AI Could Destroy Humanity... Should Investors Be Worried?

0:00Hi, welcome to the Agile Bell Money Markets podcast. I'm Dan Coatesworth and joining me today is Sarah Coles. Hi, Sarah. Hi, Dan. It's good to be back. This is actually my first podcast after the summer break and it does feel like I'm coming back to quite a lot because there's just so much to talk about, including rather alarmingly the end of the world. I know tech experts are now talking about whether AI can kill off humanity. So with that in mind, we're going to chat a lot about AI in the show. I also spoke to tech journalists, Will Giett, about whether AI can actually play a positive role for investors. We're also going to explore what else has been moving on the markets, including headline grabbing bond sell-off. Yeah, and on the back of your really interesting chat with Danny last time about student finances, we actually are going to hear from a couple of listeners about the approaches that they've taken. And obviously it's something that I know I'm facing this year, and it's weighing quite heavily on my mind at the moment. Plus, I've got some less cheering news

1:03about what the new term can mean for relationships and how to protect your finances from the fall at her. There's been a lot of interesting data out this week, including wage data that gives us an idea about how the state pension will rise next April. So we're going to have a look at the implications of that. There's also some savings data out. So we'll have a look at the world of ISIS with that. And of course, we've got inflation, or just as recording this, has really gone up by 3.1% over the last month. I have to say, I think now my teenage son has returned my spending has definitely gone up more than 3.1%. But that's just, and finally, there's a new report into the gender pentan's gap. So we'll explore the findings and share some tips of what people can do to boost their pension if their life and work or working part-time. So there's loads to discuss, but we really should start with the end of the world. It does feel like we should avoid having that elephant in the room for too long. So senior tech bros have been warning that AI could be getting too powerful too quickly and could wipe us all out. So has this had an impact on the sector for investment? I mean, it's like, it's pretty alarming

2:07stuff. So this is sort of, I'm sure most people listening or watching this podcast will have sort of caught those news. But if not, we have the boss of Anthropic, which is one of the AI platforms Claude coming out and basically urging all the AI sort of big platforms to voluntarily work together, try and set some standards. And what it was is that the crux of this sort of thing was is warning that AI technology is actually advancing dramatically faster since the summer and could be capable of taking over the entire internet and causing hundreds of billions of dollars in damage in the next six to 12 months. So as bad as alarming as you can get and we've got a chap called J. Cooke's son who's a researcher at Anthropic had said last week that he'd actually resigned from the company because he said the people building AI earnestly believe it could kill us all by the end of the decade. So how on earth do we deal with all that information? So of course this is naturally led to people debating about should there be a kill switch if everyone's sort of now thinking that what if these AI platforms get out of hand and cause terrible damage? Donald

3:14jumpers come out and said of course we don't need all this stuff just let them do their thing Nvidia boss Jensen Huang he's come out and dismissed the idea of really tough AI regulation and he was talking at a conference in San Francisco saying companies should be responsible for the safety of their own tools and they should decide themselves whether they should you know should they release or not release dangerous products. So you know I think that obviously when you've got the boss of the person who you know as a the company's at the center of supplying chips into the AI industry they're coming out and sort of being quite relaxed the president the United States being quite relaxed. He's like who's right or wrong here. Now Jensen Huang did say he said run as fast you can but if you feel that if you're not in control take a pause obviously that sort of you know that's that's a sort of a sensual approach but Sarah I wanted to just I wanted to sort of mention this on the podcast and I don't know whether anyone you know obviously watching it is

4:15coddened on to it. There's another company called TSMC which is Taiwan's Semin Conductors this is the world's largest AI chip manufacturer. Someone there came out and said it was basically comparing AI to a three-year-old Superman basically saying AI can be quite powerful but doesn't know what kind of damage it can inflict and I thought I thought that was that was a pretty accurate description and it's like what were you alarmed by all this news when you read it? I think yes obviously it's so alarming you just kind of your brain protects you from it by just assuming it can't be right. I mean I think it's it is difficult obviously the you know the lots of people saying no it's fine look look the other way is obviously always a bit of a red hair it's always a bit of an alarm bell when people kind of try and tell you not to worry but I mean in terms of how the markets have responded to have the markets kind of taken it with a pinch of salt or are they kind of thinking this could mean more controls on AI and therefore it's less of an investment opportunity.

5:15Well I think we've had I don't think anyone could disagree that this AI has been the hot investment theme for the last couple of years. I think people think there's all about this race to who has the most powerful, the most sophisticated system, how our businesses and consumers going to be using it. It's all very exciting. This has been a really important wake-up call that there are major risks involved with AI and therefore any company connected to this world needs to be aware of it. Any investor thinking about opportunities here needs to understand that somethings could go wrong as well as go right. Now the headlines that we've seen were suggested if if something goes wrong it could go very very wrong but you know the idea that people should be really appraising AI investments. I think this should be a positive. It should remind people that you got to think about what could go wrong as well as go right. Now obviously it puts a spotlight on will there be

6:16greater regulation? What happens if these things are getting out of hand? Are these companies just developing things too fast? Does this mean the pace of earnings growth for the AI, the broad AI sector could actually be a little bit slower? I think this is a natural discovery moment here. Markets wobbled a little bit for this for a couple of days. It didn't help that they also had worries about a high oil price, high inflation, what that meant for interest rates and stuff. But I think a more considered rational approach is probably quite a good thing taking some of the heat out of the market. So yeah, perhaps we could see in a couple of weeks is all these companies come out and say like yeah we'll take the foot off the pedal a little bit but I guess it's it's a natural next step to try and think about these things. And I guess presumably it's also a big boost for you know all those companies that can benefit from masses masses of prep. So lots of

