QA60 - Listener Questions, Episode 60

0:00Pete Matthew: I'm studiously avoiding trying to move my microphone because producer Kate keeps telling me off for it. So now I feel like I'm in a slightly weird angle. Well, I feel quite grand because I don't touch mine at all. So it's fine. No, I know. How do you do it? Oh, I don't know. Yeah. It's the nerves piece. Yeah. Yeah. I'm quite calm here. Yeah. 600 and how many episodes? Nerves will be a thing of the past. Hi, folks, and welcome to another Meaningful Money Q &A with me, Pete Matthew. And me, Roger Weeks. The man, the myth, and the legend. The myth? No, I'm a myth. through. You're really there. You're not mythical.

0:34Pete Matthew: He actually exists. You're not AI generated. No, I'm surprised actually. Probably get more intelligent instead of an AI version of me than the actual real one. Even more handsome than AI generated. Right, so we're back to Q &A. As always, this is number 60 incredibly. We'll start out as a temporary thing. It's become a bit of a feature. We've got some great interviews coming up though. Some brilliant books been written and some really interesting people to talk to. So we'll have a few of those in the coming weeks as well with Q &As dotted sort of between them. So where do people send their questions, Mr.

1:08Pete Matthew: Roger Weeks? Well, they need to send them this address, otherwise we won't get them. That's true. This is hello at meaningfulmoney.tv with the subject line podcast question marked urgent or time critical if it needs to be, just so we get it done within the next six months possibly. And let's get into it. Sorry, I messed you up there because I was deleting things on the fly, didn't I? I'm very sorry about that. But as always, remember, if we talk about any links today, not sure if we're going to or not, but if we do, they'll be at the show notes, meaningfulmoney.tv slash QA60. And if you're watching this on YouTube, subscriber numbers, I think, did we say about 3 ,600, something like that, Kate, which is great.

1:45Pete Matthew: So keep them coming. Subscribe to the channel if you're not already and like the video if it's helpful. Thank you so much. First one, Rog. Not so much a question as a bit of a rant. This is a bit of a rant. This is from Avi, A-V, Avi, I'm not quite sure. It says, thank you for a great podcast. I've been listening to your podcast diligently since 2014. Even then, I made sure to catch up, and since then, it's been my weekly listen wherever I am. Thank you, Avi. It's so great, and I have been a great advocate. The simple rules of saving, putting money enough aside, thinking about your future, and ensuring bad times are fundamental truths that should be taught at school.

2:18Don't get me started on the power of compounding. Well done, and keep going. Thank you, Avi. Surely try, Avi. I wanted to discuss the previous episode about what Roger said about the recent changes in pensions due soon and which Pete alluded to. What did you say, Rog? What did I say?

2:32Pete Matthew: I don't know. What did I allude to? This is regarding the new taxation that the government is introducing on remaining pension pots. It was argued that it is fair to tax a remaining pot, as was the case before. Did we say fair? Anyway, carry on. Let's continue. Right, let's avi. Before the pension reform... Cornish joke. Cornish joke. Before the pension reform, pensions would be DB-style pensions, and either the government or the employer would pay the pension. In such a case, you can argue that whatever is left should be taxed as the pot is expected to be fair across those who live longer and those who died earlier, but they were a guarantee a pension.

3:13However, when the pension freedoms arrived, the state washed their hands in providing a pension to people, and it was up to the individual to secure their own pensions. Rightly so, the state gave tax incentives to encourage people to save for their pensions. As the state has outsourced the pension provision to the individual, not taxing the remaining pension pot is fair. But now the state wants to tax what remains in the pot. I think it's not fair for the state not to provide a decent pension. Ask individuals to cater for their own and then tax what remains. Despite pension reform, studies have shown that people are under-saving for their pension.

3:46We have an under-saving crisis in the UK and taxing the pension pot will further aggravate that situation. I don't think it's fair for government not to provide a decent pension, delegate pension savings to individuals, and on top of that, tax any remaining parts. Thank you, Avi.

