QA57 - Listener Questions, Episode 57

0:00Pete Matthew: I've got like completely bored and then one step up from that we've got listening to Meaningful Money. And then watching paint dry just a bit. Hi folks and welcome to another Meaningful Money Q &A with me Pete Matthew. And me Roger Weeks. Alright bud. Yeah I think so. It's getting rather warm though. I know. Well we've just hit record and the sort of newly installed air conditioning seems to be showing an error code. Really handy. That's one of the warmest days of the year. But at least we're starting in the morning. so you know not doing this at one in the afternoon we'll do this really quickly yeah exactly yes reason enough to crack on so what do people do if they want questions answering if they want questions answering Pete they go to hello at meaningfulmoney.tv with the subject line podcast question and then we'll whittle them down to something else in the future we will thank you very much okay so as always remember any links that we talk about will be at the show notes meaningfulmoney.tv slash QA57 and in the description if you're watching this on YouTube and if you are please like the video and subscribe to the channel if you're not already, because it really helps.

1:01Pete Matthew: Thank you so much. Me first this week. This is from John, without an H. Hi, Pete and Roger, without a D. I'm hooked on your podcasts. They are invaluable and strangely fun. That's faint praise. It is really strangely fun. Strangely fun. Not expecting them to be fun, but they strangely are. Though I don't recall hearing about offshore investment bonds being discussed, this is a worry to me, because I have one, with Prudential, which my financial advisor arranged for me. My original premium invested£254 ,640 on the 11th of March, 2027. Well, it didn't, did it? So it must be either 2017, we think.

1:41Pete Matthew: So it's a typo or 2007, maybe. I would appreciate hearing your general views on offshore investment bonds. A general overview with positive and negatives. Also, I'm thinking of letting my pension advisor go and going alone at the beginning of April 2026. Well, we're in July, uh, 2026 recording this. So maybe you've done that already because I don't like the idea of paying for a pension advisor costs. And I don't plan to make any withdrawals until 2037 when I'm 67. Prudential has said that it is possible to go alone if I agree to a disclaimer because this bond is sold as an advised only product.

2:16Pete Matthew: Yeah, that's true. Though I'm confident in my ability to manage this bond because I'm a member of meaningful academy. Nice plug. Thank you. and I'm already retired at 56 and living off my prude drawdown pension. Therefore, I have plenty of time to learn. At 67, my pension pot will have virtually run dry. My plan at 67 at my state pension age is to take my bond's 5 % tax deferred allowance monthly, plus make annual segment encashments to refill my cash buffer that covers my monthly income shortfalls. And if and when I need to stop taking monthly withdrawals from the bond during smoothing shocks, suspensions or UPAs.

2:53Pete Matthew: What's UPA? I don't know. UPAs? I read that question. I didn't even spot that. No, I didn't either. Never mind. So yes, UPAs need something to smooth your way through those. Yeah. Also, when it's time to encash segments, I'd like to use top slicing relief to prevent being taxed as if I've earned that whole amount in a single year. Some stuff to unpack here. Yeah. I would also appreciate your general views on this plan too. I do realize this isn't advice. I'm hoping this question isn't too specific and that others may find it useful. All the best. John. Okay. You had a comment on top slicing? Yeah, it's only this maybe semantics, John.

3:37I just want to clear something up at the very beginning, really. Although you may know this, you may have read the question slightly wrong. You cannot use, in your words, use top slicing to prevent being taxed. I think you've actually alluded to to prevent being taxed as if I've earned the whole amount in the year. Because obviously, as an offshore bond, it's not taxed. You don't get a tax offset at all. Any income or growth you've earned when you repatriate it to the UK will be taxable at whatever your marginal rate is. Of income tax. Of income tax. So it will only affect the level of income tax you pay

4:15Pete Matthew: rather than not being able to pay anything. Yeah, exactly. So it might just be wording, but it might be not, but important. So offshore bonds. I mean, I think we must have talked about bonds more generally. Yeah. They're kind of weirdly coming back into favour. I guess probably people are sort of taking perhaps estate planning a bit more seriously with pensions coming into the estate, and they tend to play quite nicely with trusts, particularly if you're not taking – because income. they're not strictly ink they don't produce an income to get my words out in that sense no whereas a general investment account would so investment bonds are written under life insurance law so that means that any gains you make are taxed as income not capital gains so which is the first confusing bit really yeah because people do get confused on that but there is no such thing as capital gains tax on an investment the main difference between onshore and offshore obviously as the name suggests, offshore bonds are domiciled, usually in places like Ireland or Ireland.

5:21Pete Matthew: And the benefit of those is that we call it gross roll-up. So there's no tax at all as the thing grows. Whereas an onshore bond, the investment company or the insurance company that produces the bond, they essentially, within the thing, pay corporation tax. And that is deemed to satisfy your, the investor, basic rate tax band, essentially. So it means that you, as long as when you take a gain out of a bond, as long as that doesn't tip you into the higher rate tax threshold, get to that in a minute, as long as you are still only a basic rate taxpayer, you won't pay any further tax, essentially, is where we're at.

6:03Pete Matthew: So the benefit of an offshore bond is that it should grow quicker because it's not being taxed as it goes, whereas an onshore bond is. But the flip side to that... You get no offset against the tax effectively paid when it hasn't been, so... No, exactly. So, you know, you're going to pay a lot more tax when you do eventually make a gain on an offshore bond than you would because you've paid it almost as you go with an onshore version. The 5 % tax deferred withdrawals are useful and they apply to both. Yeah, and the nice thing is with most bond providers, because effectively you're allowed to draw 5 % of your initial capital every year with no tax liability, just a deferred tax liability for any gains you make in the future.

