The big inheritance shake-up for unmarried couples - and what it means

0:02Lee Boyce: Welcome to This Is Money podcast sponsored by Trading 212. Download the Trading 212 app today and open a cash ISA with promo code TIM to get the 12 month bonus promo rate of 4.76 % term supply. I'm Georgie Frost and joining me and Simon Lambert today is Lee Boyce. And coming up, could unmarried partners get automatic inheritance rights? The government is looking at new reforms to better reflect modern society. Ali has been speaking to the deputy PM about the new proposals. Also today, don't fancy DIY investing but worried about too much Elon in your passive portfolio? Simon will tell you how to invest in cheap index tracker funds properly.

0:43Lee Boyce: Plus more bad pension saving news and inconvenient parkas. What can you do about it? Don't forget to step today with all the latest Breaking Money news. Just go to thisismoney.co.uk or download the app. But first, for years, we've been reminding listeners on the pod there is no such thing as a common-law spouse. So write a will. But could that all be about to change under new government proposals, which would mean millions of cohabiting couples could gain automatic inheritance rights if a partner dies without a will? The plans would also create new rules for dividing property when unmarried couples separate and strengthen protections for domestic abuse survivors.

1:23Lee Boyce: Welcome, Simon. Welcome, Lee. Hi, Georgie.

1:26Georgie Frost: Yeah, so this is a kind of idea put together by David Lammy's Ministry of Justice. There are three and a half million cohabiting couples that are living together but don't get the same rights as you do when you are married. And what that creates is quite often inheritance problems, problems around property. you may have children but you may not be married there's all sorts of scenarios in which people aren't married and don't have the kind of rights and protections potentially you have as a married couple you know it's a modern world things have changed quite a lot in the last 20 30 40 years i would say in regards to this people were probably having longer relationships outside of a marriage mr lammy himself who i interviewed about this and you can hear his voice in a little while were saying that basically young people are putting off marriage because it's expensive to get married and something like 51 percent of children are now born outside of marriage so and i think what they're trying to set out here is better protections better rights to make sure that family finances aren't blown apart in the case of a breakup especially protecting children in those kind of circumstances now this is a consultation so we'll kind of put that out there that this isn't coming in and it's not coming in in the way, shape and form it's kind of been outlined at the moment.

2:48Georgie Frost: It will run until the 14th of August. Mr. Lamy was very clear to say that lawyers, academics, charities and the public will be able to have their say on these proposals. The thing is, and one of the kind of points to it that I kind of was questioning is, you know, does this kind of water down a little bit the concepts of marriage? Because marriage does give view those rights to finances and i think most of us are aware and know that you know does it make marriage even more of a kind of not a pointless exercise but it kind of waters down uh the kind of idea of marriage a little bit i think that's one thing that definitely our commenters in this story are talking about and they kind of understand it but there are also circumstances in which it probably makes sense for more rules uh and more rights to come into place as i say in this kind of new modern world.

3:40Georgie Frost: This is going to throw up potentially some very complicated cases. Think money, property might not fall into the hands. You might not necessarily have wanted it to. And how do you negate and fight back on all of that? So all of this is in the proposal phase. And, you know, as I say, it's an interesting concept and it affects a lot of people. It'd be interesting to see how it goes and what comes of it.

4:04Lee Boyce: as someone who is unmarried and who owns a home with someone this is something that is very relevant to me although i do have a will as does my partner however this is not just about married couples there are quite a few famous cases in the past of sisters that have been living together and haven't been able to have the house etc so this is something that personally i welcome but i absolutely understand the minefield simon that this could open up in terms of people trying to get hold of homes and oh god as if inheritance isn't sticky enough at the moment we're seeing way more cases aren't we go to court of people unhappy so oh i can imagine that this would be

4:47Simon Lambert: something quite similar yes we have seen a rise in inheritance disputes now some of that is down to the sheer number of people who still don't have a will but also some of it is down to the stakes being higher due to the substantial rise in property prices, particularly in certain parts of the country. You could be talking about lottery winning numbers. I mean, in an inheritance dispute in many places in the southeast of the country over a detached large family home, you're talking similar, you know, 500 ,000 pound, maybe a million. So you can see why you're getting more of them. The point on siblings, I think, is a really good one, because at the moment, the way things are set up, disregarding who inherits the property, who leaves the property to who, the laws of intestacy don't favour the sibling, right?

5:41Simon Lambert: But even if you set that to one side, there is an unfairness involved in inheritance tax. And this is something that is not part of this. So you're going to have something with the cohabitation over here, and then you're going to have something with the inheritance tax over there. Now, married couples and civil partners can pass their assets to each other on death free of inheritance tax. They can pass on any unused inheritance tax nil rate bans. And then the surviving partner can use that entire inheritance tax allowance. So what it means is that effectively a married couple or civil partners can pass on a million pounds tax free.

