WEBVTT - Pensions Are Another Reason to Worry About the UK Budget 0:00:03.120 --> 0:00:18.320 Bloomberg Audio Studios, Podcasts, Radio News. Welcome to Maren Talk 0:00:18.360 --> 0:00:21.040 to Your Money, the personal finance edition of Maren Talks Money. 0:00:21.120 --> 0:00:24.040 In these bonus podcasts, we talk about the best strategies 0:00:24.040 --> 0:00:26.599 for making the most of your money. Hi marin sum 0:00:26.600 --> 0:00:29.000 Set Web and with me today senior reporter of Money 0:00:29.000 --> 0:00:32.680 Dessert author John Steppeck Hi John, Hi, maam. So this 0:00:32.800 --> 0:00:37.560 week we are answering a question about pension drawdown from Mike. Hi. 0:00:37.720 --> 0:00:38.480 My name's Mike. 0:00:38.720 --> 0:00:43.080 I'm from Suffolk and my question is about pension draw down. Basically, 0:00:43.080 --> 0:00:43.880 what's it all about? 0:00:44.400 --> 0:00:47.720 And most importantly, how do I avoid getting ripped off? 0:00:48.200 --> 0:00:50.280 Great question, Mike, but do you know what? John and 0:00:50.360 --> 0:00:52.639 I were not quite good enough to answer that one, 0:00:52.680 --> 0:00:55.000 so we have ordered some extra help. Tom McPhail of 0:00:55.040 --> 0:00:57.200 the lang Cat for eighteen years, he was head of 0:00:57.200 --> 0:01:00.560 Policy and lead pension spokesman from the investment platform Landsdown. 0:01:00.560 --> 0:01:02.520 That's where we first came across each other, isn't it Tom. 0:01:02.640 --> 0:01:05.000 In twenty twenty one he conducted an external review of 0:01:05.000 --> 0:01:08.399 money and pension service on behalf of the DWP, and 0:01:08.440 --> 0:01:13.319 he has now worked for the Langcat since twenty twenty one. Right, Tom, 0:01:13.560 --> 0:01:17.160 brought down, complicated, frightening. But before we get to it, 0:01:17.360 --> 0:01:19.440 I want to ask you if you don't mind a 0:01:19.480 --> 0:01:23.840 little bit about the budget. We know that all governments 0:01:24.240 --> 0:01:27.440 want to take more money out of people's pensions because 0:01:27.440 --> 0:01:28.920 that is where the money is. There's a lot of 0:01:28.920 --> 0:01:31.120 money tied up and pensions in the UK and if 0:01:31.160 --> 0:01:33.160 you were a government looking for something to tax, you'd 0:01:33.160 --> 0:01:34.560 look at that big pile of money and go oh 0:01:34.840 --> 0:01:37.840 like some of that. And this government is no different. 0:01:37.840 --> 0:01:39.399 And of course a lot of people think that pension 0:01:39.440 --> 0:01:42.360 tax relief is already too generous, so there may be 0:01:42.480 --> 0:01:46.040 some changes coming. What might those changes be and how 0:01:46.120 --> 0:01:47.040 much should we worry? 0:01:47.600 --> 0:01:50.040 Yeah, really good question, and we probably should worry. There 0:01:50.080 --> 0:01:53.800 In Rachel Reeves and Clear Starmer have been channeling there 0:01:54.240 --> 0:01:57.400 inn at George Osbourne with a suits on of eel 0:01:57.520 --> 0:02:00.480 mixed in there as well. It's all miserable, doom and gloom. 0:02:00.880 --> 0:02:03.160 You know, we need your money because the last lot 0:02:03.240 --> 0:02:05.400 messed everything up. We can't take it off the workers, 0:02:05.400 --> 0:02:07.120 so we're coming for the rich people with their big 0:02:07.160 --> 0:02:10.800 pension pots. That's the narrative. So yeah, we should be worried. 0:02:10.880 --> 0:02:15.679 I think there are four known unknowns around pension taxation 0:02:15.760 --> 0:02:18.079 and the budgets. I'm just going to quickly run through those. 0:02:18.600 --> 0:02:24.000 So the obvious ones are incotax relief. They can monkey 0:02:24.000 --> 0:02:25.640 around with that. It all all the money goes to 0:02:25.680 --> 0:02:27.560 higher earners at the moment, and so we need to 0:02:27.600 --> 0:02:31.200 do something about that. But it's really complicated and difficult 0:02:31.200 --> 0:02:33.320 and messy, and George Osborne looked at this in twenty 0:02:33.360 --> 0:02:35.920 sixteen and backed off because it was too difficult to messy. 