4:01Pete Matthew: Thanks, Avi. I mean, we try and studiously avoid sort of political commentary, right? You know, it's like, only because it's not really the place for it and nobody really wants to hear that. If you do, go to the rest is politics, right? But it's, you know, our job really is to try and explain how things are. And yes, we will occasionally have opinions on things. I'm not sure that we've specifically said that we think it's fair for pensions to be subsequently taxed on death. I think we've just said pensions were never intended as an inheritance tax planning vehicle. They became that by default because of the pensions freedoms, right?

4:37Yeah.

4:38Pete Matthew: You happy with that? Yeah. That's a reasonable sort of thing. Yeah, it is. Yeah. Your sort of timeline is a little bit off. I mean, pensions freedoms was just the sort of final kind of opening up of everything. I mean, personal pensions have been around for decades. for the pension freedoms. And, you know, you think, yes, DB schemes were there for people who were employed, but, I mean, we're a nation of shopkeepers, right? There's countless millions of people who are self-employed, and so they needed incentivizing for providing for their own pensions, hence tax relief and all that sort of stuff.

5:10Pete Matthew: I'm actually with you. I mean, I really wish they hadn't changed. Oh, yeah. But, you know, we have pensions ourselves, right? We have DC pensions ourselves. They're going to be taxed when we die, and we think that sucks. But it is what it is. And so our job is to kind of help you navigate that rather than sort of comment too much on it. Fairness is subjective, I think. But I'm sort of with you on that. It seems daft for me to, for the state to incentivize on one hand, here are perks so that you pay into your pension. And then when you die of all the times, apply a pretty brutal tax on the right hand side.

5:48Pete Matthew: I don't, on the hill. Yeah, because I think the whole idea of the, I think ultimately pension taxation and pension benefits and tax relief is a no gain calculation because they give you the tax incentive to save. They give you the tax relief going in, but they get it all when it comes out from the income tax. So in our heads, you know, the government, they give you this to encourage you to go into it. And then when you draw your pension income, you then pay the tax back ultimately. And pension freedoms came in and suddenly said, well, actually, you no longer have to pay inheritance tax on this residual pot that you haven't used.

6:26And that was a great thing suddenly for planning for people.

6:30Pete Matthew: Yeah. That we could turn around and say, okay, that makes huge sense. And what we're going to do now is don't touch your pensions. You're all from your savings and investments to pay for your living expenses because you can leave these to the family tax free. I think that was a bit of an unintended consequence of the freedoms ultimately. Definitely. Yeah. And everyone jumped in. and made hay and we would do the same thing with the planning. I think, as Pete said, I don't think we said it's fair to tax. I think we probably said it's logical to reverse the decision that made that happen. It does seem really hard to say, okay, you've saved all your life and you're paying your income tax to get the tax relief back, but that residual fund that you're going to go to the family will tax that as well.

7:14Pete Matthew: I think, because Avi's point that we're kind of under-provided for, and therefore the government sort of taxing more heavily now is not going to help that. That's absolutely right. I think it's less the fact that it's being taxed more than the fact it's being meddled with. I mean, it drives me nuts that pensions are continually faffed with. Because how can you plan? You know, if you think, well, God, you know, I'm, say, 40 now, and I'm going to hopefully live until I'm 100. Well, how can I really plan for, you know, this pot of money that's going to be mine for the next 60 years, potentially when probably it will change and then change back and then change and then change back again three times between now and when I eventually sort of shuffle off.

7:55Pete Matthew: So I think if I really wish that firstly things will be simplified and then just left alone. But while we've got politicians who don't really think any further ahead than the next election, you know, long-term consequences aren't really on their radar. That was a political point. Yeah. But it's this constant tinkering by Whichever colour the governor are in, it's always been this thing. It's like, you know, we've now got Andy Brunham come in, and I'm not saying anything about him, good, bad, or indifferent, but it's like, oh, is he going to take away our tax-free cash? Now, that's been mooted for donkers years, and it puts this uncertainty.

