QA61 - Listener Questions, Episode 61

0:00We're rattling through, Roger. We're eight minutes in and we've done two. Yeah, it's going to slow down in a minute.

0:04Pete Matthew: Well, yeah, possibly. It's probably for the best. Hi, and welcome back to another Meaningful Money Q &A with me, Pete Matthew. And me, Roger Weeks. Mr. Roger Weeks. We're both in crew T-shirts. Yeah. Thankfully, not the same colour. Well, yeah, that would just cement the sadness of it all, wouldn't it? Yeah, they still refuse to sponsor. Or at least they don't refuse, they just haven't responded. They haven't responded, no. So since we've recorded last, you've married off your last daughter. How's that feel? I'm devastated. For those listening, Roger was sort of punching the air. Yeah, yeah. Yeah, it was very nice.

0:40I mean, it's nice to get to the end of the fourth one of the three daughters and a son. But it was lovely to see so many people happy for the couple and celebrating and stuff like that.

0:50Pete Matthew: And you were there. Yeah, very honoured. Yeah, you and Joe and the girls were there. Yeah, it was lovely. yeah it's one of those things that yeah glad I got into the expense of the whole thing exactly no it's good it was a cracking day really really good day so we're honoured to be there and well we better get on and answer some questions what do they do if they want a question answered well if you want a question answered then please send it to hello at meaningfulmoney.tv the subject line podcast question and we'll get this in the stream of them somewhere where I think we're four months down the line from the last lot of questions yeah May we're answering questions from May at the minute we will get there eventually but there's bound to be some links and stuff that we talk about today they are always at the show notes meaningfulmoney.tv slash QA61 for question and answers episode 61 that's nuts actually isn't it it's meant to be temporary anyway it seems to be going down quite well still because the questions are still coming in but if you're watching on YouTube do us a favour like the video and subscribe to the channel if you're not already it really helps so thank you for that right it's question one from Chris Hi, Pete and Roger.

1:54Pete Matthew: I'm quite a new listener to the podcast, having come across it in my current pursuit of career changing into the marvelous world of financial planning from accounting. The mini-series on what makes a good financial advisor was very eye-opening and helped me take the decision to make the leap into financial advice. So thank you. I hope you're welcome. I hope you don't. I'm sure you won't regret it. It is a brilliant career. Currently, only four days left of my notice period as of writing. So that was back in May. So hope all went well and you had a good leave-in due. My question is hopefully a very simple one, especially for gentlemen of your Caliber.

2:26Pete Matthew: Oh, obviously. I'm undecided and procrastinating on where the best place to hold my emergency fund is. With some indecision and flippancy over the past few years, I managed to end up with a little bit in a number of different pots, ranging from around 2 ,500 in premium bonds, yet to win a prize, around 4 ,000 in stocks and shares ISA, which is, of course, is taking a bit of a hit as of late. I guess Iran. It's back in May. It's still going on then, isn't it? It still is, really. And then the remaining 2 ,000 to 3 ,000 in a cash ISA. I know the short-term volatility of the stocks and shares ISA is not well suited for an emergency fund, as evidenced in the last few months, but the amount just slowly grew over time while I was haphazardly saving.

3:09Pete Matthew: In your opinion, is this just as simple as putting everything into the cash ISA and just having to eat the small inflation erosion versus interest gains. Naturally, I want the funds to be available quickly wherever to need them. Thanks for all the fantastic podcast episodes and apologies for my questions being as long as it was for such a simple ask Chris. No worries, Chris. Not a massively long question, really. No, I know. You wait till question five. So yeah, I mean, what do you think about Chris's logic, Rog? Yeah, I mean, we all amassed different savings accounts over time anyway. and having a range of these things is just what's happened in the history, Chris, really.

3:51I mean, yes, ideally your emergency fund should be held in some sort of cash-based account. Not stocks and shares. Not stocks and shares, ideally. So whether you think, okay, what I'll do is when that comes back up to where I'm happy with it, I'll liquidate that completely up to you, really. The difficulty when it comes to this small inflation erosion is the emergency fund is there for a job. Yeah. So you could ignore inflation for that purpose, really. I think so. Yeah.

