March 18, 2025 • 17 mins
On this week’s personal finance edition of Merryn Talks Money, hosts Merryn Somerset Webb and John Stepek discuss a selection of reader questions.
Among them are why pension planning could be different between men and women, what to consider when choosing an Individual Savings Account in the UK and why dying broke might not be such a bad idea.
See omnystudio.com/listener for privacy information.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. Welcome to Merin Talks
Your Money, the personal finance edition of Merin Talks Money
and these bonus podcasts, we talk about the best strategy
for making the most of your money. A Merin sumset
(00:24):
web and with Me, senior reporter and author of The
Money Just Tells the newsletter, John step back, Hi, John, Now, listen.
Speaker 2 (00:33):
We really like.
Speaker 1 (00:34):
Getting questions and feedback from our listeners, don't we jump
back me up on this?
Speaker 3 (00:37):
Yeah, it's great, it's extremely interesting, and so.
Speaker 1 (00:40):
We're going to answer a listener's question today ask us
to talk about non equity baskets. But before we get
onto that and explain to you what a non equity
basket is, of course, but you go through some of
the other notes we've had from listeners, because we promise
you we do read them all. Not all of them
become episodes, but we definitely read them all and we
think about them right. First up is Tracy. Tracy is
(01:00):
a long term listener and she takes issue with her
idea about holding cash. She feels that holding six months
worth of expenses in a cash I ser is sensible
for most people, but not for everyone. She cites two
other groups of people, first though saving for a first
house to posit, saying it doesn't seem sensible for them
to invest a posit in And I said, and the second.
Speaker 2 (01:20):
Category would be the elderly. She talks about her mother.
Speaker 1 (01:22):
Tracy explains her mother has just sold her house, now
lives in a care home and the cash in the
house is being used to pay care fees. Therefore it
doesn't make sense to invest that cash. That's actually an
extremely sensible piece of feedback, I think. And one thing
I would say, John, I don't know what you think,
but it might be a good idea if you if
you're talking about quite a lot of money from the
sale of a house, just leaving that sitting in one
(01:44):
cash account could be a mistake because you're only protected
up to eighty five thousand pounds in each bank account,
So that's worth thinking about.
Speaker 3 (01:53):
Technically, there is comfort for temporary big sums. If you
are selling the house and you'll be wee noses for
a few months, then double check with your preveder. But
I think that it's covered for up to a million
in certain circumstances.
Speaker 2 (02:08):
But that's not what we're talking about here.
Speaker 3 (02:10):
No, absolutely not. This is long term, so yeah, she bit.
Speaker 2 (02:13):
Tough to splatter.
Speaker 1 (02:14):
Yeah, and there is a case, and again there's probably
something we should look at probably another time. There is
a case for holding short term guilts and just continuing
to roll those over getting the income from that, and
there's some tax advantage there as well, So there's definitely
a case for that if you've got a very large
amount of money that you're holding on to for an
elderly parent who's in a care home, because as we know,
those care homes can come in at a one hundred
grand a year plus, right, So you know, I hope.
Speaker 2 (02:36):
It was a big house, Tracy. I hope it was
a big house, and I hope your mother as well.
Speaker 1 (02:40):
And the other thing on the housing point, that's absolutely true.
The last thing you want to do if you're saving
up for a housing deposit is to put that money
at risk in stock markets because it's short term savings.
Speaker 3 (02:51):
Right well, yeah, absolutely, And to be fair, we've never
said that. I think this slate thing Tracy was taking
Asue with as well was the eighty the cash ISA
allowance should be reduced, and I think as a slightly
trickier concept because I don't think that many people saving
up for a deposit. I mean, there's gonna be a
locket of twenty grand, which is the annual allowance for
(03:13):
one year, let alone multiples of that. I can certainly
see why you would want to keep a large sum
of cash in an ISA so that it's tax free.
For the second scenario, a kind of elderly person in
care at home fees. At the same time, I think
that there still is a discussion to be had about
whether the cash annual allowance should be as generous as
(03:34):
it currently is, but that there's an element swings and
round the boots.
Speaker 1 (03:38):
There one other thing that we wanted to look at.
Lucy got in touch to ask if there are any
free or low cost personal finance resources specifically for women.
I would say on that, but I'm interested to hear
what you said, Jonas Sanfrees. Yes, there are loads of free,
low cost personal finance resources.
Speaker 2 (03:53):
Welcome to the Merin Talks Your Money podcast on.
Speaker 1 (03:55):
Which which is free at your your favorite podcast provider,
and we do a lot of personal finance. Then of
course there's Money Saving Expert. There's Money Week, where John
and I both used to work, which has a lot
of free stuff on its website. There are boards of
websites there blonde money, John, can you think of some.
