WEBVTT - Managing your finances when you’re self employed 0:00:04.140 --> 0:00:07.590 Hello, and welcome to Rewirement, the podcast where we help 0:00:07.590 --> 0:00:11.039 you make the right connections to create your brightest financial 0:00:11.039 --> 0:00:16.020 future, brought to you by Legal & General. I'm Angellica Bell, 0:00:16.020 --> 0:00:18.720 and during this series, I'm trying to find the answers 0:00:18.720 --> 0:00:21.630 to as many questions about managing money as I can. 0:00:22.140 --> 0:00:24.570 To do that, we found people from all over the 0:00:24.570 --> 0:00:27.389 country and from different walks of life who need information 0:00:27.389 --> 0:00:30.929 about their finances. Asking things like, how much should I 0:00:30.929 --> 0:00:33.570 be paying into my pension? Where's the best place to 0:00:33.570 --> 0:00:36.329 put my savings? Or what kind of insurance do I 0:00:36.360 --> 0:00:39.479 need for peace of mind? We've paired them up with 0:00:39.479 --> 0:00:42.750 some top financial experts to give them some guidance. And 0:00:42.750 --> 0:00:45.659 we get to listen into those conversations, which means I 0:00:45.659 --> 0:00:50.880 hope, that we all learn something along the way. Now, 0:00:50.880 --> 0:00:54.240 if you work for a company, big or small, the charges 0:00:54.240 --> 0:00:56.610 are that you get paid annual leave and sick leave, 0:00:56.790 --> 0:00:59.370 you'll be enrolled in a pension scheme, you might even 0:00:59.370 --> 0:01:03.150 get private healthcare. All your national insurance and tax payments 0:01:03.179 --> 0:01:05.910 are calculated for you. And if you think you'd like 0:01:05.910 --> 0:01:08.189 to buy a house, you have a nice collection of 0:01:08.190 --> 0:01:11.729 pay slips to prove your salary. But more and more 0:01:11.730 --> 0:01:15.569 people these days are working for themselves, freelancing in the 0:01:15.569 --> 0:01:18.900 gig economy, starting their own business and being their own 0:01:18.900 --> 0:01:22.650 boss. Now, it can be exciting and rewarding, but there is 0:01:22.650 --> 0:01:26.639 a downside. All the benefits of having an employer disappear, 0:01:27.179 --> 0:01:30.510 no company pension scheme, no payroll and if you don't 0:01:30.510 --> 0:01:34.590 work, you don't earn. Sometimes people are so busy keeping 0:01:34.590 --> 0:01:37.380 their business going, they don't have time to make sure 0:01:37.380 --> 0:01:43.289 they've got their own finances sorted. Today we're meeting someone 0:01:43.289 --> 0:01:48.360 who might identify with that problem. So let's welcome, Jesse, hi. 0:01:48.480 --> 0:01:48.990 Hi. 0:01:49.170 --> 0:01:52.680 So tell me about your business. What is it and how's it going? 0:01:53.250 --> 0:01:54.030 It's going well. 0:01:54.060 --> 0:01:54.660 Which is great. 0:01:54.720 --> 0:01:57.450 Yeah, minor blip with COVID, but we're doing well. So 0:01:57.450 --> 0:02:03.540 I run a travel consultancy, helping small hotels and travel 0:02:03.540 --> 0:02:05.579 companies get their name out there. 0:02:05.789 --> 0:02:08.190 So you seem like a real entrepreneur then, as I 0:02:08.190 --> 0:02:11.400 understand it. But you have a few worries, because obviously 0:02:11.430 --> 0:02:14.190 you are working on your own and getting your business 0:02:14.190 --> 0:02:16.950 out there. And like you said, we had a few 0:02:16.950 --> 0:02:19.230 blips in life, so you never know where things are 0:02:19.230 --> 0:02:19.650 going to be. 0:02:19.860 --> 0:02:23.189 Yeah. COVID was a big blip. Obviously, travel got shut 0:02:23.190 --> 0:02:25.950 down within 24 hours. I lost all my clients within 0:02:25.950 --> 0:02:26.820 24 hours. 