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Welcome back everyone to the deep dive.

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You know, today we are going to tackle most important investment of your life.

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Like did you know that here in the UK, pensions actually hold more wealth than property?

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Wow.

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I know, right?

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That just blew my mind.

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Absolutely.

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I mean, we always hear about property being the big investment, but pensions, they're

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quietly building this massive wealth in the background.

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Exactly.

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It's a hidden financial powerhouse that we need to understand better.

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It is.

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So let's get right into it.

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First things first, can you break down the different types of pensions we have here in

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the UK?

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I think most people are familiar with like defined contribution pensions, where how much

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you get depends on how well your investments do.

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Right.

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But what about those defined benefit pensions?

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Are those still a thing?

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Yeah.

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So defined benefit schemes like the NHS pension, you're right, they're less common now.

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But basically they offer a guaranteed income based on your salary and how long you've worked.

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So it's like a set amount predictable, which a lot of people find appealing.

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Right.

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But like you said, most of us nowadays are in those defined contribution schemes.

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And that means we're the ones responsible for making the investment decisions, you know,

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choosing where that money goes, which also means we're the ones who determine how big

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that pot of money is going to be when we retire.

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Oh, that makes sense.

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So basically with defined contribution pensions, it's more on us to like be proactive and make

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those choices.

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We can't just set it and forget it.

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We need to, even if it seems a bit scary at first, engage with those pensions.

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Yeah.

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No, I get that.

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It's definitely easier to just like, you know, put it in the back of your mind and be like,

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oh, I'll deal with that later.

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But this makes it sound like later is now.

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Yeah.

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I mean, think about it.

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This is your future financial security we're talking about.

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That's true.

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Okay.

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So let's talk about those employer contributions and tax relief because that's the free money

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part everyone gets excited about.

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It's amazing how those contributions from your employer plus the tax relief can really

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boost your pension.

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If you put in 80 pounds of your own money, it gets topped up to 160 pounds.

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Like that's insane.

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It is.

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And you know, it shows you right from the start how pensions, they amplify your savings.

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It's like 100% return instantly just because you're contributing.

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Yeah.

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It's like magic money.

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And the thing is, it gets even more interesting when you consider how that interacts with

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compounding over time.

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Oh, compounding.

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Yeah.

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That's like the secret sauce for long-term growth.

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It's elutely.

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But okay, this is where it gets a little scary.

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I was shocked to learn that only one in four people actually know what their pension is

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invested in.

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Oh, wow.

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Yeah, that is a bit concerning.

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It is.

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I mean, we're talking about a lot of money here.

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You see, with those default funds, they are designed to be quite general, a kind of one-size-fits-all

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approach.

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That might not actually be the best fit for you for your personal risk tolerance or your

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investment goals.

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The takeaway here is, don't just settle for the default.

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You really got to understand where your pension is invested and see if there might be better

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options out there for you.

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Exactly.

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So it's like step one is knowing where your money is going and if it's working as hard

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as it could be for you.

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And this is especially important, you know, for higher earners because they can benefit

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even more from being strategic with their pension contributions.

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Okay, so let's talk about the higher earners.

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What makes pensions so asintegious for them?

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What's the deal there?

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Well, it really comes down to the way tax relief works with pension contributions.

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So higher and additional rate taxpayers can claim back even more tax relief.

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Okay.

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Meaning a bigger portion of their contributions, it's basically subsidized by the government.

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Hmm, that's interesting.

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So the more you earn, the more the government helps you save for retirement.

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In a way, yes.

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And Toby even mentions the sweet spot between 100,000 pounds and 125,000 pounds in income

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where it becomes really advantageous.

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Oh, I have thought about that.

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Yeah, there are some really unique tax considerations in that income range.

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Interesting.

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So it's definitely something worth investigating further if you fall into that category.

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Right, because it's not just saving, it's also about smart tax planning.

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Exactly.

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Okay, now what about people who are self-employed or run their own businesses?

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Do they get the same pension benefits as employees?

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They absolutely do.

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They might not have employer contributions in the same way, but there are still great

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options available, like the self-invested personal pension, the SIPP.

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Contributing to a SIPP directly from your business can actually reduce your corporation

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tax bill.

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Oh, wow.

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So it's a win-win.

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You're boosting your retirement savings and potentially lowering your taxes at the same

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time.

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That's a brilliant tip.

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We've got our defined contribution, our defined benefit, and our SIPP.

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Any other types we should be aware of?

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Well, maybe not types, but we do need to talk about something else.

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Lost pensions.

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Oh, yeah.

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I almost forgot about that.

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Billions of pounds just sitting unclaimed.

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It's crazy.

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Right.

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You know, it happens more often than you'd think.

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People move, change jobs, and they just forget about old pension schemes from years ago.

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Yeah, it's easy to lose track.

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But the good news is there's a simple solution.

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The government has a free pension tracing service.

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You can use it to reconnect with any pensions you might have lost track of over the years.

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Okay, so if anyone out there has ever had a job where they contribute to a pension and

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they're not sure where those funds ended up, go check out this free service.

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Absolutely.

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Okay, now for the big question, the one everyone wants to know.

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When can you actually access your pension?

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When can you finally start enjoying those savings?

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So right now you can access it at 55.

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Okay.

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But heads up, this is going up to 57 in a few years.

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So I can't just assume it'll stay at 57 forever.

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Exactly.

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It can change.

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Pension rules, you know, they're subject to change.

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Got it.

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So stay informed.

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Always good advice.

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Always.

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But you know, once you do hit that magic age, there are some interesting choices you get

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to make about how you withdraw the money.

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Oh, okay.

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Tell me more about those options.

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What's the best way to access your pension savings once you're allowed to?

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Well, one option is you can take 25% of your pension pot tax-free.

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Whoa, tax-free.

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Tax-free, which can be great, you know, for covering any immediate expenses or maybe even

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just treating yourself a little after all those years of saving.

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Yeah, I like the sound of that.

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Right.

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And then the rest of it, you can withdraw as income, taxed as income when you need it.

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Okay.

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So it's flexible.

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You can customize it to fit your needs.

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Exactly.

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It's about having flexibility and control over your retirement income.

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Now are you ready to see the real power of pensions in action?

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I think it's time for a little comparison, don't you?

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Oh yeah.

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Bring on the grand finale.

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Let's see how pensions stack up against a regular investment account.

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All right.

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Lay it on me.

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I'm super curious to see what this comparison looks like.

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Imagine you're investing 200 pounds every month consistently for 30 years.

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In one corner, we've got a regular investment account, just your typical investment account.

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And in the other corner, a pension.

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So same amount of money, same timeframe, but we're going to see how they perform differently

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because of all those pension perks.

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With that regular investment account, assuming you get decent growth, you'd probably end

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up with around 334,000 pounds after those 30 years.

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334,000 pounds.

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Oh, that's pretty good.

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It's not bad, right?

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But I have a feeling the pension is going to blow that out of the water.

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You would be correct.

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With those consistent contributions and of course the magic of employer top ups and tax

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relief, the pension pot balloons to almost double.

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No way.

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Oh yeah, we're talking about 668,000 pounds.

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Holy moly.

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That's insane.

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Right.

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Just seeing those numbers side by side is crazy.

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It really shows you the power of pensions.

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It's like a secret weapon for building wealth.

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And it makes you realize how important it is to not be passive about it.

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Even small tweaks can make a huge difference in the long run.

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Absolutely.

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So are there any specific things we should be doing to make sure we're optimizing our

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pension strategy?

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Obviously don't opt out of your workplace pension scheme.

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Even if the contributions seem small at first, missing out on those employer top ups is,

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well, it's just silly.

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It's like turning down free money.

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Try to contribute a bit more than the minimum.

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Yes, absolutely.

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Even small increases over time, they really add up thanks to that compounding effect.

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Yeah, compounding is like magic.

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It is.

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And you know, it's about finding that sweet spot, that balance between what you can comfortably

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afford now and what you want your future to look like.

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Choosing your investments within your pension is really important, right?

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Oh, absolutely.

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It's not just a set it and forget it situation.

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You have choices.

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Think about your risk tolerance, your investment goals.