6:45But you can take 5 % a year until the thing runs out technically. So 20 years if you take 5%. Yeah, 20 years. You don't have to take 5%, do you?

6:51Pete Matthew: No, not at all. And if you don't... Take 4 % for 25 years. Yeah. And if you don't take your 5%, they mostly accumulate as well. So if you've not drawn anything for 10 years on the bond, you could mostly draw 50 % of the initial capital without any tax liability whatsoever. So for that reason, it's really handy, especially if you're honestly saying I'm going to draw something in 10 years time you probably will have accumulated a lot of these 5 % so some of your initial withdrawals could easily be without any tax whatsoever. And of course if you then still just decide to take 5 % a year you've got 20 years from that point.

7:23Pete Matthew: But it is 5 % on the initial investment not what it's worth at the time. No exactly but having put in£250 ,000 you're talking that's£12 ,000 a year. Yeah. Which is a nice tax-free income for 20 years. Well right, exactly. Although it's not an income technically. No, right. So with an offshore bond, obviously we don't know details of this particular PRU thing, but a bond is a wrapper ultimately. And with an onshore one, they're issued by UK life insurance companies. And so they're generally insured funds inside them. Usually with an offshore bond, though, very often, it acts more like a pure wrapper.

7:59Pete Matthew: So you could hold almost any kind of investment within the bond as long as it's sort of liquid enough. So you could hold, for instance, a general investment account on a platform inside an offshore bond. Blowing people's minds potentially here. But you could, right? And so quite often the offshore bond companies will have a panel of discretionary fund managers, for example, or platforms that you can hold investments within that bond. But that comes at a price. Very often offshore bonds are more expensive. They are more flexible. And because they're offshore, or sometimes think they can get away with higher pricing, I'm sure.

8:39Pete Matthew: It's not about getting away with it. Yeah, possibly. Because you've got the gross roll-up, so people who appreciate the gross roll-up will just charge the fees a bit more. Exactly. And charging structures can be weird. I've seen the ability to choose from two or three different charging structures in one bond. So you can pay a fixed monthly amount and a lower percentage or a higher percentage, and then you've got to say, okay, how much am I putting in and how does that work? so they are complicated animals i think there is a place for them and i think particularly inside trusts generally offshore bonds are quite well well bonds are onshore bonds i should say really good if you're a high rate taxpayer when the money goes in and you're expecting to be a basic rate taxpayer when it comes out you know because you'll have benefited from the gross roll-up while you've been a high rate taxpayer but then when it comes out um you know you shouldn't pay any more tax because of that sort of taxed as you go thing with an onshore bond, not the case with offshore.

9:35And like onshore bonds with an offshore bond, you can actually do this top slicing thing that John mentioned, whereby you've had your 5%. Anything above your 5 % that you draw ultimately will be repatriating profit.

9:48Pete Matthew: Yes. And that will be taxable at your income tax rate. Now, if you cashed in over£50 ,000 with a profit and you had no income, suddenly you're into high rate tax. So what the bonds generally do, they're split into segments, and you can cash in a certain number of segments for yourself and say, okay, I'm going to limit the amount of gain I'm going to make in this tax year because I don't want to trip into high rate tax, say, or additional rate tax. Yeah, and top slicing allows you to divide the gain by the number of years that you've held. So if you, by the time, you know, let's assume you did it in 2017, John, you know, if you're going to wait until 2037, you're 20 years potentially into that bond at that point.

10:25Pete Matthew: so any gain you do make you can divide it by 20 you know it's full sort of policy years you divide it by 20 and add that you will pay basic rate tax no matter what you can still get top slicing and you can if you divide the gain by the number of years that you've held it add that to your income if it takes you into the higher rate band then you may pay some higher rate tax you would but if it doesn't then you won't you'll only pay basic rate tax yeah and all you do just cash in the right number of segments if you want to stay out of higher rate tax to keep you within that threshold. So they're quite flexible.

10:59Pete Matthew: Yeah. They're just expensive and they're much more opaque. And I guess the reason we don't talk about them so much is that we're trying to empower you to do a lot of this stuff yourself. And as you rightly say, John, these are generally advised only products because they're complicated. Yeah. But without us, we're hearing more about them. But they have their place, shall we say, but they're not for everybody. No. And offshoring adds cost and complexity. Right, number two, Rog. Number two, this is from Neil. It says, hi, Pete and Roger. Thanks for everything you do. It is truly life-changing. That's better than strangely fun.

11:31Yes. And Neil goes on to say, I currently live abroad and I'm a few years off state pension age. When I get to state pension age, I'm thinking of returning to the UK. When and if I do return, I will have approximately£800 ,000 in a UK GIA, general investment account. I can't have an ISA as I'm not currently a UK tax resident.

11:50Pete Matthew: True. My£800 ,000 GIA will be invested in about 10 various ETFs. I plan to live off the proceeds of the GIA alongside my state pension. Let's assume the state pension takes up my single personal tax allowance so that it's effectively tax-free. What I'm not sure is how my income in inverted commas from the GIA is taxed. Let's say I take 5 % a year, close to the 4 % rule of thumb, which is£40 ,000 a year. Although this will be my income for John's purposes, I don't believe it would be treated as income for tax purposes. It could also be subject to CGT as it's an investment, but it isn't all profit and gains, so I can't see how it would be taxed as that either.

