Your pension questions answered

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Hi, I'm Sarah Pennells

 

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and I'm the consumer finance

 

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specialist here at Royal London.

 

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Hi, I'm Clare Moffat.

 

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And I'm Royal London's pensions expert.

 

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And in today's webinar we're going

 

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to be answering your pensions questions.

 

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Now, whenever we do webinars, we get lots of questions

 

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and we don't have time to answer them.

 

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And in fact, for this webinar we've had over

 

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800 questions asked.

 

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Amazing, which Would mean a webinar of several days.

 

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However, within those 800 questions,

 

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there are some questions that have, you know,

 

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quite a few of you have asked.

 

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So we've looked at all of the questions

 

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and we'll be answering some

 

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of the most popular ones in the next 30 minutes or so.

 

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But if you'd like to ask a question as we go through,

 

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we've left time at the end to answer them

 

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and we would love to hear from you.

 

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And I can see some questions that are already coming in.

 

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As with all our webinars, we can't answer a question

 

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that's about your specific circumstances

 

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or a Royal London policy.

 

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Now, if you'd like to leave a comment or ask a question

 

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and you can do so via the slider link.

 

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And before we go any further, I'd just like

 

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to remind you when we are recording this webinar

 

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and we'll share a link to the recording afterwards

 

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with everyone who registered for it.

 

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So Clare, let's look at our first question.

 

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It's from Anna who says,

 

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I have five different pension pots

 

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from my previous employment.

 

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Is it worth combining them into one or two?

 

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Now, lots of other people asked this question as well,

 

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including Chris and Stephanie.

 

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Now this is quite complicated.

 

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Question one, we could devote a whole webinar to.

 

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In fact, Sarah,

 

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we actually did we you did a webinar on transferring your

 

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pension as part of pensions awareness week in September.

 

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Yep, that's right. And if you would like to watch

 

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that webinar, then you can find a link

 

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to it on our webinar page.

 

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Now, pension transfers,

 

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it's the topic we get asked about the most.

 

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So I will spend a few minutes now

 

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summarizing the points we covered in the webinar I did in

 

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September before I explain some

 

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of the things to look out for.

 

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Let's start with those who can't

 

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or generally shouldn't transfer their pension.

 

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And that's if you have a defined benefit pension.

 

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So for example, a final salary pension.

 

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And Mark wanted to know if there's any merit in combining

 

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his previous public sector pension into his current private

 

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pension to help boost the overall fund.

 

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Or is it best to leave them separate And mark?

 

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In many cases, there's no fund to transfer

 

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with a public sector pension.

 

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That's not the case with a local government pension.

 

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But it's generally better

 

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to leave your public sector pension where it is.

 

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And that's because it's a guaranteed income

 

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for the rest of your life.

 

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And for anybody who has one of these pensions for husband

 

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or wife or partner's life as well.

 

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If you want to transfer any kind of defined benefit pension,

 

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then you'll need to take financial advice first.

 

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But if you have a defined contribution pension

 

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where you build up a pot of money in which most people

 

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who are paying into pension have,

 

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then it may make sense to transfer it.

 

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And on the topic of pension transfers,

 

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I think it's time for our first poll.

 

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So we'd like

 

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to know if you've ever thought about transferring

 

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or combining your pension.

 

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So please cast your votes now in the poll using the link.

 

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Wow, okay. This, this is really interesting.

 

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I mean almost three quarters, the numbers are settling down

 

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so they'll probably change by time.

 

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I finish a sentence, but uh, yeah, seven out

 

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of 10 is saying they have um, another 15%

 

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heading up towards 20% saying

 

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maybe, but not sure how it works.

 

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About one in 10 say they haven't and 1% don't know.

 

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So really interesting.

 

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Many people have um,

 

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thought about transferring their pension.

 

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Now we do a lot of research into

 

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what people think about their workplace pensions,

 

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how much they save into them and so on.

 

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And in our latest research we found that half of people

 

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who said they transferred their pension did

 

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so for ease of management.

 

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So basically for less life admin,

 

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bringing your pensions together can reduce your life admin,

 

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but that's not necessarily a reason in itself to transfer.

 

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So let's look at some

 

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of the other reasons why transferring may make sense.

 

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Now, it may make sense to transfer your old pensions if the

 

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pension you are moving to has lower

 

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charges than your old one.

 

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All pension providers apply a yearly charge

 

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for managing your pension and this varies

 

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between different pension schemes

 

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and different pension providers.

 

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So it may be that you could transfer your existing pensions

 

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to a provider that charges you less

 

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than your current one does.

 

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Our research also told us that almost four in 10 people

 

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who've had several jobs in their lifetime

 

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and who have a defined contribution pension have transferred

 

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their pension when they've moved jobs.

 

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So this can definitely be a prompt for transferring.

 

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If you are starting a new job

 

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and are thinking of transferring,

 

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make sure you check the charges

 

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of your new workplace pension against the charges you are

 

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paying on your existing pensions.

 

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You can find information about charges in a document you'll

 

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have been given when you join the pension scheme called the

 

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key features document

 

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or in the annual statement

 

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that you'll get from your pensions provider

 

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or on your pension provider's app if they have one.

 

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Another reason why you might want to transfer is

 

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to get access to a wider range of investment funds.

 

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For context, most people

 

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who have a workplace defined contribution pension have their

 

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pension savings invested in what's called the default fund.

 

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Now we'll talk about this in more detail later,

 

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but this is the fund

 

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that your pension money is invested in if you don't actively

 

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decide to invest it anywhere else.

 

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All pension providers offer a default fund,

 

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but not all pension providers offer the same funds.

 

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So you may want to transfer

 

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because you new workplace pension provider offers a wider

 

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range of investment funds,

 

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or for example, has a range of funds that focus on ESG.

 

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So environmental, social and governance issues.

 

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Another reason why you might want to transfer

 

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to another pension provider is the options you get when

 

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it comes to retirement.

 

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Not all pensions offer the same flexibility about

 

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how you take money outta your pension

 

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and that may be important to you.

 

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So Clare, let's talk now about some

 

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of the reasons why transferring might not be a good idea

 

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or some of the things that you have

 

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to check that you wouldn't be losing.

 

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So people who were in old style pensions may have

 

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something called a guaranteed annuity rate.

 

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Now you wouldn't see this on a modern pension,

 

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but it was quite common in the past

 

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and you might have a guaranteed annuity rate if you have

 

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pensions that were set up in the 1980s

 

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and 1990s, even if you're still paying into it now.

 

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Now this is a guaranteed minimum level of income

 

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that a pension provider will pay when you start taking your

 

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pension savings and convert your pension pot into a

 

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regular income for life.

 

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This might not be something you want to lose.

 

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And we had a question from Gary who wanted to know

 

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what the pros and cons of a guaranteed annuity rate are.

 

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And Gary, one of the pros is

 

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that you can get a very attractive annuity rate,

 

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which will generally be higher

 

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with your existing provider than the rates available in the

 

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market when you retire and it could be significantly higher.

 

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The disadvantages that you have to buy an annuity.

 

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So there isn't the same flexibility.

 

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Tax free cash is another one to think about.

 

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It's the money you can take as a tax free lump sum

 

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or series of lump sums when you begin to take your pension.

 

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It's currently set at 25% of the fund.

 

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Some plans that were set up

 

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before the 1990s may allow you

 

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to take out a higher percentage of tax free cash, though

 

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in some circumstances you can transfer this

 

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benefit to your new pension.

 

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There's one other to be aware of as well.

 

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Currently you can't take money out of your pension

 

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before you're 55 unless you're seriously or terminally ill

 

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or you're working certain jobs.

 

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And this minimum wage will rise to 57 in April, 2028.

 

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It's not common, but some people will have a right

 

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to take their pension earlier than this

 

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and we'd suggest you speak to a financial advisor

 

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before transferring your pension.

 

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If this applies to you, it's important to explain

 

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that if you're currently an employee

 

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and you don't want to stay in the employer scheme,

 

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then you would need to check whether you would lose the

 

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contribution into your pension from your employer.

 

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Often employers will only pay into the workplace pension

 

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that they've set up.

 

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So by transferring away,

 

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you may be losing out on valuable employer contributions

 

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and that could result in a lower pension.

 

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And we have a related question on pension transfers.

 

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Hillary wants to know she can transfer her

 

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pension into a bank account.

 

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She says the only options she currently has are

 

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to transfer to another pension.

 

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And Hillary, I think it's worth clarifying this.

 

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So if you transfer a pension

 

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and it's sometimes called consolidating

 

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or merging your pensions,

 

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it means you move it from one pension

 

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provided to another so you can't transfer

 

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it into your bank account.

 

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If you do that, you are taking money out of your pension.

 

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And that's something that people typically do

 

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when they stop work and retire.

 

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And we'll discuss that in more detail later on.

 

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Okay, we've got a question from Nikki who says,

 

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can I carry on paying into my workplace pension

 

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after I've stopped working?

 

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Now this is a topic that crops up quite regularly.

 

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So Sarah, what's the answer?

 

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Well, there are two ways of answering this.

 

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Uh, first off, if you stop working

 

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for a particular employer,

 

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then your workplace pension will stop being

 

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linked to that employer.

 

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Your pension provider will essentially convert it into a

 

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personal pension for your money.

 

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It will still be invested and you can still pay into it.

 

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All it changes is

 

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that your employer's name will no longer appear on the

 

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information or correspondence about it

 

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and they won't pay into it.

 

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But you can continue

 

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to pay into this pension once you've stopped working for

 

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that employer perhaps

 

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'cause you're going to work for yourself

 

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or even if you've stopped working entirely

 

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and can afford to contribute to it, you don't have

 

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to be working or earning to pay money into a pension

 

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under the rules on pensions, you can pay an up to 2,880

 

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to a pension in a year if you have no earnings at all.

 

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Now you'll get tax relief, which is the top,

 

248

00:10:04.985 --> 00:10:06.805

top up from the government at 20%.

 

249

00:10:06.945 --> 00:10:08.605

Now that's the basic rate of tax

 

250

00:10:09.465 --> 00:10:12.085

and this will be added onto your pension contribution.

 

251

00:10:12.085 --> 00:10:14.725

So that means if for example, you were

 

252

00:10:14.725 --> 00:10:16.885

to pay in 2,880 pounds,

 

253

00:10:17.625 --> 00:10:20.365

you get 720 pounds in tax relief.

 

254

00:10:20.905 --> 00:10:25.885

And so 3,600 pounds would be paid into your pension in total

 

255

00:10:27.265 --> 00:10:28.725

if you were to start working,

 

256

00:10:29.025 --> 00:10:31.885

you would be automatically put into your new employer's

 

257

00:10:31.885 --> 00:10:34.605

pension scheme if you are 22 or over

 

258

00:10:34.785 --> 00:10:37.645

and earn more than 10,000 pounds a year from that job.

 

259

00:10:38.865 --> 00:10:40.325

So onto our next question

 

260

00:10:40.505 --> 00:10:42.205

and this one is from Naomi who wants to know

 

261

00:10:42.745 --> 00:10:45.845

how she can find out where her pension money is invested

 

262

00:10:46.705 --> 00:10:49.405

and if she can choose more sustainable funds.

 

263

00:10:50.585 --> 00:10:52.645

Before we answer that, I thought we'd have another poll

 

264

00:10:53.065 --> 00:10:56.125

to find out where your workplace pension money is invested.

 

265

00:10:56.145 --> 00:10:57.725

So if you have several pensions

 

266

00:10:58.145 --> 00:11:00.525

and please focus on the pension you are currently paying

 

267

00:11:00.595 --> 00:11:01.965

into, please vote in our poll.

 

268

00:11:08.705 --> 00:11:12.395

Okay, so default fund is

 

269

00:11:13.135 --> 00:11:14.315

in the lead so far

 

270

00:11:15.375 --> 00:11:17.475

And and this is interesting 'cause it is in the lead about

 

271

00:11:17.655 --> 00:11:20.795

six in 10 people, people say their pension monies in the

 

272

00:11:20.795 --> 00:11:25.075

default fund but actually sort of wider across the industry.

 

273

00:11:25.075 --> 00:11:26.715

That percentage is even higher, isn't it?

 

274

00:11:26.775 --> 00:11:28.715

So, uh, I think if anything it's a bit

 

275

00:11:28.715 --> 00:11:30.115

of a surprise that it's not high.

 

276

00:11:30.115 --> 00:11:33.835

That figure's settling as I'm speaking now down to 55%,

 

277

00:11:34.815 --> 00:11:36.435

one in five say they don't know.