6:24Simon Lambert: £325 ,000 each is the standard nil rate band and then£175 ,000 on top of that to cover their own home if it's passed to a direct descendant. Now, obviously, this also acts against people who don't have children. so in a scenario where you've got two siblings who own a property it's quite often the case where two siblings who own a property may be doing that because they don't have their own families they don't have children so there's a double disadvantage there and there have been scenarios in the past and i personally know of one involving a former neighbor where i grew up where you know there were two siblings living together and there was a substantial inheritance tax bill in that you know, house would pass onto the other person on death.

7:11Simon Lambert: And arguably, if you've got two siblings who've been living together for many years, that does feel deeply unfair. But to go back to what we're talking about here, if you've got a cohabiting couple that we've decided to have now been cohabiting for so long that they qualify for the new rights that are being consulted on, should that cohabiting couple not be able to get the same benefit of being able to pass on that property inheritance tax free because you could find a scenario where someone inherits the property due to these new rules but then is forced to sell the property due to the inheritance tax rules so it does create a little bit of a minefield now there's always the thing of like you may not want to get married but you could become civil partners and i do think this is something that is worth considering for cohabiting couples despite the suggestion here of these new rules is like i do I totally understand.

8:05Simon Lambert: Lots of people say that thing. Well, just get married. Just it's just a formality. Just get married. Just do it for the just do it for the monetary. Just do it for the financial benefits. It's like, well, people are like, no, you know what? I don't want to do that. But you could do a civil partnership. But I think people don't want to do a civil partnership potentially for the same reason. And obviously that route then isn't open to siblings anyway. So it's definitely something that when we read it, it's like this looks good. this looks like a good idea and then it starts to open many many more questions i think it's just right will just right well just just right oh yeah number one right will i mean actually um in in the

8:44Georgie Frost: interview with mr damma he was very very keen to point that out you know people should be writing wills and he kind of hinted at some sort of reform that's on the way for will writing as well and bringing it into the modern age he didn't go into any detail on it as you were hearing the response But he was talking about potentially making it easier and making it a kind of more mainstream message out there to make sure that people have a will. This isn't to replace wills. Will should still be the number one thing. But unfortunately, as we know, they're not necessarily on the forefront of everyone's mind.

9:16Georgie Frost: But he was very, very keen to have that point at home, just as you are, Georgie.

9:20Lee Boyce: It's weird, isn't it? Because, I mean, I did one of the sort of online will, farewell or bequeathed or whatever. I can't even remember what it was. It was a very simple process. It was relatively economical. I'll be honest, I don't have particularly complex financial situation. So it's actually quite straightforward to do. But as someone who's an expert in finance, where would you say is the big issue with wills that need to be simplified? You know, there's really quite simple options.

9:47Georgie Frost: I think it's more about the messaging, Georgie. I think a lot of people get tripped up and think it's some sort of overly complex thing that you've got to go and do with a solicitor and spend thousands of pounds on now you have to be a little bit careful because if you do a diy will you know you have to make sure that your will signed and all of the proper you crossed it across the t's and dot the i's and all that kind of stuff making sure that you know exactly what you're doing but i think it's just a bit of the messaging i think it's a bit of the kind of morbid kind of element to it as well where people don't like to think about you know potentially their death and the other part of this as well is you have to remember and i think what some of this proposals is all about is kind of more vulnerable people people that are in kind of like abusive relationships for example are probably not going to go out and get a will you know it's it's kind of one of those things in which we can hammer the message home and tell everyone to go and get themselves a will but it falls down the pile of you know to-do lists pretty rapidly i would suspect with a lot of people and i think that's where the issue line you're right a bit like diy investing platforms there's a lot more choice now in a will writing service a lot easier a lot cheaper they vary in quality so make sure you do research if you haven't done your will writing to make sure that you are going with someone legit and making sure that you know exactly what it is you're doing and i think that's i think that's what it is georgie i think some people just feel like they don't quite know what it is that they're doing in terms of you know who they're going to split a property with or money with or may even fall into that trap of going well i don't really need a will because you know i'm married or i don't need a will because i don't have enough money to give away i think there's those kind of messages that need to be kind of changed or an

11:29Lee Boyce: assumption and there's still as we said to go back to the double show that common law spouse is a thing and unfortunately it's not so we just need savvy squirrel to write a will and then we're all good um lee you did set us up for the next story you spoke about investing platforms but before we get there. Let's hear that interview with David Lammy.

11:49Georgie Frost: A lot of your listeners will think that the status of common law marriage actually exists. And that means that if you've been living together as a couple for several years, that if your partner dies, or if you split up, you broadly have the same right as a married couple. And it's a myth. The truth is, at the moment, in terms of inheritance, in terms of savings, in terms of financial assets, you don't have the same rights. And so it is important, I think, that we finally move to a situation given that 3.5 million couples now are basically cohabiting, and that more children are born to cohabiting couples 51 % than children born to married couples young people are putting off marriage because on average it costs 20 grand to get married which is a lot of money in a cost of living crisis so for all of those reasons it's right that we give cohabiting couples rights and this consultation is about the basis of those rights for the first time and what's the proposed threshold for those cohabiting and who will benefit ultimately from this?