7:21tin can companies and toilet oil companies and that sort of thing. Yeah, Hannecks and Builds are own bunkers. It's true because we have seen, you know last few days we have seen lots of people looking at healthcare stocks and utility stocks going on crikey. Perhaps I need some boring stuff as well as the excitement in their portfolio. I guess AI is always going to bring a little bit of excitement and we've obviously had these scare stories for a long time but actually you know you've also been exploring some of these positives in the way that AI can actually help investors. So Dan recently caught up with a tech expert who lives and breathes AI. So let's hear that interview now. A lot of people get into grips with AI and seeing how useful it can be and that actually includes asking for help with investing. So here to talk about AI and how people are perhaps using it from a financial perspective is leading tech journalist will guiots. So wills a regular commentator on BBC Radio and LBC. We're very excited to have them on the Agable podcast. So hi there Will, how's it going? Yeah, very good and I'm here for the reason to talk about AI but hopefully pick

8:25up a few tips from you at the same time because I can talk quite confidently about AI but investing is something that's quite new to me and actually I have to say AI has helped me to an extent. So yeah. I mean this is it's a fascinating topic because I think lots of people look say that they you know investing is not always straightforward people often just they go to Google and you know where to get some help but obviously AI the way that serves up the information is a lot I guess it's a lot easier for understands. So I mean from when you were doing a bit of research then to sort of think how can AI actually help me what did you find? Well I know having written in my other parts of my career 200 page annual reports for companies just how hard it is to actually find the information about how companies are performing. So if you run something like an annual report through an AI chat bot and say pick out all the pertinent things to me I'm considering investing it's really useful. Never trust anything AI tells you at the moment though that's the one

9:26thing I'm going to say use it as a lens it's not crystal ball it's not going to predict the future and it's not always accurate because until very recently AI convincingly told everybody that I was hosting the weekend breakfast show on ABC we should have been a very big surprise to my boss at the station because it isn't something that I was doing but it said it with incredible conviction. So especially if you're looking at something like investing take this as information maybe look for look elsewhere see what other people are saying about these bits and pieces it's quite useful as a research assistant at the moment I'd say or a bit of a sparring partner but don't take it as the you know ultimate advice of you know and and you're the person who's the expert on this but I wouldn't use artificial intelligence at the moment as my financial advisor I might use it say I've spoke I've looked at AI and take it to a human being and say what do you think about these two or three things that's probably what I would do if I was using it at the moment but importantly it's moving really quickly and I would say today is you know infinitely more better and more insightful

10:32and getting closer to accuracy than it was even a couple of years ago I think I just want to ask you whether you thought that you know when you're using AI whether it's for investing or whether it's for anything does it sort of encourage you to to take shortcuts and ultimately because that actually leads to mistakes because you're not really putting as much effort into your research because it's trying to make your life easier oh yeah exactly and there's so many reasons in that outside of investing in everything else the AI makes you dumber because you literally put something into it many people just take that and accept it I would say you know if I'm looking at something like this trust it in the way you treat a really well-read friend the bloke at the pub who knows a lot about something not the person sat at the end of the bar coming up with you know different theories for different things so I would sort of say it's kind of it's a support at the moment you know it's kind of right on certain concepts and bits and pieces of information but it can absolutely still get stuff wrong but give you false answers with such conviction that you think it's true so you know

11:37that's kind of where I see it the moment it's it's useful it's getting more reliable but don't don't make it your last line of defense yeah yeah because I think it's it's natural to sort of type in to say like ask a question like is this a good investment and I wonder if there is a like you say big risk that people actually think that this is fact it's not just deep in your yeah and that's the big challenge of AI at the moment these companies have designed these large language model chat bots to agree with you most of the time so you spend time using it if it said down I think you're a claim you've got this completely wrong you're going to go well stuff this and go somewhere else but if it says oh great suggestion Dan you you know you're on the right track etc etc etc it has a habit of sort of talking authoritatively about something and and leading you to the courage of your own convictions and not necessarily again in the world of investing but I hear that countless times in other places we've heard of people who you know are people who may have had other issues at mental issues and other things outside suggesting

12:42stuff to AI and it's saying that's a great idea and literally selling their house to go and create an idea which was absolute guff which the AI chat but I'd agreed with because it wanted to be seen as siding with the human that was operating it so there's always an element of that and like I say if we sort of go back to the primary point there's a lot of use in this as a research partner but don't don't let it think for you yeah I mean I think there's there's sort of two two ways we can look at AI from an investment perspective one is the general public just asking questions and asking for more information the other one is kind of like businesses how do they use AI and so we've got obviously got lots of fun managers who are picking sort of investments on the half of of investors yeah I wondered whether you'd come across any sort of interesting information about how how might fun managers or anyone in the investment industry actually be using AI internally is it simply to just run spreadsheets to calculations or is there a sort of evidence that now

