Few will experience the highs, lows, glamour or pain that makes up the life of a professional sports man or woman.
It’s an intense period, and if you are lucky not to suffer a career threatening injury early on, a professional athlete will have a career no longer than half that of the average City worker. That is a lot to be crammed into a short period, but it also leaves very little time to plan for your life after sport.
Professional athletes are just like other people – they need to keep a roof over their heads and put food on the table. This doesn’t happen all by itself, so taking control of your finances will remove a lot of the difficulty out of preparing for a new life and career after sport.
Pensions are not enough
Athletes these days – especially footballers in the higher echelons of the football league – will earn good money – but only while they are playing. Many will be retired by their mid-thirties, with more than half their life still in front of them.
A pension used to be the primary source of income in retirement, but gone are the days when you could make large, infrequent contributions into a registered pension scheme which you could access from the age of 35. Since 2006, athletes have had to wait until the age of 50 to get their hands on their pensions. This became 55 in 2015 – the same as everyone else – and retirement ages have now been pegged to 10 years below the state pension age. This means that by 2020, that minimum age will be 56 and will continue rising.
Tax rules have changed, so even if you were prepared to wait, those earning more than £210,000 a year can only pay £10,000 into a pension plan. And what do you do between retiring and your 55th birthday, if later?
These changes have hit professional sportsmen hard. The simple truth is that while everyone else in the country is being told to save into a pension that cannot be the only solution. This makes planning your finances absolutely essential.
From hero to zero (income)
You might be earning a decent wage now, but the bills don’t take care of themselves when you retire. It’s probably the most expensive time of your life, with a sizeable mortgage, a growing family, and some serious outgoings. Professional athletes must be more aggressive in saving for their future, because the time they can invest their earnings is relatively short. True, you could be the next Alan Shearer, but media work doesn't pay anything like playing football and very few players get to hit the big time as managers.
Cashflow is king
In order to prevent earnings falling off a cliff edge, you need to think how much you will need once you hang up those boots/spikes/lycra. Plan your cashflow; if you think you need £10,000 a month, double it, because tax, national insurance and other charges will halve it.
Consider a broad investment portfolio that can ride the ups and downs of investment markets over the decades. It should be accessible – with cash, ISAs, rental property income – so you can draw an income, but also hold longer term – illiquid – investments to offer diversification. This simply means all your eggs won’t be in one basket and you will be able to ride market movements over the coming decades.
Maybe even consider investing in yourself to develop a skill or even get a trade. That is an investment that will deliver returns throughout your lifetime.
Don't forget medical cover. Athletes are used to the best and having put their bodies on the line, athletes often carry war wounds into retirement. However, a 35 year old footballer will find their cover will cost considerably more than someone who works in an office.
Ready, set, save
There will always be temptation and peer pressure, but keeping up with the Joneses can mean you lose everything and bankruptcies among sports professionals are all too common. This is sometimes because they were badly advised, but one way or another they haven’t been able to sustain their lifestyles once their careers ended.
Being an athlete is exciting, but you must think about what happens once the final whistle goes. Saving isn't easy for anyone, but it pays dividends for those with short careers to start early. Then you can enjoy more of your rewards at leisure, instead of racing towards the cliff edge.
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of publication.