13:07Georgie Frost: Well, any unmarried couple who can prove that they've been living in a committed relationship for three years or longer, or live together and have a child, will benefit effectively from what we are now proposing, which as I say, is to give those couples a legislative basis on which to the courts and they can make provision in the event of one of those couples passing away or the couple splitting up or indeed the couples having kids and therefore having to reach judgments about inheritance and assets and other things. And is there a risk that recent partners could trump children when inheriting and how will these complicated cases be sorted out?

13:55Georgie Frost: When the Law Commission looked at this, they recognised that the new context that many of your listeners would understand, the blended family, does raise new complications for families up and down the country. They settled, and we're consulting on the basis of, if you've been together for five years, then the partner should be able to inherit in the event of one of the partners passing away. And if you've been together for two years and have children, then that partner also should benefit to avoid destitution and the things that can flow from not doing that. But I do want to emphasize this. If you're in a blended family in the United Kingdom, you should make sure you have a will.

14:42Georgie Frost: And you should make sure you have a will if you want to provide, particularly for pre-existing children, notwithstanding your new relationship and I will be coming forward with more to say about making wills easier in the modern age in the coming months. Do you think that's it that's the key for wills just to make them more simple more accessible to people is that what's putting people off sorting out their kind of finances in that way and and should they be looking at their wills and kind of re-evaluating it you know every year or what would be your advice in that regard? Yes, it's certainly the case that historically in the UK, people have been wary of looking issues that, you know, they can feel morbid looking into what might happen in the event of you dying, no doubt about that.

15:28Georgie Frost: But if you're in a blended family, please make a will. If you're listening to this, think hard about how you want your inheritance to fall. And don't assume because you're a cohabiting couple, this common law marriage exists because it does not. We're seeking to correct that. But as we speak today, it does not exist. And of course, wills are something that you should revisit. They must be witnessed, they must be legal. And of course, legal advice is available for anyone who wants to make a will. And one of the big issues for cohabiting couples is that they're treated differently for inheritance tax.

16:02Georgie Frost: The married couples who can pass assets inheritance tax free, and it's becoming an increasing issue. Will the inheritance tax rules be changed? Should they be changed? We're not consulting on today on the basis of tax. That remains an issue that sits with my colleague, Rachel Reeves. She'll be very upset with me if I either had to abolish tax arrangements for cohabiting couples. And look, I think it's right. We do recognise, don't we, as a society, that with marriage comes certain benefits. And that is still the case but we do not want to disadvantage greatly people who are cohabiting recognizing in the modern world there are many people cohabiting and also recognizing for example that with domestic violence still an issue in society women fleeing marriage we don't want to disadvantage those women who have been cohabiting with a partner and end the relationship get the courage to end the relationship and therefore a disadvantage as a result for her or indeed her children.

17:05Georgie Frost: So for all of those reasons, it's right that we bring rights to those who are cohabiting, but they are not the same rights to those who choose to formally enter into a marriage. And one last question for me. In this proposal, there was a mention here about prenups and making sure that they're legally binding in cases when they go to divorce. At the moment, these arrangements are completely watertight, although courts usually do give weight to them if they're fair. What kind of changes can we expect there on the prenup side of things? Well, you're absolutely right. Prenups are more common. They're currently not automatically enforceable.

17:43Georgie Frost: And they're only upheld if the court determines that they are fair. And there's uncertainty about what that effectively means. So that's why we're proposing legally binding nuctual agreements with safeguards to ensure that the vulnerable are protected. And these safeguards will include making sure that individuals have separate legal advice to make sure that there's nothing, no conflicts there, and that prenups must meet financial needs, for example, ensure that there's enough money for a partner to be rehoused.

18:16Lee Boyce: Right. That was Ali speaking to Deputy Prime Minister David Lammy about the new proposals. So, Simon, let's talk about investing. For most investors, the advice has been to forget trying to bother picking your own stocks. Just get a cheap tracker fund, let the market do the work. But exactly how do you do it? And how do you do it well? Especially as if everyone is buying the same handful of giant US companies through tracker funds, are we less diversified than we think? Are we just buying a lot of US tech? And But anyway, we'll get to that part, Simon. Index tracker funds. Where do they come from?

19:00Lee Boyce: What are they? How do they work?

19:02Simon Lambert: index funds an index fund is simply a fund that follows a certain market or index so to speak now that index could be a very very broad one such as the global stock market it could be a narrow one such as a country's stock market for example our own footsie 100 or it could be a basket of other investments. It could be a basket of certain types of stocks. But in its purest form, index investing involves simply following the whole market. So you want the broadest possible one. So the way that people are often told to sensibly start investing in the stock market is just by a global index fund. And then you're investing all around the world.

19:55Simon Lambert: Thousands upon thousands of companies, countries all around the world, and you just basically put your money in and then you forget about it. Now, the disadvantage of an index fund is that you won't beat the market. They're not designed to beat the market. They're designed to follow the market. And in fact, because there are fees, you will always theoretically be slightly behind the market. But the fees on these are incredibly low and they benefit from an economy of scale. So the bigger they get, the lower they can bring their fees down. An active fund, on the other hand, as opposed to these passive index funds, involves a fund manager or potentially nowadays some kind of clever algorithm or computer that is trying to pick winners.