12:31Please can you explain to me how the GIA would be taxed so that I can plan for returning to the UK and understand whether it's financially viable? It's going to be financially viable. Yeah, you'll probably be all right. Neil. Also, am I missing anything obvious? Hope that isn't too long a question to be answered on the podcast. Many thanks. Neil Thompson, a long-time listener. Well, actually, that's not too long a question at all.

12:51Pete Matthew: No, we've had a lot worse. I think, well, we've probably got a lot worse this episode. Okay, so really important. First thing to say is if you make a withdrawal from a GIA, it's like going to a cash machine. You're drawing out your own money. That isn't income. You know, it's a withdrawal. And so sometimes I think people, particularly in the office, but sometimes even with clients, I'll say, look, I need to correct the language sometimes that people use. So I'm going to draw 40 grand a year, you know, income on my GIA. It isn't income, it's a withdrawal. Particularly going on with the staff about this, actually, the team, because it's, sometimes it isn't just semantics, but actually getting the word wrong changes what we actually end up doing and you can make mistakes.

13:35Well, exactly, we're nearly saying, well, can I afford to do this because I'm withdrawing this and I'm going to be paying tax.

13:40Pete Matthew: Yeah, well, the tax on that could, if he was taxed on it all, he could make the difference between being a viable one. Yeah, exactly. But like Pete said, the important thing is you're drawing an income. All you're doing is giving yourself some money to live upon. How that's brought out, you're actually just withdrawing money from an account that's in your own name. It's how it's taxed within and what you withdraw that's the important bit. So let's deal with that. So income tax first. So if you're invested, then your GIA will be invested, I think you said, across 10 ETFs, right? So those ETFs will be invested in shares, I imagine, primarily.

14:18Pete Matthew: Might have some bonds in them as well. But those ETFs will, the income that they produce will be in the form of a dividend. And so your GIA will receive dividends. And even if they are reinvested, rolled back up into the investment, you will get a statement once a year that says, this is how much income your GIA has received from its underlying ETF investments. and that is taxable on you as income, whether you've received it out into your bank account or not. So you will get a tax voucher from your platform and it will say you've received this much income and that needs to go on your tax return.

14:57Pete Matthew: And it's that that you'll pay income tax on. Yeah, and the nice thing is if you say your basic state pension has taken up your personal allowance, then any income you then receive either out of the investment or the GIA, or that's rolled in, you will pay tax on a basic rate until it hits a threshold of, you know, £38 ,000 is what it's going to be. But you also get a dividend allowance. Yes. So although you're receiving these dividends, you may be having them out, maybe rolled over, you actually get a dividend allowance, which would be... £500. £500. So the first£500 is tax-free for you anyway.

15:34Yeah.

15:34Pete Matthew: So let's just put some figures in it. If it's an£800 ,000 GIA, let's say investing in growth. you know, growth funds. So it's not producing a massive yield. So let's say it sends out one and a half percent of yield in that year. So the funds that it's invested in, this 800 grand, throws out, say, one and a half percent. So that's what, on 800 grand, that's 12 ,000 quid. Yeah, one and a half percent on 800 grand. 1200 pound? 800, 888. Oh, you're right. I'm right. Yes. My goodness me. Mark this moment, listeners, because it's the only time that my mental arithmetic has beaten Rogers in the 28 years that we've known each other.

16:13It's very hot in here.

16:16Pete Matthew: So 12 grand of yield, say, right? So that would be the dividends. So the first 500 quid of that is tax-free because you get a dividend allowance. So you're going to pay income tax on 11 and a half grand worth of dividends, even though it has no bearing to what you draw out to spend. That's the thing, the income that the thing has produced. So that's income. But the last thing in this, sorry to cut across you, But if you say, okay, the income you've earned on this is 12 and a half, 12, take away the£500 worth allowance. You got the£11 ,500. You're going to pay£2 ,300 worth of tax. Did you just do 10.75 % in your head?

16:53Pete Matthew: Roughly. No, I didn't. 20%. No, no. Of course it's dividend tax rate. I had to look it up, man. Because I couldn't remember. Yeah, 10.75. So,£1 ,200 worth of tax on a£40 ,000 withdrawal that you're thinking of doing. actually when you're thinking of it's a 40 ,000 withdrawal I'm going to pay 20 % tax on 40 ,000 pounds it's a massive difference you'll almost certainly be more tax efficient than you were thinking which hopefully is good news so that's income but then of course if you aren't making withdrawals you have to sell the funds to do that you have to realise the funds you're invested in into cash and so you may make a gain when you do that and any gain is potentially subject to capital gains tax.

17:39Pete Matthew: The first£3 ,000 that you gain, remember it's not the withdrawal, it's the amount that you gain in selling the funds to create the cash to take the withdrawal. So first£3 ,000 is annual exempt allowance, that's tax-free anyway, and then you've got capital gains rates of 18 % and 24%, depending on, it sounds like you're going to be a basic rate taxpayer, so you're going to pay 18 % potentially CDT. So it's not too bad, actually. GIAs certainly have their place, particularly if you're not a high-rate taxpayer. Yeah, and CGT at 18 % is better than income tax at 20%. Yeah, yeah, right. And it's only on the gain.

