S1E12: How to sort your pension & retire well

0:02Damo, what are you doing? well while we're waiting for our next podcast episode i'm sat here reading this magazine that's on the table about wallpaper very very quaint very old school you know what i never realized how much i missed those little rip-off sniffy perfume things that are in the middle but yeah i think um magazines are making a comeback mate in a world where everything feels digital and i'm just dying to put down a screen all of the time i quite enjoy sitting down with a magazine and having a read of it it's almost like you know buying a vinyl record yeah feels more real more tangible the music's more authentic it's richer yeah that's right which kind of leads us into today's sponsor one of the best finance publications in the uk is money week they're in print and online so you can get that nice magazine feeling in your hands money week sift and summarize the biggest stories in finance and then add their own journalism on top it means no more endless scrolling if you want to give money week a try you can get six issues in print and on the app absolutely free by visiting moneyweek.com forward slash money.

1:01After your trial, you'll save an extra£5 on a quarterly subscription exclusive to Making Money listeners. That's moneyweek.com forward slash money and there's a link in the description for you.

1:15Do you know how much you need to retire? And most importantly, do you have a plan to get there? Pension planning should feel a bit scary. The amount that you're going to pay in will feel a bit scary, but it should because we want a good one. So if you do feel a bit scared, don't worry, because today we're going to face it head on together. I feel like when people say the word sip, they feel like they're secretly trying to tell you they're rich if they've got a sip. I got a sip. Humble flex. Humble brag as usual. David's always so modest. Massive sip.

1:51so today we're joined by lisa conway hughes aka miss lolly just to read out your list of accolades so your child financial advisor a fellow of the personal finance society and also you're a member of mensa can you just tell us what it's like being a member of mensa just to start off first of all um well i don't interact also i'm probably the the member that they don't even know about but I just did it because it was I just wanted to see if I could pass it really and um my husband got a test your own IQ for Christmas one year and I just nailed it and I don't know why or how and I thought maybe that's a fluke and um and so I did the test just really to see and I was I was surprised that I passed as well.

2:35Do they give you like a certificate? Do you get like a medal? Secret handshake? Secret handshake? Illuminati access? Well you can buy lots of merchandise if you wish discount a subway it really is nothing i get a monthly magazine that's it it's really not you are a genius it's um yeah it's not it's not as fancy as maybe it sounds tea i got i got what i did before this was i got a mensa question i'm going to put it to tea and the audience i'll read it out and then people yeah and you go as well so you can check if you're really yeah yeah so yeah you can you get up to the end of the episode okay we'll add a bit of stakes to me it's like the one percent club yeah yeah to me and if you can answer this i've got 50 pounds in my pocket hard cash hard cash okay yeah that'll give to you so you already told him the answer no no no he wouldn't do that he's not that kind of friend i'm i'm banking on the fact that he will not get this right like you know so tabitha likes cookies but not cake she likes mutton but not lamb she likes okra but not squash will she like cherries or pears don't answer it now you can you can stew on that i need to know the answer i read it again i think it might be the fuck no no don't don't give him any clues otherwise you're liable you've both got to pay me 50 quid tabitha likes cookies but not cake she likes mutton but not lamb she likes okra but not squash based on those answers would she like cherries or pears you can sit on that the chances of him getting this right are like him winning the lottery in my eyes the cheek of it i'm gonna get it right you've got many talents mate but knowing what tabitha wants to eat is not one of them you're thinking i can see you thinking we'll come back to it speaking of the lottery if you dig a little deeper into pensions and how much people actually need in retirement i think many people will think oh my god i need to essentially win the lottery to retire can we just start with a real big question of how much does a person need to retire and so when I tell the answer to this I think you've got to notice what your own reaction is because some people want to run a mile and bury their head in the sand or and think that I'm not saying correctly or other people I think can sometimes be a bit frozen but it's if you work out what you want every year and times it by 25 that's a good ballpark so if I want a 10 grand a year I'm going to need 250 grand if I want 20 grand a year I'm gonna need half a million and so when we're hearing at the minute people these rich people with a lifetime allowance problem of a million quid these people actually are on incomes of around 40 grand a year so I think there's a real there's a huge disconnect isn't there about with a million sounds a lot and 40 grand sounds quite normal yeah because the lifetime allowance is is the limit where if you exceed it you get taxed quite aggressively right yeah so right now there's no taxes scrapped but before that it would be 55 percent um and well who knows it's thought if we have a new labor government that that will be reinstated um but yeah i think there is a big a million sounds a lot but 40 doesn't yeah well that's it so the idea is there that a pot of a million pounds would produce a sustainable income of about 40 grand a year that would hopefully last you so you don't run out of money towards the end of your life exactly And 40 grand a year doesn't sound that much, does it T?

