Is it time to dump your Premium Bonds?

0:02Welcome to This Is Money podcast sponsored by Charles Stanley Direct. I'm Georgie Frost and joining me and Helen Crane today is Tanya Jefferies. And coming up, as the prize fund rate is slashed again, is it time we bid a final adieu to premium bonds? And if so, where do we go? Also today, is this a new tactic to get even fewer of us visiting our local bank branches, if we still have one, as Lloyds refuses to hand cash out to a customer, telling them they need to use the machine outside instead. Plus, can your bank stop you paying your builder in cash? And can you get in trouble for it? Crane is back on the case, this time helping a vulnerable Ovo customer.

0:42We look at the cost of putting off your pension in your 20s. It's not pretty. And would your family fritter away their inheritance? They're likely to be more careful than you think. Don't forget you stay up to date with all the latest breaking money news. Just go to thisismoney.co.uk or download the app.

1:24your way. Take control today with Charles Stanley Direct. Sign up now.

1:30Helen Crane: Investment involves risk. But first, the nation's favourite savings product has just got a little less generous, or it will do very soon. But will we search elsewhere for better returns? Now, the prize rate on the supremely popular premium bonds will be slashed from the August draw, and that is the fifth cut since March 2024. NS &I says the rate cut reflects the changing landscape for savings. So is it finally time? We talk about it a lot on the pod, but is it finally the time for the love affair to end and for us to move on to past as new? Just a quick straw poll. Who here has premium bonds? Hands up.

2:10No one can see this because it is obviously a podcast, but I am putting my hand in the air. I'm the only one putting my hand in the air. There's a lot of shaking heads. And that's the end of the straw poll. Just me then. Helen, why not for you?

2:25Helen Crane: I know other people on the This Is Money team do have premium bonds. I imagine if you had a different set of people here, you might get a full house of premium bonds holders. For me, I just don't get it, really. I'm fine with earning interest in my boring little easy access account. And I, you know, I would rather get that little bit of interest every month than have the excitement of winning a prize. It just doesn't hold that much sway for me. And, you know, when you look at the figures, so many people who hold premium bonds have never won a prize. About two thirds of premium bond holders have never won a prize.

3:01Wow.

3:01Helen Crane: It obviously depends on how much you have. And if you hold more in them, you're much more likely to win. But for me, the chance of holding money there for years and never getting anything. I personally just don't get it. However, plenty of people do absolutely love them. 22 million people in the UK have premium bonds. So don't listen to me, listen to them. They're clearly a very popular product. So not for me, but clearly for plenty of other people. Do you play the lottery? Very occasionally. I play the lottery when there's a big prize and everyone else is playing it, which is probably the worst time to play the lottery.

3:36Right. Yeah. OK. Tanya, you a slow and steady wins the race kind of person or are you a bit more of a free son of excitement with your savings product? I'm really with Helen with maybe a little bit more added apathy about the whole thing. I really hate personal admin and the thought of having another account and having to faff about with it doesn't really interest me. I'd have to have an instant access cash isa as well, I think. And so therefore you're just doubling the hassle. And like Helen, I don't really see the point. I'm not really excited by the prize. I don't pay the lottery either. Some members of my family absolutely love them.

4:15And my dad bought some for my niece and nephew when they were kids. And he absolutely adored them. And he was always winning prizes, to be absolutely fair. He was always telling me, oh, I've won another 25 quid. He never won any big prizes. and he's not likely to or he's less likely to because the rate's changing again exactly so

4:39Helen Crane: the ns and i obviously as as other banks do with their interest rates they tweak the uh what's called the prize fund rate every now and then so the prize fund rate is it's quite complicated i think we've explained it on the podcast before but essentially it's the average return that a premium bond saver would receive throughout the year. It's being cut from 3.8 % to 3.6%. The odds are the same. So you still have a 22 ,000 to one chance of winning. I mean, sorry, just saying that figure is the chance of winning is so low, 22 ,000 to one. So those odds are staying the same. However, there will be fewer big prizes.