Speaker 3 (04:10):
Others boarding money, Holy Planks, very money.
Speaker 2 (04:13):
Yeah, that's what I'm meant totally. So there's loads. Yeah,
that's good. It's very much all it is. Yeah, not
quite what Lucy's after.
Speaker 1 (04:23):
So there are lots and lots of free resources and
money saving expert is that go to for so many
people when it comes to looking at the granularity of
personal finance, And I'm not sure that you need to
look at anything specifically for women. The rules are the
same men and women. There are a few things that
are different about female personal finances. Of course, we are
the ones who take perhaps longer breaks to take care
of early relatives, to look after children, et cetera. So
(04:45):
maybe are there are issues about how much we should
put independents, etc.
Speaker 2 (04:49):
But the rules don't change. They're the same for everybody.
Speaker 1 (04:51):
So I'm not sure that you ever need to look
at female specific finances. I say that as someone who
wrote a book on female specific finances about twenty years ago.
Speaker 2 (05:00):
The rules of the same, the emotions might be different,
is that, fat John?
Speaker 3 (05:04):
I think that's fair. The one thing I would say,
and I think one of the things that came across
in your book originally is that it's not so much
about the rules as the situations. And obviously that's always
a tricky thing to talk about because people simultaneously kind
of like the idea of equality but also don't like
the idea of admitting that there are differences, and that
(05:25):
there are situations like pregnancy, for example, which are almost
bound to cause differences in your life path that are
not the same as those of the average man. What
kind of always irritates me about this discussion is that
it kind of often focuses on kind of stupid things
like are women more or less risk averse than men,
(05:45):
which is clearly just situational, as opposed to focusing on
the kind of more important things about, well, okay, what
should you do if your career is more likely to
not be a straight kind of line from twenty to
sixty five and more likely something that's broken up? And
I actually don't think there's enough coverage of those things.
I think we like to sweep those under the carpet.
(06:06):
That's kind of a separate issue that is more about
the different life path of you know, of your average
women compared to your average.
Speaker 1 (06:16):
We've got John the Feminist on the show where.
Speaker 2 (06:18):
You do.
Speaker 3 (06:21):
Only creepy man to strivee themselves as feminists. Really totally sorry,
its thing late women and sympathize with women and the issues.
But I think that you can only be a feminist
if you're a woman. Actually, that's a whole different topic.
Speaker 1 (06:36):
All right, Listie, I'm going to take that one offline
with John, but I will definitely dedicated podcast over the
next few months specifically to the different different pathways to pensions.
I think is probably what it's all about. That's the
man and women with it. Well, we'll come back to
that one. Thank you very much for it.
Speaker 2 (06:51):
Right.
Speaker 1 (06:51):
One more, I got in touch about the government's move
to abolish the lifetime allowance, how it affects people.
Speaker 2 (06:56):
If there's any way you can get back tax that
he's already paid.
Speaker 1 (06:59):
Oh, took a a retirement in twenty twenty a mixture
of defined benefit and defined contribution pensions. Games my sympathy
slipping away in slipping away over the years, my DC
did pretty well. Okay, it's gone, and I ended up
my total pension exceeding the lifetimee lifetime allowance. I'm definitely gone.
In fact, I stopped contributing and got individual protection status.
Do I have to go on with this?
Speaker 2 (07:21):
However, so the.
Speaker 1 (07:23):
Send the government doesn't bolished the lifetime allowance because it
was coming to punitive for public sector employees, especially senior
doctor doesn't even said yes, Starma had his own specific
civil service pension scheme that exempted him from the lifetime allowance.
Speaker 2 (07:33):
Yes he did.
Speaker 1 (07:34):
By the way, my sympathy for him is also entirely evaporated.
So my question is, is there any way I can
get that tax back now the lifetime allowances be abolished.
Speaker 2 (07:44):
Now.
Speaker 1 (07:44):
There may be a more complicated answer to this, but
my answer is no, I don't think so, John, I.
Speaker 3 (07:49):
Mean, I can't imagine that that is. And I think
the main thing that ian Zimia was illustrates is the
problem with the government constantly changing the rules, so it
creates I mean iansawenna he's sad to apply for lightfstime
allians protection, which means he's even got higher bakestiame alans
than most people hide. But the point is the fact
that it does keep changing, and that's very detrimental. It
(08:11):
creates winners and losers, and it also puts people off
saving anti pensions understandably.
Speaker 1 (08:15):
All right, Well, leaving that one, we are now going
to go onto today's actual episode. Today we will be
answering a question from Nelma, and she says, at sixty eight,
I self manage my money, which is all either in
a sip or an I say, well done. I increasingly
want less in equity investments and more in safer holdings.