5:57No. You know, I mean. Not with my lifestyle, no. Spend that on lunches. So, you know, like, I think most people want their life to be better in retirement. I think many people think I'm going to work and then in retirement, that's my golden years. Or some people just start discounting to make themselves feel better. Or when I haven't got, when I'm retired, I won't have a mortgage. The kids will grow up. We'll have one car, not two. but they don't think that actually you're on a seven day weekend yeah and so you actually spent you sat at work you limit yourself to spending money whereas if you're in you know when you're on good example is like when i book time off to be with my son i just hemorrhage money because it's like i've got i've got to do stuff i don't want to sit and watch tv all day it's like the newspaper can only bring you so much joy do you find that people spend more in retirement than they think they will then i think people go two ways that they um they feel quite liberated if they've done good financial planning or some people just can never switch themselves into spending mode because they've lived their life in accumulation mode and then it's too much of a head to actually switch into spending so part of my job as an advisor is to give people the confidence in retirement to actually spend because it's in my kind of see all extremes and it's so sad if you don't get that balance right it's so sad if you work too late and don't take advantage of those years when you can travel and have fun and it's so sad if you blow it all in Ibiza in year one and haven't got anything left he had a very good first year in retirement put it that way what guy yeah my kind of guy just got a beef and chopped off I'm never going back to work do you think it's changed a lot over time because like my grandparents all they did RIP they just traveled like every they were like holidays every month like Nigeria to England to America to like France but my parents are both still working so do you think it was like people used to easier it was easier back then because yeah yeah I think it's a huge mountain to climb and sometimes it's amount and we're just not willing to even look at for a while and then the longer we leave it the harder it is and so the the benefits that your grandparents had and my grandparents had was they would have had final salary pension schemes but also a larger proportion such a large proportion of their income wasn't going on property and so they had more to save and people would argue this world of consumerism that we're in now wasn't around then as well so they didn't have these financial pressures that we do now and being advertised two thousands of times a day so in some ways it was different um but then presumably they were really sensible as well I don't think we should take away from someone um working hard having a final salary pension scheme for 40 years it's still a commitment to get yeah and people made that commitment to workplaces for that reason didn't they whereas now with job hop yeah whereas people are like no the pension's good I'm going to stay here because I know that if I stay here for 40 years, I get this good.

9:02Like you say, they made that lifetime commitment. It's not fair to say it was easy. They had better structures that existed, but they also working in one place for your whole life. I like that rule of, and I think it's really easy for people to say, times what I want by 25. How do people work out what they want? Yeah. And so you've got to remember that each year you've got to redo that calculation because things cost more the next year. So it's always a moving goalpost. But I think if you sit down and look at, well, what am I actually spending right now? And do a proper one, not just a back of a fag packet, go at it.

9:39That's probably a really dated sentence now, isn't it? People don't really smoke. Back of a vape packet. But it can't just be a guess. Download your bank statements in an Excel spreadsheet. We did an episode on this, didn't we too? It was brutal. And add it all up. and the same for credit cards or things that could be lurking in your PayPal or your Apple Pay. All of those things need to go in and that is the number that you spent and start to work out well. Hopefully your mortgage will be paid off, but will it be? Because sometimes I get people calling me in real panic. They thought their mortgage was going to be cleared, but actually it's not.

10:19What do those people do? So really do make sure your mortgage is going to be cleared. The kids won't be financially dependent on you. is a thing that people say often, but we all know about the bank of mum and dad. And we do know - It's pushing further and further, isn't it? It's like, it used to be at 18 see ya. Now it's like 25, 26. And in London, I think 30 is the first time. I was going to say in Nigeria and in London, people stay at home for like a lot longer and they like, yeah, it's times different. Yeah. Like we met someone in Chelsea last night and like lots of people just live with their parents in like Chelsea, London, because they can't afford to buy in that area.

10:55so they just stay there and save money on rent. But they're all out at a bar spending 10 quid on a beer. The bank of mom and dad. I'm not saying the avocado toast is to blame, but it is funny. One thing that was like a wake up call to me though, a bit of positive in this, I sat down to work out how much I'd need and then I realized, oh, I won't be saving. You know, a large portion of what I spend a month is savings. And, you know, I've really, I'm too far with it, but I probably save over 50, 60 % of what I bring in. but that's because I'm just like paranoid constantly that that I'm not saving enough most people aren't doing that but it's still factor that in when you look at your budget go oh there's 10 to 20 percent here that I'd won't and I do think people can't help but save as well it's ingrained in them like some of my clients I really do have to tell them stop accumulating now is the spending years I wish I had that problem yeah I need to stop spending and start accumulating well you need to play a trick with yourself because I'm an accum I'm I'm a spender naturally and so I have to set boundaries which is the day that I pay myself the debt is the day that money goes into my pension into my ISA into my cash overpay the mortgage and just do all those like the annual I have to have little annual bills accounts as well for things that can crop up and then whatever is left I can just guilt free spend I don't have to all this old thing like I do love clothes and I do love shoes and I love holidays and so um yeah I've found that balance for me to do what I need to do without feeling guilty it's like managing I say it all the time it's about being good with money is about managing the ways that you're bad with money rather than like I'm I'm like you I will just run through any money in my bank account so I have systems in place to make sure that I can do that in a controlled manner yeah exactly yeah okay so So the one thing that I want to look at, so we talked about how much people are needing the budget.