0:02:26.880 --> 0:02:28.440 Oh my God. How did that make you feel? 0:02:28.650 --> 0:02:30.660 Didn't made me feel great. I'm not going to lie. 0:02:30.660 --> 0:02:32.669 It was a real shock to the system. We'd obviously 0:02:32.669 --> 0:02:36.178 just got the business to a really strong place. It was 0:02:36.270 --> 0:02:39.179 way worse for my clients than it was for me. 0:02:39.270 --> 0:02:43.440 Obviously my income stopped immediately, but I didn't have loads 0:02:43.440 --> 0:02:47.130 of overheads. But I was suddenly completely unemployed, needed to 0:02:47.130 --> 0:02:49.530 figure out how to pay my rent and it was 0:02:49.530 --> 0:02:51.810 like that probably for about five to six months. 0:02:51.900 --> 0:02:54.000 And I think this is what, we're highlighting with this. 0:02:54.240 --> 0:02:56.429 When you're working for yourself, something happens, you don't know 0:02:56.429 --> 0:02:58.229 what's around the corner. Then all of a sudden, all 0:02:58.230 --> 0:03:00.900 that business, all forecast you're expecting for the next few 0:03:00.900 --> 0:03:01.889 months, gone. 0:03:01.950 --> 0:03:02.790 Completely gone. 0:03:03.120 --> 0:03:06.510 Okay. Well we're through that, and business is in a 0:03:06.510 --> 0:03:10.139 good place. It's obvious that you're very entrepreneurial, you are 0:03:10.139 --> 0:03:14.609 driven and you're successful. You got that bit sorted. But 0:03:14.610 --> 0:03:17.070 there's another side that you haven't got sorted, which lots 0:03:17.070 --> 0:03:20.070 of people feel the same about, but don't necessarily admit. 0:03:20.550 --> 0:03:24.240 Yeah, absolutely. I mean the business is doing well. Creatively 0:03:24.240 --> 0:03:27.030 I'm really confident. If you want to open a hotel, 0:03:27.030 --> 0:03:28.230 I'll tell you exactly how to do it. 0:03:29.310 --> 0:03:31.199 I'm going to call you when I do. 0:03:31.410 --> 0:03:34.830 Yeah, please do. But, I'm 33 years old. I own 0:03:34.830 --> 0:03:36.990 my own business. A lot of my friends are a 0:03:36.990 --> 0:03:40.500 lot further ahead than me owning their own houses. They've 0:03:40.500 --> 0:03:43.110 got investments set up, and I'm just not in that 0:03:43.110 --> 0:03:45.809 position. It feels like everyone seems to know the answers, 0:03:45.809 --> 0:03:49.919 but I absolutely don't and a lot of people are giving me different advice 0:03:49.980 --> 0:03:54.030 from all over the place. It's just a bit confusing. 0:03:54.119 --> 0:03:56.640 Be really good to have some advice that can just 0:03:58.230 --> 0:03:59.520 help me along the way. 0:03:59.760 --> 0:04:02.010 Well, Jesse do not worry because help is at hand. 0:04:02.010 --> 0:04:04.439 We found someone to give you some guidance on finding 0:04:04.440 --> 0:04:08.190 your way through the money maze. Peter Komolafe is a YouTuber, a podcaster and TV 0:04:08.190 --> 0:04:10.859 contributor, and a qualified financial advisor. He's really, really good. 0:04:11.129 --> 0:04:13.979 And when you met, he started with some reassurance. 0:04:16.500 --> 0:04:19.320 Look, it's completely natural for people to feel as though 0:04:19.320 --> 0:04:21.479 I have no idea where to begin. We don't get 0:04:21.480 --> 0:04:23.369 taught it in school. This is where I'm going to 0:04:23.370 --> 0:04:26.130 give you hopefully a little bit of clarity around some 0:04:26.130 --> 0:04:30.119 of your areas. So savings, pensions, property. Do you have a 0:04:30.150 --> 0:04:34.380 priority among those three? Which one pulls you the most? 0:04:34.380 --> 0:04:37.080 I obviously get advice from a lot of my friends. 0:04:37.110 --> 0:04:39.928 Most of them own property and they're all financially quite 0:04:39.928 --> 0:04:44.339 savvy and I don't, I rent a property, and it 0:04:44.339 --> 0:04:48.719 was always meant to be property, I think. And then 0:04:48.720 --> 0:04:51.210 obviously you sit next to someone at dinner and they 0:04:51.210 --> 0:04:53.849 go, you haven't got a private pension, have you lost 0:04:53.850 --> 0:04:57.690 your mind? And you start panicking. I don't think I even 0:04:57.690 --> 0:05:01.560 have a state pension, but for me it was always savings 0:05:01.799 --> 0:05:05.010 that were for a property. And then it was also 0:05:05.010 --> 0:05:08.850 going to be sorting out a private pension. But then 0:05:08.850 --> 0:05:11.400 recently I've been