One year in... has Labour been a success for our finances?

0:02Welcome to This Is Money Podcast, sponsored by Charles Stanley Direct. I'm Georgie Frost and joining me and Simon Lambert today is Lee Boyce. And coming up, one year of your money under Labour. We run the rule over the party's first 12 months in power, the good, the bad and the ugly. We'll discuss what now looks to be an inevitable cut to the cash ISA limit. We ponder whether and what tax rises are on the way. Look at the IFS's plans to sort out the state pension and uncover what is putting off people from buying your home. Don't forget you stay up to date with all the latest breaking money news.

0:36Just go to thisismoney.co.uk or download the app. Take control of your finances with Charles Stanley Direct. Invest, save, coach or plan. Using technology where it's helpful and people where it matters. Our website and app make trading cost effective and flexible. But we're more than just an online investment service. We're here for 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. Investment involves risk. But first, tax hikes, U-turns, tears in the chamber. Just how is Labour doing when it comes to our money after 12 months in power?

1:23The headlines haven't been favourable of late, but has it really all been that bad? Lee, Simon, welcome. A year of labour. How have they done? Assess them. Mark the scorecard. I guess that what we should do is we should start out by saying what they said they were going to do. They were going to end the chaos. They were going to bring back growth and they were going to help us basically build Britain better. I'm not sure those objectives have been achieved in the first year in charge. And it was very unfortunate timing that as they arrived at the anniversary of being in charge, they had a week of what looked like chaos.

2:11Now, what I would say, and I know that I've been criticised by listeners in the past who felt I've been too harsh on Labour, is this is not a pro-Tory stance and an anti-Labour stance. This is a pro-competence and doing what is right stance. Frankly, the rot started a long time ago with the Conservative Party. we had a succession of chancellors who did bad jobs jeremy hunt for example slashing the capital gains tax allowance slashing the dividend allowance freezing to tax thresholds refusing to do anything about things like the 60 tax trap failing to actually sort out the child benefit trap before they left office and bear in mind the tories knew that they were out the door like there was there was no way they were going to continue to be in charge and yet jeremy hunt staged an attack on savers and investors that in a conversation with uh our veteran uh personal finance expert jeff prestridge the other day jeff said it could have come straight out of the corbyn manifesto i mean and actually there were bits in the corbyn manifesto about changing capital gains tax that were more generous than what Jeremy Hunt did with the allowances.

3:33So, you know, you have to set it against that backdrop. And the mistake I think that we made of trying to claw back all the money from COVID too quickly, right? So, again, we made that mistake of doing policy by ticking boxes in spreadsheets, trying to meet fiscal rules at the expense of doing what's right. now i must admit i hoped that rachel reeves would come in as chancellor and correct all that i think there was a golden opportunity to come in and go look these are the things that's wrong you know we've got a cottage industry of people earning over a hundred thousand pounds a year trying to earn less money we've got a cottage industry further down the scale of people trying to earn less money with a child benefit tax trap we've frozen tax thresholds you know there was used to be a principle in the tax system that tax thresholds should always rise with inflation because it was wrong to basically drag people in due to the rising cost of living and that we needed to have a you know a kind of honest conversation about how we were going to also then pay for the things that we need to do because these things had stopped being fiscal drag and started being anti-growth and holding the economy back and if you look at what some of the you know some of the you know expert economists for example the ifs says basically we need to raise the basic rate of income tax because we've shifted the burden so much onto higher earners now higher earners have the broader shoulders and they should pay more tax but we've shifted it so much onto them that we just can't really squeeze them anymore and actually if we if we want these things we need to be a bit more honest and we need to shift the burden more onto basic rate taxpayers instead what jeremy hunt did was he did two cuts to national insurance um the really we couldn't afford to do either of those and we definitely couldn't afford to do the second one and I think that was reckless to be honest for a very cautious chancellor that was a very reckless move unfortunately the list of and it being a financial podcast I will focus on the financial stuff and I don't want to give Rachel Reeves a kicking in a week that she's obviously had a really really bad week Keir Starmer's been behind every single one of these decisions and he needs to own absolutely right absolutely right she has been unlucky Rachel Reeves has been unlucky circumstances have not been favorable to her you know ranging from the shifting interest rate expectations the donald trump election um the geopolitical madness that's going on in the world but also you make your own luck and i think she might have made a bit of her own bad luck um so for labor i think you know they've kept compounding the errors my list goes promise not to raise main taxes.

6:07Error number one. Make massive fuss about£22 billion black hole when previously nobody was concerned about the UK's finances. Error number two. Take winter fuel payment for everyone without having really thought it through properly. Error number three. Raise employer national insurance and claim that that's not really raising national insurance. Error number four. Pension tax rate. Error number five. Benefit bungle to meet fiscal rule ahead of spring statement. They basically rushed out these benefit reforms in order to tick a box in a spreadsheet and meet the fiscal rule. Error number, what are we on?

6:44Five? Six? Can't remember. Crash low-paid jobs market with national insurance rise coming in. Biggest impact has been on the lower paid. You turn on some of the above and end up in a worse fiscal position because in order to rush through your benefit reforms, you had to promise a little sop to make it look better. But now you've reversed them all, but you've had to keep the bit that you did to make it look better. So it's actually going to cost you more money than if you hadn't just done it in the first place ahead of the spring statement. That is a strong list for a government in its first year of charge that promised to end the chaos.