12:46The PLSA put out like guidance. Sorry, sorry if I scared you. She's like, what's that? What is the, that's a buzzer to me. I don't know what is going on. What is a PLSA? The Pension and Lifetime Savings Association, I think it stands for. And they provide guidance on what they think qualities of life look like. So just off the top of my head, you can correct me, Ruth, maybe from the back if I'm wrong they say around 10k a year is like the bog standard what you need to basically just live I think 35k a year for a single person is comfortable and in the middle of that is like 25 26 that's currently now is an adequate lifestyle yeah but their their idea of comfortable is like one or two one two week holiday a year or this this kind of living standards and I think that was in the UK as well.

13:36They say Europe or UK. Yeah, one European holiday and like a UK city break, one or two meals out a month. This is like comfortable, like their highest standards. Now you're saying 35K times it by 25. And I think honestly, most people listening to this would look at what comfortable is and say, that's worse than what I have now. The issue is that they then said the average pension pot at retirement is 55 ,000 pounds. And if you whack state pension onto that, the average person is in the bottom category. Yeah. Do you find that with your work? Well, sadly, my work is structured in a way that I don't see those people.

14:17Because you speak to people that have got cash. Yeah, people that come to me, a financial advisor in central London, they tend to have lots of money. Doesn't mean they don't have money worries, but they do tend to have lots of money. And that's the reason why I started Miss Lolly, because I thought if everyone could just learn one little thing about money every couple of days then it's going to do some good eventually we can get money confident so yeah I did I did feel torn about the fact that I use my skills to advise people who are rich already um but but that's why you're here that's that's why I do what I do I want to speak to the people that that don't have the money to sit down with an advisor that because I firmly believe you know if given enough time if you just have simple habits like you say even a bit of money a month tucked away into the right types of structures over a long period of time can really change that exactly and and i do set up these little one-off sessions for people to just pick my brains for an hour and i think just have whether you learn that knowledge yourself or whether you pick someone's brain for an hour so that you're on the right track and maybe you do that every couple of years i think that constant nudging back on path back on the right direction can really really help can we do this then with to main if you don't mind mate like you're 35 years 25 actually anyone who's watching this i'm actually 25 he's lying 35 years young um and let's say hypothetically he's got no no pension savings yeah um where does he start so my natural checklist would be well what what tax bracket are you in because the more tax you pay the more important it's going to be to do pensions because say say you're earning less than 50 000 you pay in 80 into the pension the government's going to pay in 20 percent percent yeah because you're a 20 tax payer if you're if you're earning less than 100 but over 50 you're a 40 taxpayer so suddenly it starts to get a bit nicer because you pay in 60 the government pays in 40 if you're in that really dodgy bracket which is 100 to 125 suddenly you're a 60 taxpayer so you pay in 40 into the pension the government's paying in 60 so I really want to see like what can I which bracket are you in and what can we what can we do pension wise to make you fall into a lower tax bracket so a really good example is a lady's a couple of years away from retirement and she's she got in touch really to for me to help her sort a pension out she's earning 80 so it made her feel a bit sick but I managed to encourage her to do 30 ,000 a year into a pension through work and salary sacrifice because now she's a 50 ,000 pound earner she's paying no high rate tax at all and she's suddenly a 20 % taxpayer so that would be my first thing like what can I do brackets wise and then what's going on with the rest of your life because we do want pensions to be we want you to sort out your pension and your retirement but what are your commitments for the next five years because I think if someone's got loads going on like they want to buy a house or IVF that can be a really costly thing lots of women are constantly in about freezing eggs and all of those things so if if you don't understand what's going on in the first the next five years they can distract you to the point where you're not going to do the long term so I think you've got to find that balance and then um once I sort of felt I'd achieved tax efficiency for you I would then start doing um isas because everyone thinks it's just about pensions in retirement but pensions are taxable so you get all this tax relief they grow tax-free but when you spend it 75 percent of it's taxable so say someone's wanting 60 000 pounds a year in retirement they take that out their pension a taxable bit they're going to be a 40 taxpayer in retirement again so really you want to take 50 out of your pension if you want 60 grand and then you want to take 10 000 out of your isa because that's tax free so having that flexibility of different pots with different tax wrappers um would be my start and also that isa in the short term can then be there for medium term things like what what what commitments can you imagine you might have at 45 and 50.

18:36You're going to need a hair replacement. Oh, I'll get lost. A little, what do they call it? That's a low blow. It's after turkey for my teeth and my teeth, and your hair. Yeah, on that note. Right, so, you throw me that. He's like touching his head, like, is it still there? Is it still there? That's why I sit on this side, because the ball patches this side. So, the question I want to ask there then is, You talk about tax on the way out with the pension. Someone's going to say, well, why don't I just use an ISA then? Because you don't get that tax relief on the way in. And so say you're a basic rate taxpayer on the way in and the way out.

19:16The benefit is that it's only 75 % of it that's taxable on the way out. But also having taxable stuff in retirement isn't a bad thing because don't forget you've still got that personal allowance. so you've still got that 12 and a half grand. You said only 75 % is taxable. Yeah. That's a lot. It is a lot, but when you think - You can control how you take it. Yeah, so pensions used to be that you just gave away the whole lot to an insurance provider and they would give you an annuity for life. Now, the way I get clients to imagine it is literally like a cake and you take a slice every year. That could be a big slice or a small slice.

