Pension need-to-knows

Martin Lewis: Hello, and welcome to the Not The Martin Lewis Podcast, which rather confusingly is an offshoot of my normal, The Martin Lewis Podcast, the difference? Well, there are some subjects that are outside my wheelhouse or I can't answer questions on due to regulations. So in this podcast, I'm joined by specialists, and I'm asking, not answering, the questions. Well, it's me, I might chip in with the odd note or two – and crucially, too, it's you who sets the agenda. It's all about getting answers to your questions.

And this week's part is all about starting and saving in a pension. And there's a lot of info for you, including how the pensions actually work, and what are they? Should you consolidate your pensions? How to start your first pension? How to get totally impartial free guidance. Stakeholder pensions versus nest versus SIPPs? How much to save in your pension? Can pension saving ever be too little? Or too late? And loads more? Just give it a listen. Play the theme tune.

Yes, welcome to this pensions podcast. What I really want to focus on today is private and company pensions. How'd you get one? What do you do when you when you've got one? And what decisions do you need to make? We will be doing another Not The Martin Lewis Podcast on how you take your pension money when at or near retirement. So this focus is all about building up your pension pot in whatever form.

Now I'm joined and delighted to be joined by Charlotte Jackson, who's head of guidance at the Money and Pensions Service, and Mihir Choughule, who's a wealth manager at Tideway Wealth. So, before we do anything else, you two have very different roles. And I think it's important that we understand them. Charlotte, you're all about guidance, Mihir. You're all about advice. What's guidance, Charlotte?

Charlotte: Guidance says we will tell you about the subject that you're interested in, we'll guide you through some of the things that you need to think about. But crucially, we won't tell you what to do. And we won't recommend products and services.

Martin: So you couldn't tell me you need to put your pension with X provider. But what you could tell me is the pros and cons of going with a stakeholder pension over a SIPP, or what the tax implications of putting money into your pension are. Everything to understand the bigger picture, but not the final decision. And the big advantage people have with you is you're free.

Charlotte: Yep we're free, independent, impartial. So when we don't hold any products or services, it's literally just about providing support to individuals as they're trying to think through those decisions.

Martin: So if you're listening, for me pensions is one of those lucky areas where you can get free one-on-one help if you don't know what you're doing. So see the podcast we're about to do as a good guide. But then it costs you absolutely nothing. You can call up the Money and Pensions Service. And you can get one-on-one pensions guidance. But there are some times especially if you're dealing with larger amounts of money that you actually want someone to help you through to the very end point of the process. And Mihir, that's where what you do comes into effect, isn't it?

Mihir: Yeah. So we will look at an individual circumstances, you know, personal and financial, as well as you know, what their objectives are, and what basically they want to do with that pot of money. And that's really where the advice part of it comes in, where, you know, we will sit down with you and talk you through all of the different options available to you.

Martin: And you'll talk products when you're saying this provider this amount of money, this type of investment.

Mihir: Yeah, yep. So we will give you a definitive not answer, but a more sort of more than sort of guidance. Ultimately, it's the individual decision at the end of the day, but we will sort of lead you to a particular direction.

Martin: And of course, you get paid for that. Well, listen, everybody at the Money and Pensions Service gets paid to but it's free to the to the user. Whereas if someone wants to come to you or come to an independent financial adviser specializing in pensions, that pay for it, how do they generally pay?

Mihir: It varies. So some sort of firms offer sort of an initial and ongoing fee. Some firms, like the one I work at, we offer just an ongoing fee. So I mean, the charging structure varies from firm to firm, but generally, you might have an initial or an ongoing fee.

Martin: How much money do people need to have for when they're starting to come into the independent financial adviser realm? Let's be really blunt about this. Because the truth is IFAs you've got to make a living, you're not going to deal with someone with a £5,000 pension pot.

Mihir: No. And honestly, like, if it's the £5,000 or a small sum like that, honestly, you don't need financial advice. It's about keeping it as cheap as possible and making sure that you're invested in the right funds.

Martin: And you can get the guidance from the Money and Pensions Service.

Mihir: Exactly.

Martin: So what type of level give us some rough guidance, give some rough advice kind of level.

Mihir: I would say if your pension or any other assets that are sort of valued at between £250,000 to £300,000 you should probably look at getting some sort of advice on those funds by.