18:17Yeah. So if you withdraw in£40 ,000, not all the£40 ,000 will be gain. No. Say£20 ,000 if it's gain. Yeah, and you might even have a period of,

18:26Pete Matthew: one of the funds has gone down. You might even have a loss that you can offset. So, you know, there is stuff you can do. but when you get back to the UK you should be ICER-ing every year as well shifting 20 grand of that GIA into ICER might as well shelter what you can I would say but basically that's how your GIA is going to work yeah I mean and the fact that you've got 10 different funds in there as Pete said one of the funds may have gone down when I had a client who was selling some land and making a massive profit but he had some Lloydshares big losses and they made big losses on paper and what he did he sold his Lloydshares at the same time as he sold his land the loss on the shares offset the gain on the land and he's in pocket.

19:06Yeah, nice.

19:07Pete Matthew: So there is planning. That's why we have a job, isn't it? Yeah. Okay, this is question three from Sam. Hello. Hello, Sam. I always love listening to the podcast while I'm working and I find it a great way to pass time when I'm bored. That's more faint praise. It's like, okay, I've got like completely bored and then one step up from that we've got listening to being full money. and then watching paint dry just about that and then okay but anyway thank you sam i'm glad you love listening when you're bored when i listen i never really hear many young people such as myself contact the show and ask for advice so i thought i would i recently just turned 20 come on sam yeah i live at home and i don't pay any board as i work away five days a week i take home about two and a half to£2 ,700 a month after tax.

19:55Pete Matthew: At the moment, I have£6 ,000 in stocks and shares ISA. I put£500 a month in and£2 ,000 into a lifetime ISA. My only debt is my car finance, which costs me£250 a month. What is the best advice you can give me to help me become more financially stable in the future? Thanks a lot for reading and appreciate any advice you can offer. Well, we need to start with a plug, don't we? This could be a plug for Bank of Dad, which is the podcast that Pete does with his daughter Kate, producer Kate, over on the side here. You don't actually see. One day, one day we'll get a camera. Yeah, so we've been, what are we now?

20:31Pete Matthew: We're 20-odd episodes in, aren't we, Kate? 23, 24 episodes in at the time of recording this. And it's designed really to kind of backfill where we started off with Meaningful Money. I was 35 when I started Meaningful Money. Oh, that age. I know. Yeah. and perhaps unsurprisingly, the audience has kind of grown up with me and now they look like me, so mostly middle-aged white hair, you know, and retirement is kind of hoving into view for a lot of people. So we tend to talk more about retirement than anything else. Whereas Bank of Dad really is a sort of start from scratch, give you everything you need to know to learn about money and put it into use and stripping out all the stuff that you don't really need to know.

21:17Pete Matthew: But having said that, in the first 20-odd episodes, we've basically, if you just listen to those, you'd be equipped really, really well to build wealth consistently, stay out of bad debt, all that sort of stuff. And now we're starting to go a bit deeper. So there's some great stuff on there. So basically, Kate fires questions at me and takes the mickey out of me, and we laugh a lot. And it's occasionally a little bit more sweary than meaningful money, but not too bad. Rog doesn't approve. So, you know, listen to Bank of Dad, bankofdad.show, or just search for Bank of Dad on YouTube or your podcast.

21:53Pete Matthew: Catcher of choice. And yeah, hope it's helpful. So what else can we say to Sam? Sam, you're at the start of your journey. You've got a lifetime ahead of you. And listening to this will set you up well, and listening to Bank of Dad will do the same thing. I would say you're in this lovely position of earning well, not paying much out because you're living at home. We said the same thing to our girls. It's cheap to live at home. Suck it up and do as much as you can while you're there. Get used to, I say, putting money away. I think one of the important things that jumped out at me when I read this was actually you need to protect yourself against something going wrong because you're in this lovely situation where everything's wonderful.

22:35You're 20, you're healthy, great, you're doing whatever you want to do until you're bored. And I think you need to protect your income because if something comes along, maybe temporary, maybe longer term, it's going to upset the whole apple cart for your planning for the future and you don't want to try and stymie yourself to begin with. So a little bit of money now, paying for protection at your age will be really, really cheap.

22:59Pete Matthew: It's never going to be cheaper. So probably doesn't need life insurance. No, no. Income protection would be the prime one that jumps out at me because you've got a good level of income for a 20-year-old. You want to make sure that you've got that set in place. that won't protect you for the whole of your income. It'll be a percentage of your income, but it'll be tax-free. Yeah, so it'll probably be somewhere around 90 % of what his income is now, and it'll cost him pence, really. Peanuts, really. Depending on what he's doing for a living, but still. So go to meaningfulmoney.tv slash live search and talk to them about income protection.

23:33Pete Matthew: You probably don't need critical illness cover, but talk to them about it. You never know. There may be a benefit. it um you know it might help you pay a car finance off or whatever but just you know if you haven't got anybody dependent on you your main priority is yourself and your single biggest asset is your earnings power and so you've got to sort of protect that and i think on top of that you know make sure you've got an emergency fund behind you so make sure you have some cash so you're not having to dip into your suction chair's ISA if you know some big bill comes along with the car or whatever and so make sure you keep an emergency fund pick a figure that makes sense to you you know two three four five thousand quid or whatever even though that's not working for you in that it's not making you any money it's there for you to dip into should you absolutely need it and thereafter I think you sort of harness the power of small increments but in your case given your earnings power just make sure you're not wasting money so pay yourself first and look to pay yourself more first definitely enjoy i mean what you're 20 years old yeah no commitments enjoy life there's no doubt about that you should definitely do that but question can i put more away because the more secure you make yourself in this brilliantly sort of um free part of your life when responsibilities come along and you decide to buy a house, maybe, you know, find a partner of kids or whatever, you'll never have the financial freedom.

