Making sense of Money, with Pete Matthew. In these bite-size financial videos, I explain the basics of financial planning in easy-to-understand language. Money is not difficult to understand, but most people switch off to it. Hopefully I can help you first understand, and then use money to help you achieve your life's aims.
Some of the old videos need updating, so always check before you take action, and remember, nothing on here consitutes advice, OK?
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Pete, your 'tutorials' aren't "helpful", they are pure gold every single time. Thank you so much for the 'explanations' (as of course you cannot give advice 😉) you so generously provide. Love them all ❤
Hang on, hang on, you say something _very_ important at 04:42: "If you have accessed taxable benefits _from a money purchase pension_. That is called the Money Purchase Annual Allowance (MPAA)". Now I knew of the drop to £10K max contribution, but have not seen and GOV.UK etc. does not make clear that this applies only to money purchase schemes. Do I presume from the fact it's actually called the MPAA that if you have drawn taxable benefits from a DB scheme, thne the MPAA does _not_ kick-in as you have not drawn from an MP/DC pension??
Hi Pete - thanks for the video. What is not clear to me is if I can “transfer” tax free allowance between pensions. For example, if I have two pensions a) SIPP and b) final salary scheme. For simplicity let’s assume that that they are £100k each (£200k total) at the time when I am 57 and reach my minimum pension age. Can I at this point use my 25% tax free allowance i.e. £50k but take it all out of the SIPP (50% SIPP value in this example) leaving the final salary untouched and just starting to take normal income from the final salary scheme at the age 65?
Nope. There’s a couple of things wrong here. Firstly, your DB scheme doesn’t have a fund value like that - it has a guaranteed income and the tax-free cash is a function of that, whereas a DC pension is 25% of the fund. But you can’t pick and choose where and how you take tax-free cash across your total pension provision, it’s worked out on a per plan/policy/scheme basis.
The advice I received reference IHT is take out a big loan on your residential home, invest in assets via an SPV which keeps your IHT to a minimum 🎉 I haven’t seen anything contrary to this
Oh, Special Purpose Vehicle? Seems a bit drastic to mortgage your home and invest in risky assets to save tax, but I imagine that it works technically. Hardly anyone would agree to such a scheme on the basis that it would be complex and costly to set up, as well as the interest payments would be high. Presumably the SPV would have a mechanism to pay the loan interest? Unless you did an equity release loan where the interest rolls up?
Love the content Pete, this is a little political rather than financial but i think a major problem is that nothing seems to be improving with all these higher taxes, healthcare is strained public services too police are increasingly over stretched housing isnt being sorted. Alot of people wouldn't mind higher taxes if we were as efficient as the nordics but it seems we are just getting higher taxes, lower benefits from them. Im 30 and i hate to think what life will be like in this country for my future children.
How can we move to a flat rate tax relief. Surely this can be worked around using salary sacrifice arrangements. With these the employee doesn’t pay anything into the Pension - all contributions come from the employer. What else might happen if we get a Labour government? The MPAA may revert back to £4k from the current £10k. There will be some Fiddling for sure.
Cars, fuel, per mile, ULEZ, LTN etc. is the fastest way. They’ll use the ‘net zero’ excuses and pollution ruse. Air transport, holidays, will also be on there. With their majority they will change regulation to support these measures (with the blessing of the unbiased Civil Service and law courts), making it hard for any reversal in future. Lord help us.
Here was I thinking that I could escape taxes on my death! Not only will they grab my organs unless I opt out, but they may also plunder my estate? 😥. Hopefully they won't be a tax to cross the threshold of the pearly gates! Mind you most politicians would probably not be eligible.
Hi Pete. Great video and also very much liked your LTA videos recently. I am working with Demi but have a question for you. If gilts were/are considered a low risk item in ones pension portfolio then why did they drop in value so much? They do not seem to protect you in a volatile market. Any view? Are corporate bonds any safer?