7:22Now, the only thing I would say is I think what we need to do now is we need to start from a kind of like that's all in the past. We can't do anything about that. Right. What we need to do now is we need to move on in a much better fashion. and I think the first thing that could be done is for the government to come clean on some of the stuff that it's rumoured to be planning to do and say okay you know we're going to talk about cash isis in a minute I personally would say I'm not going to do anything to cash isis it's all rumours and we've decided not to do it I think that's not what they're going to do but they need to come out and say yeah look this is what we're going to do they need to come out and say we're going to leave pensions alone or this is what we're going to do to them and various other things because otherwise we are in for uh what we in now july we're in for another crazy period like we had last year ahead of the budget where people are making wrong-headed financial decisions off the back of rumors of what taxes are going to have to rise and and it's only going to escalate and they can't do what they did last time which is just let those rumors continue to swirl because it's damaging for the economy.

8:32It's damaging for businesses who are not investing. It's damaging for people because they aren't spending. And it's damaging for people's finances because they're making decisions based on rumour and what they think might happen. Lee, there's a list there, isn't there? What about the good stuff? We'll get on to taxes and whether they might have to rise in the budget, etc., talking about speculation. But what are the good things? I can't actually think of anything off off the top of my head georgie to put it's funny because i asked i asked chat gpt this because i was also struggling we got real wage growth here so real take-home pay has risen thanks to a higher minimum wage and public sector pay deals we got a significant nhs boost which not really personal finance but a national wealth fund launched and regulating bailiffs and debt protections And that's what it came up with.

9:26That's a pretty... Do you think it was scraping the barrel there a little bit? GPT was struggling. That doesn't beat Chad Simon in his error list. But I would say with that, Georgie, like some of those things, like the NHS, I mean, you could say, well, more money for NHS, but where does it all go? Like, is it... Yeah, it just feels like a never-ending kind of money. Money pit. Never, never, never solves anything. We never actually get to the kind of, you know, knob of the issue. I know there's been some announcements this week about the doctor in your pocket and all that kind of stuff trying to stop, you know, A &E waiting lists and things.

10:00But that's veering out of personal finance. I find it very difficult to kind of come up with a list of personal finance kind of moves that have been… Wins. Yeah, for kind of the whole. And actually, I was listening through that list that Simon ruled out there. I think there was maybe eight, ten things on that list. And I was just nodding along, thinking this is exactly what I would have put on the list. and it has been a turbulent first year which is unusual when it's a new political party that's coming to power you think the first year is the feel-good factor the new manager bounce you know we're kind of everyone's buzzing you know it's exciting we've we've changed they promised us change but all we've got it feels like in the last year it's just more turbulence and i think this week i did feel sorry for rachel reeves on wednesday i don't have much sympathy for politicians on the hole this is such a tough job it's so difficult and we all have tough days at work where maybe we want to go off and cry or maybe we have gone off and cried but we do it in a you know private bathroom or you know somewhere else like go for a walk and clear your head very hard when you're in a public eye like that and there's so much resting on your shoulders i think the pressure really got to rachel reeves this week and and i did feel a degree of sympathy for her because as simon says It's all Keir Starmer's decisions.

11:16And it kind of, it feels difficult. The welfare U-turn this week has been absolutely seismic. It's obviously caused lots of fractures within the Labour Party already within the first year, which is not a great sign. And it kind of spooked markets a little bit and made yields spike and all that kind of thing. And then, so I had a sympathy with her. And then I saw Rachel Rose on TV yesterday, I think on Sky News, a completely different woman. She looked like she'd had a good night's rest. She looked like she was coming out fighting. And then she kind of really backed herself and sort of, not gloating, but kind of like, I'm doing a great job as Chancellor.

11:56And I kind of thought, we've gone from one extreme to another here. And then my sympathy sort of waned a little bit. But again, I was just nodding along to Simon there. Let's not forget that much of this rot did start in the previous government. It did start with the Conservatives, the freezing of tax thresholds. you know, it did not bode well. And I would have found it very difficult to accept that Labour would have come in and started, you know, improving the situation on that front. The worrying mood music now, though, is that we're talking about a£40 billion black hole that needs to be plugged.

12:30That's the latest. We're doubling the black hole here. And then the Chancellor saying that there's going to be a cost to this week's U-turn on welfare reform, which she said would be reflected in the budget. And as Simon says, please, you know, another three months of flying a billion kites of what's going to stick as tax cuts, what's palatable for people. But I've said this a million times on this podcast. People are just fed up. How much more can we be taxed? What are you going to go after next? We're at real peak tax. I just can't see, you know, and then they're falling over each other. They talk about stuff like wealth tax that has been proven really around the world not to properly work.

13:10it just feels like running out of ideas and that's not good in now one year of a new political party and i feel like there was a long run-up to that election where they could have got a lot more ducks in the row they could have had a lot more kind of a solid plan it was quite clear that labor were going to win the election i think oh yeah yeah a good few months run up into it and i'm sure you know the discussions must have been when we get to power this is what you know were going to do but you know even the winter fuel payment stuff it was just really bungled wasn't the way that that was done it just it didn't make any sense straight off the bat it was just a kind of you know not the biggest saving in the world but it just looked particularly nasty in a world in which you know people sell the conservatives of the nasty party so i think that it's been a strange first year a strange first season of labor um can they new manager bounce second season get a few loans in i don't know it's going to be it's going to be difficult now you know recapture the confidence of the british public and maybe get some new summer signings in well that's maybe maybe that's where you know do i do i dare say cabinet re-shuffle i mean i get the feeling that rachel reese is the chance to him for the long haul famous last words because i think if it was all over i kind of don't think she would have come out all guns blazing yesterday on Thursday, I should say, on Sky News, saying that...