8:29I mean, we go back to this inheritance tax planning thing. It's like there may have been people in the last 10, 11, 12 years or whatever who may have given money to family as gifts during their lifetime, But they thought, actually, what I'll do, I'll shove it in my pension, because not only will it grow, but it'll be inheritance tax-free. And then suddenly they can't get it to get it out because there'll be income taxed on it. So it's this constant tinkering, and it's the first thing that the government will go after is a pension pot. It seems to be, doesn't it?

8:59Pete Matthew: It does seem to be. I think it's because it's easy, because it feels a little bit like one step removed. And they could say, well, we haven't messed with income tax. Technically, that's true. But the history of pensions freedoms, the removal of the requirement to buy an annuity, which way predates the pensions freedoms, that actually was 2006 a day. Prior to that, you had to buy an annuity, but only from age 75. That changed in 2006. You know, the very fact that Drawdown came about to obscure little religious sect called the Plymouth Brethren who objected to the sort of kind of lottery in the cross subsidy that, you know, somebody who lived a long time would be subsidized by somebody who died early.

9:44Pete Matthew: How a tiny sect like the Plymouth Brethren managed to get legislative change and basically introduced Drawdown? I have no idea. But I find all that really interesting. But nowhere in that did somebody say what we need to do is allow pension funds to be inheritance tax planning vehicles. It was an unintended consequence, as Rog says. And we're not surprised that they shut it down. We're almost surprised it took them sort of essentially 12 years from the introduction of the pensions freedoms to it closing down in April 2027. It took them that long to do it, really. But it is what it is. We just have to try and plan around it.

10:16Pete Matthew: We did an episode back in April actually about planning for pensions and inheritance tax. we think a big deal is going to be drawing from pensions maybe up to the higher rate band giving that money away using the gifts from income exemption all this sort of stuff and maybe even it's an easier pill to swallow to pay higher rate tax during your lifetime rather than inheritance tax and higher rate tax potentially on your beneficiaries when you die so it's going to be about choosing your poison on how much of it you take really but thanks Avi, we appreciate the input yeah, there we go Next one is John.

10:50Pete Matthew: This is me. Hi, folks. Both Roger and Pete are doing a sterling job. Thank you, John. Thank you. Sterling. Love it. My question slash observation. There's another observation coming. Given there is a good probability of myself entering a rest slash retirement slash nursing home. A rest home where they put your body before they bury it. Or chapel of rest. Chapel of rest. Okay. And we know how expensive these are. Also, there is now not the carrot of passing on DC pension pots free of IHT from April 27. Would not the best strategy be to max out the basic rate income from one's DC pot, moving it, say, into an ISA, 20 grand a year, as I write?

11:31Pete Matthew: The reason being, the expense of the retirement care and accommodation may be such that any income needed at that time from the DC pot, should funds allow, might be subject to a higher rate of income tax in order to meet the bills. I was therefore wondering if there would be any mileage in deferring taking my state pension in order to maximize the amount of basic rate pension I can remove from my DC pension pots and use this to fully fund my ISA and provide 30 grand or so of income for living. The object being to remove as much as possible from my SIP so that should I need care at the end of my life, this could be funded without paying higher income tax.

12:06Pete Matthew: Just a thought. Best regards, John. Actually, that's a really good question. what amazes me is that listeners to the podcast and viewers on YouTube now come up with these great questions and think I've never thought of that we've got them thinking so intrinsically about what's important to them so I think John this is a great question and possibly logical about your basic rate tax position it's entirely logical there's no doubt about that the question is is the tax tail wagging the dog for me. I mean, we do, obviously, when we're planning for clients, we project forward and we can see, you know, what they're drawing in each year and we're applying inflation, all that sort of stuff.

