Savers, can you use gilts to earn 8%? | Standing charge to be scrapped & budget preview

This BBC podcast is supported by ads outside the UK. Cheers to fall savings at Whole Foods Market, home of higher ingredient standards. This Halloween, share chocolates and candies, mate without that spooky high fructose corn syrup. Throwing a party, make it easy with a berry shantilly cake, ready to cook pizza, no antibiotics ever chicken wings, and sushi made fresh daily. Fog gatherings never tasted better, saved through November 3rd at Whole Foods Market. "It felt like everything I believed in was suddenly collapsing." This is the story of an Islamic boarding school in Indonesia with a dark secret of the school's head teacher. This was someone I respected above anyone else and the investigation led by students he's trying to silence. This is World of Secrets Catching My Teacher. Listen on BBC.com, the BBC app or wherever you get your BBC podcast. That is a 10.1% total gain over two and a quarter years, but that money to work harder for you in a stops and shares ISO. Which would be a terrible disincentive for people investing in private pensions. It's a complicated thing to do but it's doable. Unjustifiable, I think it's a breach of natural justice. As I say, what is sexier than a fiscally prudent man, eh? Hello, I'm Martin Lewis and this is the comingly named The Martin Lewis Podcast. I do wonder what that's going to be about. And this is our big topic episode where each week we lead on one main subject to help you save. Now usually most of it comes from my BBC Radio 5 live show with Adrian Charles, but there's also bonus money saving tips and tricks for you lucky, lucky podcast listeners. This week's big topic is nothing to be guilty about. It's all about buying short dated UK guilds. Now many investment advisors will suggest clients look at this as a more lucrative alternative to savings so I want to bring it to you as well. Done right, you can get the equivalent returns of 8% in savings and I'm joined by a specialist to go through it in detail so that you'll understand it and hopefully get your questions answered. Plus we'll talk about the government's plan to scrap energy standing charges on gas at least and a budget preview too. This week's tellers is when did taking a different financial route to the norm pay off for you. EG used a 0% card for a loan, least instead of bought, got a guilt instead of savings. And Mastermind is all about student finance. With a Star Wars bent. May the Force bear with you. Play the theme tune. What's the first album you ever bought Martin? We're talking about albums today. Oh Adrian, I've never bought an album. Okay. So Radio 2 once did an entire week on the fact that I didn't listen to music. I have bought for my daughter and I do listen to more music now because she's an incredible singer and so I listened to music because of her but I was always into information and data. Even as a kid I like sports, I like news, I didn't really put the music on. Oh god, I expected nothing less of your arm, I'm impressed by that Marty. And I have to say, I did it on Radio 2 that thing and everyone, they were all shocked on Radio 2. Perhaps you could, if there's what might not, I know what I'm going to get. If I say recommend one album for Martin to listen to it, I'll get a load of ponds. I mean, literally, no, literally Radio 2 did an entire week. I went on three times in a row where they had a competition of what one album. I think they ended up with a Beatles White album and I think was the winner. And did you ever sit and listen to it? They never gave it me. I'll send it to you. I'll send it to you then. OK. Now, just to interrupt myself there, my suspicion is if I am going to find any other people who are in sync with me who don't listen to music, they are probably listening to this podcast. So just so I can have some ammunition to take back to Adrian on this. If you are like me, it's not the guarantee music. I'm not anti music. I don't mind it being on in the background. I like to dance when I go out somewhere where that's appropriate. Not when I'm sitting in the studio. All is good. But if you're not a listener to music, feel free to let me know at Martin Lewis Podcast at bbc.co.uk. Standing charge then. What do we need to know about what the PM said yesterday? Well, let's have a listen. I think we've got the clip of what he said. It will also allow us, Mr Speaker, to do more to help people with bills. I can tell the House today that I have asked the Chancellor and the Energy Secretary to look at whether we can remove standing charges from gas bills. And to report back to this House at the earliest opportunity. Right, so he likes to send out vibes to the Prime Minister. And he's going to deliver on some of them, I assume. Is this going to be one of them? Almost certainly, yes, I would think so. So let's just break down what the standing charge is. When you pay your gas and electricity bill, there is a standing charge. It's the daily charge you pay just for the facility of having gas and/or electricity. And then there is the unit rate which you pay for each unit kilowatt hour of electricity or gas that you use. Now, the standing charge currently for someone on direct debit or prepayment is £308 a year for gas and electricity. £100 of that is gas. £200 of that is electricity. I have long campaigned against such high standing charges. For a number of reasons. First of all, I think it's a poll tax on having gas and electricity. It's a flat rate. It's regressive. It doesn't work particularly well. But second, it is a moral hazard and a disincentive for lower users to reduce their usage. Because so much of their bill is made up of this flat standing charge. It is also near universally hated. If I look at my mailbag, or my email bag is probably a better way to describe it, which is very large in my social media feed. It is the single biggest complaint that people have across all the different sectors I do, the standing charge. I have been telling governments of every hue about this for the last number of years and saying to them, "If you want something that's electorally advantageous, you get rid of the standing charge." Well, they don't have much money to spend in the budget and this is electorally advantageous. In fact, I did a poll on social media about it a couple of weeks ago where I very specifically said, "If they were simply to remove the cost from the standing charge and add that cost to the unit rate, so you know net