14:38But she got the backing of the board, which is always the risky side, isn't it? Yeah, vote of confidence is always the kind of... How many football analogies can we get in here, Lee? It's been at least a few weeks since football's been on, so... Exactly. But, Simon, Lee made a point there about the guilt yields. Bonds moved, UK government bonds. The pound fell on Wednesday after this speech. They've slightly rallied since she got the backing of the board, as it were, since Keir Starmer backed Rachel Reeves as Chancellor. Is that the markets kind of supporting Rachel Reeves? Was it a concern that if she did go, then Labour would have loosened the fiscal rules, spent more, etc, etc?

15:24What's the movement in the bond market telling us? It's telling us two things, I would suggest. Firstly, it's telling us that the market's conviction that Britain is going to manage to maintain fiscal discipline by cutting spending is not what it was. There is a view that with the U-turn on the welfare stuff, it's just like, oh, they're never going to be able to rein in spending. So the alternative in order to balance the books, which Rachel Reeves is very committed to doing, she's got her fiscal rule, is you either change the fiscal rule, which would have been fine if she hadn't made such a fuss about the fiscal rule, or you meet it by continuing to raise taxes.

16:14If you can't cut spending, that's how you're going to have to do it. And markets are looking at this and going, raising taxes is not going to deliver any growth. It's going to hamper growth. And the thing that we really need is growth to get money coming in. OK, we need to like there's a certain amount of growth that's just reliant on what is going on in the global economy and what's going on in the world at any given time. Right. And at the moment, we're not at a great level. then there's the can you do better than other countries bit and at the moment we're not achieving that that is what Labour came to power promising that we were going to do and that is actually what markets believed Labour were going to do this was this is why I find the whole 22 billion pound black hole 100 days of miserableism thing so completely baffling because they came to power on a wave of optimism a wave of optimism in the country a wave of optimism from markets as well a wave of optimism from business who said okay this is great like new government new broom they're going to sort stuff out they're going to be baseline is competency right and then they're going to do some other stuff above that and then unfortunately that expectation that they could deliver that growth has been eroded away that expectation that they can get us moving up the table out of mid-table obscurity and up into the champions league spots has to coin another football analogy like disappeared away okay so there's that problem then there's that okay what are they going to do to do the fiscal rule are they going to have to raise taxes that's an issue because that's pretty much anti-growth then you've also got the scenario where markets were looking at this and going oh hang on a minute if she goes who do we get instead and it was a vote of confidence in rachel reeves in the sense that it looked for a bit like rachel reeves might be going and they They were like, oh, left wing chancellor, who's going to take over?

18:09What could we get? And I actually still think that Rachel Rees has got it in her to be a really good chancellor. They look at it and they went, you know, she's the best we're going to get. The alternatives are not great from the perspective of the markets. I mean, I don't know who the alternatives would be. But, you know, one alternative, for example, Torsten Bell, former head of the resolution think tank, got some very strong views on wealth, inheritance. A man whose think tank proposed a limit on the overall amount you could have in a cash ISA, not just what you can put in, but what you could have in there overall, who would be very pro, more taxes on wealth, more taxes on inheritance, things like that.

18:48He would be a strong contender. I don't know who else you might get. I mean, you could get a Wes Streeting, I suppose. He would probably be more in the mould of a Rachel Reeves. Angela Rayner as Chancellor. Wow, that would be a big one, wouldn't it? I don't think it's going to happen. But, you know, Big Ang as Chancellor could definitely upset the markets. And then it now looks like Rachel Reedy is going to stay as Chancellor. And so these things have ebbed away a bit. Markets have calmed down and gone, actually, do you know what? It's probably all right for now. But there's still that little bit of extra premium that we're going to have to pay on our borrowing because they don't quite believe that we're going to be able to achieve the fiscal discipline that we said we're going to achieve without raising taxes again.

19:26And they see that as a bad thing. Lee, Torsten Bell. Well, it's a name that is familiar because I read it today in your newsletter related to the cash isa. Why are we talking about this? Because it looks very likely that July the 15th, after much speculation, is going to be the date when we find out exactly what's going to happen to cash isas. Rachel Reeves is going to give a speech, the Mansion House speech. What are we going to hear, Lee? I'm not going to tread over this too much because we have spoken about this a lot on the podcast. And this is an absolute glowing example of what Simon was mentioning earlier about the speculation and just months of speculation rather than just coming out and saying, this is what we're doing.

20:09It's just led to, you know, absolutely tens of thousands of column inches dedicated to cash ISIS. I mean, I'm not being funny, Georgie, but when you see ISIS trending on Twitter for two days in a row, I mean, I'd never thought I'd see the day. I mean, people are actually really quite interested in this. And actually 82 % of our readers that took part in a poll said that the tinkering of the cash ISO allowance would basically upset them. They wouldn't like it at all. All right, so let me just quickly rattle through this. So you get a£20 ,000 ISO allowance every new financial year. At the moment, you can blend that between cash ISO and the stocks and shares ISO, how you see fit.