Martin: That seems quite on the high side, I think there are certainly people out there who might be going at a lower level sort of £100,000. Charlotte, where are you?

Charlotte: Yeah. And, and it also depends on what type of products you have. Because if you have an older pension, so a defined benefit pension, then legislation requires you to take regulated financial advice. But people's lives can be quite complicated and messy, so pensions often don't sit in isolation. In our view, everybody would benefit from guidance on the topic and their significant percentage, also, going on to regulated financial advice is about helping equip people.

Martin: We are a bespoke podcast that tries to give people definitive. So I want some form of number from you of what type of level of pension funds you should be looking at. When you go for advice, give me something, I know you don't want to, but I'm pushing you.

Charlotte: I think if you are with somebody with a pot of say £150,000 or above, then you need to be really seriously thinking about it. But again, it depends on your individual circumstances, and what the types of products you're interested in. So people's lives are complicated. But the more you are looking at variation and flexibility, the more you should be considering taking advice.

Martin: So complex products, it might be even £75,000 pension fund and above, you might want to take a look at it.

Charlotte: Yeah.

Martin: Perfect. Right. So I'm going to do my little bit now before we come on to you doing the hard stuff, I just wanted to explain to everybody the basics of pensions, because there are lots of different categories. So the first big division is there's the state pension, and there's private and company pensions now with the state pension, generally, when you work, you build up National Insurance years, and each year that you work, you get more of those national insurance years that once you get to retirement age, you will get a payment from the state that goes into your pocket, depending on how many national insurance years you get. So, the current state pension age is 66. That's when you will start to get paid your state pension, but that number is going to go up to 67, and then up to 68. So it all depends on how old you are at the moment. But that's not what we're planning to talk about today.

Today is all about private and company pensions. Now these fall into two categories, defined benefits, and defined contributions. Let's do defined benefit first, which is more commonly termed a salary type scheme. So here you'll get a set percent of your final or average salary when you retire. And you'll earn that for each year of work. So you might get a 60th of your final salary for each year of work. So if you work at that place for 20 years, you would get a third of your final salary on retirement. Now, these are older types of schemes, they're few and far between now, they tended to used to be thought of as being absolutely gold-plated, the best out there. But there has been some breakdown in the way that they work. Why they're called defined benefits? Well, the amount that you get when you retire is what is defined, it is a percentage of your final salary.

Most people though, these days will be on defined contribution or money purchase pensions. This is where you save a pot of money. And that builds up and you use it when you retire. This applies to many workplace pensions now and all private pensions are money purchase. The pot size that you build up depends on the amount of money you put in it, and how much it grows. As simple as that. So for the vast majority of people deciding on a pension, you will be looking at money purchase a defined contribution, because it's the amount that you put in that you dictate the amount that you get out often depends on your investment returns. And that's where someone like Mihir comes in, because that he'll be telling you what to invest it in.

So, let's get into these questions. The first one comes from Twitter. It's Laura Davis, and it's a big wide one. If you're 45 and have no pension, what do you do? Charlotte? Where do you start?

Charlotte: Don't panic. That's the first thing. There's never too old to start looking at a pension. But there's obviously a wider set of things that you might want to consider. Are you employed? Are you able to save a little bit or not? Is there a workplace pension where your employer is contributing? What's your wider financial situation like. So at 45, we'd be saying have a look at going through we call it a midlife review. Look at all of those questions around your finances more broadly.

The more you can save the better. It's never too late – little and often.

Martin: It's never too late but the earlier you start, the better.

Charlotte: Totally.

Martin: So let's do the thing that scares the pants off absolutely everybody when I say it, so you no one does this what I'm about to say you will not do so do not panic, but it is this old equation. It's not particularly accurate, but it gives you a good sense. Who's the younger of you two? Mihir? You're the younger, aren't you? So, I'll ask you. So, you take your age, when you start putting in your pension, how old are you?

Mihir: I'm 30.

