The following is a transcript of a bonus episode of The Pension Confident Podcast - Personal finance tips part four. You can listen to this bonus episode or scroll on to read the conversation.
PHILIPPA: Welcome to another bonus episode of The Pension Confident Podcast. Today, we’re sharing more personal finance tips from our expert guests. This is part four, so if you haven’t heard them already, you can find parts one, two, and three on our podcast feed.
Before we start, just a reminder, anything discussed on the podcast shouldn’t be regarded as financial advice or legal advice, and when investing, your capital is at risk.
OK, kicking off today’s bonus episode is PensionBee’s CMO, Jasper Martens, in episode 23 with a smart thought about switching current accounts.
JASPER: I mean, you do need to shop around. Do you have to change it every single month? No.
PHILIPPA: I was gonna say, how often?
JASPER: I’d say a few times a year. Like you said, it takes up about an hour of your time.
OLA: If that! You log in to a comparison website, tell them what you’re looking for and within five seconds there’s already options. Then it’s as simple as making a transfer. It’s so easy these days.
JASPER: You’ve got to just invest that time, even if it’s an hour each quarter of the year. I know you like changing bank accounts, Lynn. You’ve told me about it in the past. There are some really great welcome bonuses available.
LYNN: I was always thinking, “oh, I don’t think this is going to work”. So, I’ve been trying this in the last year and I hate to admit it, but I’ve switched my main account three times now, but I’ve got £200 each time I’ve transferred! The cash bonuses now, for swapping your bank account, are really quite generous, and they do all the switching of the Direct Debits for you, and nothing’s ever gone wrong. So why would you not do it?
JASPER: It’s the seven day switch guarantee.
PHILIPPA: That’s solid, is it? Because I’ve got to say, that’s the thing that in my head stands in the way. I’m thinking, “do I believe them when they say that all my payments will be moved on? Will they all be there and will it all work?”. Does it work?
LYNN: It does work.
JASPER: It does.
PHILIPPA: Onto episode 21 with Founder and CEO of Propelle, Ayesha Ofori. Propelle is a financial education platform. It’s all about empowering women around money. In this clip, she’s talking to PensionBee’s Non-Executive Director, Lara Oyesanya. They shared some key issues you’ll want to weigh up when it comes to saving or investing your money.
AYESHA: If you can actually start investing - even if it’s a small amount, and get comfortable with it - as you start to get the documentations through, you can start to read them and become more familiar. Then eventually, you can start to invest more and more. It’s about dipping your toe in and experiencing it.
LARA: I agree.
AYESHA: With investing, you put money into an investment and you’re expecting it to grow over time, but equally it could fall. So you’re not necessarily going to get back what you put in. I think it’s the comfort levels around that, which is what potentially skews women more towards savings than investments. It’s knowing that it’s still going to be here. Yes, it may be less than if I’d invested, but it’s still going to be here, and that’s what we need to work on.
LARA: I think that’s absolutely right, but there’s also what I’ll put in the category of value proposition. Because when you think, “I don’t know whether I’m going to make the money, I might lose it. Is that of value to me? Should I be risking it? Yes, I’ve got the money, but why would I want to lose that?”.
PHILIPPA: So we’re more worried about losing it than we are excited about growing it?
LARA: Yeah, I think it’s still part of this responsibility idea. That you look at yourself and think, “is that actually a responsible decision to make when I might lose it?”.Compared to, “OK, it’s not earning a lot of interest”. But to your point, it’s there, I can see it.
PHILIPPA: OK. Here’s another question for you - is there a sense that investing is just for the rich? Do you think people don’t understand you can start really small?
AYESHA: I often say, “Do you have a pound?”, “Well yes, obviously”, “Well, then you can invest” and then they, sort of, give me blank stares. But, start small, it doesn’t matter if you don’t have a lot of money to invest. The beauty of investing is compounding. And what that means is that over a long period, you’re getting returns on your returns and it adds up quite substantially.
PHILIPPA: And if you’re interested in getting started with investing, here are Ayesha and Lara again with things to watch out for.
AYESHA: So, fees are absolutely one of the key things to look out for. Now, companies should be making their fees very transparent. But if it’s something that you can’t find or you’re not able to easily calculate what you’re being charged, then you absolutely have to ask. Because the numbers might not seem like big differences, but again, over time it matters.