20:50There's a couple of other more niche ISO products I won't get into. But for most people that have a cash ISO or a stocks and shares ISO, I'll blend the two. Me personally, I do 75 % in a stocks and shares ISA and 25 % in a cash ISA. I do not, I'm not in a position to max out the£20 ,000 limit. But I do have friends and family that can max out that£20 ,000 a year limit. And it's crucial for people, especially if you're a higher rate taxpayer or an additional rate taxpayer, because essentially if you're a higher rate taxpayer, you can only earn£500 of savings interest without being taxed. and for additional rate taxpayers they have a zero personal savers allowance that means an iso is effectively the second cornerstone i would say of most people's personal finances now the first being private pension and making sure that you're tucking enough away in that but a cash riser or an iso in general is just more at arm's reach you know your pension is locked away until you're old and great that's the whole point of you know your retirement pot for an iso it's at arm's reach if you really need it you don't really want to take it out of that tax-free wrapper but it's still within arm's reach if you need it it has become a victim of its own success seemingly because you know it's now under attack and it looks very likely that the cash iso element of it under the pretense that they uh that rachel reese wants people to invest more uh will be slimmed down to take your pick ten thousand pounds is one uh river limit five thousand pounds is another and the one that's probably been battled around the most is four thousand pounds that means that this financial year with a£20 ,000 ISA allowance could be worth five years worth if it gets down to£4 ,000.

22:27For that reason, and we have said this, I have said this on the podcast before, before the data and the stats came out, it was going to shift behaviour. Again, going back to what Simon was saying, people making decisions based on speculation. And what I think people are doing is focusing way more on the cash ISA element of their ISA wrapper, rather even if they usually invest because they're thinking well this is the last chance to you know basically cash stuff my ISA I can invest 20 ,000 pounds next year because that looks like it's not off the cards that doesn't look like it's off the table so people are sticking a lot of money into ISA since Rachel Reeves became chancellor 50 billion pounds has gone into cash ISA in April there was 14 billion that went into cash rises.

23:14That is a record. And then there was a further almost 4 billion in May. So 18 billion pounds in two months. That's a massive, massive shift in habit. Huge compared to comparison months in years gone by. Clearly, people are panicking that they're not going to be able to stick money into cash. And listen, I believe in investing. I believe in stocks and shares rises. I believe that over the long term it is a better home for your cash. I also believe in the power of a cash rise because it's a good way to sort money away the conversation i've had with the handful of friends and family that i know that are in a fortunate position fortunate enough position to be able to max out their isa they're all doing the same thing they're maxing out their cash isa for the first time and they're just completely avoiding investing for the next year whether that's the correct strategy or not well you know your jury is out but i understand the premise behind it and why people are doing it because if next year in the financial year 25 sorry in financial year 26 27 if you can only put£4 ,000 into a cash riser, I say only, if you can put£4 ,000 into a cash riser and the rest of your allowance must go into stocks and shares riser, you can see why people are thinking it.

24:21Now, the fundamental thing I don't understand about this, and Simon and I were talking about this in the office this week, how Rachel Reeves is going to encourage people who usually save, they much rather save the invest because they see investing as risky, even though the data out there shows five-year, ten-year term, you know, investing usually beats saving. But the whole thing is about putting more money into British stocks to back more British businesses. Where's the incentive to do that with this? Maybe we'll find out at the Manchester House speech. Maybe there's going to be something. Maybe we have the whole British ISA thing that fell flat.

24:59You know, but it feels like something has to happen if you are encouraging people to back British instead of going global. because we are hardwired to spread risk not putting all your eggs in one basket the other thing i would say is well i'm a i'm a man in my 30s you know i i have the appetite for investment risk there's a lot of people older people that use isis in their you know 40s 50s 60s uh who just have no appetite to invest or perhaps did invest once upon a time in a part of their kind of retirement strategy now is to not invest and rather be in a cash isis so for all of those reasons, I think that this move is a bit bananas.

25:41And the months and months that this has gone on is just, it's been completely blown out of proportion and it never needed to be this way. Simon, just briefly, can you make the case for us? Let's do the junior debating society where you have to make the case of the thing that you don't quite believe in. Can you make sense of this? Are they trying, if not to get us more investing, they're thinking, well, even if we don't invest, we might spend a bit more so we can have a bit more consumer growth, or the fact that they might get more money in tax from savings. I mean, what's the reason? Because I haven't actually spoken to anyone who seems to think this is a good idea.

26:21Well, there are some people who think it's a good idea. There are some people lobbying for this change. They tend to be in the investment industry. And it looks a little bit self-interested, if I'm going to be entirely honest. The case that they are making is that if you are going to give people a tax break, then they should be encouraged to back the UK stock market with that tax break. Now, it is true that quite a lot of ISA money actually goes into gigantic American corporations. And I don't really think that we need to cut cash ISAs in order for more people to buy Amazon shares or meta shares.

26:57you know i think you know even if they're doing it through a tracker fund however people do have home bias if you look at their isa holdings they do tend to hold roughly kind of 40 percent uk stocks and that is usually through investing in uk funds rather than investing in individual uk shares so it is true that a decent chunk of isa money that is invested goes into those companies. So it's not entirely baseless, this suggestion, but it does look very self-interested. And you will find that people are so affected by tax. So capital gains tax rates have gone up. Capital gains tax allowances have gone down.