20:39Simon Lambert: So instead of following the market, it's trying to choose winners. Now, the basic bit of investment theory behind why you should choose an index fund is that by trying to pick winners you also risk not picking winners and choosing losers instead and falling behind the market. There is all kinds of studies which will show you that it is very very very difficult for active fund managers to consistently outperform the market. The fund management industry is one that is worth a huge amount of money. Fund managers are paid a large amount of money. People who work in fund management firms make a lot of money.

21:21Simon Lambert: So they have a vested interest in telling you that they will beat the market. Yes, we get it. Okay, right. That's fine over there. But over here, you want to do something slightly different and we will beat the market. Now, there are some managers and some investors who actually do have the contract record of beating the market, but they won't beat the market year in, year out. I mean, to give you one of the most famous examples in the uk a man called nick train uh considered to be you know one of the uk's best fund managers invests kind of warren buffett style buys quality companies holds them for a long time and everything like that for many many years was considered the prime example of the manager who beats the market nick train has not been doing very well uh for a while now really since since the pandemic probably the last five years and investors who hold his investment trusts or his funds have been falling behind the market.

22:16Lee Boyce: Simon, is that because he's not picked well or because of the US tech just going bananas?

22:24Simon Lambert: Investment styles come in and out of favour. Sometimes the stuff that's going up is not the stuff that one type of fund manager might pick. And that's where the whole, you know, you should just invest in a tracker fund comes in. But a big part of this is the stratospheric gains of the US stock market, which have been driven by a small number of US tech funds. So yes, that's what's driving it. And that's what's making it really, really difficult for active fund managers when you compare their performance to a tracker fund. because actually what you should be doing before you ever invest in somebody's fund is going well could i just not use the cheap tracker instead because costs compound over time and this is exactly what's happening you know to go back to what i was going to say terry smith fund smith you know global fund manager so theoretically will be benefiting from the whole us thing and everything like that doesn't pick those kind of stocks has concerns over the valuations of some of those tech stocks got lots of managers in this position so because they're not holding them in the same proportion as the index and those big stocks in the index are driving the index up they're falling behind the index now there is an argument for active fund management in places that are less well researched things like smaller companies emerging markets stuff like that where the index might be capturing a lot of dross as well but to go back to the question you said at this you know earlier on it's all very well saying this and saying well the global market is too overexposed to these large mega cap companies but if you listen back to episodes of this podcast, you'll find me saying this one year ago, two years ago, three years ago, four years ago, five years ago.

24:00Simon Lambert: And betting against those big US tech companies has cost you a lot of money in the gains that you could have made.

24:07Lee Boyce: Well, how do you decide though? Because we've having so much noise about SpaceX and Anthropik. Goodness me, do you really want 1 % of your portfolio in SpaceX?

24:17Simon Lambert: Well, this is the thing. And you won't automatically end up with 1 % of your portfolio in spacex now people are worried they're like okay hang on a minute so apple makes up about four percent or five percent of a global stock market tracker apple's worth about four and a half trillions or five and a half trillions spacex will be worth about a quarter of that am i going to end up with a percent of spacex the index funds won't buy at that level initially because SpaceX is going to be listed on the NASDAQ as well. But what's going on as well in index fund world is people are busily trying to change the rules in order to capture some of it so that they can get SpaceX in because quite a lot of them have various rules around, like, for example, share voting rights, free floats.

25:08Simon Lambert: So that's how many shares can be bought on the stock market and all these kinds of things. And they're busy going, hey, look, this would stop us having SpaceX in our index fund. and people want to hold SpaceX. So like, yeah, maybe like with a company this big, we kind of need to bend the rules a bit. And the reason why they're doing that is it's not just SpaceX. We've got Anthropic is talking about a trillion dollar IPO. We've got OpenAI talking about a trillion dollar plus IPO. It's going to be the kind of the summer and the second half of the year is going to be characterized by these mega IPOs.

25:44Simon Lambert: and the index funds you know they want to have them in there now whether they should have them in there it is of course another question because i think people would put in their sensible shoes on to go back to what you said earlier on they put in their sensible shoes on and choosing this like just track the market thing but they are being very exposed to one trade which is u.s megatech and AI kind of thing. And if that comes tumbling down, it could be a problem. And interestingly, this week, something else also happened in index fund world, which is Vanguard's S &P 500 ETF went past the$1 trillion mark in terms of assets under management.

26:32Simon Lambert: I mean, that is amazing. So this is like Vanguard's sort of flagship ETF, which is the S &P 500 ticker symbol is VOO. And yeah, that went past the trillion dollar landmark. So but these are a very simple way of investing.

26:49Lee Boyce: Well, let's dig into that in more detail because you can get investment funds, ETFs, and you don't have to get, I know we're talking about global index trackers, but actually you can get ETFs to do loads of stuff.

27:03Simon Lambert: I mean, you can get ETFs to do almost anything. Whether you should get ETFs to do almost anything is another question. You know that phrase, just because you could doesn't necessarily mean you should.

