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Pensions, Protecting Your Wealth

Is Now The Time To Take Control Of Your Pension?

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Transcript

Unknown Speaker 0:00 Paul, welcome to wealth Talk. 

Christian Rodwell 0:03 Thank you, Chris. Good to be here. Good to have you on. I can't believe it's taken so long for us to get you here, Paul. Why don't you just Kevin and myself just shared a few words, but you know, why don't you share a little bit about your history with wealth builders so far? 

Unknown Speaker 0:16 Sure. Um, well, I mean, Kevin and I have been working together for a long time now. And my role at wealth builders, is SAS director. So I had the side of the business that that effectively helped people to create a particular type of pension. And I'm sure for the regular listeners of the podcast, there'll be familiar with SAS, or what we call the directors pension. So I had the team that takes the business owners that we work through through that exciting journey of creating a pension that they're genuinely in the driving seat of unable to really influence how their pension wealth works. Hmm. But yeah, I've been doing it for a long time. As I say, Kevin I've been working together for I believe this is our 11th year anniversary, in fact, coming up in August, so congratulations. 

Christian Rodwell 1:07 Hopefully I can get together and celebrate and have some cake. 

Unknown Speaker 1:11 That would be great. Yeah, well, when we come out of lockdown, and we're allowed to see more than just six people, you know, that would be great. You know, get out and get the team together and yeah, have a cake and a celebration. 

Christian Rodwell 1:22 So the pension pillar poll, perhaps not the sexiest of the pillars, but absolutely one of the most powerful ones if you know how to make it work for you, would you say? 

Unknown Speaker 1:32 Oh, absolutely. I'd hundred percent agree with that. And I'm certainly I would say the most common pillar probably outside of home equity and you know, making your your home pillar work. I would say most people have some wealth in the pension pillar somewhere, even if they forgotten about it in truth, you know, which of course a lot of people have. But yeah, a hugely influential pillar in In building wealth, 

Unknown Speaker 2:02 if you know how to make it 

Christian Rodwell 2:03 work, so let's talk about it, Paul, because obviously, you know, we speak to people every day, don't worry and find out about their pensions, and some people might just have a few thousand pounds. 

Some people might have, you know, a million pounds plus significant pensions and everything in between. So, you know, can anyone really make their pension work harder? Are there some basic rules that anyone can apply? 

Unknown Speaker 2:26 I mean, I think the simple answer to that is everyone can make their pension work hard, if they know what to look for, and they know how to do that. And that ranges from I suppose, at the very simple end of the spectrum to, to really just taking control of the things that you can take control of when you have simpler pensions that are all invested in the stock market. And really, that means taking hold off and controlling the costs of investing all the way up to the There's sort of super sexy and if I can call it that at the pension world, which is which is SAS that directors pension where, you know, you can and are genuinely sat in the driving seat of what is, you know the highest performance pension vehicle available? 

Christian Rodwell 3:18 Well let's let's go into some detail in those perhaps in in a short while, but I just want to reflect because we're in a kind of theme at the moment, Paul of going through the pillars and looking at, obviously the impact of the Coronavirus and how it's affected people's wealth and people's mindset as well because we talk often about people having one statement a year with their pension and it arrives and kind of look at it and stick it in a drawer and forget about it again, that typically seems to be the case because it's not the most exciting topic and, and people as you mentioned, just feel they have no control over their pension. And but over the last three months, we've seen that the markets which you know, majority of pension money is invested in the market, the markets have, you know, been significantly affected. And therefore people may have been looking and thinking, wow, okay, I'm kind of banking on my pension looking after me when I, when I get older, and it's gone down 30% or whatever it may have been over the last few months, you know, people may be now thinking about their pension a little bit more and saying, well, do I have, you know, do I have more control? Is there something more I can do about this? So, so what's your perception over the last few months? What have you been saying from people you've been speaking to? 

