WEBVTT - UK Smart Savings Dilemma: SIPP, ISA or LISA?

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio news, Marin Talks Money Listeners.

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<v Speaker 1>podcast offer. Welcome to Merren Talks Your Money, the personal

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<v Speaker 1>finance edition of Marin Talks Money. In these bonus podcasts,

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<v Speaker 1>we talk about the best strategies for making the most

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<v Speaker 1>of your money. I'm Maren sumstweb Editor at Large for

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<v Speaker 1>Bloomberg Ukay Wealth and with me today, senior borter and

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<v Speaker 1>author with the Money to Show the newsletter, John Steberg,

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<v Speaker 1>John him mel Okay. Now you know how we always

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<v Speaker 1>ask people to send in their questions in their comments.

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<v Speaker 2>Yes, we doo. Who thought they actually do? They actually do.

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<v Speaker 1>Thank you listeners, aver listening, and be for sending this

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<v Speaker 1>stuff in. And we've got a good one today. And

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<v Speaker 1>not only is it good one, but it's an easy

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<v Speaker 1>one and we like that in the question, right.

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<v Speaker 2>Yes, we love an easy question.

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<v Speaker 1>There's a lot going on at the moment. Almost all

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<v Speaker 1>questions are difficult. This one is not. And we particularly

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<v Speaker 1>like this one because you put flattery at the front.

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<v Speaker 1>And by the way, listeners, if you want us to

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<v Speaker 1>answer your question, flattery at the front is a really

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<v Speaker 1>good idea. So he starts off by saying, I love

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<v Speaker 1>the podcast. The banter between you and John is brilliant.

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<v Speaker 1>Oh god, we're gonna have to keep up the banter now.

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<v Speaker 1>And we're a podcast to you and made it in heaven.

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<v Speaker 1>We're going to put that on our marketing thinks. This

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<v Speaker 1>is this is how you get your question answered. So

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<v Speaker 1>could you please discuss in a future episode what young

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<v Speaker 1>saviors should prioritize between contributing to a SIP or an

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<v Speaker 1>itceup with an aim towards retirement. I'm twenty nine. I

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<v Speaker 1>aim save around twelve to fifteen per cent of my

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<v Speaker 1>income for retirement. Well done. I've prioritized retirement saving since

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<v Speaker 1>my first job. Currently, my penching contributions are eight percent

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<v Speaker 1>via auto enrollment, and the rest of my savings go

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<v Speaker 1>into a SIP. Although I normally try to save money

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<v Speaker 1>separately into an ISA, I generally don't reach the twenty

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<v Speaker 1>thousand pounds limit, and this year not much has gone.

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<v Speaker 1>In dued cost of living crisis and prioritizing the step

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<v Speaker 1>that empty my eye said by a flat and pay

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<v Speaker 1>for a course that would allow me to change careers. Again,

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<v Speaker 1>well done. If I've been prioritizing my SIP, I know

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<v Speaker 1>that an iSER isn't really equivalent to the US roth IRA,

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<v Speaker 1>which is more of a dedicated retirement wrapper, and maybe

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<v Speaker 1>a Lisa is better. So I think the question really

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<v Speaker 1>here is what should I do? Should I keep putting

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<v Speaker 1>money into a SIP. Should I go for a Lisa

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<v Speaker 1>or Elsa?

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<v Speaker 2>What do you say, John, I mean, I thought this.

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<v Speaker 2>I thought this was an interesting point.

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<v Speaker 1>I'm asking you how to pronounce Lisa or e Lisa.

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<v Speaker 2>Oh. I would go with Elisa Elisa because Isa meiser Lisa.

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<v Speaker 2>I mean Lisa kind of makes more sense. But Lisa Isa.

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<v Speaker 1>Anyway, Either way there's that. So his question is should

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<v Speaker 1>his after his eight percent enrollment, should it go into

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<v Speaker 1>an ISA, should it go into ALYSER, or should it

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<v Speaker 1>go into a SIP. I know what I think? What

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<v Speaker 1>do you think?

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<v Speaker 2>We honestly, the fact that they've already got eight percent

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<v Speaker 2>or to enrollment, my preference would be to go for

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<v Speaker 2>the iSER. Also, I mean ELISA would be good because

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<v Speaker 2>they can still get one at the age and then

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<v Speaker 2>you get that bumped top by a thousand pounds.

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<v Speaker 1>You know, I am very suspicious of the LISA. So

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<v Speaker 1>Eliza is it's a lifetime ISO, right, and you can

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<v Speaker 1>put four thousand pounds a year into it if you're

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<v Speaker 1>under forty, I should not.