 

278

00:11:37.015 --> 00:11:38.075

Um, and that's something

 

279

00:11:38.075 --> 00:11:39.195

that we find in our research as well.

 

280

00:11:39.195 --> 00:11:40.195

Yes, about the same percentage

 

281

00:11:40.735 --> 00:11:43.875

and 14% in funds recommended by the financial advisor,

 

282

00:11:44.395 --> 00:11:45.635

a similar percentage in funds

 

283

00:11:45.635 --> 00:11:47.155

that they've chosen themselves.

 

284

00:11:47.495 --> 00:11:49.035

And as Sarah mentioned earlier, then

 

285

00:11:49.035 --> 00:11:50.835

unless you actively decide where

 

286

00:11:50.835 --> 00:11:52.395

to invest your pension contributions,

 

287

00:11:52.425 --> 00:11:54.485

they will be put into a default fund.

 

288

00:11:54.825 --> 00:11:56.925

But you can choose to move your pension money

 

289

00:11:56.985 --> 00:11:58.005

to a different fund.

 

290

00:11:58.465 --> 00:12:00.285

But as most people are in a default fund,

 

291

00:12:00.535 --> 00:12:02.725

let's explain a little bit about how they work first.

 

292

00:12:03.425 --> 00:12:04.685

And this is something that Tim will

 

293

00:12:04.685 --> 00:12:05.765

wanted to know about as well.

 

294

00:12:05.905 --> 00:12:07.325

He said, what is the default fund

 

295

00:12:07.345 --> 00:12:09.565

and what is the choice of funds to invest in?

 

296

00:12:10.235 --> 00:12:13.205

Well, the makeup of these default funds varies from one

 

297

00:12:13.205 --> 00:12:14.285

pension scheme to another,

 

298

00:12:14.705 --> 00:12:17.605

but the idea is that it meets the needs of the most

 

299

00:12:17.785 --> 00:12:20.125

of the members of the workplace pension scheme.

 

300

00:12:20.625 --> 00:12:22.165

If you're happy to have your money there,

 

301

00:12:22.315 --> 00:12:23.725

then there's nothing you need to do.

 

302

00:12:24.145 --> 00:12:26.965

But if you do want to invest your pension money in something

 

303

00:12:26.965 --> 00:12:28.205

that's not the default fund

 

304

00:12:28.465 --> 00:12:30.925

and Nicki that might be a sustainable fund,

 

305

00:12:31.155 --> 00:12:34.125

then you can switch your money to other funds offered

 

306

00:12:34.145 --> 00:12:35.325

by your workplace pension.

 

307

00:12:36.235 --> 00:12:38.245

Some pension providers have more choice in

 

308

00:12:38.245 --> 00:12:39.365

sustainable funds than others.

 

309

00:12:39.385 --> 00:12:42.645

So it's worth checking. You can choose the funds on your own

 

310

00:12:42.785 --> 00:12:45.325

or you can take advice from an impartial financial advisor

 

311

00:12:46.225 --> 00:12:48.925

if you want to switch funds than you shouldn't be charged.

 

312

00:12:48.985 --> 00:12:51.245

If you're doing this in a modern workplace pension,

 

313

00:12:52.265 --> 00:12:54.965

the important thing to bear in mind is if you want to switch

 

314

00:12:54.985 --> 00:12:56.005

to a different fund

 

315

00:12:56.065 --> 00:12:58.445

or funds, is the level of risk

 

316

00:12:58.445 --> 00:12:59.925

that you're comfortable taking on

 

317

00:12:59.925 --> 00:13:02.965

and how much risk is associated with that fund or funds?

 

318

00:13:03.945 --> 00:13:06.965

And Rebecca asked, how do you find out about the risk level

 

319

00:13:06.965 --> 00:13:08.925

of different funds as she'd like to try

 

320

00:13:08.925 --> 00:13:10.685

and get a higher return on her pension?

 

321

00:13:11.475 --> 00:13:14.125

Well risk. It's a tricky concept to think about.

 

322

00:13:14.475 --> 00:13:16.165

More risk can mean more growth,

 

323

00:13:16.505 --> 00:13:19.405

but also a higher chance of your pension losing money too.

 

324

00:13:20.275 --> 00:13:22.285

When you think about risk in relation to pensions,

 

325

00:13:22.435 --> 00:13:24.125

it's also important to think about

 

326

00:13:24.305 --> 00:13:26.005

how far away you are from retiring

 

327

00:13:26.345 --> 00:13:28.085

or taking money out of your pension.

 

328

00:13:28.995 --> 00:13:30.645

It's the kind of decision a financial

 

329

00:13:30.645 --> 00:13:32.045

advisor can help you to make.

 

330

00:13:32.665 --> 00:13:34.525

You may not have a financial advisor,

 

331

00:13:34.525 --> 00:13:35.645

especially if you're younger,

 

332

00:13:36.025 --> 00:13:37.605

but we've got some articles on how

 

333

00:13:37.605 --> 00:13:38.885

to find a financial advisor

 

334

00:13:39.225 --> 00:13:41.325

and a link to some of the advisor directories

 

335

00:13:41.375 --> 00:13:43.925

where you can find one on the webinar page.

 

336

00:13:44.555 --> 00:13:46.485

There's also information on pensions

 

337

00:13:46.485 --> 00:13:48.165

and investment funds on our website

 

338

00:13:48.745 --> 00:13:51.645

and the government backed money helper website too.

 

339

00:13:52.305 --> 00:13:54.965

Now let's look at the next question, which is from Alicia.

 

340

00:13:55.105 --> 00:13:57.445

Who wants to know if she can track down an old

 

341

00:13:57.445 --> 00:13:58.805

pension from a previous job?

 

342

00:13:59.795 --> 00:14:02.485

Well first of all, let's talk about the huge number

 

343

00:14:02.485 --> 00:14:04.765

of lost pensions and why it's worth checking

 

344

00:14:04.785 --> 00:14:06.125

to see if you have a lost pension.

 

345

00:14:06.895 --> 00:14:10.685

There is a staggering 31 billion pounds in lost pensions

 

346

00:14:10.685 --> 00:14:13.285

with over 3 million pensions that people have lost track of.

 

347

00:14:14.145 --> 00:14:15.925

If you have paperwork from your old pension,

 

348

00:14:15.985 --> 00:14:17.285

it will be easy to track down.

 

349

00:14:17.285 --> 00:14:20.285

In that case, you should contact your pension provider.

 

350

00:14:20.745 --> 00:14:23.125

You'll need to give them your pension plan number if you

 

351

00:14:23.125 --> 00:14:24.965

have that national insurance number

 

352

00:14:25.145 --> 00:14:28.005

and your date of birth so they can identify you.

 

353

00:14:28.305 --> 00:14:31.365

Now, I dunno, Alicia, how much if any paperwork you have,

 

354

00:14:31.385 --> 00:14:33.165

but if you don't know who your pension is with

 

355

00:14:33.465 --> 00:14:34.885

or you don't have any paperwork,

 

356

00:14:35.235 --> 00:14:36.765

then you can use the government's free

 

357

00:14:36.765 --> 00:14:37.885

pension tracing service.

 

358

00:14:38.065 --> 00:14:39.725

Now, I know I've used this example before,

 

359

00:14:39.885 --> 00:14:42.285

but the pension tracing service, it's not like a government

 

360

00:14:42.285 --> 00:14:43.645

funded pension sniffer dog

 

361

00:14:43.645 --> 00:14:46.205

and it won't enthusiastically track down your lost

 

362

00:14:46.205 --> 00:14:47.245

pensions and bring them to you.

 

363

00:14:47.945 --> 00:14:50.685

But what it will do is give you UpToDate contact details

 

364

00:14:50.745 --> 00:14:52.220

for your old pension scheme

 

365

00:14:52.625 --> 00:14:54.165

and then you can get in touch with them.

 

366

00:14:55.385 --> 00:14:57.205

It is also worth saying that just

 

367

00:14:57.205 --> 00:14:59.125

because you had a job many years ago,

 

368

00:14:59.385 --> 00:15:00.645

you may not have a pension.

 

369

00:15:01.425 --> 00:15:03.765

It could be that you didn't join the pension

 

370

00:15:03.945 --> 00:15:06.525

or with some old pensions you had to be a member

 

371

00:15:06.585 --> 00:15:08.285

or an employee for several years

 

372

00:15:08.345 --> 00:15:10.605

before you were entitled to a pension.

 

373

00:15:11.785 --> 00:15:14.085

But if you want to track down your lost pensions,

 

374

00:15:14.355 --> 00:15:17.605

then the pension tracing services online at gov uk slash

 

375

00:15:17.795 --> 00:15:20.725

find dash pension dash contact dash details

 

376

00:15:20.725 --> 00:15:21.965

that's on the slide at the moment.

 

377

00:15:22.225 --> 00:15:25.245

So moving on, the next question is another one

 

378

00:15:25.245 --> 00:15:27.885

of the questions that we are asked very regularly.

 

379

00:15:28.025 --> 00:15:32.085

So Jason says, if I have already taken 25% out

 

380

00:15:32.085 --> 00:15:34.525

of one pension pot, does

 

381

00:15:34.525 --> 00:15:39.125

that mean I lose my 25% tax free from other pots?

 

382

00:15:39.225 --> 00:15:41.205

So Clare, I said this is a question

 

383

00:15:41.205 --> 00:15:42.645

that comes up in all our webinars

 

384

00:15:42.785 --> 00:15:45.445

and it's come up many times in these 800 questions

 

385

00:15:45.785 --> 00:15:47.205

And the answer is no.

 

386

00:15:47.345 --> 00:15:49.405

You can take your tax free cash from one pension

 

387

00:15:49.865 --> 00:15:51.485

or many different pensions,

 

388

00:15:51.555 --> 00:15:54.885

however, you can only take 25% of your pension fund

 

389

00:15:54.885 --> 00:15:57.445

or funds as tax free cash up to a maximum

 

390

00:15:57.465 --> 00:16:01.125

of 268,275 pounds.

 

391

00:16:01.505 --> 00:16:03.805

Now that's the maximum tax-free cash you can take,

 

392

00:16:04.305 --> 00:16:05.765

not the maximum pension fund,

 

393

00:16:06.345 --> 00:16:08.165

but each time you take tax free cash

 

394

00:16:08.165 --> 00:16:09.605

something else has to happen.

 

395

00:16:09.705 --> 00:16:11.245

So I think it's worth explaining some

 

396

00:16:11.245 --> 00:16:12.405

of those options here too.

 

397

00:16:13.385 --> 00:16:15.365

If you're a member of a defined benefit pension,

 

398

00:16:15.545 --> 00:16:18.805

so final salary pension, public sector pension, well

 

399

00:16:18.805 --> 00:16:20.165

that pension makes a promise

 

400

00:16:20.265 --> 00:16:23.245

to pay you a regular pension payment for the rest

 

401

00:16:23.265 --> 00:16:26.045

of your life and normally starts when you stop working.

 

402

00:16:26.675 --> 00:16:27.885

Then you usually have the choice

 

403

00:16:27.945 --> 00:16:30.485

to take some tax free cash as well as income.

 

404

00:16:30.505 --> 00:16:33.205

But if you want more monthly income, then you don't need

 

405

00:16:33.205 --> 00:16:35.085

to take all or as much tax free

 

406

00:16:35.085 --> 00:16:36.805

cash, you have to stop working.

 

407

00:16:36.985 --> 00:16:39.525

But then it's almost like carrying on getting your monthly

 

408

00:16:39.545 --> 00:16:41.325

salary except you get less of course.

 

409

00:16:41.945 --> 00:16:43.845

Or you might have a defined contribution pension.

 

410

00:16:44.145 --> 00:16:45.285

Now that's the type of pension

 

411

00:16:45.285 --> 00:16:47.205

that we've been focusing on in this webinar

 

412

00:16:47.205 --> 00:16:49.525

because that's what most people are saving into.

 

413

00:16:50.065 --> 00:16:52.565

So as a reminder, these are pensions

 

414

00:16:52.565 --> 00:16:53.925

where you build up a pot of money

 

415

00:16:54.145 --> 00:16:56.205

and then you use that money to give you an income

 

416

00:16:56.205 --> 00:16:57.365

to live on when you retire.

 

417

00:16:58.065 --> 00:16:59.885

But you can often take some money out

 

418

00:16:59.885 --> 00:17:01.845

before you stop working if you want to.

 

419

00:17:02.185 --> 00:17:05.805

So for an example, if you take out 25% as tax free cash,

 

420

00:17:06.195 --> 00:17:09.365

then you can move the other 75% into income drawdown.

 

421

00:17:09.745 --> 00:17:13.045

Now this means you wouldn't pay any additional tax income.