zero change." I don't mean net zero in the energy. Say in the green sense, that was bad phrasing. Net zero change in terms of the cost that you're paying, which would mean lower users would pay less and higher users would pay more. So I've made it very plain, you know, what the shift is. I did it across all my social media. I think it was 30 or 40,000 votes in. It's not a statistically representative sample, but it was over 90% of people supported it. The standing charge is hated on principle. I am unsurprised. I mean, it's the first thing I mentioned when I went to see the chancellor when I met him at when he first came in office. No, no, I was talking about easy wins that they could do. I am very unsurprised to see Andy Burnham, who has, you know, he's quite good at understanding the small things that annoy people. As you know, I've got Charity Institute dealing with that at the moment, but they're looking at doing this. They've chosen gas. I think because electricity is more complicated. It's worth me explaining to people, normally citizens' advice and I are in sync on most things on policy. This is one of those where we are not in sync. And that's because we tend to have slightly different constituencies that we look at, not in an official sense. I'm very much mainstream citizens' advice is focused on the vulnerable. And the problem with this move and the problem with getting rid of standing charges without any other change is that there are a small number of vulnerable high users, especially on the electricity people who have dialysis machines, who have to charge wheelchairs or other things who would be disproportionately affected because if you put at the unit rate, they would pay more. That's what's stopped this happening. I've been lobbying it with off-gem and otherwise. So I understand, I absolutely with citizens' advice on those problems, but I think the wrong way to deal with this is by not getting rid of the standing charge. What we need to do is give specialists to bought to those individuals and get rid of the standing charge for the mainstream. That is happening. So let me, can I do some crystal ball, guys? - Yeah, please do. So I'm hopeful that I can take people along my logical thought path on this. I think because if you get rid of standing charges on gas, there is a distributed issue that means 60% of people will be better, or 40% of people will be worse off. Most of the 40% of people will be worse off or higher earners. That's the way it works, but some are lower earners and vulnerable. And the government, because of the representations and the right representations of citizens' advice and others, the government will worry about that, that the few people it really hurts. So the fact that they are looking to get rid of the standing charge on gas, also therefore signals to me, because we are potentially going to see a 25% rise in the cost of the energy price cap, or more in January. I know it's horrible going up by a quarter. It's that level. You wouldn't do the standing charge changes unless you were also announcing increasing support for the vulnerable. So what this leads me to conclude, and I may be adding two and two getting five here, is there is probably an intervention package coming in the budget for vulnerable people. My totem would be, let's say, we're talking doubling the warm home discount from £150 of bills to £300 of bills. If you did the standing charge, charge change at the same time as that. You could therefore say that because the standing charge on gas is £108, it is mathematically impossible for anyone, even a vulnerable customer and a high user, in totality to be worse off with the two support packages. Of course, everyone will be worse off because the cost is going up in total. But the relative worse off, everyone who's vulnerable, if you've got the warm home discount support package will be better off because of the £150 that they would add extra, more than that comes whatever you're doing on the standing charge. So that support package alone would be good enough to offset criticism, which leads me to believe in next week's budget we will hear a standing charge announcement probably coming in sometime in the middle of 2027, maybe the April price cap, maybe the July price cap, maybe the October price cap, it won't be coming in in January, they couldn't organise it that quickly. And we will also be hearing that there will be some form of increased interventionist support package for vulnerable people to deal with the 25% hike in January. If right, and I got all of that right, then maybe I should do celebrity traders next year and I should go in because I will get the traders out if I've got that detective level right on this. Anything else you particularly you've got a feeling for in the budget? Well, not so much got a feeling for. I will tell you the three things that I am looking out for that are not generally being talked about. Now there's lots of mainstream stuff that everybody's talking about. So I'm going to give you the sort of the me stuff that isn't being talked about. Number one was standing charges. And so therefore I think we now know what's happening. So I'm pleased, I'm really pleased. I mean, it's only on gas, but I think it's a totally might get electricity in future. Number two is I want to see a reversal in the plan to repayment freeze, which I think is morally unjustifiable. I think it's a breach of natural justice to increase the cost of student loans to people who've already signed up to the contract with the government is a unilateral breach of contract in my view, not legally, but morally. And I think it should be reversed. And I think it's incredibly unpopular. And the third thing I'm looking out for that isn't being talked about much. And in fact, I might just ask her a question as she's here with me now. We've got Hillary Wynn, his investment director, AJ Bell. Let's see if there's what you get one budget thing. I'm giving you warning so you can think about it now that my third one is we know that next year the full new state pension and not everyone's on the full pension, not everyone's on the new pension. The full new state pension will be above the personal allowance. We know, because I asked last year, Rachel Reeves has promised that nobody who is only on the full new state pension will pay tax. The treasury has confirmed that what Rachel Reeves said will continue, but what they haven't said is what happens to those edge cases. So just to try and explain what I'm