0:02:36.360 --> 0:02:39.240 There's lots of money available there, but you'll burn up 0:02:39.280 --> 0:02:41.200 a lot of political capital if you start messing with 0:02:41.240 --> 0:02:44.880 you incotax relief, so maybe, but also quite possibly maybe not. 0:02:45.400 --> 0:02:47.880 A much easier one to tack on. My second option 0:02:47.960 --> 0:02:52.560 would be the employer's relief on National Insurance on pension contributions. 0:02:53.120 --> 0:02:55.919 Much easier to get rid of, would raise less money 0:02:55.960 --> 0:02:58.680 but still decent five to ten billion pounds a year, 0:02:58.800 --> 0:03:02.560 not nothing by any mean, and much easier to implement. 0:03:03.200 --> 0:03:06.680 So both of those would be very difficult to do immediately. 0:03:06.880 --> 0:03:08.320 You'd have to say we're going to do this, and 0:03:08.400 --> 0:03:11.280 you'll start from next April. Because there's payroll and systems 0:03:11.360 --> 0:03:13.600 changes would all have to be made. But there are 0:03:13.600 --> 0:03:17.320 those two. Third option of my known unknowns would be 0:03:17.400 --> 0:03:21.359 death taxes on pensions, and this is probably my strongest contender. Hear, 0:03:21.560 --> 0:03:23.960 really easy to do. You just stand up on the 0:03:23.960 --> 0:03:26.200 budget then and you say, as of midnight last night, 0:03:26.480 --> 0:03:28.720 anyone that dies from then on, we're going to take 0:03:28.760 --> 0:03:31.680 some tax off the residual funds on death unless you 0:03:31.760 --> 0:03:34.000 pass it to your spouse, and we'll make a spousal exemption. 0:03:34.040 --> 0:03:35.640 But if you pass at your kids, we're going to 0:03:35.680 --> 0:03:37.360 take some of it off you, and we can put 0:03:37.400 --> 0:03:39.360 in a thresholder path a million or something like that, 0:03:39.400 --> 0:03:42.160 and really simple to do, very different to avoid other 0:03:42.240 --> 0:03:46.640 than you know, drastics measures like going to Switzerland Dignitas 0:03:46.800 --> 0:03:48.600 or something. And that seems to be a case of 0:03:48.640 --> 0:03:51.800 the extreme case of the tax tail wagging the lifestyle dog. 0:03:51.920 --> 0:03:55.160 So there's that. My fourth option and the one that's 0:03:55.200 --> 0:03:58.480 really got everybody anxious, and the known unknowns is pension 0:03:58.600 --> 0:04:03.560 tax freelom sum quite easy to tackle. You could say, well, 0:04:03.600 --> 0:04:05.720 really to go for the really rich people with million 0:04:05.760 --> 0:04:08.480 pound pension pots. Currently the maximum amount you can take 0:04:08.600 --> 0:04:11.400 is two hundred and sixty eight seven hundred and twenty 0:04:11.480 --> 0:04:14.640 five pounds. How about we just turn that dial down 0:04:14.680 --> 0:04:16.719 a little bit easy enough to do, it'll only upset 0:04:16.760 --> 0:04:19.360 the rich people. Problems with that though, One died to 0:04:19.440 --> 0:04:22.280 upset the public sector workers again and they don't want 0:04:22.279 --> 0:04:26.880 to do that. Two, it's retrospective taxation and that upsets people. 0:04:27.160 --> 0:04:29.800 And three the tax free lump sum is about the 0:04:29.800 --> 0:04:33.640 only element of pension taxation that people actually understand. So 0:04:33.720 --> 0:04:36.760 if you mess with that, you've got another slew of 0:04:36.960 --> 0:04:40.320 bad headlines about how the government's coming after your pensions again. 0:04:40.839 --> 0:04:43.760 So you could feed it in gently and slowly, but 0:04:43.800 --> 0:04:46.159 then you wouldn't raise enough money. Now, this is the 0:04:46.160 --> 0:04:48.200 most difficult and myt for because it's the one thing 0:04:48.240 --> 0:04:50.000 you could do something about. You could just take the 0:04:50.080 --> 0:04:51.760 tax free lumps on out of your pension now if 0:04:51.800 --> 0:04:54.120 you're already over the age of fifty five. But what 0:04:54.200 --> 0:04:56.240 if they don't change the rules at the end of budget, 0:04:56.240 --> 0:04:57.520 at the end of the month. You know, you're then 0:04:57.560 --> 0:04:59.280 sitting