WEBVTT - How coronavirus might impact your retirement income 0:00:05.019 --> 0:00:09.749 Hello, I'm Shirley Ballas and welcome to Rewirement, the retirement 0:00:09.750 --> 0:00:14.130 podcast from Legal & General. We'd always planned to launch our 0:00:14.130 --> 0:00:17.770 series today, but whilst we've been recording, just like everyone 0:00:17.770 --> 0:00:20.630 else, we've had to find new ways of doing things 0:00:20.630 --> 0:00:24.880 with the coronavirus outbreak. In our new series, we'll still 0:00:24.880 --> 0:00:27.960 be exploring what it means to retire in today's world 0:00:28.260 --> 0:00:32.130 and how this can be an opportunity to reset, reinvent 0:00:32.339 --> 0:00:38.129 and rewire. Planning for retirement is a longterm game with 0:00:38.129 --> 0:00:41.129 great rewards at the end of it. And making the 0:00:41.129 --> 0:00:45.019 move from work to retirement is not something anyone likes 0:00:45.019 --> 0:00:48.069 to do with a bump. But for many, the current 0:00:48.070 --> 0:00:54.570 coronavirus pandemic has caused uncertainty and raised unexpected questions. There 0:00:54.570 --> 0:00:57.469 have been plenty of headlines about changes in the stock market 0:00:57.980 --> 0:01:01.529 and pension values, but it's time to cut through the 0:01:01.529 --> 0:01:04.869 worry and take a measured look at what really is 0:01:04.869 --> 0:01:07.720 going on. I want to help you feel in control 0:01:07.720 --> 0:01:11.240 of the future and put your mind and mine at 0:01:11.240 --> 0:01:14.569 rest. So, we've made this special episode to help you 0:01:14.569 --> 0:01:18.139 deal with the urgent questions many of you are asking. 0:01:19.300 --> 0:01:22.429 I'm joined by the experts from Legal & General. We have 0:01:22.429 --> 0:01:28.100 Chris Knight, CEO of retail retirement, and Sarah McLeish CEO 0:01:28.100 --> 0:01:32.520 of financial advice. And Holly Mackay of Boring Money is 0:01:32.520 --> 0:01:36.270 here to make sense of it all too. How are 0:01:36.270 --> 0:01:38.460 you all adapting to the situation? 0:01:39.830 --> 0:01:40.990 As best we can, I think. 0:01:41.630 --> 0:01:43.630 I've got two young children in the house, it's the 0:01:43.630 --> 0:01:45.959 homeschooling that's driving me nuts. 0:01:46.060 --> 0:01:48.910 Yep. Same here. I have a five and a seven year 0:01:48.910 --> 0:01:52.240 old at home. So, the school are doing a brilliant 0:01:52.240 --> 0:01:56.390 job, but like every other family you just have to 0:01:56.390 --> 0:02:02.400 do your best and multitasking across teaching, cleaning, running businesses. 0:02:02.400 --> 0:02:05.659 And I've started up a hairdressing salon now, as well. 0:02:05.660 --> 0:02:09.030 So, COVID Cuts, we call it. 0:02:09.700 --> 0:02:12.820 Well, it can't last forever. Chris and Sarah, before we 0:02:12.820 --> 0:02:16.579 get into all the detail. What's your view to anyone 0:02:16.579 --> 0:02:19.609 looking at a change in their pension right now? 0:02:19.739 --> 0:02:23.250 Oh, Shirley, look, this Coronavirus has filled our life with 0:02:23.250 --> 0:02:27.519 a lot of uncertainty and angst. People might have looked 0:02:27.519 --> 0:02:29.769 at their pension funds and seen a bit of a 0:02:29.769 --> 0:02:32.419 drop. And that's not a fun thing to have to 0:02:32.419 --> 0:02:35.790 do, obviously not to have to see. You might have 0:02:35.790 --> 0:02:39.320 quite a few different types of pension arrangements and you 0:02:39.320 --> 0:02:42.720 probably need to get them all together in one place, 0:02:42.720 --> 0:02:44.989 and have a look, and see what they really are. 0:02:45.620 --> 0:02:48.900 Get all the facts because some pensions come with really 0:02:48.900 --> 0:02:53.709 valuable, important guarantees, for example. And you should really think 0:02:53.709 --> 0:02:56.489 through and take advice, get yourself informed on what to do 0:02:56.489 --> 0:03:01.970 with those, especially. You don't have to necessarily do anything. 