talking about to people here, let's say full new state pension is £13,040-ish a year. And the personal allowance is £12,570. So you're roughly £500-quid above it, which means it'd roughly be a 100-quid-ish of tax to pay. If you only get the state pension, you wouldn't pay tax. What about somebody who has a £1-month private pension? So they get £12 extra earnings. So they're earning £13,052. Would they therefore have to pay tax on all the £500-quid? So they'd pay a 100-quid tax because of the £12-pound income, which would be a terrible disincentive for people investing in private pensions. So I'm waiting to see how they will tackle that rather difficult promise that they've made in a technical sense. Did you follow that, Adrian? I follow that, Martin. Shall we ask Hillary? Let's ask Hillary. Hillary, go on. What's your budget thing you're watching out for? So obviously I'm watching out for the taxation on share trading as well. That would be quite lovely. I don't think that's going to. What to reduce it, that would be nice on there. It's all frictional, isn't it? And we want UK shares to be traded and we want to make it as easy as possible for people to do that. And that would be lovely. I am not expecting that in any way, shape or form. But I'm also, obviously, we were very teed up on that. So that's what we're waiting for. Okay, thank you. I'm going to hit more of Hillary, who is from AJ Bell, in a moment. So at that point on five live, we nicked across the Stefan Shemalt for an update on the cricket. No point playing that for you, because it'll now be out of date. But we had a nice little ending on the back and I got to sing and I just felt, I mean, I couldn't. I couldn't cut that out. How could we not give you that pleasure? And also, I'm really excited to be on the radio at the same time as Martin Lewis. Stefan, thank you so much. I'm loving the cricket. Once I've finished this, I'm going to be focusing on that. So thank you so much. We're two men who spend our lives looking at a lot of numbers. And that's nice. Do you listen to music, Stefan? I do, yes. All right, thank goodness for that. What's your favourite album that you listen to without skipping through? Oh, Abbey Road, I think by the Beatles. That would be up there. I sometimes give Octopus his garden a miss. Why? I just don't like it. I like to be. Under the sea. Yeah. In an Octopus's garden. In the shade. Don't skip that. Don't skip that. Very good. Okay, Stefan, I look forward to speaking to you later. I'm not a Martin Lewis fan. They're just everywhere. You can't move for them. Guilt then, Martin. Okay, so what I'm going to do, I'm going to give you a brief overview and then we're going to get onto Hillary with the specifics to answer your questions. So a guilt is alone to the UK government. You can buy it today and the government promises to pay back £100 on a fixed date. It will also pay you a small fixed amount of interest. That interest is called the coupon and it pays the coupon twice a year. But what we're specifically talking about today is short dated guilt, which are those that are due to be repaid within a few years. And the reason for that is think of it a bit like fixed rate savings. It means you know exactly what you'll be paid back and you know exactly when you'll be paid it back. Now, the thing about guilt is especially over the last few years, people aren't really buying them for the interest. It's about the fact that you are buying them for less than you will get back in future. They'll pay back £100 in future. So you might buy one for £95. And the reason that this is important is while the interest on guilt is taxable just like savings interest. So if you have used up your personal savings allowance and you're not doing it inside an ISO, if you're a basic 20% rate taxpayer, if you get a pound of interest, you would get 80 P on it. If you're a high rate taxpayer pound of interest, you'd get 60 P on it. If you're a top rate taxpayer pound of interest, you would get 55 P on it. The gain that you make from it being paid more than you bought it for is free of capital gains tax. And that is the big change. It's automatically free. It doesn't need to be in the nicer to do it. If you're buying a guilt, it is free of capital gains tax. Capital gains tax is the tax that you pay on profits when you buy something. So if you sell something for more than you bought it for, you normally pay capital gains tax, that does not apply specifically on guilt. Guilts are UK government bonds, does apply on bonds from other countries, we're only talking UK here. So let me give you a bit of maths so you can start to see where this works. And we're going to go through it slowly. So I looked at a guilt this morning that matures on the 31st of January, 2029. Hillary is mouthing that in the background because it's one of the best available at the moment, isn't it? Yes it is. Okay. So that is about two and a quarter years away. The coupon, the interest is half a percent. So over the next two and a quarter years, you're going to earn roughly 1.25% total interest over two and a quarter years. Of course, that's taxable. So if you're a high rate taxpayer, you'd only get 0.75% back. But we're not really focused on that. That guilt today, and it may have moved a bit, I went since the last check, but within pennies cost 90 pounds and 80 P. And at maturity, you will get a hundred pounds. It always works on the hundred pounds. So that is a 10.1% total gain over two and a quarter years. Now some people are probably asking, hold on, it was 90 pounds 80 P. Surely that is a 9.2% gain. No, because it isn't what comes off the hundred. It's what gain would you have to get to 90.8 into 100. And it would have to add 10.1% to it. So the total gain from the capital value increasing is 10.1%. That is tax free. Totally tax free. You add the interest gain. It's about 11% or a little bit less than that if you were paying tax on the interest might be 10.8, 10.7%. Which works out to a total gain over the two and a quarter years of 4.7% a year. And I phrase it in per year because that's how savings are done. They're done per year. But that's 4.7% a year after tax. So now let's just think about it for a second. 