Skip to main content

Pensions

How To Boost Your Salary Or Pension For FREE!

Share this post

Transcript

Speaker 1 0:01
The purpose of wealth talk is to educate, inform, and hopefully entertain you on the subject of building your wealth. Wealth builders recommends you should always take independent financial tax or legal advice before making any decisions around your finances.

Christian Rodwell 0:19
Welcome to Episode 220 of wealth talk. My name is Christian Rodwell, the membership director for wealth builders joined today by our founder Mr. Kevin Whalen. Hi, Kevin. Hello, Chris.

Unknown Speaker 0:29
Good to be with you again, my

Christian Rodwell 0:30
friend. Yes. And we're just a week away now from our next live networking event, which is up in Birmingham. Yeah,

Speaker 2 0:38
we've got to get out and about have we really and very interesting to, to meet people who've been followers or members of wealth builders for a long time in the Midlands, but we've never had a chance to say hi in person. So really, really looking forward to that. Yes,

Christian Rodwell 0:53
and the tickets are really flying out. But there's still time. So you can reserve yours just head to wealth builders website, go to wealth builders.co.uk forward slash events. And we'll look forward to seeing you there. Now, Kevin, couple of weeks back in episode 218, we did a topic, which was how safe is your pension. And we've had some interesting feedback from there. And in that episode, we looked at an article that was in the newspaper of a 65 year old gentleman, and his pension pot, which did sit at 250,000 pounds just 18 months ago, and is now dropped to 163,000. So we've talked about the risks, obviously, and being more in control of your pension. We talked about a few things in that episode. And one of those we wanted to pull out and focus on a bit more today. And that is the topic of salary sacrifice. sounds painful, but it does a bit doesn't it but then the title of this podcast how to boost your salary or pension for free. So it sounds quite exciting.

Speaker 2 1:50
That way, but you see how pensions pretty much a Dream Theory. Well, you know what, you can actually make a lot of money from your pensions, if you know how to use the tax system. Now, most people understand, Chris, that there's been a kind of a well publicised, well documented, well marketed idea that if you make personal contributions into a pension, you get tax relief. So you pay less income tax. If you make corporate contributions, paid from your company, your own limited company, then you get corporation tax deductions, everybody knows that. So it's kind of homespun, and it's like, oh, it's one of those things everybody knows. But there are taxes that are sometimes a little under the radar, that if you could understand this a link between that tax and your pension, then you can actually make money and find a way to actually genuinely increase your net, take home pay. So I wouldn't say it's increasing your salary. It's increasing your net take home pay, which is still what everybody wants is not what you make. That counts in any wealth building activities, which keeps so you've got to take the tax out of the equation. And the tax that is misunderstood by most people when it comes to this particular secret of how to boost your pension or boost your net take home pay is National Insurance contributions. Because national contributions is the secret to the success of understanding that if you can recognise that it's a tax, and that both the employer politically and the employee, pay it, then you can find a way to reclaim some of that. And then that puts more money back in your life. And I've seen articles written on it. I've seen pros and cons written about the concept, but it's so poorly titled it'll be like Sass, you know, the, you know, the sass the super, super high powered vehicle, or anybody who's a director of a limited company. Wow. So powerful. However, the language is too dreary. So most people who get caught up knee deep in their businesses or in their life, they don't wait through the treatment. They end up ignoring it or go well, that's not for me, but they don't see the benefit. And this part of the problem with all pension industry is the language just doesn't make it very accessible. This concept known as salary sacrifice, wow, that sounds painful and got sacrifice something. Why on earth in a world where we're currently got so much uncertainty, inflation rising interest rates on the up? Why would I sacrifice anything? Surely, Chris, you're not telling our listeners they should sacrifice their salary and still build wealth at the same time. You can't be telling me that can you really well

Christian Rodwell 4:58
hopefully we will. can dig a little deeper into it today. And as with many things, when it comes to wealth, there's there are pros and there are cons and you need to make the right decision for you based on your own personal situation. But so perhaps we just, you know, break it down to simple four, we have, you know, what exactly is it? What does it mean, and who is it available to as well. So

