QA55 - Listener Questions, Episode 55

0:00Pete Matthew: There must be somebody in the civil service has gone, hang on a minute. Yeah, I've got an ISA. What would happen if I... Hi folks, and welcome to another Meaningful Money Q &A with me, Pete Matthew. And me, Roger Weeks. Hottest day of the year this week. Yeah, amazingly, isn't it? How glad are you to be sitting right under the air conditioning. I was driving in thinking, I'm glad they actually did the air conditioning a few weeks back. Well, yeah, because this building was designed with the kind of, you know, each floor separated into different studios and stuff. but then halfway through the process, the dividing walls got changed and some bigger studios got made into smaller ones.

0:33Pete Matthew: So for the first 18 months, I've had an air conditioning unit in here, but the controller was in somebody else's studio, which latterly I haven't had access to. So yeah, it would have been hot in here. Yeah, it's horrendous. But it's so nice to see the sun, but it's just like, it's too hot. We complain we don't get enough, and then we get it. Yeah, but anyway, here we are to do another Q &A. So where do people go if they want to leave a question, Rog? If they want their question answered, they will need to send an email to hello at meaningfulmoney.tv with a subject line podcast question. But let's get into these questions.

1:04Pete Matthew: As always, any links that we talk about will be at the show notes, which is meaningfulmoney.tv slash QA55. And if you're watching this on YouTube, help us out by liking the video, subscribing to the channel if you're not already. It's going pretty well, actually. I think we're up to 2.5, 2 ,700 subscribers or something like that on YouTube. So it's good. So thank you for doing that. Right. Let's get straight into it. first one's you, Rog. This is, actually you. Not actually me. No, I couldn't ask any questions. I don't have any intelligence to ask a decent question, really. You're supposed to be answering them.

1:35Yeah, exactly. So this is from Wayne. Wayne says, hello. Hello, Wayne. Hello, Wayne. Thanks, Roger and Pete, for the wealth of information you share and all the time you put into share on finance and pensions. Pensions?

1:45Pete Matthew: Pensions. I have listened to a lot of your podcasts on my treks to and from work and finally took the plunge to retire early at 52. Wow, good effort. To enjoy life and get away from the desk for eight to nine hours a day. That's the whole idea. I had a DB pension which allowed me to take early whilst my wife has various pensions from previous jobs, but all have the rule to take from 57 onwards. So my question is to help four to five years down the line. Could I put£300 a month or the equivalent of£300 minus the government contribution into my wife's pension to continue to take account of government contributions and take the opportunity of her being below the£12 ,000 tax threshold after giving up work?

2:22is it possible or would this be classed as pension recycling as the government would presume the cash invested is from the lump sum I got from my defined pension or is there a way to prove the money is from pay before I retired many thanks for your advice and support giving many people greater confidence with pensions and finances Wayne

2:38Pete Matthew: cool thanks Wayne quite an easy one this to kick us off yeah we often get this question it's like well I've received my tax free cash but I want to shove it back into my wife's pension actually you're allowed to do that she's not recycling and you're not recycling your pension your tax free cash into your own pension. So it works. You don't have to worry about that at all. No, for sure. And we're assuming, I mean, yeah, it would be a problem if you put it back into his pension. You know, if he took out a new pension and started putting it in potentially. Well, it depends on the amount, doesn't it?

3:06Pete Matthew: Yeah, it does, doesn't it? Sorry, I know. Maybe people watching listening, but yes, it does depend on the amount. We'll put a link actually to, it's a brilliant flow chart. I definitely linked it before. It's the Royal London flow chart. And it's like, there's five questions and either if you answer no or yes to them all, then it's fine. It'll tell you whether pension recycling has occurred or not. In this case, though, if you're going to put it into your wife's pension, definitely, definitely not. And yes, the amount is right as well, 300 gross. So 240 quid a month net. But you could, Wayne, possibly put some back into your pension if you want to or into a different pension.

3:46But you've got to look at that flow chart to make sure you're not going to exceed the thresholds. And based upon that amount of money, you're probably not going to.

3:53Pete Matthew: No, probably not. So it'll probably be all right. But yeah, check out the flow chart. But it sounds to us like you're going to be on the right side of things. Yeah. Okay. This is one that, I mean, chances are Michael's circumstances have changed, given that we're answering questions, I think, from March or April now. So hello, Pete and Roger. Thanks for all the great content and information. You are both much better than any AI chatbots. I feel slightly damned by faint praise now. but thank you I think Michael apologies for the long backstory but here it goes I'm Michael 33 I live in central Scotland I've worked in a tech startup for the last six years but felt like a change around 18 months ago so I began sitting my CII exams today I have passed R01 to R05 and also recently passed CF6 I'm sitting R06 in April this year wish me luck well good luck in retrospect you probably found out if you passed or not by now I have recently secured an opportunity to work self-employed for a specialist mortgage firm, and I start in early May as a trainee mortgage advisor.