I wish to reduce my sixty percent equities. I have
cash itces and very short term guilts. Where else can
(08:38):
I put my money to increase my non equity basket?
Is it money marketing funds and bond funds? Well, this
is really interesting one, isn't it, John, Because sixty percent
equity is at at sixty eight when it's self managed,
I'm not sure that many financial advisors would necessarily advise
now pulling that much below sixty And when we were
(09:01):
looking at this the other day and wondering exactly what
it is that NILIMA is is after hearing that there
are if it's income you're after, there are a lot
of what you might call safe income equity products. And
one of the things that you and I look at
a lot is the dividend heroes, the AIIC, so the
investment trust sort have put their dividend up every year
(09:22):
for however many years. I've actually had a new list
just in the nick of time.
Speaker 2 (09:27):
So lots of them.
Speaker 1 (09:28):
Scottish American has put its dividend up for fifty one years,
Merry Income Trust fifty one years, Runner Investment Trust fifty
three years, etc. Caledonian Investments fifty seven years, City of
London fifty eight years.
Speaker 2 (09:39):
They're not going to break that record.
Speaker 1 (09:41):
So what you know is if you go out and
you buy the City of London Investment Trust, you can't
guarantee that that dividend will constantly be put up to
match inflation if inflation goes berserk. But nonetheless, what you
know is that it's more than likely to rise every year.
So that seems if it's income you're after and hanging
on to your capital at the s same time, that
would seem a reasonably sensible way to go, even though
(10:03):
it's still an equity product.
Speaker 2 (10:05):
So that's one thing to look at.
Speaker 3 (10:07):
One of the things here is is it's just being
curious as to what Neliam's overall goal is at this point.
I mean, if she's got more than enough money and
she actually just wants to reduce the absolute amount of
risk that she's taken in her portfolio, then I can
get why you might want to move more money towards
kind of cash type assets because you just don't want
(10:31):
to take any risk by the inflation risk. It's tricky
about knowing exactly what she's aiming to do. And I know,
I mean because Neliam has been quite a regular correspondent
over the years, and so I'm pretty sure that she's
quite clued up in the fact that she's managing her
own set and all of that is impressive. But so
I'm sure she knows what she's doing. But in the
(10:51):
absence that kind of gold structure is a thing, it's
much harder to say.
Speaker 1 (10:57):
I suppose, I'm the real question is she loo looking
for to maintain her income or is she looking to
hang on to her capital one undred percent in real terms?
Speaker 2 (11:06):
Or is it both?
Speaker 1 (11:07):
These are very important ways to look at it. If
you want to preserve your capital, do you need to
preserve it in real terms? Do you just want to
preserve it in nominal terms? Why do you need to
preserve your capital I mean that's the other question that
we should often be asking people.
Speaker 2 (11:18):
What are you preserving your capital? Four?
Speaker 1 (11:20):
Is it because you want to leave it to somebody?
Is it because you're frightened of these you know, care
home fees, etc.
Speaker 2 (11:26):
What is it?
Speaker 1 (11:27):
And one of the things that we often ask people
is why wouldn't.
Speaker 2 (11:30):
You just die broke?
Speaker 3 (11:31):
Yeah?
Speaker 1 (11:32):
Why hang on to the money? What's going on there?
So that's a good question to ask yourself. But outside that, yes,
it is money market funds, it's short term guilts, it's.
Speaker 2 (11:39):
I'd be quite worry of bond funds.
Speaker 1 (11:41):
Actually, with the inflation environment, there's a lot of crazy
stuff going on out there. I'm not entirely sure that
I would look at a bond fund these days and go,
oh look, aye, buy that, I'm safe.
Speaker 2 (11:49):
You're not.
Speaker 3 (11:50):
Yeah, I cannot feel with boinds you probably need to
be looking more to And this says quite complicated, but
it's kind of structuring your own boindlide or tape. Thing
weird because probably bond funds is that they constantly sell
the boinds before the mature, and so that means that
they can take a whack when interest rates change, whereas
if you're an individual holder, you can hold the bonds
(12:11):
and I mean you'll still get whacked by inflation in
terms of you know, if you hold it for five
years and it turns out of the interest rate and
the guilt wasn't enough to compensate you for the inflation
over that time, you've lost money in real terms, but
your nominal money will come back. So I think if
you're really worried about the protection of your your nominal value,
(12:34):
then you have to look at individual bonds for yourself.
If the longer term. Obviously, money market funds are just
that is what they had do, just short term treasuries
and boinds that are shouldn't then rEFInd us by the
government very rapidly, so they're basically just cash accounts, but
in the bond market.
