RP – Live Q&A Apr 23 | Meaningful Academy

You are unauthorized to view this page.

Questions:

00:00:00 - Intro

00:01:43 - LIVE Q&A MARCH 23 video Pete mentioned that in Voyant Goals and Expenses are treated differently in some of the planning outcomes but from what I can tell did not actually explain.

00:05:04 - I hope you're well and thank you for creating such a fantastic Financial Education School. I have a question about transferring pension funds. We're planning on transferring all my husband's pensions into his current workplace pension as there are no admin or management fees. The pensions will be transferred in as cash. I feel it would be best to invest it into our chosen funds at regular intervals rather than as one big lump sum in case the markets are up at the point of investing. But as it is a large sum (6 figures) it will take a long time to drip feed it in, which means a lot of it will stay in cash until it is slowly invested which is not ideal. He will also carry on contributing his normal monthly salary sacrifice payments into the pension. The pension won't be drawn upon until 2032 when we plan to take out the tax free sum. So I'm not sure what would be the best option. Do you have any thoughts?

00:08:35 - How does tax relief work when someone is getting pension income? Defined Benefit pension pays annual £20k. Income from employment of £40k. £5k paid to DC pension - can higher rate tax relief be claimed? Is it as simple as adding up the income sources to get the tax band, even if one is not relevant earnings?

00:09:54 - Any progress on clarifying the rules wrt lump sum limits for those who have started a DB pension without taking a lump sum and still have a DC pot waiting to be accessed? Similar quest to Kevin Dawson where you have accessed DB and also taken lump sum leaving a % of the then LTA available for DC to be accessed. Any indication when HMRC clarity will be provided regarding available tax free element of DC pot?

00:10:44 - Is the small pots rule abolished with the LTA or can you still use this to get up to an extra £7,500 extra tax free cash?

00:11:14 - As a follow up to a previous question re opening a DC pension, how much can I contribute from previous years salaries? (I’ve not made pension contributions since 2015) I understand I could contribute up to £40k or my total earned income, which ever is highest, in each of the previous 3 tax years? (I know that’s gone up in last budget, but looking back former rules will apply, I assume) Also what is counted towards my total income? I have part time, self employment earnings plus my DB pension - is this included in my ‘total’ earnings or just my self employment earnings? When opening a personal pension at my stage of career (ie semi retired, planning to work P/T as long as possible 👍) does the government still add 25% on top of my total contribution, tax free or how is that actually done?

00:15:15 - Short version: What will cause funds of inflation-linked gilts to recover, given the c. 30% falls over the past year? Long version: Given how badly inflation-linked gilts were ravaged over the past 12 months, I'm trying to figure out whether it's reasonable to expect them to rise quickly in value again once yields start to return to something approaching normality. Unlike equities, where the companies have inherent value, the value of gilts appears to simply be compared to other gilts. The funds we own are full of long-dated gilts, few of which were issued at high interest rates. Given the likelihood of sustained higher interest rates, these linkers seem unlikely to be attractive to anyone again for quite some time. Will they simply crawl back up at their traditionally slow pace, effectively having "corrected" down by 30%?

00:18:11 - Any thoughts on a two-rung cashflow ladder with just 5 years of "cash" (split 50/50 between a money market fund and actual cash) and the rest in global equities? The goals would be simplicity and maximum growth, topping up the cash rung as part of an annual rebalancing, although I recognise some rule would need to be established to determine whether markets are "down". Can you tell I'm a bit disillusioned with bonds?

00:20:57 - I can’t make the live but have a question. I’ve just had a forecast from a previous employer. I have DB (15k per year from age 60 in 2027) plus around £240k DC in the same scheme. I was planning on not taking the tax free cash and doing OFPLUS (wrong acronym) but have since found out the tax free amount is 25% of the whole lot (DC but crucially also DB!!!!) so £140k instead of £60k. That’s a lot of tax free cash (80k) that I’d be missing out on if I didn’t take it. What would you advise in these circumstances. Ie instead of reducing my DB pension, all of the tax free cash would come out of my DC contributions, totalling more than half of my DC pot!