told, why are you worrying about a 0:05:11.400 --> 0:05:13.979 pension, pensions aren't going to exist when we are old, 0:05:14.730 --> 0:05:16.890 put your money into property. That's the cleverest thing to do. 0:05:17.250 --> 0:05:19.290 That gives me really good insight. There are a lot 0:05:19.290 --> 0:05:22.469 of misconceptions when it comes to pensions. And oftentimes the 0:05:22.469 --> 0:05:25.500 conversation that people will have is, you do property or 0:05:25.500 --> 0:05:28.470 pension, one of the two, I think you can do 0:05:28.470 --> 0:05:30.839 both. And there's nothing wrong with doing both. It's going 0:05:30.839 --> 0:05:33.719 to be about prioritizing, which one is the most pressing 0:05:33.719 --> 0:05:37.139 thing for you? I think the main questions then become 0:05:37.139 --> 0:05:39.688 that you'll be asking is, okay, so how do I 0:05:39.690 --> 0:05:42.120 get a deposit? Can you get a mortgage as a self- 0:05:42.180 --> 0:05:44.849 employed person? How does that all work? 0:05:45.060 --> 0:05:48.810 Can I ask, am I self- employed? As a director 0:05:48.810 --> 0:05:52.289 of my own business, does that technically still qualify me 0:05:52.290 --> 0:05:53.220 as self- employed? 0:05:53.279 --> 0:05:55.380 Well, technically you are employed because you're employed by your 0:05:55.380 --> 0:05:58.949 own business. So you'll be employed per se, but you 0:05:58.949 --> 0:06:01.020 are a director of your business, so you're taking dividends, and 0:06:01.200 --> 0:06:03.719 get y as an income as well, the mortgage side 0:06:03.720 --> 0:06:05.969 of things, you will be able to get a mortgage, 0:06:05.970 --> 0:06:08.550 no problem, even if you are taking dividends. But I think 0:06:08.550 --> 0:06:12.570 the key difference between being self- employed business owner and 0:06:12.570 --> 0:06:15.719 employed is the fact that when you go and apply 0:06:15.719 --> 0:06:18.750 for a mortgage, from an income point of view, what 0:06:18.750 --> 0:06:20.820 they do is they take your salary, and they times 0:06:20.820 --> 0:06:23.250 that by a multiple, as a business owner, if you're 0:06:23.250 --> 0:06:27.419 taking dividends and income, then the same principle applies, but 0:06:27.420 --> 0:06:30.748 it's looked at and treated differently. So typically how it 0:06:30.750 --> 0:06:35.609 works with mortgages is you will take your earnings per 0:06:35.609 --> 0:06:38.849 year, and you will times that number by four, there 0:06:38.850 --> 0:06:40.830 are some lenders that are doing more. Now you've got 0:06:40.830 --> 0:06:44.400 some lenders that are doing seven times your salary, but 0:06:44.730 --> 0:06:48.599 there's a distinction here within salary and dividends. So salary 0:06:48.599 --> 0:06:52.049 is what you get paid. Dividends will be accounted in 0:06:52.049 --> 0:06:55.920 a different way, but depending on what you are taking 0:06:55.920 --> 0:06:58.440 from the business and how you're taking it, it shouldn't be 0:06:58.440 --> 0:07:02.190 a problem, but it may need some pre- planning and 0:07:02.190 --> 0:07:05.160 some pre- work to make sure that from a salary 0:07:05.160 --> 0:07:09.750 point of view, you are taken enough with dividends being 0:07:10.080 --> 0:07:13.830 accounted for it as well. So the mortgage companies will 0:07:13.830 --> 0:07:15.930 want to see a track record. So they will typically 0:07:15.930 --> 0:07:20.400 ask for about three years in evidence of salary income. 