19:54If it's a big slice, it's not going to last forever. If it's a small slice, are you having the quality of life that you really want and out of that slice 25 is tax free okay cool so you can take out 20 20 one year and then take out or some people like i've got a client whose dream is to buy this flat in central london and needs a couple of hundred grand extra to do it so we're slicing his cake to start with 25 out is that the lump sum that you can take at 55 soon to be 57 yeah because you can get a one-off lump sum but are you saying that you can not take it as a one big cash, you could take it every month as an income and still get that 25 % benefit.

20:32Exactly. And so that has tax advantages every single year in retirement because you can control. Effectively, it goes into two parts, the tax-free bit and the taxable bit. And then you, you know, you take out how you wish. So you talk about your cake analogy and taking the slices. Like how do people actually do that? Yeah. So when I'm planning someone's retirement in the run up, say three, four years before, we're really starting to get a grip of what does risk mean and what risk do they need to be taking? Because it might be a time where we start to really ease off the risk. Or we might have the money you're going to spend when you're 80, 90 might continue to be higher risk, but the money you'll spend in your 60s and 70s might have a completely different risk profile.

21:17And then we want to build up your cash saving. So I always want clients to have three years worth of cash. and that just sounds weird to people but one year is your emergency cash buffer one year is for you to be spending in the year that you're in and one year is for the year the following year if the stock market's crap yeah um and then what we do is like a waterfall effect i'm moving money whether it's pensions isas general investment accounts offshore bonds onshore bonds all this money is moving them from the higher risk long-term stuff to the medium term um stuff and then into cash and every year we look so well what are you going to spend next year what you what's your that five-year time horizon when do you need to replace the car and then we're constantly topping up this short-term cash pot from these longer term and medium term investment pots so and then we look so we now know how much you need and then we look at well how much should come from the pension how much should come from isis how much should come from your general investment account to use up your capital gains tax allowance.

22:18So it's a pile up of lots of different investments and the government's always moving the boundaries of what's tax efficient. Now they've scrapped the capital gains tax allowance, well, practically scrapped it to 6 ,000 going down to 3 ,000 next year. A general investment account just isn't as tax appealing as it was this time last year, but maybe offshore bonds are becoming more popular. So I think it's just being able to be flexible And the more pots you've created over your life, the more tax flexible you're going to be able to be. So you're showing your knowledge there and the value of your services.

22:57Could someone listening now go, okay, I'm going to build up my pension. I'm going to build up my ISA. And then when I get near retirement, I'm going to sit down with someone like you, who's then going to help me plan how I take the money out. And weirdly, that's the stuff I love. I love working out what is the most tax efficient way for someone year by year. Because I think a lot of people just, they want to do it themselves, but then they hear that and they go, oh my God, how am I going to work that out? So a financial advisor can step in at the end and give that advice, you know, once people have got the pot.

23:24The one thing I want to talk about as well is state pension. The narrative is that's not even going to exist by the time I'm that age. How do you treat state pension? in my mind i pretend it's not coming so i i don't put it in my cash flow that i'm going to get it i think if it's going to be some nice holidays hopefully if i get it very nice to have and i think i mean there's for people who don't have very much i can't believe there'll be a day when the government doesn't look after people who don't have very much so i wouldn't be worrying that that would go completely but does it make sense that someone who has a lot of money gets 10 grand a year from the government um i don't know it just feels if if some people are living in poverty and some people living in excess then that might be a way that we redistribute wealth when in retirement yeah it's also obviously people pay a lot of a lot of tax and then to be told at the end oh well you were too rich to get that is like it's a bit of pill isn't it like you know you pay a lot of ni and i i have some clients who actually feel bad to receive the state pension they gift it to charity um because they yeah so i it's individual isn't it so you might think well i've earned it because i've paid my ni or you might think i've got more than enough so i'll give it away but i'd rather have pretended it's not coming and it'd be a nice surprise than it'd be great weekend in ibiza yeah that's not by the time you retire yeah i can't keep that like a weekend literally yeah in a hypothetical situation then let's say i've got an isa i've got my pension i could essentially take 25 of a month tax-free i could then take up to the 12 and a half grand of tax tax on like tax-free income yeah and then i could top up through my isa and not pay on any tax on any exactly yeah and maybe be pulling out 40 50 grand a year there in that example and that and then if you've got other investments you can use your dividend allowance that you can you can be really tax efficient so it is about collecting different types of things but the one that speaks loudly for retirement is pensions because of that tax relief and for higher earners is it always going to be around there's all it's always banded around every year that rather than it being 20 40 60 45 tax relief that they're just going to make it a flat 30 and to be quite honest i agree with it because it means the lower earners that need it the most are going to get a 50 tax tax benefits and those who are high earners already will get less tax relief but they have less of a problem anyway.