Speaker 2 5:18
Joking aside and teasing aside, everybody who has some form of employment, so it's really ended employees. So it's not the SAS. Same for the directors, it's really aimed at employees. Now, when you're an employee, you know, you're trading time for money, but you're creating value inside a business or a company large or small. And once you understand that, when you see your pay packet, you've got national insurance, and your National Insurance as a percentage of your pay, but the employer is paying national insurance, and they're paying more national insurance than you are. Now, currently around 13 to 14% of the minute, if you're an employer. So if you went to your employer, and said, I'm making a pension contribution anyway, and I'm trying to build my wealth. So you've looked at the cost of the scheme, you've looked at the funds, you've watched out for the default funds that I spoke about last time, so you're happy with the overall pension benefit, you can then say to your employer, instead of pay me this amount of salary, on which both you and I are paying National Insurance, if we redirected, so not sacrificing now, redirect some of that salary, and pay that into my pension instead, two benefits directly derived from that. The first is technically then you get less salary. So you pay less national insurance. So it could redirect that. But if you can build a relationship and understanding of this, and most people don't know, their employer base, employers ask insurance. And you said to them, you know, the National Insurance, you were paying on my behalf, for the amount of money, I want you to redirect, will you pay the national insurance, you're paying into that as well. So Stated differently, say you sacrificed 1000 pounds, your employer will be paying 13.8% of that money. Now, if you're paid 1000 pound less in salary terms, they're not paying that anymore. The 30.8. So if they paid it, which means you getting into negotiation with your employer, and many employers, if you have that relationship, you know, you're playing full on, you're giving your best, you're having a proper conversation. This is a well trodden path for many employees to pay less National Insurance and get actually that money that they wouldn't have got, go straight to the to the exchequer. In other words, that money comes to you instead. And employers have no reason not to do that. Unless they're either too small, and they're not paying employers national insurance, or you can't negotiate. But for the most part, you can, so you're exchanging a salary for a benefit. But that benefit has the extra boost or that employers National Insurance, there are ways that you can work out the numbers so that the net impact is your pension is the same, your pension contributions of the same, your pension values the same, but you will increase your take home pay instead. So you could do it either way. Obviously, we encourage people to build wealth, or even a beverage. So if you're going to make a bit more money, you could invest some and keep some so little complexity in the calculations. And we're more than happy. We've got a team of people, Chris, who can help with that. Obviously, it's independent financial advisors, there's partners that we work with, or if you've got one yourself, go talk to them, or talk to your employer. In case they already know this, they may already be running this for 10s or even hundreds of people in your firm. That's

Christian Rodwell 9:21
interest. So just to summarise that make sure I've got that right and Kevin. So talking there specifically about the tax and the national insurance savings, which you know, over time could lead to quite significant savings. But the downside the opposite of that is lower monthly take home pay which might just impact your shorter term financial planning.

Speaker 2 9:39
You can do that well, let's say did you did the wealth build away well, there's some consequence of that you know, your your net take home pay is a bit lower but your the boost to your wealth is bigger than the difference. Number two, say you are really critical on getting a mortgage and everything depended on it. What you were declaring as your income, then that would have a bearing. So there are always pros and cons of every action person, I suppose if you're at close to retirement, there'll be some impact on benefits and things like that. So we're not trying to say, this is a panacea. We're saying it's one of those tools that you should look into. When you're building your wealth. And the early you look into it, the better it is. Because if you can take a significant sum of national insurance, and reinvest it, and you're happy with the investment, you're gonna get compounding on compounding on compounding on compounding. And most people don't take that into account. Because as I mentioned earlier on, when people are knee deep in their life, the trickle holds them in, right, and they get stuck. And it also affects their brain, it fogs their brain, they don't see compounding, they don't get it. They understand it, you know, eighth wonder of the world or that heard that Albert Einstein compounds good thing, but they don't really understand the impact of it. Let me give you an example. Let's imagine I'm gonna ask you a question. Imagine we had 100 wealth builders. And I said to them, what would you take? I'm gonna give you a million pound check right now. Or I'm gonna give you a penny, and double it every day for the next 31 days, pick a 31 day month to give maximum impact. What do you think most people would take?

