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Speaker 1: podcast offer. Welcome to Merren Talks Your Money, the personal
Speaker 1: finance edition of Marin Talks Money. In these bonus podcasts,
Speaker 1: we talk about the best strategies for making the most
Speaker 1: of your money. I'm Maren sumstweb Editor at Large for
Speaker 1: Bloomberg Ukay Wealth and with me today, senior borter and
Speaker 1: author with the Money to Show the newsletter, John Steberg,
Speaker 1: John him mel Okay. Now you know how we always
Speaker 1: ask people to send in their questions in their comments.
Speaker 2: Yes, we doo. Who thought they actually do? They actually do.
Speaker 1: Thank you listeners, aver listening, and be for sending this
Speaker 1: stuff in. And we've got a good one today. And
Speaker 1: not only is it good one, but it's an easy
Speaker 1: one and we like that in the question, right.
Speaker 2: Yes, we love an easy question.
Speaker 1: There's a lot going on at the moment. Almost all
Speaker 1: questions are difficult. This one is not. And we particularly
Speaker 1: like this one because you put flattery at the front.
Speaker 1: And by the way, listeners, if you want us to
Speaker 1: answer your question, flattery at the front is a really
Speaker 1: good idea. So he starts off by saying, I love
Speaker 1: the podcast. The banter between you and John is brilliant.
Speaker 1: Oh god, we're gonna have to keep up the banter now.
Speaker 1: And we're a podcast to you and made it in heaven.
Speaker 1: We're going to put that on our marketing thinks. This
Speaker 1: is this is how you get your question answered. So
Speaker 1: could you please discuss in a future episode what young
Speaker 1: saviors should prioritize between contributing to a SIP or an
Speaker 1: itceup with an aim towards retirement. I'm twenty nine. I
Speaker 1: aim save around twelve to fifteen per cent of my
Speaker 1: income for retirement. Well done. I've prioritized retirement saving since
Speaker 1: my first job. Currently, my penching contributions are eight percent
Speaker 1: via auto enrollment, and the rest of my savings go
Speaker 1: into a SIP. Although I normally try to save money
Speaker 1: separately into an ISA, I generally don't reach the twenty
Speaker 1: thousand pounds limit, and this year not much has gone.
Speaker 1: In dued cost of living crisis and prioritizing the step
Speaker 1: that empty my eye said by a flat and pay
Speaker 1: for a course that would allow me to change careers. Again,
Speaker 1: well done. If I've been prioritizing my SIP, I know
Speaker 1: that an iSER isn't really equivalent to the US roth IRA,
Speaker 1: which is more of a dedicated retirement wrapper, and maybe
Speaker 1: a Lisa is better. So I think the question really
Speaker 1: here is what should I do? Should I keep putting
Speaker 1: money into a SIP. Should I go for a Lisa
Speaker 1: or Elsa?
Speaker 2: What do you say, John, I mean, I thought this.
Speaker 2: I thought this was an interesting point.
Speaker 1: I'm asking you how to pronounce Lisa or e Lisa.
Speaker 2: Oh. I would go with Elisa Elisa because Isa meiser Lisa.
Speaker 2: I mean Lisa kind of makes more sense. But Lisa Isa.
Speaker 1: Anyway, Either way there's that. So his question is should
Speaker 1: his after his eight percent enrollment, should it go into
Speaker 1: an ISA, should it go into ALYSER, or should it
Speaker 1: go into a SIP. I know what I think? What
Speaker 1: do you think?
Speaker 2: We honestly, the fact that they've already got eight percent
Speaker 2: or to enrollment, my preference would be to go for
Speaker 2: the iSER. Also, I mean ELISA would be good because
Speaker 2: they can still get one at the age and then
Speaker 2: you get that bumped top by a thousand pounds.
Speaker 1: You know, I am very suspicious of the LISA. So
Speaker 1: Eliza is it's a lifetime ISO, right, and you can
Speaker 1: put four thousand pounds a year into it if you're
Speaker 1: under forty, I should not.