5:20Helen Crane: So after this change to the prize fund rate, there'll be four fewer£100 ,000 prizes. So that's going from 79 to 75. There'll be less£50 ,000 prizes as well. So there'll be 151 instead of 159. 15 fewer£25 ,000 prizes and 38 fewer£10 ,000 prizes. The two big ones, the two 1 million jackpots are staying the same. But you've got essentially less chance of winning a big prize. And NS &E says this is happening because the changing the savings landscape is changing which is true you know rates on meaning well what they mean is that interest rates are going down on normal savings accounts I think so they're alluding to the fact that obviously as the base rate has been falling over recent months savings rates have been going down however obviously last week the base rate was held at 4.25%.

6:18Helen Crane: So I think NS &I is a bit a little bit cheeky here, you know, they say, oh, you know, savings rates are going down, which, which they are, but they're not going down too much right now. You know, it's not like the base rate has just been cut. And we've seen a real dip in savings rates, they're kind of holding relatively firm for now, you know, the interest rates will probably be cut again, and they will go down. But right now, it's Yeah, it seems a bit odd that Ennis and I said, oh, you know, that savings rates are falling because they're kind of, you know, it's on a bit of a pause at the minute.

6:51Helen Crane: But clearly, you know, it is the direction that things are going. I do think people will be disappointed by this. Obviously, as we said, lots of people hold premium bonds. But I do wonder whether little tweaks to the rate kind of mean, make that much difference to people. It's a bit of a, I was gonna say it's a bit of a cult premium bonds maybe that's a bit strong but I think if you like it and you like the lottery element you like the excitement of uh you know checking the results uh every every month then you know I don't know if the tweak in the rate is going to make a huge difference to whether you decide to keep holding them or not it's you know it's premium bonds are quite marmite aren't they you either love them or you don't and if you love them will this little tweak make a difference to you I don't know.

7:37So why do I use it? I quite like the excitement of it, but I also don't like risk, as it were. So you don't lose your money. I mean, yes, inflation erodes its value if you don't earn anything on it, but it's not quite like doing the lottery, is it? But it's the same sort of excitement. Simon uses it to have his emergency fund in it. I know that. And I think Lee's just holding on for dear life because he's not won a prize in two and a half years. And I think it's sort of some sunk cost fallacy. He can't move it out now just in case he wins the next big one.

8:08Helen Crane: No, he did win one. He finally won one. No! Yeah, it was a small one though. I think he won like£25. He was so excited. He was so... See, that's what that two and a half years, I think it's even longer than two and a half years now, was worth it. You know, that£25, he's never going to take that money out, is he? But I was interested to look at the stats about cash Isis, Tanya and premium bonds. So I think it's about 100 billion is held in cash ices. About just under 130 billion is held in premium bonds. Average amount in a cash icer is around 13 ,500. The average amount in premium bonds is about 5 ,000 to 6 ,000 pounds.

8:50The reason I mention this, obviously, Tanya, is because they both have that sort of tax-free benefit, as it were. We have a budget coming up. You know where this is heading. The government wants us to invest more. And they're looking at cash-lisers and lowering the limit. And that's a lot of money, that 100 billion figure that they'd love to get their hands on, wouldn't they? Or have it invested in UK companies, whether it would or not. Well, I'll ask you your opinion on that one. But it makes me wonder whether if they do reduce it, people will just end up putting more into their premium bonds.

9:20I think it's one of those things that people do see the value of it. They feel it's like more safe than other things, but you also get that excitement. I don't think a lot of people and there's also inertia, isn't it? A lot of people are going to do much about it. But what do you think, Tanya? Are the government going to get their hands on premium bonds as well? well if the rate is going down i suppose they might think that's enough of a deterrence effect at the same time as they potentially could clamp down on cash isas so maybe it's already happening my stance on the cash isa issue is i think people should be have the freedom to decide what they want to do with their money to as great extent as possible i'm actually prepared to pay taxes I'm I think probably more in favour of paying taxes than a lot of people because I do see the social value of it frankly but what I don't like is social engineering that influences what I can do with my own money and if I want to keep my money in a cash iso rather than invest it I know all the reasons to invest it I write about investing all the time and I know all the good reasons to it there are some reasons that people have for keeping money in a cash iso especially if they're going to buy something big soon or they're saving up for a deposit and it's imminent and they need it to be in cash.