Unknown Speaker 4:33 Well, it's interesting. I mean, this is the the biggest sort of 

Unknown Speaker 4:39 stock market 

Unknown Speaker 4:40 wobble we've probably had since you know, 2000 789 and albeit a much more condensed version of the of the crash in a way because it's, you know, dropped significantly quicker and actually, you know, come up to something resembling a normal level in a much, much quicker time. Trying to. We don't really know what the long term impact, of course is. We're still in in the COVID pandemic right now. Albeit, 

you know, thankfully, things aren't quite as bad as they were even just a month ago. But I think you know what, what I'm seeing and really what I hope people are seeing is that taking control of your pension wealth really means reviewing what your long term strategy is, and and really not just defaulting back to the same old six monthly statement or yearly statement that goes in the drawer, and not really having any relationship with their pension. And I think it's like anything, you know, Kevin, and I have been saying, for years to people that, you know, if you're a property owner, would you buy a property and then never go and see it or look at it or think about it for 20 years? You just wouldn't do it, would you? You know, you will maintain it, you would make sure it was still in a good state, you would want it to be working hard and tenanted and rented and working for you. But people do that with their pensions. And as you said, Chris, you know, largely because they're not exciting. People don't feel connected with them. And a key element to making your pension work whenever your pension looks like, is taking some degree of control and responsibility, I think. And there is one thing that everyone can do to certainly take control of the broader performance of their pension, nobody can predict a global pandemic, nobody knew that COVID was going to happen. And, you know, we're looking back now and I'm sure lots of people will have learned a lot but, you know, the one thing that you can control in all pensions is cost. And, you know, I'm sure you've probably talked about this in other podcasts. But you know, there are ways of investing in the markets where you can invest for a very, very low cost. And therefore, to an extent you can dictate and control the long term performance of the pension. Which means that the impact of short term blips like this in the longer term have much less of a negative impact 

Christian Rodwell 7:26 would be an example there or have a lower cost. 

Unknown Speaker 7:30 Well, a good example would be, you know, well, I guess lots of you know, there are lots of different types of pensions, but stock market based pensions generally tend to have at least two different layers of cost, you know, they'll have the platform provider the pension providers cost for administering their pension for them and giving them access to the funds and then you would have some fund costs. Now, typically, most people's pensions are, you know, sort of 1.52% all in, you know, if you if you factor in that there are usually fund manager costs. And you know, I sorry, IFA costs in many cases. And that's not to say those costs aren't important because lots of face providing important service, but you can definitely look to find a lower cost pension provider. And especially if you have an older pension nowadays, the cost of actually owning a pension and the ongoing fees for that have have dropped and there are lots of low cost, functional, flexible pensions available now. 

Christian Rodwell 8:42 And technology is helping with this and apps. Absolutely. 

Unknown Speaker 8:45 Absolutely. You know, there's a huge number of really technologically driven pension providers now that are really sort of pioneering a new era of basic personal pensions for example, where you can get access to Rate features access 24 hours a day on an app, you know, you can make changes to your pension either on your own or with the guidance of an ifa. And that's all very quick and easy to do, and they tend to be lower cost. And this simply wasn't there, you know, in comparison in 2008, when the word annuities was much more prominent than it is today. Well, I mean, it was the default for so many years, you know, people worked their whole lives, and then they retired and their retirement was they would buy an insurance product called an annuity, which would give them an income for the rest of their life and it was guaranteed, but of course, they would have to forfeit their, the growth and the capital they built in their pension. And so in many cases forfeited a legacy. You know, back in 2008, when the last big crash happened, drawing income from your pension in a flexible way was very, very new and definitely not anything like it looks like today. You know, fast forward to today and it's drawing money from your pension has never been more flexible and more easy to do. So you're right. It's it, there's a huge change in technology has been a big part of that for sure. You know, so getting access to lower cost pensions, and within those pensions, much lower cost funds, you know, which you might call index linked funds or track of funds, or sometimes called ETFs, exchange traded funds, they're different types of low cost funds. So we won't get bogged down in the detail but, you know, very, very low cost fund options that give you access to a really broad range of stocks and property and gilts and bonds and all the things that make up a sort of a broad stock market based investment portfolio for very, very low cost. 

Christian Rodwell 10:48 Yeah. And most people of course, think that you know, pensions are invested in the markets and that's it, but are there any alternative strategies that other people can think about? 