13:44actually doing all the work that they used to do themselves I think that a lot of them are still at pilot stage and I know there was a survey for mercer's of 131 asset managers in this year and I think 55% said they've integrated it into at least one investment process but most of them are still at pilot stage and you know nearly 20% of these these asset managers are not even close to kind of even trying and using it at the moment and it's mostly concentrated at the moment on the research and the idea generation stuff it's not touching the portfolio or the execution of trades that's not something that they're letting chatbots yet do but I would imagine and I'm not super close to this but I know in every other line of work in industry that I come close to there are groups of people thinking we can use all of the hundreds of years of shared collective knowledge of experts in our field and in the same way as these kind of more generalist large language models

14:45the chatbots that we use from open AI or from Amphropic in case of Claude or Gemini from Google or whoever there'll be some specific stuff now being developed for these fund managers would you going to help them use these tools in the future and become quicker and arguably more efficient doing this sort of stuff yeah I mean obviously it I've heard lots of examples of them so obviously helping you know their own research process like the general public would use AI practice research stuff you wonder whether if they're suddenly having cost savings from this you don't have to pay so many people to do sort of you know lots of work behind the scenes whether that'll be passed on to people like I don't I don't suppose there's any evidence of any industry saying actually look AI is making our life easier we'll make it cheaper for you to use our services have you ever come across anything like that what's happening is there's a phantom effect at the moment lots of people are laying lots of companies are laying off human beings with the view of using artificial intelligence and then discovering that replacing a human with artificial intelligence

15:48is often more expensive or currently isn't reliable enough to rely on so lots of people have been laid off in various jobs and you find the humans have since come back to be the people you know involved in you're ensuring that these processes work as successfully and there's so many sort of legal issues and other stuff around this like if who's responsible if it makes a mistake is it the people that develop the chatbot is it the trader that used it there's all sort of like issues that what often happens in the world and what often I find in my day-to-day work things develop the tech develops really quickly but the legislation and the law and the protection and the support are much slower to come through and this is probably a never example of that well I mean what if we I don't know if we can sort of put a crystal ball in front of us and look look five years or even more into the into the future do you think actually there still need some element of sort of human judgment when you're perhaps using AI to

16:48to sort of do research for investing or do you think actually by that point you know we can have a lot more trust in these computers I reckon and I'm as I said I am by no means an expert in this field but to me it feels like you'd expect the AI to be doing all the analysis and the humans to own the decisions and the relationships in the future that's how it feels to me that for lots of people investing you can obviously do a lot of this online but lots of people I know you know even for many more generations to come they prefer the personal touch of speaking to somebody in these scenarios and getting that advice so I think I think in sort of five years time or so we will see more of a lean towards it but I think it's going to be that kind of the analysis and the humans are going to be the relationship owners and you know ultimately owning the decision because until somebody says you get the AI can make the decision if that ever goes wrong you know the tech companies are not going to be one to held responsible for that it's

17:51I'm pretty confident thanks again to Will Gallet for coming on the show so I had just one follow up question for you Dan so I recently saw some concerns from the financial regulator so that's the FCA about the public potentially being too trusting of AI when it comes to investing so clearly Will made the right point to say you shouldn't trust everything AI says but the FCA research found that it isn't stopping people from rating AI really highly as a source of investing information so can you take me through what the research actually says yeah I think this is really interesting because essentially it's the FCA talked a lot of people about it and everyone's going yeah we understand that the information that we get might not necessarily be exactly 100% correct but this research was specifically focused on 18 to 40 year olds who either own or considering buying or making some investments and basically they sort of said that they 56% of them would trust AI tools for information about investing that's more than people on the TV on

18:52radio which 47% more than the press 46% and it kind of sort of says as people are getting more comfortable to the is actually expect a lean on AI even more over the next year to get this information so essentially we've got the situation where you know people are I've recognized AI is very powerful it can be helpful doing your research process but the FCA is slightly worried that they think that they are you know they could be misled and I think this is quite important so the FCA is pointing out that in their research almost half of these people mistakenly thought that actually AI generated financial information was regulated which of course it's not more than one in three believed it was fine to make an investment decision purely based on whatever AI tells you and of course that's a bit of a worry as well and also a third thought that they would get compensation from various schemes if the advice they gave from you know AI gave them actually went wrong and so all of this

19:54sort of points towards a massive misunderstanding so I think if you take a step back I've used AI to try and understand investing information I've looked at what other people they're doing and you it definitely can help with complicated terminology putting that into plain English so you can better understand things as well as we're always discussing when he was having given it go it was certain areas it was definitely helping to to put things into very simple language but you know I think it's really important to understand that it's not the same as if you were going to a qualified financial advisor now financial advisor if you did use them they don't guarantee that you make money but you do have protection if they give you unsuitable advice such as if an a financial advisor says basically I'm going to recommend that you have high risk investments if when you explicitly might have asked for low risks one so I think it's really important that you do need to you you can take information AI but use it as a starting platform go and verify it

20:56look at the source information do more research don't simply go in blind and say yeah the computer says yes I'm going to do yes I would also say that so when I've used it for things it will make sort of blanket assertions without sourcing them so if I'd say if you get something like that from a response go further ask more questions say where did you get this from can you provide the source is it a government source and then go through to that source and check that it's up to date that it's someone that you trust so it's kind of delving into where those things have come from rather than taking them strat because otherwise yeah it's it's I'm finding AI kind of comes up with some wild generalizations and then when you kind of interrogate it further it says oh yeah good catch you think yeah I was asking you it's something about I was asking about Chancellor John Healy you know as he said this what would you do in this in a different situation and Betty came out says no you are incorrect Rachel Reeves is the Chancellor you've got it wrong and it's like okay

