69: Are Pensions Still Worth It?

Hinzugefügt: 2026-05-12

[00:00:01][music] >> Hello and welcome to the latest retire well episode with me Matthew. As always, I'm joined by Joe. In today's episode, we're thinking about why pensions are your superpower and how you can use them to their full ability.

[00:00:16]Who are we? We're Wealth for Advice.

[00:00:18]We're a chartered financial advice firm based up in the northeast of England. We help people nationally and we started this podcast to help people understand their pension and retirement options a lot more.

[00:00:28]>> Before we get started with the main episode, I thought I'd mention it's your final chance to to register for our online webinars on the 14th and 15th of May. 14th at 5:30 and 15th at 12:30.

[00:00:40]There'll be a link in the description in description down below to to register and they'll be focused on what retirement means for you and things you need to be thinking ahead of retirement whether you're in sort of early stage accumulation or a little bit closer and about to to press the button.

[00:00:54]Back to to sort of the title of the episode of why pensions are your superpower. I think often pensions do get a bit of a bad reputation particularly in the in the press recently whether it's the case of you don't necessarily have immediate access to it. The big one recently on on rules changing, pensions coming into the the estate and I think that has almost developed a little bit of distrust amongst pensions and that is quite understandable given given the changes but they are still one of the most powerful financial tools that you have for your retirement and for generating an income. So yeah, we'll be looking today about why they are powerful, how they actually stack up and and what you actually need to do to to take advantage of them. Definitely and I think as you as you alluded to there, I think you know, people often go well, I don't understand it so therefore you know, is it going to exist in the same way when I get to retirement age?

[00:01:47]You know, with the constant changing of rules and tweaking, it's the element of saying you know, you know, should I be confident in saving into a pension now?

[00:01:55]I think that has gone probably too far the other way where people are going uh I'll you know I'll focus on income and cash in the bank now rather than taking full advantage of the pension and that's something we're going to be talking about today in the sense of how good is the pension and almost how can we you know champion the benefits of someone saving for the long term and benefiting from the likes of the tax relief.

[00:02:18]>> Yeah and and you mentioned sort of champion there Martin Lewis did did an episode of deep dive on pensions with money saving expert just just last week.

[00:02:25]I mean he's one of the most well-known personal finance gurus maybe people in in the UK and and I think he does he does have a bit of a responsibility to make sure that that these sort of things are are highlighted. Historically he has focused on cash savings and and maybe within the financial advice space he sometimes gets a bit of a bad name for using sort of broad brush strokes. Yeah.

[00:02:47]Um when as we've highlighted in these podcasts that there are sort of different nuances that you make sure but overall I think he does he does do a a good job it's just not almost that that substitute for for independent financial advice. Um but he he highlighted in his recent episode that there's three sort of main superpowers when it when it comes to pensions and and three sort of big reasons why you should be using and and making sure that you are taking advantage of them. Uh Matthew do you want to sort of start by running through that that that first one that you highlighted? Yeah definitely so tax relief is one of the big ones. Um essentially you know what other products are there where the amount of money that you're putting in is topped up by the government so that you end up having more invested after you've you've benefit from that tax relief. So going for that idea of putting an 80 pound contribution into a pension you can benefit from straight away the basic rate tax being added so that's 20 20% then added straight on. So therefore you almost go from an 80 pound contribution to the pension with that tax relief 100 pounds then invested and that can then be accumulating for the long term.

[00:03:50]>> Yeah and and that's just for for for basic rate taxpayers as well. If if you move on to high rate, your £60 becomes £100 cuz you get you get 40% tax relief.