Speaker 1 (12:50):
Yeah, So in the end, if you want to be
said you really are cash cash equivalent, I think so
Jason just moving into cash. And the other thing is
that we're not going to get ded get into gold now.
But you know that's a sort of cash equivalent that
might or might not preserve the value of your capital.
So if you have look on the Bluebook website, you'll
find lots of stuff about gold, and obviously in our
podcast last week was about the line, we talked about
(13:11):
gold at some length. I mean, that's worth thinking about.
But of course it's not going to guarantee the preservation
of your capital, because it's not like that.
Speaker 3 (13:19):
That's important to emphasize, just because I do think that
people get partectar in gold's going up as it is now,
people start to believe that it is something that invariably
protects the capital. We like gold on this show. We
think it. You know, we've been talking about that you
should have part of your portfolio in it for like,
you know, twenty or years now. But the point is
(13:41):
it does go down in nominal terms, and it does
go down in real terms. You know, if if you
buy it and it falls by twenty percent, which is
perfectly possible, then if you have to sell it, then
you're going to make it twenty percent loss.
Speaker 2 (13:52):
You know, that's just that.
Speaker 3 (13:53):
So it's not like cash from that point of view.
Just think it's important to emphasize, and I think.
Speaker 1 (13:59):
We're confidence saying that it will preserve the value of capital.
Speaker 2 (14:02):
Over the very long term.
Speaker 1 (14:03):
But no one could argue for a long time about
what the very long term is exactly, And I suppose
the only other option for Neirlima, which is something that
I'm sure she's thought about already, is an annuity.
Speaker 2 (14:15):
Yeah.
Speaker 3 (14:15):
Again, if she's really worried run in there, then that's
somethingty consider.
Speaker 1 (14:20):
And it's also a lot more attractive now if you
think about it in terms of the way that pensions
will be taxed going forward. In the old Azima was
slightly assuming that she's looking to leave her money to somebody,
hence the need to preserve the capital, etcetera. It used
to be you could just leave your money on your
pension and it would effectively become a trust fund for
your heirs. But this isn't going to be the case
anymore with the reforms or should I say changes to
(14:42):
pension taxation. It's now going to be liable for inheritance
tax and then liable for your income tax after that.
So that's quite a big percentage of the capital it's
going to vanish on your death anyway, assuming she's in
the zone for inheritance tax. So with that in mind,
given that you're likely to lose the majority of that
capital if you're reasonably wealthy when you die, makes more
(15:03):
sense than it used to to use the money inside
that wrapper to buy an annuity which will pay you at
a relatively good income because in unity right, so obviously
they've gone up quite a lot recently.
Speaker 2 (15:12):
Is that fair?
Speaker 3 (15:13):
Absolutely? And she also doesn't have to spend all of
the money on an innuity, and you know, shit can
get a certain amount of inflation proofing as well, although
obviously that means that you have to pay more for
the annuity. If we having this chat eight years ago,
in the idea of buying an innuity, would it seemed
kind of only if you were really desperate for certainty.
(15:33):
But at this point it's definitely something to throw into
the mix.
Speaker 1 (15:36):
Yeah, Okay, anything else, John, That's all my thoughts on
the matter.
Speaker 3 (15:40):
Yeah, it's one thing. I've got any more thoughts on
it either. I do think it does boil down to
what Nellima's overall goals, and the thing is sixty eight
is I don't know. I feel that it's quite a
tricky age in terms of thinking about you know, you
might actually have much longer to go, and alternatively, perhaps
(16:02):
you know you may not, And so I think, you know,
it's what's kind of like thinking about in those terms
of what is it that you also want to achieve
in your remaining time and thinking about what you want
to do and know what that's all about, existential and
gem But it'll be cool first pension planning for you.
Speaker 1 (16:20):
Thanks John for giving us that note to end things on.
But I would just say, by the way, that we
do not know everything about Ilima's personal circumstances. So absolutely
nothing that John and I have discussed today is to
be construed as advice, either for her or for that matter,
for anybody else. We're just shooting the breeze about what
we think, right John, Yeah, do not take this as advice.
Speaker 2 (16:38):
And if you want to do anything like we've discussed.
Speaker 1 (16:41):
And you're not expert on these things, do please consult
a financial advisor.
Speaker 2 (16:49):
Thanks for listening to this week's Maren Talks to Your Money.
Speaker 1 (16:51):
If you like our show, rate review, and subscribe wherever
you listen to podcasts also be showed. Follow me and
John on ex or Twitter at marens w and John
Underscores Effect.
Speaker 2 (17:00):
This episode was produced.
Speaker 1 (17:01):
By Summersadi and Moses, and the sound designed by Blake.
