[upbeat music] This week in markets, all eyes on the UK chancellor as the cost of government borrowing continues to rise.

If you invest in bonds, you might be feeling a bit jumpy.

US borrowing costs hit their highest level since the financial crisis last week.

The 10-year treasury yield, which helps set the cost of borrowing around the globe, hit 5.2% for the first time in almost two decades, and 30-year yields rose above 5.5%.

Yields rise when bond prices fall, so these moves reflect a nasty sell-off in the market.

This week might also be turbulent.

So what did you do to try and find that out?

I did a bit of a thought experiment.

So I traveled back in time to January 2018.

To be honest, it was a date that was sort of picked at random, but I thought it gives you a decent idea.

sort of time period to look at.

Stamp duty rules were about the same as they are now.

And I imagine two friends who had exactly the same amount of money saved, but one friend decides to buy their first property, the other person decides to rent and invest all the money they had saved in the stock market instead.

What happened here?

And as they compound each and every year, it begins to look like an increasingly expensive promise for the government to keep.

Completely.

I mean, the state pension in its current form is really, really expensive.

It represents about 5% of GDP at the moment.

But as you say, the triple lock sort of exacerbates the problem because it has this ratchet-like effect because every year you're basically picking the highest of three metrics.

which means over time, the state pension is actually rising faster than either wages or prices or 2.5%.

We've got a graph on it somewhere, but you can see it sort of accelerating away from those other measures.

Do we know anything about what the government has in mind? And why might a waiver itself be controversial? Were we just to let people off the tax?

Mm-hmm.

One of the really nice things about them is that they're flexible, so as long as you're an adult, you can access them whenever you want.

On the other hand, you have pensions, and these are designed to help people save for the long term.

And because of that, they're less flexible.

So at the moment, you can typically access a private pension at age 55, and that's actually going up to 57 in 2028.

So there's sort of a long period of time potentially where you can't actually touch the money, and there's also a little bit more of a fiddly difference in the tax treatment of pensions and ISAs.

So with a pension, though you get tax relief immediately.

Mm-hmm.

Is that true to say?

So I thought it was a useful starting point to look at how these people are investing in the sense of, are they picking funds? Are they picking individual stocks? something in between because I think there's a temptation to think as you say these people are super sophisticated investors you know they're reading up on the markets they're constantly rejigging their portfolios and there will be some people like that you know in the data that we've seen there are some people who hold almost entire portfolios in individual stocks yeah But on the whole, that's not the approach people are taking.

So funds are by and large the most popular choice.

So if you aggregate up all the data and you see sort of where people have put their money, about 80% of ISA millionaires assets are in funds.

which suggests people are quite keen on ready-made diversification.

They're happy to hand over the reins to someone else to pick the stocks that they're investing in.

And it's quite reassuring, really, that you don't necessarily have to be some sort of expert stock picker to still see really good investment growth.

Okay, so a question that a lot of investors ask us, sort of up and down the kind of wealth scale, is how many of these individual funds assets to hold? What do you learn about that looking at these millionaire investors?

Yes.

So what does that actually mean? First, you have to think about inheritance tax, so once that sort of shrunk the pot, they're missing out on £7,500.

But that's not the end of the story because income tax will also be due.

So if we assume the child is a basic rate taxpayer, they'll owe 20% more on that money, so ultimately they'll be missing out on a £6,000 inheritance.

So in this scenario, as you can see on the screen, in both cases, the beneficiary is missing out on the same amount of money.

It doesn't matter-

Mm-hmm.

So if we think, okay, they receive a £10,000 ISA, they'll take home, after they've paid IHT, £6,000.

This week in markets, investors are riding high as earning season draws to a close, but there are challenges up ahead.

The sun has barely stopped shining on investors this summer.

This week is off to another cheery start, with European and Asian stocks edging higher.

The coming days will bring several tests, though, not least around inflation.

In the US, retail giants Walmart, Target and TJX will publish their financial results on Wednesday and Thursday.

These reports will mark the end of earnings season and should tell us a bit more about how American consumers are feeling.

What's on or off the table?

So I'll caveat all of this by saying you shouldn't be making financial decisions based on speculation or like unconfirmed policy changes.

This is sort of just to provide a bit of context about what people are talking about.

But as you say, property has been in the spotlight quite a bit.

And in the past, Andy Burnham has basically argued that the UK property system is quite outdated.

And actually land is undertaxed.

And for a while, there were quite a few rumors swirling around about whether there'd be a big overhaul of stamp duty and council tax.

What is there to say?

This week in markets, stocks hit record highs after a strong earnings season.