Martin: You're 30, you halve it 15. So, the equation says that you want to put 15% of your income, and that includes employer contribution into your pension for the rest of your life to have a pretty strong retirement fund. Very, very few people manage that. But the real lesson from that is the earlier you start, the better, because the more time your money has to grow, when it's in your pension, so nobody do that equation, they go, 'Oh my God, I'm never gonna do anything'. It's not about that. It's just a way of indicating to you that early is better, and the more you can catch up later. So we'll go back now to Laura's question – 45, and no pension – we'll assume that she can contribute, where and we're going to say, first place, if you're in work, use your workplace pension

Charlotte: Yeah, because you're in work you will not have to pay any fees or charges in the same as if you set up a personal pension, and your employer should be contributing to it. So under automatic enrolment, the employer is required to put you into a pension, you can decide to opt out, but actually, you will get benefits by your employer paying in most employers will contribute towards it, and you will get tax relief on anything that you save in there. So it's a really, really good deal to save into workplace pension if you can.

Martin: So right, let's just do this for a second. Auto enrolment means you will save into your workplace pension by default. If you're age 22 to 66, and you earn £10,000 a year, you are automatically opted in. Now, the minimum total amount is 8%, of what you earn. And the employer must contribute 3% to that. So, let's just do this really simply, let's imagine you are putting in £100 a month of your income. As a base minimum (assuming it's within the right criteria) your employer would need to add £60 on top. So, you're putting in £100, you're getting £160 in your pension.

But it gets better than that everybody. Because one of the big things about pensions – one of the whole things about pensions – is their tax wrapper, you get to put the money in from your pre-tax salary. Now this happens, whether you're self-employed doing it yourself, or whether you're employed, but will stick within the auto-enrolment system.

So, imagine you've put £100 in now. Because that comes from your pre-tax salary, your gross salary. If you're a basic rate taxpayer, you only lose £80 from your pay packet. So think about this for a second, you put £100 in, it's cost you £80, the employer's added £60 on top, so for your £80 going from your pay packet, you now have £160 – double it – going into your pension, if you're a higher rate taxpayer 40% taxpayer earning over 50 grand a year, well, then for you to put in £100 only costs you £60, you only lose £60 from your pay packet. So now you've paid £60, but you've got £160 going into your pension. And that is unbeatable gobsmacking tight rates. That's why pensions are powerful. Yes, the money is locked away until you're older until you're at retirement, but as a form of saving the tax benefit plus the employer contribution is unbeatable. So auto-enrolment. Absolutely the first thing you should look. And, just a tiny quick note. It's worth me saying if you're not opted in, because let's say you're aged 16 to 22, or 66 to 74, you won't be opted in, or you're earning between £6,240 a year and £10,000 a year. In those circumstances, you can say to your employer, I want to opt in, and they must allow you to opt in and they must contribute to your pension giving you the same as they would if you'd been automatically enrolled. So, Charlotte absolutely step number one, check if you're employed, is your employer giving you a pension, well it has to it has to by law, I shouldn't say check, if you're employed, that you're within the criteria to get the pension.

But we're going to imagine for Laura here because I want to use her as an example. She's not, she's self-employed now. So where does she start?

Charlotte: Well, you can set up a personal pension and there's a range of different types of things that you can do. So you can you can ask around in terms of banks building societies, pension providers, you'll see them advertised all of the large names. Nest, you can look to start up your own pension.

Martin: What is Nest?

Charlotte: Nest is the National Employee Savings Trust.

Martin: It's basically the default pension that are used. It's the big national one.

Charlotte: And they are set up to provide low-cost pension savings for the bulk of people so they are a good first place to start. Have a look and see if what they can offer is what you want.

Martin: Now you see people what I'm going to do now is give you a perfect example of the difference between guidance and advice. Charlotte can explain how things work and talk people through the tax things but she doesn't do products, Mihir, you do products, Laura's self-employed, let's say she wants to contribute £150 a month to her pension. Where would you start her?

Mihir: Well, I mean, I think the easiest place to start is your big pension providers. I think most of them have to.

Martin: Give us some names we're talking about, Aviva?

Mihir: Not even Aviva. I was thinking something like AJ Bell, Hargreaves Lansdown, things of that nature. I mean Aviva is obviously one of them, L&G is one of them.

Martin: So but Hargreaves and AJ Bell, they're SIPPs, aren't they? Your self-invested personal pension. So let's just run through, let's just get some definitions of the different major types of pensions. We'll start with a stakeholder pension, which is?

