In today's episode we talk about pensions. Make sure to find out what the difference is between a SIPP and a SSAS, as well as Defined Benefit Schemes.
Is it time for you to take control of your pension? As well as reviewing the lessons learned from members of the WealthBuilders Community who kindly shared their experiences over the previous 2 episodes, Kevin and Christian discuss the difference between a SIPP and SSAS, as well as Defined Benefit Schemes.
Resources Mentioned In This Episode:
Are you eligible for a SSAS Pension? Find out here - https://www.wealthbuilders.co.uk/ssaseligibility
Register for free access to the WealthBuilders Membership Site to watch the pension videos mentioned in this episode - https://www.wealthbuilders.co.uk/resources
Click Here To Find Out More About The WealthBuilders Foundation Programme
Links to all WealthTalk podcast episodes can be found at www.wealthbuilders.co.uk/wealthtalk
Join the WealthBuilders Facebook Group: www.wealthbuilders.co.uk/facebook
Unknown Speaker 0:12 Hello, welcome to Episode 19 of wealth talk. My name is Christian Rodwell, the membership director for wealth builders, joined by founder of wealth builders. Mr. Kevin Wayland. Hi, Chris,
Unknown Speaker 0:24
good to be with you this time we are back in the hot seats next, next to one another feels good. It does.
Unknown Speaker 0:31
That means we can laugh together, which is a good feedback, we're getting that it's nice that we're bouncing off each other as opposed to just one person talking down a microphone, giving lessons and dispensing wisdom. So you do your job and be the straight guy and I love all the Germans. Yeah. And
Unknown Speaker 0:49
it's been a nice new dynamic to have some of our members join the conversation over the last few weeks as well. You know,
Unknown Speaker 0:56
that's been really cool. We've had three people talk about how in capacity pillar one, three people who found money, had an incredible hourly rate on their returns, finding money they thought was lost. But then they discovered and then three people who talked quite elegantly about SAS and what they've done. And while these are flavors of what people have done, there are hundreds and hundreds and hundreds of other lessons that people have taken and applied a different twist so that their own capacity, and their pensions are a reflection of who they are not a reflection of what normally happens, which is people leaving their money and not doing anything with it pretty much at all, just hoping that things will turn out for the best. And that's a real big challenge Christian
Unknown Speaker 1:45
it is. And of course, we want to extend our gratitude to all of those members, but last few weeks comments. So Kevin, we always talk about wealth builders with education, it always begins with education, the wheel of wealth, five step process, education is always there right at the beginning. So in our summary, today of pillar to pensions, why is it that this big, huge subject doesn't come with any real education, when we're at school, when we're growing up, we're not really told much about how to manage and grow a pension and
Unknown Speaker 2:18
kind of an interesting thought is that you can spend a few hundred quid on a Dyson and maybe more, and you'll get instruction set, you know, you get a flat pack from IKEA, and you'll get an instruction set, you know, get an instruction set with the biggest asset, people normally have soft, and if they think about it, the biggest bank account they have in their life on the added up. But invariably, they've had no real responsibility for basically dealing with it, because they didn't know what their choices were. And they seem to sort of fall into it almost sleepwalk their way in as if this was an afterthought of having the job. And the pension just sort of trails behind. And of course, as we've discovered it things just trail behind. They're really they're not be driven. You know, they they tend to profit the industry massively, as opposed to profiting the people who rightfully should have the money. And this is, you know, this works both ways. You know, I'm having go the industry shore. And we have to be very careful about what the industry has to say. I mean, we heard recently, didn't we just in the news, I think in the recent weeks, where we had the housing minister, kind of raising his hand again, saying, Well, why don't we let you know, people dip into their pensions so that they can buy their property first. And this is this kind of recycles itself. The thing the last time we had that was in the 90s, when they talked about sips buying be being used for deposits for by toilets, and then the government pretty much decimated the battle IT industry so that they kill two birds with that stone. And then you know, Mr. Broken Shire? Who's come up with this idea. I think it's a broken idea. I have to say, as much as I think it will be brilliant, to allow people to choose where their money goes that best serves them. I think the pensions industry will be up in arms. I think the whole industry will lobby massively. And this won't get anywhere at all, other than a few column inches somewhere. And that's a tragic shame. Because, you know, I think it's the pensions industry that gains the most from the concept of pensions, and then are always as great as they appear to be, as we know from a certain Mr. Woodford.
Unknown Speaker 4:41
Yes, the fund manager has been in the news this week.