4:56Pete Matthew: I've been offered a set monthly payment for six months and then a 70-30 split after that. I would hope to have achieved competent advisor status within that six-month period. Yeah, I think particularly in mortgages, that's doable. If I pass R06 in April, I will have my diploma. My goal is to work as a financial planner, but since I've done self-study, I don't have any real experience of the financial services industry. I'm very ambitious, but also trying to be realistic about how to sensibly map out a route to being a successful financial planner relatively quickly. To throw a spanner in the works, a family friend who is a 62-year-old IFA with£30 million assets under management is interested in discussing me joining him and eventually taking over the business.

5:37Pete Matthew: It sounds exciting, but also a little scary to me. He's only a one-man band. For now, I've accepted the mortgage trainee position, but I'm not sure if I'm doing the right thing. We definitely should have answered this one before. The owner of the mortgage company now lives in Dubai and he's looking to also remove himself from his business. He has eight admin staff who work from home across Scotland and he's the main advisor, specializing in buy-to-lets, bridging in commercial finance. They are only authorized for mortgages by the FCA. After that dissertation, my questions are, from your experience and perspective, are mortgages a decent place to start or can you end up getting stuck there?

6:12Pete Matthew: Yes, they're a decent place to start and you don't have to get stuck there. No, not at all. I mean, actually, when I joined Jackson's, one of the questions was asked of me is, would you set up a mortgage desk? It's like, yeah, I'll do that. But actually, it's a really good way of getting your, cutting your teeth on advice anyway. And you'll be talking to people a lot about protection, which is a very unsold area or unbought area, which is really, really handy. So you're not going to get stuck at all. No, it's really, really handy for you, I think. Yeah, there's no reason, particularly not if you're self-employed, because I imagine the contract is such that you could probably get out quite easily.

6:46Pete Matthew: Since I have no real industry experience, only exams, is my head in the clouds thinking I could be a full-fledged financial planner within two years? No, I don't think it is. I think that's doable with some good mentorship and proper coming alongside help. I mean, you need not to stop at the diploma. You need to keep going and find your way to Chartered. It doesn't have to be as soon as you can, but I would give yourself maybe a three-year kind of window to achieve chartered as well. Various ways to do that. It doesn't have to be CII. But two years is a reasonable timescale, particularly given that you, how old are you?

7:24Pete Matthew: 33. It's not like you're 21. And even so, you could become a financial planner at 21. I know several people who are doing that. It's ultimately about experience. You'll be a newbie financial planner, but that's all right. We all start somewhere. Yeah, and the nice thing is with your friend or a member of the family being a one-man band, actually they'll cover everything. So not as if you could have somebody to do pensions and somebody else to do life insurance and somebody else to do inheritance tax planning. That one person will have a great breadth of knowledge and experience across all their clients.

7:57So you'll get in the deep end really, which is quite quickly.

8:00Pete Matthew: Yeah, for sure. And finally, if I started with a mortgage firm and got competent advisor status as a self-employed mortgage advisor, could I then also be an appointed rep of a different financial planning firm at the same time? or is that not actually feasible in the real world? Once again, sorry for the huge essay. I guess context is needed. Thanks again for what you do. Not much good content around these topics, so keep up the good work in regards, Michael. I think it's impossible to be authorised by two different firms, but I think two different active roles, you've got to wonder how you'd manage time and what your bosses, respective bosses, would think about that.

8:36Yeah, and if the two places you possibly might work are one-man bands, that one-man band could be full anyway. That's my concern, is that you'll have one business being the mortgage side, which is fully intense on mortgages, and then the other guy's fully intense on financial advice. So I think getting both, it does mud the water a little bit.

8:58Pete Matthew: Yeah, I think so. I've got to say, though, I mean, if you've got a family friend, I mean, this is like handed to you on a plate, potentially. If you've got a family friend who's 61, looking after 30 million quid, 62 interested in discussing me joining him I mean I would be having those conversations and buying his hand off potentially because he could also mentor you and you could strike a deal with him that you buy him out over 10 years or something and he continues getting a cut of the business that he's built up you would earn well you'd be able to pay him out and cover all your costs pretty easily on that kind of That's way better than starting from scratch.

9:40Well, it's like us with Jacksons. You walked in 12 months before I did or whatever. And the business was already in place. And we knew that the clients had been looked after properly. And having that backbone already in place of clients and money coming through the door from which you can build is a real boon to you. And if you had to go through your cash for the mortgage company and decided to set up on your own and then start to build your practice, that's a huge uphill struggle. So I would say, yeah, definitely start having those discussions.

10:10Pete Matthew: Oh, yeah. I hope you're doing that already. Because that honestly sounds like a gift to us and I want to look it in the mouth, which as the weird expression goes. You know, your 62-year-old family friend may or may not be doing sort of what we call full-fat financial planning, you know, proper deep dive financial planning for clients. You're going to need to learn how to do that. So if he isn't, that's something you could start to introduce to his clients and any new clients that you take on. And honestly, once you've put a client through a full financial planning process, they're like, okay, this is how it's supposed to be done.

10:46Pete Matthew: And so you definitely need to know how to do that. The financial planning profession is absolutely brilliant at sharing. It's a really open profession, isn't it? If you go across to some sort of local event or whatever, just ask, introduce yourself to people and ask to pick their brains. They'll be like, oh yeah, man, let's have lunch. I'd love to sort of talk to you about what we do and how it's done and everything. There's a couple of good resources. One is a podcast called Trap, stands for The Real Advisor Podcast. It's quite Marmite, Trap. I was speaking to somebody yesterday who listened to two episodes and couldn't stick it.