Christian Rodwell 11:35
I think most people would probably be tempted by the million patent check. They would. But if

Speaker 2 11:41
you do the maths, and you compound a penny then to be there to beat four P. And you did that consecutively for 30 days, or 31 days, the value of that money, Chris is 10 million people do not see the vision of how big something could be. Now, of course, I'm not suggesting anybody's going to double their money in a day? Of course not. That's an illustration of an effect that it's just the vision. But do you remember I talked a little while ago about setting up a pension for my grandson, and 200 quid a month, just reinvested every month, and invested in normal stock market return would make our little Finley a pension millionaire at 50. And that

Christian Rodwell 12:26
certainly stirred up a storm on some of the social platforms didn't it? It did

Speaker 2 12:30
it day to day. But listen, the point is it's illustration, right? It's not about me. It's not about you. It's about understanding that compounding can work. And of course, in wealth builders, we always highlight and we want to empower you should make your own decisions about what you do with your own money and how you do it. Whether it's pensions for kids, whether it's Junior ices, whether it's Premium Bonds, whether it's what do you do with the old child trust funds? Is it? Is it an ICER? Is it a lie, sir? What is it? You know, so, so many different ways, and we're going to cover that too. And we're in wealth builders. So for those who are wanting to know more about how we're aiming some of our education, specifically at families, Chris, how would they know we're full at the moment? But how would they get on the waitlist for

Christian Rodwell 13:17
them? Yes, head to wealth builders.co.uk forward slash families. And you can catch the recording when we launched to find out a bit more about the programme and to get your name on the waitlist when we reopen in the coming few months.

Speaker 2 13:32
So you know, we're going to cover all of that. Because the key issue, I think, for wealth builders, is the distinctions that we help people to make, and you don't have to make every distinction. But if you listen to it, you think about it, you'll find the distinctions you want to make. And I think compounding is one of those quests, I wouldn't mind just taking a few minutes of our listeners time on this. Because, you know, it's quite a powerful concept. In fact, it's fundamental to principle number three in families, which is planting seeds. And it's fundamental to the whole wealth building process that you understand compounding. And of course, the big quote on that is, if you don't understand it, you're probably paying for compounding. If you do understand that you're probably making it work for you. And that's the first point I would say about compounding. Before you even understand what it is. You have to understand. It's a double edged sword. It can work for you putting money to work, where it works, and then it continues to work. So it's building upon building upon building. Like if you're 1000 pounds in the bank and got 10% It's going to be worth you know, 1100 a year later. And then that reinvested you get 10% on 1100. So that's worth you know, 1200 quid or whatever it would be, you could do the math yourself. The magic of compounding is also counted. By the malaise of compounding, that's when you allow compounding to work against you. And we see that don't we, in society, that vast majority of people, compounding is working against them. It's the banks, it's the institutions. It's the lenders who are banking on that compounding. It's compounding in the reverse way, acts as a brake on your finances, and in many cases, sends them underwater very, very quickly, which is why I will cover another day quiz. I'll cover why. The key things you should understand before you pay off student loan, okay, I'm not going to cover that now. But that's another big one that we will be covering, and wealth builders for families as our parents see their children getting ready to go to college in some form of higher education. So the first thing about compounding is understand whether it's creating or cutting, is it building? Or is it you going below water? That's an easy one to get right? You can kind of work that out. The second is, what's the cycle of how that compounding works. So in the example, I gave you the penny, that was a doubling every day, that cycle repeated every day, doesn't happen in life. Yeah, seeds don't grow that quickly. For the most part, it's say annually, say it was interest, or be annual interest or monthly, you need to understand the cycle. The shorter the cycle, the more you understand that, the more it's likely to benefit you. So understanding the the cycle of that, obviously, the rate, you know, what kind of rate are you likely to get? And is that guaranteed? Like it would be if there's interest? Or is it uncertain? Which is where I think most people would their pensions get mixed up, because they hear the stock market has made X money every month or every year. But it doesn't do so on a consistent basis. So as well as the right you have to understand is a consistent, or is it inconsistent? And I talked about that last time. Do you remember the risks that people are taking? They don't understand. Yeah, that's talking to one of our members. earlier on. He said he's had money in the stock market in footsie for the last five years, and it hasn't moved an inch. So you're not compounding. If you get a an event that damages or impacts on your money in a big negative way. Because you you didn't understand the risk, like that guy with the was a 250 turned into 175 in a heartbeat, you can lose money very quickly, and then you lose the the impact the powerful impact of compounding, because you haven't understood that you need consistency for it to work. I'll go back to my grandson. It's contributions that makes a difference that if care pays 200 quid a month, that's every, every month that's adding that's putting fuel into it. So you no longer worried about whether it goes up or down. In fact, in some cases, when money goes down, you buy more of the asset at a lower price, something called pound cost averaging or dollar cost averaging depending on what country you're getting the idea? Yeah,

