And many people who watch this channel have a
real good grasp of pensions invested and they
actually add to the channel by challenging and
enriching the content in the comments. Now this
adds extra dimension to the channel and it makes
the content I think more useful. But what motivated
me to set up the channel was the impact that
some basic information about pensions had on
me. Now the impact came a bit later in life for
me, early enough for me to make some adjustments
that enabled me to retire at 55. If I can have
a similar impact on even one other person then
that's enough for me. I don't mean that I'll
encourage them to retire at 55. This was personal
ambition for me and not something I'm suggesting
is a good thing. But what is a good thing is
having the basic information that will give you
options. These options arise from confidence
in your financial position. I might be through
understanding things better. This confidence
in your numbers will open up opportunities That
might be the option to maybe change a stressful
job that's adversely affecting your mental health
or your physical health. It might be the option
to reduce your hours to make the job more manageable
or better for the family. It might be an option
to take a break from work or to fulfill an ambition.
I mean, only you know how. better financial planning
can help you make these kinds of changes. Now,
I think that if I were to say something here
that may have a knock -on effect to help somebody
to make a big change for themselves, well, what
would that be and who would be the likely person
to benefit from it? So I think the person would
be someone who's never really taken time to think
about. how they can use their personal pension
to impact things. And the basic advice that I
would give that would be likely to have the most
impact will probably be how to use the tax rules
to their advantage. Now, this is basically what
enabled me to move from a difficult demanding
job to a much more fulfilling and enjoyable job.
And that was when I was 45. And it also enabled
me to retire at 55. So let you tell a bit about
my story to see if anything in there that will
work for you or somebody that you want to share
this video with. So when I was 35, I took some
time to look at my finances and I was actually
quite shocked at how much I was paying into monthly
income tax. I was a higher rate taxpayer paying
40 % and everything over. at the time of 30 ,400
pounds, at 40 % a lot. At this rate, for every
thousand pound extra I earned, 400 pounds of
it was disappearing forever to the tax office.
So what I did is I upped my pension significantly.
And I found that I was actually paying less national
insurance each month. My employer had upped their
own contribution as well. And the drop in the
level of tax That was shown on my payslip. It
was actually amazing. It was fantastic. Okay.
So I was taking home less money, but I found
that these adjustments not too difficult to manage.
I moved to a smaller car. I'll come back in a
sec. So I moved to a smaller car. I revised my
holiday destination sector and you know, As a
family, we got on just as easily from A to B
and we have as many great memories on our holidays
as I suspect we would have if we'd gone to some
more exotic locations. By the time I hit 45,
my pension statements report, that was in a really
good position. So I started finding my job challenging
at this point. Long hours and quite a lot of
working away from home. I could. I'll make a
decision, one of two things, either I could stick
with this challenging job, I retire at 52, or
I could take a much easier job and then retire
at 55. Now, I took the second option. I'd heard
of stories of quite senior people where I worked
retiring at 55 and then dropping dead a few months
later, and it had been down to... adrenaline
that kept on going for all them years. So I was
determined not to go along that route. So I moved
jobs to a normal 37 and a half hour week when
I hit age 45. So no even work, no weekend work,
my time was my own. I geared down my job again
a few years later to actually work in a home
job. and then I actually finally retired when
I was 55. I'm glad I made these choices at age
35. I think I actually probably was a bit of
a workaholic and I wouldn't have been able to
retire in a healthy state if I'd gone on this
100 mile an hour job right up to retirement.
So the big change for me was paying money into
my pension instead of paying it to the tax office.
So how does that work? Well, your pension contributions
are taken up by your employer before you are
charged any income tax. So you're paying a smaller
amount. Now this might even drop you below a
tax threshold. So maybe from higher rate tax
of 40 % to standard rates of 20%. So anyway,
you've paid less of your salary to the tax office
and you've paid more of it into your pension.
Now, there are different types of pension, but
the most common one now is a defined contribution
pension. So if this is a complete pension, the
money you have paid into your defined benefit
company pension will be topped up. but be topped
up with some extra money by the company you work
for. This pot of money then will grow over the
years that you're paying because you and your
employer keep topping it up, but it will also
grow because the pension company invested for
you. Now, typically your pension will grow at
a faster rate than inflation. So overall you're
making gains and you'll get generally a lot more
out over the years than you paid in. Hope this
was useful.