Maple's questions and comments on this show and all our shows,
as always welcome, our show emails Marimani at bloomberg dot net,
Bloomberg Audio Studios, podcasts, radio news. Welcome to Merin Talks
Your Money, the personal finance edition of Merin Talks Money
and these bonus podcasts, we talk about the best strategy
for making the most of your money. A Merin sumset
(00:24):
web and with Me, senior reporter and author of The
Money Just Tells the newsletter, John step back, Hi, John, Now, listen.
Speaker 2 (00:33):
We really like.
Speaker 1 (00:34):
Getting questions and feedback from our listeners, don't we jump
back me up on this?
Speaker 3 (00:37):
Yeah, it's great, it's extremely interesting, and so.
Speaker 1 (00:40):
We're going to answer a listener's question today ask us
to talk about non equity baskets. But before we get
onto that and explain to you what a non equity
basket is, of course, but you go through some of
the other notes we've had from listeners, because we promise
you we do read them all. Not all of them
become episodes, but we definitely read them all and we
think about them right. First up is Tracy. Tracy is
(01:00):
a long term listener and she takes issue with her
idea about holding cash. She feels that holding six months
worth of expenses in a cash I ser is sensible
for most people, but not for everyone. She cites two
other groups of people, first though saving for a first
house to posit, saying it doesn't seem sensible for them
to invest a posit in And I said, and the second.
Speaker 2 (01:20):
Category would be the elderly. She talks about her mother.
Speaker 1 (01:22):
Tracy explains her mother has just sold her house, now
lives in a care home and the cash in the
house is being used to pay care fees. Therefore it
doesn't make sense to invest that cash. That's actually an
extremely sensible piece of feedback, I think. And one thing
I would say, John, I don't know what you think,
but it might be a good idea if you if
you're talking about quite a lot of money from the
sale of a house, just leaving that sitting in one
(01:44):
cash account could be a mistake because you're only protected
up to eighty five thousand pounds in each bank account,
So that's worth thinking about.
Speaker 3 (01:53):
Technically, there is comfort for temporary big sums. If you
are selling the house and you'll be wee noses for
a few months, then double check with your preveder. But
I think that it's covered for up to a million
in certain circumstances.
Speaker 2 (02:08):
But that's not what we're talking about here.
Speaker 3 (02:10):
No, absolutely not. This is long term, so yeah, she bit.
Speaker 2 (02:13):
Tough to splatter.
Speaker 1 (02:14):
Yeah, and there is a case, and again there's probably
something we should look at probably another time. There is
a case for holding short term guilts and just continuing
to roll those over getting the income from that, and
there's some tax advantage there as well, So there's definitely
a case for that if you've got a very large
amount of money that you're holding on to for an
elderly parent who's in a care home, because as we know,
those care homes can come in at a one hundred
grand a year plus, right, So you know, I hope.
Speaker 2 (02:36):
It was a big house, Tracy. I hope it was
a big house, and I hope your mother as well.
Speaker 1 (02:40):
And the other thing on the housing point, that's absolutely true.
The last thing you want to do if you're saving
up for a housing deposit is to put that money
at risk in stock markets because it's short term savings.
Speaker 3 (02:51):
Right well, yeah, absolutely, And to be fair, we've never
said that. I think this slate thing Tracy was taking
Asue with as well was the eighty the cash ISA
allowance should be reduced, and I think as a slightly
trickier concept because I don't think that many people saving
up for a deposit. I mean, there's gonna be a
locket of twenty grand, which is the annual allowance for
(03:13):
one year, let alone multiples of that. I can certainly
see why you would want to keep a large sum
of cash in an ISA so that it's tax free.
For the second scenario, a kind of elderly person in
care at home fees. At the same time, I think
that there still is a discussion to be had about
whether the cash annual allowance should be as generous as
(03:34):
it currently is, but that there's an element swings and
round the boots.
Speaker 1 (03:38):
There one other thing that we wanted to look at.
Lucy got in touch to ask if there are any
free or low cost personal finance resources specifically for women.
I would say on that, but I'm interested to hear
what you said, Jonas Sanfrees. Yes, there are loads of free,
low cost personal finance resources.
Speaker 2 (03:53):
Welcome to the Merin Talks Your Money podcast on.
Speaker 1 (03:55):
Which which is free at your your favorite podcast provider,
and we do a lot of personal finance. Then of
course there's Money Saving Expert. There's Money Week, where John
and I both used to work, which has a lot
of free stuff on its website. There are boards of
websites there blonde money, John, can you think of some.
Speaker 3 (04:10):
Others boarding money, Holy Planks, very money.