Unknown Speaker 10:57 Well, there absolutely are and, and Again, you know, coming back to this contrast between a basic pension and an a director's pension or assess the the differences lightened day because a basic pension is geared up towards investing in the stock market. And though you may have many, many hundreds or even thousands of different funds and ETFs, and things that you can choose from, it is still just a single strategy. And that's the stock market. And you know, undoubtedly you you and Kevin would have covered this, I'm sure many times over, but there's a huge danger in all of your pension wealth. In fact, generally speaking all of your wealth, relying on just the same strategy, of course. And there are, I would say, at the highest level, at least four different strategies that a pension can use if you have the right vehicle. 

Unknown Speaker 11:48 Do you want me to cover them? 

Unknown Speaker 11:49 Yeah, please do. Right. So obviously, even functional, flexible, powerful pensions can do the stock market thing. There's a place for that in all pensions you know, we're we're big advocates here a wealth builders about you know, diversifying your wealth and making sure that you have multiple streams of income and that comes from having multiple strategies usually. 

Unknown Speaker 12:15 But you know, SAS or directors pension just 

Unknown Speaker 12:17 like a person pension, a basic pension or a CIP can do the stock market thing and in truth actually has a wide the widest possible range of funds and the widest possible range of platforms that it can hold those funds on. Okay, so that would be strategy one. The second strategy would be commercial property. And I'm talking about here, becoming a commercial property landlord and actually using your pension money to purchase any different kind of commercial property and getting the long term benefits broadly speaking, that commercial property offers. And of course, you know, we don't really know what the future commercial price We look like exactly I'm sure, like liking all big worldwide currencies, they're always changes and you know, it may well be that there's there's huge opportunity commercial property in the coming months and years but you know, you're buying a physical asset that doesn't react 

Unknown Speaker 13:21 in the same way as the stock markets do. 

Unknown Speaker 13:25 You know, you've got regular recurring income, so definitely something that could be considered. And, of course, even in additionally to that, you know, you've got in certain cases, especially as I say, with the SAS, you've got the ability to even take property skill that you might have to do development inside of SAS to. So you can take either skill you've already got in property or skill you can be taught and translate that into making your pension work harder in that area. Okay, so that's number two. Number three would be taking some of the money that your pension has and actually using it within your own business. Now that is unique and rare, it's specific only to SAS. It's something that only a SAS can do, which is what makes it such a powerful tool for business owners. But actually being able to tap into your own pension in a time where, you know, the world is a very strange place at the moment, lots of businesses sadly have failed. Lots need propping up, you know, these bounced back loans and government incentives for loan schemes and so on are really designed to try and shield and protect the best businesses and you know, good quality businesses from failing. But why look to a bank for a prop up loan when you can look potentially to your own pension and actually tap into some of your money to help grow your business, 

Unknown Speaker 15:02 you know, after the covert pandemic, 

Unknown Speaker 15:05 and that actually doesn't matter what industry you're in, whether you're in property in manufacturing and retail, it doesn't matter. The ability to borrow your own money is there, 

Unknown Speaker 15:15 if it's going to genuinely boost what your business does. 

Unknown Speaker 15:20 And then the fourth thing 

Unknown Speaker 15:23 is, is I guess what we'd call becoming the bank 

Unknown Speaker 15:26 and actually becoming a source of, of leverage and bridging for other people's businesses. And if you've got the right type of pension, you can actually lend out some of your own money. And you can lend it to any legitimate business as long as you're not connected to that business. And you can lend it sometimes to individuals to so you can actually, in a way, help become part of the bounce back solution with your own pension. If you think about In that way, you know, you could be providing loans to small businesses to help them grow and to help them come back from COVID. And, and of course, you have to be careful, you know, it goes without saying that, you know, lending has, is more complex than the other strategies we've talked about, but but you know, can be a huge boost to your wealth is a very different type of asset class and strategy to the stock market and directly owning property, of course, but, you know, could definitely add some value to people, especially if, you know, from an ethical point, people like the idea of helping and supporting other businesses, and it's a great way of, you know, helping and supporting small businesses too. Hmm. 

Christian Rodwell 16:43 Well, for anyone that perhaps has not heard of the directors pension before, I think you might have just slightly blown their mind with some of those things. 