 

422

00:17:13.045 --> 00:17:15.485

Drawdown works a little bit like your pension pop

 

423

00:17:16.035 --> 00:17:17.165

that you'll be saving into

 

424

00:17:17.165 --> 00:17:18.565

because it's normally a combination

 

425

00:17:18.565 --> 00:17:20.005

of different investments.

 

426

00:17:20.705 --> 00:17:23.125

The main difference is that you can't pay into income

 

427

00:17:23.125 --> 00:17:25.125

drawdown, you can only pay into your pension

 

428

00:17:25.865 --> 00:17:28.365

and then you move that into income drawdown.

 

429

00:17:29.225 --> 00:17:32.405

You can take as much or as little drawdown out at a time.

 

430

00:17:32.465 --> 00:17:35.045

So you might decide to take a regular income every month,

 

431

00:17:35.185 --> 00:17:37.285

but increase that in the summer for holidays

 

432

00:17:37.285 --> 00:17:38.925

and maybe at Christmas for presents.

 

433

00:17:39.585 --> 00:17:42.205

Or you might not take any income as you're still working.

 

434

00:17:42.635 --> 00:17:44.125

It's a very flexible product.

 

435

00:17:44.905 --> 00:17:47.165

And Russell wanted to know if he wanted

 

436

00:17:47.185 --> 00:17:48.765

to take income drawdown, would he have

 

437

00:17:48.765 --> 00:17:50.770

to move his pension into a drawdown product

 

438

00:17:50.865 --> 00:17:52.445

or QT take it from his pension?

 

439

00:17:53.595 --> 00:17:56.805

Well the answer is that in order to do income drawdown,

 

440

00:17:56.825 --> 00:17:59.805

you need to move your pension money into a drawdown product.

 

441

00:18:00.545 --> 00:18:02.205

Now that doesn't necessarily mean you have

 

442

00:18:02.205 --> 00:18:04.885

to switch provider because your pension company might offer

 

443

00:18:05.045 --> 00:18:06.125

drawdown products.

 

444

00:18:06.995 --> 00:18:09.845

Another option is to take a cash lump sum

 

445

00:18:10.565 --> 00:18:13.965

directly from your pension pot for 25%

 

446

00:18:13.965 --> 00:18:15.805

of every payment you get is tax free

 

447

00:18:16.225 --> 00:18:18.525

and the other 75% is taxable.

 

448

00:18:19.305 --> 00:18:21.285

But you have to receive both

 

449

00:18:21.305 --> 00:18:23.125

of these payments at the same time.

 

450

00:18:24.225 --> 00:18:26.245

Now if you're still working, that might not be

 

451

00:18:26.245 --> 00:18:27.325

as attractive an option

 

452

00:18:27.325 --> 00:18:29.845

because you could end up paying a lot more tax

 

453

00:18:29.995 --> 00:18:33.205

because that 75% that taxable part of the money,

 

454

00:18:33.635 --> 00:18:36.565

well it's going to sit on top of any earnings that you have.

 

455

00:18:37.945 --> 00:18:39.485

You might decide to buy an annuity.

 

456

00:18:39.715 --> 00:18:41.525

This would normally be after you've stopped working

 

457

00:18:41.525 --> 00:18:45.045

because the income from an annuity would be subject to tax.

 

458

00:18:45.665 --> 00:18:46.925

If you take out an annuity,

 

459

00:18:46.985 --> 00:18:49.125

you swap the money you have in your pension pot

 

460

00:18:49.345 --> 00:18:51.445

or pots for a secure income.

 

461

00:18:52.195 --> 00:18:54.085

Most people choose to take a monthly payment,

 

462

00:18:54.385 --> 00:18:56.525

but you can have your income paid quarterly,

 

463

00:18:56.625 --> 00:18:58.085

six monthly or once a year.

 

464

00:18:58.085 --> 00:19:01.365

That's up to you. Normally you would take 25%

 

465

00:19:01.365 --> 00:19:03.085

of your pension pot is tax free cash

 

466

00:19:03.225 --> 00:19:05.805

and use the other 75% to buy an annuity.

 

467

00:19:06.265 --> 00:19:08.165

But you could use the whole pension pot

 

468

00:19:08.165 --> 00:19:09.885

to buy an annuity if you prefer.

 

469

00:19:10.905 --> 00:19:13.765

The benefit of an annuity is that it's a guaranteed amount

 

470

00:19:13.765 --> 00:19:16.005

that's paid for the rest of your life no matter

 

471

00:19:16.065 --> 00:19:18.045

how long you live and maybe your spouse

 

472

00:19:18.045 --> 00:19:20.805

or partner's life too, it can stay the same

 

473

00:19:21.305 --> 00:19:24.445

or if you pay extra it can increase in line with inflation

 

474

00:19:24.665 --> 00:19:25.765

or a set amount.

 

475

00:19:27.215 --> 00:19:29.085

We've had another question which is from Gary

 

476

00:19:29.265 --> 00:19:31.485

and he wants to know, he says,

 

477

00:19:31.505 --> 00:19:34.085

if I take out my tax free cash, does

 

478

00:19:34.085 --> 00:19:35.525

that mean I'm in draw down

 

479

00:19:35.745 --> 00:19:37.525

and can't pay more into my pension?

 

480

00:19:38.155 --> 00:19:40.565

Well Gary, you can still pay into your pension

 

481

00:19:41.145 --> 00:19:43.005

and you could pay quite a lot of money into it,

 

482

00:19:43.005 --> 00:19:44.165

but there are situations

 

483

00:19:44.165 --> 00:19:47.605

where there will be a lower limit on how much you can pay in

 

484

00:19:48.145 --> 00:19:49.645

and that's because of something called the

 

485

00:19:49.645 --> 00:19:51.045

money purchase annual allowance.

 

486

00:19:51.615 --> 00:19:52.725

Let's explain what this is.

 

487

00:19:53.665 --> 00:19:56.605

If you start to take money flexibly from a defined

 

488

00:19:57.045 --> 00:20:00.205

contribution pension pot, which normally means you've taken

 

489

00:20:00.355 --> 00:20:02.445

some income from your drawdown pot

 

490

00:20:03.185 --> 00:20:07.405

or a cash lump sum from your pension, then the amount

 

491

00:20:07.405 --> 00:20:10.045

that you can pay into your defined contribution pension

 

492

00:20:10.065 --> 00:20:11.885

or pensions without you having

 

493

00:20:11.885 --> 00:20:13.885

to pay a tax charge is reduced.

 

494

00:20:14.455 --> 00:20:15.805

Let's explain it with some figures.

 

495

00:20:17.105 --> 00:20:18.925

For most people, the amount

 

496

00:20:18.925 --> 00:20:23.125

that they can pay into pensions every tax year without a tax

 

497

00:20:23.125 --> 00:20:27.085

charge is their earnings or 60,000 pounds.

 

498

00:20:27.385 --> 00:20:28.965

Nah, that's a lot of money,

 

499

00:20:29.745 --> 00:20:31.685

but if you trigger the money purchase annual allowance,

 

500

00:20:32.115 --> 00:20:34.485

then the amount that can be paid into your pension is

 

501

00:20:34.485 --> 00:20:36.685

reduced to 10,000 pounds a year.

 

502

00:20:37.275 --> 00:20:39.525

That works out at over 800 pounds a month.

 

503

00:20:39.525 --> 00:20:40.645

That's still a lot of money,

 

504

00:20:41.185 --> 00:20:43.805

but there might be situations where you want to

 

505

00:20:43.905 --> 00:20:46.725

and can afford to pay a lot into your pension.

 

506

00:20:46.945 --> 00:20:49.885

So for example, you might have stopped work, started

 

507

00:20:49.905 --> 00:20:52.365

to take money out of your pension on top

 

508

00:20:52.365 --> 00:20:53.925

of the tax free cash lump sum

 

509

00:20:54.465 --> 00:20:56.685

and then realize that you either want to go back into work

 

510

00:20:56.825 --> 00:20:59.365

or that you have to go back to work for financial reasons.

 

511

00:21:00.515 --> 00:21:03.005

Once you're back in work, you'd only be able

 

512

00:21:03.005 --> 00:21:06.045

to contribute a maximum of 10,000 pounds a year

 

513

00:21:06.835 --> 00:21:08.885

into your defined contribution pensions.

 

514

00:21:10.225 --> 00:21:13.005

It is important to emphasize that the 10,000 pounds

 

515

00:21:13.645 --> 00:21:15.925

includes any contributions from your employer

 

516

00:21:16.105 --> 00:21:19.125

and tax relief as well as the money you pay in

 

517

00:21:19.825 --> 00:21:22.005

and you can't use any previous years.

 

518

00:21:23.105 --> 00:21:25.565

And we are seeing more and more people going back to work

 

519

00:21:25.565 --> 00:21:29.205

after they've retired due to ongoing higher living costs.

 

520

00:21:30.265 --> 00:21:32.605

If you have triggered the money purchase annual allowance,

 

521

00:21:32.785 --> 00:21:34.845

you will receive a letter from your pensions provider

 

522

00:21:35.195 --> 00:21:39.005

telling you that you can't pay any more than 10,000 pounds

 

523

00:21:39.395 --> 00:21:42.685

into all of your defined contribution pensions.

 

524

00:21:43.585 --> 00:21:46.805

So when doesn't this money purchase annual

 

525

00:21:46.805 --> 00:21:47.885

allowance apply, Clare?

 

526

00:21:48.115 --> 00:21:50.365

Well it doesn't apply if you've got a defined benefit

 

527

00:21:50.365 --> 00:21:53.645

pension like a public sector pension in a similar way.

 

528

00:21:53.645 --> 00:21:56.485

It doesn't apply if you have a defined contribution pension

 

529

00:21:56.825 --> 00:21:57.965

and take tax free cash

 

530

00:21:58.105 --> 00:22:00.965

and buy an annuity where you get that guaranteed income.

 

531

00:22:01.585 --> 00:22:04.525

It also doesn't apply if you only take tax free cash

 

532

00:22:04.825 --> 00:22:07.285

and move the rest of your pension money into drawdown.

 

533

00:22:07.625 --> 00:22:10.325

But don't take any income from drawdown perhaps

 

534

00:22:10.325 --> 00:22:11.325

because you're still working.

 

535

00:22:12.105 --> 00:22:15.205

It also doesn't apply if you take up to three small pensions

 

536

00:22:15.205 --> 00:22:16.525

of less than 10,000 pounds.

 

537

00:22:17.345 --> 00:22:19.645

And just to remind people when it does apply, well

 

538

00:22:19.805 --> 00:22:22.885

It will apply if you move your pension pot into drawdown

 

539

00:22:22.885 --> 00:22:25.045

and start to take even one pound of income.

 

540

00:22:25.345 --> 00:22:28.765

And if you take any amount of one of those cash lump sums

 

541

00:22:29.405 --> 00:22:30.405

directly from your pension.

 

542

00:22:31.785 --> 00:22:35.205

Now three weeks ago we had the budget, it confirmed

 

543

00:22:35.205 --> 00:22:39.125

that the state pension will rise by 4.1% from April, 2025.

 

544

00:22:39.785 --> 00:22:41.365

It also announced changes to the amount

 

545

00:22:41.365 --> 00:22:42.405

that carers could earn

 

546

00:22:42.425 --> 00:22:44.845

and still qualify for a benefit called carer's allowance.

 

547

00:22:45.625 --> 00:22:47.045

And there was a change announced

 

548

00:22:47.045 --> 00:22:48.245

to pensions, wasn't there Clare?

 

549

00:22:49.225 --> 00:22:51.925

The chancellor said that the inheritance tax threshold, so

 

550

00:22:51.925 --> 00:22:53.325

that's the amount you can pass on

 

551

00:22:53.325 --> 00:22:55.125

before inheritance tax is due.

 

552

00:22:55.275 --> 00:22:57.525

Well they're staying the same until 2030,

 

553

00:22:58.225 --> 00:23:02.085

but pensions will no longer be exempt from inheritance tax

 

554

00:23:02.115 --> 00:23:04.045

from April, 2027.

 

555

00:23:04.385 --> 00:23:06.365

And quite a few of you got in touch about this.

 

556

00:23:07.025 --> 00:23:09.445

Adrian wanted us to explain how the change will work.

 

557

00:23:09.475 --> 00:23:11.765

Beverly wanted to know if she should amend her will

 

558

00:23:11.985 --> 00:23:14.165

as her current will doesn't mention her pension.

 

559

00:23:14.635 --> 00:23:17.525

Well, Ross wanted to know how she could mitigate the impact

 

560

00:23:17.825 --> 00:23:21.325

of the budget changes on inheritance tax and hash.