[00:03:59]Additional rate, 55 becomes 100 cuz you get 45 tax relief. And and with this, I think it's it's probably worth almost expanding on this a little bit and looking at maybe a couple of the wider rules on on tax relief. Um I think one of the big ones that we've mentioned a few times on this podcast is even if you're not earning, even if you're a non-taxpayer, you still can get that basic rate relief. Um you're limited, so you can only pay in 2,880. Government will top up by 720, um and you'll get 3,600 in in your pension. Um but it's it's worth doing. Of- often when people retire, they almost go, "Well, that's that's it for me. I'm I'm I'm not going to pay into pensions anymore." But if you can put in sort of uh 2,880 and get 7,000 uh 7,000, that would be nice. 720 pounds a year off the government. Um and it feels like it's a nice win cuz you've been paying taxes quite a lot to the government over the course of your career, but that could pay for a a weekend away or or a holiday dependent on on how much you spend on on on either of them. I also think um it's that element where we've often had in the comments people say, "I've got disparity over pension values in the household. Maybe uh husband or wife's got a large large pension and the other spouse has got a smaller pension."

[00:05:11]Even in retirement or when someone's not working, being able to put in that 2,880, get that tax relief, keeps that momentum going with the pension saving and can help ensure that throughout retirement people can use their personal allowance by drawing from the pension, which we'll talk about a bit later. Um but it's essentially saying that the pension still has a role to play even when someone's not working. Um and equally, you know, we've we've seen it with young young people, you know, junior SIPP saving for pensions for the long term. The power of time then can be a really crucial one, which we'll also think about later on.

[00:05:45]>> Yeah, I mean I've had it with a a few clients recently that that have actually gotten in touch off off the back of the podcast where they go actually we're at the point of retiring and and it's that that sort of situation where someone has been a high earner. They've been the one that have been focusing on pensions and and and maybe the other has been not left out but not not as much focus. And a few of them have been over the age of 55. So, I I go well, look, you you can put this in and because you're a non-taxpayer, you can immediately draw it out. You you're essentially getting 720 pounds extra in your bank account.

[00:06:14]It doesn't even have to to remain in the in the pension. I I probably say it should remain in the pension for stuff that we'll we'll speak about in in a second cuz you can benefit from from from growth. But, I think it's a really good thing to do that. The only caveat that I'll I'll put on this is obviously you can only pay in up to your to to your annual allowance. So, that's 60,000 but it's your salary if you earn less than than 60,000 with that base of 3,600.

[00:06:38]Um and if you've got any sort of previous years' allowances unused um dependent on your situation, you may be able to use them to do to do more than 60,000 in in any one tax year. Yeah, and I think this is really relevant for people who are early in their pension planning, really accumulating where it's almost for small extra amount that they can pay into a pension, the tax relief helps grow that contribution and helps that, you know, long-term multiplier of the pension. But, also for those people who are quite close to retirement or even pretty much at retirement age, could they then sacrifice a larger percentage of their salary? Could they almost say, you know, for the last year I'm working, I'm going to make a final push with my pension. And if I'm earning 40 grand, could I is there a way that I can afford to put 20,000 pound into a pension, benefit from that tax relief, and it's that final injection into the pension to get it up to a higher figure.

[00:07:32]So, it's really the tax relief is relevant for everyone. Early doors, it's about the accumulation and getting the sort of snowball effect going. And then later on when you're ready to almost closer to access and pensions, it can be a crucial bit of saying, you know, maybe in my last few working years, I'm going to really focus on pensions and even try and get used to living on a lower income that I might expect to then take in retirement. So, it can help you one with a psychological bit of spending in retirement, but two getting more into your flexible pensions.

[00:08:03]>> Yeah, absolutely. And and tax relief is good. Don't get me wrong, but but wait till we jump on to employer contributions. I think that's where it goes from a superpower to I think Martin Lewis kind of a super duper power with with employer contributions. So, obviously when you are paying into a pension, I mean, most people in this country are employed. There are some people that are self-employed won't be able to access this and people that run a business as a as a limited company director, but you get some other perks that that employees can. If you are an employee and and you're over the age of 22, you will be auto-enrolled into a pension and that's very much the bare bones basic of what an employee will contribute to yourself. The way that works is usually employees pay 4% with the 1% extra tax relief and an employee will top it up by a minimum of of of 3%.

[00:08:48]So, if we go back to [snorts] that 80 pounds as a basic rate taxpayer, the tax relief will top it up to 100 pounds and then that your employer will top it up to 160 pounds. So, 80 pounds is essentially doubled which is a nice thing. I mean, this is I talk about it's one of the best investments that you can do if if you've got employer matching because that 3% is a minimum. Often employers will match your contribution.