Charlotte: Which is where you have a very basic set of options available to you. And you can save into it and a narrower range of investment choices that you can pay in, you can normally delay pay, you can pause, but you're looking at a fairly straightforward savings vehicle with tax relief.

Martin: A simple, straightforward savings vehicle with capped charges, so you can't be charged a certain amount. But it's a type of standard pension.

Charlotte: It is.

Martin: The difference between a stakeholder and a standard pension is standard pensions don't have the cap charges, basically. And then a self-invested personal pension, a SIPP, Mihir?

Mihir: It's also a personal pension. But where it differs from a stakeholder is that the range of choices they do get in terms of funds is a lot higher than a stakeholder. And the onus really is on you to get an investment strategy that is suitable for you and your pension. But the charges then will be higher as well as compared to the stakeholder.

Martin: So this is why I sort of in my view, and you two are the professionals, someone who's starting a pension at 45, putting £150 a month I would be slightly nervous about them doing a set my guess is (and this is maybe because I know the type of people who ask me questions) that someone asking that question would be the someone goes, I know nothing about this stuff. I don't know what I'm doing. And SIPPs aren't really for that type of person, are they?

Mihir: It depends upon obviously the knowledge of the person who's investing it, but what they want to do and how much work they want to do. But I would counter that, Martin by saying, you know, stakeholders, obviously, are you know, the cost is a lot lower than the SIPP for example. But in terms of the investment options, if the investments, you know, if they don't perform at the end of the day, then you know, you're kind of losing out on a significant amount of growth there between 45. And whenever the person decides to retire.

Martin: Charlotte stakeholder versus SIPP for someone starting out?

Charlotte: I'd go for a stakeholder, SIPPs require a lot of work, they are more exotic, oftentimes of their investment choices, which is where, you know, we talk about higher rates of return. But those higher rates of potential return on those investments come with a much higher, typically higher level of risk. So if you aren't familiar with that investment choice, for example, we've had people phoning us up talking about truffle farming. Do you know about truffle farming is that really a good investment choice for you, we would say you have to be hands on and know what you're doing. And you're choosing to invest your hard-earned money into something that a lot of work on it.

Martin: For me, that is the difference. I think if you don't know what you're doing, you're scared and you just want capped charges, a relatively simple form of stakeholder a standard pension is probably for you. If you want to take control of your money, you want wide investment choice, you're going to follow the different investment options out there, you're going to get advice – so, you've got someone who could guide you through it – you probably want to go through a SIPP. So, we're here, just before we finish up on where self-employed people should be looking for their pension. Give us the names of a couple of stakeholders or easy places for those who don't want SIPPs to go for.

Mihir: Sure. I mean, two of the biggest ones are probably Aviva and L&G, I would say on the market. If you're looking for something more automated, then Wealthify as well.

Martin: It's not a stakeholder, but it's an easy form, isn't it? Correct?

Mihir: Yeah. So I would probably say these three, probably should be your first port of call for a stakeholder pension.

Martin: Brilliant. Thank you very much.

I'm going to move on to I think the biggest single pension question that we have had, and doesn't surprise me because I get it all the time. It's all about consolidation. So let's read a couple of them out. Would you say it's more beneficial to keep all of my different work pensions separate, or collate them into one pension pot to be managed together? That's from 'hustlingfun' on Twitter. And Rob O'Brien on Facebook says, I have about five workplace pensions, and my best putting them all together. So that to consolidate or not to consolidate.

Charlotte: With my slight OCD tendency, having things neat and tidy in one place is really attractive, but there is a big cautionary button there.

Martin: What's your big but there Charlotte?

Charlotte: The big but is have you need you need to know you're not giving anything up. And there are some really good reasons as to why you might not want to consolidate everything. So don't automatically jump in to say, I'm going to be neat and tidy and put it all in one pot. Ask some questions, keeping some separate is helpful sometimes.

Martin: So we can start by saying there's nothing wrong with being biased towards consolidating because it makes your life easier. What are the questions people should be asking before they do it?

Charlotte: The big ones, so going back to some of our early conversations about defined benefit, there are some types of pensions that have really valuable special features to them. And it might mean that you don't have very much money in it. But actually, it will bring you lots of other benefits. So things like, if you die, it would protect your spouse, for example, there may be special conditions, and that's often down in the devils in the detail. The other big but on there is, you may want to just have a final, you might want to have a little separate pots of money, because in the future, you might want to treat them differently. So again, when we come to thinking about what you do in retirement, having a couple of separate pots will enable you to maybe make a range of different options and treat them differently. And that can be really useful for tax purposes.