 

561

00:23:21.325 --> 00:23:22.685

Wanted to know if it made sense

 

562

00:23:22.685 --> 00:23:25.005

to take out the tax free cash now ahead

 

563

00:23:25.005 --> 00:23:26.085

of the changes coming in.

 

564

00:23:26.785 --> 00:23:28.205

Now before we start talking about this,

 

565

00:23:28.265 --> 00:23:30.445

we should say there is no legislation on this

 

566

00:23:30.505 --> 00:23:33.765

so it could change and when we get more detail we'll be

 

567

00:23:33.845 --> 00:23:35.205

talking a lot more about it.

 

568

00:23:35.665 --> 00:23:37.645

But first I think it's important to explain

 

569

00:23:37.645 --> 00:23:40.885

how inheritance tax works, especially when passing on money

 

570

00:23:40.985 --> 00:23:43.925

to or other assets own to husbands or wives.

 

571

00:23:44.745 --> 00:23:46.845

Now this is what happens if a couple are married

 

572

00:23:47.105 --> 00:23:48.405

and resident in the uk.

 

573

00:23:48.985 --> 00:23:52.045

If on the death of the first person anything is passed on

 

574

00:23:52.045 --> 00:23:53.685

to their husband or wife, then there's no

 

575

00:23:53.685 --> 00:23:55.005

inheritance tax to pay.

 

576

00:23:55.465 --> 00:23:58.405

Now we all have an entitlement to a nil rate band

 

577

00:23:58.545 --> 00:24:01.525

of 325,000 pounds of assets

 

578

00:24:02.265 --> 00:24:05.605

and you can leave to anyone free of inheritance tax.

 

579

00:24:06.025 --> 00:24:09.445

And this is also known as the inheritance tax threshold.

 

580

00:24:10.075 --> 00:24:12.925

This can be transferred if it wasn't used when the first

 

581

00:24:12.925 --> 00:24:14.485

person of a couple died

 

582

00:24:14.515 --> 00:24:16.365

because they passed everything they owned

 

583

00:24:16.505 --> 00:24:17.765

to their husband or wife.

 

584

00:24:18.305 --> 00:24:22.885

So this means 650,000 pounds is available in the death

 

585

00:24:22.885 --> 00:24:24.965

of their surviving husband or wife

 

586

00:24:25.265 --> 00:24:27.125

before inheritance tax is paid.

 

587

00:24:28.345 --> 00:24:30.245

But if a couple aren't married

 

588

00:24:30.385 --> 00:24:33.565

but live together, the same rules don't apply.

 

589

00:24:33.865 --> 00:24:37.365

So in the first death there's only 325,000 pounds available

 

590

00:24:37.705 --> 00:24:41.085

before inheritance tax is due rather than

 

591

00:24:41.085 --> 00:24:42.485

that unlimited amount.

 

592

00:24:43.745 --> 00:24:45.525

But if you pass on a property

 

593

00:24:45.545 --> 00:24:48.925

or the proceeds are of a property, then you're also entitled

 

594

00:24:48.985 --> 00:24:51.205

to something called the Residence Nore Band.

 

595

00:24:51.675 --> 00:24:54.965

It's an extra 175,000 pounds

 

596

00:24:55.385 --> 00:24:58.805

but it only applies if direct descendants benefit

 

597

00:24:59.025 --> 00:25:00.525

and that means children including

 

598

00:25:00.525 --> 00:25:02.005

stepchildren and grandchildren.

 

599

00:25:02.905 --> 00:25:04.725

If you're married or in a civil partnership,

 

600

00:25:04.725 --> 00:25:07.125

then this can also be transferred if the first

 

601

00:25:07.125 --> 00:25:08.325

person hasn't used it.

 

602

00:25:09.065 --> 00:25:11.925

So in the second death there's potentially a maximum

 

603

00:25:12.105 --> 00:25:16.085

of 1 million pounds available inheritance tax free two times

 

604

00:25:16.135 --> 00:25:19.645

375, 320 5,000 pounds

 

605

00:25:19.865 --> 00:25:22.565

and two times 175,000 pounds.

 

606

00:25:23.785 --> 00:25:25.165

So that's how it works currently.

 

607

00:25:25.905 --> 00:25:27.725

But the change that was mentioned in the budget

 

608

00:25:27.825 --> 00:25:30.365

and that we're getting so many questions about is

 

609

00:25:30.365 --> 00:25:31.525

in relation to pensions.

 

610

00:25:31.945 --> 00:25:35.645

Now currently if I died then my defined contribution pension

 

611

00:25:35.845 --> 00:25:37.765

wouldn't be part of my estate

 

612

00:25:38.305 --> 00:25:41.165

and my estate just means all the assets I own when I die.

 

613

00:25:41.625 --> 00:25:44.325

But my defined contribution pension will be part

 

614

00:25:44.325 --> 00:25:47.245

of my estate from April, 2027.

 

615

00:25:48.105 --> 00:25:50.045

For many people this won't be an issue

 

616

00:25:50.045 --> 00:25:51.805

because even if there is any pension left,

 

617

00:25:52.065 --> 00:25:55.005

it still won't be enough for inheritance tax be paid,

 

618

00:25:55.015 --> 00:25:56.725

especially if they're in a married couple

 

619

00:25:57.185 --> 00:25:59.845

or a civil partnership due to the rules I just mentioned.

 

620

00:26:00.625 --> 00:26:01.925

But if you own your own home

 

621

00:26:02.425 --> 00:26:04.205

and when your pension's added onto this,

 

622

00:26:04.305 --> 00:26:07.445

it might be more than the amount you're able to pass on free

 

623

00:26:07.465 --> 00:26:08.525

of inheritance tax.

 

624

00:26:09.385 --> 00:26:11.165

And that would mean inheritance tax has

 

625

00:26:11.165 --> 00:26:14.005

to be paid when you die or if you've got a husband

 

626

00:26:14.065 --> 00:26:15.325

or wife when they die.

 

627

00:26:16.465 --> 00:26:17.965

It might be worth thinking about an example.

 

628

00:26:18.025 --> 00:26:20.885

Now I should say it outset, this is complicated.

 

629

00:26:21.195 --> 00:26:23.125

However, there's been quite a lot of unclear

 

630

00:26:23.145 --> 00:26:25.285

and even inaccurate information about these

 

631

00:26:25.285 --> 00:26:26.565

budget changes in the media.

 

632

00:26:26.785 --> 00:26:28.485

So we thought it was worth explaining.

 

633

00:26:29.225 --> 00:26:30.845

So here we've got Khaled and Amira.

 

634

00:26:31.255 --> 00:26:32.685

Sadly, Khaled dies first

 

635

00:26:32.745 --> 00:26:35.045

and he leaves everything to his wife Amira,

 

636

00:26:35.595 --> 00:26:37.725

then she dies in May, 2027.

 

637

00:26:38.305 --> 00:26:39.685

The law has just changed.

 

638

00:26:40.345 --> 00:26:44.525

pre-AP April, 2027, there wouldn't have been an IHT bill

 

639

00:26:44.525 --> 00:26:46.325

because it was under 1 million pounds

 

640

00:26:46.705 --> 00:26:48.925

and defined contributions weren't included.

 

641

00:26:49.225 --> 00:26:51.565

But in May, 2027 there will be.

 

642

00:26:51.945 --> 00:26:54.885

So in amira's death the total estate is worth

 

643

00:26:55.105 --> 00:26:57.285

1,350,000 pounds

 

644

00:26:57.785 --> 00:27:01.285

and that means that 350,000 pounds is subject

 

645

00:27:01.405 --> 00:27:06.045

to inheritance tax at 40%, which will be 140,000 pounds.

 

646

00:27:07.065 --> 00:27:09.325

And one other thing to mention is as far

 

647

00:27:09.325 --> 00:27:10.885

as we understand the changes,

 

648

00:27:11.185 --> 00:27:13.405

and again there's not any legislation for this,

 

649

00:27:13.695 --> 00:27:17.165

there won't be any need um, if you've to change

 

650

00:27:17.235 --> 00:27:18.605

what you've set up currently.

 

651

00:27:18.865 --> 00:27:21.245

So you won't need to add pensions to your will.

 

652

00:27:21.985 --> 00:27:24.005

So hopefully that answers Beverly's question.

 

653

00:27:24.865 --> 00:27:27.525

The pension company and solicitors will work together

 

654

00:27:27.585 --> 00:27:30.005

to sort out any inheritance tax that's due.

 

655

00:27:31.305 --> 00:27:33.725

So if you have a lot of money in pensions as well

 

656

00:27:33.725 --> 00:27:36.565

as other assets, then it might be a good idea to talk

 

657

00:27:36.565 --> 00:27:38.965

to your financial advisor if you have them

 

658

00:27:38.965 --> 00:27:41.645

to work out what's the most tax efficient way

 

659

00:27:41.645 --> 00:27:45.885

to spend money in retirement If you are 75

 

660

00:27:45.905 --> 00:27:48.685

or over when you die, there will also be income tax

 

661

00:27:48.705 --> 00:27:51.165

to be paid on any defined contribution pensions.

 

662

00:27:51.225 --> 00:27:53.525

Now this isn't new, it's not a change

 

663

00:27:53.525 --> 00:27:54.725

that was announced in the budget.

 

664

00:27:55.705 --> 00:27:58.485

You might want to think about giving away more money when

 

665

00:27:58.485 --> 00:28:01.245

you are alive, especially if you've received the pension

 

666

00:28:01.355 --> 00:28:03.845

from your husband, wife, or civil partner.

 

667

00:28:04.345 --> 00:28:07.485

And Roz, to answer your question, that could be a way

 

668

00:28:07.485 --> 00:28:09.845

to mitigate the effect of inheritance tax.

 

669

00:28:09.945 --> 00:28:12.005

So that could be giving away lump sums

 

670

00:28:12.005 --> 00:28:14.365

or paying into pensions or ISIS for adult children

 

671

00:28:14.465 --> 00:28:15.565

or younger children

 

672

00:28:16.065 --> 00:28:18.165

or grandchildren to help with their retirement

 

673

00:28:18.185 --> 00:28:20.445

or perhaps to help get them onto the property ladder.

 

674

00:28:21.425 --> 00:28:25.405

Now hash asked about taking out tax free cash now prior

 

675

00:28:25.405 --> 00:28:27.005

to the change in April, 2027.

 

676

00:28:27.745 --> 00:28:29.205

And this is something that will be worth

 

677

00:28:29.205 --> 00:28:30.685

discussing with a financial advisor.

 

678

00:28:31.345 --> 00:28:34.685

It might depend on how large your pension or pensions are

 

679

00:28:35.025 --> 00:28:36.485

and what age you are,

 

680

00:28:37.225 --> 00:28:38.485

but Clare, you alluded to this earlier,

 

681

00:28:38.715 --> 00:28:40.965

that these inheritance tax changes

 

682

00:28:41.745 --> 00:28:43.605

aren't really gonna be an issue for most people.

 

683

00:28:43.705 --> 00:28:46.325

Now we know that many people don't have enough in their

 

684

00:28:46.325 --> 00:28:48.205

pension for the lifestyle they'd like in retirement

 

685

00:28:48.425 --> 00:28:50.405

and we also know that even if one person

 

686

00:28:51.025 --> 00:28:53.405

and is normally the husband has a larger pension,

 

687

00:28:54.105 --> 00:28:55.805

if they die first and their wife

 

688

00:28:55.905 --> 00:28:58.445

or civil partner will be likely to need that pension

 

689

00:28:58.825 --> 00:29:01.285

to top up any pension savings they have.

 

690

00:29:02.505 --> 00:29:04.925

Now there's one last question which I'm not sure we can

 

691

00:29:04.925 --> 00:29:07.085

answer, but Marin wants to know

 

692

00:29:07.085 --> 00:29:08.205

what the best football club is.

 

693

00:29:08.345 --> 00:29:11.045

So Marin, I'm not sure this is what the right webinar

 

694

00:29:11.045 --> 00:29:14.045

because we know far more about pensions than we do football.

 

695

00:29:14.045 --> 00:29:15.285

But thanks for the question anyway,

 

696

00:29:15.345 --> 00:29:16.605

as I said, we did read them all.

 

697

00:29:17.105 --> 00:29:18.165

Um, that's,

 

698

00:29:18.165 --> 00:29:19.165

that's it though from the questions

 

699

00:29:19.165 --> 00:29:20.165

we've been answering so far.