27:15Lee Boyce: exactly but i was just thinking i've got a canadian one here just to be nationalistic and whatever that yeah and that's fine you you do that georgie you stick your maple leaf on your forehead

27:28Simon Lambert: she's fully dressed in oh yeah in canadian ice hockey gear absolutely right well waving whilst waving her tracker fund around in the air you do that but just don't put too much of your portfolio on it. That's the point. Yeah, exactly. So there's two types of index funds. You've got investment funds and you've got exchange traded funds. Effectively, they're doing a similar thing. They are pooling investors money and they are investing it into the index that they are tracking. The difference is that index investment funds. So this is what in the US is referred to as mutual funds. We just tend to refer to them as investment funds in the UK.

28:07Simon Lambert: They are bought and sold by investors in units. They go up or down with the value of the asset that the fund holds and they're priced once a day and as more money comes in the fund gets bigger and as money goes out the fund gets smaller. ETFs are slightly different in that they are actually traded on the stock market themselves and so you buy and sell them in the same way as individual company shares. The reason why ETFs have become hugely popular is because they're priced continuously throughout the trading day you know instead of waiting once a day to see what's happened to the price it goes up and down all the time they're very liquid people can get in and out of them very quickly there is a an ask price for buyers and a bid price for sellers the gap between the two of them is known as the bid ask spread and the narrow difference between those two things indicates like how much liquidity there is and how much demand there is for these things it's like you're not paying a big spread on stuff this stuff fundamentally really the most important thing to people about this is kind of like just how you choose to hold your investments and also kind of what platform you're on some platforms will offer free or very cheap investment fund dealing but they will charge a higher amount for share dealing which is what you'll have to pay for etfs others will not do that and so you may as well use an etf and in fact they may not offer investment funds so to put that in context right trading 212 sponsor of this podcast is a phenomenally cheap place to invest right it has no account fees and it charges no share dealing fees so if you go out and you buy your cheap etf on trading 212 all you will pay is the etf's charges because you're not buying it in a foreign if you're as long as you're not buying something in a foreign currency and then you'll like currency exchange fees but so for example if you were to that Vanguard S &P 500 ETF that I mentioned earlier that has ongoing charges of 0.07 percent that's all you'd be paying so that's the difference between the index funds and ETFs the way to do this really simply is just use one broad global index fund that's going to enable you to back like 4 ,000 plus companies around the world as we said does leave you heavily dependent on the US market so to put that into context in Vanguard's all-world ETF, NVIDIA makes up 4.6%.

30:27Simon Lambert: Apple is 3.8%. The UK stock market makes up 3%. So you're going to have more Apple than you will have of the whole of the UK. You can tilt yourself away from that by holding the bulk of your portfolio in a global tracker fund. And then you can maybe take some of it and you can invest that elsewhere. So to go back to your point, you could have the core of perhaps like 80 85 whatever you decide in that global fund and then you could go right i'm going to use my other 20 to tilt it in another direction so if you for example held 10 of that other 20 in the uk that would be heavily overweight the uk sorry investment term here that would be holding heavily more of the uk than the uk makes up in the global stock market index and you could maybe you could choose a an etf that then invests in you know europe as well or you could choose an etf that targets dividend shares or an etf that targets smaller companies or an etf that targets gold and other commodities or something like that and then that gives you that other bit of the portfolio but you know that in that bit where you are tilting yourself away from the market even if your decisions go very badly wrong and your canadian flag waving etf absolutely tanks is only a small chunk of your investments not a big chunk of your investments you don't want to do it the other way around to put 80 into your canadian etf and 20 into your global etf because unless canada does surprisingly well um you are heavily at risk of potentially losing if it slips up.

32:14Lee Boyce: It's a teeny, teeny, tiny percentage, but it is actually up about 6%. I've got some real doozies in here. But sorry, I'm looking at my portfolio as we speak, Simon, because a bit like some people, I think, I don't know if I'm the only one here. I don't like driving an automatic car. It doesn't feel like driving to me. And for some people, they'll think, just sticking your money in a global tracker and just leaving it there. That doesn't feel like investing. I want to do something that makes me feel, and most of my money, don't get me wrong, is in a global tracker. However, I do like to dabble.

32:45Lee Boyce: So I'm probably doing it all wrong, Simon.

32:47Simon Lambert: Well, look, I've just told you all of that stuff. Most of my money isn't in a global index tracker either. I've got loads of investment trusts, active investment trusts and things like that. And I've said this before, I don't ever want to do the calculation where I work out how much more money I'd have if I just put it into a global ETF. I do know that it would be more money because there's stuff in my portfolio that's done great. You know, I've got Fidelity Special Values. That's up, you know, nearly 70%. Blue Whale, like, I've made a 218 % return on that one. Scottish Mortgage, I didn't even buy Scottish Mortgage at a particularly good time.

33:27Simon Lambert: That's up, you know, 65%. But then there's also some quite red numbers in there. And I think the bad decisions over the years have outweighed the good ones. And I probably should have just gone, do you know what? I'm just going to set and forget and not worry about it.