4:19Pete Matthew: It's opportunity cost, isn't it? It just, yeah, it's not about making you money. It's about being there. It's an insurance premium. Yeah, essentially self-insurance. Yeah, yeah, exactly. So I just think, yes, you can have it in a cash register if you want. I'm not sure it needs to be. Obviously, it depends on your wider situation. But with the personal savings allowance, you know, first thousand quid of interest is tax free if you are a basic rate taxpayer first five hundred if you're a high rate taxpayer and I think if it is going to be nice you want it easy to get at that's kind of the point of an emergency fund so you want it maybe with the same bank as your current account so you can just flick it sideways on your app, something like that or at least really easy to get to maybe if it's with another provider make sure your current account is kind of linked to it so you can make a pretty much immediate withdrawal or a worst case a day or two.

5:12Pete Matthew: Any longer than that, it's not really going to be fit for an emergency fund. Premium bludging can get your money out quite quick, can't you? Yeah, within probably a week to 10 days, I think. And it's... Yeah, you'll probably see an emergency like that coming. Hopefully not at all. No, exactly. Rarely. No, and I'm surprised you've not had a win yet, but you'll probably find a big load of them will come in now. Yeah, yeah, just because we've blessed. and you had the meaningful money blessing of your premium bond again. So I think, Chris, you need to work out what you want to have as an emergency fund for the level.

5:44Do you think that the 10 or 11 ,000 pounds you've got is right? Two, six, seven, eight, nine, 10. Yeah, is that the right amount? Is that the right amount? If it's right, then I might be moving the stocks and shares of ISA out when the time's right because it needs to be an emergency fund, but I can stand in the background. If that's just grown over time.

6:03Pete Matthew: Yeah. Yeah, you know, a good chunk needs to be in cash. I would see your stocks and shares ISA as longer term money. We'll put a link in the notes to my good friend Damien Fay. He runs Money to the Masses with his excellent team there and he has sort of best buy tables of savings accounts and stuff like that. So we'll put a link to the notes for that. Right, question two, Rog. Question two, this is from Kev. Kev. Hi, Kev. Hi, Pete and Rog. I only discovered your podcast last year, but I think it's excellent. What a great judge of character. man is you. Excellent chat. You make complex topics easy to follow.

6:37Thank you. Good. I've just turned 65 and I'm planning to give up work later this year. I currently work three days a week. I've watched a lot of Meaningful Money content over the past few years and great stuff from others and last month re-read the Meaningful Money Retirement Guide just to keep on the right track and I think we're in a good place. It's just behind your head isn't it?

6:55Pete Matthew: There it is. Yep. It's a great book. You sure how stiff my neck is there? I intend to keep making contributions into my workplace pension up to my retirement, salary sacrifice, employer contribution, low fees, etc. My question, if I retire partway through the tax year and I've already made pension contributions in excess of the 10 ,000 MPAA, money purchase annual allowance, does this mean I'd have to wait until the following 6th of April to access my pension, other than tax free cash, to avoid a tax charge? I hope this question makes sense. Thanks and keep up the good work. Regards, Kev. Yeah, the question makes huge sense, Kev, and it's a really important question, actually.

7:33Pete Matthew: Yeah, Kevin obviously understands what triggers the money purchase annual allowance, doesn't he? It's like, you know, anything other than tax-free cash. You know, you buy an annuity, you're going to draw down, you draw some taxable element, or you take an off-plus payment, you're going to trigger the MPAA, which then limits your, you know, future pension contributions to 10 grand. Yeah. But the nice thing is, it's the MPAA is measured after the trigger. So if you do trigger the MPAA probably through the year, then your allowance, obviously subject to the 60 ,000 overall threshold and what your pay was is triggered at that point.

8:04So it's not tested until after you trigger it. Yeah, that's an important little distinction actually.

8:10Pete Matthew: Obviously, that's the simple answer to your question, Kev. It's like the MPAA and the test against that is only after you trigger it. So you're probably not going to contribute after that point so you haven't got an issue. But the total contributions in that pension input period, which is the tax year, will still be measured against the normal hour. So So you probably weren't going to go over the normal annual allowance anyway. But if you have, that would still be a factor. Yeah. But good question. It's one of those things that you don't think about until somebody asks you the question. So it's really good.

