High earner financial planning: are you really wealthy?

High earner financial planning is one of the least understood areas of personal finance. You might assume that earning £320,000 a year means money is the least of your worries.

Yet for many high earners across the UK, the end of the month arrives with a rather embarrassing problem. Sound familiar? You are certainly not alone.

Meet the case study

Aged 54, has 3 frozen personal pensions of £430,000 with Royal London, Scottish Widows, and Aviva which he would like reviewed and discuss possible consolidation. He also has a frozen scheme of £14,000 with Prudential that has a guaranteed annuity rate (GAR) built in that he knows he may need separate advice for and an active company scheme through Royal London.

He would also welcome a full financial health check because he and his wife have a joint income of £320,000 but feel their money could work harder for them.

Now for the truth

That case study reads very well on paper. A £320,000 joint income and a sizeable collection of pensions. But here is what it does not tell you.

There are no savings. None. There is a £620,000 mortgage attached to their house and two children attend private school, which is one of the single biggest financial commitments a family can make.

No doubt there are also car running costs and foreign holidays in the mix, as is so often the case at this income level. And at the end of every month, despite earning what most people could only dream of, there is little left.

This is the reality of high earner financial planning in the UK right now. A £320,000 income works out at roughly £15,000 a month take home. It sounds extraordinary.

But when lifestyle costs quietly consume every penny, the income becomes almost irrelevant.

How does high earner financial planning break down?

Lifestyle inflation is the culprit. As income rises, liefstyle spending tends to rise with it. A bigger house, better schools, nicer cars, more holidays. None of these decisions are unreasonable in isolation.

Together, however, they create a situation where a genuinely high earning family have little savings.

The cost of living crisis is constantly discussed in the mainstream media. Most people associate it with energy bills, food shopping and lower incomes.

However, high earners face their own version of this pressure. It just looks different.

And because the income appears so large from the outside, it rarely gets the sympathy or attention it deserves.

The VAT bombshell that no savings makes worse

Private school fees have just increased by 20% overnight. The government's decision to add VAT to independent school fees is a significant blow to families like this one.

However, many parents are now using a strategy to soften that hit. If you pay the remaining school fees upfront in one lump sum, you lock in the pre-VAT price and save 20% on the remaining balance.

With three years of schooling left, for example, that saving could be substantial.

The catch, of course, is that you need savings or accessible capital to do it. Our client has neither. So that option is simply not available to him.

He will pay the full VAT-inclusive fees month by month, absorbing a cost that a financial cushion could have avoided entirely.

It is a perfect illustration of why high earner financial planning must include an emergency fund, even on an income of £320,000.

The pension picture needs urgent attention

Across three frozen pensions, £430,000 sounds really good. In reality, and this is where high earner financial planning so often falls short, those funds may be sitting in default investment options that no longer reflect his age, risk profile, or retirement plans.

A full pension review is therefore essential and consolidation may make sense. However, each pension needs to be looked at individually.

The Prudential pot, although small, needs close attention.

The GAR means the income it could generate at retirement may be far better than any rate available on the open market today. For that reason alone, it cannot be transferred without specialist advice.

The high earner financial planning game plan

Our client already has a very smart game plan. The intention is to downsize the family home and use the proceeds to buy a property in need of renovation. The plan is to add value through the renovation work, end up with a home with a reduced mortgage of around £300,000.

That is a very different financial position to where they are today.

To illustrate the difference, their current £620,000 mortgage costs roughly £3,450 a month. Reduce that to £300,000 and the monthly repayment drops to around £1,650. That is a saving of £1,800 a month, or £21,600 a year, which could go straight into savings or investments rather than servicing a debt.

What good high earner financial planning actually looks like

A proper financial health check for this client would include a full pension review, a clear mortgage strategy, and the creation of a monthly plan to allow consistent saving to begin. Even a modest monthly saving, applied consistently over the next 10 to 15 years, can build substantial wealth at this income level.

The private school fees will not last forever. The children will grow up. The mortgage can come down with the right plan in place.

When those costs eventually fall away, the goal is to have real financial security. 

At 54, with a strong income still coming in and some good ideas already forming, it is genuinely not too late. But the time to act is now, not when financial pressure eventually forces the issue.

If this case study feels closer to home than you would like to admit, perhaps it is time for a conversation. High earner financial planning does not have to be complicated. It just needs to start.