 

700

00:29:20.465 --> 00:29:22.845

So we've covered a lot in the last 30 minutes or so,

 

701

00:29:22.845 --> 00:29:24.125

but we're keen to answer some

 

702

00:29:24.125 --> 00:29:25.405

of the questions that have come in today.

 

703

00:29:25.745 --> 00:29:26.965

So let's have a look.

 

704

00:29:29.495 --> 00:29:31.205

We've had loads of questions coming in, I've had

 

705

00:29:31.205 --> 00:29:32.205

A lot of questions. Um,

 

706

00:29:32.205 --> 00:29:33.245

a couple of which I think we,

 

707

00:29:33.245 --> 00:29:34.525

so we've got 'em from Sophia.

 

708

00:29:34.545 --> 00:29:37.605

So we've just talked through the inheritance tax proposals.

 

709

00:29:37.605 --> 00:29:40.325

So Sophia, I hope we've answered your question, um, how

 

710

00:29:40.325 --> 00:29:41.645

that might impact pensions.

 

711

00:29:41.645 --> 00:29:43.445

That was the question that was most upvoted,

 

712

00:29:43.465 --> 00:29:45.405

but I said we have just covered that there.

 

713

00:29:45.825 --> 00:29:48.765

Um, a question here from Clive saying with drawdown,

 

714

00:29:48.985 --> 00:29:52.285

can you take your requested amount monthly or yearly?

 

715

00:29:52.635 --> 00:29:55.565

Does the pension provider automatically take the income tax

 

716

00:29:55.745 --> 00:29:59.405

off or would Clive have to fill in an annual tax return?

 

717

00:29:59.705 --> 00:30:00.925

So Clare, what's the answer? So

 

718

00:30:00.925 --> 00:30:02.165

You normally you can choose,

 

719

00:30:02.305 --> 00:30:05.205

you could only take a certain amount once a year.

 

720

00:30:05.345 --> 00:30:07.725

You could take it kind of twice a year. It depends.

 

721

00:30:07.855 --> 00:30:09.005

Often people, um,

 

722

00:30:09.005 --> 00:30:11.645

perhaps have a defined benefit pension from

 

723

00:30:11.675 --> 00:30:13.445

From those final salary public sector type.

 

724

00:30:13.445 --> 00:30:15.445

Yeah. So they might have part of that and just be using

 

725

00:30:15.445 --> 00:30:18.445

their drawdown pension just to take out money for maybe

 

726

00:30:18.465 --> 00:30:19.965

for the holidays or things like that.

 

727

00:30:20.345 --> 00:30:23.205

But an answer to the question about tax pensions work,

 

728

00:30:23.315 --> 00:30:24.565

just like salary really.

 

729

00:30:24.745 --> 00:30:28.085

And um, the pension provider will deduct the tax

 

730

00:30:28.085 --> 00:30:30.485

that you're, they're told to buy HMRC.

 

731

00:30:30.705 --> 00:30:33.525

Now if you take a very large amount out, um, initially,

 

732

00:30:33.835 --> 00:30:36.125

then you could find yourself paying a lot more tax

 

733

00:30:36.125 --> 00:30:37.445

than you would normally pay.

 

734

00:30:37.465 --> 00:30:38.805

Now that will be sorted out.

 

735

00:30:38.805 --> 00:30:39.925

You can either claim it back

 

736

00:30:40.025 --> 00:30:42.885

or it'll come back through in kinda subsequent payments.

 

737

00:30:43.265 --> 00:30:44.565

Um, but that's

 

738

00:30:44.565 --> 00:30:47.165

because emergency rate tax is applied just like it would be

 

739

00:30:47.165 --> 00:30:49.445

applied, you know, if you didn't have a tax code

 

740

00:30:49.445 --> 00:30:50.685

and you were starting another job.

 

741

00:30:51.105 --> 00:30:52.645

And there's sort of two elements to that, aren't there

 

742

00:30:52.645 --> 00:30:54.925

because as you say, you could end up paying a lot more tax.

 

743

00:30:55.355 --> 00:30:58.605

That could be if you take out a large amount of money, then

 

744

00:30:58.605 --> 00:31:01.845

that could tip you into higher rate, a higher tax bracket.

 

745

00:31:01.945 --> 00:31:04.045

So you could end up paying higher rate tax,

 

746

00:31:04.265 --> 00:31:06.525

but then you could also pay this emergency rate tax

 

747

00:31:06.525 --> 00:31:09.685

and just explain why it is that you might end up paying

 

748

00:31:09.685 --> 00:31:12.245

that tax but then either get it back or claim it back.

 

749

00:31:12.575 --> 00:31:14.765

Right? So the way the tax system works,

 

750

00:31:15.025 --> 00:31:17.205

if you took out a ve say you wanted

 

751

00:31:17.225 --> 00:31:19.285

to take out a hundred thousand pounds, um,

 

752

00:31:19.425 --> 00:31:21.285

and you wanted to take that out one month and

 

753

00:31:21.285 --> 00:31:23.325

because you had something specific to do with that,

 

754

00:31:23.415 --> 00:31:25.685

maybe you wanted to buy a property

 

755

00:31:25.685 --> 00:31:26.805

abroad or something like that.

 

756

00:31:27.155 --> 00:31:30.165

Well if you've not, if the pension fraud hasn't been given a

 

757

00:31:30.165 --> 00:31:31.445

tax code from HMRC

 

758

00:31:31.445 --> 00:31:34.485

before, then the tax system thinks you're going

 

759

00:31:34.485 --> 00:31:38.125

to be getting a hundred thousand pounds every single month,

 

760

00:31:38.125 --> 00:31:39.285

which isn't going to happen.

 

761

00:31:39.285 --> 00:31:40.845

So some nice idea but not nice

 

762

00:31:40.845 --> 00:31:41.845

Idea. And

 

763

00:31:41.845 --> 00:31:44.965

then a lot of that money you'll be paying not just,

 

764

00:31:44.985 --> 00:31:47.445

you know, you might normally be in a basic rate taxpayer

 

765

00:31:47.445 --> 00:31:48.605

or a higher rate taxpayer,

 

766

00:31:48.605 --> 00:31:49.645

but actually, you know,

 

767

00:31:49.785 --> 00:31:52.365

in certain circumstances you could be pushed into

 

768

00:31:52.365 --> 00:31:53.525

paying additional rate tax.

 

769

00:31:53.585 --> 00:31:55.365

So sometimes if you know you want

 

770

00:31:55.365 --> 00:31:57.285

to take out a large amount, it's quite a good idea

 

771

00:31:57.285 --> 00:31:59.485

to take out a smaller amount first so

 

772

00:31:59.485 --> 00:32:01.085

that tax code is received.

 

773

00:32:01.505 --> 00:32:04.405

Um, you know, and, and that might be a, a good option,

 

774

00:32:04.405 --> 00:32:06.565

but it's a good idea to phone your pension provider.

 

775

00:32:06.565 --> 00:32:07.485

They'll be able to help you with

 

776

00:32:07.645 --> 00:32:08.565

questions like this as well.

 

777

00:32:08.935 --> 00:32:12.125

Great stuff. So we've got a question from um, Ivona

 

778

00:32:12.145 --> 00:32:16.725

who says, if I take 25% of the sum out at the age of 55,

 

779

00:32:17.275 --> 00:32:20.645

what happens with the rest of the 75% of my pension money?

 

780

00:32:21.145 --> 00:32:22.565

Can I pull that out in a few years later?

 

781

00:32:22.585 --> 00:32:24.125

You know, what are my options? So I think we've,

 

782

00:32:24.185 --> 00:32:25.045

we have talked about it

 

783

00:32:25.045 --> 00:32:26.445

might be worth just a bit of a recap. Yeah,

 

784

00:32:26.785 --> 00:32:28.725

So, so I think in this situation

 

785

00:32:28.725 --> 00:32:32.445

that Rona's speaking about then she's maybe wanting the 25%

 

786

00:32:32.465 --> 00:32:33.845

tax free cash but it's still working.

 

787

00:32:34.065 --> 00:32:36.045

So often people like to do that.

 

788

00:32:36.065 --> 00:32:37.925

You don't need to take out 25%,

 

789

00:32:37.985 --> 00:32:39.885

say you had a hundred thousand pounds, you don't have

 

790

00:32:39.885 --> 00:32:44.685

to take out um, 25%, 25,000 pounds and and move the rest

 

791

00:32:44.945 --> 00:32:46.205

and do something with that.

 

792

00:32:46.545 --> 00:32:48.565

Um, you could take out smaller amounts as well.

 

793

00:32:48.565 --> 00:32:50.605

But often people do have things they want to do.

 

794

00:32:50.825 --> 00:32:52.925

We probably all have an idea of things that we'd quite like

 

795

00:32:52.925 --> 00:32:54.605

to do when when we reach that age.

 

796

00:32:55.145 --> 00:32:57.165

So she could take that out

 

797

00:32:57.165 --> 00:32:59.405

and move the other 75% into drawdown

 

798

00:32:59.465 --> 00:33:00.965

and not touch that at all

 

799

00:33:00.985 --> 00:33:03.405

and it would just increase in value hopefully.

 

800

00:33:03.865 --> 00:33:05.765

Um, and then in years

 

801

00:33:05.785 --> 00:33:08.605

to come she could start taking a regular income

 

802

00:33:08.605 --> 00:33:09.645

so a monthly income

 

803

00:33:09.745 --> 00:33:12.245

or every few months taking income from it then.

 

804

00:33:12.345 --> 00:33:14.605

So um, it's quite different.

 

805

00:33:14.625 --> 00:33:15.725

But we've talked about some

 

806

00:33:15.925 --> 00:33:18.565

of the other options which if you're still working perhaps

 

807

00:33:18.565 --> 00:33:20.845

aren't as good an idea, maybe you wouldn't want

 

808

00:33:20.845 --> 00:33:23.805

to be buying an annuity because um, you know, that's

 

809

00:33:23.805 --> 00:33:25.045

that guaranteed income for life

 

810

00:33:25.045 --> 00:33:27.125

and that would just sit on top of your taxable income.

 

811

00:33:27.585 --> 00:33:30.085

And those cash lump sums we spoke about as well,

 

812

00:33:30.275 --> 00:33:31.485

they're perhaps if you're working

 

813

00:33:31.485 --> 00:33:35.285

because that's 75% is taxable, you have to take that.

 

814

00:33:35.305 --> 00:33:36.685

But if you're not working

 

815

00:33:37.065 --> 00:33:39.965

and you want access to that tax-free cash, then you can take

 

816

00:33:39.965 --> 00:33:41.965

that out and leave the other money

 

817

00:33:42.305 --> 00:33:44.285

and it will just stay invested.

 

818

00:33:44.625 --> 00:33:46.125

Um, and it will hopefully be growing.

 

819

00:33:46.365 --> 00:33:48.605

Although you know, obviously it's like any other investment

 

820

00:33:48.705 --> 00:33:50.445

it can go up as as well as down.

 

821

00:33:50.545 --> 00:33:54.685

But then you decide maybe you stop working when you're 65

 

822

00:33:55.025 --> 00:33:56.565

and you decide how you want

 

823

00:33:56.565 --> 00:33:58.805

to actually take the income at that point in time.

 

824

00:33:59.385 --> 00:34:01.085

And I think there's couple things you mentioned this um,

 

825

00:34:01.085 --> 00:34:02.405

Clare, but just worth spelling out

 

826

00:34:02.485 --> 00:34:04.405

'cause it's another question we get quite often, which is

 

827

00:34:04.405 --> 00:34:07.045

that you don't have to take your tax free cash in one wad

 

828

00:34:07.045 --> 00:34:09.725

of money, you can take it in several payments.

 

829

00:34:10.345 --> 00:34:12.885

And the other thing is actually the importance of getting

 

830

00:34:13.395 --> 00:34:15.925

help in terms of the decisions you make when you retire

 

831

00:34:15.945 --> 00:34:16.965

or when you want to take money.

 

832

00:34:17.065 --> 00:34:19.925

So we've mentioned a few times in this webinar about having

 

833

00:34:19.945 --> 00:34:21.485

an Im impartial financial advisor,

 

834

00:34:21.485 --> 00:34:22.645

which you may or may not have.

 

835

00:34:23.025 --> 00:34:26.045

And there are resources, um, to help you think about,

 

836

00:34:26.545 --> 00:34:28.285

you know, what a financial advisor does

 

837

00:34:28.305 --> 00:34:30.485

and also directories where you can find one.

 

838

00:34:30.865 --> 00:34:33.685

But also if you have a defined contribution pension,

 

839

00:34:33.685 --> 00:34:35.405

which is obviously what we've been discussing in the webinar

 

840

00:34:35.545 --> 00:34:38.885

and you are aged 50 or over, then you can get a free call

 

841

00:34:38.885 --> 00:34:41.365

with a government backed service called pension wise.