8:42Pete Matthew: The inimitable Nick Mitchell has given us a link to the Money Helper page on the Money Purchase Annual Allowance. So we'll make sure that's in the notes as well. So you can click through and read that. We're rattling through, Rog. We're eight minutes in and we've done two. Yeah, it's going to slow down in a minute. Well, yeah, possibly. It's probably for the best. Right, question three. This is from John. Hi, folks. Both Roger and Pete are doing a sterling job. I love the hi, folks. That's a nod. My question slash observation. Okay. Given there is a good probability of myself entering a rest retirement nursing home, and we know how expensive these are, and also there is now not the carrot of passing on DC pension pots free of IHT, would not the best strategy be to max out the basic rate income from one's DC pot?

9:28Pete Matthew: Moving it into, say, an ISA, 20 grand a year. The reason being, the expense of the retirement care and accommodation may be such that any income needed at that time from the DC port, should funds allow, may be subject to higher rate income tax in order to meet the bills. Just a thought. Best regards, John. So that's not a bad idea, is it? That's a really good idea, actually. Yeah. So we're kind of changing form. Of course, this is all predicated on you actually needing care, which you might not. That's the$64 ,000 question, isn't it? Because everyone worries about the risk of it happening, and the risk is less than people imagine.

10:04Yeah, it is.

10:05Pete Matthew: But, you know, you only pay 20 % on it. Yeah. When I first heard the question, I thought you were sort of, my mind went to kind of inheritance tax planning. So we're talking about that a lot with, obviously, DC pensions coming into the IHT regime next year. Talking a lot with people about, you know, pulling out of their DC pensions up to the basic rate. Yeah. And Voyant now, the planning software that we use is a very simple little switch that says max out up to the high rate threshold. Oh, is it really? Yeah, yeah. So it'll say pull out from, you create a withdrawal, pull out up to the basic rate threshold, high rate threshold, sorry.

10:44Pete Matthew: And so we're keeping people as 20 % taxpayers, but pulling as much as we can. And then either giving that away, gifts from income, or just shifting it essentially from pensions to not pensions, ISIS and stuff. That way, at least you're only paying 20 % on it, as opposed to potentially 40 % inheritance tax on a pension, on an unspent pension, potentially, and income tax in the hand of the beneficiaries if you die after age 75. So the answer to this is... It makes logical sense to me, because actually a care home is going to cost anywhere between£60 ,000 and£100 ,000 a year. If suddenly you have to pull at that point in time from your pension, that's going to be one hell of a tax bill.

11:27So why not? If you're thinking it's likely to happen, and that's a bit of a question, but you know better than us. But if that's likely, why not have it out now? So you've got£20 ,000 worth of every year coming out, which you can allocate to that rather than dragging too much into higher rate on the income, which makes huge sense.

11:42Pete Matthew: It does make sense. Because if you think about the additional drain on your kind of overall pot, if you've got to spend a net of 40 % tax, You know, if you have to spend 75 grand a year on a care home or whatever, at least, but that's net of 40 % tax, then you're going to erode your estate pretty quick. And I'd like to say, John, that's making me think now. I think, oh, actually. There you go. Good work. Yeah. Made the oracle think. Love it. Yeah. Okay. Question for us. Question for us. This is from Elizabeth. Says, hi, Pete and Roger. I started listening to your podcast about 18 months ago, and it really inspired me to turn my finances around.

12:20I'm in my 30s and have had an overdraft and credit card debt since my late teens when I went to university.

12:26Pete Matthew: I'd be like that if I hadn't married Joe. I'm hoping for a bit of advice. I've recently started taking control of my finances and I'm in the middle of paying off credit card and card debt using Dave Ramsey's snowball method. For years I lived in my overdraft and at the top of the end of my credit card limit, paying fees on both. until a couple of years ago i would be close to my arranged overdraft limit get paid spend about a week out of my overdraft and then fall back into it until payday i recently heard about people who have had a refund on overdraft charges if they were persistently living in debt i've struggled to get my head around if this would apply to me and wondered if anyone could offer any advice particularly if it impacts credit rating or could have any negative consequences thank you best which is Elizabeth.

13:08Pete Matthew: I don't think applying for compensation or refund would affect credit rating. No, it doesn't. You can't do, surely, because that would be a bit vindictive. If you apply for this, we'll slap something on you. Yeah, exactly right. Yeah, I'm pretty sure that would be immoral and impossible. Yeah. I suppose the difficulty for here is the bank deciding whether you were having financial difficulties and they were exacerbating it by keeping you in there. The whole idea, when I worked at the bank and we lent on overdraft and credit cards and stuff, is that the way an overdraft works is that you shouldn't be using it much of the month and then you might trip into it just towards payday.

