Up next in 10
Results from the firm behind Guinness, Johnnie Walker and Tanqueray showed sales have slipped – and yet the shares in Diageo are up. City Editor Simon Hunt explains why.
Meanwhile, UK coffee drinkers continue to move further up market with Brits now drinking around 98 million cups every day - but how much further can this premium espresso bull-run go? Lee Bonniface, UK & Ireland Managing Director of DeLonghi thinks it's nowhere near finished.
Plus: as pensioners scramble to avoid being pulled into the inheritance tax net, our Investment Reporter, Maisie Grice looks at the impact this is having on financial advisors, HMRC, and you.
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0:00
Hello and welcome back to Business as
0:01
Usual with me Martin Kimber.
0:03
>> And me Matt Kenyon. Coming up on the
0:05
podcast today, it's tricky times for
0:07
Diageo as the Guinness maker posts
0:09
difficult results. But can its new boss
0:11
turn things around?
0:12
>> Have we hit peak coffee? We speak to a
0:15
leading coffee machine manufacturer
0:17
about how much further this espresso
0:19
fueled bull run can really go.
0:21
>> Plus we take you inside the mad pensions
0:24
rush to avoid inheritance tax. Let's
0:26
start today's program with our FTSE
0:28
fiend, Simon Hunt.
0:30
>> Hello.
0:30
>> Which outside of a business program that
0:32
would be quite a way to introduce us.
0:34
>> [laughter]
0:34
>> I always get introduced like that
0:35
wherever I go.
0:36
>> I'll be clarifying what that means.
0:38
First off, let's talk about Diageo.
0:39
They've been having a pretty tough time
0:41
of it recently. We've had results this
0:42
week that shows that the Guinness maker
0:46
has not been having the best sales
0:47
results and yet its share price is up.
0:51
Why?
0:52
>> So as you say it's been a pretty rough
0:54
ride for shareholders of Diageo the past
0:57
couple of years. They've seen sales
0:59
slide in various of the different
1:01
products and various of the continents
1:03
that they sell their products in.
1:06
But
1:07
earlier this year they brought in a man
1:10
known in the market as Drastic Dave. Guy
1:13
called Dave Lewis who is known for his
1:15
>> Lewis.
1:16
>> Sir Dave Lewis, you're quite right. He
1:17
has a knighthood for his services of
1:19
turnaround as far as he's as far as the
1:20
market is concerned. So he's very good
1:22
at coming in, fixing companies that have
1:24
problems, turning around their fortunes
1:26
and making them profitable again.
1:28
>> who is which companies has he had a root
1:29
around with
1:30
>> before? So one of the one of the best
1:31
examples is Tesco which a few years ago
1:33
was really struggling. In comes Dave,
1:36
you know, cuts a bit of the workforce,
1:37
cuts some of the some of the fat and lo
1:39
and behold within a couple of years
1:41
they're profitable again. So this is a
1:43
similar turnaround strategy that he has
1:45
for Diageo. He has pledged this week to
1:48
cut
1:49
as much as 600 million pounds in costs
1:52
from the company
1:54
and make it more profitable again and
1:56
and shareholders really like the sound
1:58
of that. The shares went up as much as
2:00
8% on Thursday, which is one of their
2:02
biggest single day share price rises
2:06
that they've seen in years.
2:07
So, the market reacting reacting
2:09
positively. And I I was really struck by
2:12
something drastic Dave said
2:15
in in the report that Diageo had on
2:17
Thursday because previous chief
2:20
executives have told shareholders a lot
2:23
about what they call their
2:24
premiumization strategy. In other words,
2:27
you know, if we spend an extra five quid
2:29
on this bottle of gin, we can sell it
2:31
for 20 quid more. So, the margin on it
2:33
is massive. So, we'll just sell loads
2:35
more premium stuff, and that way we'll
2:36
become more profitable. That's kind of
2:38
backfired the last couple of years
2:40
because when people feel the pinch, they
2:42
immediately trade down to the cheaper
2:44
stuff, and all the premium products get
2:46
left behind on the shelves. So, he said,
2:49
"We remain a business with a very strong
2:50
premiumization agenda, but by activating
2:53
our wider portfolio, we will serve more
2:56
consumers." In other words, he's kind of
2:57
distancing himself from that premium
2:59
drive.