21:59so you know you can you can even see things that we you and I will think that it's like surely it would get that right it just goes to show that just be slightly careful with it so we could talk about obviously AI till the cows come home but we should talk about the other stuff that's going on in the markets at the moment so I think there are quite a few big topics going around but particularly mentioned previously oil is kind of one of those big hot topics right now yeah so obviously we've got the fighting in the Middle East is still going on people worried about supplies of oil and particularly about refined products so oil it's been bubbling around nearly trading at $110 a barrel at the start of March ship before the the Iran war started it was trading around $70 so there's a massive hike we've seen of course this feeds into making things more expensive for consumers for businesses has a major impact on the direction of interest rates as we're recording this we were expecting to get updates in the US and UK about rate decisions but I think that the

23:00no matter what was being decided as recording this the outlook is over the coming months we've probably looking at one or two or even more interest rate hikes now all this obviously feeds into the bond market as well so we've had lots of worries about it now I won't talk about the internet to the bond market stuff today because if you go back and if you didn't listen to two weeks ago we had Jack from Orbis on the podcast he explained it so well it's so simple terms go back a listen to that episode or cover everything you've done but it is really important and so you have seen some slight wobbles on on equity markets not so much we haven't seen a crash which some people might be expected given all the sort of worrying headlines about a bond sell off but I think that you know this this situation is quite fluid and is changing a lot day by day so in terms of then you know obviously you get kind of the the three things that tend to get linked you've got you know sort of got oil prices going up then you've got the impact that that has on

24:01people's inflation expectations and then you have the impact on bonds but we have had that new inflation data that's come out now obviously there's always a lag with inflation data can you take us through what that's showing us yeah so this is this is explicitly for UK inflation we had inflation 12 month inflation rose to 3.1% in August up from 2.9% in July if you go back to June it's at 2.6% so you can see the direction travel is up now obviously like you like you say this is this is this is back bit backwards looking this is August we already know from the first two weeks of September the oil price has gone up even more so I would have thought that you know when we get the next round of inflation figures in one month's time they could be even worse the big problem for August has been transport costs that has been the sole driver here this is motor fuel I'm sure if you've gone to fill up your car with petrol or diesel you're going this is expensive isn't it and it

25:05particularly even more so in the last few weeks that has been driving inflation and of course this is this this is causing problems like is a central banks look up inflation and they look at the jobs market in terms of making interest rate decisions so it's troubling we don't know how long oil price will stay high but kind of the the worry thing here is like what does this mean for your household energy bills now we've got already know what we're going to have the the energy cap price cap for October December has already been agreed but what we're thinking from January you could potentially see quite a big jump you know some people are suggesting upwards of 20% quarter on quarter which is massive isn't it so what I guess apart from trying to consume less energy in your household sitting there in a darkness is there what do we do to try and prepare ourselves for

26:05potentially quite a big jump in energy prices that will have to pay in January well I think it's worse thing at this stage we have cut back hugely on how much energy we use so so much so that when off-gem kind of looks at how much the average home consumes it's actually cut that down to reflect the fact that we're using less energy there are a few things you can do so it's really worth you know if you don't have julf you also where you get your electricity and gas from the same company you can cut across that way it's obviously worth shopping around you can get discounted rates you can get fixed rates and that are cheaper than the energy price cap at the moment you can also save money by using direct debit so by switching to a direct direct debit you'll get a discount on that amount so it's worth doing all of these things as well as you know not boiling the kettle and you know trying to make your teenagers shower for less than three quarters of an hour at a time so there's lots of different things that we can do to feed into that but fundamentally it's going to be really hard it's going to be difficult when we get that rise in October and again when we get that rise in January so it's not just kind of that big you know the announcement of the inflation figure it

27:07actually really will be affecting people's lives I think perhaps people come boxing day sales and thinking okay maybe I've got I've got some a few bit of money for Christmas so I'm going to splash myself just be mindful you might actually want to keep a couple of quick back because your your energy bill is going to be quite punishing so yeah I mean you're talking about a like energy consumption obviously your your daughters off to university my daughters off to university so for both of us that will be an energy and energy saving it's pretty hard though it's in trying to think like what else stuff actually it does cost you to send someone to university yes I mean I'm constantly kind of thinking about the the extra costs so my daughter's very into cooking and she insists that she needs a trivet and I can't help but think that she'll be the only student in the whole of the UK who's like really into a trivet I think you know pot noodles just don't need it but yeah I know and a you and Danny last week touched on investing for university costs and we

28:10actually asked if any listeners would care to share their experience at the time so thanks to everyone who got in touch with their stories it's really fascinating to hear so many people who have kind of proactive you trying to help their kids avoid getting into too much debt yeah so we thought we actually would be quite interesting if we could sort of run through a couple of them on the show we so we've got we've got we had an email from a chap called Ben who said he'd started to save for his children's university fees only about three years before the first of them was going to go to university I thought it's quite interesting because lots of people talk about you know this as soon as they're born they they start to save and stuff but in reality it's probably going to be a lot of people saving much closer now Ben was talking about how you understandably wasn't comfortable investing in sort of funds for such a short sort of matter period and I think we we we get this you know people worked worried about should they take the risk of putting money into the markets and stuff so he he took the view that you know let's buy short dated low coupon guilt so that's UK government bonds so he was saying that you know it's