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<v Speaker 2>Sorry, hold on you. They've already bought a flat. You

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<v Speaker 2>already got a flat, okay in that case, So yeah,

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<v Speaker 2>the reason why you have to hang on't it.

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<v Speaker 1>Yeah, but there's more reasons to be suspicious of it anyway. Right,

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<v Speaker 1>So you can put him four thousand pounds a year

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<v Speaker 1>that comes off your twenty thousand pounds allowance. If that

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<v Speaker 1>leads you sixteen thousand pounds your normal Liza put in

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<v Speaker 1>your four thousand, and the Government's like, this is so great,

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<v Speaker 1>we're gonna prop you up. We're gonna put twenty percent on.

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<v Speaker 1>Now you've got five thousand pounds hooray, right, exactly four

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<v Speaker 1>that you have to spend it. I have take it out,

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<v Speaker 1>put it on deposit on a house or a flat,

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<v Speaker 1>but only up to a limit of four hundred and

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<v Speaker 1>fifty thousand pounds and are very successful person here maybe

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<v Speaker 1>wants to buy a house more than that valued.

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<v Speaker 2>And also yes to a frost tame buyer, you have

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<v Speaker 2>to be a first time buyer. Will not anymore or

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<v Speaker 2>you can't take it.

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<v Speaker 1>Out until you're sixty. And if you think that a

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<v Speaker 1>normal FIP or a SIP or an actual retirement product,

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<v Speaker 1>actually for this person it'll be I think fifty seven

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<v Speaker 1>because that's where it goes up to in twenty ninety eight, right,

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<v Speaker 1>and it may go higher than that, but nonetheless your

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<v Speaker 1>money is tied up for an extra three years. Now,

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<v Speaker 1>if you change your mind, with a normal ISA, you

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<v Speaker 1>can just take the money out, no problem, no penalty,

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<v Speaker 1>I think going on that. But with this, if you

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<v Speaker 1>take it out, they charge you twenty five percent of

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<v Speaker 1>the value of what you take out. And you might say,

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<v Speaker 1>well that's okay, I got topped up to twenty five percent,

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<v Speaker 1>But of course that's not how percentages.

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<v Speaker 2>Work, is it.

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<v Speaker 1>So they top you up by one thousand pounds. Now

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<v Speaker 1>you've got five thousand pounds, and maybe you make some

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<v Speaker 1>returns on that. But let's say today's a five thousand

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<v Speaker 1>pounds you want to take it out. They're taking away

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<v Speaker 1>twenty five percent. How much are they taking not one

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<v Speaker 1>thousand pounds but one two hundred and fifty pounds, And

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<v Speaker 1>for me that is a deal breaker. That is a

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<v Speaker 1>deal breaker. So you effectively do not have access to

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<v Speaker 1>your money without paying fairly substantial penalty or waiting into

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<v Speaker 1>your sixty So I would never take that. I don't

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<v Speaker 1>think opinions may differ over an ordinaryiser in the first place.

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<v Speaker 2>Not you're really I think especially the fact they've already

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<v Speaker 2>bought a host, because I think that's we are done,

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<v Speaker 2>may be a deference. But basically what they're saying is that, well,

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<v Speaker 2>should I put as we form my retirement? You're like, well, actually,

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<v Speaker 2>you get the same benefit if you put it in

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<v Speaker 2>a set And the only may not problem is that

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<v Speaker 2>you have to keep it for retirement rather than being

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<v Speaker 2>able to take.

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<v Speaker 1>Anyway. And in fact, I'm slightly assuming, given at this

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<v Speaker 1>and totally on top of everything, that they're going to

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<v Speaker 1>be a higher rate taxpayer anyway, in which case.

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<v Speaker 2>Yes, oh yeah, exactly, Yeah.

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<v Speaker 1>Might well put money into the SIP rather than into

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<v Speaker 1>a LISA. However, choosing between a SIP and an I sir, yeah,

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<v Speaker 1>I said, I.

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<v Speaker 2>Sir, noose theizes because of the political risk. However, there

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<v Speaker 2>is there's another wrinkle here low because well, it depends

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<v Speaker 2>on what they're earning at the moment, because so they're

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<v Speaker 2>getting ready salary sacrifice in twenty twenty eight, sorry, not

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<v Speaker 2>getting ready at but cutting it right down to two

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<v Speaker 2>thousand pounds from at the moment unlimited. So my inclination,

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<v Speaker 2>especially well if you're a higher earner, as I suspect

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<v Speaker 2>this person is, would be to overweight your pension contributions

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<v Speaker 2>while you can steal salary sacrifice, because for example, if

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<v Speaker 2>you're ran over one hundred thousand pounds, you want to

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<v Speaker 2>if you can do salary sacrifice to get your number

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<v Speaker 2>down to below one hundred thousand. So I think that

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<v Speaker 2>is the one issue that's worth considering here because normally

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<v Speaker 2>I would say you're putting plenty in your pension there's

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<v Speaker 2>political risk with a pension that you don't get as

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<v Speaker 2>much by an iSER, so fill up your eyes instead.