2:59
>> I hate activating
3:01
>> Yeah.
3:01
>> as a verb. May this be the year that we
3:03
never use that again.
3:04
>> I heard someone say that they interface
3:07
with customers the other day.
3:08
>> Oh, let's deactivate that.
3:10
>> Who was we've been interfacing with his
3:12
activation plan? I think one aspect of
3:13
his activation that was interesting, I
3:14
suppose the idea of premiumization,
3:16
which is also just an awful verb noun,
3:19
is is really difficult to make more
3:21
premium a brand which people always
3:23
already associate with one place in the
3:24
market. It's very difficult to make
3:26
Tanqueray feel like a very high higher
3:28
brand when people associate it with
3:30
their experience buying it
3:31
for the presumably the pre-drinks
3:33
they've already bought it for in the
3:34
past.
3:34
>> seen you've seen some efforts by Diageo
3:36
and other spirits manufacturers where
3:38
they take, say, a bottle of gin and a
3:40
bottle of vodka, they add a few
3:41
milliliters of flavoring, and then call
3:43
it like cherry vodka or something, and
3:45
then charge twice as much. And I think
3:47
consumers have started to see through
3:48
that.
3:48
>> 2016 anymore.
3:49
>> If you You were pre-drinking on
3:51
Tanqueray at uni, we had very different
3:52
experiences.
3:53
>> I'm I'm thinking more of a sort of like
3:55
an early 20s pre-drinks.
3:57
>> [snorts]
3:58
>> Simon, why is broadcaster Steph McGovern
4:00
profiting from slime?
4:03
>> That is a very good question. So, Steph
4:05
McGovern
4:07
>> [laughter]
4:08
>> Steph McGovern
4:09
famously was a BBC Breakfast presenter
4:11
then had her own Channel 4 show. She now
4:14
co-hosts The Rest Is Money podcast with
4:17
Robert Peston, one of those Gary Lineker
4:18
and Goal Hang Hang Out podcasts. Well,
4:20
she owns a retail chain called Gootopia
4:26
or Gootopia to to try and attempt her
4:29
accent. That probably wasn't wasn't very
4:30
good.
4:33
>> [laughter]
4:34
>> And it's a slime shop. So, you go in and
4:37
you have fun with slime. You play around
4:39
with it. You you know, you can stretch
4:41
it. You can make it different colors.
4:42
You just have a nice time.
4:44
>> So, it was just like it's like a shop
4:46
where you just go in and
4:47
>> You just go in, make some slime, play
4:49
around with it.
4:49
>> It sounds like a sanitary nightmare.
4:51
>> I mean, that's the business model and
4:52
it's doing incredibly well. Apparently,
4:53
they've now got a dozen stores up and
4:56
down the country.
4:58
They've started a new [snorts]
4:58
partnership with Hamleys, the toy store,
5:00
so you can go into Hamleys now and play
5:02
around with Gootopia goo. And they're
5:04
becoming profitable as well. They made
5:06
tens of thousands of pounds profit in
5:08
their last financial year.
5:11
And actually, they've it's become so
5:12
popular with with children, they have
5:14
now begun offering the services to
5:17
adults as well. So, you can now book
5:19
tickets for what they're calling slime
5:21
and wine nights.
5:22
>> [laughter]
5:23
>> I kid you not.
5:24
Um
5:25
>> Good god.
5:27
>> I I mean
5:28
>> Um
5:28
>> I I want to I I want to be optimistic
5:30
about the market and assume this is some
5:31
kind of fad.
5:33
>> Yeah, well
5:33
>> like if you had to be subjective about
5:35
this, is would you go to this?
5:37
>> I don't know.
5:37
>> Is there is is there an enduring market
5:39
for this?