0:07:21.030 --> 0:07:24.690 So again, this is where if we are planning this 0:07:24.750 --> 0:07:26.610 and we are putting a marker in the sand for 0:07:26.610 --> 0:07:28.649 this to happen in X amount of time into the 0:07:28.650 --> 0:07:31.590 future, the groundwork needs to go into it with all 0:07:31.590 --> 0:07:35.010 of those considerations as well. The dividends can count towards 0:07:35.010 --> 0:07:38.370 it, but it depends in what shape you're basically taking 0:07:38.370 --> 0:07:40.290 it. And this is where mortgage advisor will be able 0:07:40.290 --> 0:07:42.960 to guide you in exactly how to actually structure. So 0:07:42.960 --> 0:07:44.759 maybe this is a conversation as well to have with 0:07:44.759 --> 0:07:47.520 the accountant as well and say, look, this is the 0:07:47.520 --> 0:07:49.470 plan I want to buy property. I know that I 0:07:49.470 --> 0:07:51.480 need to show more income. I still want to be 0:07:51.480 --> 0:07:54.060 taken dividends, which can be accounted. How do I structure 0:07:54.060 --> 0:07:57.540 this correctly in order to do that? But if you're 0:07:57.540 --> 0:07:59.939 going to have maybe a one or two year timeline 0:07:59.940 --> 0:08:02.639 to actually make this happen, it's putting the groundwork with 0:08:02.639 --> 0:08:04.739 all these considerations in mind as well. 0:08:06.090 --> 0:08:09.510 I think also just from a self- employed point of view, the thing that I've 0:08:09.510 --> 0:08:11.730 really struggled to get my head around, I don't really 0:08:11.730 --> 0:08:15.660 have any personal savings, but I have got about 35 0:08:15.660 --> 0:08:20.550 grand in the business, which is just sitting there. And 0:08:20.639 --> 0:08:23.369 where I struggle is obviously it's my business, it's my 0:08:23.369 --> 0:08:28.440 service. And it's my turnover, in my head, I'm like, 0:08:28.500 --> 0:08:32.699 but that's my money. Why can't I use that money 0:08:32.790 --> 0:08:37.469 to get on the property ladder? So it's understanding as a self- 0:08:37.469 --> 0:08:43.108 employed person, that real difference between why that money needs 0:08:43.110 --> 0:08:45.179 to stay there, and I can't use it from a 0:08:45.179 --> 0:08:46.319 personal point of view. 0:08:46.980 --> 0:08:50.190 As a self- employed person. One of the things that you 0:08:50.280 --> 0:08:53.219 have to start thinking about, and this is something I've 0:08:53.219 --> 0:08:55.770 had to make a clear distinction on, my accountant has 0:08:56.190 --> 0:09:00.958 hammered it right into me is, the business entity is 0:09:00.960 --> 0:09:04.230 my business, but the business entity is an entity of 0:09:04.230 --> 0:09:07.140 its own. So whilst the money might be in your 0:09:07.140 --> 0:09:11.578 business account, yes, it's your business, but the money is 0:09:11.580 --> 0:09:15.150 the business entity's money. And in order for you to transfer out 0:09:15.150 --> 0:09:19.500 of the business into your personal account, there needs to 0:09:19.500 --> 0:09:23.069 be a transaction that takes place. And when that transaction 0:09:23.070 --> 0:09:26.940 takes place, tax also needs to be paid upon that 0:09:26.940 --> 0:09:30.569 as well. It's a very, very difficult thing to come 0:09:30.570 --> 0:09:32.519 to terms with. And I look at it sometimes and 0:09:32.520 --> 0:09:34.619 think, do I really want to pay tax on amount 0:09:34.619 --> 0:09:35.999 of money that I want to take from the business 0:09:36.000 --> 0:09:38.160 when I've worked so hard for the business, for it 0:09:38.160 --> 0:09:40.679 to get the money that's in the business, it could 0:09:40.679 --> 0:09:43.350 be quite jarring in that way. And I think as well with that, you 0:09:43.350 --> 0:09:44.819 also need to think about how you're going to use 0:09:44.820 --> 0:09:46.949 the money to actually make more money in the future, 0:09:47.340 --> 0:09:50.040 and actually grow that money from a business point of view. 0:09:50.190 --> 0:09:53.218 Because realistically that pot of money is money that I've 0:09:53.219 --> 0:09:57.270 earned, and that I want to use to secure my 0:09:57.270 --> 0:10:00.390 future. If so is it better for me to start drawing 0:10:00.390 --> 0:10:03.929 more dividends out month by month and taking that money 0:10:04.170 --> 0:10:07.320 and putting it straight into a personal savings account or 0:10:07.320 --> 0:10:10.529 leave it there to continue to accumulate money in the 0:10:10.529 --> 0:10:14.100 business. And then when I'm ready, pull it out. 0:10:14.700 --> 0:10:17.250 It really depends on whether you feel that you are going to 0:10:17.250 --> 0:10:21.480 need capital within the business. So are there any capital 0:10:21.480 --> 0:10:24.059 intensive projects or anything else that you know, for a 0:10:24.059 --> 0:10:25.740 fact that there might be a little bit of capital 0:10:25.740 --> 0:10:27.330 that you need to have in the business? 