Pensions. Most of us have one, but they can often be the most undervalued and overlooked asset for building your wealth. This week we revisit some of our favourite clips from previous episodes where guests provide insights on how you can use your pension to build wealth. Guests include; WealthBuilders SSAS Director, Paul Brooks who has been helping clients to understand how they can leverage their existing pensions for over 10 years. Business investor, mentor and author, Mark Stokes, who doubled his pensions in as little as two years. Not forgetting, of course, valuable nuggets of wisdom from WealthBuilders Founder, pensions expert and economist, Kevin Whelan. Tune in to hear our guests cover the key differences between SIPP and SSAS pensions, how to create more income before the age of 55 by using your pension and why you can’t rely solely on your pension to support you later on in life.
Pensions. Most of us have one, but they can often be the most undervalued and overlooked asset for building your wealth.
This week we revisit some of our favourite clips from previous episodes where guests provide insights on how you can use your pension to build wealth.
Guests include; WealthBuilders SSAS Director, Paul Brooks who has been helping clients to understand how they can leverage their existing pensions for over 10 years.
Business investor, mentor and author, Mark Stokes, who doubled his pensions in as little as two years.
Not forgetting, of course, valuable nuggets of wisdom from WealthBuilders Founder, pensions expert and economist, Kevin Whelan.
Tune in to hear our guests cover the key differences between SIPP and SSAS pensions, how to create more income before the age of 55 by using your pension and why you can’t rely solely on your pension to support you later on in life.
To help you find the content that is of most interest to you we've also curated some 'pillar specific' playlists which you can subscribe to by visiting www.wealthbuilders.co.uk/wealthtalk
Resources In This Episode:
>> WT128: You can’t rely on your pension
>> WT017: Do you have a lost pension?
>> WT018: SSAS Pensions [The Director’s Pension]
>> WT106: Three SSAS Strategies Business Owners Can Use To Build Their Wealth
>> WT099: How Mark Stokes Doubled His Pension in 2 Years Using SSAS
>> WT133: SIPP vs SSAS Pensions: 10 Key Differences
Next Steps On Your Wealth Building Journey:
>> Join the WealthBuilders Community
>> Join the WealthBuilders Academy
>> REGISTER HERE FOR ACCESS TO FREE RESOURCES
If you have been enjoying listening to WealthTalk - Please Leave Us A Review!
Speaker 1 0:01
The purpose of wealth talk is to educate, inform, and hopefully entertain you on the subject of building your wealth. Wealth builders recommends you should always take independent financial tax or legal advice before making any decisions around your finances.
Christian Rodwell 0:19
Welcome to Episode 191 of wealth talk. My name is Christian Rodwell, the membership director for wealth builders. And it's good to be back with you again today. And today's topic is pensions. And we'll be digging into the archives of some of our pension related episodes from the last four years of wealth talk. And we'll be pulling out all sorts of different aspects, including loss pensions, the difference between a CIP versus a SAS and how a SAS can be a fantastic tool to build your wealth and leave a lasting legacy for your family. So we're kicking off today, with Kevin and myself discussing some of the problems with pensions back in episode 128.