Unknown Speaker 4:44
Yes, but I don't think he did too badly. Chris, today? Well, we did a little research and we
Unknown Speaker 4:49
saw that in the financial year of 2017, 2018,
Unknown Speaker 4:54
he and his business partner still managed to pay themselves 37 million pounds.
Unknown Speaker 5:00
Yeah, someone whose money that was you think, I think it was the policyholders and the investors. He got 37 million and a bit of a, you know, stain on his reputation. But people lost their life savings Chris or low, we might be having a slight joke. It's very, very serious. And I hate the idea that people, you know, even profit by some of the big boys, you know, the the biggest pension companies in the industry were pushing touting promoting Mr. Woodford to attract funds on the management. And of course, now he's the rising star that's turned into an unfortunate black hole. You know, the money that's got lost in that black hole, is the investors and the policyholders suddenly not Mr. would fund himself.
Unknown Speaker 5:45
So we're summarizing Pelletier, pensions, and hopefully everyone tuned in now is have listened to the the two episodes from the previous two weeks, what are three key takeaways that people should be really looking for? Looking at if they currently are in a situation, if you have a pension, they haven't really paid much attention and you know, retirement is approaching, they want to maybe maximize and make sure they're doing all that they can.
Unknown Speaker 6:13
Or even if it isn't approaching, you know, it's still part of the overall wealth life. The three big takeaways, Chris, for me, if you listen to what the others have done is, first of all, they've all taken personal responsibility. They've said kind of enough is enough, you know, they took stock, they found out what they had, it's not a very pleasant job, but it's not hard job is it National Insurance number, and find out what you've got, get a statement, you know, no big deal. Few hours later, you know what you got, then think creatively. Which means, don't assume that the only choice you've got is the box, you've been put in, think outside that box. And SAS is a perfect vehicle for that. And even those who are not eligible for SAS, they could still think creatively and start to begin to build that eligibility, almost as if they're learning how to drive. Or as we would often call that a SAS simulator, is simulating the experience of building your readiness process. And that's a very interesting journey we're taking a number of our clients on. And the third one is to recognize that in order to do all of these things, to take that responsibility and be creative, and get an education, which is different from the salesmanship in disguise that really comes from the industry is to have an allow yourself that time and take time to make a decision. It's not a rushed decision to do anything dramatically different. But it still is a decision that needs to be made in all this takes time, which is the enemy of wealth. Chris, I think it's the most often used phrase, when people say to me, you know, I'd love to be wealthy Kevin, but I just don't have the time. I wish I could swear, I won't. But it's a matter of choice. And you know, I still have an email from a certain not client, because we chose not to work together. But I almost chose themselves. Well, I think they did, I think they self selected out, which is, you know, Kevin, I'm really interested in this idea of being wealthy. But I just don't want to give the time to it, you know, I'm too busy. And it is a matter of choice. So I think the key lesson is to be aware of the need to allocate time. And I think maybe we should talk more about that. Because as the foundation program is in full flow, we're seeing some of those things coming out as well from them. And we really,
Unknown Speaker 8:54
yes, both, you know, good and bad in terms of, you know, not having that time, but then so great ideas as to how you can leverage your time more effectively. So, so perhaps it's, you know, worth our slotting in and episode in between the pillars we're talking about
Unknown Speaker 9:10
just to give people a breather, because I think it's really critical, as far as the time pieces concerned. To understand that, you know, you only need to give a certain amount of time, because when you know what you're doing, and you follow the wheel of wealth, you can accelerate your money so quickly, it's easier money to earn than the money you earn in a job. So wealth money, actually is easier to make than job money. Because you've got the opportunity to leverage new cut the opportunity for that creativity and that opportunity for collaboration. So all of these things bring more leverage to the equation in a way that job situation never does. So you don't really leverage your job. You kind of feel know, you trading that time for money in a linear fashion. Really?
Unknown Speaker 10:04
That's right, we've talked in previous episodes, you know about becoming the entrepreneur changing your way of thinking, and so many people are caught in their time for money trap working for somebody else, and it has to change if you're serious about building wealth.
Unknown Speaker 10:17
Absolutely. And I think maybe having a separate episode on how busy people can be helped to find the time would be good. And we've had lots of feedback from our founder, foundation students on how they're finding time for themselves. So let's, let's share that. I mean, maybe we could even get a few of those people on who, you know, done the right things and started to find ways to create time that they didn't know they had before. Right?