29:13lucky enough to be able to afford to cover the kids fees and it's going to be able to do that but also going to be able to partially fund the living costs from you know his own income but not going to fund everything because he says there's a good life lesson there to help them manage a budget and I think that's you know I think that's a really valuable approach to take but you know whether you know I can't make any judgment here about whether using guilt is the right wrong thing we're not allowed to give any sort of a vital commentary and stuff but I would say that you know when people think about putting money away and actually thinking I need to use this money in a shorter time period perhaps saying two to three years time it isn't like a choice of just going into the market saying like I've got to invest in equities or you know some some of that things there are other products like money market funds which are deemed lower risk investments which are they've been very popular recently and they're designed to give you return a little a little bit more than cash

30:15guilt has been really popular recently obviously with the the yields have been going up on them quite a lot so say thank you very much for Ben for sharing his story with us we also had a message from Mark who's actually one of those people who started early so he started with his sons nine so he's actually been investing for his sons university studies but he's calculated it isn't worth using his savings to pay for university so Mark kindly agreed to come on the podcast to talk in person now I should say at this point that this is just one person's decision and experiences so we don't give advice on the podcast so we're not recommending anyone follows in his path but it's just a really interesting approach anyway here's what he had to say when we started earlier this week Mark thanks so much for getting a touch and also for speaking to us so if I can get you to start just by telling me a little bit about your circumstances and your sons circumstances at the moment so I have a 14 year old son and a few years ago we started a conversation about what it might be like if he wanted to go to university and talking about university fees

31:18and together we thought it would be a good idea to start putting together some savings for him for the future and so one of the things that we did was we together decided to model that out which was a fantastic opportunity for him to show me his newly acquired excel skills that he'd learned at school and obviously went and we modeled together what might happen if we put aside a little bit of money each month between the age about nine and when he was 18 at university it worked out really well for me because I recently had a pay rise and whenever I have a pay rise I always looked to put that into an investment and so we decided to do that in a junior ISO for him and to put that money into an investment so you talked about modeling it with him presumably that's not just that you've been able to build up this pot of cash but it's also been a sort of useful educational tool as well.

32:18It was a fantastic opportunity to have a conversation he was really excited about excel they've done it at primary school just that week and so to sort of take that joy that he had and to put it to a practical use which was something that I've been thinking about anyway but it was so many different aspects of it to think about well you know what do we do why are we putting money away now we talked about building an upper snowball over time so as we get bigger and bigger and we made a we made little graphs to show it and so we could see it started off slowly and it grew quickly later on and we did a little bit of research where we looked at the returns on investments over the returns from savings historically and we made a choice and in fact he was able to choose what type of investments he wanted to do and we chose that we were going to have very simple market passive funds and he chose we wanted to have one in the UK because that's where he lived

33:22and he wanted to have one in Europe because he feels part of Europe and we have family in Europe and he wanted to have one in the US and so we decided to have three simple passive tracker funds one in the US one in the UK and one in Europe and that's what we've done. Fantastic. No so you're obviously sort of edging a bit closer to university time but you've changed your mind about how you're going to use that money can you take me through that? Well this came from the modeling and actually it was my son's modeling at the time that he did where we realised that historic rates of growth from the investments were greater than the RPI and we know that his plan five student loan will have an RPI rate of inflation so hopefully if he leaves his money invested even when he's at university and he takes the student loan rather than trying to avoid taking his student loan his investment will probably grow at a faster rate than his debt and that means that after he

34:23graduates and obviously we don't start paying back until after we've graduated in the bottom job he can pay down the 9% each year of his salary and over time his investments will continue to grow many of our models that we did meant that he would actually end up with more money at the end a little bit of a nest egg having paid off his student loan depending on how big his salary was and actually the biggest risk was that if he had a huge salary from very early on then he would have to pay off his loan more quickly than the rate of the the investments but really that's not much of a risk having a huge salary from very early on but if he was a little less fortunate and his salary wasn't as high as that there's a likelihood he'd never have to pay off the full amount because although we call it a student loan it's not really a loan it's a fixed period of time that you pay it off and so hopefully at the end of that even if he doesn't have to pay off the full amount he'd still have some money left over in his investments at the end presumably if he's a very higher

35:27than there is a chance he can probably just afford to pay some of the loan that it was exactly my thinking why I'm not worried about it that's not the problem I'm worrying about so presumably when you've been doing all this modeling you're building in some risk with that about investment performance so it there's a risk that you could get a surprise if it doesn't perform as you expect it to so presumably that's something that you have to be comfortable with if you're going to take this kind of approach yes absolutely but risk in terms of investing into something like a a FTSE 100 or an S&P 500 is much lower than the risk of investing in an individual share we're not being smart stock pickers and choosing which company to invest in we're purely investing in the index and you know if the FTSE 100 index was worth nothing in the future I think we'd have bigger problems than how we would repay our student loan at that point because the UK got to be being seen as trouble and we also thought about diversifying which is why we chose three different countries and we did