25:57So for higher earners especially maybe this is the golden time of the pensions as we know it that you should take advantage. Yeah get the money in. So the one thing that I get a lot on my channel is I don't trust pensions you know when you're talking about locking it away and lack of flexibility how do you kind of dispel that with your clients or i mean maybe not your clients but with someone saying i don't trust the pension system philip green robbed all the pensions blah like that kind of narrative so i think you've got to understand the story behind the headline and the government does not want pension scandals because that we they want people to have confidence in pensions which is why all the stuff that's going on at the moment with the lifetime allowance toing and froing is really bothering me because i think it it's legitimate pension scaring.

26:45It is a reason. How can I plan for 30 years when the governments are saying they're going to change it every five minutes? But anyway, that's a separate point. I've forgotten what I was saying now. You were just talking about trust and pensions. Oh yes, trust and pensions. So trust and pensions were sort of rattled with the Philip Green staff saying that he put the money, rather than putting the money into the pension to make it secure and into the defined benefit pension, he kept it in the company. the the the thing that probably wasn't mentioned in those headlines is the government will protect that up to 90 percent anyway so that they put these provisions in place so that it can't fall very far um and that's only if you were it's about 30 odd thousand that up to the protection of 90 if it's below that it's 100 protected so most of those people would have been protected anyway um and um which is a relief but it's never nice especially if that's not explained to you and then the latest one that's all over the news is the british steel workers and that was sadly my industry taking pensions from a defined benefit world which means that defined benefit is like an nhs pension or a teacher's pension or a police person's pension you you it's it's dependent on your salary when you leave or your average salary and it's dependent upon how long you work therefore and then you get a guaranteed income for life how much you get is predefined the benefit is defined so defined benefit you know what you're going to get at the end and those cost a lot to run and that's why we don't have so many yeah they don't do that anymore and so the british steel workers had these type of pensions um they're very very secure the other end of the spectrum is what most of us have now is defined contribution i you know what you're putting in but you don't know what you're going to get out what you get out is your responsibility to check how it's invested how much is actually going in is it the right amount and so they moved these pensions from this world of defined benefit into the world of defined contribution and it's coming to the surface now that that was predominantly driven by their their want for fees rather than the want for doing the right thing um and so lots of financial advisors who are involved in that being shut down and fined and all sorts of things it's it's a big scandal really um so i think the lessons are penches themselves um are are safe um that they can often be trust-based so there's lots and lots of rules around who can touch who when you can touch it how you can touch it um the bit that often makes people nervous is inside it is still an investment and you've got to get your head around that investment and it is your responsibility and I've seen so many workplace pensions where big big corporates and you'd imagine that their pension fund was a good one but actually it's underperforming so the way to look it up is ring up your provider of every pension you've got and say what's the name of the fund that I'm in and then just go to a website called Trustnet and type that in as well into the google or press go and it'll bring up a fact sheet and there's so much information on there geeky people like me love looking at it but really what you just want to see is the one graph that's on the top left and the graph will show you two lines one is you and one is the average and I think that's just an initial sort of acid test am I about right am I under performing am I over performing and a lot of pensions do underperform and you need to you need to know that and you need to find it out quickly so i would check that at least every six months and just kind of what it's invested in as well i think like so many people that i speak to it's like this is going to be the biggest asset in your life it's probably going to be worth more than your house and you can tell me what your mortgage rate is but you can't tell me what your pension's invested in you know and i think people just need to look under the hood don't they what's the scariest word in the english language to me tax how does it make you feel me oh stress Rest, sweaty palms, squeaky bum time.

30:53Don't like it. Mum is spaghetti. Yeah, exactly. You got one shot, one opportunity to not go to jail for avoiding tax. Like, yeah, I don't like tax. It's scary. Tax can be really stressful, which is why we're excited about our partnership with TaxZap. They started in Ireland and now they're in the UK and they make self-assessments way less scary. What I like is how quick it is. You just enter your info, connect your bank, and it helps you do your expenses to reduce your tax bill. You suddenly know exactly what you owe, no waiting around for an accountant to reply, and you can file in as little as 15 minutes.

31:24Yeah, and it's built for all kinds of people. Company directors, freelancers, the self-employed, side hustlers, or even people who work full-time who need to do a self-assessment. For example, anyone who needs to claim back high-rate tax relief on their pension at work. They're HMRC recognised, so they're safe to use. Plus, tax app flags reliefs and benefits you might miss, so you're not leaving any money on the table. And they're really reasonable too. So from just£89, you can have your self-assessment sorted. If you've got to do one this year, check out TaxApp. You can get 10 % off as well using the code in the link in the description.

31:52The code is Money10. So that's M-O-N-E-Y-1-0. Okay, T, talk to me about your attitudes towards risk. I mean, I like a bit of risk in my investments, but I definitely would say since the podcast, I've toned it down a little bit, not quite as gung-ho and like carefree as I was in risk. So yeah. Yeah, shooting from the hip all the time, weren't you? Yeah. I think personally that you should take risks, but it should always be in areas where you have a unique skill set, an edge, expertise, like your job, things like this. One area that I wouldn't take any risks is compliance. Yeah, the risk changes you grow in business and you need to be on top of it, which is why we partner with Vanta.