Martin: So some consolidation good – too much not. Now, just while we're on this. So you've given us things people should look at, but it sounds quite technical in the small print. Pension Wise, would they be able to identify those in different providers? Or is that something you need to go to advice for?

Charlotte: No, you can do both in Pension Wise, the Pension Wise appointments cover special features, although they're often in defined benefits schemes. So that's not the main purpose for Pension Wise appointment, that's obviously defined contribution, but our pension guidance services under money helper do and they specialize very much in looking at those technical details to be able to provide support to ask the right questions.

Martin: So somebody would be able to come and make an appointment and say, here are the five different places I have my pensions to I've set up myself and three of workplace pensions, and I'm considering consolidating them. Can you tell me for each of those schemes, whether it is a good idea or not to consolidate?

Charlotte: Because we don't give advice? We'd be very careful not to say.

Martin: OK I'll rephrase, can you tell me the pros and cons and consolidating for each of those schemes? And they would have scheme level knowledge?

Charlotte: Yes, more often than not. So the people that we employ are all industry experts, they've typically worked 10 plus years within the industry, so they know what to look for. And that's their job to make it easier for you because we know it's difficult. In some circumstances, what we'll say is, you need to ask your pension provider and they will help you articulate what it is you're asking them.

Martin: Yeah, Mihir. Where are you on consolidation?

Mihir: I think I'm broadly in agreement with Charlotte and things you have to consider. I think one of the things that wasn't mentioned is it really depends on what stage of your life that you're in. If you're accumulating any, let's say you're in your 20s, or your 30s, chances are the pension assets that you have, are probably not going to be too complicated. And esoteric, I would imagine. So consolidation probably makes sense – probably being the key word.

Martin: Yeah, we all know we're generalizing, you can't do it without knowing the details absolutely. So the younger you are, the simpler it is, the easier it is to consolidate.

Mihir: Yes. Whereas if you're in your 40s, 50s, 60s, and you're approaching or thinking about retirement, and the focus is on preservation, not just accumulation, then it probably might make sense to have two separate two, three, or however many separate pots that you want. So that each pot does separate things, essentially.

Martin: And is some of that age difference, because pensions have changed over the years, so there's complexity in older style pensions, but there won't be for some of those in their 30s – they're just not going to have that different complexity.

Mihir: Yeah, like, like the benefits that Charlotte mentioned, you know, some of these are protected and the individual to the scheme. So these were prevalent in the 70s and 80s, which, you know, people in their 20s, and 30s, just weren't around for them. So they just won't have access to them. So you know, 20 people in their 20s and 30s likely have much simpler arrangements.

Martin: You said, keeping a couple as you're getting their retirement. This is because what you may want to do with that money will change. And I actually know because we're going to do a programme with you, too, on how you take your money for retirement. We've got questions on that. So if that's coming into your head, do listen to the other Not The Martin Lewis Podcast programme on taking your pension. Well, we'll go through that in more detail. Next question is from Craig1983 from Twitter. It's about investments. He says my pensions tumbled in the past two years, when are they likely to return to their previous high and what factors impact them. So the first thing to say is nobody knows the answer to that. We don't. But what should you be looking at how it almost how do we think about our pension money because one of the problems if you track it every day, it's gonna give you a heart attack going up and down all the time. You have to look over the longer period don't you.

Mihir: Yeah, I think obviously, I mean, I won't go into the details of why it's gone down over two years, I'm sure people are aware of the general macroeconomic factors and things like that. But I think the key here is to make sure that you have a medium to long term investment strategy there. One that you're comfortable with, one that works for your objectives, and one that works for your circumstances, and one that you would be comfortable remaining in even withstanding market volatility. I think that is the key.