36:31control the one thing that we were able to control which was the cost we looked for the lowest cost funds which is why we didn't actually go for a global tracker but we chose to go for the slightly cheaper local tracker trackers and diversify across three different markets and I guess if you choose is not to go to university at that point he's then going to have a nest egg for something else that would be a lovely problem for him to have at that point if he decides that a best investment in his life is to try and look for a job straight away he's got a great opportunity to use that to buy a home or something else I don't you know having having too much money is going to be a lovely problem for him to have rather than having to worry about how he's going to pay off the student student loan there's always going to be calls on on his money in the future and what he's going to need to spend and for and part of that conversation is what are sensible ways of spending money what is investing in yourself and we believe very much that investing in education is an investment in yourself investing in our home is an investment in yourself and investing in

37:33other skills like for example learning to drive might be something so all the time through these conversations we've used that as a way of talking about what would be sensible ways of spending this money that sounds like a really interesting approach so you're sort of building in that education as well so it makes a huge difference you're kind of building an investor as well as building a possible student so Mark thanks so much for talking to me it's been really great to speak today Sarah's been amazing thank you so thanks again for Mark for coming on show really appreciate it and I'm going to say thank you so much for everyone who who does listen to this podcast for getting in touch with us it's it's sort of nice to know that they're like what we're doing you're engaging with it so obviously with Mark there you know he's comfortable relying on investment growth to meet the costs of the interest which not going to appeal to everyone but it does sound like it's been a very positive process yeah and I think one of the interesting things about the switch to plan five student loans in England is that we kind of moved from this situation where most people weren't repainful to one where most people will

38:35so it's been a real change for the sort of people's mindset so maybe some of these people who are investing to help their kids to get onto the property ladder they're going to be thinking well maybe I should be putting some of this towards university education instead so obviously best possible world we'd all do everything you know fund everything for our children and you know you know you know I'd let them live in that gilded cage but when there's only enough money to cover one of these costs it's actually a really difficult decision because of course you have to bear in mind if you decide to put it all into the property say give it all to them as a as a deposit they will still have to get a mortgage and if they have a student loan it's not going to affect their kind of credit score but it will affect them in terms of the monthly payments are taken into consideration when the banks are considering affordability so it does mean that that student loan might affect that child's ability to get a mortgage so it's kind of weighing up all the different things and of course I would say when you're trying to calculate you know what your child is going to earn and how much they're going to pay back it's physically impossible because you just don't know you're kind

39:36of you're not just looking at like you know what they're going to graduate and hopefully what they're going to go into you also have to look at the next 40 years and how their lives might change over 40 years and none of us I've got anywhere close to being able to predict them yeah I mean so the start of the the new sort of academic years not all about children actually you've been spotting another pretty grim trend don't you Sarah yes I'm sorry it's a cheerful one for me so it's actually the fact that traditionally lawyers tend to see a spike in divorce inquiries in January which is kind of famous one but also in September which obviously kind of comes after those kind of classic family holiday periods so over the past year I had a look at Google search trends and the search is meant divorce actually peaked in the middle of August oh it's not exactly a sort of ringing endorsement of the summer holiday yeah I know I guess it's not the whistle is saying you two weeks with the family and you think that's enough of that it's more tends to be things like you know problems can get amplified or some couples don't want to rock the boat before the big family holiday especially if they've been sort of saving for it for a long time so they kind of put things

40:39on hold until they come back others kind of waiting till the kids back of school and life is a bit calmer so they can actually explore their options and think things through yeah there are sort of science people are squeezing their early research in odd hours during this sort of the holiday period I think you know searches for divorce most likely to hit their highest levels in the early hours of the morning I read that I mean that's fascinating isn't it it's such cherry stuff for people middle of August three o'clock in the morning logging on and just to see what their options are but I mean there is a period before any divorce where people kind of do way up their position and part of that will be thinking through the financial aspects as well as everything else because it is a really difficult time financially and it's why if you're in this position and you're worried about divorce it really is worth thinking through those financial aspects too all right so where should actually where should people start well there's lots of things that people need to do all at once which is obviously at the same time you're dealing with everything else but just try and keep these things in mind so think about any joint debt so if you're both named on

41:39the mortgage you're both responsible for all of it so even if you're not together you need to have a plan for how those repayments are actually going to be made and if you're going to struggle to make those repayments if there's some sort of disagreement between you you're much better off talking to a lender than sort of simply missing payments and of course when it comes to joint debt you've also got to look at joint bank accounts so a lot of people have their salaries paid into a joint account and all the household bills coming out of it so one of the practical steps is often to set up your own account and make sure that your income goes in there instead and then obviously that the bills get paid from those accounts instead so I imagine budgeting becomes very important as well it does it really does so I mean I this is going to sound fairly extreme but I'd say the earlier that you can switch into a sort of emergency budget mode the better so it can make a real difference to cut back straightaway so divorce is really expensive so not only is it that you're kind of splitting everything in half but also you're splitting your incomes between two households and it's really common to get into debt so definitely check

42:42you know how you can live on a lower budget also looking to getting any state support or you know whether there's anything else that you can do in order to bring in any extra income just for that really tricky period of the divorce and presumably it's not simply just about focusing on the house yeah so I think you know when you go through a divorce particularly when everything else is changing a lot of people will really try and stay in the family home but it's often worth really thinking about all the assets in the family and making sure that you're making the right choices so for example pensions are often overlooked and even when they're included sometimes people will sort of trade them off so they'll say well you have the pension and I'll have the house but you really need to think that through because you need to sort of consider what will happen if you end up like retiring in a huge house there's lots of expenses attached to it and no pension so obviously it's never going to be easy because you are splitting everything in two but really think about all the assets and the best possible split as well but I mean if you I guess if you do you know if you do giving out part of your pension it's you potentially come to a rebuilding phase saying exactly yes I mean it's one of the things that's been interesting is this sort of is the

