WEBVTT

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Bob is a wizard. He does magic. Now if you ask

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Bob about this then of course he's going to deny

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it. He claims he's a manager at a car production

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plant and he says he actually hates magicians

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and one came to his table once at his daughter's

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wedding and he had to get up and go to the bar.

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But he would say that wouldn't he? What I'm going

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to show you here today is some of his magic.

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Hi I'm Eric and time to retire. Now, if you're

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like Bob and earning around £75 ,000 a year in

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the UK, well, congratulations, you've done incredibly

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well. You are in the top tier of UK earners.

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But if you're in the final five to 10 years of

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your career, that 75 grand salary is leaking

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cash at a terrifying rate. Every single pound

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you earn above £50 ,000 is hit by a 40 % income

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tax rate plus national insurance. You're grinding

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through the most stressful years of your career,

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yet nearly half of your hard -earned cash is

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top -sliced and vanished before it even reaches

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your bank accounts. What if, like Bob, you could

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choose to not pay it? What if you could legally,

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safely and ethically lower your taxable earnings

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from £75 ,000 all the way down to £35 ,000? Keep

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that missing £40 ,000 for yourself. and use the

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taxman's own rules to double your retirement

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pot in record time so today we're looking at

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Bob's ultimate pre -retirement strategy it's

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called earn less to save more and what I'm going

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to do is going to break down how dropping your

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taxable footprint from 40 % to 20 % paid during

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your retirement years and how salary sacrifice

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works and The plan that transforms a heavy tax

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bill into financial freedom. Now, before we fix

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the leak, we have to understand exactly where

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the water is coming from. Now, in the UK, the

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first 12 ,500 cents you earn is tax -free. From

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there, up to around 50 ,000, you pay a very reasonable

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20 % basic rate. But the moment your salary crosses

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that £50 ,000 threshold, you enter the danger

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zone. Now from this £50 ,000 up to £75 ,000,

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you're paying 40 % income tax. On top of that

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block of £24 ,700 alone, you lose nearly £10

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,000 straight to income tax plus another 2 %

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to national insurance. So the total between the

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income tax on you and I, across your entire salary,

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is sacrificing £21 ,400 a year to the taxman.

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This is money you're never going to see again,

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completely wiped off your personal balance sheet.

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Now, let's have a look at Bob's magic trick.

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Instead of taking that top, £40 ,000 as cash,

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paying higher rate tax on it and trying to save

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what's left. He made a pretty radical choice.

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He decided to reduce his taxable earnings down

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to £35 ,000 by shifting £40 ,000 directly into

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his pension. Under the current UK rules, the

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standard annual allowance lets you contribute

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up to 60 grand a year into your pension tax free

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that's as long as it doesn't exceed your total

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relevant earnings so popping 40 grand away is

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fully within the rules now you can do this a

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couple of ways you can either instruct your employer

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to adjust your workplace salary sacrifice scheme

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or you can make personal contributions directly

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into a self -invested personal pension sip and

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then claiming the higher rate relief back on

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a self -assessment if needed by doing this she

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instantly change your financial identity in the

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eyes of HMRC. As far as the tax expense concerns,

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you no longer earn 75 grand, you earn 35 grand,

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and that completely reshapes your numbers. Now,

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workplace pension is generally the option to

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go for here, as this will also reduce your NI

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contributions and may even see your employer

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throwing in some extra cash as well because they'll

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be making a saving on their part of the NI tax

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bill. But not every employer is this flexible

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and they may lock you into a set percentage of

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your pay. Now this is where the sitcoms in you

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get. the money from your employer into your bank

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account after you've paid tax on it. Then you

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transfer it from your bank account into your

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SIP account. A few weeks later, magically, HMRC

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do their bit and pay the tax back into your SIP.

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Now, if you paid 20 % on your salary earnings

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before it was paid to you, then they top it back

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up with a 25 % contribution. now that's not magic

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that's just how the maths work for pre and post

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tax changes now for the cash you move that you

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paid 40 percent tax on then you'll be given your

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extra back when you put in your tax return at

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the end of the year now if you don't know where

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to start with a sip email me on eric at time

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to retire .co .uk and i'll send you A simple

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to follow instruction on how to set one up. Let's

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look at Bob's magic on his scoreboard. When you

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leave your salary at £75 ,000, your total tax

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and national insurance bill is over £21 ,000.

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But when you drop your taxable earnings to £35

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,000, your tax bill drops to just £4 ,486. You've

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just suspended £16 ,936 from leaking out to the

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taxman. Now look at what happens to your cash

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flow. Your take -home cash drops from £53 ,000

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down to £30 ,500. That's a reduction of £23 ,000

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in your pocket today. But look at what you bought

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with the £23 ,000 drop. A massive... £40 ,000

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sitting safely in your personal retirement pot.

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You sacrificed £23 ,000 of immediate spending

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and a taxman effectively handed you an extra

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£17 ,000 to boost your pension up to £40 ,000.

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That is an instant guaranteed 73 % return on

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your money. Now when you retire, you're likely

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to be taxed on the pension you draw, but for

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most people they'll get 25 % completely tax -free

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and the rest is likely to only be taxed at 20%.

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Now the obvious question you're going to ask

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me is how am I supposed to survive on £30 ,000

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of take -home cash when I'm used to £53 ,000?

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Well the answer is that this phase is your pre

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-retirement dry run. Now if you're say five years

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away from your retirement, this is the time to

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aggressively shed your working costs. Now if

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your mortgage is almost paid off or if your children

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have finally grown up and left home, your household

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outgoings have already fallen quite a bit. You

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don't need to sustain a £75 ,000 lifestyle anymore.

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By forcing your take -home cash down to £30 ,000

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today, You're proving to yourself that your baseline

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retirement costs are manageable. You're testing

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your retirement budget while you still have the

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safety net of a major salary. Now, if it feels

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too tight, you can easily tweak the dial next

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year and contribute 30 grand instead of 40. But

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if it feels comfortable, you've successfully

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downshifted your lifestyle early, stress -free.

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Now let's look at what this looks like if you

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maintain this strategy for just five years before

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you retire. By redirecting £40 ,000 a year, you

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dump a staggering £200 ,000 into your pension

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pot in five years. Because that money is sheltered

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inside the tax wrapper, it compounds over those

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years without any... capital gains or dividend

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tax slowing it down and when you finally choose

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to actually cross the finish line and retire

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then that extra 200 000 pounds will completely

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transform your retirement options it unlocks

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that 25 tax -free lump sum we talk about so much

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on this channel and also provides a steady safe

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income stream That will hopefully last you for

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a good proportion of your retirement life. You

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didn't do this by working harder. You didn't

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do it by taking a second job. You did it by simply

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refusing to play the higher rate tax game. Earning

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less on PayPal, but supercharging your savings.

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The smartest way to prepare for retirement isn't

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just saving what's left at the end of the month.

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Stopping the tax leak at source, shifting your

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income from higher rate bracket into your pension.

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It's going to be the ultimate pre -retirement

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cheat. Now, I'm no financial advisor. My channel's

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here just for education purposes. But if you

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do want to know more about how to set up a salary

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sacrifice scheme or how to claim back your higher

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rate tax relief via self -assessment, Make sure

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to subscribe to the channel, leave a comment

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below and I'll see you in the next video.