E28: The Bank of Mum and Dad - what's the impact on your pension? With Mark Bogard, Rotimi Merriman-Johnson and Becky O'Connor

Find out how being the Bank of Mum and Dad can impact your finances - including your pension.

The following is a transcript of our monthly podcast, The Pension Confident Podcast. Listen to episode 28, watch on YouTube, or scroll on to read the conversation.

PHILIPPA: Hello, this is The Pension Confident Podcast. I’m Philippa Lamb and today we’re discussing a hot topic: the Bank of Mum and Dad. Do you help out your adult children with money? For many young people, it’s the only way to afford university or maybe get a foot on the property ladder. For others, it may be help with ongoing costs like childcare bills or even being the main source of childcare. But how might relying on the Bank of Mum and Dad affect family relationships? And what can it mean for your own finances, especially when around one-in-four British families with children are single parent households? And what about grandchildren? You might find yourself contributing all over again. Should the Bank of Mum and Dad stay open for business indefinitely?

Well, today’s guests are here to help us answer that question. Mark Bogard is CEO of The Family Building Society. Hello, Mark.

MARK: Hello. Really good to be here.

PHILIPPA: I know you’ve done a lot of work in this area. A lot of research.

MARK: Yes, it’s how we set The Family Building Society up 10 years ago. We spoke to families about how they manage their money between the generations. So we spent a lot of time listening to people about this.

PHILIPPA: Lots of focus groups.

MARK: Yeah.

PHILIPPA: Rotimi Merriman-Johnson’s back with us again, he’s a Personal Finance Expert and Founder of Mr MoneyJar. It’s nice to see you, Rotimi. Am I right in thinking you’ve just qualified as an Independent Financial Adviser (IFA)?

ROTIMI: I did. I passed my exams in November.

PHILIPPA: So you’re properly an Independent Financial Adviser?

ROTIMI: I’m a proper one.

PHILIPPA: Good for you! Joining us from PensionBee, podcast regular, Becky O’Connor, Director (VP) Public Affairs. Hello, Becky.

BECKY: Hello.

PHILIPPA: The usual disclaimer before we start, please remember that anything discussed on this podcast shouldn’t be regarded as financial advice or legal advice. And when investing, your capital is at risk.

The Bank of Mum and Dad in practice

PHILIPPA: OK, to point out what a big story this is, this statistic caught my eye. This is the Institute for Fiscal Studies (IFS) and it says almost a third of young people receive at least one cash transfer. This is during their 20s or early 30s and it’s most commonly from a parent. It’s a lot, isn’t it? And as far as I can tell from this also, I saw a piece. Yes, I did. I saw a piece in The Times recently that said, one-in-six grandparents are regularly supporting kids or grandchildren. Did you get support from your parents?

BECKY: I have to admit, we did get a little cash injection from my in-laws when we bought our first home, because I was six months pregnant at the time, and I think they were worried that we were going to end up renting forever. So they did give a very timely gift.

PHILIPPA: Yeah, I mean, that’s the thing. Mark? You have children?

MARK: So my father nagged me and nagged me and nagged me and nagged me to buy a property, because it was the best thing I could ever do in my whole life. So in 1988, I bought my first flat with a 10^{_personal_allowance_rate} mortgage from Barclays at 7.^{_corporation_tax}.

PHILIPPA: Ow!

MARK: 18 months later, the flat was worth 8^{_personal_allowance_rate} what I paid for it and interest rates had gone up to 15.^{_corporation_tax} - because everyone got [a] variable [rate] in those days. So my mortgage was now more than my salary.

PHILIPPA: Oh!

MARK: So I spoke to my father because I couldn’t afford to eat anymore. So over the next 18 months he gave me some money each month, and then interest rates came back down again. But the really interesting thing in this story is about two years later, at some family lunch or dinner, my father leant across and said, “Mark, when am I going to get that money back?” And what I thought was a gift to get me out of the problem he’d got me into...

PHILIPPA: Right.

MARK: It’s a really important point because one of the things we see is that intrafamily money exchanges: one side thinks it’s a gift, the other side doesn’t. All of these things, people have huge misunderstandings. So, that was - I gave him the money back.

PHILIPPA: Interesting. We’re definitely going to get into that because I think you’re absolutely right. The lack of clarity around, “is this money given? Is it a gift? I’m expecting it back”. Rotimi, have you benefited from this yourself? From your parents? Did they help you out?

ROTIMI: No, I can’t say that I have. My parents provided a lot to me in terms of my upbringing and education, but I found myself in a position where I’m transferring money to parents and grandparents. I’m of the generation that’s more likely to help out.

PHILIPPA: Ah, so you’re paying it back? Yeah, OK. Yeah, it’s interesting. But at the point you make is a good one because I think my parents would have said the same, that they gave us a great upbringing, and then when we were launched as adults, we were on our own. But I’m wondering, I mean, I’m a parent myself. You’re a parent, you’ve got kids. Morally, I mean, is there a moral question here? Should we be helping them out? Should they be standing on their own feet?

BECKY: Assuming that you can, then I think a fairly tempered approach to giving is overall a good one because I think you can actually sometimes do more harm than good if you’re too generous, because that can then be very demotivating for them in terms of finding their own way in life. But clearly, there are some big structural problems, particularly in the housing market, that are creating barriers for people living the life that previous generations took for granted. And so naturally, you want to do what you can to help.

Planning for predictable financial support

PHILIPPA: So if we start at the beginning, when do we feel you should even start thinking about your children’s future financial needs? Because I think most parents know at some stage, I mean, obviously, there’s the cost of bringing them up. But you kind of know that if they go off to university, or potentially think about buying property, you’re probably going to be helping. So when do you start?

ROTIMI: There’s certainly a lot of interest for the people that follow me, around saving as early as possible, so that they can benefit from the compounding going forward. Where people are unsure is whether they should save it into the Junior SIPP or Junior ISA (JISA) environment - or use their own one. Or whether they should even let their children know that the money is being saved.

PHILIPPA: Yes. Just thinking about the beginning of this, have you got Junior ISAs (JISAs) for your children?

BECKY: Yes. I don’t really consider those Junior ISA as a deposit fund. I consider those probably they’re more likely to go on cars or university costs or something like that. Something a bit more short-term. But in terms of other savings for them, I think it’s probably a good idea to use your own ISA if you’re worried about how they might spend it before they really need it, if the purpose is a house deposit.

PHILIPPA: They don’t necessarily need to know, do they, [if] you’re saving? Might be quite helpful, not in some ways.

BECKY: I think it’s probably a good idea to hold back a little bit. You don’t want to encourage complacency to save for themselves as well. They might think they don’t need... If you’re saving for them, they might think, “Well, I don’t need to worry then. I’m fine”.

PHILIPPA: Yeah, it should be an ‘add-on’, shouldn’t it? Not an ‘instead’. Yeah. Also, we’re making the assumption people can afford to do this at all because obviously not all households have any spare cash at all to save along this line. There’s a clear divide, isn’t there? Between the ‘haves’ and the ‘have nots’.

MARK: That’s a key part. I think a third of households have less than £100 saved up.

BECKY: I think often [for] parents, their own wealth is actually in their own property. So, it might be that they don’t have any savings, and so that might be their main store of wealth.

PHILIPPA: And they’re living in their investment?

BECKY: They’re living in their investment. Often, that’s actually the pension as well. So I think sometimes people do look to what they can do with their own property - sell it? That often does happen when people are thinking about helping out their kids, too.

ROTIMI: To give a bit more of a flavour to the divide, if I may. When I was reading about a report, also from the IFS, called ‘Who gives wealth transfers to whom and when‘. I found these statistics quite interesting. So, children of [university graduates] and home-owning parents receive six times more than children of renters. White young adults are three times more likely to receive gifts than Pakistani or Bangladeshi recipients. That was what was said in the report. As someone of African heritage, I can also anecdotally corroborate the same for someone from my background. But also wealthier recipients were more likely to use gifts for marriage and for university, whereas the poorer households were more likely to use the gifts to pay off debt or to buy a new car.

Help while your child’s studying

PHILIPPA: Yeah, really interesting. I think the first withdrawal for most people from the Bank of Mum and Dad, if there’s one at all, it comes in early adulthood, doesn’t it? I think it’s about 35% of kids go on to university. Obviously, not all of them do, but it’s a big number. Others may be training or starting the world of work, but on a very low salary. So that phase when we’re helping kids to get ‘job ready‘ and they’re cash poor, I wonder whether people realise just how much they might need to help out at that stage. I was surprised when my son went to university, just how much money was involved in that for me.

BECKY: I think you have your own frame of reference based on your circumstances when you were that age. And obviously, things have changed a huge amount in terms of financial demands quite early into adult life. In reality, if you’re going to help with those things in a meaningful way, that does require, and assuming you’ve got the means, it does require quite a lot of planning in advance because they’re steep. Particularly if you’ve got more than one child.

PHILIPPA: Maintenance loans are really, really low. Rents are really high. It’s a lot of money if you’re able to help out. It’s interesting. And of course, it can go on and on. Because in my generation, we largely did, if we went and did a degree, it was a three or potentially, possibly a four-year degree. Now it’s a Masters, isn’t it? ^{_corporation_tax} of young people [are] doing a masters degree now. So we’re not necessarily talking about three years, could be five, could even be six. Should kids work when they’re at university? I did. I worked right through.

BECKY: I did. I’ve been working since I was 14.

PHILIPPA: Me too.

BECKY: It’s depressing!

PHILIPPA: Paper round, Becky? I know some people don’t like the idea of their kids working when they’re students, they’re thinking it might depress their grades.

MARK: You get long holidays. I mean I used to - I did some very funny holiday jobs, but there was one in particular I ended up doing which was market research, ringing people up and asking them questions. If I worked from 9am till 9pm, I got paid £30. In those days, you could go on holiday in the south of France for £10 a day. So, every day...

PHILIPPA: Those were the days!

MARK: ... Every day I did it, Market Investigations Limited, was three days in a tent in the south of France.

ROTIMI: I fully support kids working where they can. My youngest brother’s 18, and he did last year at a fast food restaurant and he managed to save up ^{_basic_rate_personal_savings_allowance} over that period. For that reason, he’s really responsible with money.

PHILIPPA: I’m thinking you’ve been a good influence on him, Rotimi?

ROTIMI: I’d like to think that I have been!

Funding your child’s big adult milestones

PHILIPPA: If we think about what happens next in young people’s lives, and we think about they’re through university. Back in the day, it was get a job, move out. Now, definitely not. I mean, most people are heading home again, aren’t they? After university, because rents are so high, maybe they haven’t yet got a job. I think we’ve got a huge proportion. What is it? The share of 20 to 24-year-olds living with their parents rose to over half in England and Wales. This was between 2011 and 2021, ‘the Boomerang Generation’. This is the Office for National Statistics. So this is pretty much the norm now, isn’t it? Should you charge them rent?

BECKY: Perhaps if it’s over an extended period of time, but equally, you could suggest incentives to save. “We could charge you rent, but if you save that money instead, then fine”. But it would have to be on the strict condition that that money was saved and didn’t get blown. That would be a very tricky thing to monitor.

PHILIPPA: It would. How do you police that? I mean, that’s difficult. I don’t know. What do you think?

ROTIMI: Again, coming from my background, the expectation was always that I’d pay rent, and it didn’t need to be a huge amount, but it’d be enough to help out with the bills and with food and stuff. But I think if parents are in a position where they can let their children stay for free, then they should.

PHILIPPA: It’s better, isn’t it? Because rents are record high. As we talked about this on the podcast and on other occasions, they’re ridiculously high. Huge proportion of your take-home pay. In many ways, you might as well have them stashing the cash. Because if you’re thinking as a savvy parent, the more they save now, the less you’re likely to have to help out later. Yeah?

BECKY: Yeah. But of course, it doesn’t always... I mean, if you want a job in London and your parents don’t live in London, for example, then that’s not feasible. So there has to be something -

PHILIPPA: But remote working is changing that in a big way, isn’t it?

BECKY: That’s true, yeah. But I think there’s always going to be some compromise along the way. Actually, living with your parents for a long time when you’re an adult, is difficult in many ways, isn’t it? I think if you can keep it as a short-term arrangement, that suits everybody with a fixed financial goal in mind. But yeah, the rent saving is huge. If you can do it, then why not?

PHILIPPA: Obviously, you talked about buying a property as a young person. This is a lot of people’s aspiration. I think the average first-time buyer, what is it? Is it 35 now? Yeah, it’s remarkably older than it used to be.

MARK: The thing that we learned in talking to the people who’re 25 to 30, they all hate renting because of the people they perceive as being like the landlord. And to move out, almost everyone has to club together, even if you get help from your parents. So they do it with siblings, they do it with friends. It’s not a thing you did on your own anymore, you have to plan. And the final thing is that children of single parents don’t want their single parent to mess up their own finances by helping them. And that’s a really powerful dynamic in their thinking.

PHILIPPA: It’s really interesting you say that. That’s been my personal experience. I’m a single parent. And yeah, I think when kids see you bring them up alone, I think there’s something in that, that sense of, they understand the work you put in, they understand where the money comes from. I think they do perhaps have more of a sense of responsibility. It’s fascinating your data supports it.

Implications of dipping into your savings

PHILIPPA: But if you do decide you’re going to help out with cash for a flat deposit, some thoughts around how to do that. Legal advice, tax advice, what’s the best way to... lump sum from your pension? I mean, I don’t know, pros and cons?

BECKY: Well, I mean, on the pension point, if you’re accessing your own lump sum to give to your children, obviously, you have to make sure that that isn’t going to affect your retirement. And that you’ve really done your sums and you’ve worked out what your costs may be that you don’t know about. You don’t know if you’ve got care costs. You don’t know what’s around the corner for yourself. That’s a really big decision not to be taken lightly and not to be taken too soon either, because you can access that money at 55, rising to 57 in 2028. It doesn’t mean that you should. Unfortunately, very often that need for a house deposit from the children comes around the same time that that lump sum is accessible to the parents. So it can be quite a temptation.

