The following’s a transcript of a bonus episode of The Pension Confident Podcast - personal finance tips from the experts part two. You can listen to this bonus episode here or scroll on to read the conversation.
PHILIPPA: Hello and welcome to another bonus episode of The Pension Confident Podcast. In this second special we’ve got more personal finance tips from the wonderful experts who have appeared as guests on the series so far. Keep listening for their best tips on managing your finances - whether you’re self-employed, starting a family or looking to get on the housing ladder.
Just remember that anything discussed on this podcast should not be regarded as financial advice or legal advice. When investing your capital is at risk.
And stay up-to-date by following and subscribing to the series wherever you find your podcasts. Happy listening!
EMILIE: So, I think when you’re planning for a family, it’s really important to have this conversation around, ‘OK, who’s going to take time off and when?’ Plan a bit for your finances, what’s going to happen. Because very often women do this on their own and they’re going to look at, “OK, how much time am I going to be off work? How much will childcare cost?”, and they’ll compare this to their own salary. They’ll make a decision and say, “OK, I’m not going to go back”. So, I think it’s trying to look at joint incomes, and how much you can pay for childcare, and see childcare more as an investment rather than a cost. But I think it’s really important to have these difficult conversations beforehand.
PETER: I always say this; what’s gonna help you sleep better at night? If, like Damien said, you’re at this point where, actually, the roof over your head’s the priority, then you have to make a tough decision. And it may be that the right decision at the time is to turn it off and stop contributing to your workplace pension. But you have to be mindful that you’ve got to turn it back on again.
PHILIPPA: Here’s Claer Barrett; The Financial Times (FT) Consumer Editor on self-employment in the same episode, number 17.
CLAER: Say you’re paid £1,000 for a job, then you’d probably wanna put at least 20-25% of that money away for the tax bill that’s eventually gonna arise. That trips up a lot of people. But then maybe put another 10%, as Damien was saying, into an accessible place where you can reach it. Maybe an ISA, maybe premium bonds - you could win a tax-free prize while it’s sitting in there. But then, if you can live without it for a year, then it’ll give you more confidence that you could actually lock it up into a pension, or invest it for the long term using a Stocks and Shares ISA.
PHILIPPA: Peter Komolafe again talking about the tax benefits of ISAs.
PETER: ISAs are great, because we’re talking about how ISAs and pensions can converge and interact with each other. One of the great things about ISAs and why people often get attracted to them is because you get the flexibility that comes with it. You can access the money as and when you want to, right? But, when you think about using an ISA to generate an income, it’s also tax-free. So you’ve got that added benefit as well, unlike pensions where you’ve got to pay income tax on it.
PHILIPPA: One of my favourites; Ellie Austin-Williams from This Girl Talks Money, and Paul Infield; a Barrister and Spokesperson for legal assistance charity, Advocate, in episode 14 on paying attention to the small print when you buy a home with someone else.
ELLIE: Even from a very basic perspective, if you’re buying the property together and discussing whether you’re buying as tenants in common or as joint tenants - it’s a big decision. Especially if you’re putting in different amounts of money towards the property, then you might want to discuss whether you should look at being tenants in common so that you’re represented proportionally rather than down the middle.
PAUL: Can I just explain the difference between those two?
PAUL: Joint tenancy and tenancy in common have nothing to do with renting, by the way, even though the word tenancy appears in both. A joint tenancy means, effectively, that you both own the whole thing. Though people sometimes prefer to think of it as a 50-50 split. And you can only have two people in a joint tenancy. Tenancy in common is when you own in different proportions. So as you say, if you’ve put in different amounts of money, you can actually set out - normally in a declaration of trust, when you buy the property - who owns what. That’s one way of protecting yourself, but that’s a conversation to have when you’re buying the property.
PHILIPPA: And PensionBee’s own Head of Content; Brooke Day analysing her own financial personality in episode 13.
BROOKE: I always kept talking about wanting to buy a house in London, I really wanted to live in London. But it felt like this pie in the sky dream and I would say, ‘oh I’m single, I’m never going to do that’. I was just sort of kicking the can and the responsibility down the line. When I meet someone, that’s when I’ll take this goal seriously and I’ll start saving. And I remember just one day having a word with myself saying, ‘This is ridiculous. Why am I pinning this moment that I want on waiting for somebody else or something to happen, that may or may never happen?’ Then I went and opened a Help-to-Buy ISA and I started to take savings seriously. I had this end goal in mind, that I was gonna achieve. Knowing what I was saving for and that I was the one responsible really empowered me to make it happen.
SCOTT: That’s why I always start this type of conversation with - you must have a budget. You must know what your finances look like - what’s coming in, what’s going out, what’s left afterwards, if anything? And for those that are on lower incomes, if there’s nothing left, you need to go and claim every single benefit you possibly can.
PHILIPPA: And finally, Claer Barrett from the FT again in episode 17 with some words of warning about taking cash out of your Lifetime ISA.
CLAER: If you want to crack open your Lifetime ISA and get the money out - you can, unlike a pension. But you’ll lose that bonus and you’ll also lose some of the money that you put in as a penalty. So, you have to be absolutely sure that you can live without it.
PHILIPPA: That’s it for this episode. I hope you found some useful financial nuggets. See you next time!
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.