Final Thoughts and Future Episodes

enjoyed time with your children while or at home because they've come a point where you just want them to move out. You Giving me the side eye again. Yeah. Hi and welcome to another meaningful Money Q and A with me, Pete Matthew. and me Rodue. Hey this is Our fiftieth Q and A session much I can't believe this. is it We introduced it as a way of it was help helping with the writing. Yeah just just a couple of fill in while we're getting to other sessions in. Well, yeah, it was just yeah, as you say, it was to kind of reduce the need for me to write episodes, which is a lot of work, you know I mean, not at the point where fortunately I have to write them long handand like I used to when it was just me. I mean, not long handand with like a quill. No you parchment, but you know, I mean I used to write them out. I used to script them word for word and it was like, you know half thousand words per episode Obviously, with me youew we can riff quite a bit, but even so the prepping and the thinking of what to talk about and all that of stuff This was just designed to take the pressure off a little bit, but it's actually gone down really well and I think Y It is still going down well because we're still getting a lot of questions in and with'res still at least a dozen episodes in hand. I said the monster is being fed all the time from Yeah behind tos it's really good. and As I've always said, it's nice for us to give back to people what they want to hear about And even though you might send a question you think, well, that's only relevant to me, actually it' be relevant to a load of people listening to this. so Da me And we, you know, we started dropping in a few you know, sort of like single issue episodes as well. and we may get questions that lend themselves to that. Actually one of the ones this week I think we willll probably pick up in more detail. I think we will do that's the plan. so. But anyway, if you've got a question, where should they send it Ross? They should send it by email to Hello at meaningfulmoney. Tv with a subjectline podcast question And it will be used possibly in the future. Yeah, if it's any good. If it's nonsense, we'll just chuck it in the bin. Yeah. But we a laugh at it first. Yeah Have a good laugh at your expense.. So do keep them coming. And as always, if we refer to any links or anything in today's show, we'll make sure they are at the show notes, which is meaningful Money.v slash Q A fifty five zero if you're watching this on YouTube, it's still relatively new. I can remember what the first episode we put up on YouTube was, but it's still, you know, less than a year. If you are watching on YouTube Press the like button if you think it's any good and subscribe to the channel so that you see them in future. It really helps us out. So thank you for that Right, I'll do question one this week. Okay. this is from Richard. Hello Gents. S Gents, see you. Good morning Richard My wife and I are hopefully about five years off retirement, starting at sixty and thinking about options for gifting Quite early that is early We are both planning to stay within the basic weight 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 I'm wary that a large withdrawal from a DC pot would likely take us into higher rate tax This would be mainly on me, as we would plan to spend my wife's smaller DC pot down during sixty to sixty seven to max personal allowance Before state pension kicks in Is there any downside if I immediately draw off plus from my DC up to the top of the basic rate threshold and putting excess into cash or stocks and shares Iir. 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 the priceless information for education and information only, not guidance or advice. overver the years, a long way to continue. Cheers, Richard. Thank you, Richard. Areciate that. Yeah. Yeah, I quite like this idea personally. Yeah, It is, you know, if it's one of these things when it comes to retirement planning It's like, oh only the pension will actually Retirement planning is an amalgam of things with Yeah pension, ISO, property, whatever you've got Um So yes, in effectively what you're doing Rich is saying I' taking over a pension. But I'm putting in a different fund which will be my pension part by a different name. thatt m sense, really. It does make sense and Is there any downside, Richard asks? Well, obviously you know you are paying twenty tax tax. But that might save you paying forty percent tax later on. And I think obviously with the new rules on pensions being included in the calculations for IST from next April I was saying this to my team actually and on the meaningful Academy Life C last night. it used to be retirement planoney was basically a bunch of defaults. It was like leave your pension intact and spend everything else. Yeah becausecause then you reduced your taxable estate and left the non taxable bit to grow. Tax freez. Wh is the obvious thing That's now no longer the case. There's much more nuance, which is great for us who do this professionally because it keeps us in work and we're busier than ever But there's much more subtlety and nuance. and We're now in the