11:22Pete Matthew: And I know some people who are like mega fans. So basically four very experienced financial planners. They're all blokes who chew the fat about what's going on in the industry and how to do the job right. All good guys. I know them all. Jackson's is actually starting its own podcast, speaking to the professional at large in quarter four. That's the current plan this year, so stay tuned for that. Also need to look at two outfits, one called Plan X, which is really good for new entrants. into the profession and another outfit called verve v-e-r-v-e um they they've got sort of the verve foundation as will help advisors at different stages in their journey so either like brand new entrants or people working for somebody else looking to go out alone or those looking to build their existing business so um check out both of those tons of resources and then from there you can jump off to other stuff and keep listening to meaningful money obviously wow that's really good Yeah, yeah, some really good stuff.

12:25Pete Matthew: I'm really excited for Michael. I think there's a real opportunity there. And kudos for getting all those exams under your own state. Really, really good. Yeah, cool. Right, number three, Roger. Right, this is from Paul. It says, hi, Pete and Roger. Firstly, a big thank you for all that you do for this community. I'm learning lots from you guys. I feel more confident with my finances. I'm 46 years old and currently have two pensions. My first pension is in a defined benefit plan from my steelwork apprenticeship days, whereby I only paid into it for approximately six years before moving jobs. I was able to track this down late last year and was pleasantly surprised to see that this had gone from an annual amount of£2 ,650 in July 2007 to over£4 ,400 as of October 25.

13:06I've been told to leave this as it is as it will grow over time with inflation.

13:09Pete Matthew: We agree. Yep. The other pension is a defined contribution plan with Royal London. I'm a high-rate taxpayer and currently pay 10 % of my£58 ,000 annual salary into this fund and my employer pays 5%. I would like to finish at 58 given I had a serious neck injury at 41 and don't know how long my body is going to work for me. It's a factor. Yep. This pot is currently worth£105 ,000 and I'm deliberating whether to increase my contributions in order to achieve my retirement age goal. I also have a stocks and shares ISA which is currently worth£36 ,000. I pay£250 a month into this but don't know if I would be more tax efficient to put this£250 into my pension instead.

13:47However, I'm also mindful that the pension age may increase, so by having a pot of money invested in stocks and shares ISA, I can draw this down when I like and also not bear any tax implications. Having looked into the fees which Royal London charge, and he's quoted 0.71 % for our employer's scheme, I believe I'll be able to achieve my goal quicker if I were to move this into a SIP and invest in a global ETF. Okay, we'll come back to that. I've discussed this with my employer and have asked if they would consider offering an alternative SIP option. I feel I am meeting some resistance. Not surprising.

14:18with this and don't believe a decision will be made anytime soon. In the interim, my compounding is being eaten away by the fees which I'm currently being charged and my goal is moving further away from me. I found a fee calculator online and at the current rate I'm investing, I stand to lose approximately£50 ,000 if I keep this with Royal London. Hmm.

14:39Pete Matthew: We keep me. Well, there's quite a lot to cover. I think we'll come back to this. Yeah, I think so. I'm aware that I can partially transfer my Royal London pension. However, to keep the employer contribution, I would need to keep the Royal London pension open with the minimum amount of funds and then transfer the employer contribution across to my SIP. What is the best way to go about this to make it the most fee and tax efficient? Should I transfer the employer contribution as soon as it's paid to Royal London or would it be no different to do that on an annual basis? I'm assuming the longer I have money in the SIP, the more growth it will obtain.

15:09Therefore, the former would be a sensible default. Am I approaching this correctly? Is there something else which I should consider or could consider? Thank you kindly, Paul. There's lots of humming during that one.

15:19Pete Matthew: Yeah, there was. Yeah, it's not after you. Go on. I was going to say, actually, going back to the initial question, it looks like you've got a good balance between contributing into a pension and your ISA to give you some flexibility, especially with pension age changes. But you're not looking to retire until 58 anyway. Yeah, so how old are you now? 46. All right, so 12 years, it's unlikely. It's unlikely you're past 58, really. But, yeah, it's handy to have a different pot on which you can draw. Or it's a pension pot, but it could not actually be a pension. So you can draw a pen for your retirement income effectively.

15:54Pete Matthew: There is no like optimal balance. I mean, you always say, look, that 250 quid a month would do better if you paid it into a SIP in terms of you get immediate tax relief. So we know you'll get more invested. And so, you know, more money invested for the same length of time in the same equivalent funds is going to give you more money. But then on the other side, you've got some tax to come out. I'd like it when people have balance in their pots. So I wouldn't overthink this. My kind of abiding sort of sense when reading this question, Paul, is that you may just be over-focusing on minutiae here because what you're doing is the right thing.

