QA62 - Listener Questions, Episode 62

0:00Pete Matthew: Say to a client, okay, you just said these words to me, but your face is saying something completely different. Or your body language, or your wife is saying, is looking completely different to that. She's shaking her head behind you. You say you're confident in the numbers, and she's looking as if she's like a rabbit in headlights. So let's talk about that, shall we? You know, AI is not going to do that. Hi folks, and welcome back to another glorious Meaningful Money Q &A with me, Pete Matthew. And me, Roger Weeks. The glorious Roger Weeks. How are you doing? Yeah, fine, thank you. Autumn is here, or at least it will be by the time we record this.

0:27Pete Matthew: So can you sort of look forward in time, because we're recording ahead of time, have you lit your fire yet? We're just about to, I think. There is a certain inevitability about it. I quite like it, though. Yeah, and I'd rather light the fire at this time of year than put the heating on, because we don't need the heating. But, you know, just the fire going on, the wood burner, open the lounge door, the warmth goes through. It's like the house isn't cold enough yet, so you light the wood burner and immediately kind of die of heat exhaustion. It's boring, yeah. Yeah, and then you're like, okay, just two logs.

0:59And I suddenly find I'm dozing off again. It's too hot in this place. I don't need any encouragement to doze off on the evening.

1:06Pete Matthew: Right, we've got six questions to answer as usual. Where do people send their questions, Mr Weeks? Well, I think they send them to hello at meaningfulmoney.tv with the subject line podcast question, and we'll try to use them in future episodes. Yeah, still answering questions from May, I think. But as always, as we go through these, any notes or links, we will make sure they are at the show notes, which for this episode is meaningfulmoney.tv slash QA62. And also, if you're watching this on YouTube, help us out by liking and subscribing to the... Liking the video and subscribing to the channel.

1:36Pete Matthew: That makes more sense. You can't like to the channel, can you? I was checking my grammar on the fly there. Ever so glad I did. I think I covered it well. Yeah, you did. Nobody noticed. Nobody noticed at all. It does help us out, though. So thank you in advance for that. Right. Oh, I'm number one again. Okay. Right. This is from Louise. Hi, Pete and Roger. I've been listening to your podcast for years, and it's really helped me understand and get excited about personal finance. Well. Good. I'm sort of glad about that. If we've made you into a bit of a nerd, that now nobody wants to spend time with you, then I'm sorry.

2:09Pete Matthew: Okay, our situation is married couple, both 48, no kids, wanting to retire at 50 with a lifestyle we have costed to 40 grand a year. Happy to die with zero as no family to worry about when we are gone. Right, good context. Next. Can the maths really be this simple or am I missing something? Any risks you can spot that we've not thought about? So 50 to 58, use savings from ISAs. Currently 280 grand, but will be about 340 by age 50 using the ladder strategy. You don't know what it will be. There's some growth in there, but anyway, we'll come back to that. 58 to 65, drawdown from my SIP. On course to be 350 ,000 by 58 with two more years contributions and 5 % returns.

2:54Pete Matthew: 65 onwards, my husband's DB pension of 20 ,000 per annum plus what's left from the SIP and ISAs until 68 when we both get the full state pension. So another 24 ,000 quid. I can see the risk of a few lean years, 65 to 68, if we don't have any funds left in our ISAs or SIP. But other than that, it all looks too easy. Can you see any areas we should look into further. I'm worried that if we go see a financial advisor, they will say that we don't have enough, even if we do. Would really welcome your thoughts on this. Keep the podcast coming as I look forward to listening to every one of them. Many thanks, Louise.

3:30Pete Matthew: Good question, Louise. And mathematically, this does make sense. Yeah. If you ignore any growth going forward, you should still have enough money in these funds to cover you. Yeah. I mean, I assume she's, when she says on course to be 350, I presume she's paying more. Yeah, but assume growth between now and then. But essentially, the figures broadly work. I think the key issue here is inflation, isn't it? Yes. Yeah. You know, it costs you 40 grand a year now, but it doesn't cost you 40 grand a year in 10 years time, it'll cost you 55 or 60 ,000 a year. And so it's hard to kind of do those, that kind of maths in your head, or at least it's hard for me you could probably do it um so you know this is where kind of modeling does help but um there's bound to be some more things that we can talk about here yeah i think one of the things this is all subject to all going to plan uh you know and and as with everything you can't guarantee that no no wheels will fall off this bus um so you've got to say to yourself okay what will upset this before we get to that point in time so the next couple of years do you do you have some life insurance or critical illness insurance that will cover any gaps in the meantime, or even during those periods, because if something happens to one of you, then what happens to the funds?

