QA41 - Listener Questions, Episode 41

In this Meaningful Money Q&A, Pete Matthew and Roger Weeks answer listener questions on UK personal finance, focusing on pensions, tax, and planning ahead. Topics include SIPP vs Lifetime ISA, retirement drawdown and which accounts to spend from first, Junior SIPPs, gifting company shares (IHT and CGT), and UFPLS vs drawdown.

 

Shownotes: https://meaningfulmoney.tv/QA41 

 

01:47  Question 1

Hello Pete, Roger and team.

I'd first like to say thank you for all the wonderful information you provide, it has been a great aid for increasing my financial intelligence and helping me secure my family's financial future.

My question is regarding the benefits of a SIPP vs a LISA in terms of retirement.

My understanding is they both benefit loosely from the same boost. 25% Boost for LISA and in effect 25% boost to a SIPP due to the 20% tax relief as a basic rate tax payer? They are both locked away for a long period and are both released early if I was to suffer from any serious ill health or death?

Due to this is there any benefit I am overlooking in terms of a SIPP over a LISA invested in a world wide fund? Other than age of access?

I am currently 36 and due to the increasing demands of public finances it would be logical to assume a possibility of the state pension age being raised above 70 (above 60 if taken early) or becoming restricted to who can collect (means tested) before I am to reach pension age. Whereas I would be able to claim a LISA at 60 regardless with the added benefit of it not being subject to tax?

I have a generous company pension of 6% personal and 13.7% company contributions with an additional 1% matched salary sacrifice. I also put in an additional unmatched personal 3% contribution.  As well as a small military pension. so I would not be without a pension at retirement.

Due to this is it worth hedging my bets by maxing my LISA contributions rather than a SIPP to cover potential future scenarios?

Apologies for the long winded question and I hope it makes sense.
Thank you, Adam

 

08:42  Question 2

Hello Pete and Roger!

Thank you for your wonderful podcast, I started listening several years ago and have found your advice incredibly useful.

I am here to ask a question about planning a future for a disabled child. My husband and I are in are late 30s and we have a 5 year old daughter who is autistic and has profound learning difficulties. The challenge we have is how to plan for her future care and our future careers with so much unknown. 
We both work full time and are currently both basic rate taxpayers (although we are both getting close to that boundary). We receive child benefit and some DLA for our daughter. When our daughter was born we started saving small amounts regularly into a JISA for her, but as her disabilities became clear we switched and started saving money for her within our own S&S ISAs. We still put money into her JISA when she gets gifts from grandparents etc as it seems disingenuous to keep that money under our names. We have an emergency fund, workplace pensions and are saving regularly into S&S ISAs, as well as mortgage that will last until we are about 60. 

Is there anything we should be thinking about or trying to plan for our daughter's future. At this stage, it is difficult to determine how much she will understand about money and investing or whether she would have the capability to work or live independently. It may be that she will be under our care for the rest of our lives. It is also possible that one of us may need to reduce working hours or stop working when she turns 18 and needs care after she leaves school. Is there anything you think we should consider or advice on how to navigate the unknown? We are in the process of putting together a will and in the event of something happening to both of us, the care of our daughter would be covered by my husband's sister, but unsure how to navigate the financials.

I appreciate that there are several questions within this question but any advice or areas that we can research on ourselves would be appreciated.
Thank you so much, Laura

Centurion (specialist IFA for people with children with special needs) https://centurioncfp.co.uk/special-needs/ 
Scope https://www.scope.org.uk/advice-and-support 

 

16:34  Question 3

Hello

First of all, thank you both for your wonderful podcast. I have learned so much.

I have a question about the order in which to spend in retirement and how to hold our various investments. We have worked out a cashflow ladder using cash, short-term money markets funds, a defensive mixed asset fund, a 60:40 mixed asset fund and a 100% equity fund. But we also need to think about our various wrappers- about half of our investments are in DC pensions (mine and my husband's), a quarter in ISAs and a quarter unwrapped (which we can gradually move into ISAs).

Is there a rule of thumb for how much of each investment should be in each wrapper? I'm also not sure about what we should be spending first- assuming no disasters we are hoping to give some money to our children before too long for IHT purposes. But if we take a large sum out of our pensions to do this, we'll pay 45% income tax on it which makes the IHT saving a bit pointless. So should we be making any gifts from our ISAs and using the pensions first ourselves (taking care to stay within the basic rate)? Any advice would be appreciated.

Thank you
Elizabeth

Meaningful Academy Retirement Planning - https://meaningfulacademy.com/retirementplanning   
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24:03 Question 4

Hi Roger (and Pete!),

Firstly, thank you from the bottom of my heart for the education you provide to me and so many others. You've really helped me sharpen my financial tools. After spending the last 12 years self-employed, I didn't take my personal finances too seriously. Now that I have a steady, "grown-up" job, I've been able to get organised. I have a workplace pension, a private pension, a Stocks & Shares ISA, and a Lifetime ISA, all thanks to what I've learned from you both.

My question is about Junior SIPPs. I often come across opinions suggesting that these should be the last thing you do, only after every other financial base is covered.

I didn't receive a financial education growing up, and there's no pot of gold or property waiting for me down the inheritance road. That's why I'm motivated to change the course of my children's future — even if the benefit is far down the line. For a relatively modest target amount £15,000 each at age 18 (they are currently 1 and 4), I believe my children could have a very strong footing in later life due to the extensive length of compounding available, even without continuing contributions beyond that point, or perhaps with me matching their own contributions as an incentive in adulthood.

I believe this will take some of the pressure off them which I currently find myself in having to aggressively play catch up on my retirement plan. They also have Junior ISAs, which I contribute to each month, to give them more flexible money when they turn 18.

Their future stability would mean the world to me, even if I won't be here at that point to see them enjoy it!

I'd love to hear your opinion on Junior SIPPs, as I don't think this topic is discussed enough — and it sometimes feels dismissed altogether.

Thank you, Steven

 

29:15  Question 5

Dear Pete and Roger,

You do marvellous work in educating us all. Thank you.

I am a company director with 9 alphabet shares. 5 for me, 2 for my wife and one each for my adult independent children.

I have substantial IHT liability so want to gift my shares to my children. The company has seven figures invested in the stock market.

Can I gift the shares? How do I go about?

Will that help reduce my IHT liability if I survive 7 years after gifting? Will there be a CGT liability on the gift?

The company still trades but is unlikely to qualify for BADR (Business Asset Disposal Relief) as majority of assets are in investments.
Thanking you, Narendra

 

36:35  Question 6

Hi Pete and Rog,

Firstly, thanks for all that you do, your podcasts, videos and the Academy have really changed mine and my family's life for the better.

A pensions drawdown question: If you plan to use all of your tax free allowance on retirement. Am I right that there are no benefits to using UFPLS over drawdown?

I think there used to be a benefit with the lifetime allowance but I can't see any other benefits now.

Thanks for all that you do, James