10:45And really, I just think it will be a huge mistake if the government tries to set too many rules on something which really should be down to us. Our personal savings level should be down to us. Helen, if people are thinking of bidding a fond farewell to premium bonds. Where else could they look? There was an article about Zopa recently in their new savings account.

11:13Helen Crane: Yeah, Zopa is a really interesting one. Zopa is the neo bank, as we call them, a online app focused bank. It actually grew out of a peer to peer lending company from a few years ago, but it's now sort of relaunched as an online bank and used to be just for savings accounts. So we'd often see them at the top of these of easy access cash iso tables they're offering some quite competitive rates but they've now launched their first current account which has all the benefits we tend to see with similar accounts like monzo and starling you know it has free spending of broads and things like that but interestingly if you sign up to that account you also get access to a regular saver account which offers a 7.1 percent interest rate which is very tasty rate you can only put£300 a month into that account, but it's by far and away one of the best regular saver rates out there.

12:12Helen Crane: Also, 2 % interest on your current account balance. So if you're looking to switch current account and also get a really decent regular save rate, that's one to look into. More on the savings side, say for people who might have quite a large balance in premium bonds, they're looking to switch. If you are looking for that sort of tax free element, cash ISA rates at the moment, so easy access, you can get up to 5.44%. So that's with CMC Invest, although that does include a bonus rate for three months. So it will go down after that. chip as well has got a five percent rate on a cash isa so you know there's there's still some some decent rates out there to be had if you're looking at easy access accounts the best rates are around five percent cahoots atom bank five percent four point seven five percent so if you are looking for that regular interest rather than your your exciting prize then there are some there are decent accounts out there if you're looking to switch.

13:19Just a quick one. So we've got two aunties in the house right now. Before we leave this, because premium bonds are famous because they're great gifts, aren't they? Grandparents love giving it to their grandkids. Is there anything else that they can do except cash? I suppose you could still do cash, but we'll get on to some of the problems with cash in a minute. What can us aunties do?

13:44Helen Crane: I mean, you can set up something like a junior ISA, you know, agree to sort of pay into it regularly or put a lump sum in there. Set up a savings account on their behalf, I guess, is the other main... That has to be done by the parent or guardian, right? But we could then get the details, right? Yeah, exactly. You could agree to sort of pay into it. I suppose if you were sort of feeling particularly adventurous, you could stock some shares or something like that. Obviously, can't be owned directly by the child, but, you know, do something like that on their behalf. Any other ideas, Tanya, as a genuine auntie?

14:16I'm not a very responsible auntie. I think the fun of being an auntie, you don't have to be. So I really favour handing over wads of cash and letting them do what they want and instructing parents. This is what goes for my goddaughter too, in instructing parents to let them buy something fun that you wouldn't allow them to get otherwise with it. And then just never asking, never inquiring, just letting them get on with it. So no, I don't get involved in junior ISIS or anything like that. Just hand over generous amounts of cash. I'm the same, except I got told off for giving my nephew pocket money because he was just going straight to the shops and buying sweets.

14:55And I had the policy as you enjoy your money. Have fun with it. My sister didn't agree. Anyway, talking of cash, it's a miracle to even find a bank branch nowadays in your local environs. So imagine how frustrating it must be when you actually go into one which is still in your town, but it refuses to do what you think is probably even the most basic of service. Now, you have a reader who has gone in contact. They went into the local branch of Lloyd's Bank in Kefilly to withdraw£600 in cash at the counter. Now, unfortunately, due to new rules, apparently, they were told they had to go outside to get money out of the cash machine there, which let's be honest and no disrespect to Cofili I've never been so I'm not entirely sure but I wouldn't exactly feel that comfortable taking that amount of money out of a cash machine but I have actually needed to get quite a bit of money out of a cash machine recently to buy a dog actually legitimately but they wanted cash I just remember we were going around like four different cash machines because you could only take like 200 pounds out 250 pounds out so I didn't even know you could take that much out of a cash machine.

16:08Explain what's going on here.