5:39
>> I'm tempted. I'm tempted. The the
5:41
website describes the slime and wine
5:43
nights as a brilliantly messy party
5:46
uh which guests can expect vibrant
5:48
colors, cheeky mix-ins, and even sexy
5:51
scents.
5:52
So, I mean, that sounds very exciting to
5:54
me.
5:55
>> I [laughter] think it goes to the the
5:56
sort of the early 2000s kids TV gunge
5:58
culture.
5:59
>> Yes. I think this is a recession
6:00
indicator.
6:01
>> [laughter]
6:01
>> Yeah,
6:02
cuz that came in just before the
6:03
financial crisis.
6:04
>> Yes. I think this is part of the
6:07
transformation of the high street
6:08
towards the experience economy. You
6:10
know, people don't don't just go
6:11
somewhere buy a few things and go home.
6:13
They go there cuz they want an
6:14
experience. Slime offers you that
6:16
experience.
6:16
>> One more thing to talk to to both of you
6:18
about is uh pasta. It's something that
6:21
we've neglected. We've covered
6:22
shamefully little on our few months
6:24
doing this podcast. So, lots of beer,
6:26
some slime, a couple of business rates
6:29
and whatnot. But, it's a I I googled
6:32
earlier, it's it's a 1.6 billion-pound
6:34
industry. Like, it's massive. We all
6:35
have pasta in our houses.
6:37
Arguably though, it's probably quite
6:39
ripe for disruption.
6:40
>> Mhm.
6:40
>> And um
6:42
well,
6:43
we got in touch with a husband-and-wife
6:45
team who are trying to disrupt this
6:48
market. They've co-founded a company,
6:50
Northern Pasta Company.
6:51
>> Mhm.
6:51
>> This man's name is
6:53
>> what is he called, Matt?
6:54
>> Matt Kenyon.
6:55
>> His name is Matt Kenyon.
6:56
>> [laughter]
6:57
>> So, uh this piqued my interest. It's
6:58
probably piqued Simon's interest first.
7:00
>> Yes. Simon, why did you put this
7:01
interview in?
7:02
>> I'm really I'm really a big fan of
7:04
artisanal pasta, actually, personally.
7:06
>> Cuz I think I I looked beyond um just
7:09
that superficial similarity, um which
7:11
was a great superficial similarity, and
7:13
had a chat to Matt Kenyon.
7:14
>> Matt Kenyon.
7:15
>> So, we we got on a a call together, two
7:17
Matts, and we chatted about pasta. And I
7:20
think we've got a clip from it here.
7:21
>> Probably a lot of it started from
7:22
naivety. We didn't We didn't really
7:24
understand the food market. We weren't
7:25
from the food market. So, that was maybe
7:27
quite a good uh entry for us cuz we
7:30
weren't scared of it. We kind of chose
7:32
something we chose something we loved.
7:34
We've got a love affair with Italy. We
7:36
got married there. We We holidayed there
7:38
all the time. We wanted to choose
7:39
something that was relatively simple
7:41
ingredient-wise because
7:43
I think if you can use the best
7:44
ingredients,
7:45
um,
7:46
it gives the best gives the best
7:47
product, which is basically what Italian
7:50
Italian food is, isn't it? It's all
7:51
simple, but made using incredible
7:53
ingredients and then made to be the best
7:55
it can be.
7:56
>> Yeah, it is amazing how whenever you go
7:57
to Italy, you can get like a 4 euro
7:59
sandwich, which turns out to be like the
8:00
best thing you've eaten that year. The
8:01
other big part of your story is that
8:03
it's yourself and your wife who set this
8:05
company up together. What's it like
8:06
being a married couple, but also
8:08
co-founders and your each other's main
8:11
colleagues? What's that relationship
8:13
like?