16:34Pete Matthew: You are paying and paying reasonably aggressively. I think what would move the needle more is, rather than stressing too much about the 0.71, is actually can I go from 250 to 300 quid? but it doesn't have to be just one thing or the other. I think you can potentially move some money from Royal London and set up a SIP in your own right. Please, God, don't do it monthly. No. There is no way on earth your employer is going to open a SIP just for you because company schemes are linked to payroll. Yeah. So, you know, they'd have to have like a special calculation done on the side just for you. And of course, if they do it for you, they have to do it for everybody.

17:12And nobody would want the same SIP. So everyone would have different SIPs in which the employer is going to have to try and pay in. That's never going to happen, unfortunately.

17:19Pete Matthew: I mean, I literally, I never. So ours is set up. Ours is with Roland at Jackson's. And, you know, the deductions are made. It's all linked to the payroll. I never have to adjust a standing order. It just goes out. And so for me as an employer, that convenience is worth a lot. But if you wanted to open your own SIP and say, right, once a year, I'm going to make a note. once a year, first of January, I'm going to do a transfer request and bring all except for£1 ,000 across into your SIP or whatever, then do that. And to be honest, if you look at the fact you've got£100 ,000 already in that SIP, the vast majority of that money will be in there earning for you.

17:58Your monthly contributions will pop in at some point in the future. They're not going to make a massive difference over the course of 12 months. The majority of your pension will be moved across. Will be growing, yeah. I think looking at your balance as well, because you've got this neck injury, you would like to retire at 58 but having that money in ice would be handy if you suddenly decide at 55 actually you need to do something different good shout yeah that that's a that's a clincher

18:20Pete Matthew: factor actually so i probably yeah would be stacking into ices i think it probably would be you're giving up some tax relief but for you the flexibility of you know maybe being able to finish before national minimum pension age if your health requires that you do that i think that's going to be worth bagging, I think. Interesting question that, honestly, I know we rightly talk about fees and costs and them being a drag. I'd love to know the inputs on that £50 ,000 sum. You know, the£50 ,000 worth of costs. I mean, is that until you age 100? Or is it between now and 58? I bet you it's a lot longer than that.

18:58Pete Matthew: For you to be 50 grand worse off. And compared with what? You know, is that literally just the impact of the charges on the Royal London? You're always going to pay some charges. So you need to look at the difference between. So, but the, the thing that will move the needle more is can you invest more? Yeah. No doubt about that. Actually, it's funny. Look at it. I look at 0.71 thing. Actually, it could be worse. That's not, that's not bad. Right. If I cast my mind back 10, 15 years ago, we'd be paying one and a half and twos. Yeah. And the market, you know, markets and platforms are coming in now and, and taking those down and everyone's going, Oh, I don't want to pay more than 0.4.

19:30Yeah.

19:31Pete Matthew: No, 0.18 or whatever it's going to be, you know, They do it in that voice as well, don't they? But no, it's true, which is great. I mean, it means it's democratizing good investment. I mean, you're an interactive investor customer. Yeah, I am. Which, I mean, they're dirt cheap, right? Because it's a fixed monthly fee. And it's really, really good. You know, I've triggered a crystallization to get some tax free cash. Yeah. That's because I've stopped paying it now. Five years after you've retired. I've had my last paper from Jackson's, everybody. So I thought, better... I thought I'd better trigger some tax-free cash.

20:05And that's going through automatically now. But they're great. You get these secure emails between the company stuff there. And it's really, really well put together. Good.

20:14Pete Matthew: Good. I'm putting my monthly drawer up next month. I'll finish paying you off. Marvellous. Right. Question four. Actually, I just assigned this one to you just now as well, because the last one is, question five is a monster and with various bits. No, that makes sense. All right. So this one's from Simon. It says, Hi, Pete and Rog. Great show and love the books, but not finished them yet. I bet you have by now. Well done for the books, Rog. Well, I did proofread the first one. You did, actually. And seconded you. Well, I was one of several for the second one, wouldn't I? Because, you know, I wasn't so important for the second one.

20:47It was only a bit of retirement planning.

20:49Pete Matthew: I've got like three days left to finish the update of the first one. So I'm under the caution as we record this. All right. Well, we'll get into it quickly then. Yeah. Thanks for demystifying the complex world of personal finance and financial planning. I'm in the fortunate position where my projected salary and bonus will increase again for tax year 2627 and will take me well over the£125 ,000 tax threshold before adjustments. My problem in inverted commas, so to speak, is that even after using my current year maximum pension allowance and previous year's unused maximum pension allowance, I can only get my adjusted income to be around£115 ,000.

21:24Tough life, I know.

21:25Pete Matthew: You can feel this off. It's like sort of embarrassment of the question. I can either make a large gift aid donation to get below£100 ,000 or use less of my unused maximum pension allowance and keep above£125 ,000. Not quite sure we want to do that. Am I missing any other income adjustment options? What is the actual impact of not being able to hit the£100 ,000 adjusted income and being in the£125 ,000 additional tax bracket from a tax payment perspective in real money terms? I have some small cash savings and stocks outside my ISAs as we put most of these in my wife's name as she is a basic rate taxpayer.

