if you're putting money in a pension fund, then they automatically top up the 20%. How you get the extra if you're a high rate taxpayer is a bit more complicated than I'm doing big principal. So we'll move on. So that's the first big benefit, is that you're investing from pre-tax income. The second one is that if you are an employee under the auto enrolment laws, if you earn over around 10 grand and you're aged 22 to 66, you will automatically be paying into a pension and your employer must contribute to.

11:31The minimum amount is that you're putting in 5 % of your salary and your employer is contributing 3%. There are rules about the exact amount you earn, but let's just go in principle again. So effectively, your employer is giving you more money. So let's just try and do some numbers on this. You're putting£1 ,000 in your pension. If you put£1 ,000 in your pension, your employer, give or take the qualifying, all that, is going to put in£600 on top. So you've now got£1 ,600 in your pension invested for your future with a long time for it to grow, which is always better. So hopefully you'll be at the benefit of compounding growth.

12:09The money will get bigger and bigger, certainly the earlier you start. You've got 1 ,600 quid in your pension, but how much does it cost you? Well, if you're a basic rate taxpayer, it's only cost you 800 quid in your pay packet. If you're a high rate taxpayer, it's only cost you 600 quid. If you're a top rate taxpayer, it's only cost you 550 quid. So even as a basic 20 % rate taxpayer, you're getting 1 ,600 quid in your pension. It's only costing you 800 pounds in take home pay. That is an unbeatable, manifestly winning investment. I mean, who else is getting double what they started with at no cost to them?

12:44So with those two things added together, I go back and we've done, you go and listen back to my podcast on pensions where we went to it in detail. But, you know, if you ask, you're asking me, are pensions are worth it? Yes. For most people with lots of caveats. Another question. You know, I like to put a fun one in every week. What are we doing this week? Would you rather be a fat Mick Jagger or a bald Rod Stewart? Maybe that person knows about my connection with Mick Jagger. There is a Mick Jagger connection here. So first of all, many people may not know that Mick Jagger studied accounting and finance at the London School of Economics in the 1960s, and he did two terms before he left to go and do his music.

13:29Were you in the same year? Matt. Bring back podcast producer Simon That was very rude That was very rude So anyway, when I went to the LSE in 1991 and I was General Secretary President of the Students' Union in 1994-95 and each year at the time the LSE used to elect an honorary president and it had been quite controversial in the past but in the year I was there, my entertainment sabbatical who's a chap called Gary Delaney, who's now quite a well-named stand-up comic. He proposed Mick Jagger to be honorary president and it was up against, I think it was Yitzhak Rabin and Mother Teresa, but Mick Jagger won.

14:09So Mick Jagger was elected honorary president and we wrote and Mick said, we'd like to come and present you with the honorary presidency and Mick Jagger said, yes, you're invited to come to Wembley. I'm doing a concert to come and meet me there. The LSE then said to me, because I was going with Gary, who was the end sabbatical, but Obviously, I was leading it. We would like you to tell Mr Jagger that we never closed his degree and he has only done two terms. And if he ever wants to, he still has a place to come and finish his accounting and finance degree. So I went to Wembley Stadium. We went to the VVIP area and I went in to sit with Mick Jagger and I walk in and Gary walks in and, you know, it's all very cool in there.

14:51And Gary, well, I've never forget it in my life. I hope Gary doesn't get annoyed with me telling this. but he walks in and I walk in and I shake Mick Jagger's hand. Pleased to meet you. Hope you get my name. Gary walks in and goes, Hello, Mr. President! Which is just like... So we sat in and we start talking to Mick Jagger and he tells how when he left, his accounting and finance professor had said to him, I doubt this music stuff will work out, so remember you need to come back here and get a proper job. and we talked and he talked about how he was scared to talk in the union general meeting at the LSE and all on the back now my favourite bit of this and I understand this now being in the public eye myself now is sometimes you have meetings with people then you get someone to come in after 10 minutes and say I'm sorry you have to move on to something else which is your way of getting out of it which you often need to do and someone came in after about 10 minutes and said I'm so sorry uh uh you know that's the time that we have to do and Mick Jagger said no I'm enjoying the conversation it's fine and we stayed in there for about 40 minutes we had the VIP stuff and it was absolutely wonderful.