MARK: The whole thing is so complicated. But coming back to the point you made, the single biggest variable for parents and grandparents is their own financial situation. Most people who aren’t in the position where they can give large amounts of money or buy their kids a flat, they’re worried about their own financial circumstances. They don’t know whether they’re going to live to be 70, 80, 90, or 100 [years old]. There are lots of other ways to help which don’t involve giving money or giving money in a way you can get it back because you think, “if I live to be 95, I’m not giving you the money because I’m going to need it”. That’s a really important factor for people.

PHILIPPA: Do you see that? That’s that moment when it looks like there’s cash that’s available and that’s what it gets spent on, or at least some of it gets spent on that?

MARK: Because of the issue of, “I don’t know how long I’m going to live and how much money I need”. So gifting is one option. There are lots of other options which we see parents tend to prefer. So there’s a mortgage called ‘joint borrower sole proprietor‘, where effectively a parent or parents go on the mortgage with the child. The child’s expected to pay the mortgage, but because of the parents there, it may increase the amount they can borrow or reduce the interest rate. Parents can provide security either by way of cash or using the equity in their own home. There are lots of ways that parents can help without actually giving money. And those people tend to be more inclined to do that because it keeps their options open. Because generally, once you give money to a child, even if you think, “look, I may want that back in 20 years time”, it’s gone.

PHILIPPA: You’re nodding, Rotimi.

ROTIMI: Yeah. And the only thing that I’d add is for parents who maybe have smaller amounts to give, smaller amounts given over time could also help, too. The Lifetime ISA (LISA) has a £4,000 per tax year allowance, and any amount put into that would get the ^{_corporation_tax} government bonus. So you can give as you go. It doesn’t always have to be a lump sum.

PHILIPPA: What about big cash gifts that, to be brutal, aren’t strictly necessary? We all love weddings. Weddings are lovely. They’re so expensive. This is a time, isn’t it, when a lot of parents feel that they really do need, or want and need to help their kids out with this crucially important day. If parents either foot the bill or make a big contribution, do we think that gives them a say in how lavish the wedding should be?

BECKY: I’d say so.

PHILIPPA: Or do you just have to pay up and be quiet?

BECKY: Yeah. I mean, it’s nice to have a day that everyone can remember for sure. But if the purse strings are tight, then can you have that special day without spending a huge wadge unnecessarily? Then yes, I think you can.

Ongoing bankrolling and protecting your financial security

PHILIPPA: We’ve alluded to open-ended bankrolling a little bit earlier on, but that strikes me as something that it’d be worth talking about, because if we can’t hand over cash, we can hand over time. So, that can be things like childcare, which there’s a cost attached to that, isn’t there? It might be time that you’d otherwise be working and earning. But if you’re helping out with things like childcare costs or car payments, how do you approach that? Because the question - you’ve raised this, we’ve all raised this, your own financial resilience going forward is a completely intangible number, isn’t it? And as you say, it could be when you’re in your 50s, when you get access to pension lump sums, but you don’t know how long you’re going to live, you don’t know what costs you might have, even if you own your own home, around elder care costs or care home costs, all those things. So what’s the best way to do this? And is that a point, actually, when you need to have proper conversations with your grown-up children about how long this support is going to go on for and how much it’s going to be?

BECKY: I think the cost of self-sacrifice does need to be quantified. Again, thinking of my own circumstances, my in-laws have helped us out hugely over the years and saved us thousands of pounds in childcare costs. We’ve also had to pay for nurseries and childminders and what have you, as well. But they’ve done maybe two days a week -

PHILIPPA: Have they?

BECKY: - for 10 years.

PHILIPPA: Wow!

BECKY: And now they pick the boys up from school, and so we don’t have the after-school care costs for the one in primary school anymore. So if you add all that up, that’s worth way more than a deposit. It happened at a time in their life when they were wanting to go part-time anyway. But I think it’s a big decision for grandparents to give up their own incomes to support the younger generation. You just have to make sure that you’re still earning enough to pay into a pension, so that you can eventually give up work. Again, it comes back to that point of not giving up too much for yourself.

PHILIPPA: Yeah.

ROTIMI: When it comes to the topic of finance and of helping yourself vs. helping others, I like to adopt the ‘oxygen mask principle’.

PHILIPPA: Help yourself first?

ROTIMI: Yeah. On planes, they’ll say to mums that you should fit your own oxygen mask before your baby’s because the recognition there’s that if you can’t help yourself, then you won’t be in a position to help them. It’s good to give, and it’s good to want to give, but you need to make sure that you look after yourself first.

PHILIPPA: So it’s being aware of societal pressure, isn’t it? And your own, obviously, natural longing to make sure your kids are OK. But yeah, as you say, perhaps the most useful thing you can do is make sure you’re going to be OK. Because it does strike me that if you run into financial difficulties in later life -

ROTIMI: You can’t help anyone.

PHILIPPA: You can’t help anyone. And your adult children are unlikely to be able to help you out, because they’ll be just in that place where they’ve got all the expenses of kids and maybe university or helping their own kids out with flat deposits. So there’s no buffer for older people, is there at that point? No cash buffer. No one to look after them.

Treating children equally or equitably?

MARK: Genuinely there isn’t, but it’s interesting when you start - so, the joint mortgage sole proprietor, that you talk about, sometimes we see kids helping their parents in that way.

PHILIPPA: Do you?

MARK: So you do, but it’s a much lower number than the other way around. The other thing you haven’t mentioned, which is really difficult for people, is do you treat all your kids equally...

PHILIPPA: Yes!

MARK: ...or according to their needs and their competencies?

PHILIPPA: It’s a very good point.

MARK: Some kids are good with money, some kids are lousy with money.

PHILIPPA: Some people are earning more.

MARK: Some people earn more, some people earn less. If you’re grandparents and you’ve got two or three kids, and they have different numbers of kids themselves, do you treat the grandkids equally or do you treat each of your children equally? And so some grandkids get more. Parents and grandparents really torture themselves with that question because it’s really hard to answer.

PHILIPPA: What’s the rational response?

ROTIMI: To treat them equitably.

PHILIPPA: Yes.

BECKY: Yes.

PHILIPPA: Good word. Yeah, according to need?

ROTIMI: Yes.

PHILIPPA: Yeah.

BECKY: Well, if there’s a certain pot and it’s £90,000 and you’ve got three kids, then they get £30,000 each.

PHILIPPA: Regardless of how much they’re earning?

BECKY: I think so, because if you’re a higher earner and you’ve made that choice and you’ve worked very hard.

PHILIPPA: Oh, but Becky, some really worthwhile jobs pay really badly. I think Rotimi, his definition of equity is different there, isn’t it? I think you’re talking about actual need rather than just dividing things along equal proportions. That’s what you meant, was it?

ROTIMI: Yeah, I think if different children are being - like one child’s being responsible and the other isn’t being responsible, then to continue throwing money at the irresponsible child is unfair. But if one child has a...

PHILIPPA: It’s hard to let them sink.

ROTIMI: But if one child has a job as an investment banker and the other is a nurse, then they’re going to have different financial needs. That latter job is really important, but we don’t have a financial system that’s worked out a way to compensate [for] it adequately. That’s where behaving in an equitable fashion makes more sense.

Making sure you’re on the same page

PHILIPPA: But what you’re saying about siblings or just generally feeling that they haven’t been treated fairly, that they’ve done everything they should do and there’s no money and it damages sibling relationships or damages parent-child relationships. I think that’s a really interesting point because the whole sense of parents continuing to pay, and obviously this assisting with childcare and stuff, this can go on while your kids are into their 40s, this rolls on and on and on. I’m thinking that what we should be suggesting to people is they do sit down and have proper conversations and maybe document them about this, about when this stops and how they’re making their decisions because otherwise, there’s a real opportunity, isn’t there, for fracturing families around money?

MARK: People find it so hard to talk about. Because we do joint proprietor sole owner mortgages, we had one relatively recently, it was a son and his father. So the father was going on the mortgage to help his son get the mortgage. Really unusually, the first mortgage payment was missed. So we rang up the son. So he said, “No, no, no, no, no - my father’s going to pay it”. So we rang his father up and said, “Look, your son says you’re going to pay this mortgage”. So he goes, “No, I’m not. It’s absolutely clear the son’s going to pay it”.

PHILIPPA: So what happened at that point? Did anyone pay it?

MARK: The son ended up paying. But it just shows you that even something as fundamental as who’s going to pay the mortgage in the first month, people find hard to talk about.

PHILIPPA: I mean, this is the thing we talk about on the podcast all the time, the immense value there is in having open conversations.

ROTIMI: And also writing stuff down.

PHILIPPA: Yes.

ROTIMI: A one-pager...

PHILIPPA: And sharing that document.

ROTIMI: ...an email just so that everyone’s on the same page about what’s happening.

PHILIPPA: Yeah.

BECKY: There are huge generational difficulties here, though. There are. I’ll happily talk about money all day long. But the further up the generations in the family you go -

PHILIPPA: That’s my experience too.

BECKY: - the harder that goes.

A living versus willed inheritance

PHILIPPA: I’ve got another one, another key question. We’re going to have to wrap this up soon, but I do want to talk about this. Should you give money, if you’re going to pass it on, should you give it while you’re alive? Or what about just leaving it in your will in your traditional way? I mean, that’s what people used to do. Obviously, there’s tax implications here, aren’t there?

BECKY: I think the tax implications are well worth thinking about there.

PHILIPPA: Run us through it, Becky, how does that work?

BECKY: Well, Inheritance Tax is the biggie. If you leave it when you die, then your estate is potentially liable for Inheritance Tax, depending on what you’re leaving and what assets and how much. That’s something that would come from your estate, so it’d affect your beneficiaries. One way that you can try and help them more generously is to help avoid that tax.

PHILIPPA: Yes.

BECKY: So giving earlier on. There’s a gifting regime set up. So gifts prior to seven years before your death are tax-favourable. Then there’s a taper system for gifts up until that point. And then there are some gifts that you can make that are just tax-free as well.

PHILIPPA: Yes, repeated small gifts. Is it...

ROTIMI: £250.

PHILIPPA: ...£250? Thank you, Rotimi. You can just keep on giving those, can’t you? As often as you like?

ROTIMI: I think it’s ongoing.

BECKY: These are all things worth thinking about. Unfortunately, there’s still probably a predisposition to leave it later, but giving earlier can certainly make a lot of financial sense for everyone.

PHILIPPA: But you do need to do the thing we talked about, of ring-fencing enough for your own unexpected future, whatever that might be, don’t you?

BECKY: And expected future, yeah.

PHILIPPA: It’s very hard to actually put a number on that, isn’t it? About how much... There’s lots of bands about how much we’re going to need when we’re older to live, but there’s all sorts of unexpected stuff, and particularly care costs.

BECKY: Most people don’t retire with enough in their pension to support a moderate living standard. The Pensions and Lifetime Savings Association amount. The average retirement pot is just over ^{_high_income_child_benefit} when people reach their mid-60s, which is unfortunately not going to go that far on top of the State Pension. Most people are already retiring, assuming the pension is their only pot, with less than they need. So that’s important to bear in mind. It might feel like a lot when you first access it, but it’s got to last a long time.

PHILIPPA: Given we know that, are we effectively saying you really, really should be thinking about yourself first, as Rotimi says, before you consider at all assisting your kids or grandchildren financially?

BECKY: I think so, but I think there are obvious solutions where you can do a little bit of...

MARK: You don’t have to give money. The one other thing which I’ve seen, there’s a cadre of people that just think that they’ve got to keep it whole, because otherwise water is draining out the bucket and it’s going to be empty soon. There are different segments of people. There are the people who spend too much, but equally, there are people who are just too cautious.

ROTIMI: Yeah, and if you give whilst you’re still alive, then you can actually see the benefits of the money that you’re giving and experience it with your children and grandchildren, which I think is a much more beautiful outcome than [if] you die and then you don’t even know what happens.

PHILIPPA: Yeah, absolutely. I think we do need to wrap this up now, but it strikes me the big lesson here is about managing expectations. Talk to your children about money. We say it again and again on the podcast, don’t we? Thank you all very much indeed.

BECKY: Thank you.

ROTIMI: Thank you.

PHILIPPA: Helping our kids to flourish. I mean, it is what it’s all about for parents, isn’t it? But every family, with or without kids, needs good conversations about money. We do hope that today’s discussion might help you get one of those going in your family. Join us next month. We’ll be discussing how to balance where you put your hard-earned cash. If you enjoyed this episode, please do give us a rate and review. We’d love to hear what you think. Don’t forget, you can watch us on YouTube. And if you’re a PensionBee customer, you can listen to all the episodes in the PensionBee app. Just before we go, a last reminder, anything we’ve discussed in this podcast shouldn’t be regarded as financial or legal advice. When investing, your capital is at risk. Thanks for being with us.

Risk warning

As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.

How to use your property to fund your retirement

From downsizing to equity release, there are different ways your property may boost your income stream once you've retired.

What happened to pensions in February 2024?

How did the stock market perform last month and how does that impact your pension plan? Find out all this and more.

This is part of our monthly pension update series. Catch up on last month’s summary here: What happened to pensions in January 2024?

In the UK, inflation levels (4%) are simmering down, while interest rates (5.^{_corporation_tax}) are holding steady for the fourth month running. The good news for savers is that both are expected to continually decline over the course of 2024. From April, energy bills will fall by more than 12% for most people in England, Scotland and Wales.

The BBC reported that while wages are currently outpacing inflation, the pace of pay rises is slowing down. This has led to concerns, particularly in sectors like healthcare and education, where workers have repeatedly gone on strike for better pay. In fact, 7^{_personal_allowance_rate} of UK workers intend to explore new job opportunities this year, according to new research.

This trend of increased job mobility raises questions about how individuals manage their pension savings, which are currently tied to specific employers. This is where the proposed ‘pot for life’ reform comes in. This policy seeks to create a system where workers who are switching jobs can choose where their pension contributions are paid.

Keep reading to find out how markets have performed this month and what the pot for life proposal could mean for you.

What happened to stock markets?

In the UK, the FTSE 250 Index fell by almost 2% in February. This brings the year-to-date performance close to -3%.

Source: BBC Market Data

In Europe (excluding the UK), the EuroStoxx 50 Index rose by almost 5% in February. This brings the year-to-date performance close to +8%.

Source: BBC Market Data

In North America, the S&P 500 Index rose by over 5% in February. This brings the year-to-date performance close to +7%.