21:59We don't need the childcare tax scheme and not aware of any other reason to keep under£100 ,000 except to save tax and avoid the 60 % effective tax rate between£100 ,000 and£125 ,000. I don't want to let the tax tail wag the dog. People have looked at that from us, haven't they? And happen to give to charity, but in real terms, is there actually much difference in the tax payment amount in pounds and pence as long as I kept out of the£100 ,000 to£125 ,000 range? Many thanks, Simon.

22:23Pete Matthew: I mean, it gets to the point where the hassle of avoiding it is I'll just pay the tax, but that's perhaps just me. And it's the childcare and the child benefit and all that sort of stuff that you lose. But Simon hasn't got to worry about that. Yeah, so you put a quick calc, I think, here on the additional tax. If we say he's earning about$115, I mean, you would max your pension contribution, wouldn't you? I mean, that's a given. You wouldn't say, okay, I'll put less on my pension and then go to 125. No. I can't see the reason you do that at all, Simon. So yeah, if we worked on your£115 ,000 and then said, okay, what's the additional tax for having breached the£100 ,000 threshold?

23:07So you're£15 ,000 over the£100 ,000. You divide that by two to give you£7 ,500 because that's the amount of your personal allowance that will be taken away. And then you pay 20 % extra tax on that£7 ,500 because it would have been tax-free before. That goes to£1 ,500. So effectively, whatever your excess over the£100 ,000 is, you'll pay 10 % of that in tax. On top of the 40 % you'd already be paying on anyway. Yeah, exactly. So in the scheme of things, you know, it's£1 ,500. It's not nice to pay, but it's not a life-changing, mate, when you're earning what Simon's earning.

23:43Pete Matthew: No, I mean, if you want to give to charity, give to charity. And if tax is a trigger for you to do that, then so be it. You know, that's fine. But I mean, your income is only going to go up from here. So you're not going to keep getting to the point, probably, where you just sort of keep giving away the excess over 100 grand. I mean, great, if that's what you want to do. Let's talk you out of that. But probably you're going to say, well, actually, I will pay the tax and ISA the rest if I don't need it and build wealth outside of pensions, retire earlier than you otherwise might. So I really kind of feel the sort of embarrassment and angst in the question because you're sort of putting things in inverted commas.

24:25Pete Matthew: It's a tough life, I know. But these are legitimate concerns. I would give for the purpose of giving rather than just avoiding tax. Find a balance that works well. But understand that it could be worse. I feel like I might come in for some stick for saying that, but it could be worse. And it is very much a first world problem. You ask, are there any other tax? You didn't say avoidance. are there any yeah I mean I can't remember are there any oh god I can't find the question are there any other ways to avoid the tax in it not really I mean VCTs VCTs can claim some of the tax back but in the end you're taking a risk on that side yes risky investment locked in for five years you know there's a place for VCTs and in a sense you're in the catchment for those but again talk about tax tail wagging the investment dog I mean that's a textbook example of that really too many people get into VCTs when they wouldn't ordinarily go into them were it not for the tax benefits so tread carefully yeah right this is like the mother of all questions right so I've got a little bit of inline editing but we'll probably answer some of these as we go but in order to provide a bit of an antidote at the end we've got an audio question yeah so after this our second ever I think is it yeah I know we should make more of that actually because it is quite nice Although, can you imagine people would be leaving us like 20-minute audio questions?

25:54Pete Matthew: And that'd be a bit more awkward to cut bits out. Yes, it would. Yeah, for sure. So this is from Mark. Hi, fairly new listener to the podcast. Been binge-watching them recently. Ended up here via the Meaningful Money YouTube channel. Okay, cool. Both are thoroughly enjoyable to watch and are teaching me a lot about the financial world, along with two other YouTube channels I like, Damien Talks Money and James Shack. Both great channels. Anyway, my question, if you have time, and if it's selected, will be about retiring abroad. Current situation, male, 42, living in North East England, working full-time for the NHS, and I will have two NHS DB scheme pensions in retirement, one in the 2008 scheme at 65, and one in the 2015 care scheme at state pension age.

26:35Pete Matthew: I've got two Stocks and Chairs ISAs, about 95 grand between them, one Stocks and Chairs Lifetime ISA with about four and a half grand in it for retirement, not house purchase, about 21 ,000 in premium bonds, which I use an emergency fund. Our house is paid off, so no mortgage payments. So at the minute, we can add to these savings at 500 quid a month comfortably. My wife is 34 and here on a spouse's visa and hopefully will be eligible for indefinite leave to remain and citizenship soon. It will save us a lot in visa fees and stuff when it happens. She currently works a part-time job 16 hours a week at minimum wage to fit around childcare for our two-year-old son.

27:10First question, would this part-time

27:12Pete Matthew: work count as a qualifying year for the state pension as it's below the personal tax allowance? Let's answer that one first. The answer is yes. The answer is yes, because your wife's earnings are above the lower earnings limit, which triggers the allowance for state pension calculations. So you get credit, essentially, even though she didn't actually pay international insurance. So yeah, that lower earnings limit is 129 quid a week. So the answer to that is yes. But even had she been below the lower earnings limit because she's got a two-year-old child and presumably getting child care duties yeah, getting child care duties she should get credit for that anyway and she's here on Spouse's Visa so I imagine that would be the case I imagine that would be okay yeah okay, right, moving on we have a rough plan of retiring early hopefully once our son is grown up and finished with schooling and university and moving back to my wife's home country in Asia for the better weather and lower cost of living can understand that.