Speaker 2: Sorry, hold on you. They've already bought a flat. You
Speaker 2: already got a flat, okay in that case, So yeah,
Speaker 2: the reason why you have to hang on't it.
Speaker 1: Yeah, but there's more reasons to be suspicious of it anyway. Right,
Speaker 1: So you can put him four thousand pounds a year
Speaker 1: that comes off your twenty thousand pounds allowance. If that
Speaker 1: leads you sixteen thousand pounds your normal Liza put in
Speaker 1: your four thousand, and the Government's like, this is so great,
Speaker 1: we're gonna prop you up. We're gonna put twenty percent on.
Speaker 1: Now you've got five thousand pounds hooray, right, exactly four
Speaker 1: that you have to spend it. I have take it out,
Speaker 1: put it on deposit on a house or a flat,
Speaker 1: but only up to a limit of four hundred and
Speaker 1: fifty thousand pounds and are very successful person here maybe
Speaker 1: wants to buy a house more than that valued.
Speaker 2: And also yes to a frost tame buyer, you have
Speaker 2: to be a first time buyer. Will not anymore or
Speaker 2: you can't take it.
Speaker 1: Out until you're sixty. And if you think that a
Speaker 1: normal FIP or a SIP or an actual retirement product,
Speaker 1: actually for this person it'll be I think fifty seven
Speaker 1: because that's where it goes up to in twenty ninety eight, right,
Speaker 1: and it may go higher than that, but nonetheless your
Speaker 1: money is tied up for an extra three years. Now,
Speaker 1: if you change your mind, with a normal ISA, you
Speaker 1: can just take the money out, no problem, no penalty,
Speaker 1: I think going on that. But with this, if you
Speaker 1: take it out, they charge you twenty five percent of
Speaker 1: the value of what you take out. And you might say,
Speaker 1: well that's okay, I got topped up to twenty five percent,
Speaker 1: But of course that's not how percentages.
Speaker 2: Work, is it.
Speaker 1: So they top you up by one thousand pounds. Now
Speaker 1: you've got five thousand pounds, and maybe you make some
Speaker 1: returns on that. But let's say today's a five thousand
Speaker 1: pounds you want to take it out. They're taking away
Speaker 1: twenty five percent. How much are they taking not one
Speaker 1: thousand pounds but one two hundred and fifty pounds, And
Speaker 1: for me that is a deal breaker. That is a
Speaker 1: deal breaker. So you effectively do not have access to
Speaker 1: your money without paying fairly substantial penalty or waiting into
Speaker 1: your sixty So I would never take that. I don't
Speaker 1: think opinions may differ over an ordinaryiser in the first place.
Speaker 2: Not you're really I think especially the fact they've already
Speaker 2: bought a host, because I think that's we are done,
Speaker 2: may be a deference. But basically what they're saying is that, well,
Speaker 2: should I put as we form my retirement? You're like, well, actually,
Speaker 2: you get the same benefit if you put it in
Speaker 2: a set And the only may not problem is that
Speaker 2: you have to keep it for retirement rather than being
Speaker 2: able to take.
Speaker 1: Anyway. And in fact, I'm slightly assuming, given at this
Speaker 1: and totally on top of everything, that they're going to
Speaker 1: be a higher rate taxpayer anyway, in which case.
Speaker 2: Yes, oh yeah, exactly, Yeah.
Speaker 1: Might well put money into the SIP rather than into
Speaker 1: a LISA. However, choosing between a SIP and an I sir, yeah,
Speaker 1: I said, I.