8:14
>> It can be challenging, I'm not going to
8:15
lie. Um, and when we first started, it
8:17
was it was more challenging because we
8:19
were very much it was just us two. So,
8:22
we were very much like, um, on top of
8:24
each other. Um, we when we first
8:26
started, we were both making pasta
8:27
together, and that honest I think that
8:29
lasted maybe about 2 weeks. And then we
8:33
suddenly realized like where our where
8:35
our skill set was more so, um, and also
8:38
that that just wasn't going to work if
8:39
we were going to carry on. It's
8:40
challenging, but it's also extremely
8:42
rewarding cuz we get to share those
8:44
rewards together.
8:45
>> Yeah, I imagine it's good to sort of
8:46
calibrate how your working relationship
8:47
is going to work when, as you say, it's
8:49
it's quite quite an intense dynamic
8:51
being entrepreneurs
8:53
together in that way. Also, so your so
8:54
your background is in uh is in
8:56
construction as well. How How do you
8:57
find, I suppose, pivoting over from that
8:59
world in into really quite a different
9:02
world?
9:03
>> There are quite a quite a lot of
9:04
similarities cuz I guess it's working
9:05
with your hands, it's using ingredients,
9:08
if you will, or materials to make to
9:11
make it another make something
9:12
different. Um, so I think the
9:15
practicalities practicalities of it
9:17
really stayed hand in hand. And
9:19
obviously, inherently, machinery goes
9:21
wrong. That's what, you know, it works
9:23
until it doesn't, and it does it does
9:25
just naturally, after a certain amount
9:26
of time, just goes wrong.
9:28
Um, so I think the problem-solving side
9:30
of of the construction definitely lends
9:33
itself to, um,
9:35
to to this to food manufacturing as
9:37
well, because it's your it's your
9:38
business. You've got to you've got to
9:40
get get done. You've got to get
9:41
finished. So, you've got to find that
9:43
way of doing it. Um no matter how you
9:45
get there, you've got to find a way. And
9:46
I think it is they're both similar
9:48
things. There's there's not just one
9:49
track to get there.
9:50
>> I have to say
9:52
I was very disappointed that you didn't
9:54
speak to him at length about the fact
9:55
you both had the same name.
9:57
>> I just think there's we can we can
9:58
address that now.
9:59
>> You intentionally didn't ask him about
10:01
it though for full that purpose, I feel.
10:02
>> I I I was actually really I wanted to
10:04
know about the company.
10:05
>> I think there is something very brave
10:06
about people who go into who make like
10:09
wholesale businesses like that cuz it is
10:11
brutal. You are dealing with a handful
10:13
of massive retailers. And I say all the
10:16
best to Matt and Imogen. I'd say uh
10:18
>> you didn't you weren't fussy about it
10:20
and that's a good thing, I think.
10:21
>> No.
10:21
>> And getting onto supermarket shelves is
10:23
punishingly difficult.
10:24
>> Punishingly difficult.
10:25
>> And and there's great rewards for people
10:26
who manage it. And yeah, I'll be wishing
10:28
them both all the very best. Um and
10:30
Simon, I'll be wishing you all the very
10:32
best um as you as you leave the studio.
10:34
>> Thank you. I'm I'm off to play with some
10:35
slime. I'll see
10:36
>> That's disgusting, Simon.
10:37
>> Now, there's been a lot written lately
10:38
about the premiumization of the home
10:40
coffee machine as coffee drinkers move
10:43
further upmarket. The UK drinks around
10:45
98 million cups of coffee every day with
10:48
around 12.6 million British households
10:51
owning a pod machine. However, how much
10:53
further can this premium espresso bull
10:55
run go? Joining us in the studio is Lee
10:58
Boniface, UK and Ireland managing
11:01
director of De'Longhi. Lee, welcome.
11:04
>> Thank you very much. Nice to meet you.
11:05
>> Um why don't we start on that question
11:07
then? How much upside is there still in
11:09
consumer coffee machines?
11:11
>> Okay, so you mentioned pod.
11:12
>> Mhm.
11:13
>> Pod's about 25 to 30% household
11:15
penetration. If you look at bean-to-cup,
11:18
which is where the premium end's going,
11:20
you're talking 5 to 6% households have
11:22
them. So, I would say a massive upside.