25:05Pete Matthew: Oh, well, not for a while. Anyway, because kids are such a drain, aren't they, Kate? Yeah. Worth every penny. But, you know, you're in a brilliant financial position now with hardly any responsibilities. I would make hay and get some plenty of money behind you. Yeah, and because you're at home at the moment, I mean, the obvious thing in my head would be to try to increase the money you put into your lifetime ISA. Yeah. Yeah, max it out if you can do, because at some point you may want to leave home. Yeah. And that is a really good boon to you. You get an extra 25 % bonus off the government for doing this.

25:39You don't get it now, or you're not likely to get it until the far end now. But yeah, just shove money in it because you, you know, it's free money off the government. It's like having a pension you can access early.

25:50Pete Matthew: Yeah, yeah. For buying a house. Yeah, yeah, definitely. And four grand a year you can put in. so you know if that is your goal to buy a house you've got six thousand in stocks and shares isa and two thousand in a lifetime isa you know before tax year end make sure you've contributed four into your lifetime isa and if you can't do that from income for whatever reason then shift some of the stocks and shares isa sideways and top up your lifetime isa it's free money yeah good cool from uh the government so um but more power to you sam don't know whether it's um male or female sam but it doesn't really matter so i don't know why i said that but more power to you I mean, something we would suggest might be is, you know, out of your ISAs or out of your stocks and shares, ISA or whatever, or put some money aside for your next car.

26:34So rather than have car finance, where you're paying for the car and interest on top, it would save up and pay yourself the interest effectively. So gain some interest towards the next car. Exactly.

26:43Pete Matthew: Yeah, good shout. Yeah, I forgot about that. Okay, question four, Rog. Question four. This is from Roger, apparently. No. No, no, no. No, no, that's to say that you're right. But Phil normally does put in, it's from Phil. It's from Phil. There was no name at the top. Sorry, Phil. Sorry. All right. So this is Dear Pete and Rog, not from Rog. Really enjoying your podcast. I would say that anyway, folks. And your Bank of Dad spin-off, Pete and Kate. Two plugs in one episode. I have a question about accessing a DC pension or a SIP, specifically the age one can access benefits. Hot topic. Yeah, this is just right on the cusp of it all happening now.

27:18I understand this is 55 currently. if you reach the age of 55 before April 28, after which the age rises to 57.

27:26Pete Matthew: Correct. I turned 55 in late January 2028. You're the perfect person for this, Phil, to ask this question. True. And I'm planning to retire then. As the rules stand, I will be able to access my workplace DC pension and my own SIP at this time since I turned 55 prior to the 6th of April, before the minimum age increases. I am, or was, planning to gradually draw down my DC pensions, taking small monthly amounts to bridge the gap between 55 and 65, at which point I have two deferred index-linked DB pensions, along with a state pension a couple of years after that. Recently, I saw a finance video on YouTube, which said that this is not correct.

28:04There's a link we'll put into this. Depends if it's any good. Yes. The video led me to believe the following. Having already turned 55 before April 28, I assumed I would be free to access any amount of my DC pension at any point after January 28, up to and including late January 30 when I turn 57. Since I turned 55 late January 28, I will be able to access my pension from the 55th birthday and until the April 28 for about 10 weeks. I'll also be able to access my DC pension after I turn 57 late January 30. But in the period between April 28 and January 30, stick with me everybody, I would not be allowed to draw down my DC pension nor my own SIP, irrespective of whether I had started to access it already or not.

28:47This seems ridiculous. Is it true? We'll skip the rest of it because things have changed since your question came in, Phil. Thanks so much for your thoughts and keep up the good work.

28:58Pete Matthew: Yeah, good question. The video that Phil sent is to James Shaq, actually. Shaq knows what he's doing, so I haven't watched that particular one, but I'm sure he's right. So yeah, I mean, things have changed in that we've had clarification. Unless they haven't changed, it's broadly what we're expecting, but we've had clarification now. So it's still not law, but we've had sort of very positive guidance from HMRC and even they expect it to sort of end up in this form so yeah I mean like you said Roger Phil's the perfect person to ask this question because he's 55 before the rules change and then the rules change very shortly after.

29:35Pete Matthew: 10 weeks later it's like ah! Yeah it's a huge deal actually so I mean the question is sort of worded so I'm going to be able to access my pension like for 10 weeks and then nothing. So that's not true. I mean, the short answer is you won't be able to crystallize any new money between April 28 and January 30 in your case, Phil. So from the point where the new rules come in until you turn 57, you won't be able to crystallize any new pension money from that point. But in the 10 week window that you've got after turning 55, you could, you know, plan to put in place the money you need to spend over that whole period, right?

30:23Pete Matthew: The issue is most people default to off plus these days with good reason. So off plus is, you know, the mechanism of taking either regular bits or a lump sum off your uncrystallized pension. That's the U in off plus stands for uncrystallized. Draw it straight into your bank account, one quarter of it is tax-free and the other three quarters is taxable. Dead easy. Right? It makes sense. Pretty tax efficient way to draw off your pension because you're essentially paying, if you're a basic taxpayer, paying nominal 15%. 15%. Yeah. Right? So, but you're not going to be able to do that. You're not going to be able to do any new off-pluses from April 28 until January 2030 in your case.