16:10Helen Crane: I think the important thing about this story is that, as you said, there's bank branches are disappearing at an absolute rate of knots. And when someone does go to a bank branch, it's really important that the staff know what they're doing. They give you the right advice and, you know, you get done what you need to do. And this hasn't happened at all in this case. It seems like the person who they spoke to at Lloyd's just didn't didn't really know the rules so they wanted to take out 600 pounds and they were told that if they wanted to take out money at the counter it had to be a minimum of 800 pounds so they were told as he said to go out and do this uh outside of the cash machine which I agree I mean seems insane I you know maybe it's just London but absolutely not um yeah I would not be going i mean i'd be scared to take 20 quid out of the cash machine let alone yeah yeah yeah um and so essentially this person was was given the wrong information so lloyd's hasn't actually changed the amount that can be withdrawn at the counter they haven't set a new minimum what has changed is the amount that people can take out from the atm so no rule change at the counter it sounds like this person got a bit confused so the new rule is that customers can take out 800 pounds in cash at the atm so yeah exactly so banks set different limits on how much you can take out an atm at any sort of given time um and at loyce that's sort of been increasing so it's previously 500 and they've now taken it up to 800 which you know useful for people like you who need a lot of money to buy a dog um it's not a regular current i assure you exactly so uh but but the point is this person should have been allowed to take out money at the counter with with sort of no limits they they should have been able to go up and take out their 600 pounds at the counter they definitely shouldn't have been told that they had to go outside so the rule changes with ATMs it's not with the it's not with the counter withdrawal however you know that there are some rules if you are taking out large amounts so it's worth before you go checking with your bank because you sometimes have to give advance notice if you're taking out a large amount.

18:29Helen Crane: Often the limit is around£5 ,000. So if you need to take out more than that at the counter, you might sort of arrange it in advance with your bank, partly because banks actually just don't hold that much cash anymore. Cash use has gone down so much that if you need a particularly large amount, and it's maybe a small branch, but they actually might not have the cash on the premises, that's how bad cash use has got. So, you know, if you do need to take a large amount of money, always worth checking in advance. Meanwhile, we're going to stick with cash because it's another one about taking money out of a cash machine or taking money out of branch here.

19:07But this is slightly red flaggy for me anyway, as a story. Basically, your reader is having builders in to do some work on their house. They've asked the builders to be paid half the amount in cash, which would work out at a whopping£40 ,000 that they want paid over eight weeks installments. That's£5 ,000 they'd have to get out of the cash machine, which wouldn't, or go to branch every week. Now, obviously, your reader is a bit suspect about whether this might be some sort of tax evasion thing, but they don't know. There's no evidence that they suspect. So they want to know, would I potentially be at risk of aiding and abetting tax evasion by paying them in cash?

19:50Or am I within my rights to pay them as they wish? After all, it is legal tender. Tanya, just for me, I'm not sure I'd be that happy. This is just me personally. I agree with you. One of the first articles I ever wrote, actually, was about why we should be paying tax and the pros of paying tax. But I would be a bit concerned about a builder that wants to be paid 40 ,000 in cash. Yes, so would I. There are a few strands to this. First of all, if you don't know, if you're not informed that they are actually doing it as a tax dodge, then you can't be held liable for it because you have got the right to pay them in cash.

20:31and it's up to them to pay their taxes. It's not up to you to run their taxes for them. So the extent of your personal knowledge of what they're planning to do comes into play here. Obviously, if you know that they are definitely evading tax, then you shouldn't do this. When it comes to the practicalities of this, I think I would object purely on the logistics of it. The amount of hassle that it would involve for me, you have to go to the bank and take out thousands of pounds and have to probably arrange it with the branch every every time that is an awful lot of toing and froing by me and I'm the customer I personally think that when I'm paying the money I should have less inconvenience it should be laid on for me frankly if I'm the customer rather than make me do all the work and I don't want to digress too much but I take the same attitude to going into shops and being expected to do all my own paying and bagging up and goodness knows what I'm with Lee on this one and also I think that the security aspect of it is we've already discussed this I wouldn't be happy taking out more than a couple of hundred quid at most out of a cash point or taking it out of a branch because you don't know who's watching It worries me greatly because I think women are targeted more than men in the mobile phone thefts that are going on in London at the moment.