11:26
>> That's surprisingly high.
11:27
>> Well, 5 to 6%?
11:28
>> Yeah, I honestly I'd have thought that
11:30
would be kind of 1% and the pods would
11:32
be a
11:33
a really vast 99%
11:36
>> Okay, so let me give you a stat from the
11:37
>> Let me give you a stat from Germany.
11:39
>> Yeah.
11:40
>> Uh those machines in Germany are like
11:41
35% household penetration.
11:43
>> Oh, they're good in Germany though.
11:44
They're precise.
11:45
I would just spill everything.
11:46
>> My my German family spend a good 300
11:48
euros on a machine.
11:49
>> Yeah.
11:49
>> Quite quite.
11:50
>> And is is that is that a beans cup?
11:52
>> Yeah, they put beans in and coffee comes
11:54
out.
11:54
>> Yeah, it's good like that.
11:55
>> It's that Yeah, that's what we're
11:56
talking about, right?
11:57
>> And you're and you're and you're seeing
11:59
consumer demand for these high-end
12:01
machines sort of keep up despite maybe
12:04
a loss in consumer discretionary
12:07
spending.
12:08
>> Yeah, well, year-to-date the market's up
12:10
40 to 50%.
12:11
>> Wow.
12:12
>> Right? In volume and value. So, we're
12:14
not seeing we're still seeing the
12:15
premiumization to better quality
12:17
machines as well.
12:17
>> Is is that partly driven by a sort of
12:19
cost of living squeeze if people don't
12:21
want to be that person who's getting
12:23
several 4-pound coffees and they're just
12:24
trying to
12:26
>> I think that well, there's two points to
12:27
that. I think the first one is
12:28
definitely because if you go outside and
12:31
to London now and you try and buy a
12:32
coffee, you can be paying 4, 5, 6
12:34
pounds.
12:35
If you're adding in
12:36
>> no there's no subscription in the same
12:38
way anymore.
12:39
>> No, and if you're talking about adding
12:40
syrups and alternative milks and, you
12:43
know, there's things like called a
12:44
lavender latte now, you can pay well in
12:47
excess of 5, 6 pounds for that coffee,
12:48
right? A standard flat white is 4
12:50
pounds, right? I had one on the way
12:52
here, 4 pounds. So, if you think of that
12:54
and if you're making it at home,
12:56
quality beans, milk, okay, you invest in
12:58
the machine, it's like pence,
13:00
>> Right.
13:00
>> right? So, 30 30p.
13:02
>> And De'Longhi make other consumer
13:04
electronics goods for the kitchen and
13:06
and elsewhere. Are you kind of seeing
13:08
more of a focus on the coffee side of
13:11
things as opposed to maybe some of the
13:12
other appliances?
13:13
>> So, that's really that's a very
13:14
interesting question actually because
13:16
this year we're seeing some really
13:17
interesting dynamics. First one is
13:19
coffee is definitely the growth engine,
13:20
right? The consumer demand is definitely
13:22
there.
13:23
Secondly, what we're starting to see is
13:25
things like, you know, kitchen machines,
13:26
blenders, all those type of products
13:28
also coming back. Um and do you know
13:31
why? Because we're now 4 to 5 years out
13:33
post COVID. So, we saw a massive
13:35
increase. Yeah. So, we saw a massive
13:37
increase in COVID and then the
13:39
replacement cycle on it is about 4 to 5
13:41
years.
13:41
>> Did that sort of screw you a bit in
13:43
after COVID? Right.
13:44
>> Yes. Yes. Yes, [laughter] it did. It was
13:47
painful the year after.
13:49
>> had every appliance.
13:50
>> Yes. We've got a toasty machine now
13:51
that's been in the cupboard for 4 years.
13:53
>> Exactly.
13:53
>> An average 2022.
13:55
>> But do you want to know what our hero
13:57
product of this year is?
13:58
>> Go on.
13:59
>> Come on, you can guess. What is the big
14:00
thing this year?
14:01
>> Iced coffee.