00:23:43 - We may be able to build a forever home in a couple of years. With bonds, cash and GIAs being less attractive for shorter term repositories i was thinking of buying a building site early in a consistently popular location near me. Then do the plans and wait until funds become available to build the house. Will this be a CGT nightmare if i do build the house and it becomes our main residence after selling ours or conversely if i decide we can't build and have to sell the site. I realise a building site would have no outgoings but also provide no income and a possible capital gain or... loss

00:25:40 - A question re: ETF/fund selection. Clearly we can look at TER and tracking as criteria but how much does fund size and potentially the associate spreads play into our thinking please? ie: could an ETF with a headline better TER but a larger spread be more expensive in a long run? I guess it depends on how frequently you are likely to buy/sell etc but just trying to work out how to think about it / whether to even worry about it at all. And as relevant ( hopefully ) sub question do you have any thought on min ETF size etc as the paradox seems to be there are seemingly good offers out that like LGGG ( other ETFs are available ) at good TER but small compared to others in that space to there is a school of thought that there is closure risk thank you.

00:29:02 - Hope you are well! Does your previous "post Truss" guidance on bonds used for years 3-5 still stand? As i understood this was to hold the asset allocations and not rebalance bonds and equities held. Im just wondering if you had further thoughts for this tax year after reviewing our portfolios. Bonds funds prices seem to have risen a little from rock bottom should we buy to return the portfolio to the target ratio or should we buy something else like things to cut household expenditure 3-5 years from now?

00:30:55 - I’m going part time at age 57 in September, and will need to top this up with around another £10k for the year. I will then finally retire fully a year later. My dilemma is whether to take my teacher DB pension early at 57, or leave it another year to grow (boost in about £700pa) with less actuarial reduction (including the cash free lump sum) and draw from my SIPP instead (£10k would be less than the 25% tax free I have in the SIPP). I know you can’t advise, but are you able to give your thoughts on the pros and cons of each of these – or am I overthinking this? Tried modelling in Voyant but not sure it left me any wiser. Many thanks.

00:33:40 - Generally with annuities, I understand that many people take a 25% tax free lump sum from their pension pot and then buy an annuity with the remaining 75% of the pot. What happens with an annuity if I don’t need the 25% tax-free lump sum and leave it in the pension pot and buy an annuity with the entire pot? Is it like UFPLUS when the 25% tax free element is effectively transferred to the pay out, with 25% of the pay-out being free of tax on top of the annual personal allowance, or is the tax free element lost if the lump sum isn’t taken when buying an annuity? I like the way that there is a tax-free boost on pay-out with UFPLUS and hope that it works the same with annuities if the 25% tax-free lump sum is left untouched in the pot. I remember that you seemed to be keen for people to consider not taking the 25% tax-free lump sum automatically, if people didn’t need the lump sum straight away when it came to drawdown and UFPLUS. Is this the same with annuities? Is there anything else that I should be considering if I don’t need the tax free lump sum and thinking about a lifetime RPI-linked annuity to provide a guaranteed level of base income for life?

00:38:25 - LGPS salary sacrifice Additional Voluntary Contributions (AVC)s Vs. Additional Pension Contributions (APCs). My employer is introducing a salary sacrifice AVC, which will allow 12% NI contributions to go into the pension. What are your thoughts as a person who regularly sees different schemes side by side (and regularly sees annuity purchase rates), on Local Government Pension Scheme (LGPS) APC compared with the new LGPS salary sacrifice AVC? The APC would add to the DC pot whereas the AVC would form a DC pot. For best/easiest side-by-side comparison, the APC would provide a CPI-linked income for life whereas the salary sacrifice AVC could be used to purchase an RPI-linked lifetime annuity with no protections or other pay-outs etc. to keep it simple. Both options would provide an index linked income for life. Which is the most optimal when comparing side by side? N.B. To help with the LGPS APC costs, the LGPS APC online calculator states the following: Regular payment from payroll, "Based on a Regular cost of £13.94 (before tax relief) per £100 of extra pension." And lump sum direct payment, "Based on a Lump sum cost of £1,292.00 (before tax relief) per £100 of extra pension."

00:42:23 - My brother has American General Electric ( GE Shares) .He is planning to sell and transfer the money to UK, but need to do Medallion signature guarantee waiver. An amount less than USD 10.000, can be transferred with a M S G Waiver. ( Hence, can be requested in two tranches as he has around 13000 ). Any thoughts on this?

00:43:53 - Please can I just ask whether you have any thoughts on or experience of (im)practicalities and pitfalls which might be encountered if my wife and I, in addition to being executors for each others wills and attorneys for the LPAs, also have our sons in those roles, the potential difficulty being that neither of them is UK resident (both in USA)? I guess that, so long as we have our investments with institutions that will work with non-UK based attorneys/executors, problems might only potentially occur further down the line when our sons have to take on those roles, if neither my wife nor I can no longer do so. I'm just trying to gain a wide a range of thoughts and opinions as possible in order to decide the best way forward before we go ahead with the process.