4:50And they should still be there and passed on to each of you. But what happens if, I think you need to ask some of those questions, and you're assuming that growth is straight line and it's not going to happen that way, possibly?

4:59Pete Matthew: Yeah, well, no, it definitely won't. And you mentioned, I think, 65 onwards, it's husband's DB scheme. That's going to provide a good chunk of your income. Of course, if husband dies shortly after, God forbid, but if he dies early, then it won't be all of the pension. But probably your costs will reduce as well if there's only one of you and not two. So, yeah, Rod is right. The universe doesn't guarantee you an easy ride, so you need to kind of maybe build in some disaster planning or at least kind of fork in the road planning. Cashflow ladder you've talked about in the 50 to 58 use savings from ISAs using the ladder strategy.

5:44Pete Matthew: That's smart. That just gives you some protection against having to dip into distressed assets because markets are down. So that's pretty good. And you kind of just spending. Yeah, exactly. If you suddenly find that it's not going according to plan, instead of 40 you could have it 35 you know you could use the guidelines and say okay if it increases by this amount we'll increase the spending by a bit I mean the nice thing is once your husband's DB pension is in payment and your state pension they're all index linked anyway so that'll keep pace with what you need to worry about I think looking at the figures if you look at your ISAs you say they're going to be about 340, you've got to cover 8 years from 50 to 58 or 40 ,000 pound a year is 320 so you've got 340 bit of fat in there.

6:26And there should be some growth over that 80-year period as well.

6:29Pete Matthew: Yes. So that will help towards your 65 to 68. Yes. So there are bits there that should do the job for you. Yeah. I mean, on the basis of these numbers, it looks as if it would broadly work. If you really want to be sure, Louise, then... Actually, that's a terrible thing to say. You can't be sure. But if you want to be a little bit more granular and refined about it, then you can build a cash flow model, right? You can do this yourself. You can get it done for you. I think I mentioned this last time we had a Q &A as well. So a couple of options. You can either join Meaningful Academy and go into the retirement planning phase.

7:04Pete Matthew: All right. So that will obviously walk you through a bunch of stuff you need to think about as you retire. But crucially, it gives you a year's access to Voyant. So if you look at that, use the coupon code podcast and you'll get a bit of a discount on it. So you can build your own plan. Or you can go to meaningfulcoaching.co.uk and get a hold of my friend and colleague Alistair there, and he will build a plan for you around this stuff. And it will just kind of help you with some disaster planning. You know, you can build scenarios where things don't go quite as well in terms of investment performance.

7:36Pete Matthew: Does it still work? You can ask, actually, what could we spend? Not just start with what you are going to spend. You know, actually, could we spend 48 grand a year or 45? And it still works. So, you know, I think that would be, it would, it seems from your questions that there's just that little bit of nagging doubt. Is it really this simple? Is there anything we've missed? Cashflow modelling with an app which understands the tax situation particularly will help. Because obviously when you're drawing down from SIPs and DB pensions are paying out, then there's income tax is factored in as well.

8:08Pete Matthew: So that's what I would do. But otherwise the numbers seem to broadly add up from what you've told us. Yeah, they do. Yeah. And to be able to retire at that age, at that income, really good. Yeah. Yeah. Nice work. Yeah. Nice. Yeah. Well, I mean, not having kids does help with that. There's no doubt about that. Oh, yes. So Roger's agreeing with me because he's just married off his youngest daughter, having had four children all married. And producer Kate is looking at me with the evil eye. Yeah. But, you know, fair do. It's a great effort if you can retire at 50 and spend 40 grand a year. Yeah. Yeah.

8:42Pete Matthew: Fantastic. Fantastic. Question two, Roger. Question two of this from Andy says, Hi, lads. Oh, hi, Andy. Not been called a lad for a long time. What are your thoughts on using AI to gain projections on various investments, stocks and shares, ISA, pensions, etc., and even to sense check retirement options and tax-efficient withdrawals? I know that nothing beats speaking to an actual person to gain information and reassurance, but so far I have found information it has provided to be very useful. All the best, Andy. That's a question. Nice and short. Nice and short. And the answer is, yeah, you could use it, and it should do a really good job for you.