32:30Vanta automates a lot of risk processes and helps you see your risks in a centralized platform so you know what really needs your attention. Besides risk, the main thing Vanta does is automate compliance with security protocols you need to scale, like GDPR, HIPAA, ISO 27001 and SOC 2. The beauty of Vanta is they make it easy to prove you're compliant with these standards, saving you up to 90 % of the time it takes and on average half a million dollars. If you know what these acronyms like SOC 2 are, you probably need Vanta. You can book in a demo at vanta.com forward slash making money. There's a link in the description.

33:06If you change your providers, you invest in something else, do you have to pay a fee? to like move it over? So the first thing is, so say I went with Aviva. In there, I can have access to probably in most Aviva pensions, hundreds of different funds. And there'll be some Aviva ones, but there'll be other outside providers once on the whole. So you can move usually without charge internally. In Aviva. But if you want to move to a different insurance company, then another different pension provider. If you want to move to another pension provider, say you're moving from Aviva to somewhere else. if you do that with an advisor they will usually chart well they will charge you and you can do that yourself often especially if the pot's worth less than I think 30 ,000 but then you want to be moving for the right reasons because your workplace pensions are probably going to be really really cheap probably the cheapest pensions you can get your hands on so if you're moving it to something else it's probably going to be more expensive so how do you justify that and often that can be because it's got more fun choice or maybe you've got an ethical viewpoint when it comes to investing and that's just not available within your current pension and then I think um another thing to be extra careful of I nearly I saved a man from pension death the other week he was going to move his pension and so you know how I said most pensions have 25 tax-free if the pensions before well definitely the early 2000s the 90s it's worth checking how much tax-free cash you had because he had 98 % tax-free cash what was that just a feature of the pension yeah and if he'd have moved it it would have gone to the rules of the 25 % and um there was a lot of money in there so you've got to check and the question to ask providers are there any guarantees that I would lose by moving my pension and you want that in writing before you moved anything so we'll go into that in a bit more detail in a sec what i think would be useful is just to talk about the different types of pensions because i know a lot of people sitting at home are going to be like sip work-based you know state so we so we've done defined benefit defined contribution so in defined benefit you get final salary or career average and that's just like it says it's dictated by your final salary on the day that you leave or it takes an average of your salary.

35:26And these are always relating to your employer. Yeah, with that employer. And the only people usually lucky enough to have those now are teachers, NHS. Public sector workers. Yes, exactly. Or someone that's been in the company a really long time. And then, so everything else then, and then there's the state pension. So the state pension, you get a full state pension if you work 35 years and sort of pay 35 years of national insurance contributions. and if you want to find out how you're going or if they've got your record right you can look at something called a br19 just put that into google and it it's a very efficient service it comes back straight away and it'll tell you or you can go through your government gateway and then the last one is define contribution so you get your workplace pension and you'll see these just called like a gpp means group personal pension you can get a sip which is a self-invested personal pension and i think sips kind of became like i feel like when people say the word sip they feel like they're secretly trying to tell you they're rich if they've got a sip i got a sip

36:39but it's not that way anymore a traditional

36:45a traditional sip is there because it allows you to invest a self-investment and so often people would have them let's say if they're a gp they would buy their surgery their dentist they would buy their practice in it and you can hold whatever it is as long as it's regulated within the sip um and that was the point of a sip they used to tend to be flat based fees so 500 600 000 pounds a year so the more you had in it the cheaper it was and it just had what we would call in our don't press the buzzer open architecture it doesn't mean you can invest in anything um and then i think the pension industry sort of got onto this that people like the word sip and so lots of pensions are sips now but pensions so some some sips depend it's dependent provider but some sips will actually have less protection than a personal pension in them um which you just need to be careful of but mostly a sip now a regular sip will tend to have more um investment choice than a standard one but it tend to be more expensive as well or can be more expensive it depends which provider you've got um but yeah most of the sort of standard providers that people are probably thinking about when they come and think about setting up their own pension And I'd say like Hargree Sandsdowne, AJ Bell, Fidelity, Vanguard, all of those, they will do a SIP.

38:11And it's not in the traditional sense of a SIP. Yeah. So I'm self-employed now. So I have a SIP for that reason. But I had one prior to that because I worked for an employer. I got the matched contribution, which we'll talk about in a little second. But I knew that beyond that, the fee, I could do it cheaper through, I use Vanguard, but like you said, there's loads of providers. so I was I had my work-based and then I was using the SIP to supplement it to to bring up how much I was saving I want to first talk about the work-based yeah Will won't mind me calling out that when I first met him he was like I'm not in the work-based pension I want my money and I was like you should probably get back into that because there's massive benefits around being in the scheme can you just talk us through how people can maximize the benefits of their work scheme So often, so the simple rule is with autumn enrollment, the rule is you have to put in five and the company has to put in three.

39:07And that's the simplest way. And then often companies go above and beyond that. So sometimes, so I was about to say company then, but I went, but often big workplaces will say, let's say if you put in five, they'll put in five. If you put in six, they'll put in six. You put in seven. Like a benefit to working there, like they go above and beyond what's required. Yes. So the more you put in, the more they will put in. So you want to get the most out of your employer possible. You want to get as much of that free money as possible. So have a look. If you pay more to your pension, will they pay in more?