realms where it's more true than ever that there's no rules of thumb because every case is individual and So, you know, you might say, Richard, yeah, I'm going to draw. up to the high rate band, so I'm only paying basic rate U I know that has immediate tax implications, but the long term tax implications may be better. For other people, that may not be the case. It depends on O sources of income it depends on the mix between pensions and non pensions, whether there's DB schemes in play, whether there's an age difference between the spouses, there's just so many variables that when when looking at a plan now it's like it's probably taking us twice as long I would say. build a plan and to test scenarios for a client than it used to. So You know, there's no There's no sort of rules of thumb but shifting money out of a pension using enough plus is tax ficent it? Yeah And we come back to the fact that you're fifty five Just think about gifting already we would always say look after number one first. So If you're wondering what you can spend in retirement based upon what you'll have at that point in time. taxation is a side issue really. You need to be planning what you've got, what you need And then the gifting happens as an adjunct at the end. It does. Yes, That's right.. You know, you shift money out of a pension essentially a fifteen percent notional, right? use enough plus because obviously a quarter of it is tax free and the three quarters is taxed at twenty percent And obviously it could even better than that if there's a personal allowance going on you. So you can take a chunk of money out pension with little tax implications. so that's obbviously makes sense. and certainly potentially better than You know, if you leave it in, maybe forty percent inherance tax and then income tax on beneficiaries later on. So And it kind of makes it easy to ring pens the money if you're drawing out more than need, but you stick in the ice so you know that's for future gifts. Maybe change the car. The concern is that those future gifts are quite likely to be potentially exempt transfers rather than gifts from income aren't they? Yeah, because you'd be giving the capital rather than income at that point in time. Whereas if you left it in the pension port and you drew extra income and gave the income away This is limitless for that. It's very woolly. thoseose whole rules are very subject to interpretation. That's the problem Basically Richard R We think it's you're on the right linine. Yeah. but no advice here, as you know?. All right, numberum two, Rog. Number two, this is from Steve. says Hello, Pet and Rogge. They're very, very familiar. They're Rod. Rog. What's what you call yourself? Yeah I' glad I'm called Rodog, that's fine. Loving the podcast, having only found it recently, you're doing great work. Thank you very much, Steve Ive bought and read the retirement book, sign off signed up for an intro call with Pete and I'm thinking about doing your course Thank you. You get lots of ticks on this course. That's where your questions come. Okay, we'll answer your question. Just in one question? I don't know actually. I think it might be three in one go. 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 That's the twice that's happened. People like, okay, we're going to trug a load of questions on, but it'd be good content for you. So we should be grateful. Yeah, all the rest your listeners would love my questions. Steve, that's fine. And it probably relate to loads of listeners anyway, Steve. That's ye. you are right So first, what are your thoughts on funding retirement income completely or mostly from dividends and coupon payments rather than capital withdrawal For me, it seems very attractive because I can draw down the income on a quarterly basis whilst 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 W 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. Should we pause there and answer that Yeah, I think so because there's three questions here in somewhat unrelated. So we'll break them down a bit. Yeah, I mean, I mean, if it It gives you comfort knowing that you're not touching your capital and you can draw the dividend, that's fine Yeah, and it really works. The only difficulty is obviously those dividends may change over time. they may change per quarter then they're not fixed. So Yeah, but it leaves your capital intact. rememember that we always say there's no right, there's no perfect way to do this. There's loads of ways, you know Obviously day to day at our financial planning practice. we Opt for a sort of total return approach, cash flow laddering. so we are drawing off capital, but we're doing it in a way that is measured and sustainable, hopefully If that makes you uncomfortable, then dividend you know spending divies or yield investing is perfect for you. and it's a perfectly legitimate way of doing it. Roger says Divies You know, variable that can be slashed, leisure capital intact Re really interested to know what that other retirement finance podcaster said that technically it doesn't matter whether you take income or capital I think we need contxt for that actually before we comment butmin us Of course