43:46growth in people who are getting divorced at earlier at the straight later ages and actually that can make it really difficult to rebuild but whatever age you are really once the dust settled it's really top priorities use things that paying down expensive debt rebuilding your emergency fund and getting your retirement savings on track and it can feel really overwhelming so it is worth just taking a step back and thinking I don't need to be perfect overnight I don't need to make up all the ground immediately I just need to put things in place so I can build over time I mean there's a lot to think about what what about if people find it quite daunting yeah so I'd say one of the things people will often assume they need a lawyer during this process but they don't necessarily think about getting financial advice and it can make a vast difference because they can help you understand the true value of everything as you're going into the divorce and the long-term consequences of decisions you're making and they can help you with that rebuild so at point when things feel really uncertain you know it's not just the sort of legal profession that can help you it's also the financial advice profession too so I think there's

44:46obviously lots of things there for people to consider um let's actually we take a step back we were talked about the start about some lots of other interesting bits of data I want I think maybe we should start with the wages data I mean under the triple lock the state pension increases by price inflation in September average earnings in July or 2.5% whichever higher so we've now got this information so we know that the the average earnings including bonuses for July was 3.9% so I think because September CPI inflation figures expected to be under 3.9 the wage figure is likely to be used so that's what that tells us what the state pension is likely to be so 250 pounds point 70 well it's just over 13,000 pounds isn't it from April the old state pension should increase 192 pounds 10 a week which that's 9,989 pounds a year yeah I mean I think when we talk about the pension we always talk about the full state pensions it is worth pointing out

45:47that not everybody gets that so you know it is worth you actually going in and having a look to see what state pension you are entitled to get this is under the within the gov.uk website because I think it's it's really important not to make assumptions that you're on for the full full pension if actually you're not not on track for it but you know one of the big things is if you do get that full state pension it goes that is now over the personal allowance which is it did 12,570,000 nice round number there so there's been lots of talk about possible tax bills on this money so where are we with all this talk what have you come to a conclusion or are we still in the process of flashing things out the government said that people only getting the state pension won't have to pay income tax on it because we don't really have much detail on this it wasn't really clear what else would be considered as income or if it would include income within tax allowances tax re-income or extra bits of the state pension like the deferred state pension income or surps to use terrible terminologies yeah so there's extra little bits that you might get on top particularly

46:49if you know with the surps that's the old state pension before the full the the new state pension came in but yes you can defer your pension and get a higher payment and we've got no idea whether that's going to you know be included in the exceptions so we are still watching that space aren't we but we have obviously all of this talk about the increase and the fact that it's now kind of over barrier it has lettered conversations about the triple lock itself hasn't it yeah I mean politicians of all stripes have pledged allegiance to the the triple lock you know if it stays it's likely to mean an increase in state pension faster than currently planned to balance the books a central approach will be to target set a target for the triple lock policy as a proportion of median earnings then you know then simply just pledge to peg state pension increases to earnings growth or inflation or both now we sometimes refer to the resolution foundation on the on the podcast they've been saying that triple lock guarantees no longer needed to address pension of poverty it's a typical pensioner household now has broadly the same income as the typical working

47:52age household they also believe it's physically unsustainable with state pension spending already 154 billion pounds and projected by the OBR to rise by further 80 billion pounds over the next 50 years so you know the government's doing this review of the state pension age at the moment so perhaps it's it is a chance for them to address this issue I think that's one of the things that's really important here is that it's one of those things about you know if you get your castle if you build the balls of the castle big enough to kind of protect everybody inside the state pension the risk is that you're keeping people out so the kind of trade-off is this state pension age change and whether or not we get to the point where the state pension age has to rise so much to make the state pension affordable that loads of people have a gap between when they can work you know the point at which they get their net no longer able to work because they're not well enough and the point at which they can get the state pension and that creates a whole separate kind of problem for people in that period of their lives so there's an awful lot that needs to get worked out and we can only hope that the government is tackling it yeah so let's talk about some of the other stats so we have some savings statistics which cover ISIS savings and investments in in the 2024

48:55to 2025 tax year so around 16.8 million adult ice accounts were subscribed to in that tax year that's up from 50 million in the previous year that's that's quite a big growth I mean that's largely attributed to a big increase in the number of stocks and shares accounts that were subscribed to around 1.6 million junior ice accounts were subscribed to in the year up from 1.37 million in the previous year that's really positive suggest that parents or even grandparents come around to the idea of investing money rather than just simply saving it in the bank now I guess over over a long term you know if we say over 18 years that someone could have the maximum someone could have a junior ice account for investments have got much bigger opportunity to grow than the sort of the cash equivalent but you know we do have this ongoing problem that since the junior ice launched cash has overwhelmingly dominated the landscape I just suggest that parents are still struggling to consider taking investment risk for for children or the same parents that like