Source: BBC Market Data

In Japan, the Nikkei 225 Index rose by almost 8% in February. This brings the year-to-date performance close to +17%.

Source: BBC Market Data

In the Asia Pacific (excluding Japan), the Hang Seng Index rose by almost 7% in February. This brings the year-to-date performance close to -3%.

Source: BBC Market Data

‘Pot for life’

The UK government is currently exploring a significant overhaul of the private pension system through the proposed ‘pot for life’ policy. The core idea behind the policy is to provide workers with more control over their retirement savings. Traditionally, when an individual changes jobs, their new employer selects a new pension scheme for them. Over time, this leads to multiple pension pots scattered across various providers.

The new proposal would allow employees to choose their preferred pension scheme and ask any future employers to contribute into that single pot. According to PensionBee research more than three-quarters (76%) of pension savers said they’d consider opting for the new model, while only 5% said that they wouldn’t be interested.^

^Nationally representative survey of 1,000 people, November 2023.

Benefits

Supporters of the ‘pot for life’ initiative argue that it offers several advantages to employees.

Consolidation for simplicity - combining all retirement savings into one pot simplifies tracking and management, and provides better oversight of fees.
Reduced lost funds - as employees change jobs, pension pots are sometimes mismanaged or even forgotten. This initiative aims to reduce the value of these “lost” pensions.
Increased engagement - having control over pension choices could stimulate greater engagement and more active planning for retirement.

Challenges

The ‘pot for life’ policy isn’t without its critics and potential challenges.

Reduced employer involvement - some experts suggest this policy could decrease employer responsibility and engagement with their employees’ retirement planning.
High set-up cost - implementing the ‘pot for life’ proposal may require significant resources and system changes from the government.
Outcome uncertainties - there’s concern that this may lead to less favourable outcomes for some workers, particularly if they choose pension schemes with poor returns.

When will we see ‘pot for life’?

It’s already technically possible to ask an employer to pay into a personal pension of your choice, rather than to use the Auto-Enrolment provider offered by them. However, employees rarely ask their employers to do this - and few employers agree.

The ‘pot for life’ policy is still in the proposal phase. The UK government is currently gathering evidence and consulting industry experts. No implementation timeline currently exists, therefore changes may not be seen for several years.

This is part of our monthly pension update series. Check out the next month’s summary here: What happened to pensions in March 2024?

Have a question? Get in touch!

You can check out our Plans page to learn how your money is invested in different assets and locations. You can always send comments and questions to our team via engagement@pensionbee.com.

Risk warning

How the 2024 Spring Statement impacts your pension

Read how the 2024 Spring Statement could impact your retirement savings.

Against the backdrop of pressure to cut taxes while growing the UK economy, Chancellor Jeremy Hunt delivered the 2024 Spring Statement on Wednesday 6 March and outlined the government’s taxes and spending plans ahead of the next general election. In the Statement, he revealed changes to Child Benefit and National Insurance.

No date has yet been set for the general election, but it’s expected to take place in the second half of 2024. This is likely to be the last Statement before the election. Below we summarise how the 2024 Spring Statement may impact your finances.

Spring Statement 2024 points at a glance:

National Insurance cut from 10% to 8%;
Child Benefit earnings threshold raised;
further £5,000 ISA allowance for ‘UK ISA’;
top capital gains tax rate on property reduced to 24%;
furnished holiday lettings tax breaks scrapped;
VAT threshold rising from £85,000 to £90,000; and
non-UK domiciled individuals (“non-doms”) status abolished.

National Insurance reduction

Chancellor Jeremy Hunt’s flagship announcement, in the Statement that promised tax cuts for all, was a reduction in employee National Insurance. The cut from 10% to 8% will take effect from 6 April 2024, the start of the next tax year. For workers on the average UK salary of £35,400, it equates to savings of around £450 a year.

National Insurance was reduced from 12% to 10% in the 2023 Autumn Statement and the government says the average worker will be £900 a year better off from the two successive reductions.

Meanwhile the main rate of National Insurance for self-employed workers will fall from 9% to 6% from 6 April 2024. The Treasury says this will save £650 a year for an average self-employed person earning £28,000. Nevertheless, the threshold at which you start paying income tax remains frozen at £12,571.

Director (VP) Public Affairs at PensionBee; Becky O’Connor says: “Putting more money in workers’ back pockets on the back of a prolonged cost of living crisis is clearly a vote-winning move but will also make a genuine, pretty much instant difference to individual household budgets, creating space to save or spend.”

National Insurance is paid by people between 16 and State Pension age (66, rising to 67 from 2028) on earnings of above around £12,500 a year. National Insurance isn’t paid by pensioners, so they’ll not benefit from the rate reduction. However, the State Pension is rising by 8.5% to £11,502 a year from 6 April 2024 under the triple lock agreement.

Child Benefit threshold raised

Households with children may find themselves better off from 6 April 2024, as Jeremy Hunt announced the Child Benefit threshold is rising from £50,000 to £60,000. It means if there’s a parent - or two individuals - earning up to £60,000 in a household, you can now keep the full Child Benefit. Child Benefit will be lost once one parent earns above £80,000 – up from the current £60,000. Child Benefit is worth about £111 a month for the first child from 6 April 2024, and £73 a month for a second child. So in households where a parent earns £60,000 a year, they may find themselves £2,200 better off from April 2024.

One way to keep your earnings below the Child Benefit threshold is to pay more into your pension. You can do this through a workplace pension scheme or a private pension. This means if you earn £70,000, for example, you could pay £10,000 into a pension and still receive the full Child Benefit (providing there isn’t another earner in your household with earnings above the threshold).

There are also plans to address the frustration of Child Benefit being assessed on individual income rather than family income – which can penalise single-parent families and those where only one parent is working. The government has launched a consultation that should ensure Child Benefit is based on overall household income, rather than the earnings of a single individual, by April 2026.

ISA limit increase

The total annual Individual Savings Accounts (ISA) limit is set to increase from £20,000 to £25,000 – but there’s a catch. The £5,000 additional ISA allowance is only for savers who invest in UK-listed companies.The new “UK ISA” aims to encourage investment into UK companies through the new £5,000 allowance. Any investment growth will be tax-free. The government plans to consult on the details, so there’s no launch date yet.

Property tax changes

There were a couple of announcements in the Spring Statement that may impact property investors. The first is that the top capital gains tax rate on second homes or investment property is falling from 28% to 24%. But for holiday let investors, taxes are increasing. The furnished holiday lettings (FHL) tax regime is being abolished from April 2025, meaning owners of holiday homes can no longer deduct full mortgage interest. The aim is to incentivise more landlords to let property for the long-term amid a current shortage of rental properties, rather than the tax system favouring short-term lets.

VAT threshold raised

Small business owners and sole traders may be pleased to hear the threshold at which you have to pay VAT is rising from £85,000 to £90,000.

Non-dom status abolished

The current tax rules for non-UK domiciled individuals (“non-doms”) will be abolished and replaced with a residence-based regime. It means those who stay in the UK for more than four years will pay the same tax on their foreign income and gains as all other UK residents.

In summary

Lots of announcements from the Chancellor in the 2024 Spring Statement are already in motion. Workers should see more disposable income from 6 April 2024 with the National Insurance cut, a welcome addition against the backdrop of the cost of living crisis. Although if you’ve already reached State Pension age, this won’t impact you. Households with children may also see an increase in their household budget as the Child Benefit earnings threshold increases from £50,000 to £60,000. The government estimates 485,000 families will gain an average of £1,260 in Child Benefit over the coming year.

Elizabeth Anderson is a Personal Finance Journalist and Editor (Times Money, Metro and i paper).

Risk warning

E26: Are you ready for your 100-year life? With Andrew J. Scott, Jennifer Howze and Becky O’Connor

Find out how to prepare for a 100-year life.

The following is a transcript of our monthly podcast, The Pension Confident Podcast. Listen to episode 26, watch on YouTube, or scroll on to read the conversation.

PHILIPPA: Hello and welcome back to The Pension Confident Podcast. My name is Philippa Lamb. This month we’re tackling a big one. Are you ready to live for 100 years? It might sound like fantasy, but according to a recent study, 40% of today’s Gen Z-ers are likely to live that long - at least! Now, whatever age you are, chances are you’ll live longer than your parents. And if you have kids, they could live a lot longer than you. So, just how long will we all be working, and what will retirement look like? Andrew J. Scott is an Economist, he’s bestselling Co-Author of ‘The 100-Year Life’, which made quite the splash when it was published in 2016. His latest book, ‘The Longevity Imperative‘, hit the bookstores this spring. That’s right, isn’t it?

ANDREW: It is. And spring is a good metaphor because it’s about how we remain evergreen over a longer life. So, there we go.

PHILIPPA: Nice. Well, he’s here to paint a picture for us of that 100-year life and how very different it’ll be. Thanks for coming in, Andrew.

ANDREW: My pleasure.

PHILIPPA: Among other impressive roles, Jennifer Howze is a former Lifestyle Editor of The Times. So, she knows a thing or two about how people like to spend their time. Now she’s the Editorial Director at Noon. That’s a platform all about midlife and how to do it well. Thanks for coming in.

JENNIFER: Thanks for having me.

PHILIPPA: Joining us again to help crunch the numbers and plan towards a happy retirement, we have PensionBee’s Director (VP) Public Affairs, Becky O’Connor. Always good to see you, Becky.

BECKY: Hi, Philippa.

PHILIPPA: Now, look, before we start, the usual disclaimer. Please do remember, anything discussed on the podcast shouldn’t be regarded as financial advice or legal advice. And when investing, your capital is at risk.

PHILIPPA: So, how are we all feeling about the prospect of living to 100?

ANDREW: Well, it’s daunting, isn’t it? But I think it’s going to be good. But it’s going to be a challenge. So, it’s a new era for humanity, I think.

PHILIPPA: Becky, excited? Frightened?

BECKY: I just can’t imagine what I’m going to be like at that age? It’s very difficult to -

PHILIPPA: Wrinkly!

BECKY: No, something will have been invented by then, surely, to prevent that. At low cost.

PHILIPPA: Yeah, let’s hope so, let’s hope so. I don’t know. What do you feel, Jennifer? Is it a good prospect?

JENNIFER: I come from a family of people who live a long time. My grandfather lived to 92. My mother’s in her, well I won’t say, she’s in her 80s, late 80s. And shows no signs of slowing down. So I feel like I’ve been thinking I’m going to live to 100 - at least.

PHILIPPA: Oh, so you’re quite ready for it then, aren’t you? In a way that maybe the rest of us aren’t.

JENNIFER: Oh, I don’t know about that!

PHILIPPA: Andrew, life expectancy, it varies around the world, doesn’t it? But it goes up every year?

ANDREW: Yeah, it’s a really complicated thing, life expectancy. But, in general, what we’ve seen over the last 100 years is every decade, life expectancy has increased by about two or three years, slowing down a little bit at the moment. But that means every generation is living six to nine years longer than the previous one. So, yeah, there’s this long-term trend in growing life expectancy, which is why the government says about half of the children born today can expect to live into their early to mid-90s.

PHILIPPA: Yeah, I was looking at those figures. It’s almost one-in-seven boys, isn’t it? And one-in-five girls born right now are expected to reach 100.

ANDREW: 100, absolutely. And it’s funny because I think what we tend to do, if you ask, first of all, most people understandably don’t try and think about how long they are going to live for. Although when it comes to financial planning, it’s a pretty important number. And then when they do, they tend to think about their grandparents, which, of course, if life expectancy has been increasing, is an error. And I think one of the things that it’s so important to grasp is only about 20% of how we age is genetic. About 80% is our behaviour and our environment. So, how we age is pretty malleable. So, of course, this is their question. How’d you feel about a 100-year life? It requires us to behave differently from past generations.

PHILIPPA: And we’re going to live very differently, aren’t we? Because right now it’s loosely, well, in the West, anyway, it’s a three-stage life, isn’t it? It’s education, it’s work and it’s retirement.

ANDREW: Yeah. I often say in the 20th century, we created two stages of life, teenagers, and we created retirement - and neither of them existed beforehand. My father, I think, was never really a teenager. He went to work at 14. I think the phrase first was really used in a New Yorker magazine in 1937. So, we invented teenagers. We invented this elongated time when children were developing before they became adults, and then we introduced retirement, and that worked brilliantly for a life expectancy of about 65, 70. But as we now have people living well into the 90s, we’ve got a bit of a problem, because all we’re really trying to do is stretch out that three-stage life with talk of the State Pension age going above 70.

PHILIPPA: You think we’re going to move to a multistage life, don’t you?

ANDREW: My view is that in the long run institutions should support the life we want to lead. And if you’re going to live to 100, there’s two really important things. The first is you’ve got to maintain your health. The second is, if you’re not going to see a fall in your standard of living, you’ve got to be more productive over your lifetime. So, we’ve got to work. But the key to these longer lives is we’ve got more time. How do we arrange that time? And so the metaphor I always tend to use is, I said earlier that every decade, life expectancy has increased by two or three years. That’s like saying, at the end of every day, here’s another six to eight hours. So, if we made the day 32 hours long, not 24 hours long, what would you do with that extra time? And it’s not about just what you do at the end of life. If it was me, if the day was 32 hours, I’d get up earlier, I’d go to bed later. Lovely sleep in the middle of the day. I wouldn’t have three meals, I’d have five smaller meals. Some would still be called breakfast, lunch, and dinner, but they’d change.

And that’s my sort of metaphor for what needs to happen. Yeah. That multistage career. Because the idea of starting work at 20 and finishing at 80 just sounds remorseless. And I think I’d just sort of say one more thing, because what we did in the 20th century was, as life got longer, we took a lot of leisure after retirement. And I think we’re going to be working for longer now, but we’re going to start to take some leisure this side of retirement. That may be kids starting work later. It may be working part-time before you retire, it could be mid-career breaks - but that’s what I refer to as a multistage life.

PHILIPPA: Yeah, it’s interesting. We were chatting before we came into the studio about this idea of young people already shifting to a different way of handling their 20s, maybe than I did. When it was all about, like, finish your education, get a job. You deal with students, and do you see that in them?

