Money on my mind
Lots of money-focused info this week.
This week I’ve learned loads about money. Some fun facts:
Gas prices and oil prices aren’t related in the way you think they should be:
When oil prices go up, gas prices go up (makes sense)
When oil prices go down, gas prices don’t really change (🤯)
This is because gas stations want to take advantage of consumers being comfortable with the higher prices, since they don’t know how prices will change over the coming weeks and months
And because they simply can keep prices high
You don’t pay capital gains tax on gilts (government bonds) if you buy them directly. If they’re part of a fund, you do (unless they’re in an ISA, which is, of course, tax free)
Also, you earn money on gilts through an increase in the value of the gilt itself, plus the interest earned
The Alternative Investment Market (AIM) is a sub-market of the London Stock Exchange, and, if you’ve held shares for more than two years, they become exempt from any inheritance tax (companies listed include ASOS, FeverTree, YouGov and Purple Bricks)
If any of this seems like gibberish, please let me know and I will try harder to explain in a clearer way!
I still find it weird that words like ‘gilts’ and ‘liquidity’ make sense to me now. It’s akin to stepping through the looking glass (or out of The Matrix). I never could have imagined this, and, while it’s trippy, it’s also quite cool 🤓
1. Time to check in on your savings - for two reasons
Firstly, interest rates are likely to come down slightly a bit later this year. This means that now is a great time to lock in a higher rate of interest, to make sure that you’re earning as much as you can!
Secondly:
The taxman is expecting to rake in a bumper £10.4 billion in tax on savings interest this year, according to projections from HMRC for the 2024/2025 financial year.
Interest earned on savings is taxable. Depending on your income tax band, you can earn a certain amount in interest, tax free (this is called the Personal Savings Allowance):
Up to £1,000 (if you’re a basic rate taxpayer)
Up to £500 (if you’re a higher rate taxpayer)
£0 (if you’re an additional rate taxpayer)
Say you were earning £50,000 a year. That makes you a higher rate taxpayer.
If you had £30,000 in savings, earning 5% interest, you’d have earned £1,500. £500 would be tax free. £1,000 would be taxable at 40% = £400 to pay.
But say you split the money across a cash ISA and a regular savings account, where both offer a 5% interest rate.
£20,0001 in the cash ISA would earn £1,000, tax free. And the remaining £10,000 would create £500, within in your Personal Savings Allowance. So no tax would be owed.
If you had more than £10,000 outside of an ISA, you could look at moving the rest into Premium Bonds, where prizes are exempt from cash.
2. What happens to your pension when you retire abroad?
When you move to a different country, any pension plans you have in the UK won’t automatically follow you:
But they still remain open, so you can withdraw money from them when you reach 55 (57 from 6 April 2028)
Some providers will limit how you can take your money, so it’s worth checking what your provider’s rules are, and if you need to shop around
You can usually transfer your UK pension plan(s) to a different pension scheme abroad:
You’ll need to make sure you’re transferring into a “Qualifying Recognised Overseas Pension Scheme (QROPS) - this list is a good place to start
The overseas transfer allowance is usually £1,073,100. If you move any more than this you’ll normally need to pay a 25% tax charge on the excess
You can still claim your UK state pension abroad as long as you’ve paid enough National Insurance (NI) contributions to qualify:
That’s 35 years for the maximum amount, 10 years for the minimum
But tax is still a consideration:
If you take money from a UK pension scheme, you might need to pay UK income tax on it, as it counts as UK income, but the country you’re living in might also tax you
The UK has a ‘double-taxation agreement’ with numerous countries, which means you may either be able to get tax relief or a refund, so you won’t end up paying tax on your pension savings twice - but you have to make sure that you’re on top of this; it won’t automatically be sorted for you
3. Not only should you be clinging on to your phone in public, but also be wary of unlocking it. Great…
There are two different types of phone thieves.
One set wants the phones; they’ll turn your phone off as soon as they get it, and it will end up in China (what’s happened to me, twice).
The second group are worse; they want the money from your accounts, and will be ‘shoulder surfing.’
How it works:
If you have FaceID or similar, they wait till you’ve unlocked the phone
If you enter a password, they’ll watch you type it in, and then swipe
Once they’re in:
They want to get into your banking accounts
They can reset passwords (as they likely now have access to your email and SMS)
If you don’t have biometrics set up, the chance of your phone password being the same as your mobile banking password(s) is quite high, so they’ll try that
Here’s how you can protect yourself:
Avoid doing any online banking in public places
Make sure two-factor authentication is set up if it’s offered
Where possible, use an authenticator app (rather than SMS) for two-factor authentication
Make sure your apps have different passcodes than your phone passcode (and, ideally, have different passcodes across your banking apps)
Get comfortable looking around you when you’re out and about. It’s awkward, but pragmatic
✨ Other things! ✨
MONEY
People who identify as LGBTQ+ are particularly likely to be behind on retirement planning (happy Pride 😕)
Be on the alert for estate agents who try to enforce ‘conditional selling’ whereby they’ll only move forward with the sale if you go with their mortgage broker or conveyancer (solicitor)
On Friday (pay day for many) HSBC, Nationwide, Barclays and Virgin Money’s payment systems were down for hours
LIFE
A frustrated data scientist explains AI and how realistic the impact will be on companies (frustrated is an understatement…)
I can’t believe there’s another ‘real estate for the wealthy’ show out in the world
“I hate money, but I love things, you know?” This is my kind of interview. Just the interviewee’s (Fran Lebowitz) thoughts. None of the padding
“You are not supposed to fit yourself into clothes; clothes are meant to fit you.”
Your brain starts shrinking in your 30s. So sleep, exercise and eating lots of plants is the best way to prevent memory loss.
Looking for summer reading inspiration? Look no further, thanks to
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This is the maximum amount you can put in an ISA, in one tax year