[00:09:12]So, if you put in five, they'll put in five. We've got a few few clients that we work with where their employers will match up to to to 10%. Sometimes even 15% and that could easily mean that your 80 pounds isn't just 100 pounds. Your 80 pounds becomes 200 pounds for every single contribution.

[00:09:29]There's not an investment in the world in the world where where you get 100% return on on day one. That's really where you can take advantage of of paying into a pension on a on a regular basis. 100% and I think, you know, the super duper power that you mentioned there, I think the the hardest bit is that not everyone knows about it necessarily. So, you know, people might be aware of through auto enrollment that they've got a pension, but do they know the detail of the pension and the matched element to it?

[00:09:56]Um and I think often when people are accepting new jobs or people's first job, they're aware of the pay, the salary they're accepting, but they often miss the benefits and this this pension could have a massive impact. Um my my first job, you know, working at a law firm, I remember there was lots of solicitors or training solicitors who I would speak to who weren't using the advantage of taking their full match contributions. They were very clever people. Um why weren't they doing it? Well, I think it hadn't really been explained properly to them. So, they almost saw it as a how much am I willing to receive in my paycheck? Is it going to be this or am I happy to take this?

[00:10:32]And they said, "Oh, well, obviously I'm going to want to take the higher amount."

[00:10:35]without realizing anything that they were giving up and paying into the pension was being matched, so it was actually a a pay rise. Um and I think when you think about it that way, everyone who can afford to will say, "I'll put the maximum in, please, to accept that pay rise." And as we talked about in the last mini series, the more you put in earlier, the more your pension grows and the more flexibility you've got to either retire early or have a luxurious retirement because of your pension values. So, you know, those match contributions are fantastic. Um and we've also talked in previous episodes about saying, you know, if you get a bonus, could you allocate some of that to yourself, but some of that to your pension? If you get a pay rise, could you allocate some of that to you, but some of that to your pension? Again, it's almost weighing up your short-term benefit with income, but equally your long-term benefit. Um and and I think this is where, you know, tax relief, as we've highlighted, is is really a crucial employer contribution and matching is fantastic. And again, you can see why the pensions are still the superpower that we're describing.

[00:11:42]>> Yeah, and and the third one, which I I really think is is the cherry on top of the of the cherry cherry on top of the pension case case cake, sorry, I should say, is salary sacrifice. And and and that essentially can just instead of just having that tax relief, you get some relief on your national insurance as well. Because instead of making the contribution after national insurance has been taken, it's made it's made before. You give away some of your salary and put it into your pension instead of being taxed and then national insurance taken and then put into the pension. So, back to that sort of basic rate 80 pounds equals 100. 80 pound contribution is 100 after the government have contributed is 160 after your employer has added in there minimum contribution. And then if you're a basic rate taxpayer, you get another 8 pounds national insurance saving on that.

[00:12:27]Higher rates will only get 2 pounds because you pay less national insurance at a higher level.

[00:12:32]So, that again is is a a massive benefit. And if you've got a really nice employer, they'll also contribute their national insurance saving as well.

[00:12:40]I suppose the the the caveat of of this one is it's looking like it's likely to be limited from April 2029. So, most recent budget essentially said, "Okay, instead of being able to salary sacrifice as much as you want, we're going to limit you to the first 2,000 pounds." And I've seen some people and and it was highlighted on on the show actually going, "Well, since this salary sacrifice is coming in, is it even worth paying into a workplace pension?"

[00:13:05]The answer is is yes, absolutely it is.