31:03Pete Matthew: So what could you do instead? What you do instead is, as Pete said, you work out what you need to spend over that period and you crystallize sufficient to cover that. So you draw tax-free cash up to the 25 % of the full amount you want to have, and the rest sits in a crystallized drawdown pot from which you can draw even after the 10 weeks have expired. So because that particular pot has been crystallized for the total duration. HMRC language, the word is designated to drawdown. So if you've designated that money into drawdown before the 6th of April, 2028, you can continue to draw off it, but you won't be able to designate any new funds to draw down or take off plus after 6th of April 28 until January 2030.

31:47Yeah, so to work out what you think you'd be needing to spend, allow for some tax off the back of that, obviously, and then say, okay, how much do I need to crystallize to give me a fund from which I can draw across that total period?

31:58Pete Matthew: We're going to be like really busy in the first quarter of 2020. Yeah, yeah. Because it's going to need, you know, it needs planning and you can't get it wrong because the rules are what they are. So you're just going to need to think between you turning 55 in late January 2028 and the end of the tax year, you're going to have to work out what you want to spend over the next couple of years and make sure it's already crystallized. Remember, you don't pay tax on crystallization because you're just designating that funds into drawdown. It's only when you draw it from your drawdown pot into your bank, then you pay income tax.

32:32Pete Matthew: So people are saying, oh, I'm just going to pay like two years worth of tax, it won't go. No, you're not. take your tax-free cash, designate the rest into drawdown and then draw it on the drip every month and you should pay the right amount of tax as you go. Now, I have done a video on these new rules, so we'll put a link to that in the show notes. And we'll put a link to the pensions newsletter where this came out from HMRC. And then, yeah, we will... I think there may be a sort of examples video coming as well in the short term because a lot of people are going to be thrown by this. There's going to be lots of questions on this in the next year.

33:08Yeah, there were a lot of questions being thrown at a lot of people already. And it's one of those things. It seemed unfair not to be able to access your pension after that point if I've already triggered some of it. So it's make sure you trigger the right amount so you've got that drawdown pot sitting in the background from which you pull money every month or every quarter, every half year, whatever.

33:26Pete Matthew: Yeah. Planning, make sure you've got a cash buffer outside of pensions that you can get hold of, you know, in case anything comes up because you will not be able to access any more new pension money after April 28 until January 30 in your case, Phil. Great question. Right, question five. I nearly said from Pete then. It's from Heather. Dear Pete and Roger and Nick, as a prolific personal finance podcast listener, I was surprised to only discover your podcast in December 2025. Heather, I'm surprised at that. We've been doing this since like November 2012. At the time, there was me and like Moneybox Live from BBC doing personal finance podcasts.

34:03Pete Matthew: so I'm not quite sure what you've been doing, Heather. But thank you for finding us, better late than never. The broader thing is you found us. Since then, I've been binge listening to your listener Q &A series, and I've just found the very last one, so I'm now fully up to speed and absolutely love the series. Keep up the awesome work. Thank you, Heather. Thank you. You're forgiven. I do have a few questions, but as you don't like super long questions, I'll spread my three very different questions across different weeks. Ah, we're expecting more from Heather over the next coming weeks. Okay. First one is this.

34:32Pete Matthew: As I listened to the episodes, I was surprised by the number of questions coming from men, because I had always assumed that women tend to manage the money in most relationships. Oh, I'm loving this question already. I know you said 85 % of your YouTube audience is men. That's true. I'm wondering just out of interest from your lived experience at Jackson's in this self-selecting group of people who are interested in money management, what roles do men typically play in managing finances and what roles do women tend to play? In my own household, I manage 100 % of the finances. Everything from utilities, contracts, payments to the investment portfolio.

35:06Pete Matthew: Basically anything to do with money my husband hates. So I end up doing it. Fortunately, I love it. So it works pretty well for us. And just to sign off as an indication of what a presence you've established in our household. A week ago, I scratched my cornea and the doctor told me I needed to rest my eyes. My husband caught me scrolling on my phone and said, Heather, the doctor said you need to rest your eyes. Put on your two stepdads and stop looking at your phone. I didn't need to ask who my two stepdads were. I duly put on an episode of Meaningful Money and rested my eyes. As an African woman, the wisdom of additional parents is always welcome.

35:39Pete Matthew: From that moment on, you've been known as the two stepdads in our house. Heather K.W. Thank you, Heather. Great question. I thought that was a really lovely comment, actually. We're a trusted member of the family now. Yeah, well, it's great. Ah, this is interesting. It really is. It's not very broad brush. in my house in our house Jen and I I tend to run the finances only because Jen's got this chronic fatigue and she's not got the energy to do it and now I'm retired I've got the time but before that Jen ran her own finances when her and her first husband got divorced and stuff so it's just a case of the timing for us and health and stuff like that but yeah and for Joe and I when we got married with Joe did everything.

36:32Pete Matthew: I completely abdicated. I mean, it's a good job. I would have been on the street in weeks if it was up to me before I became an advisor. But then, you know, she got to the point where there was a lot of pressure for her and it was, you know, definitely affecting her mental health. So I kind of needed to step up and I took it on solely for years. And I'm still kind of the lead on it, which sort of makes sense given what I do for a living. but I mean, she's entirely capable and it's much more now a team effort. And so what's interesting, Heather, is that you said, I'd always assumed that women tend to manage the money in most relationships.