 

842

00:34:41.865 --> 00:34:44.525

Um, and they can't give you advice like a financial advisor

 

843

00:34:44.535 --> 00:34:47.205

would, but they can talk you through those options.

 

844

00:34:47.385 --> 00:34:48.565

So it's just worth sort

 

845

00:34:48.565 --> 00:34:49.965

of looking at what's available either

 

846

00:34:49.965 --> 00:34:52.605

with your own pension provider, a financial advisor,

 

847

00:34:53.075 --> 00:34:56.365

pension wise, or all three before you make a decision.

 

848

00:34:56.505 --> 00:34:57.805

And it's probably also worth saying

 

849

00:34:57.805 --> 00:35:01.245

that if you did take 25% of your pension pot at that time,

 

850

00:35:01.265 --> 00:35:03.765

at age 55 and move the rest to draw down,

 

851

00:35:03.765 --> 00:35:06.005

you can still be saving up into that pension again

 

852

00:35:06.425 --> 00:35:08.965

and then you'd be entitled to another 25%

 

853

00:35:08.965 --> 00:35:10.005

of what you've saved up.

 

854

00:35:10.105 --> 00:35:12.085

So say in five years time you want

 

855

00:35:12.085 --> 00:35:13.245

to access some of that again.

 

856

00:35:13.385 --> 00:35:15.685

So, um, it's not a kind of one and done

 

857

00:35:15.705 --> 00:35:18.165

and that's, you know, you've exercised that opportunity,

 

858

00:35:18.505 --> 00:35:20.125

you can still save into pensions.

 

859

00:35:20.825 --> 00:35:22.925

And we've had a question from Amit who wants to know

 

860

00:35:22.925 --> 00:35:26.045

what happens to um, our pension pot,

 

861

00:35:26.085 --> 00:35:29.965

to my pension pot if I die and eventually my wife also dies.

 

862

00:35:31.025 --> 00:35:32.765

So I mean there's many choices

 

863

00:35:32.905 --> 00:35:35.205

and defined contribution pensions that you,

 

864

00:35:35.205 --> 00:35:38.725

you can actually, um, normally you fill an expression

 

865

00:35:38.725 --> 00:35:41.765

of wish form and you would see who you would like

 

866

00:35:41.765 --> 00:35:44.885

to receive your pension when you die. That can be is a form

 

867

00:35:45.235 --> 00:35:46.805

That your pension provider will offer. Yeah,

 

868

00:35:46.805 --> 00:35:48.805

It can be called a nomination benefit form,

 

869

00:35:48.825 --> 00:35:50.205

but it's a form that you would fill in.

 

870

00:35:50.505 --> 00:35:52.725

Um, and it's really worth keeping these up to date

 

871

00:35:52.725 --> 00:35:54.805

to make sure that the pension provider knows

 

872

00:35:54.805 --> 00:35:57.245

who you would like to receive, um, the death benefits.

 

873

00:35:57.245 --> 00:36:01.165

But it can be left to your husband, wife, children, friends,

 

874

00:36:01.905 --> 00:36:03.165

um, a trust.

 

875

00:36:03.665 --> 00:36:04.965

It can't be left to animals.

 

876

00:36:04.965 --> 00:36:06.885

Though I have seen an expression of wish form

 

877

00:36:06.905 --> 00:36:08.205

and whether that happens it has

 

878

00:36:08.205 --> 00:36:10.005

to be a living individual person or a trust,

 

879

00:36:10.345 --> 00:36:12.805

but you can see whoever you would like to receive the money

 

880

00:36:13.345 --> 00:36:17.685

Now, just now pensions aren't subject to inheritance tax.

 

881

00:36:18.345 --> 00:36:21.925

Um, but with the changes happening in in 2027,

 

882

00:36:22.385 --> 00:36:24.365

it might be worth as we kind of get closer to

 

883

00:36:24.365 --> 00:36:26.205

that time thinking about what happens

 

884

00:36:26.255 --> 00:36:27.765

after people at age 75.

 

885

00:36:27.765 --> 00:36:31.805

Because under 75 when your beneficiaries, those people

 

886

00:36:31.825 --> 00:36:33.365

who you name receive the money,

 

887

00:36:33.995 --> 00:36:36.045

they don't pay any income tax.

 

888

00:36:36.705 --> 00:36:40.205

But after 2027, if you're over 70 or 75

 

889

00:36:40.205 --> 00:36:42.365

or over when you die, there'll be income tax

 

890

00:36:42.545 --> 00:36:44.005

and this, you know,

 

891

00:36:44.075 --> 00:36:47.125

potentially inheritance tax charges to pay.

 

892

00:36:47.465 --> 00:36:50.805

So I think as people get closer to age 75, if they,

 

893

00:36:50.945 --> 00:36:53.525

you know, have an advisor, it's good to, you know,

 

894

00:36:53.525 --> 00:36:55.165

and your advisor will keep you up

 

895

00:36:55.165 --> 00:36:56.325

to date with what's happening.

 

896

00:36:56.745 --> 00:37:00.845

Um, but you know, this change has meant that it might be

 

897

00:37:00.845 --> 00:37:02.285

that you want to kinda think about if you,

 

898

00:37:02.345 --> 00:37:05.205

if you had split your money maybe between your husband

 

899

00:37:05.265 --> 00:37:07.405

or wife as well as children, if you've got a lot

 

900

00:37:07.405 --> 00:37:10.165

of pension assets, then it's probably good to think about,

 

901

00:37:10.165 --> 00:37:11.565

well what actually should we do?

 

902

00:37:11.565 --> 00:37:14.685

Because maybe it's better to leave it to a husband and wife

 

903

00:37:15.115 --> 00:37:18.165

because there won't be inheritance tax to pay

 

904

00:37:18.165 --> 00:37:20.365

because I, you know, I mentioned that you can give it

 

905

00:37:20.365 --> 00:37:22.485

to your husband or wife and there's no inheritance tax

 

906

00:37:22.505 --> 00:37:24.085

to pay rather than children.

 

907

00:37:24.465 --> 00:37:25.925

So it's, there's a lot of different things

 

908

00:37:25.925 --> 00:37:28.045

to think about I think in the years to come.

 

909

00:37:28.425 --> 00:37:30.005

But you can, you know,

 

910

00:37:30.145 --> 00:37:32.885

and defined most defined contribution schemes,

 

911

00:37:32.885 --> 00:37:35.205

so kinda modern defined contribution schemes you can

 

912

00:37:35.205 --> 00:37:36.325

choose to leave it to anybody.

 

913

00:37:37.065 --> 00:37:38.965

And defined benefit schemes we've spoken about, they're,

 

914

00:37:38.965 --> 00:37:40.445

they're a bit more structured.

 

915

00:37:40.545 --> 00:37:43.565

So, um, you normally there's a a, um,

 

916

00:37:43.705 --> 00:37:47.165

you can leave a pension to your husband, wife, civil partner

 

917

00:37:47.425 --> 00:37:50.125

or you know, a dependent partner you live with

 

918

00:37:50.145 --> 00:37:52.645

or dependent children can receive a pension as well.

 

919

00:37:52.945 --> 00:37:56.165

Um, and that normally lasts if it's your your husband

 

920

00:37:56.225 --> 00:37:58.125

or wife that would last until they die.

 

921

00:37:58.425 --> 00:38:00.205

If it's children it would normally last

 

922

00:38:00.205 --> 00:38:01.965

until they were 23. Yeah,

 

923

00:38:02.585 --> 00:38:04.685

And I think it is just worth, you mentioned it there,

 

924

00:38:05.065 --> 00:38:08.525

but how important it's to fill in one of these expression

 

925

00:38:08.525 --> 00:38:10.405

of wish or nomination of beneficiary forms.

 

926

00:38:10.405 --> 00:38:13.485

They go by various names and if you have filled one

 

927

00:38:13.485 --> 00:38:16.325

and maybe you joined a pension scheme years ago, um,

 

928

00:38:16.595 --> 00:38:19.165

just check that you actually still want those people to,

 

929

00:38:19.305 --> 00:38:20.365

to receive your pension.

 

930

00:38:20.785 --> 00:38:22.525

And also, I mean you mentioned this in the webinar

 

931

00:38:22.625 --> 00:38:24.685

and you mentioned it again, but just to clarify that

 

932

00:38:24.685 --> 00:38:28.565

that income tax that somebody who you leave your pension to,

 

933

00:38:28.585 --> 00:38:31.965

if you die age 75 or over, that's not a new change.

 

934

00:38:32.395 --> 00:38:34.165

That is something that is currently the case.

 

935

00:38:34.515 --> 00:38:35.805

It's the inheritance tax,

 

936

00:38:35.825 --> 00:38:38.365

that's the change, not the income tax.

 

937

00:38:38.865 --> 00:38:40.765

So we've had, well we've got getting loads

 

938

00:38:40.765 --> 00:38:41.765

of questions coming in, which is great.

 

939

00:38:41.765 --> 00:38:44.165

So we've had one here from Francesca saying,

 

940

00:38:44.505 --> 00:38:46.125

if I'm lucky enough to be able to retire

 

941

00:38:46.125 --> 00:38:49.445

before pension age, can I access my pension at any time?

 

942

00:38:49.505 --> 00:38:51.925

And, and this is something else I think is quite often

 

943

00:38:51.925 --> 00:38:53.125

confusion about in terms of

 

944

00:38:53.665 --> 00:38:56.965

if you put a retirement date on your pension, um,

 

945

00:38:57.145 --> 00:38:58.965

and what that means if you then change your mind

 

946

00:38:58.965 --> 00:39:00.165

to retire earlier or indeed

 

947

00:39:00.165 --> 00:39:01.405

later. So what's the answer to that?

 

948

00:39:01.595 --> 00:39:03.205

Well, in a defined contribution pension,

 

949

00:39:03.275 --> 00:39:04.965

whether it's your pension pot,

 

950

00:39:05.295 --> 00:39:07.685

often when you join the pension scheme it might

 

951

00:39:07.685 --> 00:39:09.645

automatically, your employer might have set up a,

 

952

00:39:09.645 --> 00:39:12.885

a pension age, it might say 60 or 65.

 

953

00:39:13.305 --> 00:39:15.725

But actually you can access money in that pension

 

954

00:39:16.445 --> 00:39:18.565

whenever you want from age 55 currently.

 

955

00:39:18.865 --> 00:39:21.085

Um, we mentioned there's some jobs you might be able

 

956

00:39:21.085 --> 00:39:22.925

to access it earlier than that.

 

957

00:39:23.025 --> 00:39:24.605

So for example, if you're in the police

 

958

00:39:24.665 --> 00:39:26.405

or the armed forces, um,

 

959

00:39:26.905 --> 00:39:28.725

but for most people

 

960

00:39:28.725 --> 00:39:31.005

that's the earliest you can access money in a defined

 

961

00:39:31.285 --> 00:39:35.405

contribution scheme that's increasing to 57 from 2027,

 

962

00:39:35.745 --> 00:39:36.845

uh, 2028.

 

963

00:39:37.825 --> 00:39:40.125

So, um, but if you,

 

964

00:39:40.125 --> 00:39:42.445

if it's set up when you perhaps look at your app

 

965

00:39:42.545 --> 00:39:44.005

or you see your annual statement

 

966

00:39:44.005 --> 00:39:46.365

and it talks about a pension age of 65,

 

967

00:39:46.425 --> 00:39:50.205

so mine currently says 65 on it, it doesn't mean

 

968

00:39:50.205 --> 00:39:51.725

that you have to wait until you're 65.

 

969

00:39:51.785 --> 00:39:53.325

So you can change that at any point

 

970

00:39:53.325 --> 00:39:55.525

and you'll get a lot more information um,

 

971

00:39:55.665 --> 00:39:57.725

as you get older from the pension scheme.

 

972

00:39:57.745 --> 00:40:00.685

So when you know, kind of from 50 onwards you would expect

 

973

00:40:00.685 --> 00:40:02.885

to see information coming out from the pension scheme

 

974

00:40:03.055 --> 00:40:04.405

explaining different options.

 

975

00:40:04.945 --> 00:40:06.645

Um, and, and what you can do,

 

976

00:40:07.805 --> 00:40:09.325

I think it's one that, again,

 

977

00:40:09.325 --> 00:40:10.165

we covered this in the webinar,

 

978

00:40:10.305 --> 00:40:11.525

but it's really useful to clarify.