0:03:02.400 --> 0:03:05.870 I'm not saying stop, but take your time. Think about 0:03:05.870 --> 0:03:09.100 what's important to you in your life and get yourself 0:03:09.149 --> 0:03:12.299 informed before you act. And as we always say, you 0:03:12.299 --> 0:03:14.769 must shop around to get the best deal for yourself. 0:03:15.470 --> 0:03:19.590 Well, I agree with Chris. I mean, pensions and most 0:03:19.590 --> 0:03:22.989 investments for that matter, they're designed for the long term 0:03:22.989 --> 0:03:26.559 for a marathon, not a sprint. So, if you can 0:03:26.560 --> 0:03:31.040 postpone making any big decisions about your pension savings, then 0:03:31.570 --> 0:03:33.799 that's got to be a good thing. But if you 0:03:33.799 --> 0:03:37.160 do need to access your... understand your options or access 0:03:37.160 --> 0:03:41.670 your pension more urgently, then I'd really recommend speaking to 0:03:41.670 --> 0:03:45.890 a financial advisor. If you don't have one, ask your 0:03:45.890 --> 0:03:52.410 friends, if anyone can recommend one or failing that, visit unbiased. co. 0:03:52.610 --> 0:03:55.980 uk, which is a website that shows all of the 0:03:56.040 --> 0:03:58.650 regulated advisors in your local area. 0:03:59.140 --> 0:04:02.469 We're being asked lots of questions around retirement planning at 0:04:02.470 --> 0:04:05.610 the moment. I'm going to sort these questions so we 0:04:05.610 --> 0:04:09.499 can talk about everyone's different needs. We've got people asking 0:04:09.500 --> 0:04:13.840 questions who are post retirement, people just about to retire, 0:04:14.130 --> 0:04:17.429 and people who are a little way off. Let's quickly 0:04:17.430 --> 0:04:20.670 explain some of the terms we're going to be discussing today. 0:04:21.170 --> 0:04:26.150 Chris, what are dividends, drawdowns, and annuities? 0:04:27.450 --> 0:04:31.960 Thanks, Shirley. These things can all be a bit confusing to get separated out 0:04:32.409 --> 0:04:36.270 in one's mind. Now look, a dividend is generally an 0:04:36.270 --> 0:04:38.770 income that you receive if you're the owner of a 0:04:38.770 --> 0:04:43.010 share in a company. Equity, if you like. And most 0:04:43.010 --> 0:04:46.950 companies pay their dividends out once or twice a year, 0:04:47.400 --> 0:04:51.299 and most companies aim most of the time to maintain 0:04:51.300 --> 0:04:54.510 those dividends or even grow them over time. But, they're 0:04:54.510 --> 0:04:57.679 not guaranteed and the dividends can be cut or even, 0:04:57.960 --> 0:05:00.069 or even stopped. And we've seen quite a lot of 0:05:00.070 --> 0:05:05.460 that from companies in this current crisis. Now, drawdown, that's 0:05:05.460 --> 0:05:09.010 a bit different. That's when you create income for yourself 0:05:09.010 --> 0:05:12.570 by drawing down money from your pension fund. Usually, that's 0:05:12.750 --> 0:05:15.820 when you're in retirement and its great flexibility because you 0:05:15.820 --> 0:05:18.630 can draw down how much you want when you want. 0:05:18.690 --> 0:05:20.770 But, of course, obviously once you've drawn it, once it's 0:05:20.770 --> 0:05:25.869 gone, it's gone. With drawdown, usually sort of benefit or 0:05:26.469 --> 0:05:29.150 peril from the ups and downs of the market. Obviously 0:05:29.150 --> 0:05:32.779 when it's up, it's good and it feels good. But, 0:05:32.779 --> 0:05:35.979 when it falls, then the amount that you can take 0:05:35.979 --> 0:05:37.659 or you might be able to take as future income 0:05:37.659 --> 0:05:40.669 from that pot as a future drawdown income can reduce, 0:05:40.669 --> 0:05:43.609 as well. Annuity's usually an income that you buy from 0:05:43.609 --> 0:05:47.330 an insurance company and the most common type of annuity 0:05:47.620 --> 0:05:50.770 is one that pays you every month or every year 0:05:51.169 --> 0:05:54.789 for as long as you live. It's not flexible, but 0:05:54.789 --> 0:05:58.950 it is guaranteed. It's guaranteed both by insurance company itself, 0:05:59.479 --> 0:06:02.799 and there's a statutory backup guarantee behind that, as well. 0:06:03.029 --> 0:06:05.659 You can buy an annuity that pays an income to 0:06:05.659 --> 0:06:08.960 your