13:45And as long as it's not getting worse every month, then you're living within your means. You just happen to be using part of overdraft for it. So if, say, you're paid£2 ,000 a month, Elizabeth, and every month you're overdraft to get in£100 worse off, then clearly they're encouraging you to have your debt make worse. but if it's holding its own, I'm sure the bank will say, well, hold on a minute, what are you spending your money on? Is it your control of your own money that you're having a problem with, which is causing you to stay in overdraft? Because you've now turned around and said, I'm now starting to pay them off.

14:19The question is, could you have done that before? But when you're a student, you probably couldn't.

14:23Pete Matthew: No, right. It's not black and white, I don't think. No, 100 % it's not. So again, thank you to Nick. It's a great page on Deck Camel. so we'll put a link to that but it looks from there that you can make a complaint about affordability and maybe get a refund of overdraft charges if the limit your overdraft limit was set too high to begin with or it was increased to a level that kind of encouraged you to kind of max it out and then live almost semi-permanently in your overdraft or your usage of the overdraft showed that you were in kind of long-term financial distress for example being in the overdraft all the time or using an unauthorized overdraft a lot so that's kind of what roger's talking about um or your overdraft was originally a student account with no charges but now interest is being added and you are in the account all or almost all of every month so i guess it's the sort of thing that you are you apply for and see how you get on i see skepticism written on your face i only i i'm not sure how you can prove whether they were encouraging you to stay and overdraft to get charges out of you or whether it's just your own control of your own money.

15:33But obviously this has been introduced for a reason. I can't see the problem with that. I go back to the fact when we were lending money, people used, I mean, if you were having bounced checks, Elizabeth, then you've got a clear route of saying, hold on a minute. You know, I was clearly living beyond my means and therefore you were having to bounce my checks or reduce my limit or drag me in and talk to me quite strongly. But if you've not got the evidence behind you, I don't know. It's really difficult because when, we used to have people like this all the time, like this, but they would use their overdraft limit and they get paid and they go back into credit and then they would use their overdraft limit.

16:09But they would get cross. If you didn't, if you did better checks, it's like, hold on a minute, my pay's coming. You could say, well, actually it's getting worse every month. If you can see it's getting worse every month, then the bank would need to do something about it.

16:20Pete Matthew: I was going to ask, did you have conversations like this, pull people in and say, look, this is sort of unsustainable? Yes. I mean, all right. But that went down well. Yeah. But then what you do then is say, okay, how do we get around this? And it's, okay, let's consolidate this onto a loan and give you a fixed amount and prove that you can afford to pay it off and get rid of it over time. Yeah. But it's those people that didn't control their spending. Yeah. And I'm, I don't want to say this, but I'm listening to a book a minute called Entitled. It's not directed at you. It's to do with a member of the royal family.

16:55Pete Matthew: Oh, okay. and who would spend money willy-nilly. So if someone was spending money willy-nilly and caused an overdraft facility, that's their own making in some respects. So what we're trying to point out here is the bank encouraging you to do that or being complicit in keeping you in overdraft to make sure they've got their charges. Yeah, so you're going to have to make a compelling case, Elizabeth, I think. It's a great name for a book about a member of the royal family, isn't it? Entitled. Yeah. See what they did there. Yeah, and it's shocking. Is it scathing? I'm about two thirds of the way through and it's like, well, rather than take a car, they hired a private jet at£15 ,000 to fly them 75 miles to go to a meeting, you know?

17:35No way. Yeah, yeah.

17:37Pete Matthew: Does it say which member of the Royal Family is? Yeah. Go on, then. It's that the artist previously known as Prince. Oh, yeah, that one. Yeah, and his ex-wife who just happened to carry on living with him for X number of years who, you know, got off to Verbier and I'm having a bad life so I go to Verbier and now go to Greece and then actually I'll go to the Arab Emirates, you know, and hiring private jets to do stuff. To go 75 miles? Yeah. I don't want to go by car, and I don't want to go by train, so I'll hire a helicopter at£4 ,500 and I'll fly myself, you know, sort of stuff. Of course he could, couldn't he?

18:11Yeah. But you look at that and think, oh my goodness me. So what I'm not saying is that's you, but, you know, there are people that would not control the spending and there are people that would do, but for things outside their control, they were kept in overdraft and loans.