there with a big bag of money that's no 0:04:59.320 --> 0:05:01.640 longer in the tax exempt pension fund and you're wondering 0:05:01.640 --> 0:05:04.480 what to do with it. So no easy answers. There 0:05:04.480 --> 0:05:08.240 are also finally, probably some unknown unknowns, but I don't 0:05:08.240 --> 0:05:08.680 know what they. 0:05:08.600 --> 0:05:13.440 Are well, that's both extremely helpful and extremely unhelpful. Tom. 0:05:13.480 --> 0:05:15.839 Thank you very much. Indeed, I mean well, I'm just 0:05:15.839 --> 0:05:17.640 going to pick you up on one thing. When you 0:05:17.680 --> 0:05:19.760 said at the beginning that it makes sense to go 0:05:19.800 --> 0:05:21.800 after the rich because they get nearly all the pension 0:05:21.839 --> 0:05:24.120 tax relief, they get sixty three, sixty four percent of 0:05:24.120 --> 0:05:26.240 the pension tax relief something like that, I do feel 0:05:26.279 --> 0:05:28.359 I must point out that the reason they get the 0:05:28.360 --> 0:05:31.600 most pension tax relief is because they pay the most tax. 0:05:32.000 --> 0:05:35.080 So that group in the higher and additional rate bounds 0:05:35.120 --> 0:05:37.680 also pay something like sixty nine to seventy percent of 0:05:37.720 --> 0:05:40.200 all income tax, and that's why they get more pension 0:05:40.240 --> 0:05:44.159 tax relief. It's not some special algorithm that fun funnels 0:05:44.160 --> 0:05:46.640 free money to the rich. It's not that I. 0:05:46.640 --> 0:05:49.960 Don't disagree with you. You're absolutely right in your analysis. 0:05:50.160 --> 0:05:51.880 And the other thing I think we should point out 0:05:51.960 --> 0:05:53.680 is about the twenty five percent. Well, it used to 0:05:53.720 --> 0:05:55.240 be that you could take twenty five per cent of 0:05:55.279 --> 0:05:58.080 your pension tax free, right, and that was great because 0:05:58.080 --> 0:05:59.840 it wasn't taxed on the win, and it wasn't taxed 0:05:59.880 --> 0:06:02.520 on the way out. Tachically, one of the only pieces 0:06:02.560 --> 0:06:05.480 of cash available anywhere in any system in the West 0:06:05.720 --> 0:06:08.560 that involves money that isn't actively taxed all the time. 0:06:08.600 --> 0:06:10.479 So that was kind of nice. On the other hand, 0:06:10.800 --> 0:06:13.760 if you're a government, you could look at that and say, whoa, 0:06:13.800 --> 0:06:17.599 hang on, totally untaxed money. That's not right. So it 0:06:17.640 --> 0:06:20.200 makes sense to me that a government of the type 0:06:20.240 --> 0:06:22.799 you suggest kist armas Is would go for that first. 0:06:22.880 --> 0:06:25.840 So yeah, that's the bit I would worry about, luckily 0:06:26.040 --> 0:06:28.560 or unluckily whatever. I'm not quite old enough to access 0:06:28.560 --> 0:06:30.400 mine yet, so it's not on my own mind, but 0:06:30.400 --> 0:06:32.320 I bet it's on the minds of lot as well listeners. 0:06:32.800 --> 0:06:34.640 As someone in the late fifties, I can tell you 0:06:34.680 --> 0:06:36.760 it is something I've given a lot of thought to. Marin. 0:06:37.360 --> 0:06:39.599 Okay, well, maybe maybe we'll do a Twitter poll on that. 0:06:39.640 --> 0:06:41.480 We'll find out how many people are worried about that, 0:06:41.600 --> 0:06:43.240 how many people are more worried about that than they 0:06:43.240 --> 0:06:45.240 are about to see a couple of game sacks, which 0:06:45.240 --> 0:06:47.200 seems to be the thing that people are mostly worried 0:06:47.200 --> 0:06:49.400 about at the moment. Johny, you were going to interrupt 0:06:49.440 --> 0:06:51.640 and say something even more helpful than the stuff that 0:06:51.680 --> 0:06:52.240 Thomas said. 0:06:52.440 --> 0:06:54.120 Well, the one I saying it strikes me is being 0:06:54.440 --> 0:06:58.920 politically easy, if not easy for everyone else, and I 0:06:59.040 --> 0:07:02.719 se very frustrating, but very stealthy the employer. Next I 0:07:02.760 --> 0:07:05.880 think is is you know, because they announced that one 0:07:05.880 --> 0:07:08.360 of the day, half of the ninety percent of the 