it matters. If you just take income, the capital is intact, If you draw capital, you might run out if you draw too quick So obviously it matters and there are tax implications, differentnt taxes on income than on capital potentially. depending on what wrappers and stuff. So it does matter. So it's not bad. No, I've had clients in the past that have the income pater into an account and then drawn a set amount from from it. So you know, I've got you fifteen hundred pounds coming in the quarter, I'll spend four hundred and fifty. So there's a bit of elbow room left in there. So if the differeivnd do drop back, you've got a bit of bit of fat in the part. So whichever way you want to do it really. All right, secondecond part. Second question. If I adopt an up plus approach to my pension and rather than take a large tax free l one off, I take the twenty five percent of each withdraw is 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 twenty five percent as taxree cash I assume they can, which would be worrying. Secondly, does the lifetime two hundred sixty eight thousand pounds limit for tax free cash still apply cumulatively over time i. e., can I only continue to take twenty five percent of my withdrawals as tax free up until they cumulatively sum up to two hundred sixty thousand pounds? Or am I allowed to take twenty five percent of each withdwal Even as the fund might grow in value, and then the total of these twenty five percent over say ten to fifteen years exceed the two hundred sixty eight thousand pounds Okay, stop there. We'll stop there and do this one. the government might change. of course they can. Yeah, they always do. Yeah sometimes now and again occasionally. I mean tax free cash has generally been sacrosanct. I mean many times have we said that it's literally every budget as long as we twentyenty years ago we was saying, oh, they change it from tax free cash to penenss a lump sum. there's no word tax free attached to it. but it's one of these massive sea changes that no government wants to cross over. No, it's politically very unpalatable, I think. Not to say won't happen though. No. And that would be annoying if you've kind of factored that as, you know a key sort of ah tenant of your I'm like retirement strategy And then it changeed, but we've seen that happen countless times as well. Yeah. So it may well happen cumulative. Yeah, it's definitely cumulative. So the limit is the limit. So once you've hit that during your lifetime It's the lifetime allowance that the l lump su allance is the allowance that you have for your lifetime on the lum of sumsbs'. So they there cumulative. So when you get to two hundred sixty eight thousand pounds it's got to stop. You could have them but you'd be taxed on them. Yeah. Fid so so you can yeah still take l sums out, but they'll be taxable De deffinitely culative. of course they might increase the lump sum allowance later, but you know, no government has a history of increasing U Well, not many, not for a long time. you know, we know like the income tax thresholds are fixed now til twenty thirty one No rate bands are fixed as well. lump sum allowance. I don't know off top my head how long that's fixed for, but it seems to be indefinite, doesn't it? Yeah does. And Steve's final third. Thirdly I'm aware of the age at which you can take your pension is changing from fifty five to fifty seven I will be fifty five in march twenty twenty seven so can access my pension under current rules But I will not be fifty seven when the change kicks in in april twenty twenty eight. So am I going to then lose access to my pension for a number of months until I then turn fifty seven in march twenty twenty nine 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 or terms around the individual pension fund Any advice on whether this would be true would be very helpful Alas, I'll finish off looking forward to hearing your thoughts on any or all the above. Best of luck with a pod. Pod Steve certainly it. Yeah, I think we mentioned this in last week's podcast or the previous one of this. It's still not written in stone yet, Steve, the difficulty with this is that Our understanding, the view is that any pots that are crystallized can continue to be accessed even During the period up to twenty twenty eight when you're not fifty seven technically Yeah. I mean you know, I kind of want to see that unequivocally, but that is what the providers are mostly saying. So anything which is crystallized so in drawdown you know, you'll be able to continue to draw off that even if, you know, after april twenty twenty eight, but you haven't yet hit age fifty seven. Whas O plus would certainly have to stop. because that is basasically almost a set of mini crystallization exactly. So our understanding is that O plus would have to stop until you hit age fifty seven, but if you've got money in a drawdown fund that you've already crystallized, you could continue to draw off that You mentioned briefly I've also heard it depends on whether's certain protections or terms around the individual pension plan. Yes, some plans have a protected pension age PPA and that would still apply even when the rules change. Yeah. So