18:30Pete Matthew: You'll have to fight your cause. Yeah, I think you have. Definitely, and make a very strong case that the charges were problematic and maybe sort of complicit in you staying in overdraft. Be interesting. Let us know how you get on if you decide to pursue. Okay. Deep breath, everyone. Right, sit back. It's the war and peace. I don't want you to do anything with my loins. Not while the cameras are rolling, anyway. This is from Stephen. Hi, Pete and Roger. Can't wait until a new episode to listen to while I'm commuting to work. Well, I hope this one makes you happy. It gives me a lot to think about and how I can prepare for my retirement.

19:07Pete Matthew: And I appreciate everything you all do and meaningful money. I'm a 35 year old UK police officer contributing to the police pension scheme, 2015 care scheme. I'm trying to sense check whether I'm being overly pessimistic about my retirement planning. So my current situation is the care pension is predicted to provide an income from around age 60 plus. I think you'll find it's 67. Police care scheme, but I may be wrong about that. Certainly the NHS care scheme is and the teachers care scheme is. So check that. I've already bought my home. So I'm using Stocks and Shares Lifetime ISA purely for retirement alongside a SIP and an ISA.

19:43Pete Matthew: Good job. I'm aiming for a comfortable retirement of roughly three to four thousand pounds per month with the goal of stepping back from full-time work around age 55 right yeah okay that's a good retirement from age 55 um the complication is the nature of the job policing is physically demanding long hours night shifts general level of risk absolutely there is also commonly cited concern that police officers may have a lower life expectancy due to these factors because of this i'm not convinced i want to stay in the job all the way to the scheme's normal retirement age. But stepping away earlier would mean delaying access to the pension, didn't know that, potentially reducing the overall benefits, needing to bridge a longer gap using my own investments.

20:27Pete Matthew: There are also structural challenges with the scheme. Contributions are a high percentage of my income. If I leave, I can't transfer the pension into another scheme, meaning it becomes deferred and grows more slowly than if I remained an active member. need to check that as well. To manage this, I'm currently contributing to a SIP for additional retirement income, maxing out my S &S Lysa as a tax efficient retirement pot, building ISA investments alongside. My concern is this, despite having a defined benefit pension, I find myself treating it very conservatively, almost as a bonus rather than a core foundation.

21:01Pete Matthew: So my questions are, am I being too pessimistic about the value and reliability of the care pension given the realities of the job and its constraints am i overcompensating by saving too aggressively into isas lifetime isas and sips instead of allowing myself to enjoy more of my income now that's a that's the question how should someone in my position balance the security of a db pension the desire for flexibility in early retirement and the reality that i may not want or be able to do this job into my 60s thanks for everything you do the podcast has really helped shape how I think about money and long-term planning?

21:34Pete Matthew: I feel like that question looked longer than it was because it's quite well spread out. It's nicely bullet-pointed, wasn't it? Yeah, it was. So, thank you, Stephen. Great question. Yeah, and I think you've hit the nail on the head is that we're helping shape how you think about money and long-term planning. You're thinking along the right lines. My initial thought really was whilst you're still doing the job and you're able to do it, carry on funding it as much as you can. it's going to do you well. It is going to be a big backbone to your retirement planning. I don't know how long you've been in the police for.

22:08So if you're 35 now and you joined in your 20s, you could have 15 years in, you might have another, I don't know, you said you might go to 50, another 15. You could have 30 years. That'd be a massive part of your retirement income.

22:21Pete Matthew: It really would. Yeah, because the care scheme is a good scheme. Apparently there's, again, thank you to Nick, Police Federation website about the 2015 care scheme. If an officer leaves before age 55, then the pension is deferred to their state pension age, which if he's 35, that could even be 68. If you're working for the police until the normal pension age, which is age 60, you were right there, Stephen, then you can take the pension without actuarial reduction. So if you work until 60, you can take it then. If you leave before age 55, you can't take it until 67 or 68. If you work until you're 57, you would need to take the pension with the reduction.

23:03Pete Matthew: Oh, so you can take it before that, but yeah, with a pretty chunky actuary reduction. It will be, yeah. Yeah, okay.