0:10:27.510 --> 0:10:30.029 No, I would never draw it all out, but the 0:10:30.029 --> 0:10:31.980 thing that I can't get my head around is the 0:10:31.980 --> 0:10:35.220 fact that it's there and that I can't use it, when 0:10:35.220 --> 0:10:38.490 I'm sitting here watching all my friends buying houses and 0:10:38.490 --> 0:10:40.979 I'm like, oh, I've got that money there, surely it 0:10:40.980 --> 0:10:43.650 should be doing something clever, and it's not, it's just 0:10:43.650 --> 0:10:44.310 sitting there. 0:10:44.550 --> 0:10:48.119 Look, the tax petition is the biggest thing to consider. If you 0:10:48.119 --> 0:10:50.490 take it all out, are you happy with the level 0:10:50.490 --> 0:10:52.470 of tax that you're going to have to pay, because 0:10:52.470 --> 0:10:54.180 that's going to be the main consideration. 0:10:54.210 --> 0:10:56.160 And would it be a really hefty amount of tax? 0:10:56.220 --> 0:10:58.170 Well, that depends on how you take it. Whether you 0:10:58.170 --> 0:11:00.270 take it as salary, whether you take it as dividends, 0:11:00.420 --> 0:11:02.309 you need to have a look at the scenarios with your accountant, 0:11:02.639 --> 0:11:04.739 to say, look, if I increase my dividends by X 0:11:04.740 --> 0:11:07.170 amount per month, in order to be able to draw 0:11:07.170 --> 0:11:09.088 this money out of the business, what does that look like 0:11:09.090 --> 0:11:11.520 from a tax point of view? If you can take 0:11:11.520 --> 0:11:12.868 it all out, and it's going to cost you, I 0:11:12.870 --> 0:11:16.439 don't know, a couple of thousand pounds versus maybe a 0:11:16.440 --> 0:11:19.049 few hundred pounds, it's a big decision to make because 0:11:19.049 --> 0:11:21.780 it's a big difference. And you need to know what 0:11:21.780 --> 0:11:24.479 those numbers look like. If you saw a property that 0:11:24.480 --> 0:11:27.420 you were like, I absolutely want this and you could take 0:11:27.420 --> 0:11:31.319 the money tomorrow. Would you? Maybe, if it was something 0:11:31.320 --> 0:11:33.660 you were really, really bought into, like, I really like 0:11:33.660 --> 0:11:35.160 this property, it's an opportunity, I want to do it. 0:11:35.160 --> 0:11:38.760 Quite like to buy a camper van, but I don't think that's going to make me any money. 0:11:38.760 --> 0:11:41.219 I don't know. Used vehicles these days, the market for those 0:11:41.219 --> 0:11:42.030 are very, very healthy. 0:11:42.030 --> 0:11:46.500 Because then I'm like, well, it's a camper van and I work in travel. So it's a travel cost. 0:11:46.559 --> 0:11:48.809 Could you do it as a business expense? Possibly. That's 0:11:48.809 --> 0:11:51.750 a conversation to have with your accountant. One thing we haven't 0:11:51.750 --> 0:11:54.360 actually spoken about is the fact that at the moment 0:11:54.360 --> 0:11:56.549 you are mid 30, so there is actually help out 0:11:56.549 --> 0:12:01.920 there via the government. So for example, things like Lifematters, Lifematters 0:12:01.920 --> 0:12:05.460 will help you as a first time buyer to get 0:12:05.460 --> 0:12:09.000 to a deposit a bit quicker. So essentially how this 0:12:09.000 --> 0:12:12.480 works, is with a Lifematter, you can contribute 4, 000 pounds 0:12:12.480 --> 0:12:15.150 every single tax year. And for every 4, 000 pounds 0:12:15.150 --> 0:12:16.949 that you put in, you're going to get a thousand 0:12:16.949 --> 0:12:19.439 pounds free from the government for the purpose of your 0:12:19.620 --> 0:12:24.179 house deposit. There are some limitations around where you buy 0:12:24.210 --> 0:12:27.990 and property prices. I think the max property value you 0:12:27.990 --> 0:12:32.940 can buy is 450,000 