21:56Is that right? Well, yes, because we're seen as an easier target and less likely to wallop the person who does it. And if then I'm expected to eight times take out£5 ,000 over several weeks, I just think I would refuse to do that. I think I would look for another builder or I would just insist that we come to a more sensible arrangement that actually was convenient for me. I agree with you. And actually, if they don't want the work, they don't want the 40 ,000. Well, bad luck to them. Are there any maximums, I suppose, Helen? Like you said about you would probably have to arrange the£5 ,000. I mean, could you go in and take the 40 ,000?

22:36I'm definitely not recommending anybody do that. I think that would be a ridiculous thing to do. Also, you have builders in your house. like you there could be people coming and going and you will have a wad of 40 000 pounds or even 5 000 pounds but i'm just curious if you do need to take that sort of massive amount of money out

22:52Helen Crane: can you do it certainly call ahead if you just walked in you probably get stuck with this 5 000 pound limit that's not every bank but most banks the this sort of daily limit is around that amount But you can arrange it if you need a lot of cash for a big purchase. They should be able to find a way to do it that you might have to go in on a couple of different occasions. But they should allow you to do it. Then the reader here as well also is asking whether the bank staff might question them about why they want so much money and whether they should be paying their builders in cash. The bank can ask you why you're taking the money out.

23:34Helen Crane: However, they can't sort of police what your builder is doing with their tax affairs. You know, it's not up to your bank to sort of worry about whether or not the builder is paying tax. You know, as Tanya said, people do have the right to pay in cash for things. And unless your builder has specifically said to you, I would like this money in cash because I don't want to pay tax, then you've done nothing wrong. I think one other important thing to mention, though, is, you know, not from a moral standpoint, but from a practical one. do you think about uh having sort of paper trail in case something goes wrong with the building work you know it would be good if you if something yeah if the work isn't done to a good standard or say they go rogue and stop turning up halfway through it's important to have that paper trail and you know you can prove how much you paid them definitely if you're paying cash ask for a receipt something that makes it clear what you paid for and when because that's going to be really important if something does go wrong.

24:31That's it for part one.

24:41I'm joined now by Rob Morgan of Charles Stanley Direct for our weekly Investing Explained feature. Rob, we've got a question here about something we talk about a lot, but lots of people probably don't fully understand. What is an annuity and why do people take them out? Yes, there's been renewed interest, I'd say, in annuities recently, and for good reason, as rates are currently a lot more attractive than they were a few years ago. And in fact, they've reached the highest level in 10 years. So if you've previously dismissed them, it might be worth looking again. So what are they? Well, simply an annuity is an insurance product that guarantees a regular income, usually for life, in exchange for your pension pot or part of it.

25:24So you can think of it as a product that sort of converts your defined contribution pension, such as a SIP or personal pension, into a defined benefit one. You lock in at a certain amount of income with certain terms for life and the annuity provider, the insurance company, must pay you that income no matter how long you live. So you can also think about it as insuring against your own longevity. So the main alternative to an annuity is income drawdown from your pension pot. And that means keeping it invested and taking regular or occasional withdrawals to fund your spending. And although that can give you a better return overall, it does also mean your money can run out, especially if you draw down too much too early or your investment returns are poor.

26:12So an annuity really offers peace of mind that you can pay your bills without relying on the vagaries of financial markets. So it's a lower risk option generally, but one that comes at the cost of losing access to the capital value of your pension. So often people opt to use an annuity to help cover their basic expenses and effectively provide some assurance that that part of their spending is covered, perhaps allowing them to take some risk or be more flexible elsewhere. Now, at present, a typical 65-year-old can secure a level annuity rate of up to 7.8%. So that is£7 ,800 a year for a pot of£100 ,000.

26:54And that compares to a rate of under 5 % for the same product five years ago. So that's an uplift that has been driven by higher long-term interest rates and in particular higher UK government bond yields. And in this environment, demand for annuities could be set to remain strong, especially given the changes we're going to see to inheritance tax in 2027, whereby pension pots are to be included in estate valuations. And that might prompt more people to consider annuities as part of their retirement planning. Now, finally, it's important to note that shopping around for an annuity can get you a better deal compared to staying with your current pension provider.