Unknown Speaker 16:51 Well, I hope so. You know, it genuinely is what I would call an exciting pension, you know, and there's not not many types of pension, you can talk about there. You would you'd use the word exciting in the same sentence, I'm sure you'd agree. 

Christian Rodwell 17:03 Yeah. And, and we often say this, but the pension really can be the fuel to power. So many of the other pillars, and you've just talked about the property pillar there, you know, as one of the main ones, and, you know, joint venture pillar, you can work with your pension, obviously, in that pillar as well, this new pillar you've just 

mentioned as well. So it really can work, you know, very, very well, as part of your overall wealth plan, and certainly not something that you should just be thinking that you can't tap into until you're 55 or beyond. 

Unknown Speaker 17:33 Well, I mean, you you absolutely hit the nail on the head there, Chris, you know, there's this this misconception that pensions are this thing that gets locked away in a box and sometimes even until you're 60 or 65. And, you know, as we talked about earlier, pensions are much more flexible. When you're 55 or over in the UK currently, at least you can start tapping into some of your pension benefits, but particularly with a SAS as I said, you know, if your business is really Looking for funding to grow, then then you can get access through the business into, you know, into the pension, some of the pension capital. And there's, you know, there's a huge amount of synergy between directors, pension, SAS, and all of those pillars, as you just said, you know, there really is it's, it's almost like a facilitator to grow lots of the other pillars, it's a tool that you can call on, that actually helps boost your pension pillar and your business pillar and, you know, other people's business pillars to choose, which is what makes it so exciting, I think. 

Christian Rodwell 18:31 Yeah. So I guess to summarize, then, Paul, and again, tying it into the circumstances that we've seen over the last few months is just, you know, always have that longer wealth term plan. You know, it that long. Yeah, that long term view really, because wealth is not created in 12 months or even a few years. You know, it's it's a long plan. And we've seen that the markets go in cycles, we know that we'll have another period like, we've Recently, and that you should have a core head. And this was echoed by Manisha as well, when we were talking about the investment pillar last week, and where possible, reduce your charges, reduce the costs, and manage and control your pension as best that you can. And for those people who perhaps, you know, our business owners, they may want to have a look and understand more about the directors pension and see how that can help them to, to really, you know, accelerate their their journey. 

Unknown Speaker 19:28 Absolutely, I'd really encourage it, you know, business owners are uniquely able to tap into the power of a SAS and even if they don't necessarily use it, to borrow their own money into their own business. There's a whole wealth of things that we've just touched on very, very quickly. But, you know, really, that's the ultimate high performance pension vehicle. But even if you're not a business owner now or you don't ever aspire to being a business owner, it certainly doesn't mean that you shouldn't be wanting to take more control over your pension and you know, Just to quickly recap those two things, as you just said, one would be, really get control of the costs, you know, do what you can to minimize your costs. And that might mean reviewing the current pensions that you've got and spending some time with a good financial advisor to really find out if you can minimize the impact of your ongoing costs. But also actually have a proper plan to manage your pension, don't just do some good work at the beginning and minimize your costs and then do the same that you've always done if that's what you do. And that's leaving in the in the filing cabinet and you know, you go into the same routine, have a proper process of reviewing whether that's on your own or whether it's with a fund specialist, a financial advisor who can really help you manage and update and change your plan as you move through. You know, I guess the key stages in your life but certainly, at least on an annual basis you would want to be reviewing tomorrow. Brilliant. 

Christian Rodwell 20:58 Both been great to have you on board. talk today. Thanks so much. 

Unknown Speaker 21:01 Pleasure. Thanks, Chris. 

Episode summary

In today's episode we are joined by Paul Brooks, the SSAS Director at WealthBuilders. Make sure to tune in if you want to know how you can make your pension work harder for you and things you can consider to reduce your pension's costs and improve its performance.

Episode notes

Can anybody really make their pension work harder? And are there some basic rules that can be applied, no matter what size your pension is?

Paul Brooks is the SSAS Director at WealthBuilders and has been helping clients to understand how they can leverage their existing pensions for over 10 years.

In this episode, Paul covers the key things everybody should consider to reduce their costs and improve the performance of their pensions, and if you’re a business owner then you’ll definitely want to find out more about the Director’s Pension (SSAS).

Resources mentioned in this episode