00:45:13 - We get enquiries for reviewing a Voyant Plan, giving an opinion on what someone is invested in. Can you briefly explain why Meaningful Money was created, why that has expanded into Meaningful Academy and why that is as much as can be done without falling under FCA regulations, and what the next step is for someone who wants to collaborate with an adviser.

00:49:58 - I run a small limited company and want to invest a sizeable sum of company cash into a GIA. Pension/ISA is maxed out for this year. Are there differences in the way the company will be taxed on the growth in a GIA depending whether I invest into an Acc or Income Fund? Further, I know I get taxed on the growth from the investment, would I also be taxed when taking that growth out of the company GIA as salary? I presume YES is the answer to that.

00:51:47 - My wife and I own our home as tenants-in-common 50:50. We bought our house in 2006 and that was the conventional wisdom at the time in order to make best use of the IHT allowance. I'm thinking this is not so relevant these days and owning the house jointly might be the way to go. The house has market value of over £1m now. Should we consider changing to become joint owners?

00:52:55 - Question ref 2016 LTA individual protection to enable a larger tax free amount - Is the DB value that counts toward this the current projected annual value at NRD of 60/65 provided by the scheme administrators multiplied by 20? Or is there a need to do the calculations based on a figure from 2016 which is obviously what I used for the DC portion of the total sum? I haven't contributed to the DB scheme since 2008 so wondered how the DB total would be any different 2016 vs now if it's based on projected value at NRD?

00:54:32 - My question is to what extent annual drawdowns from a DC pension are routinely planned around avoiding paying higher rate tax? My situation is that by the time I draw my state pension and all my DB pensions at age 66 I will have guaranteed income amounting to just under the higher rate of tax threshold. Therefore most of any drawdown under my DC pension pots from then on will attract a higher rate tax. As I have another 3 years until I reach that age, I have reasoned that it makes financial sense to drawdown from by DC pension savings now up to the higher rate of tax limit (after taking account of current DB and other income) so that I drawdown more at basic rate tax now, instead of drawing the same amount in the future at higher tax rates. I have modelled this scenario in VoyantGo and it shows, all other things being equal, that my net assets at mortality increase and my tax payment decrease as a result of this action. So it all feels very logical to do this. My question is an emotional one really – it is about paying a larger amount of tax now in the hope that I will pay less in the future as any drawings from the DC pensions in later years will, assuming tax rates are unchanged, be at a higher tax rate. It feels a bit uncomfortable paying tax now when in theory I don’t need to and ultimately tax rates and thresholds could change so this problem could disappear. We saw how sometimes the government can surprise us with unexpected tax changes, such as the recent abolition of Lifetime Allowance. Possibly a stupid / have-your-cake-and-it-eat type question from me but am interested in your views on this. Many thanks.

00:57:33 - I’m 56 and one month. I enquired about taking my DB pension now instead of at age 60 (normal age). Interesting. If I wait 3 years 11 months, it goes up by 35%!!!! So I’m waiting. Is this normal?

00:58:27 - Relevent Earnings that attrat tax relief.....What about income protection paid to emoyees by a policy purchased by employer for all employees thanks

00:59:46 - Ramin is pretty damning about linkers in general, but I know it's staple of financial planning in general so wondered if there was a strong argument to "keep the faith". I'm pondering gradually crystallising my losses on linkers and moving to the 2-rung ladder.

01:00:12 - I'm retired and taking income from mine and my wife's SIPPs and ISAs. Is there a 'best practise' way to split the cashflow ladder asset types across these accounts to simplify management, or do you just take the account landscape you are given by clients?

01:01:22 - Hi Pete, a behavioural issue! I've done my planning in V Go, and different scenarios (including not getting my French pension which is highly unlikely, but I'm still waiting for my quote six months later...). Either way we meet our goals but I cannot wrap my head around using our savings at a regular rate. I know it's crazy but any advice on this fear factor!?! I guess I'm worried if I've done things right in V Go.

01:04:20 - Re: the question on "annuity UFPLS", you could still buy an annuity with your tax free cash once it's crystallized - using an additional purchased life annuity.

Lessons in this Module: