Each person plots their own route through life.
I mean, I happen to join a profession where pretty
much everybody retired at 55. Now there are a
few professions that do this, and that means
emergency services being one of them. And I've
never worked in the emergency services, but I
do imagine that the service prefer to have people
in frontline services that are peak fitness.
Pretty much for the same reason you may not choose
a 55 year old to captain your football team.
A team of firefighters may prefer to be supported
in dangerous situations by other officers that
are at their fittest. But the profession that
I spent most of my career in was consulting with
the big four, specifically POC and Deloitte.
Now these companies also structure things, making
it optimal. for you to leave at about the age
of 55. And if you wander around any of these
offices, you won't really see anybody above the
age of 45, never mind 55. Nobody in these offices
are likely to be chasing a burglar, scaling a
burn, and stairway to rescue people. But they
will be working in teams, much like in a football
team, where your team is only is only as strong
as your weakest player. So am I suggesting that
55 year olds are worse performers in consulting
than 35 year olds? Or maybe actually, yeah. But
where age really becomes a disadvantage? is when
winning contracts for the company. So let's take
an imaginary situation. So we've got a PwC team
pitching for a multi -million -pound contract
for a management consultant to a big multinational
company. And whilst they wait to do their pitch,
they see a team from Deloitte come out of the
boardroom. They've just pitched before them.
And the average age of that team look around
30 to 35. Then you look around your team. and
your team has an average age of about 45 and
at least one member is approaching 60. Now if
you go into that pitch and you deliver exactly
the same quality of pitch at the same price,
you may find that you lose out just because of
the unconscious bias of the customer. The Deloitte
team probably just seems to have a bit more energy.
So just like in the Fire Service, The culture
and expectation throughout your working life
is that you're going to retire at 55 or before.
All people older than you in the same company
seem to disappear before the 55, and you don't
really need anyone in your organization above
that age. This makes you think a bit differently.
State pension is not something that you can rely
on. You'll have at least 12 years of not working
before that even comes into play. You start to
become aware that you kind of must plan to have
any chance of a successful retirement. And your
employer is also planning with you, so they don't
want you kicking around after 55. So they structure
the way they pay you and the way they pay your
pensions so that you're unlikely to be in a position
where you're clinging on to stay in that job
after you've reached 55, because they really
prefer you to leave. Now, the amounts. They recommend
you contribute to your pension and the amounts
that they contribute for you are designed to
make sure that you're comfortable going at 55.
So in some ways, I had a bit of an advantage
that my employer was setting things up to make
a retirement of 55 for me. Not only possible,
but quite likely really. But then... I decided
to leave the Big Four when I was 45 and I moved
to some jobs where people didn't really retire
until they were in their late 60s and pension
contributions were set at the minimum. I mean,
at this point I knew I had to take more control
of my own financial future, so I had to make
a plan. I identified that the 40 % tax bracket
was a big threat for me financially and I needed
to make sure that my salary didn't all just disappear
in tax. So I reviewed my finances to make sure
that the amount I took as salary always kept
me below the limit which I had paid 40 % tax
at. This meant I had to speak to my employer
and increase my pension contributions and this
gave me a couple of added benefits really. One
that I was paying less NI every month and also
My employer then contributed more of their money
to my pension as well. So I'd class that as a
win -win -win. It also meant that every time
my salary increased, that I would speak to an
employer and ask them to put that increase into
my pension contributions again. Now the tax savings
I worked out were actually amazing on doing this.
40 % is a lot of tax. But then I moved again
to an employer that didn't actually permit me
to change my pension contributions. They only
allowed the basic 3 % from them, 5 % from me.
I had no choice at this point other than to open
a SIC, which is a self -invested personal pension.
So now what was happening is my taxable pay was
way above the limit for paying 40%. So I was
losing a fair chuck on my salary to tax every
month. Now when that money landed in my bank
every month, I'd take the amount that I paid
40 % on, and I would pay this into my SIP. Now
a few weeks later, HMRC would then top up my
SIP with an extra 25 % of this. And then in January,
I'd fill my tax return out, and they would work
out that I paid some tax of 40%, and then they'd
pay an extra 25 % of it directly into my bank
account. So for that money that I paid 40, 40
% tax onto HMRC. They've now given me all our
tax back, which is fantastic. And for anyone
who pays a higher rate of tax, it really is worth
having to think about this. What I actually did
was to trade some of the income out my wages
for a much higher amount that I could access
than 55 onwards. And because I've been conditioned
that 55 was the normal or sensible time to retire,
this made perfect sense to me. I had a choice,
a slightly bigger car at the age of 45 and retirement
at 60, or a smaller car at 45 and retirement
at 55, and I took the extra five years of retirement.
The family I'm from has a history of dementia,
and also I've got a hereditary eye condition,
and I could see me blind by the time I reach
state retirement age. We all have freedom to
make our own choices between jam today and jam
tomorrow and making either of these choices is
not a crime, but not knowing the options exist.
Now that is a crime to me. So make sure you do
keep yourself informed on what your options are
and I'll see you on the next video. Thanks for
listening, guys.