Navigating Late-Career Financial Planning Challenges

This week's MMQ&A covered questions on whether you need an emergency fund in retirement, starting late and the mechanics of the residence nil rate band, among other things!

Shownotes: https://meaningfulmoney.tv/QA13 

Questions Asked

• 01:03  Question 1 Hello Pete n Rog

  Thank you for the brilliant podcast which has turned my money management around in four months. I love your banter as much as your expertise. My question is: Do people need an emergency fund in retirement, and if so how big should it be? With DB pensions coming my way I’ll have a guaranteed income so how important is it?

  Many thanks and keep up the great work

  Caroline  

• 04:21  Question 2 Hi guys, I’m probably not your usual demographic so I’m not sure if this will be of enough use to your listeners but… Having grown up in what may be classed as modern day poverty (raised on state benefits, single parent family) I had zero financial literacy. This meant that when I started my career as a teacher I opted out of the pension because I “couldn’t afford” to pay into it… yes I know now that was a bad move! I eventually opted back in, but then took big chunks [of time?] out to travel and have children. I divorced and had to leave my career to raise my own children. I’m now 47 and staring into a huge financial hole (as I suspect are many mothers/divorcees). Now it’s not all doom and gloom as I have made a few intuitive moves. I own a large family home and a second property (these are mortgaged), but my worry is actual cash. State pension won’t touch the sides of what I’ll need. What would be your suggestion on how to start accumulating at this late stage? I’ve opened a vanguard pension and make personal and company contributions (I have a tuition business now) but it feels like too little too late as I’ve missed the opportunity for exponential compounding. I can’t work out how to figure out what I’ll need and then reverse engineer the numbers to see if I’ll make it! I have a high tolerance to risk, but Is it just pour as much as possible into the pension and pray? Keep doing this amazing podcast please as you have no idea who you are reaching and helping each week. Jenny  
• 11:51  Question 3 Hi Pete & Roger,

  Love the pod, keep up the good work! My mum is in her eighties and has been asking me about inheritance tax and in-particular “passing on her home”.  We both take an interest in finance, so I said I’d read up on it online.

  I understand you can inherit up to £325,000 tax free.  My Dad passed away 9 years ago and I believe that his threshold would be taken into account as well, to make the total tax free amount £650,000. I then read that If you give away your home to your children or grandchildren, your threshold can increase to £500,000. I believe this would mean that the total threshold (with my late Dad in mind) would be £1,000,000? Her house is worth just under a million and she has approximately £100k in a Vanguard stocks and shares ISA.

  My main question is, if she were to make a change in her will to “pass on her home”, would this be an inheritance tax saving to her children in the future, as there would be less of a total amount to pay tax on? I’m, also unsure if the home has to be passed on to an individual, or if stating “her children in equal splits” would suffice. In reality, we would probably sell her home when the time comes, so I don’t know if there are additional rules around how long you would have to keep it for etc.

  Any clarity on this subject would be much appreciated. PS: There’s nothing dodgy going on here and we’re not wishing her away! Many thanks! John

• 17:19  Question 4 Dear Pete and Roger,

  Thank you for an excellent podcast and your contribution to allowing people to self improve their finances.

  I am 33 and think I was already on the more competent end of the financial spectrum before I found your podcast. I.e. I had no ‘bad debt’, had an emergency fund, had cleared my full student loan and overpayed our mortgage to clear 60% in 6 years (just in time for the rate rise!).

  That said, I now definitely have a better understanding of the fundamentals of financial stability and have started to invest in the last year since listening to you. I listen to a few other podcasts more directly targeting doctors to see if anything specific applies to me / the NHS pension, but still enjoy yours the most.

  Anyway, my question (regardless of whether you want to include the above compliment or not) is … why is more weight not given to S&S LISA’s for later life (alongside a normal S&S ISA)?

  My understanding is the ‘negatives’ would be … (1) loss of invested money if withdrawn early by way of the reverse 25% deduction (2) fees being slightly higher

  That said, if not withdrawn early, when comparing £4000 / year in a normal S&S ISA, the 25% bonus is surely a significant bonus even with slightly higher fees? What am I missing?

  Best wishes, Ben

• 21:23  Question 5 Great podcast

  My wife and I are both additional rate tax payers and hence our ability to put money into our pensions is limited. We have a field behind our house that we have thought about buying for a while and I was wondering whether the below was legal/valid.

  The govt introduced the concept of biodiversity net gain (BNG) around property development. There is a market in BNG units where you are paid (I believe) an upfront cost and you need to preserve the habitat for 30Y+. Receiving all the money upfront isn’t that tax efficient so executing in a pension would make sense.

  Can I 1. Buy the land behind us in my pension (believe I can get 2x leverage but not that important) 2. Sell the BNG units – bringing cash into the pension 3. Sell the field back to myself out of the pension for the amount I sold it to the pension for (clearly it’s worth less since it is now encumbered with the 30Y liability but ultimately if I want to pay full whack for it then can I?). I am happy to pay for the maintenance of the land inline with the BNG requirements

  I am now net flat (ish) on the land deal inside my pension but I’ve managed to get the upfront payment for the BNG in a tax free wrapper.

  If all that makes it too complicated I think I’m essentially asking if I can sell my pension an asset, realise a gain inside the pension and then buy it back (potentially at an off market price)?

  Hopefully makes sense, Best John

• 26:47  Question 6 Hello Pete & Rog,

  Long time listener and meaningful money fan... No worries if you don't get to answer this, just grateful for all of the amazing content you give away for free. Thanks to you both!

  In response to another question on a prior podcast Pete mentioned that he wasn't super keen on investment properties due to the fact that it's not very tax efficient and increasing regulations. I have a buy to let with no mortgage so I'm not leveraged like many landlords which has led to me questioning it as an investment.

  I don't especially enjoy being a landlord and I realise that quite often my SIPP returns are more than my rental income and the property increase in value over the year (I do charge quite low rent because I have a lovely tenant who has been there for 14 years).

  At 47 I'm thinking when the tenant finally does move on, rather than renting it out again, instead selling the property and paying the money into my SIPP and S&S ISA.

  It's worth ~£270k after £35k CGT and estate agent costs. I earn approx £50k and can back date my SIPP allowance from the last 3 years. I have a good emergency fund and my SIPP is currently £205k, LISA £45k, ISA £50k (and no mortgage on my own home, living with my partner with no kids, no debt). My plan to live on a fairly modest retirement of around £25,000 a year from my early to mid 60s depending on how my Investments do.

  Love the podcast and the clear way you explain things in a way even I can understand ;) Best wishes, Russell

Send Us Your Listener Question

We’re going to spin out the listener questions into a separate Q&A show which we’ll drop into the feed every 2-3 weeks or so. These will be in addition to the main feed, most likely, but they’re easier for us to produce because they require less writing! Send your questions to hello@meaningfulmoney.tv Subject line: Podcast Question