[00:13:09]Because you're still getting benefit on that first 2,000. And then, even without the salary sacrifice, you're still getting your employer contribution, you're still getting the tax relief on on on top of on top of everything essentially. Yeah, and I think, you know, the initial reaction for that budget was is that 2,000 pound figure too low? Are they discouraging people to save for the future, which is obviously um what the government should want so that people can be self-sufficient in retirement um and can provide for themselves. So, I think there's maybe some some room to be done between now and then. And And is that going to be the final figure? Is that the final legislation? Um I think we've seen plenty of pension rules being tweaked in recent history. Um so, there's a time that, you know, that might be tweaked and changed again. But, I think crucially with the current rules, you know, if someone was getting close to retirement, as we mentioned before, they've got the ability to sacrifice [snorts] some of their pension um and and benefit from the tax relief, which can be really, really good. And then going forward, as as the rules change, we'll adapt to those rules. Yeah, and and I think and with with regards to that that 2,000 I I I think some people maybe don't actually realize how much that is in in relation to those those auto enrollment figures that that we spoke about. Um we often do do sort of focus on on the high wealth level on this podcast and and we do look at maximizing contributions, trying to get yourself up to that personal allowance. And that's great if if if you can do it, but um that 2,000, if you're looking at that 4% employer contribution, you have to be earning 50,000 a year to to to to max out that that potential 2,000 allowance. So, the vast majority of people can probably still continue doing salary sacrifice in the way that they have been doing. Um the potential higher earners above above 50,000 will just have to take that from what they've got on 50,000 and then maybe look at some alternatives that they can do if they're already maximizing that their pension.

[00:15:07]Um but, to be honest, if you're earning above that, you you can likely look at some alternatives above pensions once you are once you are sort of already maximizing where it's at. With all those superpowers that we've mentioned, going back to some of those points where people might not trust the pension or might not be as excited as we are about the pension. If we have comments like, you know, I can't access the pension now, um rules keep changing, or maybe I don't trust pensions, you know, what would be your sort of gut reaction and gut answer to those sort of questions?

[00:15:36]>> Yeah, I mean, for for for years pensions have been first in, last out. The first thing you should contribute when when you start working, and when you're drawing out of them, generally, they're the last thing you take from because of the the the tax-efficient nature of the lump sum on death. Yeah. I think with the changes, they're still definitely first in because we've looked at the tax relief, the employer contributions, and potentially salary sacrifice you can have. There's an argument that maybe the last out is changing, given that they're coming into the estate for inheritance tax.

[00:16:05]Um however, there's so many nuances with that last out that it very much comes down to personal circumstances and and and where you sit.

[00:16:15]What age you are, what your inheritance tax might might look like. So, we'll we'll almost park that last out for now, but I think absolutely should be one of the first things that you look at with building up building up wealth for retirement. Yeah, and I think, you know, that that question of I can't access it, well, any money that you save into a flexible pension is either going to be accessed by you or your beneficiaries.

[00:16:34]So, we don't know how how long someone's going to live for, we don't know when they're going to pass away. Currently, if someone passes away before the age of 75, their beneficiaries would inherit that pension 100% tax-free. Again, that's a a really good bonus in an in an awful scenario. After 75, again, just taxed at the beneficiary's marginal rate. So, again, >> [snorts] >> that I can't access it bit is a is a relevant point to if I'm investing right now and I might need it in a year's time or 2 years time and I'm not past the pension age, but from a good planning point of view, hopefully, you can benefit from the tax relief and also have some liquidity in your cash in the short term. In terms of the the questions about, you you pension rules keep changing or I don't trust pensions.

[00:17:18]I think pension rules have changed a lot, but the the sort of the core what is a pension still very much exists in the sense of tax relief on the way in, 25% tax free cash on the way out as an availability, and then um you know, the death benefits we've talked about there with the pension falling into people's estate from inheritance tax point of view going forward. Again, that will affect some people, but equally it just affects the planning and how people can extract wealth. So, you know, I think what we've already highlighted from the tax relief, the employer contributions, and the salary sacrifices when someone's working and accumulating wealth for the future, the pension is very much the starting point, and then it's like what do they do next to build on to that.

[00:18:01]>> Yeah, exactly. And I suppose we we've spoke about sort of why pensions are good and and and what Martin sort of brought up in the show. I think there's one massive one that that he's missed when it comes to sort of the superpowers of pensions, and to to to maybe give him a bit of credit, it's not specific to pensions.