if you have that, it's quite valuable Yeah, assuming you're affected by the change. Yeah. Or if you bought annuity, the logic says the annuities of crystallization are not being paid anyw Yeah yeah ay me that Right Q question three is from Andrew, Hi Pete, Roger. Thanks for the advice And they says, go on, name that film. I wouldn't have got it. I wouldn't have got it from that, but you will get it from the other clue at the end.. So thanks for the advice over twenty twenty five in the podcasts again The question was written in deecember twenty five. There is a ton of material on YouTube 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 iss performing, etceta. Why wouldn't I want to consolidate all my pensions? and what could be the disadvantages of consolidation Basically this is the mother of all questions So Maybe grab some popcorn and a drink, a very long drink. and stick with us to this question Andrew goes on. reccently, I've met with my IFA and for a year now I've been investing heavily into my sIP. As the IFA he charges for the service he provides and I'm happy with that for now H The charges are low with this provider, quQilter. are they And it performs well as a medium risk opportunity so much I could say that. My IFA rightly in my opinion, suggests avoiding keeping myus octopus previously virgin pension as this doesn't offer flexi drawdown and is higher risk than my quilter sip but with only slightly better performance I have four pensions in total. Now my IFA would of course benefit from me moving all funds to quQuilter as he receives a percentage fee on a larger chunk of funds. So is that a warning sign for me as he cannot really be impartial At the moment, I can track my pensions online and do this almost daily. Are you clenching?'m clenching you're clenching for me here. I'm clenching too. Let's clenched together. They all have the relatively same performance and together average about nine point six percent over the past twelve months. They are all broadly within a single percentage point of each other. See the following arguments to avoid consolidation altogether So these are arguments to avoid consolidation One, trracking multiple pension funds is not actually hard to do And two, maybe when it comes to flexy acis drawdown, 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 can't see this as a big problem either Three, haaving multiple sips allows me to 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 of 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 funds with more risk as I reach later life years. F, multiple SIips allow me to have funds with different levels of risk associated with the investments. I might choose one fund to have medium risk and another quite high. The big one for me though, number five is why why why would anyone trust a single sip provider with all their future wealth? No matter how well it is managed today. the regulations which are in place, FSES protection, etceter, I just cannot stomach the risk in a single point of failure. Why Right, then there's three sub pointoints 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, it's unlikely, but it can happen. Spreading the risk mitigates this. It's 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, you'd simply change the investments. Maybe a vot right 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 be recommending consolidation. Not one article about keeping them separate P Ke, says Andrew. That gives it away he does and best regards. Die hard, of course. Of course. great film. Is it a Christmas film? I don't. Definitely. In my view. And this question was written in December so that also gives it some context I think this we need to go deeper on this, I yeah. Pice do our best to answer We can answer a little bit, I think. You wrll comment here Yeah, the first clinchy bit on here I think. At the moment I can track my pensions online and and I do this almost daily The words almost daily jumped out of me of up time I'm thinking sureurely life is too short. But if that's the way you take you take Andrew, then then do it. But it's in my head You're not living Y life today because you're worried about the money. The money is the means to the end. so ye, But if that's the the way your life at the minute and that's why you love doing it. then there's no problem with doing that. and it that allows you to check all your various pensant pots Then there's no reason why they should be amalgamated if that's what you like doing Yes, I agree. The thing that made me sort of clench and I' jokeking Andrew, right? You know, there is the talk about one performing better than another. I think we need to be really clear. It's not the pension that's performing well at all, it's the underlying investment The Tension itself is just a wrapper and the platform is just a sort of mechanism, it's just an admin thing And so You know, whether it's a quilter or a vanguard or a, you know, fidelity pension or whatever What makes them perform or underperform is what's inside those boxes. The boxes are all really only about fees and and you know, flexibility, you say one of your Pans octopus doesn't offer flex axis drawdown. So that