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Even your values can play a role.

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And understanding those different investment options, how they could affect your pension

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growth, it's crucial.

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And those hidden fees too.

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Yeah.

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Right?

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Those can really eat away at your returns.

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They can.

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That's why it's always worth comparing different providers and fee structures.

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Be an informed investor.

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Okay.

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All great advice.

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You can even choose investments that align with your values, like ethical or sustainable

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options.

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Yeah, that's really cool, right?

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It is.

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It's like your money can actually make a difference in the world while it's growing.

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It's about aligning your financial decisions with what you believe in.

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But of course, there's always a but isn't there.

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Those pension rules, they can be a little tricky to navigate.

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Like what?

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What should we be watching out for?

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Well, the contribution limits for one, there's this annual allowance, which is currently

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60,000 pounds, but that includes the tax relief.

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Okay.

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So you got to factor that in when you're figuring out how much to contribute.

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Got it.

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So it's not just about the amount you put in.

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It's about the total after that tax relief is added.

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Exactly.

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And then there's also this carry forward rule.

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Carry forward.

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Yeah, it's kind of a hidden gem.

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If you haven't used your full annual allowance in the past three tax years, you can actually

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carry forward that unused allowance.

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Oh, really?

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So you can basically catch up if you had some lean years.

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You got it.

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It's a great option if you're now in a position to contribute more.

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That's really helpful.

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Okay.

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So we've covered the basics.

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We've talked about contributions, investments, even those pesky rules.

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Now let's circle back to those higher earners.

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You mentioned they have some unique advantages.

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Can you break that down for us?

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Sure.

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So basically when you're a higher or additional rate taxpayer, you get to claim back even

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more tax relief on those contributions.

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The more you earn, the more the government helps you out with your pension savings.

261
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In a way, yeah.

262
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It incentivizes higher earners to save for retirement, which makes sense.

263
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Makes sense.

264
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So it's not just about putting money away.

265
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It's also about being strategic and using those tax benefits to your advantage.

266
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Absolutely.

267
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And this becomes especially important when you're earning over 50,270 pounds a year.

268
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Remember that sweet spot Toby mentioned, between 100,000 pounds and 125,000 pounds.

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That's where things get really interesting from a tax perspective.

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He goes into different types of schemes like relief at source and net pay and how they

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affect the way that tax relief is applied.

272
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Okay.

273
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That sounds a little complicated.

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It can get a bit technical, but the takeaway is if you're in that income bracket, talk

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to a financial advisor.

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Solid advice.

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Now, what about our self-employed listeners?

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Any specific tips for them?

279
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We talked about SIPPs, but anything else they should keep in mind.

280
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Well, Toby's a big fan of SIPPs because of the control they offer.

281
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Right.

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You can really tailor them to your specific needs and goals.

283
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And we already covered that contributing straight from a business account can be a smart move.

284
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Okay.

285
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Now, last but not least, let's talk about those lost pensions again.

286
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It blows my mind that billions are just sitting there unclaimed.

287
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I know.

288
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It's wild, right?

289
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But it's really easy to see how it happens.

290
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People change jobs, move houses, life gets busy.

291
00:12:00,760 --> 00:12:01,760
Yeah.

292
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But remember, no need to panic.

293
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That government tracing tool can help you track down any lost pensions from your past.

294
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That's like a financial treasure hunt.

295
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It is.

296
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And it's totally free.

297
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No need to hire some fancy service.

298
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Just hop online and start your search.

299
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It's easy peasy.

300
00:12:15,720 --> 00:12:16,720
Okay.

301
00:12:16,720 --> 00:12:17,960
I think we've covered a lot of ground here.

302
00:12:17,960 --> 00:12:21,880
We've talked about different types of pensions, how contribution and tax relief work, choosing

303
00:12:21,880 --> 00:12:24,800
investments, even those tricky rules and limits.

304
00:12:24,800 --> 00:12:27,880
So when can we actually get our hands on this money?

305
00:12:27,880 --> 00:12:28,880
You're right now.

306
00:12:28,880 --> 00:12:29,880
It's 55.