27:44You can only make£3 ,000 a year worth of profit, whereas previously, before Jeremy Hunt got let loose, you could make£12 ,300, pounds and Labour has since raised capital gains tax rates. People are also feeling the squeeze in many other ways in tax, as I discussed earlier in the podcast. So you will find that some of those people who could afford to put£20 ,000 into an ISA, which means that you've got quite a lot of money, right, would probably, if the cash element was cut, put some more money into investment ISAs. And even if they put more money into their investment ISA and then leave it sitting in cash, which a lot of people do um that at least it would be in a place where they could then invest it right so it will make a bit of a difference that's my argument for it my argument against it is this is a stupid idea okay there used to be a different stocks and shares isa limit and cash isa limit it used to be that you could put it all into a stocks and shares or you could only put a certain amount into cash we got rid of that because it was a bad system why we would go back to a system that was considered to be a bad system i am absolutely mystified the idea that more of this money will go into investments i think is complete nonsense if you wanted if you really want to get people to take advantage of their tax-free allowance and put it into the uk stock market then the british isa was a better idea than this because it was giving people a chunk of isa allowance that had to go into the uk stock market even then that was riddled with problems there was like okay what about investment trusts their list is on the stock market and what about if it's a global investment trust does that count what about etfs do they count are we encouraging people to be too exposed to the uk stock market when actually we should be encouraging them to use their money in a sensible way which is to spread their money around the world okay i also think that the other big problem with this is that it undermines trust in the system why would you take your most successful saving and investing product the one that everybody believes in the one that people trust and undermine it by tinkering with the rules what you should do is you should make isas better not make them worse come up with a way that is more seamless but to be to move between cash and investing and if you talk to some companies that have managed to achieve that some of the app-based companies then you know that's what they say they say well yeah people do open a cash isa but then they do shift to stocks and shares isa and it's about trying to He's trying to like take away the boundary between the two, not increase it.

30:14Right. That's what you need to do to get people to be investing. And you need to educate them. It needs to be. Look, you might think that your four percent is good, but actually you're going to over the long term, you'll lose out to inflation. And also about saying to them, it's not all or nothing. It's not, you know, black or white. It's not one end of the spectrum, the other end of the spectrum. It is a spectrum. You can just basically if you are more happy in cash, that's fine. but I tell you what you've got your 20 ,000 pounds in cash maybe try putting a thousand pounds into investments see if you like it see if it works out if it doesn't work out fine but you've only tried it with a thousand pounds but if it does work out and you do like it maybe you could try two thousand maybe you could try three thousand it's doing that thing where you get people to shift their mindset a little bit along the line and the other thing I would say is the problem with undermining trust here is that basically what will happen and i've seen this i see this i've seen like 20 years of reader comments on stories you know what's the point of putting my money into a pension they'll only go and change the rules and grab it for tax usually followed by some kind of comment about gordon brown in the past now followed by some comment about either the tories who are the you know the raging left as far as many readers are concerned or rachel reeves nowadays basically is what it's going to be but that will be the same with isis it'll be like well yeah what's the point now i could put my money in stocks and shares isa but they'll only change the rules they did a tax grab on cash isis they'll do it on stocks and shares is next so you need to build trust in the system not undermine the system so that's why i wouldn't do this i hope they don't it looks pretty likely doesn't it though simon shrugging his shoulders there i've just remembered that doesn't really work on a podcast it doesn't work on a podcast like a shrug your shoulders and and pull a meh face.

32:01Yeah, a brilliant comedy downturn of your mouth there. For the benefit of the listeners, I was shrugging my shoulders and going meh. Who knows? Who knows? Who knows? One thing, I don't want to go too much into the speculation to kind of have a lot of this coming up between now and the budget, but has there, Lee, been anything that you've been hearing, any whisperings of what might be looked at? I mean, like you said earlier, where can you tax anymore? they've already come out and said no to workers tax so they're still committing to that not raising VAT a national insurance or income tax but you know they said that last time and they raised national insurance on on on businesses and that didn't go down too well did it it could come from anywhere Georgie I mean honestly there could be even more of an inheritance grab there could be you know I wouldn't even say private pensions are off the table things like fuel duty has been frozen for a long time you know I get the impression that everything is on the table other than the things you just mentioned uh and the the fiscal rule stuff all that stick it's hard to predict but the thing is Georgie what what's happened during this podcast is that I'm now filled with dread because I realized that we are coming up to somehow it's a kind of budget like not that far away I mean I say it's sort of three months away but it's here before we know it It's going to be weeks and weeks and weeks of speculation and they have to.

33:28I personally, if I was advising Rachel Reeves and the Labour Party, is to just chop down the speculation and just be very black and white. Yes, we are looking at this and might do it like that. No, this is not going to be touched whatsoever. Otherwise, we're going to be in a similar position that we were in the run up to last budget when people were making rash, rash decisions. And it's just very unstable for people's personal finances. So my answer is expect the unexpected and also expect the expected. That's it for part one.

34:04I'm joined now by Lisa Kaplan of Charles Stanley Direct for our weekly Investing Explained feature. Lisa, a topical question. how much cash savings should I hold before I start investing? It's a good question. The classic line that we use is three to six months of expenditure but it varies a lot. So think in your head what position would you be in if you lost your job tomorrow? You had no income coming in. You want to be sure that you can pay your mortgage, pay your rent or feed your family and that sort of thing. So that's what's behind the three to six months. But it varies. For instance, if you're self-employed, you may want to hold more.

34:48I would also say if you've got some expenditure coming up in the near future, and perhaps even a year or two years away, you'd want to keep that in cash. So for instance, many people have a tax bill due at the end of July. Obviously, you'd want that available and you would keep that in cash. So it's not the same for everybody. Give it some thought. but at least three to six months' worth of expenditure. Welcome back. What to do with a problem like the state pension? It's expensive. It costs£145.6 billion a year, according to the latest official statistics, or about 55 % of welfare spend. Think Tank, the Institute for Fiscal Studies, has some ideas, including ditching the triple lock eventually, but it's urging the government to keep means testing off the table.