4.7% a year after tax. You'd need savings account paying over 6% as a basic rate taxpayer. If you're going to pay tax on your savings to get that gain as a higher rate taxpayer, you'd need 7.8% as a top rate taxpayer. You'd need over 8% to give you the same money in your pocket as buying a guilt. And that is why it's so powerful. It's all about the tax status on capital gains. Few more little points because there's not that much tax on the interest. If you've got other better reasons like investing for your ISA, you probably want to use your ISA for investing and not for guilt. And I would say I'm talking about guilt as an alternative to saving not to investing. If you're putting money away for more than five years that you don't need, you probably want to look at investing rather than guilt. This is on the safer side of that. So we're not talking about it that. Unlike fixed savings, you can get your money out early. You can sell your guilt. But then if you're selling it, you don't get a defined return. And guilt prices move. They move depending on the bond markets at the time. So you have a get out of jail free card, but you might not be lucrative if you do so. Hillary, would you agree on that? I definitely agree on that. And sometimes it can sting. I think can sting. So you're generally buying these to hold to maturity, but in an emergency, you could get your money out is the best way. You shouldn't be getting us a short dated guilt with the idea, oh, I'll get out of it early, you're getting it to hold it, but there is a little bit more rigour than fixed savings where you can't get it out at all. It isn't, they're not particularly good for people whose interest isn't taxed. So this is for people who've got more, they're not that good for smaller sums because of dealing costs. So we're telling you to talk about bigger amounts. So I make no apology, we normally do smaller savings and we do that and we do lots of other subjects. We are trying to help people who are looking at what to do with their money at the moment. So what kind of minimum then? Hillary, minimum. Minimum, I think you should be looking at already using your ISO, so you should be maybe looking at a minimum of say £50,000. You could go for ten, couldn't you? You could go for ten. You can absolutely go for ten, but it depends on the dealing costs and where you're doing. Yeah. And the purpose. But if we're going through very, and you know the type of platforms like yours at AJ Bell or Hargreaves Lansdown or others, the dealing costs on guilt are not particularly heavy. I personally think you can still do very well at 10. But below that, it's getting a bit fiddly. Yeah, below that, below that, you're losing every time you trade, so you don't want to do that. One other thing just because I probably, I've bought guilts myself. Sometimes there are things called strips listed where guilts are listed and they look like guilts, but they're not guilts are they? You know, they're stripping out income. So when you're looking at the strips, you don't want to do that. You want to buy the actual guilt. Just make sure you're buying an actual guilt. Right. And you've got to be really careful on that. Right, Adrian, you know we've got loads of questions. Did you get it, Adrian? Do you see what we're doing here? I can absolutely see what you do. I mean, my question was when you, in the example you gave from who you buying it from, direct from the government or from somebody you selling that guilt, that's the bit I mean, you can legally buy it direct from the government, but it's quite a faff. I mean, basically there are a number of different platforms that you can go to. I've mentioned a couple of them already. Are you buying them a bit like you buy in the stock market? You set up an account, you go and look up the guilt, you find the guilt that you want and there are lists of guilts out there and working out the return can be a little bit complicated. If you're good on a spreadsheet, I might build a calculator on it quite soon so that people can do it for themselves, which I think will be very helpful, but I haven't done it yet. And what you do is then you literally just go like you're buying a fund and you do a deal, how much do I want? You buy it, you've got a rate, you know what the return will be, you know what the coupon will be. So that's a market then. So there's a seller for that guilt. Somebody is selling it. Yes, in a much as when you're buying a share, you're not buying off a seller, you're going to a trading platform saying, hit what's the price at the moment I'm buying shares and you're buying off a platform, technically underlying it, there is a seller somewhere, but you're going to a platform and pressing buy and you get your other guilt. The question was interesting, yeah. John says similar risk question mark, surely there's no risk at all in a savings account up to 120k anyway. Well, there is no risk at all in a savings account up to 120k, because a savings account is backed by the financial services compensation scheme, which is backed by the UK government. Over 120k, there's no protection, whereas in guilt, all of it is backed by the UK government. This is the key Hillary. Is this equivalent to saving or is it riskier than saving? It is absolutely an investment. So if you're buying it for a specific reason, you know you're going to hold it to maturity, it is still an investment. It's not a deposit based side of the world, but it comes, as you say, with the British government backing it. So you could look at it and say it's very low risk, but you are still investing. But if you lose it all, that would essentially remain. The government's gone completely bust. So I mean, it might be the last of your problems at that point. We'd have, yeah, we'd have bigger problems if we did exactly. The UK government has never not paid out on a guilt. Correct. Yes. Right. Never in history never not paid out on a guilt. So I just, I just, I absolutely understand that the categorisation different, that this is a form of investment, not a form of saving, because saving is defined of having deposit protection, which is a technical thing. But ultimately, the deposit protection is provided by the same people who are promising to pay your guilt. So in tactical, manifest risk difference, what is the risk on a guilt that you don't have in savings? If you're going to hold it to maturity, and that's the big caveat, if you're going to hold it to maturity, you're literally just taking one step. So let me, let me just, because I want to make this, and turn this into personal finance rather than technical, right? So if we are going to take an analogy, I have a choice between a fixed rate savings account where my money is locked away and I can't get it out, and a guilt wherein my head, my money is locked