ANDREW: Totally. It’s actually very interesting. We’re seeing a sort of emerging adulthood, which that’s the phrase that demographers use, begin to develop now, as people take longer before they take on all those adult responsibilities. My dad was working at 14, he’s married at 17, he’s got a kid at 18 and a house at 19. Wow! I did all that mid-20s. For my kids it’s probably early 30s. So, I think we’re seeing some quite profound changes.

PHILIPPA: Yeah, I mean Jennifer you’re nodding. Have you seen that in 20-somethings as well? Just this slightly more laid back attitude to it. Well I don’t need to start yet, on real life.

JENNIFER: I think the 20-somethings I know, via my kids, they feel a lot more comfortable with that kind of episodic nature of their lives. Now I’m doing this, or I’m not enjoying this. My daughter went straight from sixth form to uni. She’s going to finish her course, but she’s already planning to take a year off and go travel with friends, instead of having a gap year then. But feels like she’s set herself up for that, because she’s kind of whizzed through uni. That’s the hope!

How work culture may change

PHILIPPA: I was thinking about work, Becky, and this whole how it’s going to affect, well, employers. Do we feel they’re ready for this? Because if we’re talking about a more fragmented work life, maybe that’s going to be very different, isn’t it?

BECKY: I think they have to maybe change a little bit, the work culture, and particularly, ageism in the workplace is still a thing, unfortunately. And that’s going to have to change if people are going to be working longer. So, that’s one thing that needs to be looked at, but also employers being more flexible and allowing people to go part-time and then maybe go back to full-time at some point. If they’re a valued employee and you want to keep hold of them, then looking at how as an employer, you can arrange the job around the person to keep somebody valuable in work and earning is another thing.

JENNIFER: Well, also the idea that businesses, companies will be excited about their older workers because of what they bring to the table. In addition to their knowledge, soft skills, sophistication, just an ability to be in the workplace more.

PHILIPPA: I mean, it does make you wonder whether employers will get their arms around this now that it’s going to be everyone, not just women, because women have been asking this for a long time.

ANDREW: I think that one of the problems we’ve always had is that if you want to work flexibly and have autonomy over your time, regardless of gender, you suffer a pay problem. And if everyone wants work to be more flexible, then I think we’ll design a system that helps support that. But we’re a long way from doing that right now.

PHILIPPA: Becky, it’s going to make saving more complex, isn’t it? I mean, saving is predicated on largely a monthly or a weekly or a regular wage, isn’t it? Financial products are designed for that. And if that’s not how we’re earning -

BECKY: Yeah.

PHILIPPA: - they’re not really going to work, are they?

BECKY: I mean, we have Auto-Enrolment. So, if you’re employed, then you have a workplace pension scheme. If you’re earning over a certain amount and you’re over 22, which is a good thing. So, as long as you’re employed, you’re going to be putting something away into a pension. That’s a relatively new thing. But of course, the nature of pensions has changed over time. So, we used to have more defined benefit schemes where you’d get the guaranteed income from a certain age, and now they’re defined contribution and so it’s a pot of money at the end, based on how much you’ve paid in. So, that also comes into play in terms of the choices that you have available to you. When you can retire is possibly later than you might like to retire if you don’t have enough saved up in that pot. And so people, I think, will need to have a greater awareness of what they’re going to need when they retire because of this switch from defined benefit to defined contribution, where you need to think more about it.

ANDREW: Well, I also want to pick up on this because I think this has really profound changes for pensions. Pensions, the very meaning of the word changed because of the three-stage life. A pension is seen as the income you now get in retirement. But if we change from a three-stage life, then actually we need to think about long-term savings much more broadly. There’ll be many more periods of accumulation when I’m building up my wealth. Many more periods of decumulationwhen I’m running it down. And I think ‘making hay while the sun shines’, because in a multistage life, at some point you’re going to say, my priority is I need to build up my finances. At other times you might say, actually I need to take a break because I’m stressed out or I need to spend time caring for family members. And it’s that shift in motivation at different points. But that’s a very much more complicated pattern of financial accumulation.

Financial challenges in midlife

PHILIPPA: It strikes me we’re going to see more self-employment as well. If we’re talking about these sort of portfolio careers where we’re doing a bit of this and a bit of that and at different stages of stuff. And midlifers, I mean, we’re already self-employed, aren’t we? 48% of self-employed people over 50, I saw some ONS data on that. I was surprised it was that high. Do the people in your cohort reflect that?

JENNIFER: Yes, they do. A lot of the Noon members do have these portfolio careers, but a lot of them are switching. They’re trying to do something new. And so a portfolio career really plays into that. I’d like to say, too, I think we need to really be kind to ourselves. All that self-talk on those moments when we can’t save as much. I’m having a moment right now with that. My daughter needs more financial support when she’s at university. She’s not earning, even with loans and whatnot, I’m basically footing the bill for all that. And so for me, the idea that I’m going to be really saving a lot of money for myself, for my pension or retirement, that’s just not feasible. But I can’t get stressed out about it.

PHILIPPA: Yeah, it’s going to be a different kind of mental attitude to saving, isn’t it? As you say, it’s going to be incredibly important, maybe more important than it’s ever been, but it won’t be linear, it won’t be constant.

ANDREW: I like to think about a broad portfolio of assets. And of course, finance is incredibly important. I’m an Economist, I kind of know how important finance is. But if we’re to last these longer lives, we’ve got to think about how we maintain our health, how we maintain our skills, how we maintain our relationships. And all of those require investment. They’re things that you can build up and if you don’t, they diminish and depreciate. And I think that’s that point about being kind to yourself. You’ve got to think much more broadly. When am I thinking about earning money to transfer it to later periods? Or when am I actually taking stock and building up my health or building up my skills in order to give myself an advantage later in life?

PHILIPPA: Do you know, the other thing I was thinking about, we talked happily about portfolio careers and white collar jobs and all the rest of it. But what about those jobs where physical fitness plays a big role? And there’s a lot aren’t there? When you think about catering, when you think about retail, when you think about emergency workers. All those jobs where, with the best will in the world, you can stay as fit as you like, there’s going to come a point where you don’t want to be on your feet all day. And that’s a lot of people.

ANDREW: The truth is, employment peaks at age 50 and then people start to leave the labour market. For a lucky few, it’s because they’ve got enough money, but for many it’s because they become ill, they have to care for someone who’s ill or their skills become out of date, or there’s ageism and they lose their job and can’t get another one. So, this is this really important thing about how you prepare yourself for that longer life. It starts way before you’re 80 or 90.

JENNIFER: Well, you’d hope also that there might be a change in, not just the workforce, but also in companies. You hear sometimes retail companies have a theory that employees should never sit down on their shift and that kind of thing, which just seems insane. I hope that as more older workers stay in employment, that we’ll see that bias, especially in retail, that kind of area, where it doesn’t really matter if you’re sitting or standing. It doesn’t really matter whether you’re 35, or 55, or 65.

ANDREW: I’ve done a lot of work on this and about, over the last 30 years in America, there’s been - 80% of the increase in employment has come in the form of what are called ‘age-friendly jobs’. Jobs that are more flexible, less physical and give you more autonomy.

PHILIPPA: What sort of jobs are they producing in the United States then? Age-friendly jobs?

ANDREW: It’s a big shift towards office work away from other sectors. So, what you haven’t seen is much improvement in construction jobs but, for instance, manufacturing has become a lot more age-friendly.

PHILIPPA: Automated?

ANDREW: Automation and robotics. They even put seats now for the production line so people can sit down. They might slightly slow the machine down. Basically, computing robots is sort of good, I think, for older workers.

BECKY: In fact, the government, I’d want to mention here, because it’s quite a good program. I rarely compliment the government for great initiatives, but there’s a digital skills training program that’s available for free and I think it’s a great example of something that somebody could consider if they wanted to retrain and move into something else later in life.

PHILIPPA: Absolutely. I’m thinking about other positives. I was thinking about housing because obviously it’s not all about work, is it? It’s about where we’re living. Obviously now we’ve got this proliferation of single-person households. I did wonder whether we might move back into, kind of, multigenerational living a bit as people get older. I mean, partly financially driven. Is that a good thing? Is that a bad thing? Discuss.

BECKY: We’re both smiling. I wonder if it’s for the same reason.

JENNIFER: The family compound. I like that idea!

PHILIPPA: Not everyone’s going to like this idea. I understand that. It did occur to me that might be a bit of a shift.

ANDREW: It’s already happening. You look at the age at which kids leave home, for instance, it’s much, much later.

PHILIPPA: And they come back?

ANDREW: Yeah. I think what you’re seeing though is more older people wanting to be independent.

PHILIPPA: Yeah, I suppose I was thinking about money. I was thinking about people pooling their financial resources, perhaps later in life. Just that whole thing of, OK, we’ve got two or three dwellings here, let’s throw them all into one and hopefully produce somewhere big enough for all of us.

BECKY: [From a] practical and financial point of view, it sounds ideal, doesn’t it? But then there’s, you know, perhaps some emotional issues with sharing, with different generations of the family together and that kind of thing, which would put people off.

PHILIPPA: No question! And who’s going to end up doing the caring? It’s going to be women, isn’t it? I think we all know that. Everything we’ve said so far does really reinforce that idea, that point you made, Andrew, that it’s going to take a lot more planning and a lot more saving, isn’t it? So, just remind us how long you think people will actually be working for in this new reality?

BECKY: Don’t say forever!

ANDREW: Well, you know what? Some people will. If you’re living to 100, I think you probably got to have a 60 year career. OK, now I’m always slightly low because it depends how much you earn, how much you like work, what your health is. But clearly, if life expectancy increases by 20 or 30 years, if we don’t work for longer, you take a big cut in your standard of living, so it’s a little bit your trade-off, what you want to do. If you hate work and you really, really can’t work, then it’s going to be a challenge.

PHILIPPA: So, how long, then do you see people actually being, given that they’re financially able to do it, being retired, not working at all?

ANDREW: Well, I also think retirement sort of had its day already. And the idea that there’s a single age where everyone comes to a hard stop at work is gone. And I sort of think that the notion that you should spend 30 years not working at the end of life, I’m not sure it’s terribly healthy for everyone.

We fear getting old, outliving our money, our health, our relationships, our skills and our sense of purpose. So, what do you do now to ensure that doesn’t happen? But it’s a major change, because for the first time ever in human history, the young can expect to become the very old. And I know that sounds weird, because we’ve always had old people and old people are always young. But it was only a minority of people who became old, and now it’s the majority. And I always say, if it’s a 10% chance of rain in London, I don’t pack an umbrella or a raincoat. If it’s a 35% chance, I might pack a small umbrella. If it’s an 80% chance, it’s umbrella and it’s coat. And I say those probabilities, because that’s the probabilities of a 20 year old reaching 80 in the UK in 1851, 1951, and today.

PHILIPPA: Is that right?

ANDREW: This is the other thing. Ageing is malleable. We know that there are things that we can do that make us age better. And there’s no secrets here. Everyone looks at me when I say this, like, well, what do I do? But it’s like, guess what? You don’t eat so much, you don’t smoke, you don’t drink, you exercise, you sleep well, you have positive, good relationships. All of those things make you age better and maintain your health. And of course, what has changed isn’t the knowledge that that’s what makes us age better, but the importance of doing that, because you’re now likely to become old.

PHILIPPA: Because work plays into better outcomes for things like dementia, doesn’t it?

ANDREW: Yeah.

PHILIPPA: So, you don’t necessarily want to have 30 years. Actually, I’d hate the idea of 30 years at the end of my life where I wasn’t working. But I know not everyone feels the same.

ANDREW: But it’s not just work. It’s about being engaged, isn’t it? It’s having a sense of purpose and a sense of identity and something that you need, that you want to do.

JENNIFER: Maybe the difference is that when we say retirement, we’re not necessarily thinking of sitting around the house watching TV. That’s a time when most people start to take on the projects that they’ve always wanted to do. And the thing that’s nice about a portfolio career is that you might be able to weave that more into life throughout, rather than it being something you keep right toward the very end, to do once you’re very, very old and maybe ill.

PHILIPPA: There’s lessons here for people like me, who, I mean, you talk about the projects everyone’s always wanted to do. But for those of us obsessed with work, we need to think a bit harder, don’t we, about what are we going to want to do if we’re fortunate enough to get to kind of that time where we’re still fit and we’re able and we’ve got the money.

ANDREW: But this is the right question for me, the heart of financial planning, because I think a lot of people get nervous about financial budgeting and numbers. But everyone’s pretty skilled at budgeting with time. They’re all used to the idea of ‘how do I fit everything in?’. And what this really is about is you’ve now got more time. What do you want to do with that time? And your point about, ‘I enjoy work. I want to carry on working. How do I do that for longer?’, that’s great. Other people are like, I can’t stand work. In which case, if I’m working for longer, do I change my job? Do I do something different? Is it about savings? Is it about training? But this is all about time, and financial planning for me is always about - how do I get the money I need to use the time that I want, in the way that I want it. And that’s what we got to really remember about longer lives.

Retirement landscape and pensions

PHILIPPA: Should we talk about where this money is going to come from? Because I was looking at the State Pension, and you’ll know more about this than I do, Becky. But it’s interesting, I was reading that when it first came in, I think it was 1908, wasn’t it? I’ve got it written down here. The gap between when you got it and when you were expected to die - that was only nine years. And already it’s 15. So, that’s just going to move out and out and out. I mean, it’s a great benefit, but it’s going to be a very expensive benefit for any government, isn’t it, with its ageing population? Should we even be factoring it into our planning?

BECKY: Yes, I think it’s reasonable to factor in some State Pension going forward. Like how much of a proportion of your overall income that makes up in the future is a question mark. When you’ll get it, if you’re a young person today is another big question mark.

PHILIPPA: It could end up means-tested, couldn’t it? If it gets too expensive.

BECKY: There’s several levers the government could pull to try and make it more sustainable. But I think we all agree, a bit, like we all agree on the NHS being a good thing in principle, that some kind of State Pension is a good idea. But if we think that, we also have to then accept that it’ll have to be modified to some degree, given longevity.

PHILIPPA: That certainly means later, doesn’t it? Because I think I’ve seen suggestions it’s going to need to be 71, age 71 by 2050.

BECKY: I think what the government’s going to keep coming up against, though, is regional disparities and inequalities which, you know, increasing the State Pension age is always going to seriously disadvantage some people and not bother other people.