Speaker 3 0:59
And actually, I think pensions are fundamentally broken. I really do. Chris, I think the whole concept behind pensions is flawed. Historically, we've had the final salary pension. And the final salary pension is just really now the domain of the public sector, the armed forces, the, you know, my son in law, who's a fireman, you know, people in that sort of industry and fairplay, you know, that's a government pot, and there's no money to back that up. It's future taxpayers who are paying. But when you think about that, that's a good benefit to have, for two reasons. The first reason is it's an automatic income linked to your salary soon, so you don't have the risk of trying to manage the process. So you can just do the work and build up your years of contribution. However, you need to put in 40 years, just to get two thirds out? Well, I don't think our wealth building plan is predicated on dropping your income by a third and waiting 40 years to get it. I mean, I think that's flawed. But the other thing is, and this is very dangerous for people to think about, if they don't know is the pension often dies with the person who built it. In other words, usually there's 50% transferred to a spouse. So if someone's got a 40, grand pension 20,000 is going to go to a spouse that all of a sudden, the spouse or partner is now going to live on significantly less, without having necessarily the knowledge because they assumed they were being taken care of. And then the children essentially become disinherited. Because on the death of the spouse, the money goes, you know, so, so there's no value in the family. And I just think this is flawed. And if people don't realise that families in the next generation, rather than being empowered, and wealth being created for them, and then then being included in the thinking, and building wisdom, as we know, is so important. In building wealth for families, that's all lost. And that's tragic. And that's the best you're gonna get us the best in this country. And so it's a it's a real big issue for me, and, and I think the huge transfer of risk from the employer or the public sector, to the individual. And in other words, all of the risk now, pretty much all the big companies transfer the risk of managing retirement planning to the individual. But the individual doesn't take that responsibility. They delegate it to a third party in a one day someday, I hope everything works out. And of course, we no single point of failure, having all your eggs in a stock market basket, when the stock market is volatile. When it's, you think about what we do in wealth builders, we try and encourage people to think of their security. We try and get them to think about owning assets, so they own something that's secure. When you've got a traditional pension, reduce rising and falling on the whims of a market over which you've got zero control, and use the new think that somehow that's secure. It's fundamentally unsecure. And how the hell then when you get older, are you supposed to manage drawing a secure steady flow of income from an asset that itself is fundamentally insecure? You can't do it. So you live a life almost continually in worry, in doubt, in fear. And that's what's happening to our current pensioners. They'll be Pension history, look, Where you've been Where you've worked. So you've got an opportunity to if you've got your National Insurance number, and you can have a look at where you used to work, there's probably some money there. I mean, we've got lots of examples of finding money for people or helping people discover money, they didn't realise they had all forgotten or lost, we just got disconnected. And apparently, you know, we've written an article on this before Chris is, like 10 billion pounds billion, you know, we're not talking about small potatoes, here, we're talking about 10 billion of pension money floating in the ether, while actually techniques not floating, because guess who's getting the profit from it. And it's not the members is not the people who own the money is the industry that basically is keeping the profit and, and if the money never gets repatriated, it gets kept. So you know, we want that money to go back to the real and genuine owners of that money. So number one, take stock. Number two, find out what are you paying in fees? Now there's a plethora of fees, fund manager charges, advisory charges, custodian charges, transactional charges, something we call the total expense ratio, or t er, just find out whoever's managing the money, maybe they won't be managing it for much longer. But they're managing it now. What's my tea? What am I paying, and then do the maths, have a look at it and go, well hang on a minute, you know, and if you're paying very small amounts of money, which should be somewhere in the region of point 2.3, maybe maximum point five, you know, half percent, significantly lower than two, it was lower than one, it's not too bad, it is more than one is too high. And if there's more than one and a half, it's way, way, way too high. And in any event, that's just doing one thing, that's just finding out your fees, and we can show you the impact of those fees, that will be taking money from you. In the long term, taking money from your income, because it's money you want to spend, and taking money from your legacy, you know, it's you get you get whacked three times, it was just a real problem here, you losing money from your retirement nest egg, you will, that means you've got less money to spend to generate income, which means you've got less money to leave if you care about leaving a legacy. And all of those things are quite fundamental, which is why we like people to take stock, it's boring, it's routine, it's, but it's it needs to be done. And I encourage everyone to do that. And we have a team of people who can help if people are willing to get it done. But don't know where to start or don't know how to do that I understand is really valuable. To get benefits from an employer. I think it's great. If the and of course, it's a legal obligation. Now there has to be contributions. So if you're paying five person and your employers paying 5%, you doubling up on your money, and that's great. And you can invest in two different strategies. You could say I'm invest my money in strategy A, and my my employers money and strategy B. So you've got two different things to compare. And contrast, you could do that. You could if you wanted to get to a place where you