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<v Speaker 2>But for just this time being, before the salary sacrifice

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<v Speaker 2>rules get cut, it might be worth putting more into

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<v Speaker 2>your pension, you know, depending on exactly where you are

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<v Speaker 2>on the salary bind Yeah.

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<v Speaker 1>And the political risk is the constantly changing rules. Yeah,

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<v Speaker 1>on annual allowances, on lifetime allowances, you know something, they

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<v Speaker 1>take them away, they put them back, the change the level,

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<v Speaker 1>et cetera, et cetera. And there's also, of course the

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<v Speaker 1>longer term political risk that it may be that your

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<v Speaker 1>pension money is mandated dishifting.

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<v Speaker 2>Shifting or the other.

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<v Speaker 1>I mean, there's lots to talk around this on different

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<v Speaker 1>types of pension, and no one has yet said, by

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<v Speaker 1>the way and just sip, you know, this could eatually

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<v Speaker 1>be coming.

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<v Speaker 2>I think people don't think about political risk enough because

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<v Speaker 2>there's a sense of I mean, I think maybe they

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<v Speaker 2>do now because politics has got quite a bit more chaotic.

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<v Speaker 2>But for example, if say the Green Party did win

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<v Speaker 2>the next election, and say the Labor Party had managed

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<v Speaker 2>to push through the pension mandating, then you know, you

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<v Speaker 2>don't know how much your pension might get harnessed to

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<v Speaker 2>you know, building windmills or whatever. And I think that

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<v Speaker 2>that's well, that's the main reason to be more worried

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<v Speaker 2>about a pension, and.

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<v Speaker 1>There's more of a financial oppression risk with a pension.

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<v Speaker 2>Yeah, it's absolutely and that's only because you can basically

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<v Speaker 2>instantly access your eyeser because there's plenty of things they

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<v Speaker 2>can do to screw up your eyes as well, but

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<v Speaker 2>if they do it, you can take the money out.

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<v Speaker 2>Where there's a bit of pension, you really are stuck.

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<v Speaker 2>And also, pensions are very visible form of wealth. And

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<v Speaker 2>the problem is it's a visible form of wealth. It

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<v Speaker 2>really just depends on what age you are. You know.

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<v Speaker 2>It's like if you've got, you know, a few hundred

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<v Speaker 2>thousand pounds in your pension, it's probably just because you're

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<v Speaker 2>a bit older than you've been working for longer. It's

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<v Speaker 2>not necessarily because you are inherently rich. But it's just

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<v Speaker 2>money that's just sitting there in populous Politicians can kind

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<v Speaker 2>of shout about how wealthy you people are and take

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<v Speaker 2>a chunk away from it, and the lobways have somebody

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<v Speaker 2>supporting them who has less money than you. So I

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<v Speaker 2>do think that's definitely worth thinking about.

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<v Speaker 1>So I think that's pretty straightforward.

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<v Speaker 2>M Yes, I think so, No, sir, No, sir, and.

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<v Speaker 1>Longer term prioritize and ice river sat. By the way,

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<v Speaker 1>these are purely opinions. This is not advice. John and

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<v Speaker 1>I are absolutely not giving you financial advice. We are

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<v Speaker 1>simply riffing on our own opinions around these different rappers.

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<v Speaker 2>Yes, and we are. Actually I would say in place

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<v Speaker 2>that a twenty nine year old is this together to

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<v Speaker 2>be able to put together even an email like that?

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<v Speaker 2>And saying that, and I think they probably old lady

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<v Speaker 2>with the answerism, I'll just reassuring them.

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<v Speaker 1>Yeah, we're very admiring with the young now wor old

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<v Speaker 1>enough to call people younger than us the young, aren't

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<v Speaker 1>We definitely right? Thanks for listening to this week's Mary

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<v Speaker 1>Jogs Your Money. If you like ours, share, rate, review,

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<v Speaker 1>and subscribe wherever you listen to podcasts. Although we should

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<v Speaker 1>follow me and John on Twitter x at maryns W

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<v Speaker 1>and John Underscore step Back. This episode was produced by

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<v Speaker 1>Samasadi and most of the questions to was on this

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<v Speaker 1>show and flattery of course and all our shows always

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<v Speaker 1>welcome our show email is are in money atliebook dot

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<v Speaker 1>net

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<v Speaker 2>MHM