23:13Pete Matthew: So, I don't know how you can answer this without modelling. No, no. If I were in your position, or if you were a client, we'd be really drilling down into the terms of the pension and making sure that when we modelled you retiring, Stephen, at different ages, that the pension was correctly reflected. So, you know, if you retired at 55, you either took it then, but with a monumental actuarial reduction, and assuming it's got a protected pension age after next year, isn't it? April 2028, I'm sorry. So, because then the minimum pension age goes to 57. and just whenever you know we build scenarios i want to retire at 55 okay if you do that then we know the pension will look like this and then you can see how much you've got a bridge i don't know any way that you can do this in your head or you're very good at spreadsheets yeah i think at the moment you're saying i've got that pension there i want to retire early so therefore i need to be putting some money aside into isa and lisa and and a sip to do that but there's no way of proving that that is going to be right for you.

24:24Like Pete says, let's do some planning. If you can shove some numbers into Voyant, or say, other software is available, but it's brilliant, absolutely brilliant. Then you can say, at least I'm within spitting distance of what that needs to be.

24:39Pete Matthew: That was the sound of Rod licking his finger and holding it. If you're only listening to this. I keep forgetting we're also on, just on audio as well. But I think, Pete's hit the nail on the head. If you can do some planning with this and it might be worth paying for that now at 35 and saying, okay, I'm 35, I want to retire at 50, I want this level of income, these are what my pensions look like, this is what my funding is going to be until then, then at least you would know you're within a nuts whisker of being able to do it. Or if you're not, I need to retire at 52 or 53 or 54, or I need to shove more money aside.

25:12But you do say about living some life now as well. Especially the job you've got. you've mentioned it's quite a stressful job, long hours and stuff like that. Yeah, there is a bit of living for today.

25:25Pete Matthew: Yeah, and what you wouldn't want to do, and I feel this coming out of Stephen's question, is not fully live today because you think you've got to work harder for retirement than you actually do. Obviously with planning and modelling, that's based on assumptions, right? And assumptions are going to be wrong because we can't know the future. But a little plug here for Meaningful Academy, and normally at age 35, I would put you in the build wealth sort of category, Stephen, but either way, you get access to Voyant Go for a year, right? So either that or work with a financial planner. We'll put some links to the academy, also to my colleague Alistair at Meaningful Coaching.

26:04Pete Matthew: Make sure we put a link to Alistair there as well because he can build you a plan which hopefully will answer some of these questions. Like what would your pension scheme look like if you retired at 55? if that's your kind of plan A in your mind, that's what you would really like to do, then you need to plan for that for the next 20 years and work back for that to work out how much you do need to save based on fairly conservative assumptions to then get you through the bridge from 55 to 67 or whatever. So the only way you can do it is with scenarios. You can either do it yourself, Alistair will build you a plan as well.

26:40Pete Matthew: Obviously, there's cost for that as well. Or you could work with a full-fact financial planner. so yeah do gnats have whiskers? that's the phrase I just use what other people have said to me in the past so you know I think there is one question Pete alluded to it during your when you were reading it out Pete about the deferred pension not growing any quicker than if I'm paying into it now I would say to you because this is a care scheme you get an allocation towards pension for every year you work and that then in deferment is increased over time, it's the same for everybody. Yeah, yeah. So whether you're an active member or a non-active member, I think what you're getting at is that because you're not adding to it anymore, then the pension is not going to grow as quickly.

27:24Clearly it won't do. But the funds you've already built up or the pension you've built up in deferment will grow the same as everybody else's. In the scheme.

27:31Pete Matthew: Yeah, absolutely right. It's the R in care. It's re-evaluation, isn't it? Okay, question six, Rog. Question six. Nice short one, hopefully. Yeah. Probably the answer will be a long. So this is from Lee. He says, Hello. So, first I'd like to thank you both for the valuable information you provide. For much of my life, I felt financially uninformed and unsure of my decisions. Thanks to your guidance, I've had a huge awakening in the last five months. I now feel far more confident and in control of my finances. Thank you so much for putting out this content for us all. Great to read. You're more than welcome.

28:01Yeah. I have a question regarding an employee share scheme offered by my workplace. The scheme allows me to purchase shares at a discounted price over several years. As I understand it, these shares are bought using pre-tax income and tax is only payable if the shares are sold before the scheme reaches full maturity. I am planning to open a SIP in the coming weeks and I was considering transferring the proceeds from the share scheme into the SIP once it has fully matured. It seems that this could effectively result in a 20 % gain on income that has not been taxed initially. However, this feels somewhat like a loophole and I would like to confirm whether this approach is compliant or advisable.