family, your loved ones, even after you've passed away. 0:06:09.440 --> 0:06:11.580 And you can also get what we call fixed term 0:06:11.580 --> 0:06:14.270 annuities. That's a product which pays an income for a period 0:06:14.270 --> 0:06:16.570 of time, and then maybe a lump sum at the end. 0:06:16.800 --> 0:06:20.210 That is a bit more flexible with respect to sort of encashment 0:06:20.210 --> 0:06:23.560 options. Then, you can change your mind, do something else with the 0:06:23.560 --> 0:06:26.599 money that you get at the end of the end. So, hopefully, that's a 0:06:26.890 --> 0:06:30.099 good separation of those three different, important concepts. 0:06:30.109 --> 0:06:34.379 Okay. Sarah, what are lifetime mortgages? 0:06:35.339 --> 0:06:41.359 Yes. So, lifetime mortgages a much misunderstood term. Lifetime mortgages 0:06:41.430 --> 0:06:45.870 are a type of equity release. So, these are products 0:06:45.870 --> 0:06:49.559 that allow you to release tax- free cash or equity 0:06:50.080 --> 0:06:52.869 from your home without having to move out of it. 0:06:53.490 --> 0:06:56.250 So, you can take that cash or that's equity as 0:06:56.250 --> 0:06:59.010 one big lump sum, or you can take it as 0:06:59.010 --> 0:07:01.760 a series of lump sums as and when it suits 0:07:01.760 --> 0:07:03.979 you. So, you may wish to take one lump sum 0:07:03.979 --> 0:07:06.839 now to buy a new car, another lump sum in 0:07:06.839 --> 0:07:09.870 two or three years time to do your kitchen, and 0:07:09.870 --> 0:07:12.480 so on. With some of the products now on the 0:07:12.480 --> 0:07:15.730 market, you can also take that cash or equity as 0:07:15.800 --> 0:07:18.360 a monthly income. So, you could top up your monthly 0:07:18.480 --> 0:07:23.989 income by say 150 pounds, 200 pounds a month. These 0:07:23.989 --> 0:07:29.080 lifetime mortgages or activity schemes, they're usually repaid from the 0:07:29.080 --> 0:07:33.830 sale of your home after the last borrower or the 0:07:33.830 --> 0:07:36.970 last member of a couple or a household passes away 0:07:36.970 --> 0:07:41.890 or moves into a care home. At that point, the 0:07:41.890 --> 0:07:45.900 money that is owed is essentially the toasted amounts of 0:07:45.900 --> 0:07:50.570 equity that you've released plus any interest that you've built 0:07:50.570 --> 0:07:54.319 up or rolled up, as we say over the lifetime 0:07:54.320 --> 0:07:57.630 of that loan. These products, the good thing about them 0:07:57.630 --> 0:08:00.470 is that they now come with a very broad range 0:08:00.470 --> 0:08:03.500 of safeguards and they have done in fact, for many 0:08:03.500 --> 0:08:07.129 years. One of these is something called the No- Negative 0:08:07.179 --> 0:08:11.319 Equity Guarantee. That means that you can never owe more 0:08:11.320 --> 0:08:14.700 money than the value of your property. 0:08:15.010 --> 0:08:17.819 What's just... For my interest, what's the percentage that they 0:08:17.820 --> 0:08:20.300 charge you for new equity release? So, if you take money 0:08:20.300 --> 0:08:24.390 out your house, what do you... What's generally the percentage 0:08:24.390 --> 0:08:25.360 you're paying back? 0:08:25.810 --> 0:08:30.700 It varies. It varies hugely. The interest rates can vary according to 0:08:30.700 --> 0:08:34.900 your property value, the amount of money that you're trying to 0:08:34.900 --> 0:08:38.250 release from it, which we call the loan to value 0:08:39.429 --> 0:08:42.760 ratio. On average, interest rates at the moment can be 0:08:42.770 --> 0:08:48.850 anywhere between three and 5%. So, not dissimilar from kind a of 0:08:48.850 --> 0:08:50.770 standard residential mortgage. 0:08:50.809 --> 0:08:56.030 Okay. Thank you. Okay. That's the jargon busted. Let's start 0:08:56.030 --> 0:09:00.300 with a few general questions. Holly, you're the CEO of 0:09:00.300 --> 0:09:04.360 the financial website, Boring Money. You must be getting a 0:09:04.360 --> 0:09:07.390 lot of questions right now. If someone is strapped for 0:09:07.390 --> 0:09:11.319 cash because lockdown has resulted in them losing work, what 0:09:11.319 --> 0:09:13.459 should they prioritize first? 