28:10Pete Matthew: As a rough plan, we think when I'm 60, my wife is 52, but could move later depending on family commitments. Now, if I stay in the NHS all that time, I should have 10 years in the 2008 scheme and 24 years in the 2015 scheme. With conservative planning on spreadsheets, we'll get about, between those two, about 22 ,000 a year at the normal pension ages for those schemes. My wife will benefit from a spouse's pension for the length of her life if I die first, roughly a third of these figures. I have the option of exchanging some of this pension for tax-free lump sum up to 25%. The calculation is a 1 in 12, which is a rubbish commutation rate.

28:48Pete Matthew: So question two. Everyone at work always talks about how you've got to take the maximum lump sum to avoid paying tax. I want to bang my head against the wall here, but I sort of get it. I'm not so sure, as the pension is linked to inflation over the long run, and there could end up being a big gap between your pension with and without the lump sum. What's your thoughts on this? If I didn't need a large amount of cash for a specific thing, surely it's better to go for the larger pension, even if you end up paying more tax. Or am I wrong? When we move, I'll have a full NI record for the state pension, but my wife won't.

29:20Pete Matthew: And depending on your answer to the first question, she might have 20 years' contributions, say. I mean, I hear this all the time. We'll just have the lump sum. It's yours. It's in your hand then. Yeah, once you've got it, you've got it. You know, and you can use that and invest it and spend that down and you'll be, it takes you 20 odd years before this thing breaks even. Might be less than that on a one to 12. Oh, one to 12 would be horrendous, wouldn't it? It'd be about, I'd say it'd be about eight years. Yeah. Because you think, well, it's one to 12. So with no inflation, it'd be 12 years. Yeah, true.

29:53Pete Matthew: Just backtrack a bit. So if you're giving up a thousand pounds worth of pension income for a 12 ,000 pound lump sum, right? Essentially with no growth in the income, you'd have to live for 12 years to be better off, wouldn't you? keeping the income. But with indexation as well, that's probably going to take it down to about eight, I would have thought, because your income is going to rise every year, whereas your tax-free cash is a one and done thing. So the fact is, it's far too simple to just say take the lump sum. Of all the questions in personal finance, that is arguably one of the most individual questions.

30:26And it's the one that everyone in the public will say, well, of course you've got to take your tax-free cash. You've got to take your tax-free cash. Yeah, you've got to pay tax, do you, mate? No. No. Why have the income that goes up? You may never live that long. but you probably will and if you don't your wife will and she'll have a third of that pension and that will increase with inflation so it's too simplistic to just say yeah got to take it

30:46Pete Matthew: got to take it and it's not binary anyway you could take you don't have to take the maximum lump sum or nothing you could cut somewhere in the middle and give up some income for some lump sum depends on what you've got outside pensions otherwise depends on the value of your house depends on your cost of living there's just a million variables why I have a job right so it's too simple but the other thing you've got to be careful of is once you move abroad, your state pension will stop escalating. Yeah, that's true. So you'll have no inflation once you've moved. So that additional wrinkle then says to me, it's more to it than just say you either take it or you don't take it or you take half it and don't take it.

31:24I think you need to plan this in. Oh, definitely. And that all goes back to how much will you need to live upon once you're back over in Asia?

31:31Pete Matthew: Yeah. Yeah, for sure. Planning needed. and what 42 now 42 yeah so you know you're planning quite a long way ahead you're going to be you certainly don't need to be making like tax free cash decisions now um all right let's have a look question three uh this is still from um uh mark mark so question three if we move abroad before she has a full national insurance record can we make voluntary payments for extra years while resident in another country. I see you can pay about 900 quid for one year in this country, but I'm not sure if we are already living abroad. We can still do that. Thank God for Nick.

32:11Pete Matthew: Class 3 National Insurance voluntary contributions can be paid to protect the right to state pension. There are conditions, and from what you've told us, you would have lived in the UK for more than three years and so would probably meet the conditions. We'll put a link. You need to search gov.uk for NI38 apparently. So we'll try and find a link. Thank you, Nick, for putting that answer in. Yeah, well done, Nick, because I did switch up afterwards as well. It's like, that's a really good thing to be able to do. Yeah, right. I keep forgetting the chap's name because the question's still on. Mark, right.

32:40Pete Matthew: Okay, so assuming my savings continue to grow and the stock market doesn't completely collapse, it's not going to complete that. I will use these savings to bridge the gap from 60 to 65 and then the state pension age, and I'll fund the move with the sale of our house, which will also give us a cash buffer, hopefully. Question four. When moving abroad, can I keep my stocks and shares ISA? I know you can't contribute more to it, but keeping it open to grow, receive dividends, withdraw money, the government website says you can, but a lot of the provider websites are vague, and some say that they don't allow it.