It's A-level results day on Thursday, but investors are celebrating a different set of numbers.

Some of the world's biggest companies have published financial results in recent days, and markets have been pleasantly surprised.

UK, US and European stocks are all trading near record highs, and importantly, the gap between them is narrowing.

For years, the US has been top of the class.

but the three regions have delivered very similar returns over the past year.

Is there such a way?

There is.

So there's something magical known as carry forward, which basically lets you tap into unused annual allowance from the past three years.

So in theory, and it is very much a theory because we'll come into the various caveats later, but someone could contribute £240,000 into their pension in a single tax year and still enjoy the tax relief that we've been talking about.

So that's based on the current year's allowance and the previous three years' allowance.

So that's obviously quite an extreme case.

Yeah

... enjoy the tax relief.

Is that where you should be looking to generate this extra income?

I think it's a really good place to start.

So the benefits of paying into a pension when you're young are really well known.

So you've got decades of time on your side.

You can compound your growth by just leaving it there to grow and grow.

Often the benefits of someone older paying into a pension are overlooked a bit because it's tempting to be like, well, I'm going to be accessing this money quite soon.

What's the point in just locking it away to then unlock it a few years later? And you're not going to leave it for too long to benefit from the investment growth.

What is there to say in terms of turning that money into the income you need?

Mm-hmm.

And it's basically there to look at whether the UK pension system is fit for purpose and fit for the future.

And actually, the Pensions Commission landed on these rates all the way back in 2004, but the government updates them every year to make sure they account for inflation.

And the last set of figures we have are from 2023, so they're a little bit out of date now, but those are the latest ones, ones we've managed to get our hands on.

Mm-hmm.

Um, so if we just take one example, it's someone earning £52,000 a year would need a pension pot of around 510,000 plus the state pension to sort of achieve that target replacement rate.

We assume a few things.

So the first is that you will be receiving an average state pension, and the other is that you would opt for a 4% withdrawal rate in retirement.

What is happening from next year when it comes to ISAs?

So I'll caveat all of this with that we don't have draft legislation yet.

These rules haven't been formally presented to Parliament.

But the government has given a very clear indication of what it wants to happen from next April.

And there are a few changes to go through.

I think if I set the scene by saying there are two main types of ISAs.

There are cash ISAs, which basically work like a traditional savings account.

So how are those being treated?

This week in markets, investors pause for breath after a dramatic six months.

We're officially in the second half of 2026 and after months of political drama at home, conflict abroad, IPO excitement and oil shocks, investors will be hoping for a breather this week.

Economic updates are thin on the ground and earnings season won't begin in earnest until next Monday.

So there's no better time to reflect on the past six months and what they tell us about the future.

Global stock markets had a great start to 2026, despite lots of risks.

The S&P 500 has just posted its best quarter since 2020, while European stocks are trading at fresh highs.

The reason, I guess, we keep coming back to it is that it is such a nuanced and difficult problem, isn't it? Why, Gemma, is investing for income in retirement hard to get right?

Sounds incredibly obvious, but when you retire, you're not getting paid anymore.

So you have a pot of money that you have to make last and you're thinking, well, first, how much can I afford to take out of that pot every year? You don't want to take too much because it might deplete too quickly.

You don't want to live too frugally and impact your lifestyle.

You're also thinking about what you want to invest that money in, whether you want to play it safe and risk inflation eroding your savings, or do you want to be a bit more ambitious and risk volatility? And then the third problem is probably a bit less well known, but it's called sequencing risk.

And that is the idea that two people could retire with exactly the same amount of money, achieve exactly the same average returns over the course of their retirement, but have entirely different experiences.

And that's because one of them... experiences a market crash very early on in their retirement, which basically derails things because they're having to withdraw money from their pension when their investments are down.

This sort of is accepting the fact that you're going to withdraw and deplete a pot, but have riskier assets later on to recover.

expectation of Pensions UK who come up with these numbers.

Exactly.

So it is actually quite a small tier at the top who will be achieving this.

I think it's also worth noting that there are loads and loads of details about what people are spending money on.

And it's actually quite fun to click through to see what the spending expectations are.

And it's a bit of a pick and mix exercise.

So you might see, say, you might look at the clothes, for example, and I think they estimate that you'd spend... about £1,600 a year on clothes and shoes if you're in a comfortable retirement.

for a radio station and they were talking about these numbers and they spoke about the 42 or the 45 000 pounds of you know that's what you need for a comfortable lifestyle and people took that more or less in their stride what shocked people and it kind of caused in fact quite a bit of sort of consternation was when you got to the numbers needed to generate that level of income what can we say about that what do we know would be required to get to those levels of income