14:02
>> No.
14:02
>> Um it's not still air fryers, is it?
14:05
>> No.
14:05
>> No, I was just yeah.
14:06
>> It's air conditioning.
14:07
>> Oh, you air conditioning.
14:08
>> We sell air conditioning units. We sold
14:11
them out after the first heat wave.
14:13
Unbelievable. I could have sold
14:14
We all we we had we ordered like 20,000
14:17
units from China from from a
14:18
manufacturer in China. I could have sold
14:20
that five times over.
14:21
>> Well, this this opens up a whole new
14:22
line of questioning then. You know,
14:25
a lot of climate scientists are saying
14:27
these heat waves are here to stay.
14:29
Um Britain is now going to be the new
14:31
South of France.
14:32
Um does that mean you're going to be
14:34
ordering in a lot more of those in
14:35
future? Are you counting on that kind of
14:36
revenue in future summers?
14:38
>> Yeah, of course. Right? So, I think air
14:39
con is definitely here for staying in
14:41
the UK. You get the odd bad year and air
14:43
con's really interesting. Consumers
14:44
invest if it's hot early in the summer.
14:47
>> Mhm.
14:47
>> Right? If we have it like a really hot
14:49
Easter, people buy. If you have a hot
14:50
August but a cold Q2, people don't
14:54
invest because they're going to wait
14:55
till next year. But then also, if you
14:56
bring that back to coffee, what you're
14:58
seeing in the trends of coffee that
14:59
we've had to adapt our coffee machines
15:01
to is iced coffee, cold brew. You know,
15:05
if you look at the stats now, coffee
15:07
shops out there, 50% of the coffees will
15:09
be cold.
15:10
>> So, our City Electrical Simon said he
15:12
didn't believe that there was such a
15:13
thing as a cold coffee machine and I
15:15
showed him
15:16
>> He's a denier.
15:17
>> Yes, he was a denier. But I then I
15:18
showed him a listing
15:20
>> Yep.
15:20
>> online of one of your machines. How does
15:21
that work?
15:22
>> Okay, so there's two things that you
15:23
have to do. You can't brew cold
15:26
espresso, right?
15:27
>> Mhm.
15:28
>> So, what you do is you do it over ice,
15:30
but we've got technology in the machine
15:31
where you can brew cold brew,
15:33
right? Which is a different type of
15:35
coffee. If you know the difference
15:35
between espresso, espresso is
15:37
effectively a short coffee, right? A
15:39
cold brew is something that's brewed
15:41
really slowly, and you can brew that
15:43
cold.
15:44
>> And what what what what does the output
15:45
of that look like?
15:46
>> It's it's more floral.
15:47
>> Okay.
15:48
>> It's a larger cup, and it's a lot I
15:50
would class it as lot thinner. So, it's
15:52
not the intensity of an espresso, but
15:55
it's a more floral drink. People drink
15:56
it with tonic, right? Which is really
15:58
interesting, cold brew.
15:59
>> That's for you to decide.
16:00
>> And also and also the other thing as
16:02
well is we have technology to make cold
16:05
foam, which is super super unique. So,
16:08
you can put ice over the espresso, and
16:10
then you do cold foam.
16:11
>> I think it's we're really stretching
16:13
what I would I mean, I might be quite
16:14
close-minded about what I thought a
16:15
coffee could be, but we're we're
16:17
stretching the definition of this. I
16:18
suppose as an Italian company, are there
16:19
any questions sometimes philosophically
16:21
about how far can we take coffee? How
16:23
far can we stretch the definition of
16:25
coffee? Where do you draw the line?
16:26
>> The the equivalent of pineapple on
16:27
pizza, right?