PHILIPPA: Well, they work on percentages, don’t they? So this stuff ramps up. These are significant sums of money.
LARA: To add to what you’ve just said, is the fact that if you’re selecting your own investments, the fees are cheaper compared to if somebody else is making the selection or managing it for you.
PHILIPPA: It feels quite daunting.
AYESHA: It can, but it really doesn’t have to be. There are, absolutely, some funds out there that are actively managed by fund managers and therefore will have higher fees because there’s a team of people somewhere actually making decisions. But there are funds out there such as exchange traded funds (ETFs) that have significantly lower fees because they’re passive funds. So, you can still get a wide range of diversification through funds like that, but the fees tend to be quite low. Again, a great place to dip your toe in.
PHILIPPA: Moving on. In episode 19, PensionBee’s Chief Technology Officer, Jonathan Lister-Parson, shared some valuable thoughts on balancing taking time off work to look after your kids if you’re in a couple. It’s a big issue for all parents, but in this particular clip, he talks about how sharing childcare early on can help reduce that pension gap we’ve often talked about between men and women.
I guess what you can also do is get your partner to pay your pension contributions for you while you’re taking time out to raise kids?
JONATHAN: Yeah you can do, but the magic in the system is that if you get, say your male partner, to take more time off work and look after the child so that you’re reducing their hours and you’re increasing the amount of hours that the woman can work. So you get to parity where the man’s working fewer hours but the woman’s working significantly more hours. Then you get to a point where even though the man’s working fewer hours, actually net, as a family, you’re better off because the woman’s not affected by this long-term trend of much reduced pay over the duration of their career. Missing out on promotions and opportunities. And so, by just introducing a little bit more support from the man earlier on, you can then both have a much healthier long-term career and that’s how you can end up with much better long-term savings as a family.
PHILIPPA: Now, if you’re self-employed, freelance, or you run your own company, this one’s for you. In episode 24, we talked to Emilie Bellet, who founded Vestpod, a financial community for women to start breaking the taboo around money. She shared what she’s learned about how to keep a dividing line between your personal finances and your business finances.
EMILIE: I think you should definitely have an accountant. It’s probably a cost, but I’d say it’s an investment for you. When you set up and have that first conversation with an accountant, especially in small businesses, to understand the tax relief. Especially if you’re a limited company and you have a lot more responsibility and you have to publish your yearly accounts and potentially register for VAT at some stage. So they’ll be really really helpful.
EMILIE: But it was also about separating my personal finances versus the businesses finances. And I know when you’re a sole trader, you should definitely have separate business accounts because it can be very confusing sometimes when you start paying from your own account for the business and for yourself, your mortgages, it all comes from the same pocket. So even if you’re a sole trader, make sure you have separate, at least, bank accounts for you and your business.
PHILIPPA: OK. So if you’re setting up a little retail business online or something, just for yourself, at the kitchen table, you should have a business account and keep everything separate?
EMILIE: It’ll make your life easier because you’ll also have to pay taxes and there’s expenses that you could deduct. So you’re going to have to work with your accountant and having things separate will help a lot. And if you make investments in your business that come from your personal bank account to your business bank account then you should document everything that you’re doing.
PHILIPPA: Finally, here are two great money website founders: Mrs. Mummypenny, aka Lynn Beattie and Ola Majekodunmi, Founder of All Things Money. They talked about the importance of discussing money with your loved ones. If you’d like to hear more from them, you’ll find the rest of that conversation in episode 23.
LYNN: I think from the moment you know that, particularly a relationship, is getting serious, you have to have that financial conversation. And almost ‘marry up’ your money mindsets. I was married to a spender and I was a spender - that’s a really dangerous combination. Don’t be afraid to do it because marrying the wrong person is a really expensive mistake. Not just because of all the assets that have to be split, but getting divorced costs a lot of money.
OLA: Which people don’t talk about either, do they? I think, going back to the early stages of dating, a lot of people don’t ask about money spending habits. They may think it’s weird they were asked that on the date, but I think it’s really important to know. I think it’s a really important question.
JASPER: Would you ask that on the first date though?
OLA: First date? Maybe not. But third or fourth!
PHILIPPA: Thanks for listening. You can catch up on all those episodes and more wherever you like to get your podcast. We’re also in the PensionBee app and on YouTube. Make sure you click subscribe so you never miss an episode, and we’ll be back on your feed with another episode at the end of this month.
Risk warning
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.