9:15Because the way that AI is built, it's going to be super useful more and more in the future anyway.

9:19Pete Matthew: Ah, not a doubt. And it's learning all the time. You know, there's new models coming out every few weeks, it seems, and each one's better than the last. So what we're seeing is a bit of a trend is that clients are sense-checking their advisors. Some friends of mine were talking about this. One of them particularly, he had a couple that had been clients for quite a long time, and they fed every document he'd sent to them, every advice letter that he'd sent to them over something like a 10-15 year relationship that he'd had with them. Now, fortunately, it came out and said, actually, your advisor's done a fantastic job for you.

9:52Pete Matthew: He's not one of our advisors. Yeah, no. You know, you've done an excellent job and all that. So it's like you passed the AI test. But, you know, this is going to happen more and more, and I think it should. It'll certainly keep us on our toes, right? you said specifically Andy using AI to gain projections on various investments yeah I mean projections are projections at the end of the day exactly we say okay your balance funds are going to grow at 7.5 % a year and you say to the AI tell me what it will be if it does 8.5 % a year yeah it's only going to work to the projections you're going to tell it to use yeah and even if you say well, okay, look at the performance of my portfolio over the last 30 years.

10:40Pete Matthew: You could, I mean, you could use sort of approximate to like a Monte Carlo thing. So it'll say, right, okay, apply a random year based on the last 30 for the next 30. But it's still just guesswork, right? It's just, and you could even ask it to do that like a thousand times and kind of aggregate the results. That's essentially what Monte Carlo modeling is. But I mean, it's still wrong. This is a projection, we don't know. It might be an intelligent projection, but I don't think you need AI to do that. I think with the right prompt, AI can do incredible stuff. I was telling you before we hit record, I had a client in Bermuda, actually, is UK, but was working in Bermuda and had done for a while.

11:24Pete Matthew: And he was in IT, I mean, like a seriously bright guy and really got this stuff. But he let me have a look at the model he'd built for himself. And it was like nothing I've ever seen. and even factored in the fact that they were, him and his wife were planning to move back to the UK and hence their tax situation would change. And it had this incredibly like animated thing of like flasks, it almost looked like a scientific experiment. So like flasks of money. Oh, right. Pots of money. They'll go down and down. Yeah, and where to take it from in each year. It was clever. I edited myself there. And just, you know, that's going to be happening more and more.

12:02Pete Matthew: I've already had some emails. I'll say I've essentially built myself a version of one in AI. And it's like, cool. You know, AI can be wrong. I don't doubt that it's going to be really, really helpful for a lot of people in the future. But it can still be wrong. You can't trust everything. It's like, you know, in China, they've got these self-drive cars now. So you can get in the car, the taxi, and it'll take you somewhere. It's like, I know it should work fine, but am I going to trust it? With my life. With my life. So, you know, so these things, you probably end up saying, okay I've done all this and go see an advisor and see the words of their eyes and say can you reassure me all this yeah I agree so I mean I asked a question of just chat GPT a super quick question ahead of my academy live call the other night and I basically said can you just give me a rundown of the most recent of the primary rumours ahead of October's budget right okay that was basically the prompt right and he came back and said just to confirm the budget's in October not November I said October's budget and the Chancellor isn't Rachel Reeves anymore I was like I never said anything about Rachel Reeves and it was bizarrely off you know and it's like hang on this is the latest chat DPT model and it was a very simple prompt give me the main rumours around October's budget and it said the budget's in October not November I know that's what I said and it's not Rachel Reeves anymore.

13:32Pete Matthew: It was bizarrely weird. Like it obviously had a freak out. And what you don't want is to make a lifetime decision around your retirement if your AI decides to hallucinate like that. It's not there yet. Or Arnold Schwarzenegger walking through the door. You know?