39:40And ideally, go for it. Often a couple of percent reduction in your take-home pay won't break the bank, whereas it's going to make a massive difference to the amount that you have in retirement. And people can just ask their HR department, you know, what do you contribute? Can I up it? Yeah, well, so you can definitely up it yourself as well, but will they pay more if I up it? And then you can up it yourself. And often a word that gets talked about is salary sacrifice. And I don't think people know what that means necessarily. really. And what it means is, let's say that lady with the 80 grand, we've asked her employer to salary sacrifice 30 ,000 pounds of her money into her pension.

40:21And that means she pays tax and NI on 50 ,000 because the employer is effectively not paying her that 30. They're putting 30 in the pension paying her 50 so she pays tax on ni on that um 50 000 um the other way you can do it is you pay into the pension the pension assumes that you're a basic rate taxpayer and then if you're a high rate taxpayer they owe you 20 so you get your tax back but you're never going to get that ni back um but the problem is you've got to be careful because if you salary sacrifice into a pension but want a mortgage, often the mortgage will only be based around that new lower salary, in this case, 50 ,000.

41:06So you've got to be certain that it's the right thing to do and that it doesn't impact your work benefits too much. We know about the 25 rule and we know that we hear this 15%. I've also heard rules of, you know, save half your age and things like this. And one thing that's important is you can save more. So if you struggle when you're 20, when you're 50, you can be throwing loads in. How much should people save a month? well it it to know the true answer you need to use it a pension calculator and there's loads online just go to a provider site rather than the state pension one and you can you'll say if I pay in this amount every month this is my salary what am I on track to get but I do think the half your age is a is a nice benchmark so is that like you split your age in half and that percentage So I'm 42, so I should be putting 21 in, 21%.

41:57And that's with, again, with all in, with the tax relief, with your employer match, with all of that. So it's not just 20 % of my wages. But it also doesn't mean that's going to be the solution. You've got to make sure you're in the right investment. It's a combination of so many different things, but I think it's a good sense. But also when people invest, I often find, especially women, will be overly cautious because they think this is a really important part. I better be careful with it. But actually being cautious can be very risky. So while you're young, let's say you've got more than 10, maybe even more than 20 years to go until you spend the money.