 

979

00:40:11.665 --> 00:40:14.765

So Sally, you're saying when she draws her pension,

 

980

00:40:15.145 --> 00:40:16.845

is the monthly payment taxed at source?

 

981

00:40:17.145 --> 00:40:18.925

So the answer is yes,

 

982

00:40:19.465 --> 00:40:20.645

Yes you will pay,

 

983

00:40:20.825 --> 00:40:22.365

but as I, you know, as I mentioned earlier,

 

984

00:40:22.585 --> 00:40:26.525

it works exactly the same, um, as if you were, you know,

 

985

00:40:26.625 --> 00:40:28.045

if when you're employed

 

986

00:40:28.045 --> 00:40:29.205

and you're taxed by your employer,

 

987

00:40:29.385 --> 00:40:31.405

so you'll pay the right amount of tax.

 

988

00:40:31.545 --> 00:40:34.645

So you know, if you only had a very small pension, um,

 

989

00:40:34.785 --> 00:40:36.565

and you were under state pension age,

 

990

00:40:36.755 --> 00:40:38.325

then you'd still have your personal allowance.

 

991

00:40:38.505 --> 00:40:40.005

So if it was under the personal allowance,

 

992

00:40:40.005 --> 00:40:41.085

then you might not pay tax.

 

993

00:40:41.425 --> 00:40:43.445

Um, you might be a basic rate taxpayer,

 

994

00:40:43.525 --> 00:40:46.125

a higher rate taxpayer, so you will be taxed.

 

995

00:40:46.225 --> 00:40:50.805

Um, and that's HMRC give that tax coding to um,

 

996

00:40:50.865 --> 00:40:52.245

the pension provider and they will

 

997

00:40:52.245 --> 00:40:53.445

deduct that money at source.

 

998

00:40:54.505 --> 00:40:56.805

And we've had, uh, another question is from Chris saying

 

999

00:40:56.875 --> 00:40:58.485

with drawdown, can I vary the amount

 

1000

00:40:58.565 --> 00:40:59.645

I wish to draw each year?

 

1001

00:40:59.785 --> 00:41:02.245

And as Clare is that you explain in the webinar, I mean one

 

1002

00:41:02.245 --> 00:41:04.845

of the beauties of drawdown, one of the advantages of it is

 

1003

00:41:04.845 --> 00:41:07.725

that it is flexible that you are not tied into taking a

 

1004

00:41:07.725 --> 00:41:09.805

certain amount either one year after the other

 

1005

00:41:09.865 --> 00:41:11.405

or indeed within that year.

 

1006

00:41:11.505 --> 00:41:15.565

So you know, you might decide that you want to take more as,

 

1007

00:41:15.585 --> 00:41:17.845

as Clare was saying, for holiday or for Christmas

 

1008

00:41:17.845 --> 00:41:19.805

or for anything else where you see an expense,

 

1009

00:41:19.865 --> 00:41:21.605

you think actually I need some more money now

 

1010

00:41:21.865 --> 00:41:23.245

and then you can reduce that amount.

 

1011

00:41:23.265 --> 00:41:26.685

You are not then committed to I've taken this amount

 

1012

00:41:26.685 --> 00:41:28.085

of money and that's why therefore I'm

 

1013

00:41:28.085 --> 00:41:30.365

committed for the rest of my life. Um, but obviously

 

1014

00:41:30.365 --> 00:41:32.085

That we see, yeah, we see kind of quite,

 

1015

00:41:32.545 --> 00:41:33.645

it is quite common with people

 

1016

00:41:33.645 --> 00:41:35.965

that they might take more money in the early years

 

1017

00:41:35.965 --> 00:41:39.085

of retirement because they're um, healthy, they want

 

1018

00:41:39.085 --> 00:41:40.965

to go on lots of holidays, they want

 

1019

00:41:40.965 --> 00:41:42.165

to enjoy not not working.

 

1020

00:41:42.665 --> 00:41:45.925

Um, but then perhaps they get a bit older perhaps kind

 

1021

00:41:45.925 --> 00:41:46.885

of health wise, they don't want

 

1022

00:41:46.885 --> 00:41:47.925

to travel abroad for example.

 

1023

00:41:47.985 --> 00:41:50.925

So maybe they reduce the amount of money they need, um,

 

1024

00:41:51.225 --> 00:41:54.085

but then maybe a few years later if care

 

1025

00:41:54.145 --> 00:41:55.525

for example is needed, they might need

 

1026

00:41:55.525 --> 00:41:56.645

to increase the amount they have.

 

1027

00:41:56.705 --> 00:42:00.325

So, so it's, it's very flexible like that you um,

 

1028

00:42:00.425 --> 00:42:03.245

you don't have to take the same amount out, um,

 

1029

00:42:03.385 --> 00:42:04.845

for the rest of your life for example.

 

1030

00:42:05.425 --> 00:42:06.525

But obviously I think there maybe

 

1031

00:42:06.575 --> 00:42:07.925

there are disadvantages as well.

 

1032

00:42:07.945 --> 00:42:10.325

So obviously the advantages, the flexibility,

 

1033

00:42:10.345 --> 00:42:13.605

but the disadvantage is unlike an annuity where you get

 

1034

00:42:13.605 --> 00:42:15.725

that guaranteed income and you know once you've bought it

 

1035

00:42:16.115 --> 00:42:17.605

that income will carry on being paid.

 

1036

00:42:17.605 --> 00:42:19.165

You don't get that guarantee do you

 

1037

00:42:19.165 --> 00:42:20.445

with income draw down? That's

 

1038

00:42:20.445 --> 00:42:21.445

Right. And that's where financial

 

1039

00:42:21.445 --> 00:42:22.925

advice can be invaluable

 

1040

00:42:22.925 --> 00:42:24.485

because an advisor will help you to know

 

1041

00:42:24.785 --> 00:42:27.085

how much you know you should be taking out

 

1042

00:42:27.085 --> 00:42:29.045

or how much you can take out so

 

1043

00:42:29.045 --> 00:42:30.685

that you know it will last you

 

1044

00:42:30.945 --> 00:42:32.405

and for the rest of your life.

 

1045

00:42:32.465 --> 00:42:35.725

And we're all living longer so people could be living

 

1046

00:42:35.735 --> 00:42:37.405

until they're 95, a hundred

 

1047

00:42:37.545 --> 00:42:39.085

and we, you know, we want to make sure

 

1048

00:42:39.085 --> 00:42:41.325

that there's enough money, um, to fund that,

 

1049

00:42:41.325 --> 00:42:42.325

that whole retirement.

 

1050

00:42:42.345 --> 00:42:45.765

So I think it's really useful, um, when an advisor can

 

1051

00:42:45.765 --> 00:42:48.125

of looks and they can tell you they can work it out

 

1052

00:42:48.345 --> 00:42:50.645

and they can say, well, but actually you could take out a

 

1053

00:42:50.645 --> 00:42:52.805

little bit extra every year at Christmas time

 

1054

00:42:52.825 --> 00:42:55.565

or for holidays, but this would be a good kind

 

1055

00:42:55.565 --> 00:42:57.045

of regular amount to take out.

 

1056

00:42:57.825 --> 00:42:59.605

And we've had two questions from Brendan

 

1057

00:42:59.605 --> 00:43:01.245

that are related on salary sacrifice.

 

1058

00:43:01.265 --> 00:43:03.805

So he wants to know how does salary sacrifice work

 

1059

00:43:03.905 --> 00:43:06.165

and does your company have to offer it by law?

 

1060

00:43:06.265 --> 00:43:09.205

So, um, I mean in broad terms, Brendan,

 

1061

00:43:09.205 --> 00:43:10.205

the way salary sacrifice

 

1062

00:43:10.205 --> 00:43:12.925

and it's sometimes called salary exchange works, is

 

1063

00:43:12.925 --> 00:43:14.685

that you essentially sacrifice

 

1064

00:43:14.705 --> 00:43:17.205

or exchange some of your salary in return

 

1065

00:43:17.205 --> 00:43:18.965

for your employer paying

 

1066

00:43:18.965 --> 00:43:20.765

pension contributions into your pension.

 

1067

00:43:20.785 --> 00:43:24.445

So instead of as you would normally do, you pay some uh,

 

1068

00:43:24.685 --> 00:43:25.685

contributions from your own salary

 

1069

00:43:25.785 --> 00:43:28.125

and your employer will pay some on your behalf

 

1070

00:43:28.435 --> 00:43:31.725

with salary sacrifice, you sort of exchange a portion

 

1071

00:43:31.745 --> 00:43:34.805

of your salary and then the employer makes all the

 

1072

00:43:35.085 --> 00:43:36.845

contribution sort of on your behalf really.

 

1073

00:43:37.305 --> 00:43:39.525

And what's the advantage, why would somebody,

 

1074

00:43:39.525 --> 00:43:40.525

why would a company do it

 

1075

00:43:40.585 --> 00:43:42.445

and why would somebody want to do it?

 

1076

00:43:42.795 --> 00:43:44.325

Well there's a national insurance saving.

 

1077

00:43:44.665 --> 00:43:47.445

So actually from kind of the individual's point of view,

 

1078

00:43:47.745 --> 00:43:49.605

you save national insurance, um,

 

1079

00:43:49.665 --> 00:43:51.525

and you know, we all like to save tax

 

1080

00:43:51.825 --> 00:43:54.485

but it means more money can go into your pension

 

1081

00:43:54.585 --> 00:43:56.365

but actually for the same amount you were paying

 

1082

00:43:56.365 --> 00:43:59.805

before, um, companies don't have to offer it by law,

 

1083

00:43:59.805 --> 00:44:01.725

it's just something that they can offer.

 

1084

00:44:01.725 --> 00:44:03.165

It is a contractual change.

 

1085

00:44:03.705 --> 00:44:07.285

Um, so because your headline salary is going to reduce,

 

1086

00:44:07.385 --> 00:44:09.325

but in exchange for that you're going to be getting

 

1087

00:44:09.325 --> 00:44:12.685

that pension contribution from your employer that's,

 

1088

00:44:12.705 --> 00:44:14.485

you know, your pension contribution as well.

 

1089

00:44:14.665 --> 00:44:16.085

But essentially it means

 

1090

00:44:16.085 --> 00:44:18.125

that actually more can go into your pension,

 

1091

00:44:18.495 --> 00:44:19.525

which is always good

 

1092

00:44:19.605 --> 00:44:22.805

because you know, most people have a retirement income need.

 

1093

00:44:22.805 --> 00:44:24.605

So the more that can go in, the better

 

1094

00:44:24.625 --> 00:44:26.805

and if it, it's this, you know, more goes in

 

1095

00:44:26.805 --> 00:44:28.005

for the same amount you were paying

 

1096

00:44:28.005 --> 00:44:29.565

before then that's a real bonus.

 

1097

00:44:30.705 --> 00:44:33.245

Now you mentioned earlier on about, uh,

 

1098

00:44:33.305 --> 00:44:36.645

we were talking about how you can mitigate against the, um,

 

1099

00:44:36.925 --> 00:44:38.485

proposed inheritance tax changes

 

1100

00:44:38.665 --> 00:44:40.445

and we were talking about giving away

 

1101

00:44:40.975 --> 00:44:42.005

money while you're alive.

 

1102

00:44:42.005 --> 00:44:45.805

Maybe that's sort of paying into a child or grandchild's ir

 

1103

00:44:45.805 --> 00:44:47.765

or pension to help them with their retirement

 

1104

00:44:47.765 --> 00:44:49.045

or maybe to get on the property ladder.

 

1105

00:44:49.265 --> 00:44:50.525

And so we've had a question on,

 

1106

00:44:50.545 --> 00:44:52.085

on this from Raymond who's saying,

 

1107

00:44:52.375 --> 00:44:54.645

could you talk about children's pension options and,

 

1108

00:44:54.665 --> 00:44:57.085

and how one would pay tax efficiently into them

 

1109

00:44:57.105 --> 00:44:58.685

and what are the limitations?

 

1110

00:44:58.705 --> 00:45:00.885

So we, we haven't got time to go into it in detail,

 

1111

00:45:00.905 --> 00:45:03.845

but just at a high level, what can you do if you do want

 

1112

00:45:03.845 --> 00:45:05.045

to set a pension for your child

 

1113

00:45:05.045 --> 00:45:06.725

or indeed your grandchild? So

 

1114

00:45:07.335 --> 00:45:09.525

First of all, we have to think about an adult child.

 

1115

00:45:09.825 --> 00:45:11.765

So you've got an adult child, um,

 

1116

00:45:12.065 --> 00:45:15.325

and you would like to pay into their pension for them.