Speaker 3 8:25
you look at something called a partial transfer. Now, I'm not suggesting people do anything, but you could find out, which is if I wanted to, and I've got the choose 100,000. What's the minimum amount of money I need to leave in that scheme? Well, let's say it's 5000 pounds. Okay, so now you've got 95,000, you could completely remove from the workplace pension, and put it into another pension if that pension served you better and and it worked for you. And again, that could be a different type of pension or it could be just a different strategy within the same one. But most employers are not actively helping people to understand these choices, because that's not their role is it? You know, you've got to be responsible for yourself and we've got many, many hundreds of clients who take their money out of their workplace pensions, they don't lose the benefit, but they use that money elsewhere, whether they create a a SIP or a SAS, the SIP is a self invested personal pension. So it's a personal pension with only really one extra dynamic, which has commercial property and commercial properties isn't for everyone. But that's an option. And the other of course, which we've spoken about, many, many times for those who are eligible business owners, not employees, but business owners, then they're eligible for something known as a Sass and we've we've talked about Sass, probably many, many times and certainly there's lots of podcasts and, and lots of resources on Sass and we know that the sass team sends a pension into a business and a business owner is taking responsibility. And they run their pension like they run their business. And I love SAS for that reason. And it's the very thing that got me kind of changing my pension life myself, when I kind of wrestled with this from 2008. And first of all tried to save that didn't work, because it was still restrictive. And then discovered SAS and realised the power of that. And now I'm in a very enthusiastic advocate of SAS for those who are willing to get involved, willing to learn what it takes to in terms of running, learning their own investor DNA, so they know what they're interested in for themselves. It's not more delegation, and those who've got a business and are willing to get their hands on their money, and to build a plan that eventually also includes their children so that the whole idea of SAS is a family plan, you know, a y FA, you know, it's your family's assets, not an IFA, I look after your money.
Christian Rodwell 11:07
Did you know there are 1.6 million loss pension pots in the UK worth nearly 20 billion pounds. And those remain unclaimed, according to research from the PPI, which is the pensions Policy Institute? Well, in Episode 17, we invited some wealth builder members to share their experience of following the process of recovering a lost pension. And wow, well, there's some big results.
Speaker 3 11:31
It's definitely the asset that the vast majority of the population, you know, use to build their wealth upon. So one they know they're going to draw income from. But they're ill equipped to know how the income conversion works. So I'm going to try and break the myth hold the stock market is the only way to do that. When you can invest in business, you can invest in property, you can become a bank and take the same profit that banks do in the same way that banks do with security with good rates of interest, there's so many ways that people can can take that that control. And well, we've got lots of clients who will give evidence of how they've done that, as well to bring it to life. Rather than just hear the theory. It's to hear people who've taken the lessons on board, and done dramatic things, including a dare I say, Chris, and I'm not giving financial advice. And it's important to stress that this is a podcast for education and information. And hopefully a little bit of entertainment along the way, is definitely definitely not meant to be a place of financial advice. We dispense on here principles, that we believe in our fundamental like principle of understanding where you've what you've got principle of understanding how it works, and the principle of understanding how to get leverage on it. So that's a long way of saying there are many clients in our community groups who've wrestled long and hard with the final salary pension as well. And I've taken the steps to seek and take control over that money and dramatically improved their lives and their value of the legacy, way, way, way more than the pension they would have had had they left it with their employer, but that's for them to tell. And as always, you know, this is not advice. It's just simply me saying, Hey, listen to what people are doing and think about what's right for you and make your mind up.
Speaker 4 13:28
I had already some money into the SAS pension kitty. And Kevin's requests. He said, Oh, sure everything's in there. Did you have any other any other funds anyway, the money I thought, no, no charts, I said, but I thought that prompted me to maybe actually go and have a look. So what I did, I had a Happy Sunday afternoon. Going through some files we've got here obviously with all the accounts and past accounts and all the rest of it. And we're going through the old old pension files and found stuff is already there. And I found one for one pension fund which I thought was in there. I did a check in the SAS kitty that is I did a check and it wasn't and in that I thought wow, this looks good. And so I contacted the pension fund after that and find out it's 100,000 pounds in there the value the transfer value, so Wow. Wow. So I notified Kevin he was very happy. I was very happy. And it went into the kitty after that. Worked for
Speaker 5 14:24
H boss going back or 99 I joined the company until 2007 took voluntary redundancy and understood that it was actually a frozen I was told that it was a frozen pension realise it wasn't a lot of money at the time. And I even recall making a phone call through to them and they told me it was worth about 10,000 pounds at the time that it was frozen. So basically left it took Matt Kevin started talking to him. And he bet me 20 quid that it was gonna be worth even maybe up to 60,000 Sure enough, got a surprise when I found that it's worth 255,000 So yeah, he huge opportunity for people out there got no
Christian Rodwell 15:01
doubt my word so caught. We're talking a quarter of a million pounds there.