42:35You want to take the most amount of risk that you feel comfortable with because the difference between getting. So I have a client yesterday and I ran a cash flow model for him for his lifetime. if he gets 1.8 % a year return, he has enough money to live until 90. If he got 2.5 % return, bearing in mind he's 70, he would have enough money to live all the way until 100. So that little percent extra gives him eight more years of money. Yeah. And the key thing is at 87, you can't work. No, you can't fix that problem. You need that money, right? Yeah. I want to talk about this because people are going to go today after this and they're hopefully going to log on to their pensions and they're going to look what's in there and one issue call it an issue that I have with the way it's framed is the labels they apply to funds they call them like adventurous and I think most people's idea of adventurous is like jumping out a plane when in reality it's it's not that is it you know I'm 100 % equity which means yeah there you go 100 % in the stock market i don't have bonds because i'm young enough to know that over 30 years say of how long i'll be investing that the stock market tends to produce better returns but i think this label of like moderate adventurous yeah balanced feels very sensible yeah it's like oh i'm balanced yeah but you know adventurous it's not it's not like high octane stuff is it it should be more no and if you want to dig a bit deeper that website trust net is a really good place so i talked about that graph on the top left if you just scroll down there's some pie charts and it shows you how it's invested and it'll show you your top 10 holdings and often they're in very very big big corporate companies that if they go bust then we've all got very big problems quick question all these benefits are for people who are employed yes are there any pensions for like self-employed people you can have any pension whether you're employed benefits for self-employed people only so so if you're self-employed in that you're um like a sole trader the benefit is that it will help you control the amount of tax that you pay so often and we know that self-employed people do not pay enough into pensions um i can't guilty i think it's about 16 yeah sorry the carol's guilty oh everyone's guilty except for this guy yeah 16 i think of self-employed actually pay into a pension 16 yeah 16 yeah i'm not part of that 16 pay in yeah we need to get you started then i think i think people are just like so in their business aren't they i need the cash flow i need to go because when i was work when i was employed i they had my company pension everything i've still got and it was done for you it was done for me so it's easy but now i'm like uh wow i've got bills i want to go on holiday i want to buy a new car so yeah there's all these things that get in the way and then exactly and you're not alone and you don't have yeah you're like well you're worried about your business as well so you might reinvest in the business and i think it's that the the fluctuation i remember at the very beginning when i was in my 20s when i had just starting out my client base and my income was all over the shop and it's really unsettling and at that time i was i can only commit to 100 quid a month into my pension and i did it but i really wish i'd done more um so the way i the mind game that i play with clients who are self-employed is we do the minimum that they know they can definitely afford can rain or shine in their business and every quarter I give them a nudge so I've worked out so every client will know their number right you owe your future self this every year but let's do the monthly that we know you can afford and then every quarter I'm going to give you a nudge to try and do a quarter of the difference another quarter of the difference and so they can see if they're going off track and so and then at the end of the tax year it's then taking a step back and say well how much did you actually end up earning overall and how much should we put in your pension just to be that little bit more tax efficient um so i think that's the right way to do it if you're self-employed if you're a limited company the benefit is it reduces your corporation tax that's me yeah so i would same same approach because your your company income can fluctuate but yeah do an amount and then when you as you grow your business well if you're like me I like to feel almost in a sense of scaredness that oh my god if I do max it out this year like so the pension allowance this year is now 60 ,000 for this year it was 40 ,000 for last year do I have 20 ,000 extra I don't know but I did it yeah you're just gonna and it's like I'll deal with the consequences put you back against the wall a bit yeah exactly and so i think pension planning should feel a bit scary the amount that you're going to pay in will feel a bit scary but it should because we want a good one yeah yeah like i often say to people i get this comment all the time so oh i'm not going to live to 60 you know i'm gonna i'll be dead by then it doesn't matter but actually if you look at the stats you're far more likely to actually reach you know 80 odds than you are to to die young and if you want to depress yourself there is actually on the office of national statistics um a lot a longevity calculator and you can purse how many beers you drink a week and like how many shots of tequila you do you should be dead how were you deceased four years ago but the the the best place to be a man is richmond the pontemes the average man in richmond lives till 92 i live quite close to richmond there you go my uncle lives around there yeah i'll help you spend your pension if you haven't finished off yeah i live in the north of england and we we i think the stats are bad on the north and some parts of scotland are especially bad it's my pie habit i'm like really into pies pie and mash yeah yeah yeah perfect thank you so just to round this off now what i'd like i think you've given loads of information thank you and it's been really clear i just want people to have like actionable steps that they can walk away with what can they do today to kind of like get on top of this so i think number one is understand that your pension providers work for you so call them up ask them all the questions make them explain it to you find out what fund you're in find out the cost of your pension so what is the total expense ratio of my pension and that just is industry jargon for what are all the charges like don't leave a single one out what are all the charges of my pension every year and just so that's the first thing get familiar and get in touch with your pension I think a really good thing to do is to track your um net worth every month so I try to do it the first week of every month I have to do it tomorrow otherwise I've broken my own rule but um I've put down all my assets all my um debts and then see my total net worth every month and I I have it with my home and without my home because I don't want my home to give me a false sense of security and then I have my 25 times number in yellow in bold at the far hand right of the spreadsheet and then I can see what percentage um I've made for the record it's 25 times because we're meant to live for 25 years retired right it's meant yes it's similarly yes but also it's that if you have an investment it wouldn't be unreasonable for it to grow four percent a year and so you could take four percent out every year and maintain that that it's the four percent rule it's something called the trinity study that looked at what a safe withdrawal rate is from a pot of cash and all they mean is if you take a percentage each year what's the chances that it will last you through retirement there's they now think maybe it's like five percent or three percent i work to three percent because just to be safe yes i want to potentially retire early and i want to base it on the fact that i'll live to 100 because i'm an optimist i don't want to die so you know i work to three percent yeah would that mean that i times it by 33 come on yeah come on mensa and you should be thinking about tabitha mate so that's coming up soon yeah i think i think i know what it is yeah you you can give the answer after he does okay i could be really wrong another question that people are going to ask is i worked at eight different employers i've got pots everywhere should i be bringing them all into one pot like pension b seems to be everywhere this company i hear their name banded about all the time it seems almost like really on the forefront of people's minds to consolidate you know what do you think about that so i think a lot of these pension consolidation companies it's a good idea to know where they all are there's so many pensions that i lost it's billions of pounds of pension you just call your previous employer you can google track my pension but you've got to be really careful make sure it's got.gov on it because loads of scammers then try and get your pension details and then nick them so make sure you go on the.gov website but it's track my pension trace my pension and then putting them all together is a good thing but often these consolidation companies are just tracker funds dressed up quite expensive so you might not want to go you might want to do it yourself and if you're going to be a tracker, then go with a true tracker provider.

51:44I moved all mine into a Vanguard SIP and just bought the tracker funds myself. I didn't need a company to do it. And doing it internally on their website or any of the big platform provider websites, super easy. And I'm not allowed to recommend funds, but for example, Vanguard do have the sort of, we've done it for you type of funds, which are called their life strategy funds. I use a global index, which is, you know, again, same, but you can really drill it down on there. Yeah, like if you want to just buy the S &P 500 or whatever. You can even screen ethically as well. Yeah, ESG funds. So yeah, if you're going to be a tracker, then I would be a true tracker with a true tracker provider.

52:21So just before someone goes away now and consolidates all their pensions into one, can you just talk about some of the things they should look out for and the potential pitfalls? Yeah, so one of them is like we were saying with those British steel workers. Do you realize that you're taking money from a defined benefit to a defined contribution? Do you really know what that means? And another one is who is actually benefiting because consolidation can be a good thing. But if you're paying big advisor fees to do it, is it genuinely moving you forward in the right direction? And so just be wary of if someone makes money only if you move your money, that it's going to be the right thing.