50:00you know lots of parents here you know we did a bit research and if you go back to children born in February 2008 who had thousand pounds invested at birth in what was then the child trust fund if they put that into a global track fund they'd have five thousand six hundred ninety pounds by the time they were 18 if they put that into the bank and getting four percent interest they'd have just over two thousand so big big difference yes I don't I think one of the interesting things about this kind of publication of the ice starts is that we've seen increases across the board really so we've seen huge rises in the number of stocks and shares is being paid into and the amount being paid into stocks and shares is but an even bigger rise in the amount being paid into cash is and this is at a time when if you remember back into the 24 25 um tax year we were seeing interest rates start to come down so you would typically expect at a period like that to see people slightly less enthusiastic about cash is but if you remember

51:01back to that time that's when all that endless speculation about the cash is started and people started worried that in the future the cash is might look different or it might be less generous and that's when really towards the end of that texture they really started to flood their cash ises so we it is a positive sort of story and that we've seen growth across the board what's interesting is this sort of weird distortion where you know the government was aiming in making this change trying to get people to invest more and it looks distinctly like one of the impacts it's had is to get people to save more instead so it won't necessarily have been on there sort of ideal list of things that we're going to come out in this in this data but it is really positive that people are kind of considering protecting their savings and investments from tax at a time when so much talk about so many taxes that could go up yeah so we also had an interesting report into gender pension gaps to say what was what what did it say yeah so this is new research from the pensions policy institute which shows that women age 55 to 59 have around half the pension

52:01wealth of men the same age that's actually 54% of it so it kind of broke it down into why it looked it said that about 39% of the gender pension gap was about the way women's working patterns changed during their careers so women are significantly more like work part time for a period than men and in many cases I suppose this comes as a result of having children and women taking on care and responsibilities and it's why set pro AJ Bell money matters research identified that that gender pension gap actually starts to open up quite dramatically at the age of 28 because that's what the time when a lot of people are thinking about having their first child or having their first child and then all of that feeds into kind of how they behave in terms of pensions I presume that the gender pay gap will play a part in this as well aren't it yes exactly so the report said that made up about 19% of the gap so women working full-time are paid on average 6.9% less than men but this gap really grows as we get older so if you look at actually ages sort of 16 and 17 women are actually earning more than men by the time they reach 22 to 23 men have started to

53:04edge ahead only slightly so their pay gap is 0.9% but then it really takes off so obviously we have the issue that it's not just about the kind of the maternity leave and that sort of and the possibility of sort of career gaps at that point there's also the fact that you know when women either work flex be work part time whatever it is that they do to make things work for them they tend to miss out on those really important pay rises and promotions which affects their pay throughout the rest of their life and so we get the sort of cumulative effect where it gets wide or wider so by the time you get to your 50s the pay gap is 12.5% which is really significant so that's big difference in take-home pay obviously also means that women are paying less into their pension each month which kind of has a snowball effect on their pots over time so the government data shows in retirement the income gap between men and women is widest of all so with those age 60 and over actually face a gap of 12.6% so it's it's a really significant issue for women well I mean there's surely there's a few things that women can do to boost their pension even when

54:07facing these challenges so I just wanted to perhaps could you run through a couple of them? yeah of course so I think one of the things to bear in mind and this is something that when I had my first child this was something I very nearly ran into is if you go on maternity leave it can be really tempting to pause your pension contributions because money is really tight but if you can keep up payments you only have to pay a percentage of the actual maternity pay you're getting and your employer actually needs to keep making the same contributions as before so you get actually quite boost to your given what you're paying in you're getting a lot more for your money if you're making less than £10,000 a year after you've come back to work with each employer so that can have maybe a people are sort of building a job out of several smaller jobs then it doesn't mean you won't automatically be enrolled into the pension scheme at work which is one of the reasons why women will miss out on pension contributions during this time so it's worth knowing that if you earn between 6,240 it's always always these really weird numbers and never a nice round of a but between that and 10,000 pounds with one employer you have the right to opt into the scheme and be treated like anybody else in the scheme so it means if you put money in you get

55:10employer contributions if you're actually making less than that 6,240 pounds then you can also join scheme but you won't get those employer contributions so it's kind of worth checking what's on offer also just think about your contributions as a couple so if one of you stops work for a period or kind of moves part time you will already be having those conversations about how an earth you're going to pay the vital bills say things like the mortgage well actually it's worth just adding pensions to that conversation and considering whether there's a way to maintain payments so for example if you're not earning your partner can actually pay in £2880 a year and that gets topped up by tax relief even if you're not paying any tax to £3,600 a year which can make a really significant difference if that sort of those payments are maintained during any gaps that you have in your in your earnings well Sarah there's a really good top tips so I think it's really important to be able to to hear like what this sort of situation actually be able to go off and do something positive about it and I think obviously we need a positive to especially for this episode that

56:10started talking about the end of the world. Yes it's not been not been the cherries end of the world divorce as brilliant what we needed was death and we've got like the full set so that is all from us this week so thanks so much for listening or watching and of course thanks to our interview guests Mark and Will if you enjoyed the podcast please make sure you follow us so you don't miss an episode and we'll be back next week for more insights on the world of money and markets where we'll be talking about a twist on property investments and asking if supermarkets are the perfect tenant. This podcast is for educational purposes and the views expressed don't necessarily reflect those of AJ Bell the podcast isn't telling you if a certain investment is suitable or not the value of investments can change and you can lose money as well as make it it's also important to remember that how your tax will depend on your individual circumstances and rules can change the way an investment performed in the past may not be the same as how it behaves in the future if you want help go see a qualified financial advisor