12:51Pete Matthew: And you can see very easily, I mean, we don't know what the tax rates and bans are going to be in the future, but we do know that fiscal drag is a thing and tax bans don't rise ahead of inflation and all that. Been fixed for years now. Been fixed for a few more years yet. So in almost every case as we're planning, clients become high rate taxpayers. we assume actually in the software that we use the system knows if like the tax bands and stuff are fixed but where that ends of currently 2031 you know where that potentially the current legislation ends we assume a lower rate of increase on the tax bands than we assume a rate of inflation so the thinking is we're going to pay a little bit more tax every year and because of that kind of conservative assumption almost all clients end up as higher rate taxpayers and it's just like, well, okay, so be it.

13:40Pete Matthew: So I do wonder if the tax tail isn't wagging the dog a little bit, but there's nothing wrong with your logic, John. No. And this balancing up whether I defer taking my state pension or not is an unknown quantity. If you knew how long you're going to live, you'd know whether it's a good idea to defer that one year. If you defer one year, I think Pete was saying earlier on, it takes about 15 years to get back to where you would have been because you've lost a whole year's worth of income. It's before we record that, I think. But yes, because you get the 1 % deferral for every 9. 1 % uplift in your pension for every 9 weeks.

14:15Pete Matthew: So you get an extra 5 or so percent. 5.8, yeah. Nick did the maths for me. Thank you. So for every 52 weeks you defer, you'll get about 5.8 % increase in your pension. And if you do that for one year, it takes you about 15 years of receiving your pension from the deferred point to get back to where you would have been, to have received to have received in total yeah exactly so that's a factor 15 years is quite a long time at 67 you know 83 82 you know should be possible it should be possible but you don't know no but there's nothing wrong with John's logic I just don't think it's an answerable question because we don't know how long you're going to live and we won't prior assume whether you know you are likely to go into the implication being is that you think you may do we all have this specter of if I go into care it's going to be expensive but is it really likely to happen?

15:07But the implication is it might possibly be for you. So it's, yeah, whatever you said, it makes huge sense to me.

15:14Pete Matthew: Yeah. Just not a question I've even thought about before. You can only know whether it's the right thing to do in the rearview mirror. That stuff is so many financial sort of decisions. And so you've got to basically make a decision, own it and stick to it and try not to second guess yourself. Otherwise you'll tell yourself. Yeah. And if you leave your DC pot, that will continue to grow. So actually you'll be paying tax on some of the growth rather than some of your money in some respects. Yeah, yeah, you've mentioned that before. It's always a good point, that. Yeah. You know, okay. Right, question three, Rog.

15:42Question three. This is from Sean. It says, hi, fantastic podcast. I've learned so much and will continue to absorb as much information as I can. Good job, thank you. Apologies, this is a long question. Actually, it's not that long, Sean. This is not a long question, Sean. I worked for a company that enrolled me in a nest pension whilst I was employed by them. I decided to carry on contributing when the employment stopped. My logic was I pay in£80, tax relief is£20, the pot is£100. Take money out, I get 25 % tax-free, which is£25, and the£75 residual is taxed at 20%, so I net£60. So my£80 becomes£85 without taking into consideration any pension fund growth.

16:22Have I got this right? Yes. Yes, you have. Then there's a 1.8 % charge on contributions, if I'm right, to deduct off the calculation above. Yeah. My final question is, should I stop contributing now and hypothetically the funds stay exactly the same value? Am I right in thinking the annual charge of 0.3 would eat into my gains? Overall, my thoughts are that every pension podcast drills into the listeners how great pensions are and I agree if the employer is paying in also. If not, the fund performance becomes even more critical. Hopefully you haven't fallen asleep yet. Best wishes and keep up the brilliant work.

16:56Can I regret Sean? Actually, that wasn't a long question at all. No, no, relatively speaking,

17:00Pete Matthew: not a long question. It feels like a bit of a non sequitur, though. So we've got, I mean, Sean is right on the charges, although you have to factor in the 1.8 % initial charge. So again, thank you, Nick, for doing the maths in advance. But you still end up on top. Yeah,£80 in becomes£83.47, basically factoring in the initial charge, right? It's still not bad. So, but why then should I stop contributing now? Hypothetically, the fund stays exactly the same value. Am I right in thinking the annual charge of 0.3 % would eat into my gains? Yes, it will, because that's the way that it works. But if your gains are 6 % a year, you lose 0.3, you're at£83.47 in that example.

17:44Pete Matthew: It's going to be up by 5.7. Exactly. It's still going to go up. So the 1.8 is an initial charge as a one-off of every contribution. Yeah. Once that's gone, it's gone. Yeah. So you're sitting now with a fund that you're continuing to pay into that's going to be charged at 0.3, but you're going to be investing it at far higher than that. Yeah. I mean, we said when we were looking at this before we hit record, I don't know that I would continue to pay into Nest if I didn't have to at 1.8 % initial charge. There are better options out there. Depends on how much is in it, of course. You know, there are sort of pensions that charge you on a percentage basis, which are great if you've got a smaller pot.

18:23Pete Matthew: There are pensions that charge you on a flat rate, like a flat monthly amount, which is better if you've got a larger pot. and the amounts will depend on how much you've got in your pot as to which of those is better. And I think Nest is relatively high charging for 1.8 % of every contribution, so there are better options. So I would consider an alternative and maybe transfer your Nest into it and start paying into that new one. But I'm not sure I understand Sean's question about stopping contributing now. Is it just about the annual charge eating into things? I think so. In which case, that's true of anybody, isn't it?

18:58Yeah, exactly. I mean, if this was a pension pot and you had an advisor and they were charging you 1.8 % of every contribution, you go, to hell with that, I'm not doing that. You would say, I'll do something else. So there's no reason why you should stick to Nest for this 1.8 % upfront of every contribution, because you could do something with somebody completely different and you wouldn't have that charge possibly at all.

19:20Pete Matthew: No, sure. And you might get an ongoing charge of 0.3, maybe a little bit less, maybe a bit more, but, you know. Yeah. There's no reason why I would stop paying in, I would carry on paying in, but in a different fund. Yeah, certainly don't stop contributing. That's not the point. As Roger says, shift it to something which is a little bit more, sort of, a better charging. My friend Damien Jordan, of the brilliant He of Damien Talks Money, on YouTube fame, but he has a podcast called the Making Money Podcast, also on YouTube. And he and his friend Timane chat with the chief operating officer of Nest.

19:58Pete Matthew: It's a good episode, actually. Oh, right. So we'll put a link to that in the notes. Yeah, I've never been a fan of Nest. I think it's higher charging than it needs to be. It was the default pension fund that the government had because they were the only companies that ended up bidding on it. But they had this weird rule that if you were under age 27, they put your contributions into cash. Into cash. It's like, it's just horrific. Anyway, question four from Tom. Hi, Pete and Roger. I'm part of a workplace pension scheme that my employer and I contribute towards. I'm exploring the possibility of doing a partial transfer out of my workplace pension into a SIP.

20:33Pete Matthew: My reason for this is to have more investment options than my current scheme while still receiving my employer match. Can you explain the pros and cons of this move and things I'll need to consider? Thanks and appreciate you folks. Thank you, Tom. We appreciate you too. I'm studiously avoiding trying to move my microphone because producer Kate keeps telling me off for it so now I feel like I'm in a slightly weird angle I feel quite grand because I don't touch mine at all so it's fine no I know how do you do it I'm just a faff I don't know I don't know it's the nerves piece yeah yeah I'm quite calm here yeah 600 how many episodes you think nerves will be a thing of the past okay anything wrong with Tom's logic no not at all I had a bit of a faff to start moving stuff around but there's no reason Do it once a year, maybe?

21:17Yeah, exactly. Don't do it too often. But if you're allowed to do partial transfers out and you want to sip because it gives you more investment opportunities the way that you want them, then why not? Why not? I can't see a problem.

21:29Pete Matthew: Nest won't let you do partial transfers. You haven't said that you're in Nest, but you will need to check with your workplace scheme whether they will allow partial transfers. Not all do. Nest don't. But really, by doing what you propose, you've got the sort of best of all worlds. Always check charging, right? It might be that your workplace scheme is very highly subsidized and you're paying NAF all in charges. The best one I ever saw was 0.02 % per year. Really? Yeah, unbelievable. Fairly recently, actually, a client came to us and he said, oh, yeah, I'm only paying 0.02%. And we were like, oh, yeah, of course you are.

22:03Pete Matthew: And we wrote to Zurich. It was Zurich, actually. And they came back and it was right. They're like, man, a life. That's the cheapest workplace pension. It must have been a huge scheme. I thought. He wasn't employed by Zurich. No, exactly. But yeah, massive scheme. So yeah, 0.02. You're going to struggle to beat that on the open market. But there are some really low-cost pensions out there. Roger's an interactive investor customer, aren't you? Yeah, I am. Super low-cost. And it works really, really well. So check charges. But other than that, pros and cons, there aren't really any cons except for maybe an annual or six-monthly FAF.

22:36Pete Matthew: But even that's as easy as it's ever been. Just request a transfer on your new platform and it'll happen. Yeah. Be careful. Don't request a full transfer. It'll close your existence. Yeah. So maybe some minimum balance you've got to leave there. So yeah, check that. But you only need to check that once. Just make sure you leave that amount in. Question five, Roger. Question five. This is from Liam. Says, hi, Pete and Roger. Very new listener to the podcast while on garden leave. And I think it may be on a regular on a new commute to my new job in the city. I wonder if that job started because these are still April questions.

23:08Welcome to your new job.

23:09Pete Matthew: Yeah, yeah, hope it's going well. Yeah. I have a question about the tax position for said new job and how to get the most from my salary, which is on a base and commission basis. My base salary is in the basic rate tax plan, but commission will more than likely push me into the high rate tax bracket, but not by much. Given my monthly income is going to fluctuate due to the commission, how can I best mitigate the tax hit that comes with going into the high rate tax bracket? I'm aware of the ability to salary sacrifice X percentage into pension, but given the fluctuations, so I'm not 100 % sure how to navigate this.

23:40If it's not too much to ask, how best would you advise investing or saving this besides the usual ISA routes? All the best from the soon-to-be regular listener, Liam from Surrey.

23:49Pete Matthew: So he's asking about investing and saving, but I think you might be slightly over-worrying about this. We've both been on commission, basically. Yeah, we have. So we've had jobs where, you know, with like a baseline income and then commission or bonus on top, and it can be a bit of a faff to keep on top of. there is a reason why advisors are really really busy in march right and it's because you know you get to month 11 and month 12 of the payroll year the tax year and you finally people sort of know yeah what they're going to have earned for the year so you know assuming you know you're working on tax years here you know the business that you complete in february will probably you'll get paid the commission on it in March.

24:33Pete Matthew: And if you're anything like any other commission-based salesperson in the world, you'll be keeping track of what you're owed and what you're expecting next month. So come February, you're going to have a pretty good sense of what you're going to earn in the year and whether the total means you're going to be in the high rate tax band. And that gives you a few weeks where you can do something about it. Yeah. And you say you're not going to go over by much. So you should have quite a good handle on that anyway. But the thing is, if say you thought you're going to go over by£2 ,000 and you want to throw, oh, okay, I'll throw£2 ,000 gross at my pension to keep yourself within the basic rate tax band.

25:07And in the end, you're only£1 ,500 over the top. Actually, there's not going to be a massive penalty for that. There's no fine by HMRC for having paid too much into your pension. What they'll do, they'll just drag back the basic rate tax relief you've received by mistake. Or the high rate. No, it won't have any. No, it won't have any. No. So if you pay too much in, yeah they will yeah you would still get your tax relief it's not like he's

25:34Pete Matthew: going down into non-taxpaying status no yeah I mean I just wonder if

25:48Pete Matthew: you know if Liam has like a really good month like say he has like five grand commission in one month oh yeah payroll system has to be a pain yes because they they tend to say okay right this is the new income, and we'll just kind of basically multiply that by the rest of the months left in the payroll year, and we'll tax accordingly. So we've all heard of emergency tax. It's basically where the wrong tax rate gets applied, because it's making assumption about the whole year. Then you might have a couple of really sort of quite lean months. Generally speaking, though, if you're employed, the tax works its way out throughout the year.