Speaker 5 15:06
Yeah, probate for the Yeah, not expecting it at all. So yeah, obviously a great surprise
Christian Rodwell 15:11
that certainly yes now so what exactly was the process? Did you just go back to obviously you knew who the pension was wherever you just called them up and you didn't ask them what the value was,
Speaker 5 15:20
yet people believe it's a difficult process even simpler. So I spoke to my sister about it because she worked at Midland Bank going back into the 70s and 80s. And told the very same thing. So you know, already. I told her how simple it is, because it's a simple case of national insurance number, and you give them a call and they trace it and you ask them for the value of the equity transfer value. And yeah, took five days, it's a frustrating weight, not knowing but then when it comes through, it's, it's very nice surprise.
Christian Rodwell 15:51
So you may be asking the question, what is a SAS pension? Well, SAS stands for small self administered scheme. And it's a type of pension that's available to business owners, allowing them access to private pension funds before the age of 55. In Episode 18, myself and Kevin dug a little deeper into SAS pensions.
Speaker 3 16:11
And that very slim edge that represents the balance between the two is something which is known as a member directed scheme. In other words, instead of being relying on your employer, instead of relying on an insurer, you take responsibility for self. So it's no surprise that self administered scheme, or small self and scheme, I'll come back to that, and second is about self. This isn't about being an insurance company or being an employer, it's about being responsible for money, which you can now do something with. And that money small service has been means small means less than 12 people. In other words, it's designed to be operated by people and families and small businesses, it's not meant to be the massive schemes that you will see, you know, where there's 1000s, and 1000s and 1000s. Of members, it's meant to be managed and controlled in that way. So that small self means you now, so when an insurance company, you know, it's the insurer who's responsible, they legally are the owner of the scheme, because a trust, which is pension is always written under rules of trust. So there's some benefits of that, which I guess I'll come on to during the course of the session on pensions, but one of the huge benefits of trusts it's tax free. And it's inheritance tax free income tax free corporation tax free capital gains tax free, I don't know if there are any more taxes quiz, but that's, you know, pretty tax free. So it's a tax free Trust Fund, run by yourself or up to an 11 people. So you can buy a big family together or a small business together. And scheme is just another word in law for pensions. So small self administered scheme means a pension plan, run by the people who own it, they take control, and then they invest that money in the way that they think reflects their wealth dynamic reflects their past experience reflects the future direction of where they want to go. And is a real incredible opportunities. I'm sure you'll hear from the three participants today. You know, who shared their knowledge and their experiences, Chris, they will have all learned something that they didn't know before. And this is a really key thing about how the SAS pension can works. It's it can facilitate your personal growth and an increase in your personal ROI. That's a return on your intellect, you become a smarter investor, it increases your financial ROI, your return on investment. And because you're building this, and it's a trust fund, it never ends. So it means you can pass that on to the next generation, and the one after that, and the one after that. So you're building a, almost like a wisdom inside the SAS as you learn more and do more. And then you can invite your children and family members in from age 18. You have to be 18 to be a trustee. That's the technical definition of somebody who's runs a scheme as a trustee. And while it more sounds quite complicated, isn't it's teachable. It's manageable for people who are serious about building their wealth because wealth is a business. Even in your mind building wealth is like a business. And a SAS is a pension scheme that's run just like a business. And you know, as a business has a board of directors a SAS is a board of trustees. That's the same. A business makes profit on which you pays tax. A SAS makes pro Free, but it's tax free, as I mentioned, so that's pretty busy. And, you know, a pension or a company has to report to the Inland Revenue every year what they're doing. And that has to happen in a SAS, it's an annual reporting system. Of course, all these things are done. There's, there are people like us and and others who provide that support and that education and that training to make this highly, highly possible and interesting and pleasurable for people to get involved in.
Christian Rodwell 20:32
In Episode 106, a wealth tour, we were very pleased to invite SAS director at wealth builders, Mr. Paul Brooks, to talk about some of the different strategies that a SAS can allow you to do.