[00:18:18]Therefore, he he might not have mentioned it from from that way, but I think what what the the biggest superpower of pensions and other investments are, it's the it's the power of time. It's the power of of compounding. The the fact that when you're paying into a pension, usually you're going to start probably in your early 20s, some sometimes later, and then you've got 20, 30, sometimes even 40 years before you're you're going to access it. And and that just allows the growth that you've got in year one to then be multiplied in year two, and it's just growth and growth over time. Um with the earlier start, the longer that you've got to grow, and and and the more that that sort of initial say 80 pounds that you pay in can can sort of just compound and and snowball effect essentially. Definitely, and I think, you know, on our recent episodes we talked about the earlier you start focusing on pensions, the less you have to put in to get up to those significant pension figures uh that we were talking through. And I think, you know, that is 100% the the key benefit of the pension is, yes, tax relief on the way in, but it's the time frame of being invested.

[00:19:20]And we know in the UK, you know, personal savings is often focused on the likes of cash. In America, there might be more of an investing culture, but people who are investing in the UK, it's often their first investment might be through their pension. So, it's their first experience of that long-term investing.

[00:19:37]Um and actually, by thinking about it more, looking at the numbers more, they can see the benefits of that long-term growth. Um and I think you've got a couple couple of examples of what that accumulation long-term looks like.

[00:19:50]>> thought it would just be good to to almost come back to that that 80-lb scenario again that we've used throughout the scenario throughout the the episode. And and and let's say that that that 80-lb does become 160 from a a basic rate taxpayer um with employer contributions going in. Um that's only 160 on day one that that you put in. But if you are investing in your pension, which you should be, that'll immediately start start to grow. Um and after 10 years of of compounding, and I've just used 5%, which is what the FCA would say is a mid a mid growth rate. Um that that 160-lb is going to be worth 260-lb.

[00:20:25]After 20 years, it's going to be worth 430-lb. And after 40 years, if it's sort of a a full retirement time horizon, that 160-lb is going to be worth almost 1,200-lb just from that one contribution going up. And if if you think about, well, we're putting 160-lb in a month Yeah.

[00:20:42]and just have that adding up over time, quite quickly, a very small contribution is going to become pretty pretty big and pretty meaningful in in retirement. Um and and the other one that I I just wanted to to sort of mention is I think we've we've mentioned it relatively recently.

[00:20:57]Sometimes when people look at growth rates and they go, "Well, that's all right, but what does it actually mean?"

[00:21:01]A a a rule that I've come across is is the rule of 72. Uh essentially, it's it's a rule that helps you understand how long it takes an investment to double. So, how long is it going to take this £160 to double? And And what you essentially do, you take 72, you divide it by your growth rate, and then that gives you the amount of years, roughly, that it should take. So, 72 / 5 is 14.

[00:21:21]Should take around about 14 years at a 5% growth rate for for any investment to to to double. I think it's just quite a nice sort of thought of, "Okay, if if we're looking at different risk levels, different returns on investments, almost trying to contextualize it and and give you a bit more of an understanding."

[00:21:36]Definitely. And I think what's really good about those sort of figures in the illustration there is to say, we've looked at put potentially, you know, one month's contribution, and then after 40 years, you know, what what could have been £80 going in, if that's, you know, 1,100 in 40 years' time, could that be a month's worth of income for someone?

[00:21:56]Well, actually, that's a really good way of thinking about one month's work now, 40 years later, it could be a month of income, or, you know, it could contribute to half of someone's income, for example. So, yeah, I think the doing the right things earlier rather than later definitely, you know, starts that snowball effect. Um, and it it's about, you know, going back to what we said before, if someone can put more in, if you can allocate bonuses, you can quite quickly be jumping up the ladder to get that snowball effect going. Um, I sometimes see people go, "Okay, the world seems a bit more volatile from an investment risk point of view. Um, obviously, with things like Trump and and conflicts around the world, that's valid from a volatility point of view, but should that mean that people pull away from pensions or don't invest?" And I think often that question comes from a point of view of going, "Ooh, I might do it in the future when things are a bit more stable, but I'd rather not do it now." Again, what's your sort of gut feeling and gut reaction to that sort of point? I mean, the the time is now, Matthew. Seize the day. Um, no, the when with volatility in in it's the perfect time if you regularly contribute in because we've said it on many episodes already, you're essentially buying your stocks and shares or whatever you're invested in at a discount.