0:09:14.449 --> 0:09:17.140 Yeah, surely. I mean, we're getting loads of questions and 0:09:17.140 --> 0:09:20.780 there's an unprecedented use of the word unprecedented, at the 0:09:20.780 --> 0:09:24.429 moment. Really, at the risk of stating the bleeding obvious, 0:09:24.429 --> 0:09:27.949 if someone's lost their job and they're strapped for cash, 0:09:27.949 --> 0:09:31.079 the first thing to look at is cutting costs. There 0:09:31.079 --> 0:09:34.319 are some practical things we can all do. Switching utility 0:09:34.319 --> 0:09:37.010 bills can save a couple of hundred pounds a year, 0:09:37.459 --> 0:09:40.879 checking your direct debits and your standing orders. These can 0:09:40.880 --> 0:09:44.100 really rack up and accumulate. So, go in and make 0:09:44.100 --> 0:09:48.100 sure you need all of those. Things like insurance renewals, 0:09:48.370 --> 0:09:50.660 don't just take the first deal of your offer to 0:09:50.660 --> 0:09:55.819 shop around. The next thing is debt. You know, debt... 0:09:55.819 --> 0:09:57.650 I think my analogy is it can be a bit 0:09:57.650 --> 0:10:00.639 like fat. You can have good debt and you can 0:10:00.640 --> 0:10:05.069 have bad debt. The bad debt, the sort of saturated 0:10:05.069 --> 0:10:08.270 fat of the financial world are things like payday loans, 0:10:08.490 --> 0:10:13.079 credit cards, store cards. Those are typically things with really 0:10:13.079 --> 0:10:16.400 high interest rates and we have to focus on paying 0:10:16.400 --> 0:10:20.660 those off first. You can explore transferring a credit card 0:10:21.189 --> 0:10:25.079 on a nought percent plan, transferring that over. The last 0:10:25.079 --> 0:10:28.660 thing is obviously mortgage holidays. There are some many sort 0:10:28.660 --> 0:10:32.760 of mortgage providers willing to talk to people and postpone 0:10:32.760 --> 0:10:35.809 or delay mortgage payments. So, those are the sort of 0:10:35.809 --> 0:10:37.740 most obvious areas I'd start. 0:10:37.980 --> 0:10:42.280 Just learned a lot there. Should someone in that position 0:10:42.280 --> 0:10:44.679 stop paying into their pension for a while? 0:10:44.959 --> 0:10:49.040 They could. I mean, these are odd time. Normally, Shirley, 0:10:49.040 --> 0:10:52.449 I'd almost never suggest someone stops paying into the pension. 0:10:53.030 --> 0:10:56.439 Pensions are confusing and they're full of jargon, but actually, 0:10:56.439 --> 0:10:59.510 what a pension gives you is some free money. That 0:10:59.510 --> 0:11:02.439 doesn't always come across. If you're a basic rate tax 0:11:02.439 --> 0:11:06.030 payer and you stick 80 pounds into a pension, the 0:11:06.110 --> 0:11:09.589 government will top that up by 20 pounds. This is 0:11:09.589 --> 0:11:12.360 sort of quite often not so well understood. If you're 0:11:12.360 --> 0:11:16.910 a higher rate taxpayer, it can be even more. So, 0:11:16.910 --> 0:11:20.089 I think turning your back on a pension, just because 0:11:20.089 --> 0:11:22.109 it's full of jargon and it could feel a long 0:11:22.110 --> 0:11:25.380 time away, is quite often a bad move. What I 0:11:25.380 --> 0:11:28.449 would say though, is we have to be practical. We 0:11:28.449 --> 0:11:30.890 can only spend the money we have coming in. If, 0:11:31.569 --> 0:11:34.809 as I've mentioned before, there is that debt lurking, those 0:11:34.809 --> 0:11:38.410 bad debts, those expensive debts, then for heaven sakes, we 0:11:38.410 --> 0:11:41.670 all have to prioritize getting rid of those first. So, 0:11:41.670 --> 0:11:45.270 normally, I'd hang on to the pension because it does 0:11:45.270 --> 0:11:48.880 give you a really good way to turbocharge your savings. 0:11:49.050 --> 0:11:51.510 But, if there is expensive debt, then we have to 0:11:51.510 --> 0:11:52.840 get rid of that first. 0:11:52.959 --> 0:11:57.040 What's going on with company pension schemes when employees are furloughed? 