13:48Pete Matthew: It was bizarre. And so I'm not even remotely worried about AI taking my jobs because I still don't believe for a very long time people will want to make the kind of, the ultimate financial transition most of us make and that we spend most of our time in, the transition into retirement. I don't think people want to make that decision purely on the basis of kind of inhuman response, which may be wrong. Yeah, because actually what we do is very, very human. It's not necessarily A plus B equals C or one plus two equals three, in my last math question. but the fact is how would I feel about this and what do I need to worry about and you know taking that off clients is what we do a lot of.

14:34Pete Matthew: It is and you can ask AI to kind of you know sense check you and even you know act as a kind of behavioral coach but it's not going to be like a real human who's experiencing that not even any remotely time soon. Because, you know, I will quite often say to a client, okay, you just said these words to me, but your face is saying something completely different. Or your body language or your wife is saying is looking completely different to that. She's shaking her head behind you. You say you're confident in the numbers and she's looking as if she's like a rabbit in headlights, terrified about this massive decision.

15:12Pete Matthew: So let's talk about that, shall we? You know, AI is not going to do that. And a good financial planner, a financial coach, will. So I think my role will be here for a while yet, but it's just going to be augmented by AI, which is very exciting. Right, we'll just get off the soapbox, step to the side gently, and place the soapbox out of the way. Right, okay, this is question three from Mike B. Hi, Pete and Roger, love the show. A couple of linked questions for you, if I may. It's cheeky. Cheeky, Michael? Two linked questions. Perhaps one more for Roger. More cheeky. And his direct experience. All hypotheticals, for me because I'm 10 to 15 years away from retirement.

15:51Pete Matthew: How does semi-retirement work? Or even perhaps returning to full-time work after retiring? Do I just declare it on a tax return? Easy enough. What about national insurance? I know that once you've declared retired, your future pension contributions are capped. However, I was listening to a pension briefing from my DC provider and they seem to suggest the 25 % lump sum doesn't trigger the contribution limit. So why wouldn't I draw £20 ,000 a year out of the lump sum for£57 ,000 and put it in my ISA? All the best might be. There's quite a bit in there, actually. There is, actually. A couple of misconceptions.

16:27Yeah, once you've declared you're retired, I don't know who you declare you're retired to. Your employer. Spouse, probably. Yeah, I mean, you can declare you've left your job on your

16:40Pete Matthew: tax return, obviously, if you're... I mean, that's what P60 is for. Exactly. But if you're a director and stuff like that. But your future pension contributions aren't capped at all. The pension and you retiring, in the word of commas, are two completely separate acts. Yep. The pension is just a product in the background that sits there until sometimes you want to access it. So, no, when you declare yourself retired, you're just saying, I'm no longer doing that job. It's like I declared I'm no longer going to be a financial planner, charter financial planner, I'd like to say. for Jackson anymore, but then Pete dragged me back into part-time work.

17:16Pete Matthew: Yeah, exactly. That's the example, isn't it? Yeah, a prime example. That's why you latched onto me, I think. Seminary retirement works in a way that, you know, if you could set up your own business, you have to declare that to the taxman. So self-employed, yeah. Self-employed. So you say, I'm doing this job. I can't remember if they, you have to give them some sort of guesstimate earnings. I don't think you do. Just say, I may be self-employed. and all you do when you do your tax return you add your self-employment as a separate line effectively and say I've earned this now based upon that then they may or may not charge you national insurance so it depends on your thresholds but you can earn quite a bit without paying national insurance yeah and it's going to get it's going to get both easier and a bit more challenging because of making tax digital yeah so I think it's currently this year yeah I think it's coming out already that if you earn over 50 ,000 self-employed you've got to do MTD you've got to use an app like Xero or FreeAge or whatever and submit quarterly kind of mini returns alright and it's going to go down to 30 ,000 I think next year and they haven't yet set in law when the next threshold will kick in but it's only a few years away anything if you're self-employed you're going to need to use a proper accounting app and submit to the revenue quarterly so you know but as regards mine literally I retired from Jackson's as an advisor and a director.

18:43I then spent a little, very little time doing nothing and then encouraged me to come back and do this, which I love doing. You can say banked. But all I do, when I do my tax return now, I just put a line saying I'm self-employed and it says, okay, what have you done? What's your net profit? All that sort of stuff. So that's not difficult. And they then tell me how much national insurance I need to pay. But that's just basically how that goes.

