In this Meaningful Money Q&A episode, Pete Matthew and Roger Weeks answer listener questions on UK pensions, retirement planning and tax-efficient investing. They discuss the upcoming inheritance tax changes for pension pots, whether deferring the State Pension can help with care-fee planning, and how Nest pension contributions and charges really work. The episode also covers partial transfers from workplace pensions to SIPPs, managing commission income around higher-rate tax, and building a cash flow ladder for retirement abroad in Spain.
Shownotes: https://meaningfulmoney.tv/QA60
01:51 Question 1
Thank you for a great podcast. I have been listening to your podcasts diligently since 2014. Even then I made sure to catch up and since then it's been my weekly listen wherever I am. It's so great and I have been a great advocate. The simple rules of saving putting enough money aside thinking about your future and ensuring bad times are fundamental truths that should be taught at school. Don't get me started on the power of compounding. Well done and keep going.
I wanted to discuss the previous episode about what Roger said about the recent changes in pensions due soon and which Pete alluded to. This is regarding the new taxation that the government is introducing on remaining pension pot. It was argued that it is fair to tax the remaining pot as was the case before.
Before the pension reform, pensions would be DB style pensions and either the government or the employer would pay the pension. In such a case you can argue that whatever is left should be taxed as the pot is expected to be fair across those who live longer and those who died earlier. But they were guaranteed a pension.
However when pension freedom arrived the state washed their hands in providing a pension to people and it was up to the individual to secure its own pensions. Rightly so the state gave tax incentives to encourage people to save for their pension. As the state has outsourced the pension provision to the individual not taxing the remaining pot is fair. But now the state want to tax what remains in the pot.
I think it's not fair for the state not to provide a decent pension, ask individual to cater for their own and then tax what remains. Despite pension reform, studies have shown that people are under saving for their pension. We have an under saving crisis in the UK and taxing the pension pot will further aggravate that situation. I don't think it's fair for government not to provide a decent pension, delegate pension savings to individuals and on top of that tax any remaining parts.
Thank you.
Avi
10:49 Question 2
Hi folks. Both Roger and Pete are doing a sterling job.
My question/observation. Given there is a good probability of myself entering a rest/retirement/nursing home, and we know how expensive these are. Also, there is now not the carrot of passing on DC pension pots free of IHT (from April 2027). Would not be best strategy be to max out the Basic rate income from ones DC pot, moving it say into an ISA (£20k p.y. as I write). The reason being, the expense of the retirement care and accommodation may be such that any income needed at that time from the DC pot, should funds allow, may be subject to higher rate income tax, in order to meet the bills.
I was therefore wondering if there would be any milage in deferring taking my state pension in order to maximise the amount of Basic rate pension I could remove from my DC pension pots? i.e. use this to fully fund my ISA and provide £30k income for living The object being to remove as much as possible from my SIPP so that, should I need care at the end of my life, this could be funded without maying higher rate income tax.
Just a thought
Best regards
John
15:42 Question 3
Hi. Fantastic podcast, I've learnt so much and will continue to absorb as much information as I can.
Apologies this is a long question.
I worked for a company that enrolled me in a Nest pension whilst I was employed by them.
I decided to carry on contributing when my employment ended. My logic was
I pay in £80. Tax relief £20. Pot £100
Take money out. 25% tax free = £25
£75 taxed at 20% = £60
My £80 becomes £85 without taking into consideration of pension fund growth.
Have I got this right?
Then 1.8% charge on contributions if I'm right to deduct off the calculation above.
My final question is?
Should I stop contributing now and hypothetically the fund stays exactly the same value am I right in thinking the annual charge of 0.3% would eat into my gains?
Overall my thoughts are that every pension podcast drills into the listener's how great pensions are and I agree if the employer is paying in also. If not, the fund performance becomes even more critical.
Hopefully you haven't fallen asleep yet.
Best wishes and keep up the brilliant work.
Kind regards
Sean
20:23 Question 4
Hi Pete and Roger,
I'm part of a Workplace Pension Scheme that my employer and I contribute towards. I'm exploring the possibility of doing a partial transfer out of my workplace pension into a SIPP. My reason for this is to have more investment options than my current scheme, whilst still receiving my employer match. Could you explain the pros and cons of this move and things I'll need to consider?
Thanks, and appreciate you folks.
Tom
22:54 Question 5
Hi Pete and Roger,
Very new listener to the podcast while on garden leave and think it may be a regular on the new commute to my new job in the city!
I have a question about the tax position for said new job and how to get the most from my salary, which is on a base and commission basis.
My base salary is in the basic tax bracket, but commission will more than likely push me into the higher tax bracket but not by much.
Given my monthly income is going to fluctuate due to the commission, how can I best mitigate the tax hit that comes with going into the higher tax bracket?
I'm aware of the ability to salary sacrifice X percentage into pension, but given the fluctuations I'm not 100% sure how to navigate this.
If it's not too much to ask, how best would you advise investing/saving this besides the usual ISA routes?
All the best from a soon to be regular listener,
Liam from Surrey
26:59 Question 6
Hi chaps, love the podcast, thank you for investing the time to create it and keep it running, I've recommended it to many people and its been a source of great information to me and my lovely wife; well done.
My wife and I have been full time residents in Spain for around 20 years (pre-Brexit so I fall under the withdrawal agreement terms) and my wife is an Irish passport holder. I am 58 and my wife is 57 this year.
We have no debt and our mortgage is paid off, I have a small DC pension, not yet crystalised (around £210,000) and my wife has a small DB pension that she will take at age 60 (around £7000 a year).
We have £118000 invested in global tracking ETF's and we will both be entitled to full UK state pensions if and when we get to the relevant ages - fingers crossed! In addition, I will be entitled to a reduced Spanish state pension from the age of 65 which is forecast to be around the same value as my UK state pension.
We know that we will have more than enough income when we get to state pension age, we live frugally but well, we've never wasted money and always been savers and we have a very good handle on our monthly costs (I'm addicted to Excel and have recorded our household expenditure and income for more than the past 5 years!)
We're semi-retired now and live off of passive income built up from my career in Spain as a self-employed IT guy, we are able to live within our means, however we also plan to run the business down over the next 2-5 years and fully retire, my question is in relation to which of our savings to draw on first - I guess it's a cash flow ladder question.
Given that I am not going to be taking the 25% tax free portion of my UK pension (as it will be taxable in Spain), are there any advantages or disadvantages to crystalising it, I will plan to draw down as and when we need the money. I believe that once I crystalise my pension I can continue to have it invested much as it is at the moment but I will be able to apply for an NT tax code to make withdrawing money easier at that point. We will certainly need around £100000 to see us from now'ish until we get to state pension age, should we take this from my pension or investments and pay the relevant Spanish tax on it or is it better for us to take it from the NS&I accounts as there will be no tax implication this way.
Kind regards and thanks
Richard