Speaker 6 20:43
Number one, is using the money you've built up. And whether that's from contributions or whether that's from you know, amalgamating existing pensions into your SAS, and using it to support your business by buying your own business premises from your self. So, this is for existing business owners who've already got a business premises, but they're looking to perhaps change the way they hold their assets or make things slightly more tax efficient. And basically, what I'm talking about is using the money they've accumulated in this asset, as I say, to buy their premises from their selves, actually exchange, the SAS, with the cash, buying the premises. So effectively switching the property and the money around, the business has now got an injection of capital into its bank account, it can use that money for anything it wants, go out and buy more equipment, or hire more staff or invest in new systems, you know, all those important leverages that that you teach so well in the academy, Chris. But you know, effectively, what you've done then is take that commercial premises, plunk it inside the tax free environment of the SAS. And that creates a few things, it creates a new stream of income coming into the SAS in the form of the rental income from the property, the business becomes the tenant, and the SAS becomes the landlord. So because there's a landlord and the tenant, the SAS has to charge a rental income, it charges the rental income to your business, that rental income is a tax deductible expense. So not only are you generating a new flow of income into your SAS, which is in a way kind of like a new source of contribution, you're also being able to offset the cost of that rental income against a corporation tax bill. Smart. Pretty cool, right? So just a very, very simple change, nothing hugely sophisticated, but but just simply by shifting the way your Sass and your business own things can can really actually make quite a big difference to your tax position to the growth and the value of your Sass which of course, is entirely free of tax and and is a tax free legacy when you no longer here.
Christian Rodwell 23:25
In episode 99 of wealth talk, we were joined by a very good friend of wealth builders, Mr. Mark Stokes. And Mark shared with us his knowledge from 25 years of expertise in business and property, as well as how he managed to double his pension in just two years. What was your relationship like with your pension for many years mark?
Speaker 7 23:44
Very, very clear on my relationship with my pension it was, it was about a three minute experience, once a year of picking a letter off a doormat, looking at my pension statement and thinking, well, that's not very good. Hopefully, it'll be better next year. That was my pension management strategy, and not particularly proud of it. That was my pension strategy for a quarter of a century. But I come back to that mandate I gave to myself and to my wife that we would take control of our personal economy at the end of 2014 2015. And that included all aspects. And you know, my pension I knew was on the largest bank accounts that I had, but I didn't have access to had absolutely no idea of sips and sasses at that time and alternative structures. But you know, I was I was like a dog with a bone there I needed to find a solution. I worked very quickly. But you know, I like a like pressure. I did a lot of due diligence. And in doing that due diligence, which took you know, six, seven months to work out what a what a SAS was What a CIP was looking at all the options talking to people, it was very clear that there wasn't really one place to to go at that time. You know, wealth builders didn't exist then SAS Alliance didn't exist then. And there was only fragments of information out there. So I drew that together and through my experiences, decided on on SAS, that was the that was the thing to do way back then. It was only after I'd set my SAS up in 2016 that I first met Kevin. So Kevin and I have had a long running, relationship and friendship over all things SAS and wealth creation ever since then, but setting up a SAS for the first time was, was a big, big step for me, Christian in taking control of that personal economy. I wanted to challenge tradition, I was ready to challenge tradition, and taking control as being a trustee. And we have four trustees in our in our SAS, myself, Nigel and their respective wives. That was a very big catalyst for us. And having taken control in I wanted, I wanted a very clear mandate, I wanted to play by all the rules played by all the options that HMRC allowed me to do so. So yeah, it was it was invigorating to say the least.
Speaker 3 26:29
Listen to the lesson in there, crumbs, 25 years, pensions, wilderness 25 years to build double in as many months. That's just incredible, isn't it? That's almost an acceleration. You just don't expect no wonder he's excited about the subject of SAS and why it's such a key issue.
Christian Rodwell 26:53
Have you ever wondered what the real difference between a sip and a SAS to popular pension schemes in UK actually are? Well, in Episode 133 of wealth talk, we covered the 10 key differences and answered all of those questions.