Speaker 2 (04:13):
Yeah, that's what I'm meant totally. So there's loads. Yeah,
that's good. It's very much all it is. Yeah, not
quite what Lucy's after.
Speaker 1 (04:23):
So there are lots and lots of free resources and
money saving expert is that go to for so many
people when it comes to looking at the granularity of
personal finance, And I'm not sure that you need to
look at anything specifically for women. The rules are the
same men and women. There are a few things that
are different about female personal finances. Of course, we are
the ones who take perhaps longer breaks to take care
of early relatives, to look after children, et cetera. So
(04:45):
maybe are there are issues about how much we should
put independents, etc.
Speaker 2 (04:49):
But the rules don't change. They're the same for everybody.
Speaker 1 (04:51):
So I'm not sure that you ever need to look
at female specific finances. I say that as someone who
wrote a book on female specific finances about twenty years ago.
Speaker 2 (05:00):
The rules of the same, the emotions might be different,
is that, fat John?
Speaker 3 (05:04):
I think that's fair. The one thing I would say,
and I think one of the things that came across
in your book originally is that it's not so much
about the rules as the situations. And obviously that's always
a tricky thing to talk about because people simultaneously kind
of like the idea of equality but also don't like
the idea of admitting that there are differences, and that
(05:25):
there are situations like pregnancy, for example, which are almost
bound to cause differences in your life path that are
not the same as those of the average man. What
kind of always irritates me about this discussion is that
it kind of often focuses on kind of stupid things
like are women more or less risk averse than men,
(05:45):
which is clearly just situational, as opposed to focusing on
the kind of more important things about, well, okay, what
should you do if your career is more likely to
not be a straight kind of line from twenty to
sixty five and more likely something that's broken up? And
I actually don't think there's enough coverage of those things.
I think we like to sweep those under the carpet.
(06:06):
That's kind of a separate issue that is more about
the different life path of you know, of your average
women compared to your average.
Speaker 1 (06:16):
We've got John the Feminist on the show where.
Speaker 2 (06:18):
You do.
Speaker 3 (06:21):
Only creepy man to strivee themselves as feminists. Really totally sorry,
its thing late women and sympathize with women and the issues.
But I think that you can only be a feminist
if you're a woman. Actually, that's a whole different topic.
Speaker 1 (06:36):
All right, Listie, I'm going to take that one offline
with John, but I will definitely dedicated podcast over the
next few months specifically to the different different pathways to pensions.
I think is probably what it's all about. That's the
man and women with it. Well, we'll come back to
that one. Thank you very much for it.
Speaker 2 (06:51):
Right.
Speaker 1 (06:51):
One more, I got in touch about the government's move
to abolish the lifetime allowance, how it affects people.
Speaker 2 (06:56):
If there's any way you can get back tax that
he's already paid.
Speaker 1 (06:59):
Oh, took a a retirement in twenty twenty a mixture
of defined benefit and defined contribution pensions. Games my sympathy
slipping away in slipping away over the years, my DC
did pretty well. Okay, it's gone, and I ended up
my total pension exceeding the lifetimee lifetime allowance. I'm definitely gone.
In fact, I stopped contributing and got individual protection status.
Do I have to go on with this?
Speaker 2 (07:21):
However, so the.
Speaker 1 (07:23):
Send the government doesn't bolished the lifetime allowance because it
was coming to punitive for public sector employees, especially senior
doctor doesn't even said yes, Starma had his own specific
civil service pension scheme that exempted him from the lifetime allowance.
Speaker 2 (07:33):
Yes he did.
Speaker 1 (07:34):
By the way, my sympathy for him is also entirely evaporated.
So my question is, is there any way I can
get that tax back now the lifetime allowances be abolished.
Speaker 2 (07:44):
Now.
Speaker 1 (07:44):
There may be a more complicated answer to this, but
my answer is no, I don't think so, John, I.
Speaker 3 (07:49):
Mean, I can't imagine that that is. And I think
the main thing that ian Zimia was illustrates is the
problem with the government constantly changing the rules, so it
creates I mean iansawenna he's sad to apply for lightfstime
allians protection, which means he's even got higher bakestiame alans
than most people hide. But the point is the fact
that it does keep changing, and that's very detrimental. It
(08:11):
creates winners and losers, and it also puts people off
saving anti pensions understandably.
Speaker 1 (08:15):
All right, Well, leaving that one, we are now going
to go onto today's actual episode. Today we will be
answering a question from Nelma, and she says, at sixty eight,
I self manage my money, which is all either in
a sip or an I say, well done. I increasingly
want less in equity investments and more in safer holdings.
I wish to reduce my sixty percent equities. I have
cash itces and very short term guilts. Where else can
(08:38):
I put my money to increase my non equity basket?