35:39Simon, why do anything with the state pension? What's wrong with it? Except it's expensive. Well, it's obviously expensive because we pay it to lots of people and we've made it better in recent years. So it is a cost. And unfortunately, the problem with the state pension is that there is this belief that people have paid in national insurance contributions and that's gone into a pot that's going to cover their pension in the future. and that's not true. Basically what pays the pensions of people getting their pension now is the people who are working at the moment and then the people who are working at the moment hope that there's going to be some more people coming in at the bottom in order to pay them when they get their money and so on and so on and so on.

36:24It does sound a bit like a pyramid scheme, I must admit. The problem with this pyramid is that it's the wrong way up as well and that there's more older people in the older generations due to baby booms than there are in the younger generations who were working and paying the money in. So it's getting increasingly expensive at the same time as it's getting harder to cover the costs. The statistics there are not directly comparable, by the way. I'm using that as a figure of speech, so please don't email in and send me demographic data saying that there's actually more people. you know there's obviously more people of working age than there are of pension age i think that's true actually just painting myself into a corner here look the point is it's expensive because lots of old people and the pension has got better right okay and there's working people who are paying for it the other problem is is we keep tinkering with the bloody thing right so you've got the triple lock right actually ironically we haven't tinkered with the triple lock we've left the triple lock alone.

37:25But the triple lock was a bit of tinkering in order to try to make the pension better. And it has made the pension substantially better, but it has also made the pension substantially more expensive. And this is a problem that is only going to continue. That then leads to the whole like, well, they're going to have to means test pensions. Actually, we're not that far off the state pension, even if you only got state pension income ending up being taxed because tax thresholds are frozen and the pension's going up and it's going to go those two lines are going to cross at some point at which point you're going to be back in the situation of that slightly mad thing of giving people money and taking money or back off them which always looks a bit sort of not so sensible until you realize that actually there's loads of places where we do this and that's just the way life works anyway what the ifs has said is that it would be a very good idea to lay out some rules of the plan for the state pension and what we will do and what we won't do and then stick to them and get some form of cross-party support for this with an enduring promise that this is what we will do and this is what we won't do.

38:34Now I must say that does sound like quite a sensible plan. Lee what do you make of all of this though why not means test it what should you do instead the refs i do think they do they do actually come up with quite sensible uh ideas and kind of uh reports and things because this is something that is bubbling away that is a real the very epitome of kicking the can down the road um you know a problem for for another decade uh type of thing and it's very difficult to shake out of your mind it's that common like down the pub chat isn't it yeah well maybe not amongst some people but normal people but you know will will the state pension always be there you know in in retirement will you as someone potentially in your 20s 30s 40s be able to rely on state pension to make up part of your retirement or will it be means tested i think that is quite a common thing that people do talk about and lots of people also of pension age do talk about uh the payments being quite measly and not being fair enough and that's despite this uh the triple lock having been utilized for a quite a long time and as someone says has improved where we're at but in this IFS report there was some there was some devil in the detail in there that I was looking at sort of pouring over the pages and one of them said a current trajectory uh by 2068-69 the retirement age would need to be 74 in order for the state pension system to still be working if the triple lock remained in place.

40:11That means essentially if you were born in the 90s, you or mid to late 90s, you might not potentially get your state pension until 74. That's what the IFS was laying out in this report and that I think should worry people and should make people think to wrestle hold of your own private pension and your own retirement. And as we always say on this as well, if you're self-employed, looking to get a bloody sip. So the proposals that they're saying in here, they're talking about the reforms, getting cross-party support, all that kind of thing is just so difficult. But if you think about it, this is such a huge cost and it's such a huge part of people's lives.

40:53But really, we can't carry on just not having the awkward conversation. I would argue that within one year of being in power, it's probably not something that you should be looking into. This is more of a kind of a little bit more further down the line. But what the IFS is saying is some of the things that it's saying. The government should choose a target level for the state pension set as a percentage of average earnings in the wider economy and keep using triple lock to decide annual increases until it is reached. After that, it would be heights in line with average earnings growth or inflation if that is higher.

41:25Currently, the state pension is worth 30 % of median, meaning the middle value not average full-time earnings. And it said the state pension age is currently 66, and between 2026 and 2028, it will rise to 67. But the next rise to 68 is still up in the air. The IFS says it should only rise as longevity and older ages rises, but by less than that, meaning the average time spent receiving the state pension would increase. And also said here, auto-enrun went into work pensions should be charged, So employers have to put at least 3 % into a pension for every staff member, even if they're not making minimum contributions themselves.

41:59That last one is the onus on having your own private pension and making sure that you're on track and not being heavily reliant on the state pension, which, you know, I'm not saying everyone in this current generation, but there are a lot of people who currently just solely exist on the state pension. And if you're just solely existing on the state pension, that does look measly. You know, that is a sum of money to live on. That is not easy whatsoever. And that's why there has been strides towards us taking more control of our retirement and how it looks and not to be overly reliant on the state pension if you want to have a good quality retirement.

42:44Are we likely to get anything on pensions soon, Simon, do you reckon? Yes, the government's going to do like a pension adequacy review. I think there's a plan that Rachel Reeves is going to announce this in her Mansion House speech. The government has committed to doing something on pensions and making pensions better. So, you know, this is why these ideas are coming out now. And there's been various other ideas. Some of the stuff about helping people to build emergency pots as well alongside their pension, emergency pots that they can access are good. what what i think is good in here is this we need to change the triple lock we need to make sure pensions are decent and then and then we change the triple lock i think that's a good idea but also this stuff about improving auto enrollment minimum contributions employer contributions the self-employed as well getting them to contribute to pensions because i think there's a temptation to look at auto enrollment as a great success and then sit on our hands and go yeah pat ourselves on the back look we did something good there didn't we and we did do something good there and there should be pats on the back but we need to keep ratcheting it up because you're in a scenario where we are in the shift from people having defined benefit pensions where their employer was responsible for their retirement income to define contribution pensions where people are responsible for their own retirement income.