Forget the smug face Pete, some one has to pay the tax, and seemingly you prefer we hard workers to pay it. We never reach the life time allowance, this is just a sop to the doctors, we will have them out within two years, if they do not re-introduce it ASAP. We will be lobbying for it hard.. Looks like I need to find another utube advisor, you seem only to be for the rich. Fee's may be the reason, stay away from this guy.
Ooof, that’s a bit harsh, Carl. The smug face was only about being right, not because I agree with everything I’m talking about here. For ages though, I’ve been in favour of a higher, flatter tax relief rate which would benefit basic rate taxpayers, but be worse for higher earners. Likewise, taxing pensions on death, but only over a given threshold would only affect those with larger pension provision, is those who can afford it. I think my record of helping everyone understand personal finance for 14 years speaks for itself. So let’s not write me off as only favouring the wealthy, eh? I wish you well; thanks for watching.
There will be a section of your audience to whom multidecade investing is not an option because they are too old. One thing I think you should be saying rather than the generalised advice to sit on your hands and see what happens is IF you will be doing something in the next year or so that could be severely impacted by a change in policy, consider bringinig that decision forward. For example, if considering taking tax free cash perhaps do it now just in case it is reduced or abolished.
I think you’re right with how they will tax through probate. It mustn’t be forgotten that due to most of the population having a lack of savings for retirement and the state pension reducing in real terms and starting at a later age, any government needs to encourage private pension contributions
I agree. They don't seem to take into account inflation. The tax free lump sum will be worth much less in 10 years. I can't see it being increased though.
Thanks, Pete. This is really pertinent for me. I've just turned 60 and have built up a large DC pension pot. I was thinking of retiring this year due to changes at work but will probably stay another year or two unless Im made redundant. I'm still paying into my pension quite heavily, as much as anything to avoid paying so much tax, but I also wonder how much tax I'll eventually end up paying when I do take my pension. FWIW, I don't have any children unfortunately so the inheritance aspect is less important for me than supporting myself in old age, especially after what has happened to my (divorced) parents and grandmother in later life with their care. Dealing with this, and finding adequate care (and funding arrangements) has been a nightmare. If any goverment looks at inheritance tax, they also need to fully address care home fees and capping contributions for this. The present government pledged to do this but failed to do so I'm also concerned that the tax-free element of the pension may be looked at, though that would also affect people with smaller pots, which would be an extremely unhelpful thing for any government to do.
It would definitely put people off having a pension in the first place as this is a problem already and eventually the state pension will fizzle out could mean in years to come the benefit bill explodes.
The state pension should not cap at 35 years NI contributions. Those who worked longer should get more. Someone who goes straight into work at 18 would have 50 years of contributions by age 68, those last 15 doing nothing for them.
You could always plan to retire on reaching 35yrs NI contributions. This would over the same 35yrs require reasonable SIPP contributions and an ISA to bridge those years until SIPP can be accessed.
I chose an annuity. I’m 63 years of age and it’s December 2023 and this is why. Average life expectancy im going to say 83 to keep the figures nice and simple. So 20 years for me (It’s a crucial figure to bare in mind for obvious reasons!) My pension pot was 232K 174K after I took the 25% tax free. So if that money made nothing and lost nothing that would give me a gross income of £8,700pa. Using PensionWise to gain access to legitimate annuity comparison quotes I was offered £12, 380pa which I’m more than happy with especially considering the state of the world today. I have a frozen final salary scheme which I’m already drawing and the state pension to too look forward to at 66 1/2. All together they will provide a total income just slightly more than I had when I was in employment. Basically used in conjunction with other assets you might have they can be a fantastic choice.
I'm looking forward to a Labour government personally if we are going to be taxed let's see something for the money as it is we are being hammered for tax and the country is falling apart nothing work's that leads to the question were has all the money gone?
You'll get massive taxes with the same poor results - just chucking money at things is no guarantee of success. The country is governed by incompetent politicians and and equally incompetent civil service - nothing will change until there is competent leadership.
