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QA42 - Listener Questions, Episode 42

QA42 - Listener Questions, Episode 42

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 Pete Matthew and Roger Weeks cover self-employed saving rates, inheritance tax and estate planning, and how dividends are treated inside pension drawdown (including SIPPs). They also discuss salary sacrifice and contribution limits, the pros and cons of recycling tax-free cash, and whether to overpay your mortgage or invest via a Stocks & Shares ISA. Shownotes: https://meaningfulmoney.tv/QA42 01:07 Question 1 Hi Pete and Roger, Thank you for your amazing podcast! My question is about budgeting & savings percentages: Should you aim for a % of your gross pay or your net pay when it comes to aiming for a savings percentage? e.g. Invest 20% of gross or net? I'm self employed and work contract to contract. From each contract payment I have to give 25% to agents and lawyers. Then I get paid the rest and have to put aside some of the money ready for the Tax man. When planning for how much I should save / invest from each contract payment should I be putting aside: 20% of the original contract amount? (which would be prior to the agents taking their cut and prior to the tax man taking his cut?) 20% of the amount left after the agents but prior to the tax man? Or 20% after both the agent cut and tax man cut? Thank you! Isabel 05:50 Question 2 I am a 70 year old widow with no children. My current net worth is about £2 million. This is made of of a house (£500,000), savings and investments (£1,150,000) and a drawdown pension pot of £350,000 which I inherited from my husband. My husband died aged 68 so the pension pot is currently tax free. I plan to leave our inheritance tax free allowances of £650,000 to family, mostly nephews and nieces and the reminder to charities. The drawdown pension will also go to named family members until the rules change in 2027 after which this will also go to charity. I understand that this would mean my estate wouldn't be subject to inheritance tax. Am I right about this? Is there anything I might not have thought about or any flaws in my thinking? Thank you for your very informative podcast, Susan 08:24 Question 3 Hi Pete and Roger, I'm still catching up on the back catalogue and am still loving the show, the listener questions are a great alternative, absolutely brilliant :) My mind has been wandering as it usually does, and this time thinking about my retirement plan and what dividends will look like at retirement. I have some queries I would love you to clarify please if possible. As it stands I have a combination of SIPP and stocks & shares ISAs all globally diversified with various stocks and ETFs etc and also a NHS DB pension. I'm about to turn 49 and planning on a retirement at around 60. I'm trying to plan in the most tax efficient way (obviously this may change with future governments). For now though I am trying to max out my ISAs regularly for the tax free benefits and in particular focussing on a goal of using global ETF high yield dividends as income annually at retirement. I have a Vanguard SIPP with 3 ETFs. I plan to take the 25% tax free amount from this when I retire. The rest (75%) I plan to leave as is, in the same ETFs and as they will hopefully still be paying dividends, I am a little confused as to how these will be regarded, such as for tax purposes? My assumption is the dividends will be added as cash to my now 75% remaining pot and then if I start to drawdown on this then I guess I will be taxed as normal depending on my tax status at the time only on what I drawdown as income. However when the dividends are added to my drawdown (75%) portfolio will this be part of my annual tax free (currently £500) dividend allowance OR will they not count as they are in my "pension pot" (and not classed as income) as is the case currently pre-retirement? At the present should I actually be adding the dividends that I currently receive in my pension pot to my annual tax free allowance (£500 for me)? (I assumed dividends in a SIPP don't need declaring/adding up towards your annual tax free dividend allowance). I hope that all makes sense? Thanks for all your work with the podcasts and Listener Questions too, you guys are awesome! Cheers lads, Jon 13:22 Question 4 Dear Pete and Roger, I've just turned off lifestyling on my pension thanks to your excellent podcast and videos. You may have saved me thousands so many thanks! I now have a cunning plan! I work for a university and have a hybrid pension with the Universities Superannuation Scheme (USS). Payments for my regular defined benefit (DB) pension are made via salary sacrifice. I'm also making additional voluntary contributions to the defined contribution (DC) part of USS, also by salary sacrifice. I've increased these DC payments to a level where my reduced effective pay is just above the level of the National Living Wage. As all my USS contributions, DB and DC, are made by salary sacrifice, they count as employer contributions. As I understand it, I am also allowed to make employee ...
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