16:28
>> Yeah. Well, it's
16:29
>> So, it's really really interesting cuz
16:31
if you go to Italy, they are bar
16:34
espresso drinkers, right? They're not
16:36
into what we're drinking. We're
16:37
influenced by the US, right? So, I call
16:39
it there's three waves of coffee. The
16:41
first wave, if you go back 20 years, is
16:43
is the Starbucks and uh you know, the
16:46
coffee shop coming over to the UK. So,
16:48
you start seeing Costa and all these
16:50
things, which is I would say average
16:52
coffee quality. Then you see the second
16:54
wave, which is specialty coffee, and I
16:56
think you had Grind in here before, and
16:58
you talked to them. They're a specialty
17:00
coffee shop. That started to premiumize
17:02
people's demand for quality coffee, and
17:04
now I think in we're entering the third
17:06
wave, which is variety, right? So,
17:08
people are demanding taking coffee
17:10
everywhere, right? So, matcha,
17:13
uh people are adding lavender, people
17:16
are adding more syrups, people are using
17:17
more alternative milks. And I class
17:19
that's the third wave of coffee.
17:20
>> We've run out of time, so we'll leave it
17:21
there. Lee, thank you very much for
17:22
joining us.
17:23
>> That's okay. Thank you very much.
17:24
>> And finally, pensioners across Britain
17:26
have been scrambling to avoid being
17:28
pulled into the inheritance tax net. The
17:30
pension provider Royal London has told
17:32
City A.M. that the rush to protect
17:34
assets from the taxman shows, quote, no
17:37
sign of slowing down. That's because of
17:40
a Rachel Reeves era change, remember
17:42
her, where assets within private
17:44
pensions were swept up into the scope of
17:47
inheritance tax. Our investment
17:49
reporter, Maisie Grace, has been all
17:51
over this.
17:53
Maisie, how worried are people about
17:54
these changes?
17:55
>> Yeah, I mean, sorry to bring the mood
17:56
down from delightful chat about salmon
17:58
pasta, but sadly pensioners and their
18:01
families are quite
18:03
worried about this change. It's It's
18:05
coming April 2027. It's It's brand new.
18:07
It stops that IHT exemption that people
18:09
have been enjoying for so long. And
18:12
speaking to Barry O'Dwyer yesterday,
18:13
chief executive of Royal London, he
18:14
confirmed what I've been hearing around
18:16
the city already is that
18:18
this shows no sign of slowing down. In
18:20
the lead-up to the change, people are
18:22
going to be taking greater notice,
18:23
really being proactive, and this is
18:24
going to extend beyond when it is
18:27
introduced, because more and more
18:28
families are slowly but surely realizing
18:31
that, oh my gosh, we are going to be
18:32
dragged into this net. And that is
18:34
primarily due to frozen tax thresholds.
18:36
>> Have HMRC made a bit of a mistake here
18:38
in extending the net so much so that
18:40
people who weren't planning on doing any
18:42
kind of tax planning before are now
18:44
actually thinking and now actually sort
18:46
of familiarizing themselves with the
18:47
seven-year gifting rules and stuff like
18:49
that. People who would have actually
18:51
paid a bit more inheritance tax without
18:52
even expecting to are now taking
18:55
preliminary steps and maybe even losing
18:57
HMRC sort of income through this.
19:00
>> Again, yeah, it comes back to frozen tax
19:01
thresholds. That decision has
19:03
pulled the City A.M. favorite here,
19:05
Henry's high earners not rich yet, in
19:06
particular, into that threshold. And
19:09
that is pulling in these people who do
19:11
not classify themselves as very rich or
19:12
wealthy at the word very middle class
19:14
jobs such as doctors, accountants, and
19:16
they're finding themselves sort of in
19:18
this scope and it is causing a lot of
19:19
panic and as you were saying, yes, maybe
19:20
HMRC have messed this up here because we
19:22
are sort of living in an era right now
19:25
where people are becoming increasingly
19:26
worried about their finances, about
19:27
their pensions, about what their family
19:29
going to have to do after they die. It's
19:31
really all it's just piling in onto this
19:33
fear and that it is growing and growing
19:35
and growing and a lot of wealth managers
19:36
and asset managers are really raising
19:37
the alarm here.