Evening Pete, Right I have watched most of your videos around Pensions, and investments. I want to just quietly expand my fiscal portfolio by adding perhaps a Stocks and Shares ISA (as I dont have an ISA yet). Say £25 per month for the next decade or so - to see what happens. I currently have a Pension, Savings, Bonds and other fiscal diversified stuff which I have been doing for decades. What is the best app to use - as I am completely bewildered by the options, and just want to make one that allows me to do a little S&S ISA with my taking a small punt each month.
So glad you were right on this one Pete. Great video as always. I hope that the pension allowance stays at £60K PA but have not heard or seen any mention of that in Labour’s manifesto. They should also not be allowed to change the rules for anything you have accumulated to date - Any changes they implement should be based on new contribution’s only, that way you can make an informed decision before deciding to pay more into you pension.
The problem is that politicians making the decisions are themselves on salaries and have pensions which those in the private sector can only dream about. If Labour wants equality, then put public sector workers on the same pension arrangements as most in the private sector - I.e. 3% ‘employer ‘ (taxpayer) contribution, not 20%+.
Interesting idea on the inheritance tax change, not great personally, but I think you are right as it would be seen as not penalising the retired person. Of course the unintended consequences could be varied, spending down your pension, taking the lower tax penalty and then putting into a trust or such like. To me it seems that governments are very bad at anticipating what we might do when they do X.
Hi I've got a pension access wanting to give my details rather are legitimate, I am worried because I am self-employed but are used to work for the council is this to deal with the council patent set up and still paying regards from Andy
Under a Labour government, we'll end up paying higher taxes once the unions kick off with sky high wage demands. If you're a motorist, prepare to get hammered....
My concern is the pension commencement lump sum or tax free cash. My plan was to take out enough to pay off my mortgage when my fixed rate ends at the end of 2026. The soonest I can get my hands on this pot is August 2025. My concern is that they reduce the amount you can take tax free or scrap it. Do you think they could do this, I need £130,000 tax free to pay my mortgage I can do that if the amount is still the same at 25% of pot value but this labour government has me concerned and they might scupper my plans entirely. I am not employed and full time carer for mom and dad as an only child right now and coming up to my 54th birthday.
@@khiburgess5848 Pity sure there has to be consultations and it has to be debated a number of times in commons and lords to get royal assent it’s how long that process takes, hopefully gets blocked and not until end of 2025/26
I don't think they can squeeze any more juice from the tax payer. Millionaires are leaving in their droves to avoid UK taxes now. It might be time that politicians considered doing something very radical ... like spending less.
Is there evidence they are leaving in their droves? I think that effect is often overstated. Choosing where you live purely based on tax rates seems a rather narrow way of making important life choices (if you are lucky enough to be in that position).
I have moved job a few times and they used different pension providers would you recommend taking my savings out of them and putting it under a single one?
That’s *usually* a good idea but I can’t advise you to do that. Search the channel for ‘tidy pensions’ or ‘consolidate pensions’ and you’ll find more on the subject
Personally I think that so long as there is still a spousal exception for tax on pension pots, such that a spousal annuity/ drawdown or DB pension benefit is not broken by any changes, then I’m not sure why a pension pot should be exempt from inheritance tax. Surely my pension is for my retirement, i think that the concept of thinking of it as an investment vehicle for avoiding inheritance tax for children is the wrong outcome from the law change that allowed it. Also I don’t see that a lot of people would be impacted by this as generally pension pots will decline in value in payment.
I agree. Of all the options put forward here as possible ways of taxing pensions, removing the protection from inheritance tax seems the most reasonable.
I couldn't have put it better myself. A pension should be a pension and not an inheritance tax loophole to give to children IHT free. I worked alongside persons who were building up sizeable DC pension pots due to annual input and generous tax relief and who had no need to access them with the intention pass the pot onto children. The lifetime allowance pension tax charge was unnecessary and effectively penalised those who had over many years managed to build up their pension. I hope that it never comes back. Far better to tax pension pots for increased taxation under IHT rules with spousal exception as per current estate rules including ISA's.