PHILIPPA: The sort of people we talked about who do manual jobs, or jobs that they can no longer do if they’re -

BECKY: Completely. I mean, there’s a really strong case that some people should receive the State Pension much earlier.

PHILIPPA: Sooner, yeah.

BECKY: And they can’t be ignored. So, it’s really complicated and even means-testing, you know, it sounds like a great solution to it but good luck to the person trying to work out where to put those boundaries.

PHILIPPA: And always very expensive, means-tested benefits, it’s complex to do, isn’t it? How much more money are we going to need? I know it’s a big question. We’ve got an Economist at the end of the table and you know all about this, Becky. What’s the answer?

BECKY: Well, so let me quote the PLSA Retirement Income Living Standards amount.

PHILIPPA: Please do.

BECKY: So, this is the amount that you’re likely to need for different living standards in retirement, if you’re single or in a couple. There’s economies of scale to being in a couple, not surprisingly. For a moderate standard of living, which involves going on holiday, a foreign holiday once a year, and a few other kinds of luxuries, eating out once a month and so on. A single person it’s £31,000 and for a couple it’s £43,000. And for a comfortable standard of living, you’d need an annual income as a single person of £43,000 and as a couple, £59,000 between you. So, that’s just to give you an idea.

And then obviously, if you multiply that by the number of years you’re expecting to live for, you don’t need that amount of pension, because if it’s remaining invested in the market, then hopefully that pension pot would grow. So, it’s not quite the same as just multiplying that amount by the number of years you expect to live for, you could have slightly less in your pot. But it’s quite a lot of money. And you can, if you’re entitled to the full State Pension or any State Pension, you can subtract that from those figures. And at the moment, we’re looking at a State Pension of around £11,000 for the full new State Pension. So, that makes it seem slightly more achievable, perhaps.

But if you’re thinking about a comfortable retirement, you’re looking at the top end of that. Everything that Andrew said about working and so on, you can supplement your income through work if you’re able to work, and I think more people will be doing that realistically.

PHILIPPA: But of course, you can’t be sure that you’ll be able to work, can you?

BECKY: No, you can’t. And this is why a pension provision of some kind is so important. So, you know you’ve got something to fall back on, because you can’t assume either that you’re going to be able to work and therefore none of this applies to you.

PHILIPPA: What’s your feeling?

ANDREW: Well, these are really hard and difficult topics. And as those numbers suggest for most people, including myself, we haven’t got enough for what we need.

I do think, in economics, of the concept of ‘human capital’, which is your skills and your ability to work. And if you really want to make sure that you’re not going to be badly off in a longer life, the really big thing to do is to invest in your human capital, because if there’s a change in the pensions or if you suddenly have to spend more money but you could earn some more money, that’s enormously valuable. So, the solution is going to be, for sure, saving more, but also really making sure that you’ve got that human capital, that health, that skills, that purpose, that relevance. That means if you need to, you can top your money up again.

PHILIPPA: It does suggest to me then that, I think we’ve alluded to this earlier, investing in resilience, your own personal resilience and your own happiness and connectedness. This isn’t just a nice-to-have in this scenario, is it? It’s really, really important.

JENNIFER: Oh, my gosh. I mean, this is what we see. So, Noon runs these retreats, and what we find is the women who come there, they’ve had all these really different things happen to them, some of them quite shocking. But what they’re really looking for, yes, they want to reset with their work or with their money, but really it’s about reinvesting with their relationships.

PHILIPPA: This is relationships of all kinds?

JENNIFER: Relationships of all kinds, yes. So, it could be family relationships, relationships with your children, romantic relationships, even friendships or colleague relationships. Just that sense of really getting in touch with ‘What do you want now?’, and that it’s OK for that all to change, but you got to keep your eye on the ball for the end goal. Are these too many sports metaphors?

PHILIPPA: Not at all. I think we love a sports metaphor. But it’s interesting you say that because, as you say, if people, largely women, everyone, firefighting up until midlife, basically making it all happen, keeping it all heading in the right direction, and then you get to this point where you’re thinking, ‘OK, now I need to invest in these relationships that, frankly, I’ve been neglecting and just not foregrounding’. How do they do that? How do you advise them that they can start doing that?

JENNIFER: What we like to do is take an opportunity to say, ‘OK, step back. Also, it’s OK. Loads and loads of people feel this way’. And I think for a lot of people, especially in midlife, they feel like, ‘I should have it all together. Why am I falling apart? This bad thing has happened, but I’ve always been so resilient. Why am I not still on track?’.

PHILIPPA: Yes, ‘I’m older, so I should be fine’.

JENNIFER: ‘I should be fine’. And that discovering other people also feel that way and creating that kind of community of women that are like, ‘yes, it’s awful. Don’t worry, you’re doing fine’.

ANDREW: This is so important, what you’re doing, because when we go through transitions, there’s a thing that anthropologists call ‘liminality’, which I got very excited about writing ‘The 100-Year Life’. Because liminality is that bit in between when you’re no longer what you were and you’re not yet what you’re going to be. And some people love that space. For others, it’s very difficult. So, teenagers, we invented teenagers, and every teenager knows they’re no longer the child that you think they are, but they’re not yet the adult they’re going to be. And so it’s a difficult time. So, we create institutions to help people go through that transition, and that’s what we need to do now as we’re living longer lives. Because if you’re 50, you’re different from your mother and your grandmother at 50, because you’ve got more time ahead, you’re going to go through more transitions. But that’s often painful and difficult and uncertain. But if there’s others around to help you, to reassure you and say, you know what, this is great, because the real point of a longer life, I think, is to develop as an adult. I think [David] Bowie once said something like: ageing is the wonderful process where you become who you were always meant to be.

BECKY: Exactly.

ANDREW: And I think that’s it. We think about teenagers as, oh, you’re developed as an adult or 30, you’re an adult. But as life gets longer and longer, that adult development has to extend. When life was short, we rushed through it. But now -

PHILIPPA: It was about survival, wasn’t it?

JENNIFER: Well, and that’s what we call our community of - they’re ‘Queenagers‘.

ANDREW: Right, brilliant.

JENNIFER: They’re still going through that massive change, but now they’re, kind of, grown up.

PHILIPPA: Yeah, that’s a whole other podcast. Isn’t it? Fascinating, it really is. Can I just have your tips? What should we all be doing right now? I know we’re not the people around the table, the generation that’s necessarily going to make it over 100. We might do. But maybe for our kids, what should we be telling them to do right now to prepare for this?

BECKY: Eat well, practise sports, follow your interests, I think -

PHILIPPA: Make a lot of friends?

BECKY: Just, you know, look forward to a long life and hold that vision. To not just think about the one thing that you’re going to do for your job or what you want to do, but just think about the opportunities that’ll arise throughout.

PHILIPPA: Yeah.

ANDREW: The key to all of this is that you’ve got more time ahead of you. So, you’ve got to make a friend of your future self, because there’s a lot more future selves and it’s hard to know what I want to do tomorrow, let alone in 10, 20, 30 years time. But you sort of know that if I give my future self: health, money, purpose, skills, relationships - I’ll have options.

PHILIPPA: Jennifer?

JENNIFER: Think about investing now. I know that feels a little on the nose because of what we’re talking about, but really make it painless and everybody should be doing that. Often I feel like we only talk to one small part of society or one age group or whatever. It’s for everybody.

BECKY: What I’ve taken from this conversation is we need to rethink what a pension is actually for and not think about it as just for the future when we’re not working, when we’re sitting watching TV or going on holiday or whatever, but as something that’s there as a backstop for many different life moments where we’re not working temporarily or not earning as much and just reconceptualise what a pension is actually for.

JENNIFER: Yeah.

PHILIPPA: So interesting. It’s fascinating. Thank you very much indeed, everyone.

JENNIFER: Thank you.

ANDREW: My pleasure.

PHILIPPA: Next time we’re going to be talking about a challenge many of us have faced, trying to ‘keep up with the Joneses’. Just how much are you spending on that? And did you ever wonder if you might be paying quite a high price for your friendships? We’ll be diving deep into the true cost of your social circle. I think that’s going to be fascinating. If you’ve got the PensionBee app, you can find us there and on YouTube. Please do rate and review us if you’re liking the podcast. You know we always love to hear your thoughts.

A final reminder before we go, please remember anything we’ve discussed on the podcast, it shouldn’t be regarded as financial or legal advice, and when investing your capital is a risk. Thanks so much for being with us.

Risk warning

How to top up your pension and help close the gender pension gap

We explain how paying extra into your pension can help narrow the gender pension gap.

Why parents need to make a Child Benefit claim to protect their State Pension

Could you be missing out on National Insurance credits and State Pension entitlement by not claiming Child Benefit?

What happened to pensions in May 2024?

How did the stock market perform in May 2024 and how does that impact your pension plan? Find out all this and more.

This is part of our monthly pension update series. Catch up on last month’s summary here: What happened to pensions in April 2024?

Each year publicly listed companies hold an event for their shareholders, known as an Annual General Meeting (AGM). May is often a busy time for AGMs, with many big companies (like HSBC and Shell) choosing this month to provide an update on their performance. In most cases, the CEO of the company will share information such as the financial results or any business strategy announcements for the years ahead.

This year’s AGM season has seen some interesting trends:

physical meetings are still popular, but many companies are opting for hybrid formats allowing remote participation;
environmental, social, and governance (ESG) issues are a major focus for investors; and
investors are interested in how companies are adapting to new technologies, such as Artificial Intelligence (AI).

The outcome of AGMs can influence stock prices, so investors may keep a close eye on these developments.

Keep reading to find out how markets have performed this month and discover what the key AGM trends are - plus the impact shareholder voting can have.

What happened to stock markets?

In the UK, the FTSE 250 Index remained flat in May. This brings the year-to-date performance close to +1%.

Source: BBC Market Data

In Europe (excluding the UK), the EuroStoxx 50 Index fell by over 3% in May. This brings the year-to-date performance close to +9%.

Source: BBC Market Data

In North America, the S&P 500 Index fell by over 4% in May. This brings the year-to-date performance close to +6%.

Source: BBC Market Data

In Japan, the Nikkei 225 Index fell by almost 5% in May. This brings the year-to-date performance close to +^_ni_rate.

Source: BBC Market Data

In the Asia Pacific (excluding Japan), the Hang Seng Index rose by over 7% in May. This brings the year-to-date performance close to +4%.

Source: BBC Market Data

The purpose of AGMs

An AGM shouldn’t just be a one-way street for information for businesses to share updates, it’s also the annual opportunity for the company’s leadership team to answer direct questions from their shareholders, the people invested in their company. These meetings enable shareholders to challenge management, hold directors to account and ensure that the views and interests of shareholders are part of the decision making process. An important way to do this is via shareholder voting on topics such as the re-election of directors, remuneration policies, dividend payments, share payments and the approval of company accounts. Increasingly we’re seeing votes against directors used as a way for shareholders to signal dissatisfaction with the direction leadership are taking the company.

Company spotlight: Shell

Earlier this year, oil and gas giant Shell relaxed its goal for cutting carbon emissions by 2030. The company argued there’d be high demand for natural gas and a bumpy shift towards cleaner energy sources. On 21 May, Shell held its 2024 AGM in London.

The activist group, Follow This, asked Shell to align its emissions targets with the Paris Agreement on climate change, including the carbon released when customers burn the company’s fuels. The group had backing from major investors, managing trillions of dollars, on their proposal. Around ^{_corporation_tax_small_profits} of shareholders voted in favour of this proposal, down from just over ^_basic_rate last year. Shell’s management team had recommended that shareholders reject it. However, the management team also recommended endorsement of their aim to achieve net-zero emissions by 2050.

PensionBee philosophy

At PensionBee, our customers’ views guide our approach to voting. In 2024, we sought customer input on how shareholders can express dissatisfaction with the management of the companies their pensions invest in. Through interviews, focus groups, and surveys, we gathered feedback from our customers.

The majority of our customers expressed that shareholder resolutions, when the shareholders of a company submit a proposal in the form of a written resolution, and AGMs are the most effective ways to hold companies accountable for their behaviour. To ensure our voting policy aligns with our customers’ expectations for the 2024 proxy voting season, we presented customers with real examples of prominent shareholder resolutions from recent AGMs such as McDonald’s Corporation and Shell Energy. Proxy voting season refers to the time period during which shareholders of a company have the opportunity to vote on important matters through the use of proxy forms.

We asked our customers to indicate their voting preferences in each scenario. The PensionBee Voting Choice Report 2024 contains the complete survey results, revealing how our customers would’ve voted in the given scenarios. These insights will help us shape our approach to proxy voting and corporate governance.

This is part of our monthly pension update series. Check out the next month’s summary here: What happened to pensions in June 2024?

Have a question? Get in touch!

Do you want to know more about your pension plan with PensionBee? You can check out our Plans page to learn how your money is invested in different assets and locations, or log in to your BeeHive to see your specific plan. You can always send comments and questions to our team via engagement@pensionbee.com.

Risk warning

Why we must talk more about the gender pension gap - and figure out a way to beat it

How can we protect ourselves from the gender pension gap?

How customers continue to shape the future of the Fossil Fuel Free Plan

Find out how our customers continue to shape the future of PensionBee’s Fossil Fuel Free Plan.

At PensionBee, our customers have always played a key role in the product development process. Since our launch, our customers have been vocal about their desire to address some of the world’s biggest problems, such as climate change, through their investments.

In direct response to our customer’s feedback, we introduced the Fossil Fuel Free Plan in 2020 - a plan that excludes fossil fuel and tobacco sectors. Three years later, in 2023 we launched our Impact Plan after customers were increasingly wanting to invest with impact.

Each year we use surveying to reaffirm that our pension plans continue to meet our customers’ investment expectations. In February 2024, we invited customers in the Fossil Fuel Free Plan to share their current views. We asked them about:

approaches to fossil fuel divestment; exclusionary screens; and
appetite to move to a Paris-aligned or climate transition benchmark in the future.

Read the full report with the survey results. Below are some of our key findings.

Customer sentiments on fossil fuel financing

Although slightly lower than in 2021, our 2024 results show that the majority of our customers still want to cut ties with companies that continue to fund fossil fuel projects.