pounds, within the London area. It's 0:12:32.940 --> 0:12:36.809 a good vehicle to use as a potential to get 0:12:36.809 --> 0:12:40.620 you towards a house deposit a little bit sooner. And 0:12:40.620 --> 0:12:43.260 obviously when it comes to pensions, one of the unfortunate 0:12:43.260 --> 0:12:46.110 things is that as a business owner, you don't have 0:12:46.110 --> 0:12:49.740 the automatic cover that you're going to receive than if 0:12:49.740 --> 0:12:52.618 you worked for a business, you walk into a business, 0:12:52.619 --> 0:12:54.958 a pension is offered to you. As a business owner, 0:12:55.230 --> 0:12:59.730 it's your responsibility to provide that for yourself. And it's 0:12:59.730 --> 0:13:02.520 something that a lot of business owners have to really 0:13:02.910 --> 0:13:06.240 be intentional about setting up. But it's a really important 0:13:06.240 --> 0:13:08.189 thing to make sure you have set up within the 0:13:08.190 --> 0:13:11.069 business. It can be a business expense, so it can 0:13:11.070 --> 0:13:15.270 help you reduce your corporation tax essentially. Okay, now there 0:13:15.270 --> 0:13:18.210 is something called, (inaudible) was introduced and that's where 0:13:18.210 --> 0:13:20.010 if you were an employer, if you've got employees in 0:13:20.010 --> 0:13:23.580 the business, technically speaking, according to legislation, you should be 0:13:23.580 --> 0:13:26.610 paying in a certain amount into your pension every single 0:13:26.610 --> 0:13:30.779 year. So the number is 8%. So that is 3% from 0:13:30.809 --> 0:13:34.830 the business, from the company, then 5% from you as 0:13:34.920 --> 0:13:38.490 the employee within the business. So that is the minimum 0:13:38.490 --> 0:13:41.160 that you could start with. Your retirement may not be 0:13:41.160 --> 0:13:44.429 for 30, 40 old years. So any money that goes into 0:13:44.429 --> 0:13:47.429 a pension, you want it to be working as hard 0:13:47.429 --> 0:13:51.030 as possible for you. And obviously it is an investment. 0:13:51.030 --> 0:13:53.640 So your investment will go up. It will go down 0:13:53.940 --> 0:13:56.578 over that period of time. As long as you're happy 0:13:56.580 --> 0:14:00.029 with the notion that over the long- term, it should 0:14:00.030 --> 0:14:05.100 perform better and get you really, really good returns over that long- 0:14:05.100 --> 0:14:08.730 term piece. You're able to manage the investment risk in 0:14:08.730 --> 0:14:10.828 how you look at it. You can review it every 0:14:10.830 --> 0:14:13.230 single year if you needed to, but doing it via 0:14:13.230 --> 0:14:15.270 the business does make sense, because it can help you 0:14:15.270 --> 0:14:17.640 reduce your corporation tax. 0:14:18.179 --> 0:14:21.929 Because I've just hired my first employee, literally 10 days 0:14:21.929 --> 0:14:24.780 ago. But so am I right in thinking that from the 0:14:24.780 --> 0:14:28.620 business, I need to look at a pension twofold. So 0:14:28.620 --> 0:14:30.690 I need to look at it in terms of my 0:14:30.690 --> 0:14:32.609 private pension that I set up, that's going to be 0:14:32.610 --> 0:14:34.110 the one that's working really hard and I put most 0:14:34.110 --> 0:14:37.021 of the money into. And then, and did you say auto- enroll- 0:14:37.021 --> 0:14:37.441 Auto-enroll. 0:14:38.040 --> 0:14:40.949 Pension, and I need to set that up for both 0:14:40.949 --> 0:14:44.940 me and Laura, and I need to put 3% of our 0:14:44.940 --> 0:14:48.150 salaries into that. And then Laura can opt in as 0:14:48.150 --> 0:14:49.380 to whether she adds 5%. 