0:07:08.400 --> 0:07:10.360 journalists covernment don't even know what they're talking about, so 0:07:10.400 --> 0:07:12.200 it never gets into the paper until the end of 0:07:12.240 --> 0:07:16.760 the week. You can hide the fact that this would 0:07:16.760 --> 0:07:20.680 technically affect affect public sector workers too, but you can 0:07:21.160 --> 0:07:24.160 exempt that in a much less overt way than the 0:07:24.200 --> 0:07:27.360 tax free lump sum or then come tax relief, and 0:07:27.400 --> 0:07:30.240 all that happens is that basically either our auto enrollment 0:07:30.240 --> 0:07:35.400 pensions get worse or you know, our private sector employers 0:07:35.560 --> 0:07:39.000 pay more. So that I can see that being very appealing, 0:07:39.080 --> 0:07:41.240 and it is quite a big chunk of change, you know, 0:07:41.320 --> 0:07:43.800 fifty ten billion, because the problem is also if you 0:07:43.840 --> 0:07:46.560 exclude the dB workers from the lump sum of the 0:07:46.600 --> 0:07:48.800 tax relief, the other thing, but the tax relief is 0:07:48.840 --> 0:07:52.160 like a huge amount of income tax relief saving, if 0:07:52.200 --> 0:07:55.880 you like, actually comes from the dB side, not the 0:07:55.960 --> 0:07:58.600 DC side. So if you want to make the sums 0:07:58.600 --> 0:08:01.320 add up there, then you have to include the dB 0:08:01.400 --> 0:08:04.920 workhouse or else is basically okay, maybe it's maybe was 0:08:04.960 --> 0:08:08.400 doing there, certainly nowhere near, you know, because the pension actually, 0:08:08.400 --> 0:08:10.360 if it is constantly quoted, has been worth about fifty 0:08:10.360 --> 0:08:13.720 five billion or something like that. But actually, whenever you 0:08:13.760 --> 0:08:17.280 boil it down, if you start excluding lots of different 0:08:17.320 --> 0:08:20.320 groups from that, then the actual amounts that are sort 0:08:20.360 --> 0:08:23.560 of politically easily targetable are much much smaller. So I 0:08:23.600 --> 0:08:27.680 think that's the other interesting thing about this. It sounds 0:08:27.680 --> 0:08:29.000 like the sort of thing, Oh, why haven't they done 0:08:29.000 --> 0:08:30.680 it already, and then you realize, well, they haven't done 0:08:30.680 --> 0:08:33.520 it already because actually this is a massive, massive mainfield. 0:08:34.280 --> 0:08:37.440 Well I bet my bottom dollar that if any of 0:08:37.440 --> 0:08:40.719 these so called reforms come into play, most of the 0:08:40.760 --> 0:08:42.239 public sect will be exempt. 0:08:42.520 --> 0:08:44.559 We're gonna have to revisit this conversation in a few 0:08:44.600 --> 0:08:45.120 weeks time. 0:08:45.559 --> 0:08:48.800 We are definitely revisiting this conversation, Tom. I look forward 0:08:48.840 --> 0:08:51.600 to having you back on anyway, back to poor old Mike. Mike, 0:08:51.679 --> 0:08:54.200 we have neglected you. I'm sorry. This is about you, 0:08:54.559 --> 0:08:57.200 not about or worries about or twenty five percent so 0:08:57.520 --> 0:09:01.720 pension draw down, Tom, what's that all about? And how 0:09:01.760 --> 0:09:03.640 does Mike avoid getting ripped off. 0:09:04.400 --> 0:09:08.280 So let's just briefly rivisit the bad old days. Before 0:09:08.320 --> 0:09:13.720 twenty fifteen, draw down existed, but it was much more restricted, 0:09:13.880 --> 0:09:16.599 and typically people when they got to retirement would have 0:09:16.600 --> 0:09:19.360 to take their accumulated for retirement savings and hand it 0:09:19.400 --> 0:09:22.600 over to an insurance company in exchange for guaranteed incan 0:09:22.600 --> 0:09:27.360 for life. It gave you certainty this annuity, but you 0:09:27.440 --> 0:09:30.320 lost your capital. So George Osborne decided in twenty fifteen 0:09:30.320 --> 0:09:33.360 no one should have to buy annunities anymore. Instead, everyone 0:09:33.480 --> 0:09:36.040 was free to just leave their money in their retirement 0:09:36.080 --> 0:09:38.920 savings pot what we now call draw down, and just 0:09:39.120 --> 0:09:41.719 draw money out of those retirement savings as and