Sadly, our customer views are still ahead of available data. The industry continues to lack a reliable dataset that would enable them to exclude companies that fund fossil fuel projects. This is due to the poor quality disclosures from these financiers, who aren’t required to fully disclose their emissions under current regulations.

Paris-aligned climate investing

Since the current plan launched over three years ago, a new approach to climate investing has emerged. This approach focuses on Paris-aligned and climate transition benchmarks. These aim for a minimum 7% annual reduction in carbon emissions to achieve net zero emissions, in line with the 2015 Paris Agreement’s goal of limiting global temperature rise to 1.5°C.

A majority of respondents expressed a desire to move beyond traditional exclusionary-based approaches and towards strategies that align with the Paris Agreement. As a result of the decarbonisation pathway, these types of strategies increase investment in green revenues over time.

Finally, a majority of respondents are happy to pay small one-off costs for an improved plan, provided that the overall cost didn’t otherwise increase.

Next steps

At PensionBee, we’re committed to listening to our customers. We’ll continue to evaluate the FFF plan as well as develop other potential plans that would best reflect our customers’ views. We’ll continue to work closely with our asset managers to implement our customers’ wishes. To help build customer confidence, we’ll also work on developing and sharing educational material on Paris-aligned investing. We want to thank everyone who participated and shared their views. We rely on customer feedback to keep pushing the market forward and closing the gap between savers’ views and investment plans on offer.

Have a question? Get in touch!

Risk warning

What do the Conservative and Labour party manifestos mean for your pension savings?

As the UK gears up for the next general election, voters are closely examining the manifestos of the major political parties. Here’s a breakdown of what it could mean for your pension.

As the UK gears up for the next general election, voters are closely examining the manifestos of the major political parties. With polls heavily suggesting a Labour win, all eyes are on two main parties. So what are the existing Conservative government proposing for pensions? And what could a new Labour government under Sir Keir Starmer mean for your retirement savings? Here’s a breakdown of their manifestos and the potential impact on your pension.

The Conservative Party manifesto - what are the changes to pensions?

Triple lock maintained and ‘triple lock plus’ confirmed

The current triple lock ensures that the State Pension increases each year by the highest of inflation, average earnings growth, or 2.5%. The Conservative party has pledged to go a step further by introducing the ‘triple lock plus’. This means that as the new State Pension increases, it would remain below the taxable income level, sheltering many pensioners from paying more tax.

Director (VP) Public Affairs at PensionBee; Becky O’Connor says: “The State Pension is a vital safety net for most retired households and must be preserved at a meaningful level. An enhanced triple lock policy raises the question of whether a continually rising State Pension age may be required to manage escalating costs.”

National Insurance cuts

The Conservative party has proposed to cut National Insurance (NI) from 12% to 6%. This move would leave workers with more take-home pay and more opportunities to save for the future.

Abolish National Insurance for self-employed

The party will remove Class 4 NI contributions for the self-employed. This will be the second NI cut after Class 2 NI contributions were cut in April 2024. The Conservative party has said this won’t impact entitlement to the State Pension which is currently linked to an individual’s NI record. This means self-employed people would see an increase in their take-home pay, encouraging them to save more for the future.

Reforms to Child Benefit

First mentioned in the Chancellor’s Spring Statement back in March, the manifesto promises to reform Child Benefit. What does this mean for pensions? The complexity in the current system has resulted in many parents missing out on NI credits. This has had a knock-on effect to their State Pension entitlement. The reform would also mean that families would be able to claim Child Benefit until their combined household income reaches £120,000.

What’s missing?

While the Conservative party’s manifesto pledged to protect pensions - there were a few notable policies missing. The manifesto, released on 11 June 2024, failed to mention changes to Auto-Enrolment or the introduction of a lifetime pension. Here’s a recap of what the party has previously said.

Changes to Auto-Enrolment - the party has previously suggested plans to expand Auto-Enrolment. A Conservative-backed bill from March 2023 included lowering the minimum age to 18 and the removal of the lower earnings limit. This would mean young workers could start saving earlier and from the first pound earned.
Introduction of ‘pot for life’ - in last year’s Autumn Statement, the Chancellor announced plans for a pension ‘pot for life’. This would give workers the power to choose their pension provider. Plus it would solve the problem of workers collecting multiple small pots throughout their career.

The Labour Party manifesto - what are the changes to pensions?

Triple lock maintained

The Labour manifesto echoes the Consevative’s promise to maintain the current triple lock on the State Pension. A Labour win would mean the State Pension continues to increase each year by inflation, average earnings growth, or 2.5% - whichever is highest.

Reforms to the pension landscape

The manifesto also promises to reform the pension landscape and improve security in retirement. The Labour party has stated it’ll review workplace pensions and aims to improve outcomes for UK savers and pensioners alike.

Director (VP) Public Affairs at PensionBee; Becky O’Connor says: “The ‘pot for life’ concept could be popular and relatively easy to introduce. So it’s disappointing that further details on the next steps of this process weren’t outlined.”

Increased investment in UK pension funds

The Labour party has said it’s also committed to boosting the economy by incentivising pension funds to invest in UK businesses. It’s said the increased investment from pension funds to UK markets would also deliver better returns for UK savers. In January, the party’s Plan for Financial Services included a plan to create a British ‘Tibi’ scheme, although this hasn’t been outlined in the manifesto.

What’s missing?

No mention of the Lifetime Allowance or ‘pot for life’ was included in the Labour manifesto, released on 13 June 2024. Here’s what the party has previously said on these policies.

Reintroducing the Lifetime Allowance (LTA) - the Conservative government scrapped the LTA in April 2024. The LTA was the limit at which an individual would be taxed at when withdrawing their pension. The Labour party had previously suggested it might reintroduce the limit. However, they’ve since made a u-turn.
Introduction of ‘pot for life’ - while Labour has promised to review pensions, its manifesto failed to mention specific policies such as a pension ‘pot for life’.

Summary

While change can often feel uncertain, it’s important to remember that your pension is a long-term investment. This means you have plenty of time to top it up, track its progress and plan for your retirement. Making regular contributions to your pension is a good way to benefit from any potential market volatility around elections.

Have a question? Get in touch!

Risk warning

E29: Pensions vs. cash - which is best? With Holly Mackay and Martin Parzonka

Find out the pros and cons of pensions and cash - how can you make the most of both?

The following is a transcript of our monthly podcast, The Pension Confident Podcast. Listen to episode 29, watch on YouTube, or scroll on to read the conversation.

PHILIPPA: Hello and welcome back to The Pension Confident Podcast. My name is Philippa Lamb. Now, last year we discussed the pros and cons of Pensions vs. ISAs and which was the smartest place to put your savings. Today we’ve got another head-to-head: pensions vs. cash. Since the start of 2022, the Bank of England has raised the base interest rate 13 times! It’s no surprise then that savers are reconsidering where to put their money. But you know where you are with cash, right? Put it in a savings account in your bank and it’s there when you want it. But if the interest rate you’re getting doesn’t keep pace with inflation, those savings could actually lose purchasing power over time. With your pension, you’d usually expect your money to benefit from long-term growth. But you can’t get at your cash - it’s locked away til you reach your retirement age. And of course, that could be decades away. So, what matters most to you? Easy access to your money or making it work harder? And how can you make the most of both?

Today’s guests are trying to get their teeth into those questions. Holly Mackay is the Founder and CEO of Boring Money, a financial website designed to help ‘normal people’ cut through the jargon and better understand their savings, investments and pensions. Hello Holly.

HOLLY: Hi, Philippa.

PHILIPPA: From PensionBee, we’re joined again by Martin Parzonka, he’s their VP Product, and we’ve had him on the podcast before. Welcome back.

MARTIN: Thank you. Happy to be here.

PHILIPPA: The usual disclaimer before we start, please remember that anything discussed on this podcast shouldn’t be regarded as financial advice or legal advice. And when investing, your capital is at risk.

How does inflation eat away at our money?

PHILIPPA: Now, you two are going to hate me now, because I’ve got a little maths question for you.

MARTIN: Morning maths!

PHILIPPA: I thought we’d start with the tough ones. OK, imagine it’s five years ago, it’s 2019. You go shopping, you spend £100, and you come home with big bags full of shopping. Here’s the question: if you went out today and bought the exact same items, how much do you think you’d have to spend?

HOLLY: Five years? Well, we know inflation has been pretty ugly.

PHILIPPA: Yeah.

HOLLY: And we know it got to over a high, at one point of 11%. So, I’m going to guess about, I’m going to guess about ^{_lower_earnings_limit} because I know you get [less]... Well, everyone knows that, right? You just go to your local supermarket; you don’t get as much for that same £100. So, ^{_lower_earnings_limit}.

PHILIPPA: ^{_lower_earnings_limit} from Holly. Martin?

MARTIN: I think inflation has been, as you say, running about 11% recently. I think the stats I saw were that the basket of goods [is] probably about 3^{_personal_allowance_rate} higher, depending on what it is.

PHILIPPA: So, you’re saying £130?

MARTIN: Yeah, £130.

PHILIPPA: Holly wins!

HOLLY: Yes!

PHILIPPA: £123.38. But pretty good, both of you, I’ve got to say.

HOLLY: In five years.

PHILIPPA: I know, it’s a lot.

HOLLY: That’s hardcore.

Shopping around for the best rate

PHILIPPA: That’s inflation in a nutshell. Just one of the things we need to balance when we’re thinking about where to keep our savings. Let’s start with the obvious question on that. Why wouldn’t you keep all your money at your bank, in a current account or a savings account? It’s simple, it’s safe - why not?

HOLLY: I mean, I might jump in there. The first thing I’ll say, possibly controversially, is if people have any form of cash savings, your bank is... It’s highly likely that’s the worst place on Earth you could leave your money in your bank’s current account. Because one thing with, particularly the high street banks, is loyalty simply doesn’t pay. So, if you’re banking with any of the big names out there, don’t assume that they’ll look after you. Because the reality is they don’t. So, we have to shop around, we have to look at other options for our money. And it’s easy, isn’t it? Life’s busy, there’s three million things to do on that to-do list. But if you have any sizable chunk of cash savings and it’s in your current account, honestly, you may as well finish listening to this podcast and go and throw some money out of the window, because you’re not getting what you should be.

PHILIPPA: OK, what about bank savings rates? I mean, is that better if you put it in a savings account?

MARTIN: I think they pray on inertia as well. So, they know that you’re in a current account. And like Holly’s saying, they’re not going to do much for you because you’re there already, right? People don’t like to switch.

PHILIPPA: They’ve captured you already.

MARTIN: They’ve captured you. And so, they’ll push savings accounts at you, but they’re actually not that much better because they just rely on you to go for the easy option. “I already know this bank. I’m just going to open that savings account”. And oftentimes, they’re also not that great. A little bit better than the current account, but they lock you in and you could get better rates elsewhere.

PHILIPPA: Because they do play on the idea that we think it’s quite hard to move accounts as well, don’t they? Which now it really isn’t, is it?

HOLLY: No, it’s really much easier than it used to be. And the new bank you move to will quite often do a lot of the heavy lifting for you. And just to give people a sense, I mean, in my particular bank, the current account, the attached savings account there currently offers around about, it’s under 2%.

PHILIPPA: Really?

HOLLY: But it’s not hard to go out there and find rates that are double that! So, I think shopping around is a really good idea. There’s not just one pot of money. This is what we tend to think about: “what shall I do with any spare cash I have?” There are lots of different pots that we can use. And so, I think it’s really important to think about, “what do I actually need that money to do for me?” And it might be that you have some money in an easy-access savings account. There might be some you can set aside for a year, say, and then you’ll get more interest on that. So, I think the first exercise is mentally think about the jam jars and what are you going to put in each of them? What do you need your savings to do for you?

PHILIPPA: Yeah, so stop thinking about it as just a pot of cash.

MARTIN: Yeah, for sure. I like the jam jars concept. There’s also, to remove some inertia, there’s products out there that, not offered by high street banks necessarily, but that roll up cash. I’m someone that I don’t really like cash, whether it’s controversial or not. My risk profile is different, [I’m] a bit younger, so I like to make my money work for me. That said, you still want to have some cash on hand for bills. Obviously, you need to operate money to do stuff, to buy groceries. What you want to be able to do is take the thought out of saving that. So, there are some products out there that’ll just roll up (or round up) money that you’ve got that you spend, put it somewhere else, and they generally have a higher interest rate than a high street bank. So that’s something to consider as well.

PHILIPPA: In fairness to bank accounts, I suppose we should say, there are no complex investment rules here. You’re saving, you’re not investing really. I guess you can think of that as a plus point. I think a lot of people do, don’t they? They think, I understand this. I put the money in the bank. There’s nothing complex here for me to understand. If I want it, I can get it. But we shouldn’t be thinking that.

HOLLY: You’re absolutely right. With cash, you know the deal. The deal is pretty clear. But I think we’re just saying, make sure you get the best deal out there. Actually, there are quite often, it’s the challenger banks. We’ve talked about some of the newer brands out there, they’re hungry for new customers. Yeah, they work hard for you. They’re the ones with the good rates. Actually, they’re the ones with the better mobile experience as well. It can be super easy to set up an account. You could do it within 10 minutes on a commute, really.

Building an emergency fund

PHILIPPA: So, as you say, ideally, we want to keep some cash handy. I think everyone feels that if you can, just in case. It’s that ‘just in case’ feeling, isn’t it? If we’re thinking about that jam jar, the cash I like to keep where I can get it whenever I want it, how much should we set aside? I’m not talking about a figure here; I’m talking about a proportion.

MARTIN: I think the rule of thumb is three months of expenses. I think it’s important, again, where you are in your life stage and your risk profile to make your money work for you. But you’ve got to just look at what you can do without. If expenses do come and there’s something unexpected, make sure you can at least draw down from your investments. What I mean by that is if you’re putting money into something that’s not cash, can you still access it? So, stocks and shares, for example, can you sell them if you need to?

PHILIPPA: Immediately.

MARTIN: Immediately, right? And oftentimes it’s pretty liquid, which means you can get the cash out of that quite quickly. There’s obviously a risk with that. If markets have gone down, you might be selling at a loss, which you need to be ready for.