0:14:49.890 --> 0:14:53.219 That's right, yeah. So if you are having conversations with 0:14:53.219 --> 0:14:55.770 your account, your account can guide you around how you 0:14:55.770 --> 0:14:58.889 set up. A lot of businesses will just do something 0:14:58.889 --> 0:15:01.530 like Nest for example, is a really, really simple way 0:15:01.530 --> 0:15:04.170 to get it done. They are very, very helpful, low 0:15:04.170 --> 0:15:07.530 cost. It's a good place to get started. My limited 0:15:07.530 --> 0:15:10.469 company, I pay into a Nest pension because I had set one up 0:15:10.469 --> 0:15:12.990 for myself, but I also have a private pension as well. 0:15:13.080 --> 0:15:15.480 With who, who should I set up a private pension with? 0:15:16.199 --> 0:15:18.569 There are lots of providers out there. I mean, it 0:15:18.570 --> 0:15:21.570 depends on what you prefer really and what you like 0:15:21.570 --> 0:15:23.340 in a provider. One of the bigger things that you 0:15:23.340 --> 0:15:26.790 really want to be looking at is, fees, cost. Those 0:15:26.790 --> 0:15:29.700 will be a really important point for comparison. Some will 0:15:29.700 --> 0:15:31.889 be more expensive than the others. Although there are caps 0:15:31.889 --> 0:15:34.979 on how much providers can actually charge you, but how 0:15:34.980 --> 0:15:37.020 they also invest the money in a pension as well 0:15:37.020 --> 0:15:39.060 might be really important to you. If you have certain 0:15:39.060 --> 0:15:43.950 ethical views, some providers will have that, others won't. So 0:15:43.950 --> 0:15:47.010 when we talk about state pension, you've worked at places 0:15:47.010 --> 0:15:51.120 previously, you're running a business currently, you will be accumulating 0:15:51.240 --> 0:15:54.090 national insurance years, that will go towards your state pension. 0:15:54.090 --> 0:15:58.140 So it's just really important for you to continue to make those contributions 0:15:58.140 --> 0:16:01.740 and acquire national insurance contribution years towards that state pension. 0:16:01.920 --> 0:16:04.889 We've nailed the pension. Apart from my guests, my most 0:16:04.889 --> 0:16:07.620 obvious blunt question is realistically, how much should I be 0:16:07.620 --> 0:16:09.360 putting into a private pension per month? 0:16:09.809 --> 0:16:12.209 So try and work to the minimum. So 8%. 0:16:13.170 --> 0:16:15.630 Of my turnover or my salary? 0:16:15.840 --> 0:16:19.140 Of your salary, I would say in terms of maximums, 0:16:19.200 --> 0:16:21.479 it's really up to you. Pensions are such that you 0:16:21.480 --> 0:16:24.539 can be flexible now, so you can pay in monthly. 0:16:24.719 --> 0:16:26.849 But also if you have a really good year in 0:16:26.849 --> 0:16:29.129 the business, you want to throw in 5, 000 or 0:16:29.129 --> 0:16:30.929 10,000 here and there. You can also do that. 0:16:31.410 --> 0:16:33.990 When I was saying earlier, oh, everyone was saying that 0:16:34.470 --> 0:16:36.600 pensions aren't going to be a thing when we're older, 0:16:36.990 --> 0:16:40.259 surely any money that I have saved into a private 0:16:40.679 --> 0:16:44.399 pension part, that's my money. And I will get it 0:16:44.400 --> 0:16:45.180 at some point? 0:16:45.270 --> 0:16:48.360 Absolutely, yes you will. There's a lot of misconceptions about 0:16:48.360 --> 0:16:50.190 them saying that it's not going to be around, and 0:16:50.190 --> 0:16:52.530 it's going to be a waste of time. I always 0:16:52.530 --> 0:16:54.630 say to people, it's best to have it as your 0:16:54.720 --> 0:16:57.600 backup plan. It's not going to hurt you if you 0:16:57.870 --> 0:17:00.329 pay in a hundred pounds, 200 pounds, whatever that minimum 0:17:00.330 --> 0:17:04.529 might be in per month, without just trendle in a way, working 0:17:04.529 --> 0:17:07.080 a way for you over the course of 30, 40 years, 0:17:07.289 --> 0:17:09.660 because that will amount to a pot of money. First 0:17:09.660 --> 0:17:13.770 and foremost, under the current legislation, you hit 55. If 0:17:13.770 --> 0:17:15.658 you have a hundred thousand pounds in year pension part, you can 0:17:15.809 --> 0:17:18.900 take 25 grand completely tax free and people will either 0:17:18.900 --> 0:17:20.398 use that to pay off their mortgage or go and 0:17:20.400 --> 0:17:23.490 buy a deposit for a rental property, depending on how 0:17:23.549 --> 0:17:25.680 big your pot is. But with this as well is 0:17:26.010 --> 0:17:28.260 