19:08Pete Matthew: Yeah, it is. The pension contributions are capped. What you're talking about there is the money purchase annual allowance. And so that is not triggered by you retiring. It is triggered by you taking taxable benefits from a DC pension. So if you just take the tax-free cash, your pension briefing person was correct. That doesn't trigger the money purchase annual allowance. The MPAA caps your future pension contributions at 10 grand a year, right? Right, okay, which is still a decent sum. Still a decent sum, really. Why wouldn't Mike draw 20 grand a year out of the tax-free cash and put it in his ISA?

19:44Pete Matthew: It's his last question. Yeah, I can't see any reason why not to do that. Our initial thought, wasn't it, that if you leave it in your pension fund, the whole thing grows and your latent tax-free cash grows. But the same can be said. If you take it out and put it in the stocks and shares of ISA, it'll still grow outside. Yeah.

20:07I can go either way. If I go back to one of the questions we had in the last podcast that we did about question and answers, somebody said about what happens if you go into care home. So I guess once the money's out tax-free and it's sitting in a tax-free ISA, then at least you've got access to it. You're then not having to draw a bigger amount for whatever the reason, which may trigger some income. I don't know. But yeah.

20:31Pete Matthew: Straightforward enough. Yeah. I think we'll put some links. There's some gov.uk links and stuff. We'll make sure that they're in the show notes for you, Mike. But good question. Question four. Question four. This is from Joao. Beautifully pronounced. Yeah. Well, Pete put a prompt here. I suppose it's pronounced. The pronunciation. Joao. I had to look it up. It says, hey, Pete and Roger. Hey. Hey, Joao. First of all, thank you so much for all the free information you provide. I just moved to the UK and your podcast has been an invaluable source of information and has helped me navigate the financial aspects of living in the UK.

21:02Love that. Thank you. Really handy. Yeah. With the new salary sacrifice rules for pensions coming in in 2029, does it make sense to move any additional pension contributions above the£2 ,000 limit to a SIP instead of an employer plan? My employer plan has different fund options, but fees are high. 1 % per fund plus 0.3 % management.

21:21Pete Matthew: That's quite punchy. So I'd rather be with a low-cost provider. I'm currently getting my employer match and contributing extra to save on income tax and NI. But the new changes make me think I should make the additional contributions to the SIP directly as I get no NI savings. Am I missing something? Is there anything else I should consider? Best, Joao. You're not missing anything at all. No, I've just moved to the UK and yet I've got a deeper understanding of the personal finance system than 98 % of the population. So good effort, Joao. I mean, 2029 is a way off yet. You know, will we have a new government by then?

21:54Pete Matthew: Or roundabout then potentially sort of May 2029 or November 2029. Trump hopefully should be gone by then. Yeah, I'm not sure he has much influence over the NI rules, but maybe he does. Look, so it's a way off yet. You're adding complexity by adding a SIP, but once those new rules kick in, there's very little benefit in salary sacrificing over the 2000s. If you're not going to get the NI benefit, you're better off contributing to a SIP, I would have thought, particularly if you're going to save fees. It was always about the NI at the end of the day. You save on the checks, which you get anyway, and you save on the NI.

22:31and what tended to happen is because the employer has paid less NI, they would often give you a bit of a boost as well. So that's not going to happen from that point in time. So there's no reason why you should do that. But 2029 as Pete said, is still a way off yet. So if you can salary sacrifice right through to then, then fill your boots.

22:48Pete Matthew: Yeah. Because you'll be getting the NI and the income tax savings. Yeah. But after that, rethink. But I wonder if it'll change before then. You turn on your government, maybe. Well, yeah, it could be. But amazing. Welcome to the UK, Joao. You should become a financial planner. Okay, this is from Susan. Question five. Not too long. Okay. Hi, Pete and Roger. Your podcast is one of my must-watch YouTube channels, and I'm working my way back through them gradually. My husband and I are in a bit of an unusual situation in that we lived abroad for 31 years, returning to the UK in 2020. More by luck than investment decisions.

23:25Pete Matthew: Thanks to businesses and home purchases, we came back with significant funds. We received very good advice regarding investing when we moved back, and I've done a huge amount of research and feel I am pretty well-educated regarding our future finances. I do love a spreadsheet. We have been bed and ISA-ing each year to move funds from GIAs into ISA, as obviously we couldn't put the full pots into ISAs. I don't strictly have a question, you do actually towards the end, rather than sharing what we are doing. If you intend or need to withdraw funds from your GIA anyway, surely it's a good idea to withdraw the dividends as they occur, as you've got to pay tax on them anyway, that's true.