44:08And that is the case for most private sector workers nowadays. But you've still got private sector workers retiring with chunks of defined benefit pension that they built up before their workplace stopped the defined benefit pension. Now, you've got people in the public sector who've got defined benefit pensions and are still getting them. And that's great. But you've got people opting out of those because they're saying they can't afford their contributions because in order to get that defined benefit contribution, you might be having to put in 10 % of your salary, for example. Now, it's great because your employer is putting in like, they work, it's weird, they basically tell you the equivalent of your salary that they're putting in, even though actually what they're doing is then just promising to give you a certain amount in retirement anyway.

44:54So it kind of doesn't matter. It's like, it's just on them to sort that out. But yeah, it's like, you look at the numbers, It's like 20, 20 percent, 25 percent, you know, people's salaries going in. But people are passing that up because they're saying, well, my contribution is unaffordable. So you need to make sure that those public sector workers are making the contributions that mean they're doing it. We probably need to have a very, you know, honest conversation about whether we can continue to support defined benefit pensions in the public sector. I wouldn't want to see a race to the bottom, though.

45:25And that's what my concern would be, is that we go, oh, well, we can't afford that. So we're going to everyone's going to get the bad system rather than trying to achieve the good system. Everybody gets the bad system. But I do think this stuff about ratcheting up auto enrolment and not just going, oh, yeah, we did a good thing. And let's sit back is that we need to do that. And, you know, it is an extra cost on employers. But frankly, employers have benefited from a bit of an easy ride on pensions over the last 10, 15, 20 years compared to what they used to do. Maybe we do need to push a bit of this back onto them.

46:02Yes, indeed, Simon. Right. Finally, structural problems, bad smells, clutter, shoddy entrance, lack of curb appeal are the main reasons homes fail to sell. Now, that's according to two property experts. There is a premiere, a new premiere of a new Channel 4 TV show called Can't Sell, Must Sell. Scarlett and Stuart Douglas have shared some of their horror stories with This Is Money and told us what they fixed to get the property sold. Lee, bad smells, clutter, shoddy entry, lack of curb appeal. I can absolutely agree with that. Oh, yes. I think those five things are nailed on. I think they actually probably are the five things that I would name and having currently go through a house hunting process and a house selling process.

46:52I think actually the one that people really trip over, literally clutter is the one. Honestly, it's really hard. And we've had loads of viewings on our house over recent weeks. And when you've got two young children trying to sort of shove away of the clutter, it is not a simple task. it is not easy um and actually you it's hard because we've been viewing houses as well and you kind of know that they're in the same position they've been tucking their clutter away into sort of wardrobes and like you know lofts and at one point a couple weeks ago i had to put some of the clutter from the house into the car because i just i could i ran out of time uh to put the clutter away and what the thing is with the clutter is that if it looks like you haven't got enough storage space to put things you can put people off now it isn't an easy endeavor uh i would say especially with children as i've come to find out um and actually be honest it's part of the reason why we're trying to move house but that that is a must thing i agree with your lack of curb appeal as well you don't want to be buying a house that just looks ugly from the outside and when we've been house hunting this summer i've just ruled out because i just do not like the look of the house whatsoever and bad smells honestly it's hard to override that because you're probably thinking, well, I'm going to have to replace all the carpet or hard flooring.

48:09If there's been pets, for example, you know, smelly dog smell, difficult to get out. I would say back in the day it was probably smoking, but lots of people don't smoke anymore and their houses probably smell like bubblegum vape or whatever it is that people want. So it's probably quite nice. So just flipping this around, actually. So this Channel 4 programme started on Wednesday. I've watched this pair, actually. They had another programme. They know what they're doing. They know what they're talking about. and at the bottom of this article that we've done is the three tips to get a house sold and the first one is highlight the positives now what i've done with the estate agent and georgie you're probably not going to be surprised to hear this i do have a laminated a4 sheet of selling the house that i think that the estate agent would quite likely miss out uh if i didn't tell them this includes that the boiler is under five years old it includes that we had the conservatory replaced so it's no longer plastic and there's an actual usable glass uh it includes that we have a water softener system within the house all the little bits and pieces that make the house actually sing and justify the price point that quite often the estate agent might not point out or might forget because let's not face it sorry let's face it they're going around from home to home trying to sell them and it's quite easy to forget so i thought actually just having a lemonade sheet with the selling points was quite an ingenious idea if a little bit sad but i don't care um number two is good photos taken now i had the photos taken and i shifted all the boxes of clutter from downstairs upstairs while i took the pictures of downstairs and then i moved it all downstairs from upstairs when they took the pictures of upstairs the pictures that came back made me want to buy the house the photo absolutely incredible and i sent it to my mum and my mum is literally like the least enthusiastic person you can ever imagine uh everything is just yeah it's all right it's average yeah well i sent her the pictures and she was like wow if your house looked like that all the time you should just live there i was in agreement and then i'm again i've been i've been house hunting some of the photos photography of some of the estate agencies yeah absolutely shocking i was looking at one the other day was taking for sort of the strangest angles and there's clearly some poor photoshop in it because um some of their walls look like they it looked like a crooked house and it was like a it wasn't like an old house it was so bizarre so having good photos is key but i think the number one thing is price your home sensibly if you're going to price people out of your home or come up with silly sums of money that you're asking for your home without knowing the local market looking around what else is selling of a similar sort of stature but also playing to your strengths so thinking about you know if you are close to a train station in a commuter town that's really important being close to good schools you have to really make sure that you price your home sensibly if you don't it's just going to be sat languishing on the market and the estate agent is simply going to kind of turn around to you after a few months ago you're going to have to lower the price and really you do not want to be going down that line buyers have a lot of information at their fingertips and they can see also what's going on in the local market and they can see actually also that you've reduced the price of your house which isn't really ideal um so yeah i think it's an interesting article uh i think it's very good and you know lots of sensible advice in there there's also lots of things when you are buying a home that you shouldn't be put off by you shouldn't be put off by clutter because you know you've got to be able to visualize what you can do to the house you shouldn't be put off by things like bad decor it doesn't take much to you know change change a room's sort of vibe, it's lighting, it's colour, you know, all of that kind of stuff.