Is it money marketing funds and bond funds? Well, this
is really interesting one, isn't it, John, Because sixty percent
equity is at at sixty eight when it's self managed,
I'm not sure that many financial advisors would necessarily advise
now pulling that much below sixty And when we were
(09:01):
looking at this the other day and wondering exactly what
it is that NILIMA is is after hearing that there
are if it's income you're after, there are a lot
of what you might call safe income equity products. And
one of the things that you and I look at
a lot is the dividend heroes, the AIIC, so the
investment trust sort have put their dividend up every year
(09:22):
for however many years. I've actually had a new list
just in the nick of time.
Speaker 2 (09:27):
So lots of them.
Speaker 1 (09:28):
Scottish American has put its dividend up for fifty one years,
Merry Income Trust fifty one years, Runner Investment Trust fifty
three years, etc. Caledonian Investments fifty seven years, City of
London fifty eight years.
Speaker 2 (09:39):
They're not going to break that record.
Speaker 1 (09:41):
So what you know is if you go out and
you buy the City of London Investment Trust, you can't
guarantee that that dividend will constantly be put up to
match inflation if inflation goes berserk. But nonetheless, what you
know is that it's more than likely to rise every year.
So that seems if it's income you're after and hanging
on to your capital at the s same time, that
would seem a reasonably sensible way to go, even though
(10:03):
it's still an equity product.
Speaker 2 (10:05):
So that's one thing to look at.
Speaker 3 (10:07):
One of the things here is is it's just being
curious as to what Neliam's overall goal is at this point.
I mean, if she's got more than enough money and
she actually just wants to reduce the absolute amount of
risk that she's taken in her portfolio, then I can
get why you might want to move more money towards
kind of cash type assets because you just don't want
(10:31):
to take any risk by the inflation risk. It's tricky
about knowing exactly what she's aiming to do. And I know,
I mean because Neliam has been quite a regular correspondent
over the years, and so I'm pretty sure that she's
quite clued up in the fact that she's managing her
own set and all of that is impressive. But so
I'm sure she knows what she's doing. But in the
(10:51):
absence that kind of gold structure is a thing, it's
much harder to say.
Speaker 1 (10:57):
I suppose, I'm the real question is she loo looking
for to maintain her income or is she looking to
hang on to her capital one undred percent in real terms?
Speaker 2 (11:06):
Or is it both?
Speaker 1 (11:07):
These are very important ways to look at it. If
you want to preserve your capital, do you need to
preserve it in real terms? Do you just want to
preserve it in nominal terms? Why do you need to
preserve your capital I mean that's the other question that
we should often be asking people.
Speaker 2 (11:18):
What are you preserving your capital? Four?
Speaker 1 (11:20):
Is it because you want to leave it to somebody?
Is it because you're frightened of these you know, care
home fees, etc.
Speaker 2 (11:26):
What is it?
Speaker 1 (11:27):
And one of the things that we often ask people
is why wouldn't.
Speaker 2 (11:30):
You just die broke?
Speaker 3 (11:31):
Yeah?
Speaker 1 (11:32):
Why hang on to the money? What's going on there?
So that's a good question to ask yourself. But outside that, yes,
it is money market funds, it's short term guilts, it's.
Speaker 2 (11:39):
I'd be quite worry of bond funds.
Speaker 1 (11:41):
Actually, with the inflation environment, there's a lot of crazy
stuff going on out there. I'm not entirely sure that
I would look at a bond fund these days and go,
oh look, aye, buy that, I'm safe.
Speaker 2 (11:49):
You're not.
Speaker 3 (11:50):
Yeah, I cannot feel with boinds you probably need to
be looking more to And this says quite complicated, but
it's kind of structuring your own boindlide or tape. Thing
weird because probably bond funds is that they constantly sell
the boinds before the mature, and so that means that
they can take a whack when interest rates change, whereas
if you're an individual holder, you can hold the bonds
(12:11):
and I mean you'll still get whacked by inflation in
terms of you know, if you hold it for five
years and it turns out of the interest rate and
the guilt wasn't enough to compensate you for the inflation
over that time, you've lost money in real terms, but
your nominal money will come back. So I think if
you're really worried about the protection of your your nominal value,
(12:34):
then you have to look at individual bonds for yourself.
If the longer term. Obviously, money market funds are just
that is what they had do, just short term treasuries
and boinds that are shouldn't then rEFInd us by the
government very rapidly, so they're basically just cash accounts, but
in the bond market.
Speaker 1 (12:50):
Yeah, So in the end, if you want to be
said you really are cash cash equivalent, I think so
Jason just moving into cash. And the other thing is
that we're not going to get ded get into gold now.