Martin: So this is something people find very difficult, let's just imagine you put, we'll call it £10,000, plucking a number out of the air, you put £10,000 in an investment, that investment – and a pension is just a tax wrapper, you're choosing investments to put inside it – it's just a good way to do that with tax, that investments dropped to £8,000. Now people tend to think there's a law of return, 'I will wait until it goes up to £10,000, until I'm going to, to deal with it. Whereas actually, philosophically, should people be more thinking I have £8,000, what I had before whether it's £6,000, before £10,000 is irrelevant. I have £8,000. Is this the best place for my £8,000? Not, I wait? Is a better way to go, isn't it?

Mihir: Yeah, I think so. I think firstly, the strategy should be outlined at the outset, taken into account, if you need that money at some point, and then the risk would be altered depending on whether you need access to that money in the next one or two years versus if you're happy to leave it there for the next five to 10 years. Those are two significantly different strategies. And I think, you know, depending on which sort of stage you're in, if it's sort of medium to longer term, I appreciate seeing sort of red on your investment portfolio is not pleasant, it's not pleasant for anyone. But if you know that you have 5/10 years to let that money recover before you need access to it, you really shouldn't panic and take a decision, which then impacts you over that period.

Martin: No, my view was less that you panic, because it's dropped to move it out. It's more that whatever amount of money you have whatever has happened in the past, the amount of money that's in your account is what you've got. And you should always just say, 'Is this the best place for that money?' Yeah, but look, we are terrible in this country with investing, we have no understanding. Generally,(many individuals do) of risk. You know, you contrast it to the states where everybody instantly tries to put far more money in stocks and shares rather than savings. I mean, some people blame me for this because I only ever talk about savings. I don't talk investing because investing is not my bag, I'll probably do Not The Martin Lewis Podcast on this at some point, because it's something that I need specialists in to talk about, but you're going to put your pension almost invariably is going to be an investment, it's going to go up at times it's going to go down at times. Think of it like a sine wave, if you remember it from school, the real question is, is the overall direction over a long period of time going upwards? That's what you want. The fact it's dropped over the last six months, doesn't necessarily matter. If it's dropped down over the last 10 years, that's a problem. But over six months, things will go up and down. So you just have to understand pensions are for the long term, not the short term. That's what it's all about, isn't it?

Charlotte: It is.

Martin: So we've got a caller on the line. Now it's Emma Torrance from Nottingham. Hello, Emma, what can we do for you? What's your question?

Emma: Hi, Martin, I've got some money that is invested on a platform in a SIPP. I used to have a financial adviser, and then I withdrew most of my money, mainly to pay off my mortgage when all the rates changed. But my SIPP was left on the platform. And very nicely, the adviser isn't charging me for any fees, but I can't put more in, take bits out I can either take all of it out or not. But I'm just wondering, should I move it into somewhere, you know, either into a pension? Or am I able to move it into a normal pension rather than a SIPP?

Martin: So Emma, I'm assuming you're over 55 At this point, if you've taken money out of your pension.

Emma: Yep. Yeah I'm 55.

Martin: So you're able to take the money out of your pension? Charlotte, let's come to you.

Charlotte: The first thing is, is looking at you saying that the adviser hasn't been charging you but obviously that's going to be a key question around taking your money out. So transferring it. So you shouldn't be able to look at transferring it into another form of pension but have a look at what's suitable for you. What are the options for you going forward in terms of the types of things you're going to want, in the future.

Martin: What are you going to want in the future? Let's try and dig into that. What should you be looking at?

Charlotte: So that's things around really thinking about what do you want your retirement to look like? How are you going to want to access that money because if you transfer your money into a different type of pension product, you want to make sure you've got the full range of options that are of interest to you before you move your money over. So have a little bit of a look, shop around. We would say take up a Pension Wise appointment to talk through what those different types of pension products might look like. But a key thing will be looking at the costs and looking at what you want.

Martin: So your biggest problem is the money seems to be trapped. You can't add to it. You can't deal with it. It's just frozen in this SIPP. Is that right?

Emma: Yes, that's right. So Mihir any idea of where she should go to unfreeze it? Let's melt it for her.

Mihir: I think, Emma, thanks for your question. Firstly, I think the first port of call is probably to understand why that money is frozen on that platform. Because even if you do not have an adviser attached to it, as you stated, you should still be able to access the pension and transfer it away. So if there's a reason it's frozen in there and you can't move it.

Martin: Do you know, Emma, what is the reason it's frozen?