24:02Pete Matthew: If the dividends are as much as you need, you don't then need to sell any investments and risk exposure to capital gains tax. Also, if the dividends are more money than you need, then dropping that money to an ISA also works, or using the gift from income option for the kids. Just to add a question, I do have one regarding inheritance tax. If parents gift a child money, say to help with the deposit for a house? Am I right in thinking it will be assumed for inheritance tax that it was gifted 50-50 by the parents? What happens if one parent dies within seven years? Everything would pass to the spouse free of inheritance tax, but how would the gift be treated?

24:39Pete Matthew: Would the gifted money drop out of the estate still seven years from the gifting, or is there some other rule? Thanks and keep up the good work. Best regards, Susan. I think what she says about taking income from the GIA makes sense in that particular circumstance. Yeah, it does. Yeah, I mean, if you're paying income tax on it anyway, why not just have it drip out and help your income needs? I mean, if the dividends are more than you need, there's got to be something to be said about potentially changing the funds so you have some... Lower yield. Lower yield ones. And there's no problem in paying capital gains.

25:14At the end of the day, it's a tax like any other tax. So, you know, if you were to have... You think I'll try and gauge how much dividend you get get from the yielding it from what funds and stuff like that but um but yeah gifts from that is fine you know from uh gift from income exemption so that's all fine so this is the actual question

25:33Pete Matthew: and meet the question really is about the gifts and yes gifts are made by individuals not couples yes so and remember this is assuming the revenue like start asking questions after you've gone so it's the executor's job remember to write down any gifts and to report them correctly the revenue you always assume you're telling the truth, but reserves the right to check. And if they check, you don't want to find that you've been lying or your executives have been lying. So gifts are made by individuals and it would be assumed really that any gift was made 50-50. I mean, unless, for example, you could clearly show it came out of just one parent's bank account.

26:09Yeah.

26:09Pete Matthew: That'd be transferred from one parent into the joint account and paid out the joint account. Yeah. So if you could show an audit trail, you know, to a different outcome, then, then yeah. So, So, and if one parent dies then within that seven years, we must be careful with terminology because people say, well, the gift's just added back. No. The tax is calculated, right? What was a potentially exempt transfer, a pet, becomes a failed transfer if the person dies within seven years. But of course, if they die between sort of four and seven years, there's a tapered amount of tax to pay. But ultimately, the gifts are made and they take up the first chunk of the nil rate ban.

26:50Pete Matthew: So if it's a gift made within seven years, the transferred nil rate ban to the surviving spouse would be reduced because the gift takes up the nil rate ban first. Seven-year rule is largely relevant then, certainly in terms of the tax tapering, because it used the nil rate ban and hence no tax. It means more tax on the rest potentially when the second spouse dies. So it is a little bit more nuanced than a lot of people think. But the nice thing is you're thinking about it and saying, okay, we were happy to give this money to the children to help them. And it's so much nicer to give the gift whilst you're alive and see the benefit of that go to your children than it happens after you're gone.

27:29Pete Matthew: Oh, yeah, yeah. Give with warm hands, not cold. So, you know, seek legal advice or proper financial planning advice if you're in any way unsure. There's a lot of benefit in getting it right at outset and recording it correctly. Decent audit trail. so whatever you want to happen and whatever has the best result for you as a couple. So for instance, if there was like quite an age disparity between a couple, it might make sense, all things being equal, for gifts to be made by the younger spouse, right? But you need to evidence that very clearly, right? Because if the revenue come knocking, you want a pretty watertight case.

28:07Pete Matthew: Right, question six. Question six, the last one is from Josh. Or Josh. Josh, ooh. Yeah, okay. So, hi, Roger and Pete and Nick and Kate and anyone else I've forgotten. Ah, it's nice. Shout out for Kate, yeah. This is slightly different from the usual questions that you answer on your podcast, so you're at least safe for me asking for financial advice on anything. Phew. On a number of episodes, you've expressed annoyance at constant changes being made to various forms of tax-efficient savings, such as pensions and ISAs. Have we really? It doesn't sound like us. On the assumption that you would agree the current legislation isn't perfect and therefore at some point will need a change, what would be the financial advisor approved method to push through any needed changes to these kinds of accounts such that tax on these accounts can be changed if there are genuine good reasons to change it but it doesn't become a political football for consecutive governments.

