QA50 - Listener Questions, Episode 50

In this UK personal finance Q&A episode, Pete Matthew and Roger Weeks answer six listener questions covering pensions, retirement planning, investing, and mortgages. You will hear practical guidance on topics like using UFPLS and ISAs for gifting, whether dividend income is a sensible retirement strategy, and what to consider before consolidating multiple pensions into one provider. The episode also tackles planning priorities, including how to sense-check your annual financial review, when it is worth switching to a higher-equity pension fund, and how to balance pension contributions versus ISA funding and mortgage overpayments. If you are looking for clear, jargon-free retirement and wealth-building advice in a UK context, this one is packed with real-world considerations and next-step thinking.

Shownotes: https://meaningfulmoney.tv/QA50 

 

02:24  Question 1

Hello gents,

My wife and I are hopefully about 5 years off retirement starting at 60, and thinking about options for gifting. We are both planning to stay within the basic band, but if plans go well we hope to support our kids while we're still alive with help towards a house deposit or similar. Am wary that a large withdrawal from a DC pot would likely take us into high rate tax. This would be mainly on me as we'd plan to spend my wifes smaller DC pot down during 60-67 to max personal allowance before state pension kicks in.

Is there any downside if I immediately draw UFPLS from my DC up to the top of the basic rate threshold, and putting excess into a cash or S&S ISA? That would then build up tax free and be used to fund family gifts (or perhaps replacing a car). my thinking is - the portion we move to ISA is still effectively part of the retirement portfolio - just held in a different wrapper.

thanks for your priceless information (for education and information only not guidance!) over the years. long may it continue!

cheers, Richard

 

07:15  Question 2

Hello Pete and Rog,

Loving the Podcast having only found it recently.  You're doing great work.

I've bought and read your retirement book, signed-up for an intro call with Pete and am thinking about doing your course.

In the meantime, and I know this is greedy, I have three questions.  I think they'll be interesting to your listeners, though, so here we go...

First, what are your thoughts on funding retirement income completely or mostly from dividends / coupon payments, rather than capital withdrawal?  For me it seems very attractive because I can draw-down the income on a quarterly basis while not touching the capital.  That makes me feel safer from having to sell in a down-market.  I can also expect the capital to grow a bit over time, at least the equity generating dividend element.  That said, I've seen one of the other retirement finance podcasters say that technically it doesn't matter whether you take income or capital.

Second, if I adopt an UFPLS approach to my pension and, rather than take a large tax free sum one-off, I take the 25% of each withdrawal as tax free, how does that work in the future in two respects.  First, can the government later change the rules and say that I can no longer take 25% as tax free?  I assume they can, which would be worrying.  Second, does the lifetime £268k limit for tax free cash still apply cumulatively over-time i.e. can I only continue to take 25% of my withdrawals as tax free up until they cumulatively sum to £268k?  Or, am I allowed to take 25% of each withdrawal, even as the fund might grow in value and then the total of these 25%s over say 10-15 years eventually exceeds £268k?

Third, I'm aware the age at which you can take your pension is changing from 55 to 57.  I will be 55 in March 2027, so can access my pension under current rules.  But I will not be 57 when the change kicks-in in April 2028, so am I going to then lose access to my pension for a number of months until I then turn 57 in Mar 2029?  I've heard someone say that there might be an exception for people who have already accessed their pension.  I've also heard it depends on whether there are certain protections/terms around the individual pension fund.  Any advice on whether this would be true would be very helpful.

Looking forward to hearing your thoughts on any or all of the above.

Best of luck with the pod.

cheers, Steve

14:52  Question 3

Hi Pete & Roger,

Thanks for the advice (go on, name that film) over 2025 and the podcasts.

There is a ton of material on you tube covering why pension consolidation is a good thing. How it simplifies the admin. How it makes it easier to track what you have and how it is performing etc.

Why wouldn't I want to consolidate all my pensions and what could be the disadvantages of consolidation?

Recently I've met with my IFA and for a year now I have been investing heavily into my SIPP. As the IFA he charges for the service he provides and I am happy with that (for now). The charges are low with this provider (Quilter) and it performs well as a medium risk opportunity. My IFA, rightly in my opinion, suggests avoiding keeping my Octopus (previously Virgin) pension as this doesn't offer flexi drawdown and is higher risk than my Quilter SIPP but with only slightly better performance. I have four pensions (SIPP) in total.

Now my IFA would of course benefit from me moving all funds to Quilter as he receives a percentage fee on a larger chunk of funds. So that is a warning sign for me as he cannot really be impartial.

At the moment I can track my pensions online and I do this almost daily, they all have the relatively same performance and together average about 9.6% over the past 12 months. They are all broadly within a single percentage point of each other.