Christian Rodwell 18:11
absolutely. Yeah. So multiple layers almost contributing towards this compounding.

Speaker 2 18:16
Yeah. And in the end, we want the compounding to be collected. You know, we want you to bank on that. So the more you can create multiple recurring is with different cycles, different rates, different risks, different approaches, different ways that you can get involved. The more you build your confidence around understanding how these things work. And don't just delegate your money to a third party who's by the way, getting the compounding whether you get it or not. But think about that. If you've got your money with an institution who gets paid first, they get paid. So they get paid each month, no matter no matter what. So, you know, they're compounding your money, whether they make money for you or not, which is why very interesting, Chris, we had a few few people reached out to us on the score. idea we mentioned this was in

Christian Rodwell 19:08
the last podcast 218. We

Speaker 2 19:11
said for our members, we do a free report on these things called a score report basically looks into how is your pension working and how effective is it at five different levels, we still got a little bit of room to do a few more before the end of the year. So if anybody wants to know what likely benefit they're getting, what compounding they're getting, what sort of charges their pay at another thing. There's no power of compounding attempts. And if you're paying amps and charges, you're not going to make as much money. So what retirement options you've got, what fund options you've got. And of course, whether you've nominated your spouse, partner or children as beneficiary, to keep it inheritance tax free, which is another so I can understand very quickly, Chris that this whole idea of wealth and pen chins in different assets and building different layers is confusing. And sometimes can get a bit overwhelming. Which is why we ask everybody to do one small thing every month, just a small thing every month. Because if you do a small thing every month, you're going to compound the result for you buy it in that action next month and having that action and month after that. So whatever however small the action, we asked you to take it. And that's the key. So compounding is also about your actions. It's not just about the financial impact. So compounding is very deep, very rich, very powerful when you understand how impactful it is in your life, if you can work with it, as opposed to it working against you. Anyway, we think we did a bit of a round robin round with the FBI, so boost your income and compensate. And then

Christian Rodwell 20:53
the thing is, we're leading up to Christmas Kevin in a festive mood, shall we give away a few more score reports. And if you listening now and you'd like to really kind of see underneath the bonnet of your pension, we'll do that for you. We'll provide that score report, I definitely recommend you take advantage of this. And it's really simple. Just drop us an email to Hello at wealth builders.co.uk put the word score report in the subject line, and one of our team will get back to you and let you know what next steps are. So yeah, you said we've got a little bit of room for a few more, Kevin. So let's offer those out today. Should we also end with a review, which

Speaker 2 21:31
I will mention though, I'm just working on a little sort of gift list some suggestions, that sort of 12 days of an A, we're using the Christmas word a bit early, but you know, the I'll be doing something to help parents, as well create some little ideas that they can use on the run into Christmas and what they can do to engage their children with lessons which are more valuable than any gifts that they could make of anything else.