would be an obvious reason to shift that You don't have to shift it into Qilter, you could just shift it to another platform But when you talk about pererformance. and how some do better than oth at different times, it's the fs inside them consolidation, you could still have lots of different funds inside a single pension wrapper And you can still track the performance of the different funds and all that It smacks of a sort of fundamental misunderstanding might just be the way we've read a question that it's not the pensions that perform, it's the investments inside them All right, so please understand that So That is not a reason for or against consolidation, I don't think It's just fact Because in my pension plan, I got various funds If some are more racy than others and you keep an eye them as they go along. So that's not a reason not to have them all in one place. you're worry about security and FSCS and stuff like that. Yeah, if that concerns you, then, you know There's no reason why you shouldn't give searate No, that's the point. I mean Andrew' talking in pretty sort of visceral terms here. I just cannot stomach the risk in a single point of failure. to be honest is all that matters. that's the thing that drive you. If that's the thing that worries you, then You're not going to do it you don're going to sleep No, and that's not worth it So if what it takes for you to sleep well at night is to have full pensions, then soud your advisor. Yeah, have full pensions You know, this is all about you. honestly, I feel like it's so easy to get buried in the mechanics of how money works and supposedly optimal Setups for things But the overriding guiding north star has to be whether you can live with it, because otherwise, you'll just be tied up in it. you'll sort of tie yourself in knots and you'll lose sleep, and nothing's worth that So forget your advisor. yourour advisors obviously There's no doubt, advisor looking to consolidate. they are going to make more money. We do the same But if we're managing money for a client, we also want to make our own life a bit easier, right but we would give a clients two pensions if they wanted it. if that's what it was necessary to help them sleep. It does make it more complicated when you're drawing down. You say the pension providers track, keep records of likeike you know percentages taken, cumulative lump sums and stuff like that. There's no way on God's earth I would leave that up to the providers providers change. they buy, they're bought and sold you know, we quite often are asking for information providers and they can't provide in because that was three companies ago So keep your own records, right? When you're taking benefits, track how much lump sum, how much tax free cash you are taking, donon't leave that up to the providers But ultimately, man You know, we'll dig into this a bit more on next week I think, but you got to go with what you feel. Yeah. and the fact that your cruelter pension doesn't offer drawdown, well, you may not be going into draw down without Virgin one the crilter. the Virgin one Yeahah sorry, yeah the octopus, the previous Virgin one If it's not applicical to now, it doesn't really matter You know, if if you're not accessing Flex acis drawdown for ten years Yeah, then it does matter whether it's in that fund or not. or you may not you may even buy a nutie with it and it's got no bearing on it whatsoever. So it' what you need. But if you would lose sleep by having it in one place, then don't have it all in one place.actly right You know, it's, um It's the advisor's job to get to know you well enough to be able to sererve you and give you the peace of mind that you deserve. So You're right to challenge Should I say One thing in your advisor's defense, it's very difficult to advise a client where the advisor's got one chunk of money and then the client has lots of chunks of money elsewhere because there's always a tension and you have to kind of need Um each other involved. So if get if you get to the point where you retire and you're drawing down off your pension plans and your advisor is helping you draw down off the one that they control, that's going to be a recipe for things getting properly messed up So the worst thing is, which we won't do it now, but we have had some clients in the past where they've got two advisors. Yeah, looking after different pots. That's just impossible U Okay, question for R Quion for this one from Mark with the sea. Mark theat Mark with the sea is h Hi Peter Roger. love the podcast Obviously you're a very good listener. I've just completed my annual review thanks to the checklist from earlier seasons, and was wondering if you can suggest if there's anything else I should consider or I am missing to help position me better financially In context I'm thirty seven and married with two children under five So and then Mark lists them down says, I've got a pension. I contribute to my workplace pension, which is four percent of the company contributes eight to their max, which is good Stock and share is ISA, I invest five percent of my take home pay into two Vanguard funds monthly Children's junor stocks and shares ISA. I invest a