0:11:57.670 --> 0:11:59.860 Yeah, this is another sort of confusing area, but the 0:11:59.860 --> 0:12:03.290 bottom line is, if you've been furloughed, your boss still 0:12:03.290 --> 0:12:07.869 has to pay your national insurance contributions and your pension 0:12:07.870 --> 0:12:11.500 contributions. Now, at the moment, if you've got a workplace 0:12:11.500 --> 0:12:15.449 pension, the law says that your employer has to pay 0:12:15.449 --> 0:12:20.030 3% on, what's called your qualifying earnings. So, just to 0:12:20.030 --> 0:12:23.609 give you an indicator, if you're earning 30, 000 pounds a 0:12:23.610 --> 0:12:26.760 year, then your boss will be paying an about 60 0:12:26.760 --> 0:12:30.140 pounds a month for you. So, do check it out, 0:12:30.140 --> 0:12:32.469 but it's really important that people know that they are 0:12:32.469 --> 0:12:37.980 still entitled for those pension payments even if they've been furloughed. 0:12:38.559 --> 0:12:41.630 As the stock market has gone down, is now a 0:12:41.630 --> 0:12:43.949 good time for people to be putting more into their 0:12:43.949 --> 0:12:46.309 pension pot if they can afford to? 0:12:47.059 --> 0:12:50.319 Yeah, this one's really counter intuitive. It feels frightening at 0:12:50.319 --> 0:12:53.030 the moment, but I always think when the daily mail 0:12:53.030 --> 0:12:56.520 splashes the headlines out there about stock markets crashing, it's 0:12:56.520 --> 0:13:00.280 actually a really good time to think about investing or 0:13:00.280 --> 0:13:03.679 to pay more into your pension. Now, it depends on 0:13:03.679 --> 0:13:06.610 timing, as always. I wouldn't say that to someone in 0:13:06.610 --> 0:13:11.280 their nineties, they have very different timeframes to younger people. 0:13:11.719 --> 0:13:15.609 But, my analogy here is, when we're investing in things 0:13:15.610 --> 0:13:19.140 for the long term, when do we think about buying 0:13:19.140 --> 0:13:21.959 them? So, if you're thinking about making an investment for 0:13:21.959 --> 0:13:23.829 your home... I kind of like (inaudible) as a 0:13:23.829 --> 0:13:27.709 cookware. It's really lovely, but it's horrendously expensive. Do you 0:13:27.709 --> 0:13:29.860 buy it when it's full price or do you wait 0:13:29.860 --> 0:13:32.460 until January and buy it when it's in the sale? 0:13:32.949 --> 0:13:35.000 In a way, that's how I think about the stock 0:13:35.000 --> 0:13:38.770 market at the moment. There's some really brilliant brands out 0:13:38.770 --> 0:13:41.170 there that will recover from this things will kind of 0:13:41.170 --> 0:13:43.650 come back to normal, and now is a chance to 0:13:43.650 --> 0:13:46.620 sort of invest more in your pension, or your ices, 0:13:46.790 --> 0:13:49.729 and get access to those investments when they're on sale. 0:13:49.730 --> 0:13:53.149 So, don't necessarily freak out when you see sort of 0:13:53.150 --> 0:13:55.959 headlines about lower stock markets. It can be a great 0:13:55.959 --> 0:14:00.089 time to access fantastic companies at lower prices. 0:14:01.240 --> 0:14:03.989 Let's bring in Chris and Sarah with a few question 0:14:03.990 --> 0:14:09.379 for those people who are approaching retirement age. Chris, for 0:14:09.380 --> 0:14:13.120 someone who is planning on retiring next year, should they 0:14:13.120 --> 0:14:16.140 be putting this off if the value of their pension fund 0:14:16.140 --> 0:14:16.929 has fallen? 0:14:17.250 --> 0:14:20.790 Well, Shirley, I think there's perhaps two aspects of this. The one is 0:14:21.060 --> 0:14:24.200 when people should stop working and retiring, and the other 0:14:24.200 --> 0:14:26.560 one is when they might want to access their pension 0:14:26.560 --> 0:14:30.770 funds. So, on the first one, I know lots of people have 0:14:30.770 --> 0:14:33.229 been having mixed emotions about wanting to carry on. I've 0:14:33.229 --> 0:14:36.249 heard people who were intending never to retire, have decided, " 0:14:36.250 --> 0:14:38.640 No, actually I've had enough of this. I want to 0:14:38.640 --> 0:14:43.140 retire." For many people, working part time can be a 0:14:43.170 --> 0:14:45.129 good option, and we can see lots