Christian Rodwell 22:02
But Whoa, that sounds good. All right. Well, stay tuned for more news of that. But a review this week from Simon who says I have known Kevin for nearly 20 years from when I downloaded his first ebook saver 14 fast. I was impressed that he took the time to contact me directly to find out my thoughts about it. Kevin is a person of great integrity and significant practical wealth and financial knowledge and experience. And our paths drifted apart over the years but I've always been watching from a distance and seen the creation and growth of wealth builders. Due to my own changing circumstances. I decided to join wealth builders in May 2023, and have been impressed with its structured and supportive approach to wealth creation and growth and the community of like minded people willing to help. I'm also very grateful for the guidance and support from my wealth coach Manish Kataria is a consummate professional skilled in financial and property investments, and a really nice chap too. And if you're serious about creating growing and protecting your wealth and leaving a lasting financial legacy for your family, then I highly recommend wealth builders to you. Very,

Speaker 2 23:09
very nice Simon and I do recall Simon and he also referred me very kindly to other members of his family. And we played golf together originally, way back, I can't remember whether we played well or not. But we're just older now and I'm sure we'll pick up the clubs again and, and dust off a relationship but it's so kind of him to kept in contact and almost watch from afar. And we often see that, don't we, Chris? We see people going round the outside round the outside, as we call it, you know making a decision. And I'm going to leave on a final point, Chris, which is really quite powerful quote, which I was reminded of recently, which is a Tony Robbins quote, most people will know Tony Robbins when they think things like he said, it's in your moments of decision that your destiny is made. And what a great quote when you think about it, your destiny shaped by decisions you make. And all too often we know. And we sometimes lamented, don't we we look at each other and go, Why 95% of the population, still not going to reach security and then independence. When there's so much information. There are so many ways to do it. And there's a mismatch between intention and action. And what we hope to do is try and get a few more people to turn that intention into action, as long as we ask them do something small. So if you've been listening to the podcast for a little while, and you haven't done anything, let me ask you to do one thing. Either request a free score or log on to the families waitlist or do us a review to say hey, like Simon did. I'm out there 20 years, or two years or one year, and I'm listening, and I'm interested in what you have to say. And one day I'm going to get around to making a deal decision to choose wealth as to drifting and going around the outside because it frankly, if you're not building your wealth, you're drifting. We know that. So tell us why you're drifting, and we'll do our best to help you. Because that's our passion, isn't it to try and get more people to be set for life and get their children set for life, and have the trials and tribulations that our younger people are going to face in an increasingly uncertain and unstable future. Your

Christian Rodwell 25:27
point well made, please do reach out to us. Lots of different ways to do that through the socials book a discovery call head to the wealth builders website wealth buzz.co.uk. You'll find all of our contact details there. So we hope you enjoyed listening to today's episode. Don't forget to hit the share button, send it to a friend and Kevin will catch up Same time, same place next week.

Unknown Speaker 25:47
See you in Birmingham, my friend.

Speaker 1 25:52
We hope you enjoy today's episode. Don't forget that we are constantly updating our resources inside the wealth builders membership site to help you create build and protect your wealth. Head over to wealth builders.co.uk/membership right now for free access. That's wealth builders.co.uk/membership

Episode notes

This week, we dive into the world of wealth-building strategies and uncover some hidden gems that can help you elevate your income without any extra costs.

Ever wondered what a salary sacrifice is and how it can potentially boost your income or pension? We break it down for you, along with demystifying national insurance contributions and how reclaiming them can give a nice boost to your take-home pay.

Kevin and Christian emphasise the value of salary sacrifice for all employees looking to amass wealth. Understanding the terminology and advantages is key to fully tapping into this wealth-building strategy.

In the episode, we shine a spotlight on the magic of compound interest and its pivotal role in wealth building. We explore the intricacies of the compounding cycle, interest rates, consistency, and the associated risks.

Tune in for an enlightening episode filled with practical financial wisdom that could be your stepping stone to a brighter financial future.

Resources mentioned in this episode