20 days ago by Kimi

Guest blog: It's not just about the salary

Tamsin Guest Blog Header

This week, we're handing over the reigns of the blog to Tamsin Caine MSc., FPFS. Tamsin is a Chartered Financial Planner and Director of Financial Planning at Smart Financial and Smart Divorce.

At Smart Financial, she helps SME owner managers and senior executives to work out what they want from their lives and what they need to do to achieve that. At Smart Divorce, being a Resolution Accredited divorce specialist, she helps separating and divorcing clients to sort out their finances and helps them to divorce amicably so that they can start living their new chapter. In her spare time, Tamsin is a single mum of two teenagers, loves hiking in the Peak District and volunteers at her local rugby club Sale FC.

If you’re thinking about a career move, life change or relocation, which We Are Adam are helping you with, one of the things that often gets missed by the excitement and planning is the financial implications. You may have been offered a position with a higher headline salary than you currently earn, but is it enough? From a financial perspective, there are other areas that you should be considering.

 

Location 

Where you will be working is often thought about in terms of the time it will take to get to work, but you should also consider the cost. If the journey is a longer commute, your petrol costs or train ticket will increase. Does the salary increase compensate sufficiently for this?

You may be considering a full relocation to another part of the country. There are even more considerations for this type of move. You may remain living in the same place but stay away during the week. You may opt to move lock, stock and barrel. Whichever you opt for, calculating the cost is really important. The area that the new job is in may be more expensive and so housing may also be more expensive. What about the cost of living in general? There are areas of the UK where everything costs more! 

You should also think about basics, like lunch. If you are based in a small town, you might have a local sandwich shop that is relatively cheap. There may even be subsidised meals on site. When you move to your new job, is the only option an expensive chain. You could take lunch to work, but is this an option if you are living away from home in the week. Will you also need to consider other meals if this is the case?

 

Bonuses

If your new package is a bonus related to either your individual performance or the business performance, find out how likely it is that you will achieve them. What has happened in the past? Have the bonuses always or rarely been achieved? If you are making a big move, it is important to question what the actual situation is likely to be.

 

Pensions

Pensions often get forgotten in a job move but they can be incredibly valuable benefits. Let me give you an example; I was speaking to a lady in the North East, who was considering moving from an employed management role in the NHS to a consultancy position. She would earn substantially more each month but we worked out that her overall package would be less, due to the level and type of benefits provided by the NHS. With some pensions, particularly final salary and career average, it can be difficult to work out the annual value. This is where you might want to speak to an adviser for help.

If your current and future employers both offer workplace pensions, you might think that they will therefore be easy to compare. However, even in those instances, there may be differences in contribution levels, i.e. they may have opted to offer more than they have to, and how much of your earnings are pensionable, e.g. they may only pay into your pension between two limits, rather than the whole amount. Your employer may offer to match the contribution level that you make, often to a limited percentage.

 

Financial Protection

Whilst some offer nothing at all, most businesses will offer some type of death in service benefit. This means that your partner and family will receive a number of times your salary if you were to die whilst employed by them. They may also have included some critical illness cover for you. This will mean that if you are unable to work due to one of a list of specific critical illnesses, you will receive a lump sum. The lump sum may be taxable if the company pay for the cover, unless it is classed as a P11D benefit in kind, where you are taxed on the premiums.

Income Protection is sometimes offered by companies. This is an excellent benefit, providing regular monthly payments to you after a certain period of time (usually from when your company sick pay stops). Insurance companies will only insure 75% of your income as a maximum, so that you still want to return to work. As with critical illness cover, if the premiums are a P11D benefit in kind, the payments made to you in the event of a claim are tax free. For example, one of my clients was diagnosed with a liver disorder requiring a transplant. His employer had an income protection policy that would pay him until retirement. The business had always paid the premiums and so when the income was paid to my client, it was taxable. However, it meant that he received regular income during the last 5 years when he was unable to work, until he was able to draw his pension.

Private Medical Insurance is another benefit often provided by employers, particularly larger corporates. If you, or sometimes your immediate family as well, have a serious illness or injury requiring medical treatment, these policies will ensure that you are able to access medical consultations and treatment privately, rather than waiting for the NHS.

I have also seen some employers include travel insurance in their employment package, particularly in those businesses where regular overseas travel is part of the job.

Each of these insurances would have different costs if you wanted to replicate them individually, many depending on your age, state of health, smoker status, among others. If your current package includes some or all of the above but your new position doesn’t, it would be worth gathering evidence of the cost of them, either for negotiations with your new employer or to understand the cost of replacing them if you choose to do so personally.

 

Consider the Cost

Whenever we consider a change of direction, it is important to consider the full cost of making that move. Have a full understanding of the whole package that your employer currently offers and compare it to those on offer with your new employer. Also, just because they don’t offer something, doesn’t mean that they won’t consider it to secure your services. You can always negotiate.

It’s not just about the monetary value

When you are considering the cost of making a move, you should also think about the other personal costs. The new position should help to move you closer to your personal and financial goals, without meaning you compromising on your values.

 

We work with many clients who think carefully about what they want to achieve and then plan for what they need to do financially in order to get there. This may be being financially independent from 49 or moving abroad at 62 or working part time while the kids are young. These goals are all important to the individuals they belong to. However, they may also be underpinned by what they are not prepared to do, because it doesn’t align with your values. For example, if one of your values is around spending time with your family at the weekend, a job that requires you to be away one weekend in four, then whatever the package, you are unlikely to take it.

 

If you need help with any aspect of your finances, please don’t hesitate to get in touch with me on LinkedIn.