26:24Pete Matthew: And so by the time you get to month 12, you'll have been taxed correctly for the most part, right? Obviously, if then you start making contributions into a SIP or whatever, you might have to claim a higher rate tax pack or whatever. But generally speaking, I wouldn't worry too much. If you go into the higher rate band, as Rod says, you want to just make a pension contribution to pull it back below. That's dead easy. And you should have time to do that in March to make sure that you're below the higher great threshold for the year as a whole. Other than that, sounds like a plan. Yeah, good for you.

26:59Pete Matthew: Right, last one from Richard. Hi, chaps. Love the podcast. Thank you for investing the time to create it and keep it running. I've recommended it to many people. Thank you. And it's been a source of great information to me and my lovely wife. Well done. My wife and I have been full-time residents in Spain for around 20 years, pre-Brexit, so I fall under the withdrawal agreement terms and my wife is an Irish passport holder. I'm 58. My wife is 57 this year. We have no debt and our mortgage is paid off. I have a small DC pension, not yet crystallized, around 210 ,000. It's not that small. And my wife has a small DB pension that she will take at around age 60, around 7 ,000 a year.

27:36Pete Matthew: We have 40 ,000 each in national savings and investments, 118 ,000 invested in global tracking ETFs, and we will both be entitled to full UK state pensions if and when we get to the relevant ages. Fingers crossed. That's interesting. Yeah, because you've been in the country for 20 years, yet you've still got full state pension entitlements. I'm not doubting you, Richard, but definitely check that and get that in writing. Fingers crossed. In addition, I'll be entitled to reduced Spanish state pension from the age of 65, which is forecast to be around the same value as my UK state pension. Nice.

28:08Pete Matthew: We know that we'll have more than enough income when we get to state pension age. We live frugally but well. We've never wasted money. And we've always been savers. And we have a very good handle on our monthly costs. I'm addicted to Excel and have recorded our household expenditure and income for more than the past five years. We're semi-retired now and we live off passive income built up for my career in Spain as a self-employed IT guy. We are able to live within our means. However, we also plan to run the business down over the next two to five years and fully retire. My question is in relation to which of our savings to draw on first.

28:43Pete Matthew: I guess it's a cash flow ladder question. Given that I'm not going to be taking the 25 % tax-free portion of my UK pension, as it will be taxable in Spain, are there any advantages or disadvantages to crystallizing it? I will plan to draw down as and when we need the money. I believe that once I crystallize my pension, I can continue to have it invested, much as it is at the moment, but I will be able to apply for an NT tax code to make withdrawing money easier at that point. We'll certainly need around£100 ,000 to see us from now-ish until we get to state pension age. Should we take this money from my pension or investments and pay the relevant Spanish tax on it?

29:24Pete Matthew: Or is it better for us to take it from the NSNI accounts as there will be no tax implication this way? Current regards and thanks, Richard. We're not telling you what you should do. That's advice, Richard. So we're not going to tell you what you should do. That we'd be on a very sticky wicket if we did that. Yeah, but yeah, you're right. it's a cash flow ladder question. It depends, and this, where some planning comes in, whether you're going to end up paying a small amount of tax now or no tax now and what you do over your lifetime, really. It's difficult for us to say what's the best place and we won't.

29:55You know?

29:57Pete Matthew: I mean, Richard's clearly got his handle on the tax implications of various things. Is the main question whether he should crystallise? That's one of the questions. Yeah. Why would you crystallise the whole lot in one go if you don't need it all in one go? Well, you wouldn't. Well, I wouldn't, would you? No, no. So Richard, I'm not sure whether that's a Spanish taxation thing, but literally you only crystallize what you need to draw from the pension at the time you need to draw it. Because you're not going to take your tax-free cash. So what would normally, normally, what people like us would do, we would take our tax-free cash because we're in the UK, and then having taken the tax-free cash, then...