of more people 0:14:45.130 --> 0:14:48.729 doing this. You can help boost your pension pot. You 0:14:48.729 --> 0:14:50.759 help some money going further. You're not spending so much 0:14:50.760 --> 0:14:53.850 if you're still working, so that can really work for 0:14:53.850 --> 0:14:56.560 some people. So the second part is when to access 0:14:56.560 --> 0:14:58.760 your pension pot. It is scary when you see the 0:14:58.760 --> 0:15:02.500 headlines in the papers. People should just check their pension 0:15:02.500 --> 0:15:05.170 pots because they may not have fallen just as much 0:15:05.170 --> 0:15:09.460 as they fear. Especially, if they've been in a life 0:15:09.460 --> 0:15:13.740 stage, or a lifecycle fund where they would have been 0:15:13.740 --> 0:15:17.810 in safer assets and not just in inequity. So, people 0:15:17.810 --> 0:15:20.880 have lots of options, and they just have to give themselves some 0:15:20.880 --> 0:15:24.430 time and space to consider those options before acting. 0:15:24.729 --> 0:15:28.729 With all this uncertainty, would buying an annuity be a 0:15:28.729 --> 0:15:30.760 good or bad option at the moment? 0:15:31.010 --> 0:15:36.040 Annuities can offer people real security and certain uncertainty in 0:15:36.040 --> 0:15:38.660 these times, which is obviously very valuable. I think there's 0:15:38.660 --> 0:15:40.990 often a misconception here. You don't have to take all your 0:15:41.270 --> 0:15:43.790 pension money and buy an annuity. You might just take 0:15:43.790 --> 0:15:47.590 a part of it and use that to generate income 0:15:47.590 --> 0:15:52.300 that sort of meets your essential spending requirements. Once you've 0:15:52.300 --> 0:15:55.960 done that, of course, you've met your essential spending requirements, 0:15:55.960 --> 0:15:57.520 you can be a bit sort of freer and easier 0:15:57.520 --> 0:15:59.840 with the money that you have left. We always say 0:15:59.840 --> 0:16:02.300 to people that they must shop around to make sure 0:16:02.300 --> 0:16:04.900 they get the best deal. The other thing that people 0:16:04.900 --> 0:16:07.989 perhaps don't know is that if you're not in such 0:16:07.990 --> 0:16:10.690 great health, then you can actually get a much better 0:16:10.690 --> 0:16:14.120 deal from an annuity provider and much higher level of income 0:16:14.460 --> 0:16:16.570 than if you are very healthy. Some people think it's 0:16:16.570 --> 0:16:18.770 kind of the other way around, but for annuities, that's 0:16:19.090 --> 0:16:22.489 how it works. So, particularly, it's important when you consider 0:16:22.490 --> 0:16:25.250 buying an annuity, you think about your health and you 0:16:25.250 --> 0:16:30.060 make sure you tell your advisor and insurance provider about 0:16:30.060 --> 0:16:32.330 that so you can actually get a great deal. So, 0:16:32.900 --> 0:16:35.729 I think annuities, be a lifetime annuities, the rest of your 0:16:35.729 --> 0:16:38.350 life, or fixed term annuities for a period of time, 0:16:38.580 --> 0:16:41.000 they can be a really good option for at least 0:16:41.000 --> 0:16:43.479 part of your money if you shop around and make 0:16:43.479 --> 0:16:45.000 sure you get the best deal for yourself. 0:16:45.450 --> 0:16:49.470 Sarah, with returns on retirement plans being low at the 0:16:49.470 --> 0:16:52.710 moment, wouldn't it be better to take your pension in 0:16:52.710 --> 0:16:54.770 cash and stick it in the bank? 0:16:55.000 --> 0:16:59.519 Well, Shirley, as Chris said earlier, when markets are uncertain, 0:16:59.520 --> 0:17:03.510 there's a huge temptation to switch your money into cash. 0:17:03.640 --> 0:17:08.330 That's a very, very human reaction, but of course, savings 0:17:08.330 --> 0:17:11.209 deposit rates are at an all time low at the 0:17:11.210 --> 0:17:16.290 moment with the bank of England interest rates being at this 0:17:16.290 --> 0:17:20.080 new level. And more importantly, there is, as we said 0:17:20.080 --> 0:17:24.939 earlier, a risk that you then lock in any potential 0:17:24.940 --> 0:17:29.240 losses that at the moment