 

1117

00:45:15.595 --> 00:45:18.005

Well technically you can pay into their pension

 

1118

00:45:18.005 --> 00:45:21.525

because it's, it's actually the child's tax relief

 

1119

00:45:21.525 --> 00:45:22.605

and earnings that are counted.

 

1120

00:45:22.665 --> 00:45:24.845

So say the child is earning 30,000 pounds,

 

1121

00:45:25.355 --> 00:45:27.445

theoretically there could be 30,000

 

1122

00:45:27.445 --> 00:45:28.485

pounds going into their pension.

 

1123

00:45:28.705 --> 00:45:31.165

Now probably most people aren't going to want to pay as much

 

1124

00:45:31.165 --> 00:45:33.285

as that, but it can be as much as

 

1125

00:45:33.285 --> 00:45:37.525

that now actually tax efficient, um, for the adult child

 

1126

00:45:37.525 --> 00:45:40.045

because they're going to save income tax as well.

 

1127

00:45:40.465 --> 00:45:42.845

And there are certain kind of um, you know,

 

1128

00:45:42.955 --> 00:45:45.565

some people might be caught in things like the high income

 

1129

00:45:45.565 --> 00:45:47.005

child benefit tax charge

 

1130

00:45:47.025 --> 00:45:48.845

and that's where they lose child benefit.

 

1131

00:45:49.305 --> 00:45:52.925

So there's areas where actually helping your adult child

 

1132

00:45:53.305 --> 00:45:56.325

by paying a pension contribution can really help them save

 

1133

00:45:56.325 --> 00:45:58.405

quite a lot of money as well as having

 

1134

00:45:58.405 --> 00:45:59.525

that pension in retirement.

 

1135

00:45:59.745 --> 00:46:01.045

Now Sarah you mentioned earlier

 

1136

00:46:01.055 --> 00:46:02.645

about everyone can have a pension.

 

1137

00:46:03.185 --> 00:46:05.285

So if we're talking about young grandchildren,

 

1138

00:46:05.465 --> 00:46:07.125

so under eighteens, uh,

 

1139

00:46:07.155 --> 00:46:09.405

most under eighteens don't have a lot of earnings

 

1140

00:46:09.405 --> 00:46:11.485

unless you're maybe a TV star.

 

1141

00:46:11.945 --> 00:46:14.765

Um, but if, if you don't have any earnings then you could be

 

1142

00:46:14.765 --> 00:46:17.245

paying that 2,880 pounds a year

 

1143

00:46:17.465 --> 00:46:20.565

and then the child gets the extra tax left to make it up

 

1144

00:46:20.565 --> 00:46:22.405

to 3,600 pounds.

 

1145

00:46:22.585 --> 00:46:25.165

So, you know, it's really a great idea

 

1146

00:46:25.165 --> 00:46:26.885

because you can be paying into their pension.

 

1147

00:46:27.425 --> 00:46:29.605

Um, they can't access it until their pension age,

 

1148

00:46:29.605 --> 00:46:31.205

but it's really going to help them out in the future

 

1149

00:46:31.235 --> 00:46:32.765

with their retirement income need.

 

1150

00:46:32.765 --> 00:46:37.725

And you know, things like paying into, um, ISOs to help them

 

1151

00:46:37.725 --> 00:46:39.445

with kind of lump sums to, you know,

 

1152

00:46:39.445 --> 00:46:41.205

to buy a property at some point that's,

 

1153

00:46:41.235 --> 00:46:42.605

that can also be a good idea

 

1154

00:46:42.605 --> 00:46:44.045

or a combination of these things,

 

1155

00:46:44.465 --> 00:46:46.725

but it just means that it's kind of money coming out

 

1156

00:46:46.725 --> 00:46:49.565

of your estate which might be subject

 

1157

00:46:49.565 --> 00:46:51.685

to inheritance tax at some point

 

1158

00:46:51.985 --> 00:46:53.925

and being used in a really tax efficient

 

1159

00:46:53.925 --> 00:46:55.125

way on a family basis.

 

1160

00:46:55.995 --> 00:46:58.005

Okay, just time for one or two last questions.

 

1161

00:46:58.005 --> 00:46:59.005

So we've got one here from Phil,

 

1162

00:46:59.005 --> 00:47:00.165

which I think is really interesting

 

1163

00:47:00.165 --> 00:47:04.765

and he says If I don't retire at 66, can I keep contributing

 

1164

00:47:04.765 --> 00:47:06.005

to the company pension

 

1165

00:47:06.585 --> 00:47:08.405

and will I still get employer pensions?

 

1166

00:47:08.425 --> 00:47:09.805

And Clare, I think this is really interesting

 

1167

00:47:09.805 --> 00:47:13.205

because um, there is obviously the state pension age is

 

1168

00:47:13.205 --> 00:47:16.805

currently 66 due to rise to 67 um, in the future.

 

1169

00:47:16.985 --> 00:47:20.245

But that doesn't mean you have to retire at 66,

 

1170

00:47:20.315 --> 00:47:23.405

that just means that's when you'll get your state pension if

 

1171

00:47:23.405 --> 00:47:25.485

you are sort of currently a state pension age,

 

1172

00:47:26.465 --> 00:47:27.645

the actual retirement age,

 

1173

00:47:27.645 --> 00:47:28.885

the age at which you have to stop work.

 

1174

00:47:28.940 --> 00:47:31.565

That was abolished quite a number of years ago.

 

1175

00:47:31.985 --> 00:47:35.285

But I think many people understandably get confused

 

1176

00:47:35.285 --> 00:47:37.325

and think, ah, there is a retirement age and partly

 

1177

00:47:37.445 --> 00:47:39.645

'cause often for shorthand, some people refer

 

1178

00:47:39.645 --> 00:47:41.445

to the state pension age as the retirement age.

 

1179

00:47:41.445 --> 00:47:43.485

Mm-hmm. It's not, you don't have to stop working

 

1180

00:47:43.485 --> 00:47:44.645

to get your state pension

 

1181

00:47:45.185 --> 00:47:48.205

and you don't have to stop working at 66 if you don't want

 

1182

00:47:48.205 --> 00:47:49.085

to and your employers,

 

1183

00:47:49.085 --> 00:47:50.285

you know, you're gonna carry on working.

 

1184

00:47:50.705 --> 00:47:53.365

So if you are still working at 66,

 

1185

00:47:53.705 --> 00:47:55.965

and we know again from our research there are quite a few

 

1186

00:47:55.965 --> 00:47:58.325

people who are in their late sixties,

 

1187

00:47:58.555 --> 00:47:59.925

even very early seventies

 

1188

00:47:59.945 --> 00:48:02.085

who are working maybe not full-time

 

1189

00:48:02.085 --> 00:48:05.205

but working then you can still carry on,

 

1190

00:48:06.225 --> 00:48:07.125

you can carry on working,

 

1191

00:48:07.145 --> 00:48:08.245

but what does it mean for your pension?

 

1192

00:48:08.625 --> 00:48:10.165

Are you still able to to pay in

 

1193

00:48:10.165 --> 00:48:11.165

and does your employer have to pay

 

1194

00:48:11.165 --> 00:48:12.165

In as well? Yeah. Um, your

 

1195

00:48:12.165 --> 00:48:13.765

employer will be paying in, um,

 

1196

00:48:13.985 --> 00:48:16.805

and it depends how old you keep on working to,

 

1197

00:48:16.805 --> 00:48:18.325

but 66, you know,

 

1198

00:48:18.325 --> 00:48:19.965

definitely your employer will be paying in,

 

1199

00:48:19.985 --> 00:48:21.285

as you mentioned, the kind of age

 

1200

00:48:21.285 --> 00:48:22.365

where people had to retire.

 

1201

00:48:22.365 --> 00:48:23.365

Well it's disappeared.

 

1202

00:48:23.785 --> 00:48:26.645

Um, so there are a lot of people we're seeing working.

 

1203

00:48:27.065 --> 00:48:29.645

One thing I would mention that if you are receiving your

 

1204

00:48:29.645 --> 00:48:32.285

state pension, you know, it's, it might be worth

 

1205

00:48:32.965 --> 00:48:35.325

reducing your hours slightly because remember that um,

 

1206

00:48:35.325 --> 00:48:37.925

your earnings, the state pension will kind of eat up some

 

1207

00:48:37.925 --> 00:48:39.245

of your personal allowance, quite a lot

 

1208

00:48:39.245 --> 00:48:40.285

of your personal loans now

 

1209

00:48:40.385 --> 00:48:42.045

and your earnings will sit on top of that.

 

1210

00:48:42.185 --> 00:48:44.245

So you could be paying a lot more tax.

 

1211

00:48:44.785 --> 00:48:46.845

So that's one to think about when you kind

 

1212

00:48:46.845 --> 00:48:48.245

of receive your state pension.

 

1213

00:48:48.825 --> 00:48:50.765

Um, actually you need to think about

 

1214

00:48:50.765 --> 00:48:52.205

what the tax situation will be,

 

1215

00:48:52.225 --> 00:48:53.445

but um, you know,

 

1216

00:48:53.465 --> 00:48:55.925

at 66 your employer will still be paying

 

1217

00:48:55.925 --> 00:48:56.965

into your pension as well.

 

1218

00:48:57.445 --> 00:48:59.125

I think maybe just one other thing that possibly

 

1219

00:48:59.125 --> 00:49:00.245

is causing some confusion.

 

1220

00:49:00.245 --> 00:49:02.965

So earlier on in the webinar we were talking about, um,

 

1221

00:49:02.965 --> 00:49:05.605

being automatically enrolled if you move to a new employer

 

1222

00:49:05.985 --> 00:49:08.645

as long as you age between 22 and state pension age

 

1223

00:49:08.865 --> 00:49:10.925

and you earn at least 10,000 pounds in that job,

 

1224

00:49:10.945 --> 00:49:12.885

but that's actually being enrolled.

 

1225

00:49:12.985 --> 00:49:14.085

So once you are in Yes.

 

1226

00:49:14.105 --> 00:49:15.405

As, um, as fillers, once,

 

1227

00:49:15.405 --> 00:49:17.245

once you're in there mm-Hmm that doesn't matter.

 

1228

00:49:17.585 --> 00:49:20.005

So project's worth clarifying. So well great.

 

1229

00:49:20.045 --> 00:49:23.165

I think that's actually, um, all we have time for, but

 

1230

00:49:23.165 --> 00:49:27.285

before we go it's just time for our last poll, uh, which is

 

1231

00:49:27.875 --> 00:49:29.125

what topics would you like

 

1232

00:49:29.125 --> 00:49:31.085

to see us cover in future webinars?

 

1233

00:49:31.505 --> 00:49:32.725

Please vote in our poll.

 

1234

00:49:32.725 --> 00:49:34.125

We're very keen to get your thoughts.

 

1235

00:49:35.445 --> 00:49:35.565

I,

 

1236

00:49:40.705 --> 00:49:42.875

Okay, so, um, we're getting a

 

1237

00:49:42.875 --> 00:49:43.955

clear favorite here, aren't we?

 

1238

00:49:43.955 --> 00:49:45.955

Again, how much do you need for a good retirement?

 

1239

00:49:45.955 --> 00:49:48.675

So over half of people, as soon as I start saying this,

 

1240

00:49:48.675 --> 00:49:49.915

of course the percentages change,

 

1241

00:49:49.935 --> 00:49:52.275

but over half of people have voted for that.

 

1242

00:49:52.275 --> 00:49:54.075

One, how to make your money last in retirement a quarter,

 

1243

00:49:54.585 --> 00:49:56.475

your pension death benefits, that's also coming up.

 

1244

00:49:56.475 --> 00:49:58.715

And then tax your end, um, as well.

 

1245

00:49:58.815 --> 00:50:00.035

So that's really helpful.

 

1246

00:50:00.315 --> 00:50:02.475

'cause every, every time we do these polls, we do, you know,

 

1247

00:50:02.475 --> 00:50:04.355

we do look at the results and we do, um,

 

1248

00:50:04.385 --> 00:50:05.835

take them into account and try

 

1249

00:50:05.835 --> 00:50:07.875

and do webinars that we know you're interested in.

 

1250

00:50:09.255 --> 00:50:10.555

And that's all we've got time for.

 

1251

00:50:10.575 --> 00:50:12.875

So we're going to be sharing a link of the, um, recording

 

1252

00:50:12.875 --> 00:50:14.275

of the webinar in the next few days.

 

1253

00:50:14.275 --> 00:50:16.075

But in the meantime, thank you.

 

1254

00:50:16.735 --> 00:50:18.595

Um, uh, thanks for joining us today.

 

1255

00:50:18.735 --> 00:50:21.475

Thanks for joining us.