small sum monthly into each child's stocks and shares ISA, both Vanguard target retirement funds for when they turn twenty one. Interesting idea emergency fund, I have four months expenses in a cash ISA Life Cover, I have a private policy and eight timees salary death in service benefit Critical onness cover I have both a private and work policy. Incrome protection cover. Again, I have both a private and work policy. Work policy is limited to thirty six months and private policy is to age sixty five. Mortgage overpayments, I over pay the mortgage monthly with aim to reduce loan to value and length of term when currently fixed rate ends and debt I have no major debt I think I'm in a good position, but wanted a sense check in case I'm missing something Thanks and keep up the good work Murg. So this is good if I was in Bancashire again, he's like, well I can't tell you anything because you've ticked most of the boxes like on the frame. There's no gap finding here. I feel like Mark wants to sort of congratulate him here. but I mean you are doing a great job now thirty seven Yeah, you' doing everything right here. should always It should I feel like it should always be to an end. What is the goal here But at thirty seven with two young kids, the goal is just like save as much as you can. Yeah Have a life, enjoy time with your children while they're at home because they'll come a point where you just want them to move out.. You Giving me the side eye again.. You know know in all seriousness, you know, don't say oversave to the detriment of your ability to enjoy time with the kids and have memories with them. You know, it sounds to me like you're doing everything right. just as you get older, thirty seven, certainly usually when people start getting in touch with us They're in their sort of mid forties and the earliest, aren't they? So I need to start thinking about what it's all kind of Yeah I was four. Yeah. the children are growing up and they won't be here for forever and stuff like that But they are really. Yeah. even when they move out, they they're still massively attached to your body So so at some point, you know you're doing all the right things at the right time. as Pete said, you know, enjoy your money, save as much as you can, put it away your pension so you can spend in the future and stuff like that But there will come a time in your life think, o, this needs to lead to something. Do I want to get rid of the mortgage really, really early orr do I want to retire before I get to sixty seven what it's going to be? And then you can target your money in different places at that point Good Good question th, Well well, they' M m doing all the right things. I feel like we need a camera and produce a c just to cast these side eyes. Yeah guess when she wches when people say, how nice we are. Okay question five from Matt Hello to you both. J just wanted to say I really enjoy your podcast and YouTube channel. Thank you Matt. Great to have you with us. My question relates to workplace pension. I want to move from the default lifestyle fund into a one hundred percent global equity fund, like you already, Matt. I also have a sIip and an ICer 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 five percent 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've left it for too long and allll that I am debt free including the mortgage and I have redirected my mortgage payment into my sip. Do everything, Ryan. My question is at forty seven and three quarters forty eight now? Yeah, probably bud. Yes, exactly. Is it too late to switch from the default fund? I'd welcome your take on that. Keep up the good work. It kind of regards Matt. Well, no, no It' never too late because Pension fund, you might not converted to an annuity at sixty five or whatever age you're going plan to take it. It could be around for another fifty years, M Yeahint inv it. Mad. So there's no reason why you shouldn't Well, you ought to get out of the default lifestyle fund. Oh, yeah depending on the pensions' written to,'re probably not going to start lifestyling for a while. But if it's in a default fund, it's probably managed. it's probably sixty forty or seventy thirty equity bonds. would you know, I'd be looking to shhift that It's never too late, man You know, as Rog says, the money iss going to be in invested for decades probably. So it's not too late. You're really only just getting startied. You're still probably in the first half probablyably the first third of that money being invested. so Yeah, but do make a comment here, Matt, that I can't fully transfer without losing the match, so I've left it for far too long. Well, there should be a fund that you can get into within your existing pension without having to transfer it air anyway. I think that's yeah Yes., definitely. don'tun don't switch your workplace pension. No, that would be madness. you lose the benefit of Eploy a match, salary sacrifice, all that other of stuff. so no keep it where it is. Yeah But there will be fund options Yeah. Just you see what funds are available and choose want that's most appropriate for you? Yeah, there'll be a list. You probably log in and there'll be a list of