33:11Pete Matthew: Is it the case that when the time comes, I'll have to transfer my ISAs to one of the more expensive providers, say, who are more likely to allow this? Yeah. You might just need to, if you're on a platform that doesn't allow you to hold an ISA while you're outside, You know, the legislation is one thing, which you rightly say you can't add to an ISA if you're a non-resident, but it might be that the providers, you know, it's their prerogative to say we don't want to deal with people who live abroad, in which case you'd have to move to a different provider before you go away. Yeah, yeah. And it wouldn't necessarily mean it's going to be a more expensive provider.

33:41No. I mean, you must have looked into this, but you've got to be a bit wary because any withdrawals and any capital gains you make on the ISA, although it would be tax-free in the UK, depending on the country you're now living, their taxation might be that actually any gains earned anywhere in the world or any income earned in the world might be taxable. So although it's in a nice over here and not taxable, it may still be taxable over there. Definitely. I need to check.

34:05Pete Matthew: Okay. Now, I already know that the country I'm moving to doesn't have a reciprocal agreement. So our state pension will be frozen, there you go, at the level that we claim it. And we've based all our plans and number crunching on this. You are planning ahead. And the country I move to may charge tax on money I draw. There you go. when I transfer it over and on my pension. So we'll seek advice of accountants over there nearer the time. Good. My last question would be about if I die first, probably more likely, me being older and male, is more for my wife inheriting my UK-based assets, the bank accounts and the ISAs and the NHS pension.

34:44Pete Matthew: NHS pension should be easy as she's already my nominee on record and we'll go through with her the forms and website for claiming it. Perfect. The ISAs and bank accounts are the main worry. Will it be easy for her to transfer them over to her? I'm assuming the joint accounts will be pretty much automatic. Will, yes, will the single accounts be easy? Can she keep the money in the ISA still in an ISA, but in her name? Would having her own ISA make this transfer easier? And most importantly, is this something you think can be done online over the phone from abroad, or will it involve a trip back to the UK?

35:19Pete Matthew: Back and forward to branches, assuming they haven't all been shut. Oh, there's been a feeling in that last comment, I think. Yeah, exactly. You've got to wonder why you would keep money in the UK if you're permanently moving abroad. I guess if you've got a family over here, if your son stays, son? If your child stays over here and doesn't move to Asia with you, then maybe you might want to certainly keep a bank account over here, one bank account. And yes, if it's joint, if you die, Mark, then, you know, it would become your wife's automatically. Yeah. I mean, if you know that the ISA, is going to be taxable from income and gains when you're abroad, there is no real need to keep it as an ISA.

36:01I mean, I don't know whether you could do that from abroad, whether your wife will be popping back because you're the one that's no longer here. It just seems to be an extra bit of admin that you can do during your lifetime.

36:17Pete Matthew: Yeah, I agree. I mean, it's hard enough to transfer accounts when you're both in the UK because the providers are inept for the most part. And, you know, my team at Jackson's are continually finding to get things moved into one person's name. It's nowhere near as good as it should be. You know, there will always be ID requirement, proof of address requirement. That's going to be challenging if your widow is, you know, over in Asia and having to deal with UK companies. So it's going to be a pain. We always talk about simplification, and this is a textbook example of that. Obviously, while you're here in the UK, you want to maximize the tax benefits of the accounts you're in.

36:56Pete Matthew: But when it starts getting close, these are the questions to ask then, because tax rules might change between now and then. Intercountry treaties might change between now and then. So, yeah, I think it's good to think ahead, but you're not going to be able to tile this up in advance. and fact is it's going to be tricky if one of you, you know, if you've got money here and your wife is abroad after you die. And there is an additional permitted subscription so if you were to pass with your ISA in place, yes, your wife could have an additional allowance for the amount that you leave behind and it would be easier for her to open one with an existing provider that she's already got with an ISA than if she had to open a new one again.

37:40Pete Matthew: But the question is though, is if it's because an APS is, it's an allowance. Yes, of the amount. Yeah, but would she get that if she's expat? Because you don't have any allowance. Yes, you do. You do, do you? You do, yeah. Oh, good. I'm glad to check that. Yes, if it's only done within three years of death or 180 days of the estate being wound up, then yes, you can, even if you're not based in the UK. Oh, there you go. I'm glad I didn't know that. Mark says, thank you for taking the time to read this email. Sorry it was so long. And no worries if it doesn't get chosen. and we chose it anyway. Yeah.

38:11Pete Matthew: It's like that. So thanks, Mark. Okay. So producer Kate needs to have her finger over the button because Holly has sent in a voice note. So here is Holly asking her question. Hi, Pete and Raj. Absolutely love the podcast. It's been the backbone of my financial planning for some years now. It's something I recommend to people all the time, including the books, which are absolutely great. My question is about the recent budget changes in regards to stocks and shares ISAs and cash ISAs. So I'm under 65 and I've been saving for some years now in a stocks and shares ISA. I'm saving up a deposit to buy a house probably in about another four or five years time.

38:53In the back of my mind, I'd always intended that once I'd saved enough of the deposit, I would move, I would transfer the stocks and shares ISA into a cash ISA just for easy access and less volatility as I actually look to buy the house. My understanding of the new ISA limits brought in in the last budget is that I won't be able to transfer my stocks and shares ISA to a cash ISA to keep it safe once I've reached my goal. Is that correct? And if so, what would you advise I do once I've reached the deposit I need? Do I de-escalate the risk in my stocks and shares ISA and keep it in there? Or should I just accept that I'll have to withdraw it into a savings account and pay tax from there on?