51:49You have to look at the bigger picture. I was making notes, Lee, as you were talking there. Curb appeal, Simon, has two things for me. When I first read it, I was like dropped curbs. So I live on a street where you may have a curb, you may not, you may have, you may park. It's completely random luckily we have a drop curve but it's next door neighbor has a right nightmare curb appeal there's a house a couple of doors down that's got a rotting caravan right in the in front of the house it just makes the whole street look really nasty so i've written neighbors again nothing you can do about that but there are things in terms of shower pressure i know lee's lee's wife is a big fan of well testing for the shower but wi-fi why didn't i check it before i i bought this place it's got zero not wi-fi zero mobile reception you think i live in timbuktu or something those are my issues simon dropped curb appeal that's a good one that's it do you do you have dropped curb appeal depending on where you live dropped curb appeal can be a major appeal um it's funny what lee said there about the the clutter and the photos when we sold our flat in london we spent like a year trying to sell it it's 2019 brexit chaos year nobody wanted to buy houses everybody's really worried about buying houses the market was totally dead in that year our house was permanently decluttered the clutter had gone not into the car fortunately otherwise we'd have been having to move it out of the car back into the house every time we wanted to go somewhere but it was in a storage unit and i must admit i loved that year in our flat it was one of the best years i didn't love the bills from the storage unit which storage is so expensive but yeah i reckon the first years in that flat where you've got the novelty and then the final year in that flat where we didn't have like half the crap was amazing it was absolutely brilliant it was permanently tidy it was permanently uncluttered makes such a difference you weren't just constantly falling over stuff and go where am i going to put this um and yeah the photos look great but it was an unrealistic way of living the other thing i would say is that actually i do agree i love lee's laminated sheet but i do agree with that thing of like sell the sell the home and the area to the people who are buying especially if they don't know the area because that's like a major selling point for people the fact that you might have a great local pub that you can walk to yeah yeah but there might be a lovely park down the road the fact that like what do you do at the weekends you go off and like you can get to the countryside really quickly you can go for a walk or you can get into town really quickly there's these great shops and actually it's got a really good high street it's one of the places that's still got a good high street or do you know what's brilliant about living here you jump on the train you can be in london or the nearest major city in 30 minutes yet when you get back here you just feel like you like left it all behind now don't follow your buyers potential buyers around the house in their ear all the time we had we did a talk we talked about this a few weeks ago didn't we with the um the the the the wife who was doing that but if you've got interest if you've got a second viewing or something like that or you do have that opportunity or even if you do just like you know what it doesn't hurt for them to have an a4 sheet of paper that just says yeah this is the great stuff about living here because like the estate agent doesn't necessarily know that they can try and give a little bit of that stuff and sometimes they will give the patter but the people who are going to be buying your home are most likely to be a bit like you if you're selling a one-bedroom flat because you've grown out of it to first-time buyers like they're gonna you would have probably been a first time and you loved it for a reason if you're selling a three-bedroom house you know because you need a bigger house because your family's growing what's going to probably happening is someone who's five years behind you in the family states is moving in all those things yeah tell them that tell them that and increase the emotional appeal not just the curb appeal but the emotional appeal right simon stats of the week all right start of the week 3.7 percent That is how much the average home has risen by since 2016, according to wealth manager Rathbones, which says that although we think that house prices always go up and we actually feel that they have gone up quite a lot and they're very unaffordable.

56:18Since 2016, it claims that the price of residential property has risen at an average of 3.7 % per year and barely kept up with inflation. the stock market on the other hand the uk stock market which has not been the world's greatest performer since 2016 and is generally looked down upon and not in a way that people look at house prices that has risen by an average of seven percent a year so 100 pounds invested in uk property in 2016 would be worth 134 pounds in 2024 so it's to the end of last year whereas Whereas the same amount invested in a portfolio of UK and international stocks would have risen to£174.

57:02You can't live in the stock market, though. You can't. That is very true. Thank you very much, Simon. Thank you, Lee. That is it for this week. You can keep up to date with all the latest breaking money news. Just go to thisismoney.co.uk or, of course, download the app. And if you have any comments or questions for the team, anything you'd like them to look into, you simon you can email us podcast at thisismoney.co.uk and come to thisismoney.co.uk forward slash podcast to find all podcasts past and join in the debate in reader comments and if you like our podcast why not rate us wherever you found us it helps other people find us too take control of your finances with charles stanley direct invest save coach or plan using technology where it's helpful and people where it matters our website and app make trading cost effective and flexible but we're more than just an online investment service we're here for 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 investment involves risk