PHILIPPA: Yeah. I mean, if we’re thinking I’ve always thought three months sounds like a lot. I understand it’s a nice idea, but if you add it all up, it’s a lot. Can we maybe drill down into the actual bits of that expenditure that you really do need to save for? Because we all spend a lot of money over the course of three months, and some of it we probably don’t need to spend, do we? So, is it about actually picking the bones out of that? It’s the rent or the mortgage payment. What do you think, Holly?

HOLLY: Perhaps controversially, no. I’m not sure that I think three months is a lot to have in cash. I think if you talk to financial planners, they’ll typically say it’s between three and six months. Now, I know that sounds huge, but then you think, OK, we’re not in the most certain environment at the moment. What would happen, say, if you lost your job? What would that mean for your rent payments? So, it’s just that comfort blanket around us. Of course, if you’ve got kids, the never-ending voracious cheeping beaks that need to be fed, you might factor that in. So, it does depend, I think, if you’ve got dependents or not. For me, it’s three months as a minimum, as a starting point for our financial plan.

PHILIPPA: So, if we’re thinking about that as one of your jam jars, and I really love this jam jar idea, is that a savings goal in itself? If people are listening to this thinking, “there’s no way I could set aside, right now, three months money, let alone six months money”. Is that the first thing you should be saving for, actually, your emergency cash jam jar?

HOLLY: Absolutely. That for me, is the... I think we all have steps on our financial journey, and there’s an order we should do things in. The first, actually, even before that, would be to pay off any expensive debt. So once that’s done, then absolutely, I think people’s first goal is to get to that three months of outgoings.

PHILIPPA: And just to spell out the reasons for that, if you’ve got debt like that, you’re paying far more in interest, then you’ll gain wherever you put it in savings.

HOLLY: Absolutely. In savings, in an ISA, in whatever it might be, is getting rid of that debt is the very first starting point.

MARTIN: Actually, with the base rate increasing, I think credit cards now are like 3^{_personal_allowance_rate}. It’s insane!

PHILIPPA: Insane. So, if you’re not paying that off every month, that’s a huge bill, isn’t it?

State benefits that are impacted by savings

PHILIPPA: Just sticking with cash, are there any downsides to holding a lot of cash in savings? I’m thinking about state benefits here. Do you risk losing access to state benefits if you’ve got quite a lot of cash saved?

MARTIN: Yeah. If you carry too much cash, too much in inverted commas, it can affect your Pension Credit. If you have ^{_money_purchase_annual_allowance} or less in savings, it won’t affect your Pension Credit.

PHILIPPA: Just remind people what Pension Credit is.

MARTIN: So, it’s the amount of extra money that the government will give you if you’re on a low income and you’re of State Pension age.

PHILIPPA: OK. Other benefits that you might risk if you’re holding too much cash?

MARTIN: Yeah, cash can also impact your Universal Credit, which is a payment to help with living costs if you’re on a low income. So, £16,000 is the cut-off point of savings you can have before Universal Credit is impacted.

PHILIPPA: OK. So just to be clear, if you, and it’s your cohabiting partner as well, isn’t it? If you’ve got £16,000 or less in savings, investments, that’s not a problem for Universal Credit. I’m assuming here that pension savings, we’re going to get on to pensions later, they don’t count towards this? That’s not a problem for benefits.

MARTIN: No, that doesn’t affect your Pension Credit.

What are the rules on cash savings?

PHILIPPA: OK, that’s great. Shall we move on to the options about where you keep this cash cushion we’ve been talking about? Best places?

HOLLY: I think we have to not just chase headline rates. For me, it’s about what institution is looking after my money. I have to say I’m a big fan of NS&I, that’s backed by the government. So, for me...

PHILIPPA: This is National Savings?

HOLLY: That’s exactly right. NS&I is backed by the government. They’re the last man standing, effectively. If everything goes to pot, everything goes to seed, NS&I should be the last financial institution still there. They won’t always pay the best, but they’re typically pretty competitive. I feel very secure having my money there. That, for me, is a consideration when we’re looking at financial institutions. Typically, some of the ‘sexier’ brands out there are some of the newer ones, and I do worry a bit about how they’re funded, who’s behind them. Of course, money is protected for us by the government. If a bank or a financial institution signs up to what you’ll see online as FSCS, the Financial Services Compensation Scheme, then anything up to £85,000 is typically safe with that institution.

MARTIN: Well, yeah, on the topic of FSCS, I guess shameless plug, at PensionBee, the way we structure our investments, they’re life-wrapped policies, and so they benefit from 10^{_personal_allowance_rate} protection. If the financial institution that holds an investment, so with us, it’s either BlackRock, State Street, or Legal & General. Honestly, if one of those goes under, there are big problems in the world.

PHILIPPA: Yes, globally.

MARTIN: That said, customers’ funds are protected up to 10^{_personal_allowance_rate}. Now, it’s important to note that when we say safe in inverted commas or safer, it doesn’t mean that money can’t fluctuate. And if markets do drop, the money will drop. So, customers aren’t protected from that, but they’re protected from those institutions defaulting or going bankrupt.

PHILIPPA: Yeah. So, these are all significant. I mean, it takes a while to save the money. You don’t want to lose it, do you? If things go badly. What about Cash ISAs?

HOLLY: That’s the whole point of a Cash ISA, I think, is - I love ISAs. They’re like Tupperware pots. You stick your money in, and the taxman can’t get his hands on what’s inside that pot.

PHILIPPA: So, this isn’t a jam jar?

HOLLY: It’s not a jam jar. God, you can [with] tell my food analogies [that] I’m feeling a bit greedy today! They’re in that pot. This is really important because the tax take for all of us is going up and up and up - and is just going to keep going up. So, ISAs are awesome. But, spoiler alert, we also get a certain amount of money every year we can earn in interest and not pay tax on, whether it’s in an ISA or not.

PHILIPPA: And that’s currently?

HOLLY: That’s the Personal Savings Allowance. It depends on how much tax you pay. If you’re a higher rate taxpayer, you can earn ^{_higher_rate_personal_savings_allowance} a year in interest before you pay any tax on it. If you’re a basic rate taxpayer -

PHILIPPA: Which is most of us.

HOLLY: Yeah, you can earn ^{_basic_rate_personal_savings_allowance} a year in interest. For me, the smart move, I think, is to look at your first lump sum of money, any cash savings, and go for the good rates. And quite often, those are not in Cash ISAs. But just make sure that the interest you earn on that every year isn’t going to go above that Personal Savings Allowance. So, ^{_higher_rate_personal_savings_allowance} if you’re a higher rate taxpayer or ^{_basic_rate_personal_savings_allowance} if you’re a basic rate taxpayer.

PHILIPPA: That’s a lot of interest, isn’t it? Most people aren’t going to be getting that much interest on their savings. So, they’re not going to be paying any tax regardless.

HOLLY: And with current interest rates as they are, to give you an idea, if you’re a basic rate taxpayer, that would be about ^{_isa_allowance} in a savings account. That would generate about ^{_basic_rate_personal_savings_allowance} a year. So, it’s quite generous. So, for me, Cash ISAs aren’t quite as shiny as they once were because we’ve got that Personal Savings Allowance.

PHILIPPA: Interesting. What’s your take on that?

MARTIN: Yeah, I agree. I think if you’re going to take advantage of ISA allowances and the benefits that come with them, Stocks and Shares ISA, because that way you’ve got risk on. You’ve got your money working for you. Investing in stocks and shares in that ISA, generally speaking, markets will outpace inflation and interest.

PHILIPPA: Over the long-term.

MARTIN: Over the long-term. Then the benefits of not paying tax on that gain is better than not paying tax on the interest gain. Like you say, Holly, you could save that money somewhere else in a savings account that’s not in an ISA and still get the benefits of not having to pay tax on it.

Small steps to save for your future

PHILIPPA: We’re back to the jam jar idea. But this is starting to sound like a plan, isn’t it? However small the sums are, and it’s important to say that, I think, because we’ve [had] these conversations. I think a lot of people listen to it and think, all I’m talking about is maybe I could save it would be £50 a month. Why are we even having this conversation? But actually, it’s still worth thinking about that.

HOLLY: £50 a month? Yeah, it can be huge. I started working in finance in Australia, ages ago, aeons ago, and pensions were compulsory, and my employer set it up for me and they paid in, it was probably about $40 a month. And I remember at the time going, “well, that’ll buy me loads, won’t it?” And then I moved back over to the UK, forgot it was there and then tidied it up a few years ago to bring it over. And I was like, “oh my God”. Because we talk about compounding quite a lot. Here’s another analogy for me. I think it’s like building a snowman. And you start off with a tiny little ball of snow and you roll it around your garden forever, and you think, blimey, I’m going to be here all day. And then just towards the end, the bigger the snowball gets, the quicker it grows. And the same is true of our money. So, I’d say to people, even if you start a pension and you put in £10 a month, it doesn’t matter. It’s just the first step is getting started. And it does grow, that snowman does kick in.

PHILIPPA: See, I’m worried about the snowman idea, because my idea of a snowman is that you build this snowman - and then it melts!

HOLLY: I guess the melting is maybe you spending your pension in retirement, swanning around the world having a laugh!

Are pensions ‘hot’?

PHILIPPA: But what you say is absolutely right. I think this is a good moment. Let’s leave cash behind for a moment. Talk about pensions. The basics, they can be hard to understand. I think there’s no denying it. They can feel very complicated to ordinary people.

HOLLY: I wish I was in charge of marketing for the government because I’d run a really good pension [campaign]. Pensions are hot!

PHILIPPA: Go on then. Give us your elevator pitch.

HOLLY: You get ‘free money’. I mean, if you’re a basic rate taxpayer and you put £80... Let’s forget the word pension. You just put it into this ‘account thing’. You put £80 into this ‘account thing’. The government wave their fairy wand and that pops another £20 in that pension account, so that £80 becomes £100. Just like that, you don’t have to do anything other than put that money in. I think that’s really poorly understood as still we don’t explain that core benefit to people very well. Now, why does that happen? It’s basically bribery from the government. They’re patting you on the head, Philippa, and saying: “Philippa, we’d really rather not have to pay for everything you need when you’re really old”.

PHILIPPA: When you’re old and needy.

HOLLY: “So please, Philippa, be a good girl, put £80 in a pension, and to encourage you, we’ll give you back all the tax you paid on that money”. Roll it all up. So, bingo, you’ve got £100. And that’s such a fundamental benefit. It gets even hotter, Philippa, for higher rate taxpayers, because not only does that happen for them, but when they come to do an annual tax return, they get effectively another £20 on that £80 because you reduce your income in that tax return by another element because you’re a higher rate taxpayer, you’ve paid more tax, so you’re getting more tax back. So, if you pay into a pension, in any one financial year, when you come to do your tax return, you’ll be high fiving yourself because you can reduce that taxable income. And that’s a nice feeling in January.

PHILIPPA: Yeah, absolutely. At any time of the year, I think, isn’t it? And as you say, the chunks of ‘free money’ here, they’re substantial as a proportion of what you’re saving. They really are. I think it’s worth talking about workplace pensions here as well, because as you mentioned, Holly, your employer back in Australia, lobbed this what seemed like a very small amount of money into your pension pot at that time, years ago. And then it just rolled up and rolled up. This is ‘free money’ from your employer, isn’t it? And Auto-Enrolment, the government’s bid to make us all jump into that method of saving. That’s been very effective, hasn’t it?

MARTIN: It has, yeah. So, there’s a couple of things also to consider is that a lot of employers will match the contributions you’re making into a pension as well. And so, if you don’t contribute yourself, they also won’t contribute. And so, you’re losing out twice.

PHILIPPA: Yeah, that’s a good point.

HOLLY: I think everyone listening, it’s really worth it if you don’t know. This particularly happens with larger companies, bigger brands. If you don’t know, get on the phone to HR, look on the intranet, whatever, find out about this matching. If your employer matches your workplace pension, then that’s what I’d call a no-brainer, right? Because if you put in, as Martin has just said, another 1%, they’ll give you another 1%. That’s like getting a 1% pay rise.

PHILIPPA: Yeah, right there, isn’t it? They put ceilings on this, don’t they? There’s a limit to how much they’ll let you pay in because there’s a limit to how much they want to match. But well worth doing.

HOLLY: For most of us, we won’t reach that, sort of, limit. So, it’s really worth investigating. And if they do match and there are those extra contributions, there’ll be very few other places where you can get such a good return on your money.

MARTIN: Just on the point about a few places you can get that return on your money, just going back to the tax relief point that Holly was talking about earlier, it’s yeah, you’re so right. It should be shouted from the rooftops. Where else in the world will you get ^{_corporation_tax} instantly on the money you put away? That’s an amazing return.

PHILIPPA: Unless it was some crazy scheme where your money would be very much at risk.

MARTIN: Yeah, exactly right.

HOLLY: And blow up horribly!

PHILIPPA: Exactly. Terribly bad idea if someone’s offering you ^{_corporation_tax}, I’d think largely, you have to be asking some questions about that, don’t you?

The case for personal pension saving

PHILIPPA: OK, if you’ve signed up for your or you’ve been signed up for your workplace scheme, what are the arguments for setting up a personal pension as well?

MARTIN: Yeah, really good question. The benefits could be that you may want to diversify, not have all your eggs in one basket. Although that said, most plans that you’d invest into in a pension are diversified anyway. You put money...

PHILIPPA: When you say diversified, you mean?

MARTIN: Having money in the US markets, having money in UK markets, in emerging markets, Asian countries, African countries. It’s good to have that spread.

PHILIPPA: Pension funds don’t just invest in stocks and shares, do they?

MARTIN: That’s right. It’ll also be bonds. There’ll be some money held in cash as well. Commodities, property, pretty much anything you can put money into.

PHILIPPA: Commodities being things you make stuff out of, copper, gold, that sort of thing?

MARTIN: Oil.

PHILIPPA: Yeah, all that sort of thing. They have this very diverse, to use your word, range of investments. That essentially is all about insulating you from risk, isn’t it?

MARTIN: That’s right.

PHILIPPA: If something goes badly, hopefully something else is going well.