[00:23:11]And when your time horizon is 20, 30, 40 years, ideally, you want the market to be sort of going down and down and down and down and you're buying stuff cheaper and cheaper and cheaper and then on the day that you retire it it it it chucks up by a a fair way.

[00:23:24]In reality, that that doesn't happen, but essentially when something like Iran Iran war happens, most of our portfolios maybe down to 5% in in March. And if you put your contribution in in March, it's gone up by 5% in April, roughly.

[00:23:40]That that like depends what you're invested in.

[00:23:42]So, you've actually just got a 5% discount on on on what you've got. So, yeah, I think it's it's worth putting in. I I wouldn't sort of shy away. You do have to be careful of time horizon because if if maybe maybe we're not talking about pensions, maybe we're talking about buying a house or something and you you've got a less than 5-year time horizon cuz let's be honest, everything doesn't bounce back within a month. It doesn't always happen.

[00:24:05]But yeah, if if you've got a long time horizon, volatility is your friend. If you've got a shorter time horizon, that's when you have to be a little bit more careful with what you are investing in and and how much you're willing to to lose, really. Yeah, I think that's spot on. I think you know, when people are saving for the long term, volatility is their friend. Risk shouldn't be a negative thing. It should be a positive thing as long as you are aware of the level of investment risk that's being taken.

[00:24:28]And we know that as someone gets closer to retirement, their almost need to access the money and the figures are a bit more concrete. So, therefore, maybe that risk tolerance or that feeling of risk might start to drop down. But if you are 20, 30, 40 years old, saving into a pension for the long term, you know, right now when there's more volatility in the world or more volatility in the market, you know, your pension is really benefiting from that.

[00:24:54]>> Yeah, absolutely.

[00:24:56]So, I suppose get getting towards up and but not quite. I I did want to We've spoken about how pensions are are very good and and and a really important part of your your overall portfolio. But, I just thought it'd be good to to just spend a little bit of time on them all talking about what a pension isn't and and and and what you should maybe be aware of. And I I think that that first one is what we've we've spoke about literally just then is a pension isn't guaranteed. It's not something where you can almost put in these contributions and completely forget about it. I I wouldn't be checking it every single day. That's probably not healthy. But, making sure that you understand sort of where you're invested, the charges that you might be paying, the overall retirement plan as well is really important with a pension. And then, check it semi-regularly to make sure that it's still on track. Um, there are obviously other pensions. So, we're this this very much is focusing on on defined contribution pensions, flexible pensions. If you've got a defined benefit pension, that that is a little bit more self-sufficient. You can just let your contributions go out and and wait till you retire. But, with a flexible pension like this, I think it's it's definitely important to at least keep keep an eye on it. Yeah, definitely. And I think, you know, like you say, it's not guaranteed. If someone's then reaching retirement and they've got retirement options, there are guaranteed options like the annuity that they can look at. So, if someone is a low-risk individual who's finds volatility worrying or, you know, that flexibility doesn't add value to them, there is things that they can do. But, equally, when they're saving, they're still part of that journey where investments can go up and down.

[00:26:25]Um, in terms of, you know, is a pension self-sufficient? As you mentioned, you know, there's a need to almost say, you know, what does my pension look like?

[00:26:33]What are the charges? What's the investment performance been? You know, has my pension provider changed or have I changed? Have I moved address? Do I want to update my beneficiaries? Again, there's that regular cycle of making sure that everything is up-to-date. And I think one of the crucial things that we're talking about today is, you know, the pension is the superpower, but that's not the only thing you should focus on. You know, when we talked about, you know, short-term planning, someone should always have their own cash buffer and have the security. And if someone was saying, "Well, I'm not, you know, I'm looking at my pension for the long-term, but I'm also thinking about something in the shorter chapter."