away and I can't take it out. What is the difference in risk? So I'm, what I'm doing is I'm, I'm deleting your, if you try and sell it early, there is an investment risk. Let's delete that. This person is holding till maturity. What is the risk difference? So if all of those conditions were fulfilled, there's very little difference on their, the minimus on their, it's just literally what you've gone through to put the money in. So you've, you've traded on a platform for the guilt and you've gone to a bank for that fixed rate savings account. And the key difference though is, as you say, midway through. If you need that money out, your cash in the bank, you know, it's, it's, it's moved up, whereas it's a guilt. So arguably, it's the extra flexibility that you're getting that you're saying is a risk. Well, one could also argue the other way around for one's own finances. The fact that they have ability to get it out. I mean, listen, if I were to get really, I'm just playing it the other way because I want people to understand it and ultimately you listening your decision on the risk basis. But if I have a fixed rate cash iser by law, a fixed rate cash iser must allow me to access my cash for a withdrawal penalty. Now, I understand that we draw a penalty. It's that will be, might come be a hundred and eight days worth of interest is a pre-announced amount. But ultimately, you're getting, you know, there's a similar idea with a guilt here. If I'm going to take it early while the penalty I might pay for taking it out early isn't unknown. And that's what gives the risk element. There is an analogy within that, isn't there? There is sort of similar. It is, it is. But I would say, you know, there are events every so often that can really hit guilt. Like we're in one year. Yeah, possibly. And yes, we are. And, you know, also when you look back 2022, guilt's were hurt quite badly at that point. So I think you can say, if you're holding to maturity, there are thereabouts, but if you need it beforehand. And I would just say, my entire premise today is about buying short dated guilt to maturity. It is not about trading in guilt. It's not about long or non-ended dated guilt. It is short dated guilt, which we'll define as let's say five years or less, because if you're going over five years, you want to be looking at investing anyway. And that's the premise that we're in. It isn't the same as savings. Most people won't feel that comfortable doing it because they don't have, you know, it's not what they used to, but it's absolutely. And it's the premise I started with when you go to an investment advisor and you've got money and they say, oh, you've got quite a lot in savings. The first thing they say is, why don't you have some of that in guilt? It's a similar risk profile. And you're going to earn more because you're a higher or top rate taxpayer. That's what they say, isn't it? Exactly. It's exactly that. And that's why I'm discussing it here today so that you get that even if you haven't gone to one of those people. I'll put the questions in, decide amongst yourselves who's best equipped to answer it. So, Charlie wants to understand how I can invest in something like this within a stocks and shares ice. I have one, but I don't understand how I'm meant to use it. And I'm looking to do some trip feed investing. So as I mentioned earlier, Charlie, whether you should actually be using your ice of the guilt, because there's not much tax on them, there's only a little bit tax on the income, not on the main gain is a question. But you can just bat on an investment platform and the same as a stocks and shares. I said, just don't necessarily use your ice of this. You'd be better to use that for straight investing. Some of the places, I mentioned AJ Bell and Hargreed lands down. There's also interactive investor and fidelity and free trade and money farm. All of those places allow you to buy UK guilt. So you could go to any of those where stocks. I said, what would you say? I wouldn't do a guilt in a stocks and shares ice. I say you, as you said, you can absolutely put that money to work harder for you in a stocks and shares ice. Yeah. Cool. Okay. A lot of acronyms for you to unpack in this from Alan T212. That's trading 212 who's a platform for buying and selling shares and funds only has guilt ETFs. Yeah, exchange traded fund. It's like a fund of guilt as opposed to buying an individual guilt. Okay. What are positive negatives of buying guilt in an ETF like VGOV? Okay. So this is a this is a Hillary one. I mean, am I right? If you buy a fund, there isn't, you would pay capital gains tax on it. Absolutely. Okay. On there. So the benefits of going through that rate are that it's cheap. You know, that VGOV when you mentioned Adrian is not 0.05% in terms of charges. It is diversified. So instead of buying one guilt, you're buying 65, but we're talking about short dated guilt today. In that 65, you can go from the really, really short dated guilt, i.e. maturing in the next three months all the way through to 50 years. So you're losing some of that known benefit of knowing that you're going to get paid that hundred pounds when it matures. So therefore it's higher risk because it's more of an investment than is it? You're going to get more price fluctuation. Absolutely. You're more exposed to the market and you're exposed to it over a longer time frame. So you're much more sensitive to interest rate changes as well, which is important. But if you buy in a fund, it does suit that is a question that we just had because of course there are no tax benefits if you buy it in a fund in terms of that capital gains tax. I suspect you won't like my phrasing here Hillary. Oh really? Because you're right. But in a way, is it more that a short dated guilt, how to mature it is more akin to saving, but if you're buying a guilt fund, it is more a form of investment because there's more volatility over long-term and there's no end date. Concepts, not exactly, not in a regulated sense, but in a conceptual sense. Yes, you're totally right, I don't know, I'm not phrasing, but no, you are correct in kind of behaviour. Yes, that makes sense. Okay, quite. Right. The Duke of Dengeham is slightly political, this question is why would anyone buy UK guilt, treat the UK like a business and it's a bankrupt mess. It taxes ambition, dissentivises hard work, punishes earners and funnels capital into all the wrong places, you're not investing in growth, you're under right in decline. You're not