19:39
>> It's also maybe not the best vibe for
19:41
the government to be putting across
19:42
specifically when in the broader
19:44
pensions market the pushes are launch
19:46
the pensions dashboard to help people
19:47
consolidate pension pots. People have
19:49
more jobs across lifetime they ever had
19:51
done before. Also the move to try and
19:52
consolidate pension pots to make I
19:55
suppose people's earnings from pension
19:57
payments more effective. Is there a risk
19:59
that this ends up I suppose undermining
20:02
broader campaigns to get people paying
20:04
into private pensions?
20:06
>> Well, that's a that's an interesting
20:07
question because I I don't think this is
20:09
going to stop the pension push that
20:10
we're seeing because Pension Minister
20:13
Bell who is still in post and under
20:14
Burnham and his team have forgot what I
20:16
was saying earlier have been ringing the
20:17
alarm more and more and more that you
20:19
know, yes, you're worried about your
20:20
family what happens after you pass away,
20:21
but before that, once you leave work,
20:23
you also have to survive. You know, you
20:25
have to live, you know, a lot of people
20:27
are entering retirement now with funds
20:29
that do not go beyond I think the
20:30
average is is around 7 years. People are
20:33
living for longer, much, much longer.
20:35
So, that is causing the greater need to
20:37
have more pension cash and you know, and
20:38
it comes back to again that we are
20:40
seeing people with multiple jobs who
20:42
maybe within that earn under the you
20:44
know,
20:45
auto enrollment threshold, self-employed
20:46
people do not automatically qualify. A
20:48
lot of young people are opting not to
20:50
save into their pension at all in order
20:52
to pay their rent, get in the house, not
20:54
afford stuff, raise a family. So, this
20:55
is a problem.
20:56
>> And that's really that's really
20:56
corrosive because the amount of compound
20:58
interest you're missing out on if you're
20:59
only starting to pay in in your early
21:01
40s.
21:02
>> Mhm. Exactly.
21:03
>> Time is the most valuable resource you
21:05
have in terms of that interest
21:07
compounding. Just lastly, Maisie, how
21:09
what kind of physical form are we seeing
21:11
this take? Is it people taking their
21:13
tax-free lump sums and potentially
21:15
giving it to kids for house deposits, or
21:17
is it to pay off their own mortgage, or
21:19
is this how we're seeing this kind of
21:20
trend materialize?
21:22
>> So, from what I've been hearing from a
21:23
lot of wealth managers at the moment,
21:24
like yes, that is a fact that people are
21:26
considering. I've heard that through
21:27
conversations. I can't prove it, you
21:29
know, as of like I find out myself, but
21:31
I've heard it. The thing that I what we
21:32
are seeing and the thing that was proved
21:34
in today's results from Quilter, another
21:36
wealth manager, they're seeing a huge,
21:38
huge push for financial advice. And that
21:40
is coming from across the board from
21:43
wealth managers again to asset managers
21:45
to independent advisers. People are
21:47
trying to access advice that maybe they
21:48
wouldn't have done before to figure out
21:50
what to do. So, that is something that
21:51
we do definitely know that we are
21:52
seeing. We are seeing this push to sort
21:53
of come to terms with what is going on
21:55
in order to not get caught out when this
21:57
change comes in next year.
21:59
>> Well, to anyone listening, seek
22:00
financial advice on this stuff. You
22:02
never know, might work out, might be
22:04
beneficial.
22:04
>> Can't hurt.
22:05
>> Can't hurt.
22:06
>> Maisie, thank you very much.
22:07
>> Thanks, guys.
22:07
>> Well, that's just about all we have time
22:09
for today. Thank you very much for
22:10
listening to Business As Usual.
22:12
>> Two very exciting weekend activities I
22:15
can offer up to you are subscribing to
22:16
our newsletters and of course
22:19
downloading our free app. So, do that.
22:20
>> It's got everything those expensive apps
22:22
have except ours is free. We'll be back
22:25
in your podcast feeds on Tuesday at 6:00
22:27
a.m. But until then, have a great
22:29
weekend and we'll see you then. Bye-bye.
22:31
>> Goodbye.
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