307
00:12:29,880 --> 00:12:30,880
But going up to 57.

308
00:12:30,880 --> 00:12:32,520
In 2028, yep.

309
00:12:32,520 --> 00:12:34,400
And of course, these rules can change.

310
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So always stay up to date.

311
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Got it.

312
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Flexibility is key.

313
00:12:38,240 --> 00:12:42,840
But once you do hit that magic age, there are some cool choices you can make about how

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you access that money.

315
00:12:44,280 --> 00:12:45,400
Oh, yeah.

316
00:12:45,400 --> 00:12:46,880
So spill the beans.

317
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What are our options?

318
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Well, you can actually take a 25% lump sum completely tax-free.

319
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Seriously, tax-free.

320
00:12:54,760 --> 00:12:55,760
Totally tax-free.

321
00:12:55,760 --> 00:12:58,960
Great for those immediate expenses or maybe you just want to celebrate all those years

322
00:12:58,960 --> 00:12:59,960
of saving.

323
00:12:59,960 --> 00:13:00,960
I can definitely get behind that.

324
00:13:00,960 --> 00:13:01,960
Now, what about the rest of the money?

325
00:13:01,960 --> 00:13:02,960
What are the options there?

326
00:13:02,960 --> 00:13:07,360
So the rest of it, you can withdraw it as income and it'll be taxed like regular income.

327
00:13:07,360 --> 00:13:11,080
But there are some clever strategies you can use to minimize your tax bills.

328
00:13:11,080 --> 00:13:13,280
So it's worth looking into those when the time comes.

329
00:13:13,280 --> 00:13:15,760
So it's not a one-size-fits-all situation.

330
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You can kind of customize your withdrawal strategy to fit your needs and goals.

331
00:13:20,920 --> 00:13:21,920
Exactly.

332
00:13:21,920 --> 00:13:22,920
And that's what's great about pensions.

333
00:13:22,920 --> 00:13:23,920
You have choices.

334
00:13:23,920 --> 00:13:25,020
You have flexibility.

335
00:13:25,020 --> 00:13:29,560
It's about taking control and making your money work for you, even in retirement.

336
00:13:29,560 --> 00:13:30,560
This has been amazing.

337
00:13:30,560 --> 00:13:33,040
I feel like I've learned so much about pensions today.

338
00:13:33,040 --> 00:13:36,200
It's important to have a good understanding of this stuff because it really can impact

339
00:13:36,200 --> 00:13:37,600
your financial future.

340
00:13:37,600 --> 00:13:38,600
Absolutely.

341
00:13:38,600 --> 00:13:42,640
And I think the key takeaway here is don't be afraid of pensions.

342
00:13:42,640 --> 00:13:45,120
They're not as scary or complicated as they seem.

343
00:13:45,120 --> 00:13:46,120
Yeah.

344
00:13:46,120 --> 00:13:47,960
Once you break it down, it all starts to make sense.

345
00:13:47,960 --> 00:13:52,000
So before we wrap things up, any final words of wisdom for our listeners?

346
00:13:52,000 --> 00:13:55,840
What's the one thing you want them to remember?

347
00:13:55,840 --> 00:13:56,840
Take control of your pension.

348
00:13:56,840 --> 00:13:58,160
Don't ignore it.

349
00:13:58,160 --> 00:13:59,440
Don't put it off.

350
00:13:59,440 --> 00:14:03,120
The more you engage with it, the better equipped you'll be to make those important decisions

351
00:14:03,120 --> 00:14:04,880
that will shape your retirement.

352
00:14:04,880 --> 00:14:06,680
Couldn't have said it better myself.

353
00:14:06,680 --> 00:14:11,280
Take control, empower yourself, and start building the retirement of your dreams.

354
00:14:11,280 --> 00:14:12,280
Wow.

355
00:14:12,280 --> 00:14:14,720
I feel like we've really cracked the code on pensions today.

356
00:14:14,720 --> 00:14:15,720
Yeah.

357
00:14:15,720 --> 00:14:16,720
It's been a pretty deep dive.

358
00:14:16,720 --> 00:14:20,800
Who knew it could be so, dare I say, interesting?