28:57All the best, Josh. That's really, really good. And it's one of the things we scream and shout about when things change. It's like, why are they doing that?

29:06Pete Matthew: Why are you changing it? Yeah, and usually it's pretty short-sighted and they'll change something. and say, well, we've costed it out. This is going to, you know, create another£20 billion of capital gains tax over the next sort of parliament and a half. But what they don't realise is that incentives drive behaviour. So if you're going to tax something, you know, people stop selling stuff. Like you say, if you're going to change capital gains tax, people will stop selling things. Yeah. You know, or, you know, change their behaviour so that the tax take isn't, you know, what it was intended to be.

29:39Pete Matthew: the issue for us I mean you know the plus side is it keeps me in work yeah keep changing the rules we have to keep changing things for people and obviously it keeps us in work which is quite nice but it makes it really difficult to plan particularly long term when the games you know the rules of the game are continually changing yeah and the thing that annoys me is that the rumours of the rules changing impacts on people's decisions as well you know there's this every year well going back ever since is it 2006 pension simplification when tax free cash the words tax free cash was changed to pension commencement lump sum yeah they've removed the words tax free they've removed tax free that means at some point they're going to tax this well we're 20 years down the line now but every you know in a few months before the budget it's like oh I think they might be going to tax the tax free cash and it's going well it'll be 15 % or they'll remove it all together and then people take massive decisions on their finances based upon that rumour.

30:41So what I would love, and it's never going to happen, is that each political party would say, look, we're never going to touch tax-free cash. The main staple that people build their finances around is having this tax-free cash. They go without during their lifetime and not spending the money they want to because they want to have decent retirement, and that includes this tax-free cash. Now, it would be a massive political mistake for any party to say we're going to remove the tax-free cash or whatever because it's... Yeah. People have been planning for 10, 20, 30, 40 years. I understand if something stupid comes along and upsets the whole financial advocate for the country, they would need to take action.

31:21But if they just said we're never going to touch the tax-free cash...

31:24Pete Matthew: It would chill people out, wouldn't it? Yeah, we might alter the level of tax if you get going in. We might alter the threshold of how much you... Yeah, and your allowance and stuff like that. Fiddling with those things. But we'll never touch the tax-free cash, it will make it far, far relaxed with people. Okay, that's never going to be removed. I know that's allowed for my planning. As we record this, we're about four weeks away from the next budget. This will go out about 10 days before the budget, I think. And I mean, already, we're getting questions about, you know, should I take my tax-free cash?

32:00Pete Matthew: Is the Chancellor, as if, you know, we've got like a hotline to number 11, is the Chancellor going to change this? you know back in 2024 some advisors were suggesting that their clients take tax-free cash ahead of the budget that year and then using the cooling off rules to undo it when nothing was changed in 2025 all the pension companies would say well not having that because it's obviously a massive amount of working cost so and in 2025 remember the budget was really late so by the time it came along The rumor mill was just so loud and noisy. But some advisors actually recommended their clients take that for cash on the back of a rumored change and then were sued by their clients.

32:47Pete Matthew: I mean, like rightly so. I mean, that'll teach them because it's a moronic thing to do, I think, if you'll forgive the sort of emphaticness of that, to make such a massive lifetime change, an irreversible decision on the back of a rumor. Yeah. It doesn't make any sense at all. So for me, the changes I would like to see, I would like to see essentially retroactive changes outlawed. So let's just say we're going to make changes to pensions from like October 26 when the next budget is. But any changes can't apply retrospectively. So any money you've put into a pension, any planning you've done on a pension to that point, the rules stay as they were at the point at which you put money in.

33:35Pete Matthew: That's what I'd like to say. It's never in a million years going to happen. It would be very complicated. Can you imagine? This is between like 2022 and a 2026 pension. It'd make the exams challenging, wouldn't it? Yeah, and you think about the change in IHT laws. They're coming next year. How many people will be funneling money into pensions, knowing they're never going to spend it. But actually, it's a great IHT wheeze. And the government's just changed the rules. It's like, hold on a minute, I've thrown that money at it. Like you say, I can understand from now on, if I carry on funding, that doesn't count.