investing in it, you're buying a bond, you're buying a promise, so the question isn't, do you like the company? If you like, the question is, is it going to pay me back? Where are you on this Hillary? I mean, it was worth noting, everybody's talking about bond market crisis and bomb rates on the up, how does that actually affect short dated guilt? So it does have an impact, particularly if you're going to sell it before it matures, but we're not talking about that. So in reality, you are buying the bond, you're buying the interest that's been promised and also the payment back at redemption. So in reality, whether you like what the UK government is doing or not, as long as you believe that they're going to pay you, which, as you said, they haven't defaulted on. The other thing in life is guaranteed, but it would be, it would be more than the big issue. It would be an economic catastrophe for all of us, even those who don't have bonds. Correct. So in reality, it's not a call on the politics, it's a call on Willis pay out in the short time. And does what's going on in the bond market at the moment where yields have gone up, so interest rates have gone up? Does that mean the price you can buy a short dated bond that has gone down? So actually, buying right now, arguably, people who are buying short dated guilt are benefiting, if you're buying right now. Technically. Yes. Okay. Chris says more information, he wants more information on guilt ladders to using pension planning. This isn't when you promised your neighbor, you know, I'm going to give you a ladder back for Christmas and you don't do it. That would be it anyway. Oh, I thought that's what it was. Yeah. So a guilt ladder, I'm going to leave this to Hillary, it's basically where you buy lots of the mature at different times that you've got a constant income flow, isn't it? Absolutely. So it's all about managing income. It's, you know, you usually look at buying this when you're approaching that the perfect retirement or looking at starting to turn on your retirement income and you can control kind of how much and what time frame you're looking to, usually people do this with advice helping there. But, you know, a good spreadsheet and mathematics. Yeah. So basically, it's like saying, well, I'm going to need income every six months, so I'm going to buy these bonds that mature on six monthly periods over the next sort of 10, 15 years. I've got a constant flow of income looking at putting my money in a way that will keep the income, the unneed factoring in inflation on that. It's a complicated thing to do, but it's doable. It is very doable, but you're right. It is complicated. And it's a retirement thing because you don't normally need the income as much if you've got this type of money when you're, when you're working. Yeah. John says it's another question. I think you need some translation. He says, do you argue the quote unquote crash buffer logic or just purely yield for a younger saver is the duration risk worth it over a high interest account right now? So I think crash pressure means that you might go into it as the fact that if the stock market went down, guilt might become better value. And so they work in a counter cyclical way, I think, is that what he means there? And pure yield is just as a straight investment, Hillary. Well, it's quite an interesting one, actually, because of course, guilt should protect when equity markets have their moments on there, but the reality is they don't always do it. So we have to be quite alive to that. It's a case of when yields do rise, though, that they'll bite. As a young investor, though, I would, as you say, it's about retirement in that guilt example we were showing through. As a young investor, I think you've got to be quite wary of not taking enough risks. So your savings don't work hard enough for you. So you've got, you know, we've got savings, we've got guilt, so it's hopefully if you're, I mean, it's really, if you're not paying tax on your savings, it is quite a complicated way to go unless you've got a lot of money. Right. And actually, again, more than five years, you'd look at straight investing equities as well as this, and you know, there might be some guilt, if you bought a managed funds, there might already be incorporated in there. But it's both, isn't it? Depends on what you're trying to do it for. And how, you know, what makes you sleep at night? And whether it's for a specific purpose as well. But let's try and give an example, if you have money put aside that you needed in four years time, because you've got a 10 year cheap fixed rate mortgage that was maturing in four years time. And therefore, you're going to want to reduce the amount that you're borrowing in four years time. Would, and you paying tax on your savings, would buying a guilt that matures in three and a half years, assuming it's a good payer, that would be the type of thing you'd use it for. It would be totally logical to go down that route. Absolutely. Rather than savings because with the tax gain, if you're, especially if you're a higher or top rate tax payer, it could be beneficial. And it's not for everyone. It's not saying we should replace savings with it. It's saying it's something else you should look at in your arsenal. If you're keeping a lot of cash aside for a specific purpose that you're going to need that money in the next, you know, you might have sold a house and be want to buy in two years time. You might be moving abroad and want to come back in two years time and use that money to buy house all those type of cases. I hope everybody's understood it. I just felt it was the type of thing we've never talked about that is a real live option for many people that they won't know about in many cases unless they go to an investment advisor. Hillary has been brilliant. Thank you. Hillary, thanks very much. If can you tell us what your favourite album is that you listen to without skipping before you go? I'm in Martin's camp. Oh, yes, you see, it's probably not a coincidence, is it? Another no music finance. Did you, has anyone messaged in? Have we got any other Luddites like us or music Luddites out there? There's one or two. I think they all work in financial services. That would be my, yeah, that's what I would semi. Hillary went. Thanks very much. Thank you. We have great spirit but no soul, obviously. From AJ Bell. Tell us about your tell us now. When did taking a different financial route to the norm pay off for you? EG, you used a 0% card