359
00:14:20,800 --> 00:14:21,800
Right.

360
00:14:21,800 --> 00:14:24,520
They get this reputation for being so dull and confusing.

361
00:14:24,520 --> 00:14:25,520
Totally.

362
00:14:25,520 --> 00:14:29,880
But once you understand the main ideas, it's like this whole new world of possibilities

363
00:14:29,880 --> 00:14:30,960
opens up.

364
00:14:30,960 --> 00:14:35,040
And over time, those small changes, they compound.

365
00:14:35,040 --> 00:14:36,960
Compounding, our new favorite word.

366
00:14:36,960 --> 00:14:41,000
So whether it's adding a little extra to your contributions every month or just taking

367
00:14:41,000 --> 00:14:45,360
the time to actually look at your investment choices.

368
00:14:45,360 --> 00:14:46,920
Every little bit counts.

369
00:14:46,920 --> 00:14:49,800
It all gets you closer to that dream retirement.

370
00:14:49,800 --> 00:14:50,800
Absolutely.

371
00:14:50,800 --> 00:14:55,240
It's all about taking control of your financial future and making sure your choices align with

372
00:14:55,240 --> 00:14:58,240
your goals and what you want your life to look like.

373
00:14:58,240 --> 00:15:01,200
And the good news is, it's never too late to start.

374
00:15:01,200 --> 00:15:02,200
I love that.

375
00:15:02,200 --> 00:15:05,680
You know, it's easy to get overwhelmed with all the details, especially if you're just

376
00:15:05,680 --> 00:15:07,320
starting to think about pensions.

377
00:15:07,320 --> 00:15:08,320
For sure.

378
00:15:08,320 --> 00:15:12,200
But remember, even just taking a first step, like educating yourself a little bit, taking

379
00:15:12,200 --> 00:15:15,400
a look at where you're at with your current pension situation.

380
00:15:15,400 --> 00:15:16,560
Right, right.

381
00:15:16,560 --> 00:15:17,560
That's huge.

382
00:15:17,560 --> 00:15:19,320
And there's so much help available, too.

383
00:15:19,320 --> 00:15:21,480
You don't have to figure it all out on your own.

384
00:15:21,480 --> 00:15:27,360
Okay, so as we wrap up this deep dive, what's the one key message you hope our listeners

385
00:15:27,360 --> 00:15:28,560
take away from this?

386
00:15:28,560 --> 00:15:30,080
What's the big takeaway?

387
00:15:30,080 --> 00:15:31,800
Don't be passive with your pension.

388
00:15:31,800 --> 00:15:33,680
Really, that's the most important thing.

389
00:15:33,680 --> 00:15:34,680
Don't ignore it.

390
00:15:34,680 --> 00:15:35,680
Don't put it off.

391
00:15:35,680 --> 00:15:38,280
The sooner you start engaging with it, the better.

392
00:15:38,280 --> 00:15:39,280
Understand it.

393
00:15:39,280 --> 00:15:40,280
Explore your options.

394
00:15:40,280 --> 00:15:41,280
Exactly.

395
00:15:41,280 --> 00:15:44,880
And you'll be so much better prepared to make those decisions that really matter down the

396
00:15:44,880 --> 00:15:45,880
line.

397
00:15:45,880 --> 00:15:46,880
Love it.

398
00:15:46,880 --> 00:15:51,120
Take control, be empowered, and build that awesome retirement you deserve.

399
00:15:51,120 --> 00:15:53,440
This has been such a fascinating deep dive.

400
00:15:53,440 --> 00:15:56,080
I feel so much more knowledgeable about pensions now.

401
00:15:56,080 --> 00:15:57,080
Me too.

402
00:15:57,080 --> 00:16:01,200
It's been great unpacking all of this with you and to everyone listening.

403
00:16:01,200 --> 00:16:04,000
Your pension is a powerful tool.

404
00:16:04,000 --> 00:16:05,000
Don't underestimate it.

405
00:16:05,000 --> 00:16:06,560
Thanks for joining us on the deep dive.

406
00:16:06,560 --> 00:16:10,240
We'll catch you next time for another adventure into the world of knowledge.