I can see the following arguments to avoid consolidation altogether.
1. Tracking multiple pension funds is not actually hard to do.
2. Maybe when it comes to flexi access draw down it gets a bit more complex to get the tax free elements right to be as tax efficient over the long term but the pension companies track the percentages taken so I cannot see this as a big problem either.
3. Having multiple SIPPS allows me see how they perform against each other. Sometimes one is a little more volatile than the others but in actual fact I'd like to see more volatility on one over the other. Makes things more interesting. Of course that might change in later life so I may choose to draw more heavily on the well performing fund with more risk as I reach later life years.
4. Multiple SIPPS allow me to have funds with different levels of risk associated with the investments, so I might choose one fund to have medium risk and another quite high. 
5. The big one for me though. Why, why, why would anyone trust a single SIPP provider with all their future wealth? No matter how well it is managed today and the regulations which are in place and the FSCS protection etc, I just cannot stomach the risk in a single point of failure. Why?
So the IT platform could collapse making the funds inaccessible either for a short time or for months.
Rogue actors inside or outside the company could arguably sabotage the platform. Yes this is highly unlikely but it can happen. Spreading the risk mitigates this. There is a very real concern.
Poor management of the funds could lead to a serious downturn in the investments whether that be short term or longer term. Now the underlying funds might underperform but if that is your key worry then you'd simply change the SIPP investments.

When I research reviews on the web for anything I look for the pros and cons and decide which opinions seem most sensible to reach a balanced view. However in the case of pension consolidation everyone seems to recommending consolidation, not one article about keeping them separate.

Yippee cay aye (same film) and best regards,
Andrew

 

25:05 Question 4

Hi Pete and Roger,

Love the podcast.

I have just completed my annual review (thanks for the checklist from earlier seasons) and was wondering if you can suggest if there is anything else I should consider or am missing to help position me better financially.

For context I am 37 and married with two children under 5.

Pension - I contribute to my workplace pension which is 4% and the company contributes 8% (their max).
S&S ISA - I invest 5% of take home pay into two vanguard funds monthly.
Children S&S ISA - I invest a small sum monthly into each child's S&S ISA, both vanguard target retirement funds for when they turn 21.
Emergency Fund - I have 4 months expenses in a cash isa.
Life cover - I have a private policy and 8x salary death in service benefit.
Critical illness cover - I have both a private and work policy.
Income protection cover - Again I have both a private and work policy, work policy is limited to 36months and private policy is to age 65.
Mortgage over payments - I overpay the mortgage monthly with aim of reducing LTV and length of term when current fixed rate ends
Debt - I have no major debt

I think I am in a good position, but wanted to sense check in case I am missing something.

Thanks and keep up the good work.
Marc

Annual Review: https://meaningfulmoney.tv/2023/03/01/simplify-your-annual-review/ 

28:22 Question 5

Hello to you both,

I just wanted to say I really enjoy your podcast and your YouTube channel.

My question relates to my Workplace pension. I want to move from the default lifestyled fund into a 100% global equity fund. I also have a SIPP and an ISA that are fully invested in the same global equity fund and I wanted to bring them all into line. I have a salary sacrifice scheme with a 5% employer match and I wanted to take full advantage of that by paying into a better fund. I can't fully transfer without losing the match so I have left it for too long. I am debt free including the mortgage and I have redirected my mortgage payment into my SIPP. My question is, at 47 3/4, is it too late to switch from the default fund? I'd welcome your take on that.

Keep up the good work

Kind regards, Matt

 

31:02  Question 6

Hello Pete and Roger,

Really enjoy your podcast and find your advice really insightful, many thanks for what you do.

My question is about pension planning and specifically about getting the balance right between pension contributions, ISAs and reducing my mortgage.

I'm 46 and have saved from an early working age to build up a total pension pot amount of £510k as of today. I have prioritised my pension over other kinds of investments given the tax related attractiveness of pensions and use salary sacrifice as a way of keeping under £100k income - something important for us as a family in terms of qualifying for child nursery support, plus of course in maintaining my personal allowance.

I find my job quite stressful and would like to be able to retire in 10 years at 57, or at least take on a lower paid (maybe even minimum wage) or part time role at that time for a few years until retiring fully.

My assumption is that to be able to make this a reality it would be wise to build up my ISA, (which as of today totals only £15k), as a tax efficient bridge until nearer state pension age, and to minimise the need to drawdown excessively on my private pension in the early years.

Assuming you concur, my question is would I be best to reduce my pension contributions to enable me to put more in my ISA?  Of course this would mean potentially losing/ reducing my personal allowance.

The other factor in play here is my mortgage which is higher than I'd like at £380k. Ideally I'd like to increase my level of mortgage overpayments significantly in order to try to reduce the balance as much as possible over the next decade whilst working full time but again this will see me going over the £100k income level in order to do so.  I know I could probably clear whatever mortgage is remaining in 10 years from my tax-free pension amount but I'd like to minimise taking the tax free money in order to help the pot compound as much as possible to take me through to old age but also help support our two girls who are currently just 8 and 3 in their early lives.

Your thoughts and advice would be gratefully received.

Many thanks in advance and please do keep up the great work you do!

Kind regards, Lee