The following’s a transcript of a bonus episode of The Pension Confident Podcast - Pension tips from the experts. You can listen to this bonus episode or scroll on to read the conversation.
PHILIPPA: Hello and welcome to another bonus episode of The Pension Confident Podcast. We know how complex pensions can seem, so this time, we’ve rounded up 14 pension saving tips from the podcast so far. So, wondering how inflation and the cost of living impacts your pension, or what to do about your pension while you’re taking parental leave? It’s all here, plus lots more.
Just remember that anything discussed should not be regarded as financial advice. And when investing your capital is at risk.
Remember to follow and subscribe wherever you listen to your podcasts so you never miss an upcoming episode. Happy listening!
And let’s kick off with Damien Fahy from Money to the Masses with our very first tip of the series.
DAMIEN: OK, first of all, I’d say ‘engage with Auto-Enrolment‘, because as you said, it’s free money. And, I think, ‘you need to start now’, is the other tip. So, it isn’t about how much you put in, it’s the impact of starting to put in. It’s just the start, don’t think ‘that’s too little’. I think that’s the second one. And the third one is to ‘engage with it, manage it, look where your pension is invested, and make life choices about it’. Whether it’s about the risk or that you want to make a difference with your pension. So don’t just ignore it and think that it’s something that someone else will look after for you. That’s not the case if you’ve not got a financial advisor, which most people don’t. I think if you do all three of those, you’re probably going to be in a good place.
PHILIPPA: Here’s PensionBee’s own Martin Parzonka in our second episode, on the potential of your pension.
MARTIN: So, by putting your money into a pension pot, you can choose your investments and be invested in a range of assets, which could see rates of return above inflation. Now, past performance is no guarantee of future success. But it’s important to take these things into account.
PHILIPPA: PensionBee CEO; Romi Savova recorded with us in episode three. She shared her thoughts on what to do with your pension when you’re on parental leave.
ROMI: I think for women in particular, the most important thing while you’re off, is to keep the pension contributions going. Because again, those small differences - they seem insignificant at the time, but they become big problems later on because of the way that compound interest works.
PHILIPPA: Another parental leave discussion in episode 14. This time I was talking to Ellie Austin-Williams, Founder of This Girl Talks Money.
ELLIE: I’ve seen suggestions, which I think are great, suggesting that male partners could top up the pension contributions of the female partner while they’re off work, to make sure they’re not missing out.
PHILIPPA: We’ve talked about this on the podcast before. It’s an excellent idea and pretty much no one does it, do they? The higher earner, the person who’s still working should be paying pension contributions for the other person and why not?
ELLIE: Yeah.
PHILIPPA: Here’s Rachael Oku, PensionBee’s VP Brand and Communications in episode four on the advantages that pensions have over traditional bank savings, when it comes to passing on assets to your loved ones.
RACHAEL: There are also incentives when it comes to passing on your pension. So, with a pension, if you pass away before you’re 75, your beneficiaries can, in most circumstances, take that tax-free. And then if you’re over 75, your beneficiaries will pay tax at the nominal rate.
PHILIPPA: Being a personal finance podcast, we’ve obviously talked a lot about the cost of living crisis over the last year and a half. Here’s PensionBee’s Clare Reilly in episode five on how to think about savings in tough times like these.
CLARE: I mean, look, it’s so important to invest, if you can. Investments are going to grow faster than salaries. And at this time when we’re talking about all the measures the government didn’t do, you can still get tax relief on pension contributions and that’s still free money from the government.
PHILIPPA: OK, so enough about putting money away. Here’s episode 11 and Mark Smith, Head of Media Relations at the Pensions and Lifetime Savings Association (PLSA) on when to start taking your pension money out.
MARK: So, first and foremost you have to be 55 (57 from 2028) to start withdrawing from your pension. It’s not always advisable to start withdrawing at 55 because, if you want to carry on working and contributing to your pension, then you’re limited at that point. So first thing’s first, make sure you actually need the money, or that you actually want to start accessing the money.
PHILIPPA: So, don’t take it just because you can?
MARK: Don’t take it just because you can.
PHILIPPA: And again, on how to maximise that pot - here’s Mark Smith from the PLSA on episode 11.
MARK: It might be that you’re older, you’re closer to retiring and at that point you can take 25% of your pension tax-free. It’s a really good idea to pay off things like debt at that point. Paying off your mortgage might be a good way to set yourself up for a decent retirement.
PHILIPPA: PensionBee’s Clare Reilly talked in episode 16 about the need for an easy way to move your pension pot around seamlessly.
CLARE: PensionBee has, for many years, been calling for a pension switch guarantee to give people the ability to pick up their money and move it around the system. The way that you can do with current accounts or utilities. You’ve a right to move that money to another regulated provider. So keep trying, move the money and move it again if you find that the provider that you’ve moved to isn’t offering you the choice or the type of investments that you want.
PHILIPPA: In our first podcast recorded in front of a live audience, episode 17 was an expert panel debate on the relative merits of pensions vs. ISAs. It’s getting loads of downloads. Here’s a selection of some of the most useful moments from Money to the Masses Founder; Damien Fahy, the Financial Times‘ Claer Barrett and PensionBee’s Director (VP) Public Affairs, Becky O’Connor.
DAMIEN: Whatever you’re putting away, whether it’s into a pension or other savings, it’s not an on/off thing. You can dial down and dial back up. And I’ve used that analogy before - it shouldn’t be like a light switch, not on/off, but like a dimmer switch. So you can turn it down when you need to, but then turn it back up at a later point. If you turn it off, it becomes much more difficult to turn it back on. It’s a mental thing.
CLAER: I think that everybody needs to take a longer term view of how long their money’s gonna be invested for, regardless of the tax wrapper that it’s in. Whether that’s a pension or an ISA. What’s becoming the norm nowadays is that you don’t take all of your money out of the stock market at the point at which you retire. You leave it invested and you manage those investments and hope that you can generate enough income to live off those investments for longer and not exhaust them.
BECKY: I’d just say though, that financial advice comes at a cost and it’s one that a lot of people can’t actually manage even with the pension pot size that they might have when approaching retirement. So there’s something called Pension Wise, which is a free government guidance service, which is actually really good. It’s not full-on, very detailed financial advice that you’d expect from an Independent Financial Advisor, but it does go into some detail and it’s personalised.
CLAER: You can leave anyone your pension. It doesn’t have to be somebody you’re married to. My pension will go seven ways between my three stepchildren, and my four nieces and nephews. If you want the money to go to them, there are massive tax advantages in passing it to them. In some cases, if you die before the age of 75, the money will go to them tax-free or they’ll only have to pay the marginal rate of tax that they pay when they access the pot.
I’d say with both pensions and ISAs, you’re getting the most bang for your bucks. I’ve tried to explain pensions before to a group of school children, like a supermarket meal deal. So, you’re putting in the sandwich but then you’re getting the free money, which is the contribution from your employer, and that’s the drink. And then, because you’re not paying tax on any of that money and it can grow tax-free, that’s the packet of crisps that the government’s throwing in.
PHILIPPA: That’s it for this episode. Hope you found some useful takeaways to mull over. See you next time.
Risk warning
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.