33:44Lee Boyce: Lee, let's talk about another miserable pension savings story, shall we? Yay! But this is quite an important one. The influential Pension UK figures have been released. What we need to save to have a basic, moderate, comfortable retirement. And the findings have shown that And pensioners now need to find£30 ,000 more than they did last year to maintain a comfortable standard living throughout their retirement. Throughout their retirement is key because when I read that, I was like£30 ,000 extra a year. Oh, my word. So that gave me a bit of heart failure. But you do need a pot of about half a million to 800 ,000 to enjoy a comfortable retirement.

34:28Lee Boyce: And when I say comfortable, Lee, we're not talking about swanning off on cruises every other week, are we? This is, you know, a comfortable retirement.

34:37Georgie Frost: I'm grinning here because Simon and I had the same conversation the other day about that 30 ,000 figure and the fact that it's over the entire lifetime. Not what you need annually because that would be a bit terrifying. Yeah, I'm just grinning at that.

34:50Lee Boyce: I'll give up now.

34:51Georgie Frost: I'm going to answer this, Georgie, as a real vanilla ETF investor who drives an automatic. Oh, Lee. So when you were saying that, I was bristling a little bit because I must be the most basic human. Oh, Lee.

35:06Simon Lambert: Hang on a minute, though. Just before you continue, Lee. So petrolhead manual car driving, Georgie. Just remind us what your car was.

35:12Lee Boyce: It still is. It's a mocha. A Vauxhall mocha.

35:16Simon Lambert: A Vauxhall mocha.

35:17Lee Boyce: But I tell you what, nothing feels more real than driving that old piece of crap. You never know what's going to fall off next.

35:23Georgie Frost: I'm going to go back to the pension story. Here we go. okay so this is a pensions uk piece of data it comes out annually it's kind of intended as a barometer for people to kind of use for planning their retirement savings it's an independent report it's done by the center for research in social policy at lothbury university and it takes in all sorts of factors and spits out a figure of how much you're going to need to have a certain kind of retirement and there's three retirements labeled here and which i'll get into shortly but what at a really basic level is showing is that if you want a moderate lifestyle it will cost £32 ,700 a year for one person and£45 ,400 for two you'll need that every year but it's estimated that just 23 % of the working population would reach such a level for a comfortable lifestyle which is the one above that£45 ,400 for a single person£62 ,700 for a couple only 9 % of people are on track essentially to do that.

36:25Georgie Frost: Now what these figures do do they do also factor in state pension into this so they're working on the basis that you're going to get full state pension.

36:33Lee Boyce: And also that you've paid off your mortgage right because I wonder that in 20 years time those figures are going to look very different as to the number of people who've bought a house as a number of people who are renting in retirement.

36:44Georgie Frost: Exactly and that's the thing about somebody's piece of visage like you have to take them a little bit with a pinch of salt because you know individual circumstances and where you're at in your life can completely vary and it's really worth pointing out this is just meant as a very very very kind of loose guide it's just i think to sharpen focus onto your private pension saving and trying to sort of say look this is what you need to maintain a lifestyle you may have come accustomed to you don't want to get quite later into your working life and find that actually you're going to be well sure so those three categories Georgie um they start with minimum for a couple 22 and a half thousand pounds is what's needed single person 13 ,900 pounds most working people were on track for that retirement thanks largely to state pension which of course we again won't know what will look like um you know in decades to come time but um that includes 200 pounds a year to maintain property uh it's roughly £57 a week on shopping,£111 for a couple.

37:42Georgie Frost: It's just no car, but using public transport instead. Week-long UK holiday every year and a budget of around about£460 a year for a single person on clothing,£182 for a couple. You then go up to moderate, the figures have already said on that, £500 to maintain property per year. It's£59 on shopping for a single person,£107 for a couple. Based on a three-year-old small car, replaced every seven years. two weeks in europe and a long weekend in the uk every year and a much bigger clothing budget of 1500 pounds for a single person 2500 pounds for a couple that's quite a big clothing budget i i think and then the final one is comfort 600 pounds a year to maintain property also because the maintain property thing again it just depends on what property you're in um shopping 78 pounds for a couple 139 pounds for um sorry 78 pounds for a single person 139 pounds for a couple That's both a three-year car replaced every five years, two weeks in Europe, and three long weekends in the UK every year, and the same clothing budget as a moderate.

38:41Georgie Frost: Now, what does that all mean? What do you need to have saved up at certain points of your life in order to guarantee a kind of fairly decent retirement? Now, if you want to retire early, 55, and you want to meet that minimum requirement, you'll need£152 ,140 saved up. for moderate 546 360 comfortable 816 000 pounds roughly now that you know not a huge amount of people choose to retire at 55 and of course if you're going to retire that early you're going to need to have a big pension pot i think what's probably a more useful barometer in this is at 65 and 70 so if you want a minimum retirement at 65 you'll need to have just about 45 grand saved up for a moderate retirement£335 ,217.

39:30Georgie Frost: And I would say that that is probably the kind of most people's target would be around about there. Retiring around about£65 ,000, you know, £335 ,000 is what's needed for a moderate. If you want a comfortable retirement,£532 ,000 you're going to need. And then if you push your retirement back another five years, for a minimum retirement, you'll need just£15 ,000 saved in a private pension,£237 ,858 for a moderate£387 ,923 for a comfortable retirement. Now, I know that's a lot of figures that are being banded about, but it is really worth taking stock, as we always say on this podcast, of where you are at with your private pension saving, how close you are.