39:40I do feel this is a bit unfair, as I would lose the tax-free money by not being able to transfer it to a cash ISA anymore. So it sort of feels like I'm starting again. I've been saving over many years for this deposit in the stocks and shares ISA. And ironically, it's made me wonder if I should have stuck it in a cash ISA to begin with and not invest it, which is obviously what the government has been trying to encourage us to do in the first place but maybe I've got this wrong let me know what you think. Thank you

40:10Pete Matthew: Thank you Holly, those are a different voices Actually it's very well produced, it's nice and clear Yeah, there's a little bit of traffic in the background but very lovely and clear So I could have gone either way there I think Holly, yes you've fallen in this horrible situation that appears to have arisen as a result are the government trying to change these rules? You're doing all the right things. You're investing in attributable assets that the government's trying to get us to do anyway and build your wealth in a really, really considerate way. And you're right in saying, we would always say when you get to the point you think you've got enough, then you de-risk it and then you've got it there available for you to purchase because you never know when that's going to happen.

40:52But yeah, you can't do this.

40:54Pete Matthew: No, no, you're not going to be able to do it. It's next year, isn't it? Yes. April 27th is coming in. So, I mean, this is another sort of inept attempt, I think, by the government to encourage people to invest in UK assets. So, I mean, obviously, they haven't explicitly said you've got to invest in UK assets. But by firstly reducing the cash ISA allowance from 20 down to 12, and then that's for under 65s, of course. and then taxing interest on cash held in a stocks and shares, I say, they're just, it's meddling. Honestly, I wish they would just stop faffing around with stuff. I mean, you know, it's tax on interest.

41:37Pete Matthew: So depending on the numbers involved, it's not going to be a massive amount of tax. But if you've got 50 ,000 quid in your ISA and suddenly you move it all to cash because you're planning to buy a house pretty quick and you're a higher rate taxpayer, then yes, it could be material. 4 % interest on 50 grand is what,£2 ,000? So if you're a high rate taxpayer, you're going to pay 800 quid in tax. And a bit more now because the tax on cash has gone up, hasn't it? Because it's going to be 22%. Oh, yeah, 22%. 42 % and 45%. Yeah, yeah. 42%. Right. So yes. Yeah, horrible. It's a pretty rubbish situation.

42:16Pete Matthew: Is the answer to anything? It's going to be money market funds, isn't it? I think they're going to enjoy more popularity. Yeah, but it depends on how the government are going to classify those money market funds when that happens as well. Are they going to be cash-like? Is it going to be too close to being cash-like? They will still have you for that. To be, I guess, decided, is it that? I think it is at the minute, yes. But you're doing all the right things, Holly. You're saving towards it. And in the back of your mind, you know that, based on everything you've learned from us, that you would de-risk it when you come to do it because you've got the amount you need and you want to make sure that's in place.

42:48But yeah, you... Not being able to transfer into cash is,

42:53Pete Matthew: that's short. Well, even for some sort of short period, if the government said, okay, you've had the ISO for 5, 10, 15 years, to convert to cash for 12, 18 months, for that reason, we'll allow... They introduce all these different rules and allowances. I want to just say, okay, if you've had an ISO for X number of years, we'll let you have a cash ISO for... Transfer, yeah. For a short period, I don't know. ah just it's short sighted isn't it and but it is what it is I suppose what you could do Holly thinking about it is you could start dropping £12 ,000 a year into a cash ISA and the rest be invested so you still got your investment around the back and you've already de-risked some of your ISA yeah yeah and cash rates aren't overly bad at the minute obviously yeah could do that so sort of contributions from here on in yeah 12 into a cash ISA possibly the rest into stocks and shares and the stocks and shares that will do its bit and then perhaps try to de-risk that into money market funds if you're allowed to.

43:52Pete Matthew: Yeah, but if, yeah, your sort of proportion between cash and stocks and shares would increase in favour of cash over time as well if you're using your cash-wise allowance. Tough one, Holly. You're understanding it right. That's the point. It's just, yeah, it's pretty rubbish and you're exactly the kind of person who's going to be caught by this. So sorry about that. Yeah, unintended consequences. The government think of something. Ah, this will be a jolly grease. We'll do that. and then someone like you who's done the right thing is going to be penalised for doing that but they are there must be somebody in the civil services going hang on a minute yeah I've got an ISA what would happen if I actually I'm saving into an ISA and I'm doing this I'm going to get caught by this because that's the intention anyway so sorry about that Holly but you are understanding it right yeah but I hope those answers were helpful even if they're not the answers you may have won over here especially Holly but do please keep them coming in at hello at meaningful money dot tv with a subject line podcast question and we'll drop them in at some point in the future.

44:47Pete Matthew: We will, as soon as we can. So that's it for this week. All our links, and there's been quite a few today. Actually, they are at the show notes, meaningfulmoney.tv slash QA55. But that's it. Thank you so much for watching. Thank you, Mr. Roger Weeks. We will talk to you next time.