15:54So out of loyalty to my university and loyalty to the brilliant way Mick Jagger treated me when I was a 22-year-old or 23-year-old student, I'm Mick Jagger.

16:07And I've got a question from at Jezebear on X. He's asking, can you put a personal loan into a cash ISA? What an interesting question. So I presume what you're saying is you've taken out a personal loan, you've got the money, can you save the money into a cash ISA? Well, those are two entirely separate products. A personal loan is a lending vehicle that gives you a set amount of money. Then you have structured repayments. You'll be paying a set amount each month for three to five years at an interest rate. You then have that amount of money and it's up to you to do with what you choose. I mean, there are a few loans that ask you what you plan to do with the money when you got it out, but most don't.

16:44So let's assume that you haven't lied or done anything wrong on the application. You've got this set amount of money. Well, that's your money. I mean, you could go and put it on the horse races if you wanted to. I would strongly suggest you didn't. It would be a terrible thing to do with debt. But it's your money. So if you wanted to save that money into a cash ISA, a cash ISA is just a tax-free savings account. You know, you have easy access cash ISAs where you can put money in and take money out when you want. You have fixed rate cash ISAs. So yes, you could put it into a cash ISA. My big question though would be, why.

17:15If you have that money and you're not using it, the amount you earn on a cash ISA, there is no question that is lower than the amount the personal loan is costing you, right? Because cash ISAs are paying four, four and a half percent. The cheapest loan on the market, even for a large amount, is around six percent at the moment. And you'd have to have a great credit score to get that. So there's just no question that you're spending more money having the loan than you would earn in a cash ISA. So my question is, if you don't need the money, then absolutely, I'd be going back to the personal loan and saying, I mean, there might be a couple of early redemption penalties over a couple of months.

17:51Can I pay you off? And I'd be paying off as much as you can off the personal loan to reduce your borrowing rather than put it in a cash ISA. Now, it may be that you've used the loan for some things. You've got a little bit of money left over that you need to spend on it in six months time, in which case holding it in a cash ISA isn't such a bad idea. But generally, I think you're making a mistake to do that and would be better just to pay off the loan. Now, I should say as a caveat, there is a technique called stoozing that I've been talking about now for getting on for 20, 25 years. Stoozing is where you deliberately borrow money at 0%, interest-free, and you put that in high interest savings.

18:29So you're earning money, you're earning interest and money lent to you by someone else. And I always talk about my favourite bit of money-saving poetry ever, which is when the egg account that many people who are older than you, Matt, will remember, not as old as Mick Jagger maybe, but older than you, and that is the egg account, and okay, I'm doing it from memory, so forgive me if I'm not getting it right, the egg account was giving 0 % for 20 months, and I took money from the egg account at 0 % for 20 months, so I got a spending card, and I used that card to spend on, instead of using money from my bank account to build up the debt that I didn't need.

19:07I had the money in my bank account. And then the highest paying savings at the time was Egg at 6%. So I then put the money I'd artificially borrowed at 0 % from Egg into Egg Zone savings and made 6 % interest on money Egg had lent me at 0%. Now, in my world, that is poetry. Now, that's called stoozing. And it has to be done very carefully and deliberately. And you need to know exactly what you're doing. And you need to keep the money ready so that you can pay it off at any moment, but you can make quite a lot of money doing that if you do it right and you've got a stew's pot. But you can't do that with a personal loan because a personal loan, there are no personal loans at zero percent and therefore there's no point in doing it.

19:47So can you do it? Yes. Should you do it? No. Callers of the Week. Okay, Martin, we've got another caller for you. You ready? Yes, indeed. Jonathan is in Balik. Is that how you pronounce it, Jonathan, in Northern Ireland? That's correct, yes. Balik in Fermanagh. What can I do for you, Jonathan? Hi, Martin. Yeah, so my question is, myself and my wife recently bought a house, first-time buyers here in Belichan, Fermanagh. And we obviously, part of the mortgage, you have to take out home insurance, which we did. So they had a condition that you would take out home insurance, but you didn't have to take it out with them, did you?