only really exist on paper 0:17:29.460 --> 0:17:32.690 or on a computer screen. If you do lock in 0:17:32.690 --> 0:17:36.639 those losses, then you've forgotten the opportunity to allow your 0:17:36.639 --> 0:17:42.020 investments any time to recover when markets go back up 0:17:42.659 --> 0:17:46.010 as they eventually will. As we said earlier, pensions are 0:17:46.010 --> 0:17:48.239 designed for the long term. They are designed as a 0:17:48.240 --> 0:17:51.409 long term investment, but if you do need to take 0:17:51.409 --> 0:17:53.659 money from your pension, if you do need to make 0:17:53.659 --> 0:17:57.359 that decision more urgently, then one thing I would say 0:17:57.359 --> 0:18:00.580 is it's really important to be up to speed with 0:18:00.580 --> 0:18:05.280 the tax rules on withdrawing money from a pension. As 0:18:05.280 --> 0:18:08.139 most of us know, pensions allow you to take up 0:18:08.139 --> 0:18:13.070 to 25% of your pension pot tax- free. So, if 0:18:13.070 --> 0:18:16.139 you have a pension pots of a hundred thousand pounds, 0:18:16.139 --> 0:18:19.699 say, you can take 25, 000 pounds of that with no 0:18:19.970 --> 0:18:25.760 tax bill whatsoever, but the remaining 75,000 will be subject 0:18:25.760 --> 0:18:29.109 to tax at what we call your highest marginal rate. 0:18:29.330 --> 0:18:32.770 So, that may be 20% if you're a basic taxpayer, 0:18:33.060 --> 0:18:37.310 40% or even 45%, the numbers are slightly different in 0:18:37.310 --> 0:18:42.409 Scotland, 21, 41 and 46%. So, if you were to take a large 0:18:42.409 --> 0:18:45.200 amount or even the whole amounts of that pension pot, 0:18:45.669 --> 0:18:49.669 then you could face a much higher tax bill than 0:18:49.669 --> 0:18:53.700 if you simply took smaller amounts over a longer period. 0:18:53.750 --> 0:18:57.200 So, as always, really important to take advice and to 0:18:57.200 --> 0:18:59.749 understand those tax implications. 0:19:00.179 --> 0:19:04.699 That's interesting. 25% tax free, but on the other 75%, 0:19:06.359 --> 0:19:09.949 you're taxed at whatever bracket you're at right now. Right? 0:19:09.950 --> 0:19:12.000 So, if I'm in a high tax bracket time, I 0:19:12.000 --> 0:19:16.419 have to pay that tax. So, that comes off your pension... Interesting. 0:19:16.560 --> 0:19:20.929 Absolutely. If you took you... If you did have a hundred thousand pounds 0:19:20.929 --> 0:19:23.460 and you took it all in one go, then that 0:19:23.460 --> 0:19:26.310 could push you into a higher tax bracket than you've 0:19:26.389 --> 0:19:28.800 potentially ever been in before if you've always been a 0:19:28.800 --> 0:19:32.179 basic rate tax payer. So, quite a lot to think 0:19:32.179 --> 0:19:36.250 about and lots of great free sources of information out 0:19:36.250 --> 0:19:40.919 there, like pensions wise that will explain carefully. 0:19:41.600 --> 0:19:42.510 Boring Money, as well. 0:19:42.909 --> 0:19:44.710 Boring Money, of course, of course. 0:19:45.440 --> 0:19:49.570 Sarah, if someone is in say the early sixties and 0:19:49.570 --> 0:19:52.399 has seen their income reduced due to the COVID- 19 0:19:52.399 --> 0:19:55.429 situation, and they now think they won't be able to 0:19:55.429 --> 0:19:59.290 pay their mortgage off before they retire, is there anything 0:19:59.290 --> 0:20:00.970 they can do other than sell? 0:20:01.040 --> 0:20:04.460 Well, Shirley, what I would say to anybody who does find 0:20:04.460 --> 0:20:08.300 themselves in that situation, your first port of call should 0:20:08.300 --> 0:20:11.649 be your current mortgage provider. So, you will have seen 0:20:11.649 --> 0:20:14.720 in the news that mortgage providers are being asked by 0:20:14.720 --> 0:20:19.070 the government to provide mortgage payment holidays. So, speak to 0:20:19.070 --> 0:20:23.709 your mortgage provider, understand what relief is available to you 0:20:23.760 --> 0:20:27.269 before you do anything else. The challenge, of course, with 0:20:27.270 --> 0:20:31.070 downsizing or selling up at the moment is, of course, 0:20:31.070 --> 0:20:34.250 that the housing market has grown to something of halt. 0:20:35.470 --> 0:20:39.230 It will, of course, come back. But, the timeline for 0:20:39.230 --> 0:20:44.180 buying and selling houses at the moment has extended considerably. 