for a loan, you leased instead of bought, you got gilts instead of saving and how much better off were you? Why don't you start aging? Okay, Emma, I do my food shopping with gift cards bought from a cash back up. In four months, we've made £90 plus just from regular shopping. It didn't seem much at the time but now we have a full week shop thanks to cash back. I'm not sure, can you just explain that? I'm sure she's talking about the cash back sites like top cash back in Quidco and is getting, you know, is buying a gift card, getting £10 cash back for doing so. And therefore effectively, if it all works and the cash back gets paid through, she's buying a £100 gift card at 90 quid. And if you know you're going to spend it, never hold on to gift cards for a long case, the company goes bust, they'd not worth anything. But if you were going to buy in three days time, something costing £100 and you can get £100 gift card for a net cost to you of £90, you're up. Sam, bought an expensive diamond eternity ring for my wife using Tesco ClubCard. I remember when this was big. This was back in the days when ClubCard converted to goldsmith vouchers at quite a good rate. It was actually four to one. So if you had £100 worth of gift cards of Tesco vouchers, you could get £400 in goldsmiths. She had to be measured for the ring, so knew how I was paying for it. I don't think she minded. We're still married. I have had so many people that remember, I actually had it in a show in about 2007, 2008 because people would effectively shop at Tesco, had £500, £600 with Hillary's face has gone, eyes have gone wide. £500, £600 worth of Tesco vouchers converted into goldsmiths and have £2000 they could spend on an engagement ring. Why not? I love it. I mean, as I say, what is sexier than a fiscally prudent man, eh? I was going to put some romantic music on, but it means nothing to you, anyway. Bill says, stumbled across you in the mid-nautist, that would be you. Did your carton on it was called Lifestyle Laundry? You framed it. Yeah, you framed it as give yourself a pay rise, aside overpaying my mortgage, mortgage free by 09, started investing, retired at 55 last year. Oh, that's really lovely. That's what I'm saying. Sarah, I use three credit credit cards at 0% purchase rate to buy a car, worked out how much I'd pay on the typical loan and divided that between the cards, so same monthly cost 0% interest. Again, the can sometimes be a credit card fee. If you've got a good credit score and you're disciplined and you know what you're doing because credit cards are open-ended, that's the worry, but then interest free is cheaper than paying interest. Simple as that. Brilliant. Jackie, also, bought a car with two interest free credit cards with intention of transferring balance to another card, made the same payments as higher purchase would have been. All very interesting, they're both doing the same thing. What you don't do if you use a 0% card as a loan is you don't pay willy-nilly, you treat it like a loan with a fixed repayment mentally self-disciplined. Made redundant after being unfurlo, which was good luck as I was about to leave anyway, so paid them off fully one month before the 0% ended, probably saved a fair amount, and I immediately got another job. Love it. I just need to tell you that Alison in Northampton is a financial advisor, and she doesn't listen to music either. She's not a financial advisor, she didn't listen to music either. It's not just us. Fair enough, Alison. They're all listening to five live, that's why. Well, that's why. Yes, Karen, the Virgin One mortgage and offset mortgage, so you keep your savings and mortgage in one account. Any savings you had offset the debt and you only paid interest on the difference. EG 100,000 pounds mortgage, but 40,000 savings went, you only paid mortgage on 60,000, calculated daily too, but you have to be super organised with finance. Otherwise, you thought you had a lot of money spare to spend, I'll save thousands and more importantly years. A saving year saves you thousands. So there's offset mortgages, people often ask me about them. So the rate tends to be higher than a normal mortgage, So you really need to be keeping a substantial amount of savings in them so that the gain on the savings outweighs the increased cost on the debt. But if you do that, then it can be very lucrative. Even as much as, let's say your salary, you've got three grand a month coming in, while the salary is in there, it is reducing your mortgage by three grand. And obviously, as you spend it, then it's reducing it by less. But even that can be again, but it only tended to work if you had big enough savings to keep in there to offset the increased debt. Trevor, switch and large purchase, sofa and small solar installation on to Virgin three year, interest-rebalance transfer, then place the cash I had to pay for it in a two-year fixed interest account at 4.75% so that's stoozing it's known as, brings the solar pay back down by several years. And we've only got one more, so won't you do that when I find my mastermind file? Okay. Richard says my mortgage insurance would only cover one year's repayment. So I overpaid the mortgage over time by the equivalent sum and cancelled the insurance, saved on premiums, and reduced the capital sum, smart move if you can do it. Yeah, interesting form of self-insuring, and those payment protection only paid out for a year anyway, that was one of the whole parts of the scandal that we had when they were massively overexpensive. So we are going to do mastermind now, before we do agent, I need to say Hillary is still here, you are not allowed to ask her for help, but we might ask her if she wants to answer at the end. Okay. You can't, that's cheating. Play the mastermind theme tune. Hello, welcome to Martin's Money Mastermind, Adrian. You have got 25 right and 44 wrong in this three option multiple choice quiz, which means hurrah, you are better than random chance, and you could actually get the next five wrong and still be BRC, it's unprecedented, this is your best run ever. Yeah, are you going to make this one particularly hard, I know you are, I know what you're like, you know music, cruel man. A long time ago, well March 1967, in a maternity ward, not far, far away, Quintan Birmingham, a small child cried its first cry, already it sounded mildly disappointed with life. Now, gazing at two identical newspapers, twin sons, Adrian contemplates his future - I fancy a change of direction, back to university