20:24I didn't have to take it out with them, no, but it was actually a broker through work that arranged it the first time. So we went with them and it was kind of a reasonably across the board in comparison with the other ones that we did see. It seemed normal. But the year has passed and I'm after getting the email from the company for the auto renewal. And it's increased. Can we just be pantomime for a second? Can you say auto renewal again? Yeah, auto renewal. carry on yeah yeah absolutely yeah um and the auto renewal went from 717 pounds which was what we paid and they're proposing an increase to 1469 pounds so it's more than doubled um and my question is just how has that happened now just keep in mind i have no claims i haven't even been in touch with the company all year.

21:21It just doesn't make sense to me. I know we've had a big storm this year that did some damage to some houses in the area. But my question is just how can that be justified, such a huge increase? Well, I don't think it can be justified. But I think probably the better answer is, does it have to be justified? No, we don't have price controls on home insurance. Now, actually, the home insurance market, prices have dropped slightly over the last year. So my big warning to people this year has been don't just settle for a renewal being at the same price because you're then arguably, same on car insurance, I should say, arguably even if at the same price you're effectively being ripped off because you should be expecting a reduction.

22:02Now, there can always be individual changes in risk profile that may be due to the macro weather effect that you've had. But I can't see that being worth justifying two times. And the main lesson that comes from this is don't accept your auto renewal. you need to go and look for new insurance each year. Now, some people thought this was all over because... Do you know what price walking is, by the way? Have you heard of price walking? I don't. No, I haven't. So price walking is basically each year when you get an insurance policy, they walk your price up a little bit at a time. So if you stay with the same insurer, after five or six years, you will be paying 40%, 50 % more than the equivalent new customer.

22:45And that was always done. I mean, in your case, they haven't walked it up. They've gone sort of Herculean Superman leapsome bounded it up to double the price. And now we had legislation put in place a few years ago that said there was meant to stop this. It was called stopping the loyalty penalty. And what that effectively said is that existing customers should not be charged more than new customers. However, there was a baboon. There was a big but here. And the big but is that it is channel specific. And what that means is it's only existing customers going through the same method of a new customer who can be charged that price.

23:22So, for example, let's imagine we've got Matt here with us. If Matt had a comparison site and you were an existing customer who had gone to Matt's comparison site last year, you couldn't be charged more than a new customer going to Matt's comparison site this year. But you could be charged more than a new customer going direct. You could be charged more than a new customer going to a different comparison site. Now, you've gone through a broker, which is not a very big channel, if you see what I mean. So effectively, within where you are, that rule just isn't that effective. Because, OK, they might be charging everybody who's gone through that broker more, but not necessarily everybody who's gone through a big, different comparison site more.

24:03So I'm just explaining some of the logic why this may have happened. Obviously, I don't know the details, so I'm guessing and making it up. But the really big lesson is you need to go and start all over again. And I suspect you will find someone very substantially cheaper. If you get it for 700 quid last year, I suspect you'll still be getting it for that or even less this year. Well, we've actually have phoned around and the cheapest we've got is actually AXA NI, specifically AXA NI. They have a branch over in Northern Ireland and they're giving it for one. It's just over 1 ,000. But that's only because we also have our car insurance with them.

24:39You know, it's the multi-product offer. And that's after... We seem to just... Have you done the comparison site? I haven't done the comparison site yet. But you see, the thing is, in Northern Ireland, they won't even quote. A lot of them won't even quote us. Axa NI tends to be the cheapest that we find. So it is interesting. It does sound to me there's something I'm missing here about the situation going on because I can't see why it would have gone up 50 % even on the cheapest quote. And maybe it is the storm that you talked about. It's an interesting one. Yeah, it's just one last thing just before I go.