[00:27:08]Maybe that's where some money in things like cash ISAs or stocks and shares ISAs could really add value as well.

[00:27:13]>> Yeah, I I think that the sort of the ISA, the the cash savings and other investments are are really important.

[00:27:20]And it's about Another thing, don't just focus on pensions and retirement planning specifically. You need to make sure that you're enjoying today while planning for tomorrow. But yeah, the cash savings again, it's an interesting one. Actually, next episode we'll be looking at almost actually what what happens when a retirement plan doesn't go right. And there are real key bit there on on, "Okay, how do we How do we maybe maneuver here? How do we make sure that we are steering the ship back back on track?"

[00:27:44]Um but yeah, from from what we've discussed there just to sort of wrap up um bit before listeners' question. I I Yes, pensions do or or may be perceived as having a bit of a bad reputation. I'm still their biggest fan um whether that's a cool thing to say or or or not. And and and you get the advantages of tax relief, of employer contributions. But but crucially as well, with time, that that that compounding compounding factor. Yeah, I think that's spot on. I think from our point of view, we're always going to bang the drum of the pension.

[00:28:13]Um and it's just how the wider things bolt on to it for someone's individual circumstances.

[00:28:18]>> Yeah, fantastic. So, uh and well, before we end, we'll jump on to to a listener's question as as as always. Um and and this is maybe a bit more of a technical one. It's actually on, "Okay, how do we get money out of the pension?" So, um this was asked on on YouTube and it said, "Okay, can I access tax-free cash out of my pension when I retire? Pay it to my wife, and then my wife contribute it to her pension to benefit from that £720 tax relief assuming she's still working. Or is this considered tax-free cash recycling?

[00:28:49]Yeah, so again a really interesting question, a good technical question.

[00:28:52]When it comes to tax free free cash recycling, what they're worried about is someone saying I'm going to take tax free cash from pension one and then I'm going to make a contribution back into the same pension, so either that pension one or set up another pension their own name and use that same money to get tax relief again and then almost potentially take some more tax free cash out almost creating that cycle. So, tax free cash recycling isn't allowed when you're looking at that one individual. When you're thinking about a couple, because pensions are individual, there's no direct link between your pension and your wife's pension, so therefore that contribution wouldn't be considered as tax free cash recycling for the wife.

[00:29:31]Again, there's there's a number of things to think about um and it might be that you say, you know, if that wife was a a high earner, she can be benefiting from that tax relief and that could be great. Um but equally then, what tax is she going to pay when she comes to access access her pension in the future.

[00:29:49]So, there's an element of of saying from a practical point of view, have you given up something that was completely tax free for some tax relief, but then there's going to be some tax free cash for her, but not all of it. Um so, there's a few different things to balance, but in answer to the question, it wouldn't be considered recycling and there's definitely times as part of a um a long-term plan, especially to try and balance different assets in different people's names that it can be really sensible to either use cash for those contributions or to consider things like tax free cash that could have come from a defined benefit pension and it could be finding a new home in the wife's pension there or it could have come from tax free cash from a a flexible pension. Yeah, absolutely. I mean, I think you you you've covered that well. I don't think there's anything else for me to add. Um we we we love answering sort of questions from uh clients or or or listeners of the podcast. So, if if you are listening on on YouTube or or Spotify, please leave a comment down down below. It's always good to to sort of see the conversations that are down there, and often it's actually different people helping each other and and and talking about sort of what what you've done in retirement, and and I think that's that's really helpful. Um if you are listening on on YouTube, please please subscribe, and and Spotify, leave a leave a review. It's always helpful in sort of getting the podcast out there, and and having more people talking about pensions, which is something something I love. Um and uh we we do have our our sort of our newsletter now that that goes out um the first Tuesday of every month. And and and as always, we'll we'll have our sort of weekly Tuesday um episode. Um next episode we'll be looking at sort of what happens when when stuff goes wrong with your your retirement plan. So, um look forward to see you again next week for for that episode.