But you know that's a sort of cash equivalent that
might or might not preserve the value of your capital.
So if you have look on the Bluebook website, you'll
find lots of stuff about gold, and obviously in our
podcast last week was about the line, we talked about
(13:11):
gold at some length. I mean, that's worth thinking about.
But of course it's not going to guarantee the preservation
of your capital, because it's not like that.
Speaker 3 (13:19):
That's important to emphasize, just because I do think that
people get partectar in gold's going up as it is now,
people start to believe that it is something that invariably
protects the capital. We like gold on this show. We
think it. You know, we've been talking about that you
should have part of your portfolio in it for like,
you know, twenty or years now. But the point is
(13:41):
it does go down in nominal terms, and it does
go down in real terms. You know, if if you
buy it and it falls by twenty percent, which is
perfectly possible, then if you have to sell it, then
you're going to make it twenty percent loss.
Speaker 2 (13:52):
You know, that's just that.
Speaker 3 (13:53):
So it's not like cash from that point of view.
Just think it's important to emphasize, and I think.
Speaker 1 (13:59):
We're confidence saying that it will preserve the value of capital.
Speaker 2 (14:02):
Over the very long term.
Speaker 1 (14:03):
But no one could argue for a long time about
what the very long term is exactly, And I suppose
the only other option for Neirlima, which is something that
I'm sure she's thought about already, is an annuity.
Speaker 2 (14:15):
Yeah.
Speaker 3 (14:15):
Again, if she's really worried run in there, then that's
somethingty consider.
Speaker 1 (14:20):
And it's also a lot more attractive now if you
think about it in terms of the way that pensions
will be taxed going forward. In the old Azima was
slightly assuming that she's looking to leave her money to somebody,
hence the need to preserve the capital, etcetera. It used
to be you could just leave your money on your
pension and it would effectively become a trust fund for
your heirs. But this isn't going to be the case
anymore with the reforms or should I say changes to
(14:42):
pension taxation. It's now going to be liable for inheritance
tax and then liable for your income tax after that.
So that's quite a big percentage of the capital it's
going to vanish on your death anyway, assuming she's in
the zone for inheritance tax. So with that in mind,
given that you're likely to lose the majority of that
capital if you're reasonably wealthy when you die, makes more
(15:03):
sense than it used to to use the money inside
that wrapper to buy an annuity which will pay you at
a relatively good income because in unity right, so obviously
they've gone up quite a lot recently.
Speaker 2 (15:12):
Is that fair?
Speaker 3 (15:13):
Absolutely? And she also doesn't have to spend all of
the money on an innuity, and you know, shit can
get a certain amount of inflation proofing as well, although
obviously that means that you have to pay more for
the annuity. If we having this chat eight years ago,
in the idea of buying an innuity, would it seemed
kind of only if you were really desperate for certainty.
(15:33):
But at this point it's definitely something to throw into
the mix.
Speaker 1 (15:36):
Yeah, Okay, anything else, John, That's all my thoughts on
the matter.
Speaker 3 (15:40):
Yeah, it's one thing. I've got any more thoughts on
it either. I do think it does boil down to
what Nellima's overall goals, and the thing is sixty eight
is I don't know. I feel that it's quite a
tricky age in terms of thinking about you know, you
might actually have much longer to go, and alternatively, perhaps
(16:02):
you know you may not, And so I think, you know,
it's what's kind of like thinking about in those terms
of what is it that you also want to achieve
in your remaining time and thinking about what you want
to do and know what that's all about, existential and
gem But it'll be cool first pension planning for you.
Speaker 1 (16:20):
Thanks John for giving us that note to end things on.
But I would just say, by the way, that we
do not know everything about Ilima's personal circumstances. So absolutely
nothing that John and I have discussed today is to
be construed as advice, either for her or for that matter,
for anybody else. We're just shooting the breeze about what
we think, right John, Yeah, do not take this as advice.
Speaker 2 (16:38):
And if you want to do anything like we've discussed.
Speaker 1 (16:41):
And you're not expert on these things, do please consult
a financial advisor.
Speaker 2 (16:49):
Thanks for listening to this week's Maren Talks to Your Money.
Speaker 1 (16:51):
If you like our show, rate review, and subscribe wherever
you listen to podcasts also be showed. Follow me and
John on ex or Twitter at marens w and John
Underscores Effect.
Speaker 2 (17:00):
This episode was produced.
Speaker 1 (17:01):
By Summersadi and Moses, and the sound designed by Blake.
Maple's questions and comments on this show and all our shows,
as always welcome, our show emails Marimani at bloomberg dot net,
Host
Merryn Somerset Webb
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