Emma: No, I can take it out and transfer it I just can't add to it or take bits of it is my understanding. So it was on a platform that was that adviser had access to but because I'm no longer using the adviser.

Martin: I'm guessing you've got an advisory only platform one that the public can't use themselves. So then the issue him Mihir is you want to move it to a more public facing platform, like the two you mentioned earlier, AJ Bell or Hargreaves Lansdown, is that right?

Mihir: Correct, I would say that the first port of call is to probably move away to, like AJ Bell. or Hargreaves Lansdown on one of those sort of more reputed pension providers, just so you know that your pension is safe, first of all, and then you can access it. And then the question, obviously, is what Charlotte mentioned earlier, you need to have a look at the costs of the various sort of pensions available, as well as the access options. So not all of them offer flexible options, all of them. So that really needs to be the two things that you need to consider when moving away, or transferring away.

Martin: Summarising the information: step one is probably move it towards a much easier to operate, consumer facing SIPP provider. Once you've done that, then make an appointment with Pension Wise to start talking about what you want to do with the money for your retirement and making an appointment with Pension Wise is good information for anybody listening to this in any pension circumstance. It's always a good stopping to call it. I'm sure Mihir even as an independent financial adviser, you'd support that type of call?

Mihir: Absolutely. Yeah, I think the first point, of course, should always be a guidance session with Pension Wise or all of these other services out there. And then and only then if your circumstances are more sort of esoteric and complicated, then consider approaching an adviser.

Martin: Emma, does that answer your question?

Emma: Yeah, I think so. Both that last bit, but also the first person had said that he can go into other forms of pensions, which was helpful, doesn't just have to remain an asset.

Martin: No, but it doesn't. I mean, you could do it in one stage, you may want the Pension Wise call first. But if you want to keep it in a SIPP for flexibility, just moving it to one that's available to the general public is the right way to go through. It's what I'm hearing from our two specialists here. And thanks so much for calling.

So next set of questions is all about, are there ever any times it's just not worth putting money into a pension, Muncie saying, 'Well, is it ever too late to start saving into a pension?' And Annie is asking me 'with how pensions can be counted as income against welfare or care home funding, is it worth boosting a tiny private pension into a slightly larger private pension? I worry, it can be a lot of struggle and strife to save up, only to get excluded from the possible positives of a micro income'. Now, there is some logic in here because there is a top up to the state pension called pension credit for people who have no other forms of pension. And therefore, it could be slightly self-defeating, if you're near retirement to put a small amount in a pension, because you'd lose the pension top up, so you wouldn't necessarily have gained of saving. But that's an extreme case, isn't it, Charlotte?

Charlotte: It is, you start getting into the realms of how much how whether you're accessing the money, so if you're not accessing it, and it's sitting there, if it's below a certain level, then actually, that's not doing any harm. There are means-tested benefits, the way you go into that space, particularly if you're looking at going into a care home that you need to take into consideration, but each of them are a balancing act, in terms of what you need to pay, what you're accessing at the moment. And the point at which it comes into scope for assessment against means-tested benefits.

Martin: So help us through that, because that's the question. When is it too late? And how small is too small? I know, I know; I'm pushing you I can hear. But look, someone who's 45 wanting to save £100 a month it's going to be a benefit to them. Someone who's 65 looking to save £10 a month, it probably isn't fair. If they haven't got any other any other assets or income.

Charlotte: If they haven't got any other assets or income, then it comes down to what their outgoings are and yes, you have to ask the question about what would be the value, in what circumstances would it benefit them.

Martin: I understand that this is difficult because it absolutely varies. I'm trying to push you on scales of magnitude. So let's stick with that, you know, £65/£10 a month is going to be questionable. £45/£100 a month is probably not going to be questionable. Yeah. Mihir you have anything to add on this to help show that out and being mean?

Mihir: No, I think to broadly summarize, it's never too late to add to your pension firstly. But if you are 45, and you are proposing just to use that example, £100 a month, that, you know, over, let's say, 15 to 20 years by the time you get to retirement, given compounding, and you know, given the contributions that you'll make over that period, it's really about your time horizon. Do you have enough time left until you access that pension for it to grow?

Martin: You might be talking £40,000 to £50,000 on that amount, might you if you've done very well.

Mihir: Yeah, absolutely. I mean, it completely boils down to the investments that you have.