when 0:09:41.760 --> 0:09:44.840 they choose. Through the remainder of their lives. They're still 0:09:45.000 --> 0:09:47.640 entitled to take up twenty five percent of their pot 0:09:47.960 --> 0:09:52.080 tax free, either upfront in one lump sum or as 0:09:52.120 --> 0:09:55.160 a slice of whatever income withdrawals they take. See you 0:09:55.160 --> 0:09:57.480 take one hundred pounds out, twenty five percent is tax free, 0:09:57.559 --> 0:10:00.160 seventy five pounds to tax. And you can keep doing 0:10:00.200 --> 0:10:03.360 that up to the current tax freedom some which we've 0:10:03.400 --> 0:10:06.080 just been discussing in the budget context, which is currently 0:10:06.080 --> 0:10:08.600 capped out at two hundred and sixty eight thousand, seven 0:10:08.720 --> 0:10:11.200 hundred and twenty five pounds or twenty five percent of 0:10:11.200 --> 0:10:14.920 the pot, whichever is the lower. So the joy of 0:10:15.000 --> 0:10:17.880 drawdown is you have control over your money. It remains invested, 0:10:17.960 --> 0:10:19.920 it's growing, You draw on it as much or as 0:10:19.920 --> 0:10:22.560 little as you need for your retirement. The problem with 0:10:22.679 --> 0:10:26.000 draw down is it's complicated. It's really difficult to know 0:10:26.360 --> 0:10:29.079 how much to take out on where to invest your money, 0:10:29.080 --> 0:10:32.880 and how to manage that decumulation of your retirement savings, 0:10:32.920 --> 0:10:36.320 such as you optimize your sound of living through your 0:10:36.360 --> 0:10:39.760 retirement without running out of money before you die, given 0:10:39.920 --> 0:10:41.720 that you don't know when you're going to die. And 0:10:41.760 --> 0:10:44.360 to be honest, most people are not investment experts, So 0:10:44.440 --> 0:10:46.440 where do they put the money to minimize the risk 0:10:46.480 --> 0:10:49.800 and maximize returns and avoid unpleasant things happening. When you're 0:10:49.800 --> 0:10:53.480 accumulating your retirement savings, you're happily sake investment risk, and 0:10:53.480 --> 0:10:55.320 if it goes down a bit, well it doesn't really matter. 0:10:55.640 --> 0:10:58.920 Once you're retired, your perspective changes. You really don't want 0:10:58.920 --> 0:11:01.720 to take investment risk beause when the money's gone, it's gone. 0:11:01.800 --> 0:11:04.280 You've got no more income coming in so it's all 0:11:04.360 --> 0:11:05.760 together a lot more complicated. 0:11:07.360 --> 0:11:10.520 Okay, so you've got all those complications, and then you've 0:11:10.520 --> 0:11:13.000 got this added complication of not really knowing how much 0:11:13.040 --> 0:11:15.079 of your twenty five percent to take ween. I mean, 0:11:15.120 --> 0:11:18.200 you suggested you could just go through your entire retirement 0:11:18.280 --> 0:11:20.800 taking every time you take something out seventy five percent 0:11:20.840 --> 0:11:22.720 of it. Depending on the amount on your pot, obviously 0:11:22.800 --> 0:11:25.040 seventy five percent of it is taxed and twenty five 0:11:25.040 --> 0:11:27.040 percent of it isn't tax. But a lot of people 0:11:27.040 --> 0:11:29.040 think they'd really like to take something out of the beginning, 0:11:29.440 --> 0:11:31.280 they want to pay off a morga, do' give some 0:11:31.280 --> 0:11:32.800 money to their children or whatever it is from this 0:11:32.880 --> 0:11:35.120 tax free lumps on, and then they're down to well, 0:11:35.160 --> 0:11:38.240 maybe they're taking out ninety percent tax and ten percent 0:11:38.320 --> 0:11:40.880 not tax, and I even I find that kind of confusing. 0:11:41.600 --> 0:11:44.280 Yeah, absolutely agree with you. And look, I'm probably more 0:11:44.360 --> 0:11:46.560 familiar with this than most people are. I'm still using 0:11:46.559 --> 0:11:48.520 a financial advisor to help me plan all of this, 0:11:49.000 --> 0:11:50.840 partly because I've got better things to do with my life, 0:11:50.840 --> 0:11:53.960 but also because it's really helpful to have an external 0:11:54.000 --> 0:11:57.280 objective person helping me to optimize my tax strategy and 0:11:57.320 --> 0:11:58.800 so on, and I'm not drawing my money yet, but 0:11:58.840 --> 0:12:01.000 I will do one day soon. For me, I find 0:12:01.000 --> 0:12:03.079 it easier to use a financial advisor to do that, 0:12:03.280 --> 0:12:05.079 but they cost money, and not everyone wants to pay 0:12:05.080 --> 0:12:08.240 a financial advisor to manage their money for them in retirement. 