28:36Thank you very much for your time. Kind regards, Lee.

28:39Pete Matthew: short answer is yes just depending on what kind of scheme it is yeah there are two different types of scheme there's a share incentive scheme where your employer often will give you some shares and then you buy some partnership shares and they then top them up for you and then there's save as you earn now save as you earn my understanding is I think you pay the it's taken out of net pay but I'd need to check that I was reading it yesterday and I was talking about it and I got confused between the two as well But actually, the answer to your question, Lee, is yes, you're right. If you do, at maturity, use those share proceeds and transfer them, so no good cashing them in and putting in.

29:20Pete Matthew: Yeah, you'd have to. You'd have to cash them in. Except, into an IC you can transfer them in. I don't think you can to a SIP. You can do it in a SIP as well. Can you? Okay. You might have a bit of a problem finding a company that would do it. That's the difficulty. Well, yeah, it needs to be a full SIP. You know, not like a basic problem. No, exactly. You can only buy funds with it. It needs to be a proper sale, probably. I mean, HL, maybe. You can buy direct shares in HL. I hope it's learned that. So as long as you do it within 90 days of maturity, it goes in as a personal contribution and you get the tax relief.

29:48Yeah, amazing. So you're not paying any CGT on the money as it comes out because you just transfer it in. It's really good.

29:54Pete Matthew: Yeah, it sounds like a loophole, but it's an incentive. Yeah, exactly. So, you know, it's good. We strongly suggest you sell the shares, though. don't have both your income and your financial future linked to the productivity of a single company. We've seen countless examples of this, even colleagues, but I'm sure if you've used the example before, I had a chap who had 180 ,000 quid worth of cable and wireless shares, and it turned into 8 ,000 pounds, so I was still at a 96 % loss or something. We eventually sold them. I think they recovered to about$21 ,000 for his widow after he died. But he was fortunate.

30:39Pete Matthew: He was retired and he had a great pension. But imagine if he was still working for cable and wireless, had all that money in cable and wireless shares, company goes under and suddenly both his income and his future have disappeared. That's not great. So we strongly suggest, I mean, share safe schemes are a brilliant idea, you know, tax incentivized and all that. But when the shares become yours to do with as you want, sell them and go into you know, multi-asset, global asset sort of global equity type thing don't hold shares in a single company or certainly not on a material proportion of your overall wealth it's a risky strategy Wow, yeah I think that's it Wow, barely over 30 minutes We seem to fly through that one, you can tell we haven't done it for a couple of weeks so yeah, but we hope those answers were really, really helpful some really good testing questions once again, but do please keep them coming in at helloameaningfulmoney.tv with the subject line podcast question.

31:33If you write them and say, oh, this is a hard podcast question or easy one, then we decide whether we'd include them or not.

31:38Pete Matthew: Exactly, yeah. We'll just stick them in the bin if we don't want to answer them. I think we answer them pretty much all of them. But we do still have something like a dozen episodes worth of questions in hand. We basically sort of keep up to it. Oh, good. You're not going anywhere, son. Now, next week, I've got I'm going to call it a great interview I haven't recorded it yet so it might be but I'm sure it will be because of who the guests are so they are Philippa Han and Moira Summers Philippa is I've met Philippa a couple of times honestly one of the most impressive individuals that I've ever met she's the CEO of Paradigm Norton which is a financial planning firm based in Bristol who I deeply admire they're one of my kind of gold standard people and firms that I aspire to be like at jackson's so she's the relatively new ceo but she spent i think 25 years of her life as a lawyer suing financial advisors yeah i love that i said that's where i met her i didn't because you want to me i went i went to a big meeting about uh defined benefit pensions and and um in port albert she was there and fantastic and she's just one of these impressive people is like i've got to listen to what yeah incredible really good so she and moira summers who is a psychologist if memory serves have written a book called The Fault Lines of Finance Why Good People Do Bad Things all about ethics and how easy it is to just step over the line and before you know it we're into sort of pretty deeply unethical and fraudulent behavior so it's a brilliant, brilliant book so I'm interviewing them early next week actually as we're recording this and that will be next week's podcast if you're listening to this that's a very confusing timeline but never mind it's going to be a great episode I hope you enjoyed it this week.

33:22Pete Matthew: We'll be back the week after that with another Q &A. Thank you, Rog. Cheers, Pete. Thank you all for watching and listening. We'll see you next time.