Speaker 3 27:08
Probably, you know, when you get a question that you get all the time, you know, when somebody says if if I had a pound every time somebody asked me that question, you know, I'd be I'd be rich. Well, this is the question I get asked, not quite every day, but several times a week. And I got not quite fed up with answering the question, because when you get asked the question, which is, Kevin, what's the difference between sipping Sass, you know, awkward language, self invested, personal, pension, SASS, small, self administered scheme. They're not sexy titles, no marketing prizes. No BRIT Awards for that. What you get is just boring pensions. But pensions are the mainstay, and so tax efficient, forgive the terrible titles, think about compounding exponentially tax free. And there's a huge difference between the CIP which is probably 50 times bigger in terms of numbers in the UK than the SAS. And and I'm going to put right a myth that there are some myths purported, often by those who sell sips, that they're better. And I just want to put that case that there are 10 key differences. And I've enlisted the help of co director Paul Brooks, you know, who runs the SAS programme? He and I to have a really, really good dialogue. I think it's about 4550 minutes Chris, if I remember it, you know, didn't get your you know, I get on my soapbox. I don't care how long it takes. If the message is worth giving, it's worth spending time on. So bear with us guys. You know, it's a longer one. But if it's something that's important to you, you know, you you've thought about it, you've heard somebody say the word sip and somebody say the word SAS and you think they're the same, they're not the same.
Speaker 6 29:15
CIP is different for a couple of reasons. And, again, it comes down to control but it's because we're the CIP the pension owner is never in control. The control is actually with the company that runs the pension, the professional trustee company. And that means that they set the list of things that can or can't be done, not based on what the law allows, necessarily, but based on what they feel comfortable with.
Speaker 3 29:48
Okay, so, okay, I'm thinking I'm getting that so a bit like, if the menu of what I can do with the SAS is just whatever the law allows paying she needs to do. And a SIP is whatever the SIP trustee the professional company you operate that allow? Yes, that's right. Absolutely. Is there a difference in investment then what's the difference?
Speaker 6 30:13
Well, so with with a set, there are, I suppose two main categories that most IPs are now, right. One is stock market based investments, right. So collective funds and shares and you know, a huge variation of different stock market based things. And some steps will also allow you to go out and buy commercial property. The single biggest thing that a CIP can't do that a SAS can do is something that we refer to as borrowing but pension rules call us Steinbach. Which in really simple terms, is the ability for a business owner to actually borrow some of the money from this as a commercial
Speaker 3 31:05
account at that point and access, I think, a little bit later on. So but what about the investment choice that I could make? You know, can I there's some things that are simple, let me buy that assess, or rather, somewhere SAS will let me buy but a sip? Wouldn't let me buy. So can I buy a property and turn it into residential and a sip?
Speaker 6 31:30
No, no, that's not really allowable? No, because most SIP trustees aren't really comfortable with letting people do that.
Speaker 3 31:38
Right. Okay, can I can I lend to a third party with a sip?
Speaker 6 31:46
Occasionally, very occasionally, yes, it is possible, but it's much, much more tricky. And and there are a whole list of ticks in a box that have to be fulfilled which mean actually, in the real world, it's actually it's quite difficult to do with the set.
Speaker 3 32:03
Okay. So in summary, then, because we've got a lot to get through anything a SIP can do. A SAS can do. Yes, absolutely. But anything a SAS can do, probably can't be done in a SIP unless it's buying stocks and maybe a piece of commercial in simple term.
Christian Rodwell 32:26
Well, there you have it. Hopefully you're a little bit more enlightened around the topic of pensions now, and perhaps even excited to investigate a little bit further about what you might be able to do with your own current pensions to make them work harder for you. And if you have any questions at all, please do reach out to us at wealth builders, we would be so happy to help you. And there's a couple of ways that you can do that. You can either drop us an email Hello at wealth builders.co.uk or join our free Facebook community just head to Facebook search for wealth builders. And that's pretty much it for today's episode. You'll be pleased to hear that Kevin is back in the hot seat again with me next week. So until then, see ya.
Speaker 1 33:08
We hope you enjoy today's episode. Don't forget that we are constantly updating our resources inside the wealth builders membership site to help you create, build and protect your wealth. Head over to wealth builders.co.uk/membership right now for free access. That's wealth builders.co.uk/membership