0:12:08.320 --> 0:12:10.360 So then you're into realms of Okay, who's going to 0:12:10.400 --> 0:12:12.680 actually look after my money for me? And then you're 0:12:12.840 --> 0:12:15.040 you're into the realms of an investment platform such as 0:12:15.080 --> 0:12:17.400 the guys I used to work with at Harbury's Landsdown. 0:12:17.480 --> 0:12:19.560 Other platforms are available, quite a few of them are 0:12:19.600 --> 0:12:21.560 cheaper as well. And then you're going to decide where 0:12:21.559 --> 0:12:23.599 you're going to invest your money on the platform, and 0:12:23.640 --> 0:12:25.360 you're going to use active managers, you're going to use 0:12:25.360 --> 0:12:28.800 passive managers. How do how do you optimize your returns 0:12:28.800 --> 0:12:31.320 forst minimizing your risk because you don't want to particularly 0:12:31.400 --> 0:12:34.440 volatile investments. You want consistency of income stream to pay 0:12:34.480 --> 0:12:37.040 you that income you're drawing from your retirement savings. And 0:12:37.120 --> 0:12:39.160 you know you've talked a bit about the tax strategy 0:12:39.200 --> 0:12:41.960 and how you minimize the amount of tax you're paying. 0:12:42.400 --> 0:12:44.400 I'm not pretending any of this is simple. There are 0:12:44.520 --> 0:12:47.360 tools out there you can use. We're starting to see 0:12:47.360 --> 0:12:50.839 FinTechs coming to the fore and offering services to help 0:12:50.880 --> 0:12:53.839 people do this. As a company called Guide with two 0:12:53.920 --> 0:12:55.920 Eyes in the middle for some reason, they've got some 0:12:56.000 --> 0:12:58.280 quite nice technology that helps you do all this kind 0:12:58.280 --> 0:13:01.000 of thing. And the FAA is trying to help those 0:13:01.040 --> 0:13:03.760 platforms the likes of Hardbrea's fans that are mentioned twice. 0:13:03.800 --> 0:13:06.520 Now we've got to stop doing that and others who 0:13:06.559 --> 0:13:09.240 are going to bring in more kind of guidance to 0:13:09.280 --> 0:13:11.880 help customers as they manage their money through this process. 0:13:11.920 --> 0:13:13.640 But I don't think it's ever going to be simple. 0:13:14.000 --> 0:13:15.800 Okay, do you have to move your money? I mean, 0:13:15.880 --> 0:13:18.280 let's say, for example, your DC pension is with a 0:13:18.360 --> 0:13:20.400 VIVA with one of the big life insurance or something 0:13:20.440 --> 0:13:22.520 like that. I have a variety of mini dcs all 0:13:22.559 --> 0:13:24.160 over the place. One of them, I'm pretty sure it's 0:13:24.160 --> 0:13:25.920 with a Viva, possibly one of the worst, who knows, 0:13:25.920 --> 0:13:28.840 we'll check later. But once you get to retirement age, 0:13:30.040 --> 0:13:31.679 will they just keep that for you and manage it 0:13:31.760 --> 0:13:32.959 for you? Do you have to go off to a 0:13:33.000 --> 0:13:35.719 platform or can I just say to a Viva? This 0:13:36.280 --> 0:13:39.000 is really making my head hurt, just give me some 0:13:39.040 --> 0:13:39.760 money every month. 0:13:40.360 --> 0:13:42.360 I'm sure they would be delighted to help you with that. 0:13:42.400 --> 0:13:45.240 And Viva is one of the other financial institutions that 0:13:45.280 --> 0:13:48.680 definitely does offer a drawdown service, so so yeah, you could. 