40:12Georgie Frost: I would use that 65 mark and that 335 ,217 figure as a real benchmark. Have a look where you are at your age, how much you've got in your private pension, how much that private pension has returned to you in the last five to ten years and where that could possibly using a compound calculator take you if you carry on making the same payments into it over the course of the rest of your time until 65 and how how close you are to that if you are someone that would rather have a more comfortable retirement you're going to need to act now making sure that you are maxing out your pension payments as much as you can because you can't buy time but as i say like this is this is just a real kind of benchmark it is used by the industry

41:01Lee Boyce: so it's quite robust but there are lots of nuances to it yeah a conversation starter i would suggest as i think i've heard someone say and it's very important to be talking about this i wouldn't be totally wedded to those exact figures but a bit like when we summarized the first story writer will save save into pension simon i remember when these figures first came out

41:25Simon Lambert: it was many years ago and we uh discussed them in detail and and the granular detail i remember it was like trading up from kind of two cans of supermarket lager to a bottle of sauvignon blanc wasn't it that was the thing that amused us i think the thing to remember about this and i actually think that these pensions uk figures are really good this benchmarking is really good because it helps people picture okay well do i want that don't want that what's it going to cost me you do have to remember that these are the figures for if you retired now if you're not retiring now it's going to cost you more money because of inflation and i don't want to alarm anyone listening to the podcast but I do think it is important to know some of these numbers so for the moderate retirement I did these calculations at the moment that's a 32 ,700 okay so knock off your state pension okay you're going to need 20 ,200 income now if you look at someone retiring in 25 years time so they're retiring at state pension age in 25 years time So state pension age in 25 years time be 67 or 68, I think.

42:39Simon Lambert: So like early 40s now. Well, if you allow for inflation being two and a half percent over that period of time, that means that you're going to need£37 ,700 on top of your state pension. So I've taken the state pension out of this number. and the pension pot you're going to need to get that if you work on the basis that you can get five percent income from your pension pot each year would be 754 000 pounds so that's just for an individual to have a moderate retirement if you do the same calculation with the numbers for a couple between a couple for a moderate retirement they're going to need a pension a combined pension pot of 1.3 million which sounds a lot but remember it's two people so that's actually 650 each and actually if you have been part of the auto enrollment generation and investing into your pension um you know from early on and you do relatively well in terms of wages in your life and everything you don't have to earn a huge amount you will potentially hit those numbers it's amazing how big people's pensions will be comfortable though gets really spicy do the same calculation for an individual who wants a comfortable retirement in 25 years time allowing for the state pension, etc., inflation at 2.5%, they're going to need a£1.3 million pension pot as well, but just to themselves.

44:01Simon Lambert: If you do it for a couple, they're going to need a£1.9 million pension pot combined between them in order to have a comfortable retirement.

44:11Lee Boyce: Oh, wow. It's a good job they got rid of the lifetime pension cabinet.

44:15Simon Lambert: Wow, it's funny that, isn't it, when you start talking about some of these tax things and you start realising that actually these massive pension pots don't make you a squillionaire you're not going to be you're not going to be firing it out with elon musk anytime soon you're basically just going to be able to go on holiday and have some sauvignon blanc um and it puts the puts the inheritance tax changes into perspective doesn't it you know that oh but hardly anybody pays inheritance taxes only a few small a small handful of rich people well an entire generation that's having to invest their pension pots and basically if they want to have a moderate retirement as a couple they're going to need 1.3 million pounds in 25 years time and the most they can give away in harrisons tax-free at the moment is only 1 million pounds so it'd be 300 000 pounds over anyway i mean i would make the point that you are meant to spend your pension in retirement not sit on it and pass it on but it does put these things into perspective it's hard to put your finger on some of these pension pot numbers because there's varying bits of data and then you've got to allow for this kind of generational shift between um defined benefit defined contribution and everything like that and then investment gains and so on i mean like the good thing is what we were talking about earlier is most people's pensions are invested in relatively simple almost tracker funds which will have benefited hugely from the growth in the u.s stock market so you know at the moment they're outpacing their investment returns are outpacing pacing the requirement of inflation but let's just hope we can keep that up.

45:47Lee Boyce: Aye, quite. All right then, finally Lee, read a question time to your resident consumer lawyer Dean Dunham, tackling another issue for you. Now, I know a situation like this and I was really quite intrigued by this and I'm sure lots of people do. A van, it is also a van, maybe I live in the same area, a van or lived, has been parked at the corner of our cul-de-sac for five months. All my neighbours and visitors have to drive on the wrong side of the road to just get round it, which is annoying and potentially dangerous. The owner used to live in a nearby village, so not even in your cul-de-sac.

46:25Lee Boyce: But word is, he's moved to bloody France. I added that emphasis, by the way. What can we do to get this removed? Lee!