Speaker 2: Sir, noose theizes because of the political risk. However, there
Speaker 2: is there's another wrinkle here low because well, it depends
Speaker 2: on what they're earning at the moment, because so they're
Speaker 2: getting ready salary sacrifice in twenty twenty eight, sorry, not
Speaker 2: getting ready at but cutting it right down to two
Speaker 2: thousand pounds from at the moment unlimited. So my inclination,
Speaker 2: especially well if you're a higher earner, as I suspect
Speaker 2: this person is, would be to overweight your pension contributions
Speaker 2: while you can steal salary sacrifice, because for example, if
Speaker 2: you're ran over one hundred thousand pounds, you want to
Speaker 2: if you can do salary sacrifice to get your number
Speaker 2: down to below one hundred thousand. So I think that
Speaker 2: is the one issue that's worth considering here because normally
Speaker 2: I would say you're putting plenty in your pension there's
Speaker 2: political risk with a pension that you don't get as
Speaker 2: much by an iSER, so fill up your eyes instead.
Speaker 2: But for just this time being, before the salary sacrifice
Speaker 2: rules get cut, it might be worth putting more into
Speaker 2: your pension, you know, depending on exactly where you are
Speaker 2: on the salary bind Yeah.
Speaker 1: And the political risk is the constantly changing rules. Yeah,
Speaker 1: on annual allowances, on lifetime allowances, you know something, they
Speaker 1: take them away, they put them back, the change the level,
Speaker 1: et cetera, et cetera. And there's also, of course the
Speaker 1: longer term political risk that it may be that your
Speaker 1: pension money is mandated dishifting.
Speaker 2: Shifting or the other.
Speaker 1: I mean, there's lots to talk around this on different
Speaker 1: types of pension, and no one has yet said, by
Speaker 1: the way and just sip, you know, this could eatually
Speaker 1: be coming.
Speaker 2: I think people don't think about political risk enough because
Speaker 2: there's a sense of I mean, I think maybe they
Speaker 2: do now because politics has got quite a bit more chaotic.
Speaker 2: But for example, if say the Green Party did win
Speaker 2: the next election, and say the Labor Party had managed
Speaker 2: to push through the pension mandating, then you know, you
Speaker 2: don't know how much your pension might get harnessed to
Speaker 2: you know, building windmills or whatever. And I think that
Speaker 2: that's well, that's the main reason to be more worried
Speaker 2: about a pension, and.
Speaker 1: There's more of a financial oppression risk with a pension.
Speaker 2: Yeah, it's absolutely and that's only because you can basically
Speaker 2: instantly access your eyeser because there's plenty of things they
Speaker 2: can do to screw up your eyes as well, but
Speaker 2: if they do it, you can take the money out.
Speaker 2: Where there's a bit of pension, you really are stuck.
Speaker 2: And also, pensions are very visible form of wealth. And
Speaker 2: the problem is it's a visible form of wealth. It
Speaker 2: really just depends on what age you are. You know.
Speaker 2: It's like if you've got, you know, a few hundred
Speaker 2: thousand pounds in your pension, it's probably just because you're
Speaker 2: a bit older than you've been working for longer. It's
Speaker 2: not necessarily because you are inherently rich. But it's just
Speaker 2: money that's just sitting there in populous Politicians can kind
Speaker 2: of shout about how wealthy you people are and take
Speaker 2: a chunk away from it, and the lobways have somebody
Speaker 2: supporting them who has less money than you. So I
Speaker 2: do think that's definitely worth thinking about.
Speaker 1: So I think that's pretty straightforward.
Speaker 2: M Yes, I think so, No, sir, No, sir, and.
Speaker 1: Longer term prioritize and ice river sat. By the way,
Speaker 1: these are purely opinions. This is not advice. John and
Speaker 1: I are absolutely not giving you financial advice. We are
Speaker 1: simply riffing on our own opinions around these different rappers.
Speaker 2: Yes, and we are. Actually I would say in place
Speaker 2: that a twenty nine year old is this together to
Speaker 2: be able to put together even an email like that?
Speaker 2: And saying that, and I think they probably old lady
Speaker 2: with the answerism, I'll just reassuring them.
Speaker 1: Yeah, we're very admiring with the young now wor old
Speaker 1: enough to call people younger than us the young, aren't
Speaker 1: We definitely right? Thanks for listening to this week's Mary
Speaker 1: Jogs Your Money. If you like ours, share, rate, review,
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