30:32So you want to take£25 ,000 worth of tax-free cash, you crystallize£100 ,000 of your pot, and the 25 ,000 is 25 % of that because you're not doing that calculation. If you want to draw 15 ,000 pounds a year from your pension, you crystallize 15 ,000 and take it out. You don't touch the rest. The rest stays as it is invested where it is now and you draw on that again next year and the year after and the year after. So you don't crystallize the whole pot in order to start drawing some each year.

31:00Pete Matthew: No, I agree with you. I mean, I suppose you could. Is Richard's question, the fact that there's no tax-free cash available because it's going to be taxed in Spain, Does it even matter? Because normally we would say that because what you don't crystallise can continue increasing value and hence accrue more tax-free cash. More tax-free cash, I suppose. So I guess Richard's argument is, well, is there any point in that? I mean, I guess, I don't know why you would choose and kind of bake in the option never to have an increase in tax-free cash. I mean, you know, the universe throws weird things at us.

31:30Pete Matthew: It might be not in the plan now, but it might be that Richard and his wife moved back to the UK. Yeah, 10 years time you move back, you think, actually, it'd be nice to have some tax-free cash now. Yeah, and you've basically given that up. So I would still opt to crystallize just what you need. And maybe like have a thousand quid extra in that pot just because this NT tax code thing, which both you and I had to look up. So this is a sort of no tax tax code where there's a cross option, not cross option agreement, like a double taxation. Double taxation, yeah. So, you know, rather than you pay UK tax on it, the NT tax code basically pays it out to you tax free and then presumably you'd have to declare that on a tax return in Spain pay the Spanish income tax on it.

32:10Pete Matthew: So if you want to sort of have an account, rather than use UFPLUS where there is no drawdown account, you could say, yes, okay, well, I'm going to crystallize what I need this year, plus just keep an extra thousand quid in that account just to kind of keep it there alive and keep the tax code applied to something. Yes. You maybe do that, but I don't really know the logic of crystallizing the whole lot just because there's no further accrual to tax-free cash. No. but you also talk about do I take it from my national savings accounts or do we take it from pensions I'm proud of you would say why pay tax earlier than you need to yeah if you know what you need definitely start with tax free accounts yes I can't see any logic of not doing that but don't run them completely down you never know when you you might need access to them but it's a continual balance this between tax now and tax throughout your lifetime as we said earlier on so there's no right answer So it depends on your individual circumstances, this passive income that you're talking about.

33:10Pete Matthew: So planning is the answer. I'd normally direct people to the academy in this case, but the academy won't cope very well. The version of foient that you get in the academy won't cope very well with Spanish taxation. There's no way to do that. You could probably hack it a bit, but it would be a bit of a pain. So Nick, in sort of preparing the episode for us, said it might be a good suggestion to have my friend Phil Billingham back. Like, Phil is the brightest advisor I've ever met when it comes to cross-border stuff. So maybe we'll have him back on before long and talk about, like, pension planning and things like that when it comes to expats.

33:45Pete Matthew: So good shout, Nick. Yeah, that's it, I think, isn't it? Yeah, I think so. Yeah. Interesting mixed old bag of questions. Yeah, we do get a great mix of questions, don't we? And, yeah, please do keep them coming in. I hope the answers we've given today are helpful. We try to make sure they are. but do please keep the questions coming in to hello at meaningfulmoney.tv with the subject line podcast question and we'll tag them in at some point in the future we will, we're still answering questions from April so we've got some catching up to do keep saying that, we never get any closer than about five months away do we but that's it for this week, hope you enjoyed it hope it was useful, thank you for the comments thank you for the questions, thank you for all your warm questions, every one of these you know say warm comments at the start and we really appreciate that, keeps us going keeps us interested, let's face it.

34:31Pete Matthew: So any links we've talked about there are at the show notes, meaningfulmoney.tv slash QA6060. Hope you enjoyed it, folks. Thank you so much for listening. Thank you, Mr. Roger Weeks. We will talk to you next time.