Unknown Speaker 10:48
Yeah, so let's definitely do that. Let's Let's dedicate an episode to time and anything else that we need to wrap up on pillar two for pensions? I think we've we've covered it in quite some death five last three weeks now.
Unknown Speaker 11:02
Yeah, I mean, I would say probably the only other one that probably makes sense to look at is for those people who've got the defined benefit. pension schemes as again, not close their mind, to what that looks like. It doesn't mean do anything. It just means do that stop. Take, for example, a lesson on this. I was talking to someone this morning to I wanted to bring it up today who had a pension scheme with an employer. And in the final salary pension scheme, it said your pension is roughly 20,000. And the lifetime allowance, which is the maximum you can have the pension which million quid was 400,000. So what they do is they take the pension income terms of by 20. And say your lifetime allowance for the value of this pension referenced a lifetime allowance was 400,000. So when I said to this lady, so what's your pension words, she said 4000 said, that's not, that's not transfer value. You know, the transfer value is significantly different figure based on the economic circumstances of the day. Now, we know recently, when we spoke about Chris, who kindly gave us the story of his pension, which was, you know, around about 6000 pounds a year. And his transfer value, if you remember, was to five, five to a quarter million. Yeah. Now, so if you multiply that, you know, that's getting on for, you know, certainly more than 40 times. So, you know, if this lady's pension is calculated, in the same way, and the pension was 220,000 pounds a year, then this could be 800,000. Now, when I told her that not not to make her feel anything other than to say, you should really just find out, because 800,000, as opposed to 400,000 could represent a fundamental, different figure that allows you to think differently about how you feel. And as she doesn't have any children. The key thing for for her was to, you know, to be able to control that income, because she's involved in involved and invested in property. And while you know, these individuals will always need to take professional financial advice, and we will certainly recommend they do that, it just means you still have a chance to think. So I recommend anybody who's got a file sorry, scheme, not to make the assumption that it's the perfect fit for them, but just to look into it, and decide Have a look, was to transfer value. What's the income if you like the income, and you know, you could bank on that, and then build the rest of your wealth on top of that, almost used it as a foundation if you'd like. If, however, it fun fundamentally doesn't fit to you on and you more entrepreneurial, and you want to be involved in understanding the pros and cons of that to perfectly reasonable thing to do. And we've got many clients who've gone through that process. And their life has changed completely as a result of that. So it's just that point, that given economic circumstances, now with low interest rates, there's an opportunity for people just to have a second thought about now.
Unknown Speaker 14:32
And we've talked obviously, in depth about SAS, but maybe more common term for a lot of people is set. And we haven't really talked much about
Unknown Speaker 14:42
you know, sipping SAS are often used almost in the same sentence, you know, as if they're the same thing. A lot of people say to me, Well, I'm thinking about doing a simple process. So let's let's deal with that one. That's a great question, Chris. So a sip, self invested personal pension
Unknown Speaker 15:01
is a
Unknown Speaker 15:03
wolf in sheep's clothing.
Unknown Speaker 15:06
It's a personal pension. So it's a product. And as a product, somebody else controls where the money's invested. And other words said, we're only allowed to investments, an investment in the stock market, and they'll be a range of stock market investments, you can choose one, and all and sometimes not commercial property. So the fact that someone might have some flexibility in that sip, to choose different funds, doesn't mean they're making their pension work in a way that will best suit their wealth dynamic, or the way will best suit the pillars that they choose to invest in. So for example, they wouldn't be to invest in property, they wouldn't be able to join forces and collaborate, the invariably will be able to get leverage, you know, so this many ways that a sip is actually quite restrictive, but it sounds better, because it says self invested. And it's not quite the same as a SAS where you are the owner, the operator and the driver. If you think about a vehicle, with a sip, somebody's driving, you're sitting next to them saying, turn left or right. And they say, Well, you can't turn right here and you go Okay, then. So you're kind of stuck there. With the SAS, you can turn left, right, go straight on, you can make all those choices. Now a sip as a product. So you buy it off the shelf, a SAS you have to create. And also remember, you have to be a business owner. to own SAS, you do not have to be a business owner, to sit because just a personal pension,
Unknown Speaker 16:43
no. So if someone maybe who's listening now who has their pension in a sip, they don't have a limited company, then they don't have any plans at the moment to set up a business as anything they can do to perhaps improve the performance or some channel that they can do against their set to reduce costs.