46:35Georgie Frost: What a cheek. I love the rumour mill. I love the neighbours that hot-footed it off the france i just left the van there i love i love these neighborhood kind of disputes uh it's crazy do you know what georgie and i know you've got examples of this i'll give you two really quick examples of this and i think that there's quite a lot of this that goes on that winds up neighbors more than anything because if you do live in a cul-de-sac or you live in a road where space is at a premium it's really irritating when people have more than sort of two or three vehicles um you know potentially they've got vehicles on their driveway and then they're off street parking and on street parking as well and it's quite it's quite annoying so the two examples i'm going to give is a former neighbor sold a business and had a big transit van parked on there we were in a semi-detached had a big transit van that parked right outside their front door they could hardly get out the front door and they came right up to our driveway and it was there for about four or five years and unused so the business was sold uh he went to go and work and do something else and the van just sat there and sat there and i asked numerous times and it was always like yeah it's going to get sold this summer and it never did and it was really annoying because it has a knock-on effect so everyone else is parking because then they can't get on the drive so they're parking on the street uh and so on and so forth the other example i'll give um there's a road a few roads away from me when i walk home from the train station to my house and someone has got and i know word of a lie about six to eight mercedes wow and lots of them just like flat wheels in the front uh drive one of them's a seven door mercedes a limo mercedes and it literally takes up half of this road and it must wind the neighbors up something rotten all of these kind of like you know unroadworthy cars and dotted about on the driveway looking unsightly and then just the loads of others just sitting around and i think that there are people who like to fiddle around with cars and do them up and all that kind of thing and i'd never poo-poo that you know that's people's hobby and whatever but i think if it starts to become it's a detriment of neighbours um i think it causes more disputes than what we know so what can you actually do now the first port of call is to make sure that this van or any vehicle that you think has been kind of abandoned or left somewhere for quite a long time is to make sure it's taxed and insured and has a valid mot you can do this on the gov.uk website run the registration through the free vehicle inquiry service it instantly tell you if it's taxed and has a valid mot if both are up to date the owner is actually legally entitled to park it on any public road where there are no parking restrictions and actually that's the other thing that happens right that councils start throwing in parking restrictions in places because of things like this so again around my area near the station you know there's a big car park for the train station people don't want to pay for parking so they inevitably go down other roads and so for example it'll be like a 10 to 11 am you're not allowed to park on this side road but they start i think they start spreading out elsewhere because of things like this because people get fed up anyway so your fever is lapsy you haven't been able to having able to kind of get them on that you can report it to the dvla untaxed vehicles on public road could be clamped impounded ultimately scrapped can happen in weeks that doesn't happen contact local council ask them to investigate whether it's an abandoned an abandoned vehicle um explain the circumstances how long the vehicle has been left attended and why you believe the owner has now left the country so basically there's all the evidence that you've got councils have power under the refused disposal amenity act 1978 to remove vehicles that appear abandoned after serving notice if the van is causing a genuine obstruction or danger which it actually does sound like in this uh case you can also report it so the police on 101 so not the emergency hotline but on 101 as a highway obstruction and finally check whether your road has any parking restrictions you may have overlooked uh agreeing with your neighbors to report the issue together carries more weight than a single complaint i think that's key you know i joked around there about all the neighbors kind of all the rumors they've gone to france but you might not have evidence of that and maybe a neighbor does um it's strength in numbers georgie i think if there's 10 of you saying this van is parked here and it's a complete nuisance hasn't been touched and i think it does carry a lot more weight than just feeling like it's just

50:47Lee Boyce: a petty one person fed up with something absolutely right right simon's day of the week 47 that is

50:56Simon Lambert: the percentage of small london flats that are now selling for less than that they were bought for so this is one bed flats and studios this is according to analysis of land registry data by property data firm Bricks and Logic. It's from a really, really interesting story that Ed Magnus has written for us about what's going on in the London flat market and why there are concerns that this is spreading to other parts of the country and actually perhaps has. And also what the impact is on the rest of the property market because if people can't sell their flats on the first rung of the ladder, they can't move up the ladder and so on.

51:35Simon Lambert: um but yeah 47 of flats of small flats and that isn't just flats that were bought recently this is flats that could have been bought you know 5 10 15 20 years ago that 47 is studios and one bed flats and then two and three bedroom flats it's 34 so there is a real issue going on here some of it is people who bought new builds um and they paid the premium price for them um and there's obviously problems with leasehold and so on but also some of it is just you know even just normal converted flats and things like that however the one thing i would say is if you want to buy

52:14Lee Boyce: that makes it a good time to buy yeah yeah quite except will you then have a problem in five to ten years time when it goes down but either way thank you very much simon thank you lee and thank you for listening you can keep up to date with all this is breaking money news just go to this thisismoney.co.uk or download the app. And if you have any comments or questions to the team or anything you'd like them to look into, Simon.

52:36Simon Lambert: You can email us at podcast at thisismoney.co.uk. Send us your questions if you want us to try and answer them. And come to thisismoney.co.uk forward slash podcast to find all podcasts past and join in the debate and read the comments.

52:48Lee Boyce: And if you like our podcast, why not rate us wherever you found us? It helps other people find us too.