Martin: This is a dilemma people face, it's certainly on the pension credit. But it is only when you're talking very smaller amounts later in life that this is going to be an issue.

Charlotte: It is, so you're looking at anything less than £16,000, your money safe net, it's not really going to be counted against you. The other key consideration that a lot of people have is, is that pensions are a way of passing on wealth to your dependents, so your spouse or your children. So what we're seeing more of now is, is people saving in even in later years, and not accessing that pot, because it comes with tax relief, and you can pass that on. And that's a really big consideration.

Martin: What's the tax relief, the inheritance tax?

Charlotte: So you don't pay tax, you don't pay tax on it at all. So if you don't access that pension pot.

Martin: At any age?

Charlotte: And you were then to die, that pension pot gets passed to your spouse or your children after you.

Martin: So if you've never touched your pension, it can be passed down without tax, without capital gains tax.

Charlotte: Yes.

Martin: They'll still pay income tax on even if they...

Charlotte: Yeah, yeah.

Martin: But the lump sum was passed across as long as they've not touched it.

Charlotte: So if you can afford to save something, then what we're seeing more people do now is looking at that as a way of passing it on without inheritance tax. And a lot of people want to be able to do something for their families afterwards.

Martin: Brilliant.

We have a caller on the line, now Mihir, this is one for you, I think. Ben, where are you, Ben?

Ben: I'm in West London, Ealing.

Martin: OK, so Ben from Ealing? What's your question?

Ben: So I've just opened up a SIPP, and I'm 47 years old. And is it better to pay in regular small amounts? Or shall I take some of my savings and pay a large amount in one goes into the SIPP?

Martin: So should you spread it over time your contributions going in? Or should you just dunk it in? They call it pound cost averaging? Correct?

Mihir: It's called pound cost averaging Ben, thanks for your question. And to be honest, if possible, then regular investing is, in most circumstances preferable to doing a lump sum. And the reason for that is basically the market will go up and the market will go down. So if you have a regular amount going in at, you know, let's say on a monthly basis, then you take advantage of those dips in market performance. Whereas if you put in a lump sum, the market could fall sort of 5% to 10%, the very next day, and then you're kind of playing a bit of catch up. So the question comes down to market timing, no one can market time regardless of what they tell you. So in order to mitigate that as much as possible, putting in regular amounts on a monthly basis also, is probably your best choice there.

Martin: So we're talking about smoothing the risk, aren't we, if you put it in every month, then you're getting a generalized price. If you put it all in in one go, then you might be very lucky and bought at the bottom, you might be very unlucky, and bought at the top, either way, you're amplifying the risk. So putting in regular amounts over time rather than lump sums is a way of smoothing that risk out. Ben, what do you think about that?

Ben: That's great. That's, I kind of thought that just for clarification.

Martin: How old are you sir? if I may ask, you sound very young on the phone.

Ben: 47.

Martin: It's when your eyesight starts to go, you realize you're not that far from retirement, don't you?

Ben: Yeah, absolutely.

Martin: 45 my eyes went. It's when I had to start wearing glasses. I still haven't accepted it at 52. Thanks, Ben. Thanks for calling.

Ben: Thanks, Cheers, bye.

And I think that is probably a good place to leave it now. We've covered a lot. I have loads more questions, but I think people are probably exhausted with listening to this. We go back again to where I started. If you need help on pensions, start point is to call Pension Wise, get yourself an answer. It's totally free. It's independent guidance. But if you want more bespoke help you want someone to pick products for you, and you got a decent pension pot, it's worth getting yourself independent financial advice as well. So thank you very much to everybody who's called thank you so much to Charlotte Jackson, head of guidance at the Money and Pensions Service and Mihir Choghule is wealth manager at Tideway Wealth.

And that's it for this episode of the Not The Martin Lewis Podcast. Although there was actually quite a lot of me in there wasn't there. I hope I asked some questions that were interesting for you. If you've enjoyed it, please do listen to others in the Not The Martin Lewis Podcast series, the full episode lists some of them may not be out yet, depending on when you're listening to this, are renters rights, inheritance tax and probate, general tax questions and taking your money out of your pension. Do spread the word about the Not The Martin Lewis Podcast and the Martin Lewis Podcast series. I'll stop now; I'm getting myself confused.