37:11Pete Matthew: My experience, if you'd agree with this, is it's more for the noise the other way around. Yeah, I would have said so. I mean, we've had ladies that would run the money for the family, but the vast majority of my clients, I would say, would have been the man. or perhaps jointly. Yes. I do think it's changing though. Bear in mind the demographic, as you rightly say, it's a little bit self-selecting. But for us, you know, given our sort of ages, the audience looks a lot like us. So it's mostly middle-aged blokes, right? But at Jackson's, we tend to deal more with folks who are at retirement or who are retired.

37:52Pete Matthew: And so there is a bit of a generational thing as well in that often, you know, the boomer, baby boomer generation, more often it was the guys who managed the money because they saw their dads do it. And it was just a cultural thing, really. That is definitely changing very much, a good thing. And so it's less the case now. But honestly, there's always outliers. So, you know, we get clients in where the woman is handling absolutely everything. and the bloke is like a hanger-on. And we get some families where maybe the fella is doing most of the work, but his wife is there asking great questions, interested, but doesn't handle just the day-to-day stuff.

38:41Pete Matthew: So my own view is the ideal. The mechanics don't really matter. In your case, Heather, you say you find it interesting and your husband hates it. It would be ridiculous to force him to do it. so it makes sense that you do it as long as you're aligned and you're both part of the big picture stuff where you're heading as a couple what your retirement plans are okay if you've just experienced a weird cut in the video I know my face is a completely different color it's just because I've had a massive coughing fit nearly died on camera but never mind so like you know every couple's different and everybody's got different strengths I look at my parents-in-law Michael always ran the money but when it came to deciding stuff, it was always jointly.

39:25This is what we were thinking. And then Beth would have been involved in the whole thing. And we've had husbands and wives come in and the husband's been thinking about something and saying, well, look, the wife said, okay, I want Roger to explain this to me now. They want to understand what he's telling me just to make sure. So it is a collaborative thing and you're never going to get anywhere unless you do that sort of stuff really.

39:47Pete Matthew: They're very careful of when on client meetings. in almost every case one partner will be dominant just because that's the way it is and they're dealing obviously with a very specific subject but it's important and I tell my advice team this you've got to make sure that both parties understand so it'll always be any questions let me come to you first this is in this case any questions, does that make sense? please tell me if it doesn't because I'll find a better way to put it really important that everybody understands And so, you know, I think our experience is perhaps different to what you expected, Heather.

40:26Pete Matthew: You know, it's your experience is that you're the sort of financially sort of capable one in your relationship. Our experience is probably that's more often the other way around. But I think it's changing. But we're happy to be your stepdads. Yes. Very cool. Lovely. Number six, right? Number six. This is from James. Says, hi, Pete and Roger. Firstly, I love the show. it has been transformative for me and my family. I'm looking ahead to retiring in a few years and have a drawdown question for you. Anticipate that I will have a£600 ,000 pension pot and want to check whether my understanding of the withdrawal strategy is correct.

41:02Here's what I'm hoping to do. I want to take£30 ,000 of taxable income in each of the first two years before the state pension kicks in. Understand that? In year one, I also want to spend£100 ,000 to buy a lifetime annuity. Also makes sense. Critically, I want to preserve all of my tax-free cash at this point. Now, we'll talk about that in a minute. So the£30 ,000 income will be taxable, and I assume that the annuity purchase is not taxable as the income from it is. Then at the start of year two, I want to take the 25 % tax-free cash, say£150 ,000 in one go, and use it to move house. After that, I would draw£20 ,000 a year of taxable income from the remaining pot forever.

41:44Not relevant to the question, but I thought it would make the question make more sense. My understanding is that this can be done by partially crystallizing only the amounts needed in year one and leaving the rest of the pot uncrystallized so that the full 25 % tax-free cash is available for use in year two. I also understand that this is not UFPLUS, just regular crystallization. A bonus question if you have time. I assume that the income draw in year one will generate 25 % tax-free cash. Can I just leave this in my drawdown account to be used in year two? To contribute towards the full tax-free cash amount, or do I have to take it out?

42:21Could you confirm whether my understanding here is correct, and whether most pension providers, for example Standard Life or Vanguard, allow this kind of phased crystallization and delayed tax-free cash? Sorry, I find crystallization very confusing. Thanks very much. Absolute legends, the both of you, and the teams behind you. James, your number one fanboy.

42:39Pete Matthew: Oh, good. Well, James, thank you. Yeah, it's really nice. Very kind of you. Look, don't think, James, that you're in any way sort of daft or sort of unable to sort of understand this. Loads of people have issues with crystallization. I think there's some pretty significant misunderstandings here, though, that we need to clear up. And we've got to start with the fact that tax-free cash is entirely theoretical until the point at which you crystallize. right it's notionally 25 of your pot but only if you crystallize the whole pot at that point so if you've got a 600 000 pound pot in order to access 150 gram worth of tax-free cash you have to crystallize the whole lot the other 450 goes into drawdown you take your tax-free cash out right so what you're proposing to do is kind of say right okay right at the start of what your plan here your pot's worth 600 so therefore there's 150 gram worth of tax-free cash you want to kind of ring fence that, that's tax-free, and start drawing off the taxable bit, leaving that tax-free cash in place.