27:31It's rather like shopping around for car or house insurance. There's a number of options to think about as well. including adding in a spouse's pension or choosing an escalating income rather than the level one. And there's also enhanced rates the older you get and if you're in ill health. So speaking to a qualified advisor is definitely recommended to get things right and maximise what you can receive because once an annuity is purchased, the decision can't be reversed. Well, thank you very much. Thank you. Welcome back. Some rather stark new research has spelled out just how much it could cost you in later life if you put off starting a pension when you are young.

28:09So just a delay of five years in your 20s can create a£40 ,000 hole in your retirement savings. That's according to standard life. Now, that's based on the minimum saving levels under auto enrolments. Of course, if you put in more or your employers match the contributions, for example, it could be a lot bigger than this, couldn't it, Tanya? Tell us a bit more about this research. Why is it we put it off and sort of what advice you would have for young people? because none of us are in our 20s here. This topic comes up now and again, because there is a really, as you say, stark deficit that people will suffer the later they start saving into a pension.

28:51It's down to compound growth, which is basically because you earn returns on what you put in, you then earn returns on those returns, you go in with a higher amount, then you earn returns again on that higher amount again, and so on. And you don't actually need to know a lot of fancy maths, just grasp that that has an exponential effect on your savings. And the secret ingredient in that is time. The longer this goes on, the bigger the impact it has on your savings. And the difference, even after five years, is quite big. 40 ,000 down is quite a lot. This is based on someone starting at 22, saving 25 ,000 a year, they're getting 5 % growth, but there's a 2 % inflation drag and a 0.75 % fee drag on it.

29:47So it's quite a realistic scenario. If you start at 22, 210 ,000 by the time you're 68, that goes down to 170 ,000 if you start at 27. If you start at 32, only 136 by the time you retire. if you start at 37 you're really pushing it by then 107 000 pounds if you really really wait until you're 42 82 000 odd pounds there's the difference between 82 000 and 210 000 is absolutely vast as you can see all of that said you can see the really good reasons why you should start as early as you can why it really pays and why as standard life says your future self will thank you but let's be realistic and whenever I do stories like this I always include caveats that young people do not have a lot of money they have got a lot of pressures on them and they have other nearer time priorities that might seem more important to them they may simply literally not have enough money once they've paid for food and accommodation and getting to work I actually have every sympathy I was definitely there I did not start a pension in my first job the reason was I was on a pittance and I had to run a car on that pittance.

31:04It was absolutely compulsory that I ran a car on that pittance because I was a local journalist and I had to drive around to get stories. So there was no wriggle room there and I was overdrawn every month. So I wasn't going to go more overdrawn to join the pension scheme. And in my second job, there wasn't a pension scheme. I was lucky there was one in the first one, but I made an active choice not to do it. and so it actually wasn't until my late 20s that I joined a company which had a pension scheme and it was affordable so I guess I must have been in the sort of 27 range myself on it so I completely understand why people can't do it and I think young people should give themselves a break if you can't do it you can't do it but do it in the knowledge that you will be missing out and you might want to play catch up later if you are lucky enough to get a job where you get bonuses and you get pay rises, you get promotions later on, then try and take it more seriously.

31:58Make a promise to yourself that you'll take it more seriously and try and make up some ground later. It isn't too late and you can put more in then. I'm glad you said that, Tanya, because I look at some of these stories and think, the vast majority of people listening will not be in their 20s. Some will be. And if you're listening and you, you know, then absolutely take on board what Tanya said. But it is actually more common than you think, especially among finance journalists, who you'd think would be first job straight to it. We'll get to Helen in a minute. I'm sure she did it all properly.

32:27But I didn't really start. I'm the same, like journalism, especially broadcast journalism when I was doing it, especially sports broadcast journalism, was pittance. Then I had a major back injury. So I didn't really start a pension until I was 31, I think. I was having a conversation last night with a very good friend of mine who's got actually a very good job, but just did not do what Tanya said there, did not prioritise. Now, about the age of 38, 39, he started to panic, had only about 20 ,000 because we went through the figures last night. That's how we roll when I hang out with my mates. But I was curious because we covered this as a story about five years ago.