Unknown Speaker 17:03
While you think I might have mentioned before on pensions, the first thing I'll say before I do the CPR, which I've talked to you about before, which is chargers performance and risk is to recognize though, that if wealth is a matter of choice, and you choose to be wealthy, you have to choose to be an entrepreneur. Even if you're not going to be an entrepreneur, today, you have to be one at some point, to maximize the impact of all the pillars because having a property portfolio makes you a business owner, having a business makes you a business owner. Having an IP having IP essentially means you can rent it, trade it, sell it, lease it, you're a business owner. And if you're in joint ventures, you're connecting collaborating for profit. So you're a business owner. So in reality, more people might think first about the direction of where their pillars would go, and then let their pension follow that. So just get ready. You know, for the thought process of being an entrepreneur, and if necessarily leave your money in a separate present. But certainly look at the things you can control charges for sure, because most sips charge a percentage. So let's take you know, let's take that lady I mentioned so say if the value the pension was 800,000. And she was in a typical sip, you want to know what she'd be paying in fees? Yes, place. Okay. So let's say she chooses a cheap sip. So she does a good job. But she invest in funds, because there's no other choice, she might be paying between one and a half and 2%. Overall. Now, let's say it's 2%, because that's the average 16,000 pounds in fees, it's quite a SAS would be 15, 1600, you know, because it's not about funds under management is just about the administration, or providing the reporting to the Inland Revenue. And the, almost the the custodianship of the assets and the moving of money when they make decisions. So a SAS is usually over the long term, substantially cheaper over the long term. But the problem is you have to pay to set it up. And as I've said to you before, Chris, we've got this calculator that you can plug your charges, your expectation of return based on your risk from yourself or any personal pension come to that. Compare that to the costs of setting up a SAS, the running costs of SAS and the expected return on investment in the assets that you control. And what I almost always see, when people look at that, you know, as a massive difference, and you know, wouldn't be lost on you to see that the difference almost always leads to the idea of if someone's ready, they're willing and able to get involved. And they can make their money work harder. And as a result, easier to create wealth. And they're not relying exclusively on the stock market. Now while it's true that everybody should take advice, and that's fine. Nonetheless, people could see for themselves, and then take the appropriate advice before they make that decision. But it's all transparent, you know, so we don't push anybody down the path. But nonetheless, I like people to look at the path. So they can choose their own pathway, as opposed to the path that's been chosen by somebody else, whose interest is really skewed towards, you know, having funds on the management in almost every advisory firm,
Unknown Speaker 20:43
sip provider,
Unknown Speaker 20:46
and fund manager. They're all trying to get a share of your money. I think there's a conflict of interest going on there. But it's undisclosed. And most people think they're being smart because they've got a sip, not realizing that in fact, sipping Arsenal, completely different vehicles altogether.
Unknown Speaker 21:03
That's been very, very interesting indeed. And, of course, if you're listening, and you've got questions, don't forget, you can go to wealth builders.co.uk forward slash wealth talk, not only can you catch up on all of our episodes there, they can also hit the big orange button, then send us a voice message. And we'll pick that up, and maybe even give you a shout out on a future episode.
Unknown Speaker 21:27
Okay, that'll be good. It's nice to see that some people start to do that now. But more often than not, I think people are comfortable with sending us an email, which they can do as well either, you know, directly to
Unknown Speaker 21:38
Hello at wealth builders. co. uk, we've got the wealth builders Facebook group, we've just tipped over the thousand members Mark was selling this week. It's nice and lots of conversations going on in
Unknown Speaker 21:48
there. And of course the the other group as far as SAS is concerned, you know, where I'm actively involved is this alliance? Many one should go have a look at that now over 2000 members there. So can you believe 2000 people taking control over the over their pension? That's now 10% of the entire SAS market? Well, you know, just within our community now, so myself and Mark Stokes having a great time, you know, bringing that story much more to the wider community really. So looking forward to getting out and about in the country and telling more people about it. Absolutely.
Unknown Speaker 22:24
Great. Well, I think we've wrapped up the pensions pillar pretty nicely there. I hope that everyone's you know, really learned something there and part of my day is perhaps certainly to take some action or just look at the current situation.
Unknown Speaker 22:38
That's right. Don't be don't sleep, walk, you know, take some action. Take responsibility, be creative. Give yourself a little bit of time and take your time when you getting advice and making the right decision.
Unknown Speaker 22:50
Great. Let's catch up on the next episode of wealth talk heaven and perhaps we can do that. So it on time.
Unknown Speaker 22:57
Why don't we do that? Okay,
Unknown Speaker 22:58
see you next week. See ya.
Transcribed by https://otter.ai