43:43Pete Matthew: You just can't do that. No. The very first step on any crystallization is taking your tax-free cash out. So you can't access any taxable income until you've had your tax-free cash. Now, if you're saying, I think I want to jump in straight away with this one. If you're saying in year two, I I want to spend£150 ,000 buying a property, we'd be saying to you, take it now. Take it to start. Because you know you've got the£150 ,000. Heaven forbid you don't do anything until year two, and you say, right, I'm going to buy my house now. I want to take my£150 ,000 out. And your pot has gone from£600 ,000 to£550 ,000.

44:22No, call it£560 ,000. Makes it easier in my calculations. Suddenly, you've lost£10 ,000 of tax-free cash because your pot's gone down by£40 ,000. So if you know that in year two, you're going to be buying a property, we'll be saying, you need to make sure you've got that£150 ,000 available, have it out now. And that makes everything else from there on far, far easier in your decision process.

44:44Pete Matthew: Yeah, because then you're just drawing taxable income as you need it. Yeah. So this, I mean, you say, I also want to spend£100 ,000 to buy a lifetime annuity, though, that's a bit of a wrinkle. Interesting to know why. You may well have reasons. So if you spend 100 grand on a lifetime annuity, usually you would crystallize 133, whatever it is, right? So gross that up to get your tax-free cash on top, leaving 100 ,000 pounds to buy the annuity, right? And you're right. There's no tax on that transaction because the annuity income is taxable for the rest of your life, right? and you don't have to take tax-free cash when you crystallize so you could just say I'm going to take£30 ,000 out and I'm going to not take any tax-free cash on it I don't know why you would do that and the same thing with lifetime annuity you could say I'm going to spend£100 ,000 on my pension pot in its uncrystallized state to buy an annuity well if you do that you've just lost£25 ,000 worth of tax-free cash because you converted£100 ,000 of your uncrystallised pot to buy an annuity.

45:55So that's why Pete said you draw 135, have your 30-odd thousand pounds tax-free cash out, and then use your crystallised 100 ,000 pounds. Otherwise, you're losing tax-free cash again.

46:05Pete Matthew: There's very few reasons that I can think of to crystallise without taking tax-free cash, isn't there? No. Because you're throwing away tax-free cash. Yeah. Because whatever you crystallise, it's only at that point of crystallisation that you get the option to take 25 % tax-free cash. and so I don't know why you would do it. This all seems complicated to me but you know what you want to do. You've got reasons for buying an annuity so buy an annuity but in so doing I'll be making sure in that transaction I'm getting some tax-free cash and putting it towards a house purchase even if that's a year later and then say right okay what's the rest of my that I need and it's probably the rest of the fund you would need to crystallize to release enough tax-free cash then to buy the house.

46:49Yeah, you are making it slightly complicated, James. I think my driving force on this is you're buying a house or changing a house in 12 months' time. Let's crystallise the whole flipping pot, okay? Have your£150 ,000 out and earmark that for your purchase.

47:06Pete Matthew: Stick it in the bank. Stick it in the bank. And then you say, okay, I'm going to take£100 ,000 of my crystallised pot now and buy an annuity with it for whatever reason. You've obviously thought about this. That makes sense. And then I'm going to take out£30 ,000 in year one. And I take out£30 ,000 in year two, and then from then on, it's£20 ,000 a year, and it's taxable. So I think you need to make sure you've got that£150 ,000 if that's the amount you think you need to buy the property. There is no way to defer tax-free cash after the point of crystallisation. And so you ask towards the end, you know, whether most providers, for example, Standard Life or Vanguard, allow this kind of phased crystallisation, yes, and delayed tax-free cash, no.

47:46Pete Matthew: So you can crystallise in bits. You don't have to crystallize your whole fund, but you do. If you want your 150 grand tax-free cash out, you will need to crystallize the whole lot. So I really, it's funny. I mean, this is one of the things that I think people have struggled with most throughout my career. And I've sort of tried to every possible which way I can to explain it. And still people find it confusing, which is a shame really, because it means it's too complicated. Well, I think if you cash your mind back to the day 20 years ago, So you get to retirement and you would take your 25 % tax free cash and you'd buy an annuity and it was all quite simple.

48:20And then suddenly drawdown came along and it's like, ooh, that's really good. And then later on, Uff Plus, which I couldn't understand why that was invented, but I do know now, because it's like just a short crystallization, really, the drawdown. So it's become more awkward because the government have introduced flexibility and in the flexibility, it then causes problems. But you can only have your tax free cash at the point of crystallization. You can't have the income without taking your tax-free cash first. True. Good question. Really good question. Cool. I see. Let's hope those answers were helpful.

48:53There's some really good testing questions here and some things that aren't quite straightforward for most people. So we don't worry about that at all. But do please keep them coming at hello at meaningfulmoney.tv. Hello? Hello. Hello at meaningfulmoney.tv with the subject line podcast question. If that all made sense, Nick will put them in the line somewhere.

49:12Pete Matthew: Yeah, yeah. and we're still answering questions from April 2026 and we're recording in July and this episode is probably coming out in August so you know we're a few months behind but what else is new but that's it for this week, hope you enjoyed it, links are at the show notes, meaningfulmoney.tv slash QA57 another one of these next week I believe but we hope you enjoyed it, thank you so much for listening, thank you Mr. Roger Weakins, we will talk to you next time

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