34:12How they'd work, I don't know.

34:13Pete Matthew: Well, you'd just have to have a different port. You'd have to have like a post-October 26 pension port. And that's in your estate. But anything that was in your pension to the point, to budget day 2026, is not subject to IHT. But I mean, of course, they'd never change anything then, because there wouldn't be any actual benefit in doing it for decades to come. No. It's easy for them to change. I mean, the potential tax take on bringing pensions into the IHT regime is just bonkers. Yeah. It's got to be huge, isn't it, really? Yeah, but I mean, you know, people use more allowances and stuff like that, I guess, but it will be crazy.

34:46The one thing that, if I latch onto another one now, really, for me, would be is when the government's decided to make a change to lobby providers and advisors saying, okay, if we did this, how would that affect your client's decisions going forward? Because they bring in these rules saying, that's happened and there's unintended consequences. As a result of that, this happens and people don't pay in. Like proper consultation. Yeah, proper consultation.

35:11Pete Matthew: I'm sure they pay lip service to that. They'll say that they've consulted the industry, but they ignore them. There's been a huge amount of lobbying by the industry and by consumer groups. Because when pensions come into the IHT regime next year, originally was mooted a six-month window to calculate and pay the IHT, so six months after the date of death. Well, I mean, people are saying that's just not long enough. There's a whole load of work that needs to be done in a very short period of time, and particularly if people have got disparate pensions, they've got half a dozen different pots, you've got to get all the numbers in, as well as everything for the rest of the estate, calculate the tax due, apportion it to each pot, and then instruct the pension companies to pay it and have it been paid all within six months.

35:58Pete Matthew: And loads of lobbying, further consultation, and the government will go, nah, we'll keep it. Six months it is, and that's now in the law. But the stupid thing is that a simple estate can take six months. Yeah. So you're thinking that people that would have done this have got really quite substantial estates. It's never going to be done within six months. It lends it massively to pension consolidation, actually, which, again, will keep us in work, which is quite nice. but there may be reasons why you might want to keep two or three or more pension pots. I can't think of many reasons, but now there's a really compelling case to simplify, to make life easier for your executives and to avoid interest charges.

36:36Yeah. I think I'll be dead, though. I don't care.

36:41Pete Matthew: Well, you won't care. No, it's like, how much do you like your executives? If you don't, then really just have loads of pots everywhere and really just wind them up. I think, Josh, we're not going to have the right answers for you on this. But we do complain all the time when the government tweaks things. It's like, had they not think of how that's going to affect everything else down the line. Law of unintended consequences. They don't seem to abide by that law, do they? No. And you did mention about limits and allowances increasing by inflation every year because, you know, IFT limits and stuff.

37:10Pete Matthew: Well, yeah, I'd love to see that. I mean, it makes it complicated. but I mean, you know, I can't remember if the, I think if the nil rate band since it's been frozen had increased, it'd be, I want to say it's something like five or 600 grand. And yet it isn't, but it's backdoor taxing. Yeah, it's more people who dragged into the tax threshold. Fiscal drag, they call it. Yeah. Yeah, yeah. So it's like, well, we haven't put tax rates up, but we've kept the boundaries where they are for 20 years. Thanks a bunch. Yeah. My house has gone up by 100 % in that time. Yeah, yeah. So they've been dragged into it, you know, whatever.

37:41Yeah, for sure.

37:41Pete Matthew: So, yeah, anyway, let's... So although we didn't have the answer to that one for you, Josh, we hope the answers to all the rest of the questions were helpful. I'm not sure Josh was after an answer there, really. No. He was after an opinion. Yeah, and we probably gave it. Give that in space, yeah, yeah. So, yeah, I hope they were helpful. If they're not, then just please keep throwing other questions to us at hello at meaningfulmoney.tv with the subject line podcast question, and we will try to include them in the future. We will, before too long, hopefully, but that's it for this time. Notes and links are at the show notes, meaningfulmoney.tv slash QA62.

38:11Pete Matthew: Hope you enjoyed our blokey banter. Thank you so much for listening. Thank you, Mr. Roger Weeks. Cheers, Pete. We'll talk to you next time. Cheers.