perhaps, I'm torn between econometrics as I love money mastermind so much and Jedi studies because it looks cool, a glowing figure appears. Adrian, I am a no one can no be, down one path lies regression analysis, standard deviations, the dark side of the spreadsheet. And the other lightsaber theory, a module on the force and a dissertation on whether Jabba ever paid his council tax for his hut. I've got a bad feeling about this, yet even a Jedi needs funding. So all that Adrian was a setup for this question. It's a long walk up a steep hill for a very small picnic. Adrian, you start a three year degree now aged 59, taking out £50,000 total intuition fees and maintenance loans under the English Plan V rules, which are the rules for current English starters of university. If you still owe money when you reach state pension age, 67 for you, what happens to your repayments? A, they would have ordered you stopped at 65, a new hope. B, they stop when you reach state pension age, return of the pensioner. C, you keep repaying under the usual income rules, the Empire Strikes Back. So you've taken out a 59, you're 67, you know, you've still got money going on it. Would they, it have already stopped at 65, would it stop at state pension age, would you keep repaying even though you've now hit state pension age? My mates often get at load at this age anyway, can I definitely get one? Not only could you get a loan, because you're under 60, if you did it very quickly, you could actually get a maintenance loan as well, not just tuition fees. If you've as long as your first time going to university and you've not been before, so you can't do a second first degree if you're not on me. What have been before? Well yes, I know, but not for the setup of the question age. Okay, all right. You could have told me. You're also, we don't actually have a live Jedi. I think it goes. You know, there was some fiction in this, I think it's, I think it's see. So you keep repaying under the usual income rules, the end pass, strikes back. We've got Hillary here. We're going to put you on the spot. It's not what you do. So you don't worry if you get it wrong. I mean, your colleagues will make fun of you, but otherwise you'll be fine. They will, and they'll love it. I'll go with B. Okay. So now this is a really interesting question, because when your student loan is wiped, depends on which student loan plan you have. For example, if you started between 1998 and 2005 in England, Wales and Northern Ireland, your loan is wiped when you hit 65. If you started after that, then it may be 30 years or 25 years after the April after you start, after you left university. On the plan five loan, which we're talking about here, the rules are the student loan is wiped 40 years from the April you were first due to repay. Usually, and staggeringly beat Hillary, play the hallelujah and make history. If I've beaten Hillary, that's worth double points. Sure. I'm almost tempted to give it you. But this is what's really interesting about this, of course, is the amount you repay depends on your income. Even on the plan five student loan system, you are repaying 9% of everything you earn above 25,000 pounds. So the key for many people who take loans later and student loans later, it's when your income drops, you may have less income than the thresholds. So you would in practice, unless you had quite a decent pension income coming in, stop repaying anyway. It's just your loan isn't wiped for 40 years. And that sort of makes sense. Somebody goes and does a degree at age 62 and then happens to have a lot of wealth in their retirement. Why would they not be contributing back to the system? But it is interesting. We do see many older people who've not gone for a degree towards the end of life or even once they're in retirement. You can no longer get a maintenance loan, but you can still go to university. You could start university with pension income under 25,000 pounds and no, you'll never be repaying a penny if you took the loans. That's just how the system works. So there you go. Which one are you going for? Econometrics or Jedi studies, Edwin? Do you know what? I've never seen Star Wars. Goodness me. And you have to go about me and music. Wow. You're right. But I've got a rectifier. I've just never seen it. I'm not trying to make a deliberate point. That's homework. Well, it is homework. Use the force, Edwin. You can confuse about where I'm supposed to start, because it's not sort of the third or the. As an adult, you start on the new hope. You don't start on number one. You got it, because you don't, they might put you off. You want to start on the original Star Wars, the 1970 whatever edition. I prefer Star Trek, but I still like that. I'll do that if you listen to all of Lamb Lies down on Broadway. Sorry. I couldn't hear that. These sounds. OK. Thanks, Martin. And that's it. Well, normally at this point, we do pod extras, but I think we managed to cover everything. Hillary was great on GILTS. I'd love to get your questions in on that. I hope you managed to understand it. Again, it's a little bit niche, but I think it's the type of thing we need to talk about more, so people know what is available for them out there. Thanks to everybody who got in touch, that is it for this week. We tend to put out a new episode every Thursday and Monday, which is our question time podcast, where you can ask me absolutely anything and everything, open brackets within reason close brackets. If you've enjoyed today's show, please tell your friends you've been listening to the Martin Lewis podcast, and why not subscribe and leave us a review. Then your pockets will be pleased with you, and we will be too. And if you haven't enjoyed it, and you've been listening this long. Well, frankly, I think you should feel a little bit guilty. After all, you made your own decision. You made your own bed. No one else to blame. [Music] Martin Lewis is the founder of MoneySavingExpert.com, but of course, other consumer and price comparison websites are available. You can get in touch with Martin's podcast production team by emailing Martin Lewis podcast at bbc.co.uk. The offers and rates mentioned in the podcast are correct at the time of recording. However, if you are listening on demand, it's worth double checking as details can date. Remember to subscribe on bbc sounds and leave us a review, however you listen. It felt like everything I believed in was suddenly collapsing. 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