options. So look for obviously global, look for equities. lookook for trackers if you can. you might not be able to get the exact same fund. depends on the scheme itself It doesn't have to be the exact same fund, just it's the exact same approach, right? So global equities king as opposed to actively managed. and as low cost as you can, right? So doesn't have to be exactly the same font Last one, this is from Lee. Yeah. says Hello, Pete and Roger Really enjoy your podcast and find your advice really insightful. many thanks for what you do. Information, not advice You all that as we should have that as graic on the Jingle order ye. Jingle. Information. Not advice Yeah, yeah Other singers are available. My question is about pension planning and specifically about getting the balance right between pension contributions, ISIS and reducing my mortgage. O I'm forty six and I've saved from an early working age to build up a total pension pot amount to five hundred ten thousand pents as today. That's really good at age forty six. Lee. I've prioritizeed my pension over other kinds of investments given the tax related attractiveness of pensions and new salary sacrifice as a way of keeping under the one hundred thousand pounds income somethingomething important for us as a family in terms of qualifying for child nursy support, plus, of course, in maintaining my personal allowance I find my job quite stressful and would like to be able to retire in ten years at fifty seven or at least take on a lower paid, maybe even minimum wage job 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 ISer which as of d totals only fifteen thousand pounds tax efficient bridge until neare a state pension age and to minimize the need to draw drow down excessively on my private pension in the early years Assuming you conccur, my question is, would it be best to reduce my pension contributions to enable me to put more into my ISA Of course, this would mean potentially losing or reducing my personal allowance. The other factor in play here is my mortgage which is higher than I'd like at three hundred eighty thousand pounds. Ideally, I'd like to increase my level of mortgage overpayment 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 one hundred thousand pounds income level in order to do so. I know I could probably clear whatever mortgage is remaining in ten years from a tax free pension amount. But I'd like to minimize taking the tax free money in order to help put the pot compound as much as possible, to take me through to old age, but also to help support our two girls who are currently just eight and three in their early lives Your thoughts and advice will be gratefully received, many thanks in advance and please do keep up the great work you do. Kind regards, Lee Mm. Oh this is we're back to the one of these. Is the balance right between pensions and IS and savings and It's hard at a hundred grand though. Yeah. I mean this is the downside of the cliff edge Personal allowance, you know, withdrawal and the Um, particularly the u you know, child support, whatever it's called, I can never remember. you know, the nursery support for for the hours because you really Normally, we would say, well, okay, rather than sort of drop your pension contributions in favor of RSer contribution, we' just say, look, when you get pay rise, just redirect that into ISA contributions or mortgage overpayments At a hundred grand, you want to you don't want to take a pay rise Right? And so your only then option is further sacrifice, isn't it as salary goes up You mentioned The age of the kids is quite important here because it's not going to last that long. these nurs. Yeah, the nursery support with eight and three, the eight year old is outside of that now and you've only got a three year old. sent this question in six monthso. So they're probably three and a half by now. So the actual support for your nursery is only for the next twelve, eighteen months, two years. posossibly Yeah. And at that point That may be the decision then say, okay, I'm willed to pay a bit more tax by going to the threshold. but That sixty percent breakpoint at one hundred thousand pounds is painful. It's hard to get over that really And I'm not really sure there's an answer that is going to be palatable from a tax point of view, because you wouldn't voluntarily incur Essentially sixty percent notional tax rate to overpay your mortgage. or to pain into an ISA It's less I mean you absolutely shouldn't do it now while you've got the nursery. No support. That doesn't make any sense. But it might be that the cost of you sobbing your icer is that you pay sixty percent income tax burn I can't imagine any scenario where I'd be comfortable with that really? No and if it's sorted away into your pension, Yes, your pension is going to race away. Instead of accessing your ISA that you would considerered having been done at that point, you just access more of your tax free cash Yes, and this is probably you can't have your cake and eat it sort of thing because You say that, you know, you'd Hang on, I'd like to minimize taking the tax free money in order to help the pot compound as much as possible You