This week I share some lessons we can learn from Johnny Sexton’s reported pension planning in recent weeks! I’ve not even met the man (yet!) but he is a sporting legend, and I admire everything that he’s done (even balling the referees for some of their Cup Final decisions!). And he has set yet another fine leadership example in terms of his pension planning. Let’s learn from the boss! (Oh, and pardon me but I couldn’t help writing this with more than a hint of tabloid journalism in mind!!)

Sporting Hero

Rugby heroes usually gain most plaudits for their jaw-droppingly tough and skillful performances on the pitch. When it wasn’t at all popular back in the late 80’s and 90’s I was a huge rugby fan – Nick Popplewell and Eric Elwood (another mighty outhalf!).

Rugby was not popular back then – and being an amateur sport at the time, all the players worked in full time roles such as bank staff, teachers, small business owners etc, just as county GAA players do these days.

But since professionalism hit, all has changed. There is more money obviously for players, and the level of fame across the population has mushroomed! And there is no bigger Irish Rugby star than Johnny Sexton, the Irish rugby legend!

And he’s done something financially smart off the field that’s grabbing attention in the media recently: his limited company has reportedly invested over €550k into a pension for him, both a smart tax planning move, but also goes towards securing Johnny and his family’s financial future.

Crouch, touch, pause and engage as we dive into why this pension planning move is as awesome as a Web Ellis winning conversion, how it’s not just helping Sexton’s future, but also teaching us all a valuable money lesson, and why planning for the long haul is where the real victory lies :).

Why Pension Investments Score Big

Before we jump into the how and why of Johnny’s pension planning move, a quick reflection on ‘why pensions?’. Well, turns out they’re like the ‘Player of The Match’ of the financial world for a few solid reasons:

1. Playing the Long Game: Athletes’ careers are like fireworks – bright but short-lived! With the bumps, bruises, and retirement knocking on the door, Sexton’s stepping up and ensuring he’s got a financial safety net when the final whistle blows.
2. Compound Interest Magic: Compound Interest is like that extra boost your scrum gets when you bring on a Cian Healy after 50 minutes of a tough match! By putting money into pensions early (he’s only in his late 30’s, and won’t be drawing it for probably 20+ years), Johnny’s letting his money snowball over time, thanks to the magic of compound interest.
3. Tax Breaks Huddle: Pension contributions, particularly from your own company account, come with tax perks that can make accountants do a little happy dance. Putting money into your pension can mean paying less tax now, both personal and corporate, which is like securing bonus points for scoring an extra try or two!
4. Diversification Defense: Just like a rugby team needs more than one star player (we have many heading to the RWC!), your money needs a diverse roster. Pension planning helps spread one’s financial muscle across different investments, so if one gets taken out by a dodgy Eoin Farrell tackle, the others might still score under the posts! Having multiple retirement income sources can be a wise thing to be building.

The Sexton Playbook

Sexton’s pension power play isn’t just about bulking his pension account. It’s got some seriously sweet side effects:

1. Leading by Example: As he leads by example on the pitch, making the difficult decisions and getting stuck in, he’s doing so off the pitch. Sexton’s smart move isn’t just raising eyebrows; it’s raising awareness. By showing other athletes (and regular folk like us) the importance of planning for retirement, he’s kicking off a financial fitness trend. And of course, one has to have the cash in one’s business to do what he did. The lesson and media coverage show confidence in using pensions to support your tax and financial planning.
2. Smart Tax Planning: Based on the media coverage, his firm had nearly €2m in cash. That’s akin to having a few backs in your scrum; a total waste of time! By taking advantage of recent pension changes, any employee can receive any amount into a PRSA in their name, and pay no Benefit In Kind on that payment. Plus, the company gets to write off the expense, so pays less or no Corporation Tax. In the year that his firm did it, 2022, Johnny’s company showed a loss = zero tax! Just like his famous choke tackles; totally ethical, legal, effective and smart!
3. Long Term Plan: As already mentioned, I know nothing about Johnny that can’t be read in the papers etc, but let’s say for example that he had €300k in pensions before his company did the €500k top-up. He would then have c€800k invested in pensions by 38 years of age. Let’s work on the basis that he will not need to draw that pension until he is say 58, 20 years from now. Hopefully, he is properly invested with fair fees, and so a reasonable long term assumption would be that the €800k will grow at average of 6% per year (being conservative). In 20 years, that €800k will be worth €2.56m, thanks to compounding. That would put his pot over the current Standard Fund Threshold (read more about that in Blog151 here), but that’s a good problem to have. Plus there are things that he can do to navigate that if the Threshold isn’t increased over that timeframe (surely it will!?).
4. Post-Retirement Chill: Hanging up the jersey and trading locker rooms for golf courses can be a shock to the system. I’ve read that he has been studying and plans to get into the workforce in the coming years, but if he chooses not to, with a pension in play, Johnny’s ensuring he’ll be able to go sipping on piña coladas without the worry of a shrinking bank account, should he wish to!

The Winning Strategy: Long-Term Financial Planning

Johnny Sexton isn’t just a rugby star; he’s a role model for solid financial moves that anyone can emulate. Whether you’re holding a rugby ball or a briefcase, here’s what his story teaches us:

1. Kick Off Early: Time is like a magic ingredient in the search for wealth. The earlier you start investing for retirement (even if it’s just a little bit), the more time your money has to grow – and that’s some seriously reliable financial trick play
2. Consistency Trumps All: Johnny’s pension play isn’t about dropping a fortune all at once. Not many of us can do that. It’s about making regular contributions and letting them rolling-maul over time! Consistency is the secret sauce.
3. Call in the Experts: Just like you wouldn’t face a scrum solo, it’s smart to consult financial props to help you! They are the experts in developing a strategy to beat even the Boks scrummage! They can help you tailor your approach, to adjust your angle here or there, to keep your elbow here or there, and to make sure your ears are well taped so you don’t end up with a bad case of the cauliflower ear by the time retirement comes round!
4. Mix Up Your Moves: Remember that time Johnny faked left and went right to score a try? He’s not one for the goose-step but he shows that even us mere mortals who can’t do a Simon Geoghan, can make some very fancy moves! He shows that diversification is another key ingredient in action. Spread your investments around to reduce reliance, and increase your chances of success.

Closing Thoughts

Johnny Sexton’s decision to stash some of his company funds in pensions isn’t just a one-off play; it’s a game-changer. He’s proving that thinking about life after the final whistle isn’t just reserved for old-timers; it’s a smart pension planning move for everyone, even those who are 2 or more decades away from needing that retirement income.

Whether you’re on the pitch, in the office, or just planning your next move, remember that playing the long game is where the real victory lies. So here’s to Johnny Sexton, not just a rugby legend, but a financially smart cookie we can all root for as we tackle our own money game 🙂

Bring home Web Ellis Johnny!

Paddy Delaney QFA RPA APA