0:13:48.760 --> 0:13:51.800 They would manage that transition for you and help you 0:13:52.000 --> 0:13:54.720 just draw income from your retirement savings as you wish. 0:13:54.760 --> 0:13:57.040 So most of the big life insurance companies and the 0:13:57.040 --> 0:14:00.720 investment platforms they offer these kind of drawdown is And 0:14:00.800 --> 0:14:04.520 in fact, the DWP has just noticed the fact that 0:14:04.640 --> 0:14:07.960 all the big occupational pension schemes, the master trusts and 0:14:08.000 --> 0:14:12.680 the schemes run by employers, don't do this. And their 0:14:12.720 --> 0:14:15.520 approach hitherto has been to say, look, Mary, you've got 0:14:15.520 --> 0:14:17.679 to retirement. Well done, here's your bag of money, off 0:14:17.720 --> 0:14:19.960 you go, don't spend it all at once. And they've 0:14:20.000 --> 0:14:21.400 sort of woken up to the fact that it's a 0:14:21.440 --> 0:14:25.040 suboptimal real situation, and so they're now looking at bringing 0:14:25.200 --> 0:14:28.760 legislation to require all pension schemes to offer what they 0:14:28.800 --> 0:14:33.680 call guided to cumulation sort of default retirement income solutions, 0:14:33.720 --> 0:14:35.560 but no one's got as far as yet working out 0:14:35.640 --> 0:14:36.960 exactly what that will look like. 0:14:37.120 --> 0:14:40.640 You see, that makes me feel a tiny bit uncomfortable, actually, Tom, 0:14:40.640 --> 0:14:44.720 because one of the pros of the DC pension system, 0:14:44.760 --> 0:14:47.360 the New Order and ROMA DC pension system, is that 0:14:47.400 --> 0:14:49.920 people are at least at one point forced to engage. 0:14:50.000 --> 0:14:52.000 And you know, you talked about the old days earlier, 0:14:52.000 --> 0:14:54.920 and in the old days, your pension accumulated somewhere vaguely 0:14:55.000 --> 0:14:57.000 out of sight. It wasn't really anything to do with you. 0:14:57.040 --> 0:14:59.040 And then you got to the point of retirement and 0:14:59.120 --> 0:15:01.080 you had a sort of one and a half hour 0:15:01.800 --> 0:15:04.560 meeting with someone or you look, you received a letter 0:15:04.640 --> 0:15:06.600 and you ticked a box and someone provided you with 0:15:06.600 --> 0:15:09.840 an annuity, and you were You didn't have to engage, right, 0:15:09.880 --> 0:15:13.280 it was all done for you by big, faceless financial organizations. 0:15:13.280 --> 0:15:15.800 And if we get back to the point where you 0:15:15.920 --> 0:15:18.400 have an auto enrollment pension, which you really don't have 0:15:18.480 --> 0:15:20.040 very much to do with, I mean you could, but 0:15:20.080 --> 0:15:22.520 most people don't. It just happens out of sight. And 0:15:22.560 --> 0:15:26.600 then there are default options for draw down instead of 0:15:26.680 --> 0:15:29.320 having the you know, the new marvelous world of fully 0:15:29.360 --> 0:15:32.840 engaged financial semi. I was going to say, semi experts. 0:15:32.840 --> 0:15:35.040 That's absolutely not true. People who understand what's going on 0:15:35.080 --> 0:15:37.760 with their money are engaging with the financial industry. We're 0:15:37.800 --> 0:15:40.160 back to the old days any day now and the 0:15:40.200 --> 0:15:42.600 government will be requiring everyone to buy an annuity. 0:15:43.240 --> 0:15:46.520 Well well, and don't joke about that, Merin, because I 0:15:46.520 --> 0:15:49.320 think this government would be quite relaxed about introducing what 0:15:49.360 --> 0:15:53.120 they would call guardrails or controls or bumpers down the 0:15:53.200 --> 0:15:56.200 lane to help guide people in their retirement income strategy 0:15:56.240 --> 0:15:58.160 and avoid the risk of them all running out of money. 0:15:58.160 --> 0:16:00.360 And I think there was a legitimate public policy concerned 0:16:00.400 --> 0:16:02.760 that too many people will take too much money out, 0:16:02.880 --> 0:16:05.920 spend it all and then become a liability on the 0:16:05.920 --> 0:16:09.080 welfare state. And as you know, taxpayers, we might have 0:16:09.120 --> 0:16:12.200 feelings about that. So I think I think this government 0:16:12.280 --> 0:16:15.080 is looking in that direction and maybe reintroducing a degree 0:16:15.120 --> 0:16:17.040 of control around us. We haven't heard it yet, but 0:16:17.080 --> 0:16:19.880 I'm waiting for that. So about that could happen. But 0:16:19.920 --> 0:16:23.200 in the meantime, I think if they do introduce sort 0:16:23.200 --> 0:16:27.920 of guided default decumulation time strategies, they will always I 0:16:27.960 --> 0:16:30.560 think it's done with the intention of Look, when you 0:16:30.640 --> 0:16:32.400 knock on the door and say I need my money now, 0:16:32.440 --> 0:16:34.880 but I don't know what I'm doing, they will say, okay, well, 0:16:35.000 --> 0:16:38.560 let's walk you through a decision making process. Let's funnel 0:16:38.640 --> 0:16:41.320 you down to an outcome based on maybe a degree 0:16:41.320 --> 0:16:43.120 of questioning and a bit of interaction and a bit 0:16:43.120 --> 0:16:45.000 of people like you tend to do. This kind of 0:16:45.680 --> 0:16:48.520 process is rather than just put you know, one day 0:16:48.520 --> 0:16:50.920 a letter arrived saying, Hi, Mary, We've sorted your retirement 0:16:50.960 --> 0:16:52.480 income out for you, and here it. 0:16:52.360 --> 0:16:54.960 Is, and don't you worry about the charges. We've got 0:16:54.960 --> 0:16:58.960 that all under control thing. Okay. So a bit of 0:16:59.080 --> 0:17:00.200 just in time, education and a. 0:17:00.200 --> 0:17:02.200 Bit of nudge, you've got it. 0:17:02.280 --> 0:17:06.000 Yeah, okay, So what is our final advice to Mike? 0:17:07.720 --> 0:17:09.760 My final advice to Mike would be one talk to 0:17:09.840 --> 0:17:12.840 pension Wise. It's a free government service that's really helpful 0:17:12.880 --> 0:17:15.320 at walking people through the decision making process. It will 0:17:15.359 --> 0:17:18.840 empower you to have more informed conversations with your pension providers, 0:17:19.119 --> 0:17:21.600 and it is free. So so what's not to like 0:17:21.640 --> 0:17:23.879 about that other than you lose about forty five minutes 0:17:23.920 --> 0:17:25.840 of your life and it will probably be time well spent. 0:17:26.000 --> 0:17:30.640 So I'd encourage you to do that. Think about think 0:17:30.680 --> 0:17:32.359 about your standard of living. I think one of the 0:17:32.400 --> 0:17:35.560 biggest challenges people find as they approach retirement is knowing 0:17:35.920 --> 0:17:38.040 what income they need to live on and how to 0:17:38.040 --> 0:17:41.560 build in wriggle room around unexpected costs, and then think 0:17:41.600 --> 0:17:44.160 about how much certain income you want? You know, what's 0:17:44.200 --> 0:17:47.120 your what's your capacity for variability around all of that? 0:17:47.400 --> 0:17:50.840 And then from their start to think about, Okay, do 0:17:50.920 --> 0:17:53.000 I need some guaranteed income? Do I need an innuity? 0:17:53.080 --> 0:17:54.879 When does my state pension kick in? If I'm going 0:17:54.920 --> 0:17:59.560 to go into draw down? What's my tolerance for challenges? 0:17:59.600 --> 0:18:02.320 Who's offing good service? What are the investment choices? How 0:18:02.359 --> 0:18:04.119 active do I want to be with managing all of that? 0:18:04.720 --> 0:18:06.840 Take your time. This needs to run up at it. 0:18:07.000 --> 0:18:09.119 You can't all this in an afternoon. 0:18:09.640 --> 0:18:12.119 And that is why we get in the experts every 0:18:12.200 --> 0:18:14.840 now and then. Tom, thank you so much for joining us. 0:18:14.880 --> 0:18:18.000 My pleasure, Thank you, thanks. 0:18:17.800 --> 0:18:20.280 For listening to this week's Meren Talks Money. John, if 0:18:20.280 --> 0:18:22.320 you like to say thanks again, I talked over you. 0:18:22.359 --> 0:18:25.080 No, I cannot I do anything to the expert opinion there. 0:18:25.200 --> 0:18:27.520 I thought it was comprehensive and marvelous. 0:18:28.920 --> 0:18:31.199 Thanks for listening to this week's Meren Talks Money. If 0:18:31.240 --> 0:18:33.399 you like us, show Rage, review and subscribe wherever you 0:18:33.400 --> 0:18:35.639 listen to podcasts and keep sending questions or comments to 0:18:35.680 --> 0:18:38.280 Merriorn Money at Bloomberg dot nuts. You can also follow 0:18:38.320 --> 0:18:41.280 me and John on Twitter or X. I'm Maren, I'm 0:18:41.320 --> 0:18:44.680 as marins W and John is John Underscore STUFFECT. This 0:18:44.680 --> 0:18:46.920