33:08And he's managed to go to 200 ,000 in about five years. Now, he has funneled a heck of a lot of money. He's lucky he works for a company that matches an increased contribution. But that's been his priority. a huge. Another personal finance journalist friend of mine, 34 % they put in. I think he's looking at has been 50 % of his earnings. Now he can do that. He doesn't have kids. A lot of people can't do that. But as Tanya says, it is possible. You just have to make that promise to yourself and you just have to commit. But it is going to be a lot harder. You're talking about figures of 34 and 50 % than rather 15 % or 10 % or whatever when you're very, very young.

33:49Now, Helen, buck the trend here. Tell us you started at this wee age of, no, your parents started a pension for you the second you were born. Is that the case?

33:59Helen Crane: Wouldn't that be excellent? I'm afraid as we've really explained to everyone how poor journalism pay is in the early years here. I did the same. And actually, I started work just after also enrolment came in. So in my first job, I had to actively opt out of paying into my pension. which I did. However, I, well, luckily, I don't think luckily is the right word, but I was only in that job for a couple of years. And then I think in a way, it was fortunate that when I started my next job, I was auto enrolled, because I think if I'd stayed in that first job being opted out, it would be really easy to just go along with it.

34:43Helen Crane: Oh, you know, maybe I'll, maybe I'll opt back in next month. So luckily, I kind of had the foresight to think, okay, hey, I've had a slight pay rise going into this new job and I can sort of make the pension thing work. I mean, it wasn't a very good pension in that job. I wasn't paying much in and the company wasn't giving a very good matching rate, but it was something, you know, it's kind of a start. But I agree, it's really difficult when your sort of margins are so fine to sort of put that money away for the future. I did again, actually, so a couple of years ago when I was saving quite seriously for a house deposit, you know, really sort of scrambling together all the money that I could.

35:27Helen Crane: I had a bit of a review of my finances and what I was paying every month and considered opting out of pension again, just sort of temporarily. But in the end, decided not to and decided to just cut down my contribution a bit, which is maybe a bad thing to do but like Tanya said you know people have so many different kind of financial priorities and I for me at that time just having that bit of extra cash to put into my deposit fund was was really useful so I did make sure to um to sort of put it back up again once I bought my flat but you know it's difficult I would say to to young people you know if you can and I understand it's so difficult because I've been in this position but what I would do if I kind of has my time again maybe not with pensions but with savings um I didn't really start saving at all till I was in my late 20s because I just thought oh I can't save much so what's the point I'll just save nothing and I do kind of wish that even if I just put in like 20 pounds a month into a savings account I think it's a it's a bit of a mentality thing and you know I thought like oh if I can only put in 20 quid what's the point I won't bother but I kind of wish that I just started just a little fund just to make you kind of feel like you're sort of doing something and then for it to build up.

36:47Helen Crane: But it's difficult, isn't it? Life is, no one's perfect and just do what you can. Exactly. Do the best that you can. Well done, Helen. What's prudence and extravaganza? This is from a guide that Tom Stevenson of Fidelity wrote for us. He wrote a really great guide to compound growth, setting it all out. And to illustrate it, he had two sisters, Prudence and Extravaganza. One, Prudence, started saving at 18. £20 a week, it works out. About £1 ,000 a year, it worked out as. She carried on saving throughout her working life. Her sister, Extravaganza, saved absolutely nothing but had a great life.

37:26Age 38, she suddenly realised her sister had already amassed hundreds of thousands of pounds and decided she'd get on board as well. But because she started so late, she was so far behind, she could clearly never catch up. But by the time they both reached 60, going from memory, extravaganzas had only got to 80 ,000, whereas prudence was on 500 ,000 by then. So you can see the stark difference, can't you? And the thing to really remember with it is time. Time is the really important thing, even with putting in really, really small sums, 20 pounds a week. I mean, it's not nothing, but it's not a huge sum, but it's the compound growth that really, really, really boosts it.