pensions, people often think that pension is going to die 0:17:28.260 --> 0:17:30.270 with you. Like you can't pass it off to family 0:17:30.270 --> 0:17:32.760 and you know, kids and beneficiaries, actually, that's not true. 0:17:32.760 --> 0:17:35.370 You can pass it on. And for the most part 0:17:35.609 --> 0:17:38.938 you can pass it on without inheritance tax up until 0:17:38.940 --> 0:17:42.448 certain age. So 75 is the main point that where it 0:17:42.450 --> 0:17:44.850 cuts off. But if you imagine you have a business 0:17:44.850 --> 0:17:46.738 that you might sell or you have other assets that 0:17:46.740 --> 0:17:49.109 you might sell, most of those things will be part 0:17:49.109 --> 0:17:51.990 of your estate for inheritance tax if you become inheritance 0:17:51.990 --> 0:17:55.649 tax liable, but your pension sits outside of that. So 0:17:55.920 --> 0:17:58.980 it's a really nice tax efficient vehicle to actually use. 0:17:58.980 --> 0:18:01.290 And like I said, as a plan B, there's nothing 0:18:01.290 --> 0:18:03.148 wrong with having it, just trying it along in the 0:18:03.150 --> 0:18:06.240 background to give you that backup plan, if you will. 0:18:06.869 --> 0:18:07.920 But plan A should be to buy a house. 0:18:09.420 --> 0:18:12.300 I think for you, plan A because it is so 0:18:12.599 --> 0:18:16.739 immediate, it will come quicker than retirement. And think about 0:18:16.740 --> 0:18:19.470 it this way. When you get to retirement age, you 0:18:19.470 --> 0:18:20.970 probably don't want to be in a position where you have 0:18:20.970 --> 0:18:23.938 to think about rent, and be thinking about the inflationary 0:18:23.940 --> 0:18:25.800 rate of rent as well. You don't want to get 0:18:25.800 --> 0:18:28.770 to 60, you've got to pay 800 pounds per month 0:18:28.800 --> 0:18:31.349 in rent, the following year, it goes up to eight 0:18:31.349 --> 0:18:33.239 50. You don't want to be in that position. You 0:18:33.240 --> 0:18:35.430 probably want to be in a position where you have 0:18:35.699 --> 0:18:39.150 no mortgage. You own your property outright. It's an asset 0:18:39.150 --> 0:18:41.550 that if you wanted to downsize, you can release some 0:18:41.550 --> 0:18:44.519 cash from it. It will give you more options later 0:18:44.520 --> 0:18:46.620 on than not doing it at all. 0:18:46.950 --> 0:18:49.648 So I guess my final question is based on the 0:18:49.650 --> 0:18:52.918 fact that I'm obviously self- employed, so that doesn't cover 0:18:52.920 --> 0:18:57.869 anything like sick leave, paying my team's salaries if anything 0:18:57.869 --> 0:19:00.780 was to go wrong with the business, I don't have 0:19:00.900 --> 0:19:03.570 business insurance. Should I have business insurance? 0:19:04.080 --> 0:19:07.170 This is one of the biggest challenges that a lot 0:19:07.170 --> 0:19:10.920 of self- employed business owners actually face. If you don't 0:19:10.920 --> 0:19:14.220 work, the business doesn't work really. And it's a big, 0:19:14.220 --> 0:19:18.570 big risk. Insurances are there to help with that. There are 0:19:18.570 --> 0:19:21.119 things like key man insurance, it covers the key person 0:19:21.119 --> 0:19:24.509 in the business. You can pay for it via the 0:19:24.509 --> 0:19:28.019 business account. So it's a business expense and what that 0:19:28.020 --> 0:19:30.988 does, it covers you as the key person within the 0:19:30.990 --> 0:19:33.540 business. So for example, if you're unable to work, accident, 0:19:33.540 --> 0:19:37.200 sickness, that kind of stuff, it can then step in 0:19:37.200 --> 0:19:39.658 to cover the financial hit that the business would take 0:19:39.660 --> 0:19:43.289 for you not being there. It's slightly different to general 0:19:43.290 --> 0:19:45.688 business insurance, which is more about if you're going to 0:19:45.690 --> 0:19:48.570 a public exhibition. And one of your stands falls on 0:19:48.570 --> 0:19:51.930 someone. That's more about public liability. These are very specific 0:19:51.930 --> 0:19:54.869