0:20:45.700 --> 0:20:49.129 So, if you need to... if you are in that 0:20:49.129 --> 0:20:52.820 situation, if moving out isn't an option for you at the 0:20:52.820 --> 0:20:56.439 moment, if you aren't able to access some form of 0:20:56.440 --> 0:21:00.330 relief from your mortgage provider, then of course, equity release 0:21:00.379 --> 0:21:04.490 could be an option to consider. There are also now 0:21:04.530 --> 0:21:08.379 some active release products on the markets where you can 0:21:08.379 --> 0:21:12.139 pay off the interest on these loans every month so 0:21:12.139 --> 0:21:15.500 that it doesn't build up over time. So, it behaves 0:21:15.550 --> 0:21:19.529 rather than like a traditional mortgage product, but as the 0:21:19.530 --> 0:21:24.379 term lifetime mortgage suggests, these products are designed for a 0:21:24.379 --> 0:21:27.929 lifetime. They're designed for the long term. So, they should 0:21:27.929 --> 0:21:32.409 never be seen as short term fixes or ways of 0:21:32.409 --> 0:21:35.639 getting yourself out of a short term problem. They do 0:21:35.639 --> 0:21:39.859 require really careful consideration and they should always be taken 0:21:39.859 --> 0:21:42.270 alongside expert advice. 0:21:42.429 --> 0:21:47.210 All right, let's talk about older homeowners. Where do you 0:21:47.210 --> 0:21:52.060 stand if we're planning on downsizing? The housing market is 0:21:52.060 --> 0:21:54.840 pretty much frozen at the moment, so these people can't 0:21:54.840 --> 0:21:56.410 move anytime soon. 0:21:56.909 --> 0:22:01.409 Again, Shirley, as we said with pensions, if you can 0:22:01.409 --> 0:22:03.810 ride this out, if you can wait, if you can 0:22:03.810 --> 0:22:07.519 postpone that big decision about downsizing, then that's got to 0:22:07.520 --> 0:22:11.609 be the best thing to do. So, try and ride 0:22:11.609 --> 0:22:14.879 this out, wait until the housing market recovers, and if 0:22:14.879 --> 0:22:18.510 you do want to downsize, then try and postpone that 0:22:18.679 --> 0:22:20.229 decision if you possibly can. 0:22:20.429 --> 0:22:23.679 Now, moving onto some questions from people who have already 0:22:23.679 --> 0:22:27.919 retired. If someone is drawing their pension income through an 0:22:27.919 --> 0:22:32.039 investment portfolio, their income will be affected as shares and 0:22:32.040 --> 0:22:36.129 dividends have fallen. Do people need to revisit their plans 0:22:36.129 --> 0:22:39.219 and the income they are taking from their pension pot? 0:22:39.409 --> 0:22:43.919 Yes, Shirley. Now is absolutely the time to revisit those 0:22:43.919 --> 0:22:46.990 retirement plans, but perhaps not in the way that you 0:22:46.990 --> 0:22:51.369 think. What we often see is that in times of 0:22:51.369 --> 0:22:56.730 uncertainty, people draw more income from the pension drawdown fund 0:22:56.730 --> 0:23:00.359 because they're seeing their investments fluctuates. In fact, they should 0:23:00.359 --> 0:23:03.689 actually be doing the opposite. As we said earlier, it's 0:23:03.689 --> 0:23:07.780 really important to allow your investments time to recover, to 0:23:07.780 --> 0:23:11.490 avoid locking in some of those losses. As I also 0:23:11.490 --> 0:23:14.429 said before, it's so important at this time to take 0:23:14.429 --> 0:23:18.090 really good advice. If you don't have an advisor, as 0:23:18.090 --> 0:23:20.889 I said, do you go to unbias. co. uk to 0:23:20.889 --> 0:23:23.700 find a regulated advisor in your local area. 0:23:24.609 --> 0:23:27.290 It makes me feel really grateful for my financial advisor, 0:23:27.290 --> 0:23:31.160 by the way. Learning so much. Okay. 0:23:31.369 --> 0:23:31.709 Absolutely. 0:23:32.280 --> 0:23:34.189 Holly, anything you'd like to add there? 0:23:34.600 --> 0:23:36.810 I think the bottom line is at the moment, if 0:23:36.810 --> 0:23:40.580