Retired? Here’s whether to spend your ISA or pension first

**Danni Hewson** (0:09)
Hello, and welcome to this week's AJ Bell Money & Markets podcast. I'm Danni Hewson, and after weeks of speculation, by-election, and finally, a coronation, the UK has a new Prime Minister. So, what are markets made of Andy Burnham so far, and what of his choice of Chancellor? To mull all that over, I am joined by Dan Coatsworth. Hi, Dan.

**Dan Coatsworth** (0:33)
Hi there, Danni. Yeah, it's been quite a week, isn't it?
Certainly, you know, on the Chancellor side of things, we had John Healey on our potential short list of candidates, but I think for a lot of people, they were really surprised when he was announced. Obviously, the former Defense Secretary was quite significant because, you know, immediately on this news, we saw Defense stocks climb. We'll be chatting a little bit later about why that happened.

**Danni Hewson** (0:56)
And we'll also discuss what has already happened from a policy perspective, including that VAT cut on domestic energy bills and also what looks like won't happen, at least in the short term, like the unfreezing of tax thresholds.

**Dan Coatsworth** (1:14)
We've had the latest inflation data and employment figures, we've got a good idea about the economic backdrop that Andy Burnham has inherited. Now, in a bit, we're going to be joined by Rachel Vahey from AJ Bell, who's going to talk about the big question lots of people ask. Should you, when you retire, start by taking money from your ISA or your pension? There's a really interesting debate, so stick around for that.

**Danni Hewson** (1:37)
Yeah, it's a question we get asked an awful lot. And if you are looking for a place to splurge some of that retirement income, it's a place that my mom actually loves to shop, Primark. And it's lowering prices ahead of being spun off by its parent company, Associated British Foods.
The question then, of course, is what does that mean for the state of the business? Plus, we're joined by AJ Bell Head of Investment Solutions, James Flintoft, to mull over the broader state of markets as the price of oil, I'm afraid, climbs above $90 a barrel once more.

**Dan Coatsworth** (2:14)
So, let's get through, actually, just probably worth pointing out. We are recording this on Wednesday afternoon.
So, we are recording just before we've heard from some of these big tech companies. And we'll look about all those results in next week's podcast. But for now, Danni, should we chat about the market reaction to Andy Burnham's first couple of days as Prime Minister? Because he has wasted no time in coming out with lots of little things to tease people. We still don't have the sort of the bigger picture policy. What do we know so far and how are financial markets sort of reacted?

**Danni Hewson** (2:46)
I think the most notable move has been in the 10-year guilts. People were really watching very closely to see how borrowing costs would react. Of course, when it was announced that he was going to stand in the Makerfield by-election, those 10-year guilts shot up and we've seen them edge higher. Notably, we've seen them edge higher every day since Monday and then again Tuesday, and then again today. That's because we are having this drip of policy announcements aimed, as Andy Burnham says, at helping people with the cost of living, immediate help. A couple of the big ones that we have had, most notably was the announcement on Tuesday morning that that would disappear from domestic electricity bills. So that was charged at 5%.
It's now going to be taken down to 0%, but not until the 1st of October. And the big sort of row, the reason that we had market reaction was Andy Burnham and his new team came out and said, this is all costed. We're going to pay for this because we are scrapping the ID scheme that Keir Starmer had started the ball rolling on. Now, it emerges, we believe, from some of the outgoing team that actually there was no money set aside for this scheme. So the 850 million quid now has to be found from somewhere, as does the money to pay for the capping of the bus fares at £2 in England.
And I think a lot of investors are getting a little bit nervous, thinking that maybe this shows the direction of travel for an Andy Burnham Premiership. Maybe it means that he is going to want to spend more, and potentially that, of course, could mean that he's going to want to borrow more. And money markets are saying, look, the UK's debt levels are incredibly high. I mean, they are nudging up on 100% of GDP to economic growth, so GDP to debt. So there's not a huge amount of wiggle room. And although I must stress that we have seen bond markets, those guilt yields edging higher across the board because of what is going on in the Middle East, but the UK is still something of an outlier. So we did see also the pound falling against both the euro and the dollar. But there's just a lot of question marks, still a lot more questions than answers. And when pushed on some of the policy announcements or the hoped for policies that he would introduce, there's already been a bit of backtracking. And most notably, I think, one of the things that he was telling reporters was that when he was on the campaign trail in Makerfield, the number one issue which came up time and time again, and you will not be surprised by this, Dan, it is the freezing of tax thresholds. I mean, this has been a bugbearer for a lot of people, right?