probably can't do that, you almost certainly are gonna need to draw tax free cash If I was planning for you, right and you were approaching retirement, if you got a very mismatched Pension and non pension. situations, you tons of money in pension, not a lot outside One of the first things I would plan and check if it makes sense is to fully crystallize max your tax free cash. and split the difference then. So you have more in non pension money primarily to give you a choice of venue from which you draw down donon't have to just draw everything as off plus from your pension pod pay tax on Most of me to give you options for. So if you need to change the card down the line, you've got non penschammentoney you can draw from. Owise you're going to end up Buying your car, having paid forty percent on the money you needed to buy it And so I think probably not going to be able to have the benefit of that compounding and youre increasing your tax free at your age You're probably going to be bumping up against the lump sum allowance anyway. You're probably gonna to have taxreeash capped And so, you know That's another factor I don't I honestly don't think there's any answer here. No and we can give that makes sense. No and as well, if you think, okay, I'll put money not put into pension, I'll put into ISer Be I want to spend that to get me through this gap It's the same thing. Because if the ice is low and your pensch is bigger you'rerawing from this Yeah they're both invested And therefore, instead of drawing the ISO, which is I've invested, I'll dw for my pension that's invested instead. So it's the same money. But it's more tax effici sho it in the pension and saving a sixty percent tax than shoing it down here. But like Pete said, you could do the full crystallization thing do the full crystallization thing and then move money into non pension at that point in time Yeah I just don't think this is a question you can answer now It's a problem that is almost unfixable because you're at the one hundred grand threshold. And as long as that rule remains you either have to accept a sixty percent tax charge in order to fund your ISA or overpay your mortgage. Or you just go all in on your pensions and say, okay, at least I will have maximum tax free cash All right You don't say if I presume there's a spouse giving those kids in play but it might not be, you know. I Is there anything you can do with your partners tax allowances or your pension contributions or ICR allowances or whatever. May not be. You don't even mention that. you just talk about yourself. So U but I don't think Lee's situation is fixable. I think he's probably just going to have to accept the fact that he's going to be very pensiant. Yeah. I had a client You know, this week actually who And mean we're talking a million and a half in pensions and She had DBase games. and they had between them about twenty grand inysis So also an incredible disparity. So I just said to And he tooen most of his tax free cash already. So a good chunk of that one money was already crystallized And it was very close to his total pension provision way over the lum suum allowance anyway, so the old lifetime allowance. And I just said, Jim, look, you are going to have to accept the fact that you are going to pay a ton of tax. throughout your life But that's okay because you can sustain your desired lifestyle. Yeah And because you've ended up in the position you are, because you've taken the tax advantages of paying inter pensions, such that you've got this massive partot The downside of that, I'm afraid, is that you are gonna to pay tbts on the way out. Yeah, it is it is. But you can cover your lifestyle If you were considering going to have a lower paay job in ten years time and you can't ac your pension, I might be tempted to throw if you are going to bite the bullet and pay more tax. be overpaying the mortgage becausecause you have that liability if you go about less income in ten years time. have a lower mortgage liability at that point in time if possible. So if you are going to do it, overpay the mortgage rather than from the ISIS. That's the way my brain would goes Cool, interestnteresting monst. Yeah. some testers there actually because they're quite long in places. But I hope those answers were helpful. Even if we're bit garbled in places No, if I'm bit garbling. But no, but I hope they were helpful, but do please keep them coming in. We've hit fifty, We'd like to get to another fifty. Let's get to one hundred. see what happens. It might take us a couple more years. But please keep them coming at hello at meaningifful Money. Tv with a subjectline podcast question and we'll try to fit them in sometime down the line It was the first one? I did write it down October twenty twenty four. so we're basically eighteen months on from that So another eighteen months, we might get another fifteen we'll see But anyway, hope you enjoyed it folks. Thankk you so much for listening. As always, any notes and links are at the show notes, meaningfulmoney d.tv slash QA fifty Thank you so much for watching. I hope it's been helpful. Thank you, Mr. Roger Weeks. News to the next fifty. We'll see you next time