38:11And plus time. If you're an older person and you see this story, it's on This Is Money at the moment. Show it to somebody. Show the prudence and extravaganza graph. It is the tiny little line at the bottom that goes across for extravaganza for what she builds up. And then there's this massive line which goes up into the stratosphere for prudence. and hopefully that will help them grasp what they might be missing into and they need to get into as soon as they can they think they can afford it give yourself a break like I said don't angst about it too much but when you can start that journey because the sooner the um sooner the better I think as regular listeners to the podcast will know I'm sort of in the extrudence camp or the prugavaganza spend money it's there to enjoy you work hard for it but make sure you get value from it and that's where i think a lot of us fall down is we fritter away stuff that doesn't give us anything it's not it's just pointless i'm not in the camp of hair shirts self-flagellation and you save absolutely every penny so what you get hit by a bus when you're 55 sorry to be depressed but You know what I mean?

39:23It's like enjoy your money. It's a balance, but it's a really good indication of what you can do if you try hard. But finally, we recently spoke about what we would individually do if we got, say, inheritance tax or windfall or something. That's something we've discussed on the pod and whether actually we would have the confidence to invest it. And a lot of us wouldn't say wouldn't have the confidence to invest it. But what about our families and what would we want them to do if we left them in inheritance? apparently our families would be more careful than we might think tanya would you care what your family do with it i spend it go mad if i left them anything i wouldn't care but personally and i think that that is what a lot of people do feel so this is a nice survey by hargreaves lansdowne interviewed people who think they're going to leave an inheritance and people who might be expecting to get an inheritance and I think that overlaps to some extent but about 30 % of us don't mind what our beneficiary is going to do and then about 20 % would like them to save.

40:31After that it's investing, paying off your mortgage, paying off debts generally, putting into a pension is quite low down on the list of what their hopes are. On the other hand when you look at the survey results from the people who are trying to think what they might do with an inheritance 53 % said they would save at least some of it and there's lots and lots of sensible things on the list about investing paying off the mortgage and having fun only comes in seventh and below that is make a big one-off purchase or just spend it as I go along so all of the what you consider less responsible things are bunched up right at the bottom of the list now Hargreaves does comment Sarah Coles from Hargreaves does make the very reasonable comment that some people when asked this will say um the thing that they think people will want to hear which is I would be responsible for it and whether they would if they had an inheritance be tempted to take a nice holiday or buy a new car that's another matter they they might so we have to we have to be a bit dubious about what people are declaring in advance they would do.

41:40But the results, I think, are strong enough. And the trend is clearly evident in this, that a lot of people are not worried about what their beneficiaries do with their inheritance. And a lot of people, when they think about what they would do with it, would go for a safety first approach. I've only ever got one that I'm aware of, one inheritance amount. It wasn't an enormous amount. do you know what I did with it I didn't save it I didn't vest it I spanked it going to the Galapagos Islands and it was worth every single penny best trip of my life still think about it the most amazing experience if you ever get the opportunity to go to the Galapagos Islands hopefully you'll go not because someone's died but it actually sort of not to get spiritual or whatever but it did actually give me some time to reflect on the person that died and gave me that money and it was a real on lots of level an amazing thing to do so it wasn't a huge amount of money I might I might like divvied it up a bit more but that's what I did with it Helen look I

42:41Helen Crane: think if it was me I think the priority for me would be you know whether you spend it sensibly or unsensibly like do something with it do something specific with it for me if I got inheritance the worst thing I could do is just spend it on a thousand little things that you don't remember I think if I was going to leave an inheritance to someone I'd really like the thought that they you know either yeah went on like a lovely holiday or bought something really special that they'd always wanted or you know paid it off their mortgage if that's what they want but I think they do do a thing with it don't just spend it all on like three little things from ASOS which is what I would be tempted to do like just absolutely no fancy coffees and clothes but no, I would try very hard not to do that.

43:28Fabulous. Right. That is it for this week. Thank you so much, Helen. Thank you so much, Tanya. And thank you for listening. You can keep up to date with all the latest breaking money news. Just go to thisismoney.co.uk or, of course, you can download the app. And if you have any comments or questions for the team, anything you'd like them to look into, Helen?

43:46Helen Crane: You can email us on editor at thisismoney.co.uk. You can tweet us at ThisIsMoney or you can join the debate in the reader comments. And if you like our podcast, why not rate us wherever you found us? It helps other people find us too.

44:20For you, regardless of your financial needs or if your life takes an unexpected turn, your finances, your way. Take control today with Charles Stanley Direct. Sign up now.

44:33Helen Crane: Investment involves risk.