MARTIN: Yeah. It’s important also to have a look at the type of investment plan you’re putting your money into. So not all plans are like that. Some will just be 10^{_personal_allowance_rate} company stocks, and that’s OK, depending on your risk profile. If you want that, you can have that. Some people don’t want that risk. They want it 10^{_personal_allowance_rate} in bonds. That’s OK. Maybe two years ago it wasn’t OK. Bond markets were interesting.

PHILIPPA: Personal choice.

MARTIN: Yeah, personal choice. Exactly. That’s the point of diversification. So, we got into this point also from your question about why would you set one up?

PHILIPPA: Yes, why would you have one as well as a workplace pension? It’s all money out of your spending pot every month, isn’t it?

MARTIN: Yeah, that’s right. So, one of the things you can do by having a personal pension on the side is that if you do move employers, you can just have that with you all the time. So, roll that employer pension into your personal pension. Next employer, go to their scheme, leave them, roll it into your personal pension again.

PHILIPPA: And this brings us to a point we make so many times on the podcast, but it’s worth saying, again, you need to understand what your pension is all about. Ask your employer, don’t you? Get them to tell you because they hand you a bunch of stuff on day one. You don’t read it; you forget about it. Most people have no idea what their workplace pension is investing in or what they’re getting or what it’s worth. But your employer has to tell you all this stuff, don’t they?

HOLLY: And it’ll be, there’ll be a website. I mean, I can’t... Some of the websites will be pretty dodgy. You’ll be looking at it thinking -

PHILIPPA: “What does this mean?”

HOLLY: “This was built in 1994”, but there’ll be a number there. It’ll tell you how much you’ve got in it. It’ll tell you what the fees and charges are, and it’ll tell you where your money is invested.

PHILIPPA: So that’s definitely worth doing. We always want to know where our money is and what it’s doing. I think that’s the lesson here, isn’t it?

HOLLY: And how much it is. Just getting that number is vital. It’s a first step, really, in sorting it out. We talked about jam jars earlier. It’s just working out what you’ve got in every jam jar before you work out what to do with it.

PHILIPPA: So, we’ve said lots of great things about pensions, but I’m going to say, tell me about the downsides. The first one that comes to my mind is you can’t get the money, can you? Not until you retire.

HOLLY: It’s locked away.

MARTIN: That’s true. But it’s actually not locked away that long. It’s 55 right now before you can draw down from a pension, but 57 in a couple of years’ time. And it’ll keep increasing, likely. People are living longer, so it makes sense that you can’t access your pension for a little bit of time. Interestingly though, [in] the UK, 57 is actually quite young. In Australia, it’s ^{_pension_age_from_2028} before you can access.

PHILIPPA: Is that right?

MARTIN: Yeah. There are benefits here to putting your money into a pension scheme. The other benefit is that the first ^{_corporation_tax} that you do draw down is tax-free [capped at £268,275]. That’s pretty cool.

PHILIPPA: When you say draw down, you mean take out?

MARTIN: Take money out of the pension. The main downside is locking it away for a while. But honestly, like I said, it’s quite young still. If that’s the only downside and you get ^{_corporation_tax} free money instantly.

HOLLY: Hang on, Martin, I’m going to cut in. 57, there’ll be -

PHILIPPA: OK, Holly, go for it.

HOLLY: Well, to me, it might not have seen that long away. She blushed! Thank God this is a podcast, not telly.

PHILIPPA: Full disclosure, Martin is the youngest person in the room.

HOLLY: Philippa, how do you know? But I think for people, particularly people in their 20s, 30s who are thinking about buying a property, you’re cautious about locking your money away into a pension. And this is where I think for people under 40, an alternative is the Lifetime ISA. This is a vehicle where you can pay in up to £4,000 a year if you’re under 40, and the government will match that with up to ^{_basic_rate_personal_savings_allowance} every year. So that’s a total of ^{_starting_rates_for_savings_income}, you could save there. There are catches with that. You have to spend that money either on buying a first property, or if you change your mind and decide not to, you can then use that for retirement. If you change your mind and take the money out sooner, you get clobbered with punitive rates. So, you have to be pretty damn sure that you’re either going to buy a property or use it for retirement. But that’s a vehicle that does give people who are saving for a property a bit of flex. It’s an alternative to a pension. There are pros and cons to both. But particularly, I think for self-employed people who don’t have those workplace contributions it’s an interesting tax wrapper to have a look at.

PHILIPPA: Yeah, it’s a fair point about the employer’s contributions. If you’re not getting those, it’s a bit of a more of a straight question where you want to put your own money, isn’t it, Martin?

MARTIN: Holly’s right. Lifetime ISAs are quite beneficial because you do have that option to either take it for retirement or for a first property. But I think there’s caps as well to that. So, it could make sense to have both.

PHILIPPA: Yeah, we’re back to the both, aren’t we? We’re back to the do it all.

HOLLY: More jam jars.

PHILIPPA: More jam jars.

HOLLY: Kitchen’s getting very busy, Philippa.

Final thoughts

PHILIPPA: I know, but I’m thinking, is this the lesson from this podcast? That’s what it is. However much you’ve got or however little you have, don’t imagine that it just needs to go in one place.

HOLLY: And I think that’s really key. And it’s that visual, what do I want this money to do for me? And there’ll be different things, different time frames. We’ve talked about the three to six months of disposable income. That’s one jam jar.

PHILIPPA: The safety cushion.

HOLLY: Then the furthest, longest one down the track is the pension. But there’s other pots to it. And an important message is they can all be quite small because I think for younger listeners in particular, it’s as important to get started and to set the habit as it is to think that you’re having an enormous financial impact.

PHILIPPA: Particularly with a pension, I suppose. Would we add to that, don’t ignore your jam jars, because if you’re paying tiny amounts in when you’re 22, when you’re 32, all being well, if you’re earning a bit more, you should be ramping up your jam jars and making your jam jars bigger. You can’t just keep on paying a tiny amount into your jam jars.

HOLLY: Nice tip there, pay yourself first. So, whenever you get a future pay rise, you can’t miss money you’ve never had. So, the first thing you do is set up a Direct Debit to come out on pay day so you can’t spend it and just hike it up, do it every, hopefully, year and align it to a pay rise.

PHILIPPA: So, the wealthier you get, the more you should be saving?

HOLLY: In theory. Sounds crazy, doesn’t it? But it’s true.

MARTIN: Avoid lifestyle creep. Just, I can get a nice flat white, I can go and get a better flat white, or I could just put that money away, right?

HOLLY: They’d all cost £4 in London anyway!

PHILIPPA: I think we’re going to wrap it up there. There was always so much more in these things, isn’t there, than you think about, but really helpful tips. Thank you very much.

HOLLY: Thank you for having me.

PHILIPPA: We’ll be back next month exploring the question: can money buy you happiness? I’d like to find out. Seriously, though, there’s a lot to talk about in this one. We’re really going to try and get a solid answer on it, so it’s going to be well worth listening to. Meanwhile, please leave us a rating. Write us a quick review in your podcast app. You know we love to hear what you think about every single episode. Remember, you can find us on YouTube and in the PensionBee app, too. Just before we go, always remember, anything discussed on the podcast shouldn’t be regarded as financial advice or legal advice. When investing, your capital is at risk. Thanks for being with us.

Risk warning

How PensionBee’s plans are performing in 2024 (as at Q2)

Find out the performance of the PensionBee plans at the end of Q2 2024, when compared to the UK and US stock markets.

This is part of our quarterly plan performance series. Catch up on last quarter’s summary here: How PensionBee’s plans are performing in 2024 (as at Q1).

We’ve passed the midpoint of 2024 and it’s proven to be as eventful as anticipated. This year has been dubbed the ‘year of elections‘, as over 80 countries head to the polls to elect their next government. With Emmanuel Macron calling a snap election in France and Joe Biden withdrawing from the Presidential race in the US, there’s already been a few twists and turns.

In terms of economic developments, the Bank of England in the UK achieved its 2% annual inflation target in May. Despite this, interest rates have been held steady at 5.^{_corporation_tax} since August 2023. In the US, inflation reached 3% in the 12 months leading up to June, while the Federal Reserve has maintained an interest rate range of 5.^{_corporation_tax} to 5.5% since July 2023.

There has been market growth in many geographies and sectors this year, with one of the biggest winners being Japan, with their ultralow interest rates, weak currency and solid economy. Investors (including Warren Buffet) have flocked to the Nikkei 225 to enjoy the spoils of their recent upwards swing. Customers in our equity plans have exposure to Japan, a developed market economy, and this has therefore been a performance enhancer this quarter for them.

Keep reading to find out how global markets and our PensionBee plans have performed over 2024 so far.

2024 figures cover the period between 1 January and 30 June 2024.

This blog is only meant to provide information. The data comes from our money managers or plan factsheets. Performance figures are before fees. Past performance isn’t an indicator of what will happen in the future. As with all investments, capital is at risk.

Company shares in 2024 (as at H1)

What are company shares?

Company shares are units of ownership in a company. When a company wants to raise money, it can issue shares to investors who pay a certain amount of money for each share. By buying shares, investors become part-owners of the company and can enjoy its profits or growth. But, they also take on the risk of a decline in share prices if the company performs poorly or even goes bankrupt. Company shares are also known as ‘stocks’ or ‘equities’, and they’re commonly traded on stock markets.

Global stock markets

From a snap election in France, the change of Democratic presidential nominees in the US, and rising geopolitical tensions in the Middle East - there’s been a backdrop of uncertainty in global markets. Despite this, many companies have proved resilient and have broadly delivered strong earnings in the year-to-date. The technology sector has seen another significant upswing, with Artificial Intelligence (AI) continuing to excite investors about future profits.

Index	Investment location	Performance over H1 2024 (%)	Equity proportion (%)
FTSE 250 Index	UK	+3.^{_personal_allowance_rate}	10^{_personal_allowance_rate}
EuroStoxx 50 Index	Europe (excluding the UK)	+8.2%	10^{_personal_allowance_rate}
S&P 500 Index	North America	+14.5%	10^{_personal_allowance_rate}
Nikkei 225 Index	Japan	+18.3%	10^{_personal_allowance_rate}
Hang Seng Index	Asia Pacific (excluding Japan)	+3.9%	10^{_personal_allowance_rate}

Source: BBC Market Data

PensionBee’s equity plans

Plan	Money manager	Performance over H1 2024 (%)	Equity proportion (%)
Shariah Plan	HSBC (traded via State Street Global Advisors)	+21.5%	10^{_personal_allowance_rate}
Fossil Fuel Free Plan	Legal & General	+11.9%	10^{_personal_allowance_rate}
Impact Plan	BlackRock	+6.6%	10^{_personal_allowance_rate}
Tailored (Vintage 2061 - 2063) Plan	BlackRock	+10.9%	10^{_personal_allowance_rate}
Tailored (Vintage 2055 - 2057) Plan	BlackRock	+10.8%	10^{_personal_allowance_rate}
Tailored (Vintage 2049 - 2051) Plan	BlackRock	+10.2%	96%
Tailored (Vintage 2043 - 2045) Plan	BlackRock	+8.8%	85%
Tracker Plan	State Street Global Advisors	+9.6%	8^{_personal_allowance_rate}
Tailored (Vintage 2037 - 2039) Plan	BlackRock	+7.4%	72%
4Plus Plan	State Street Global Advisors	+8.2%	71% ^
Tailored (Vintage 2031 - 2033) Plan	BlackRock	+6.^{_personal_allowance_rate}	59%

^Equity % at 30 June 2024, asset allocation changes on a weekly basis due to the plan’s actively managed component.

Bonds in 2024 (as at H1)

What are bonds?

Bonds are a type of investment where you lend money to an organisation, like a government (sovereign bonds) or company (corporate bonds). In return, they agree to pay you back with interest over a fixed and pre-agreed period of time, this is known as the coupon. A bond yield is the anticipated rate of annual return that an investor gets from a bond for its duration (maturity of the loan).

Bonds have different ratings, with AAA grade also known as “investment grade”, signifying the highest quality with minimal risk of default. Due to their historical stability and predictability, bonds are a popular choice for shorter-term investors such as retirees who plan to draw down in the near future. Bonds are also known as ‘fixed-income securities’ or debt.

Global bond markets

There was a widespread anticipation that interest rates would swiftly come down over the course of the year. Bonds have an inverse relationship with interest rates, so fixed income investors keep a sharp eye on these announcements.

With inflation proving sticky in many developed economies including the US, Central Banks have been hesitant to cut interest rates too quickly. This has continued the unusual trend of an ‘inverted yield curve’; meaning the shorter the bond term, the higher the price yield. This is occurring because the expectation is that over the long term interest rates will increasingly fall.

Fund	Source	Performance over H1 2024 (%)	Fixed-income proportion (%)
Schroder Long Dated Corporate Bond Fund	Morningstar	-2.8%	86%

Source: Morningstar

PensionBee’s fixed-income plans

Plan	Money manager	Performance over H1 2024 (%)	Fixed-income proportion (%)
Pre-Annuity Plan	State Street Global Advisors	-3.9%	10^{_personal_allowance_rate}
Tailored (LifePath Flexi) Plan	BlackRock	+3.6%	72%
Tailored (Vintage 2025 - 2027) Plan	BlackRock	+4.5%	41%

PensionBee’s money market plans

Plan	Money manager	Performance over H1 2024 (%)	Cash equivalent proportion (%)
Preserve Plan	State Street Global Advisors	+2.7%	94%

Have a question? Get in touch!

Risk warning

How will my pension be affected by the new Prime Minister Sir Keir Starmer?

Following a landslide election win, Sir Keir Starmer has become the UK’s new Prime Minister. But what does that mean for economic policy and pensions?

Sir Keir Starmer is the UK’s new Prime Minister after a landslide win for Labour in the 2024 general election. So what does his appointment mean for your pensions and savings?

The Prime Minister outlined his party’s stance on pensions and savings in the Labour manifesto but more policy priorities will be set out later in the year. Firstly, in the King’s Speech on 17 July then at the Labour conference in September and finally in this year’s Autumn Statement.

As the new government takes shape, we summarise the Labour party’s key intentions for your pensions, savings and investments.

Triple lock State Pension protection

Labour has promised the triple lock will remain in place for now. This means the State Pension increases each year by either:

inflation;
average earnings; or by
2.5% - whichever is highest.

However, Labour hasn’t specified how long the triple lock will remain in place.

Labour has also said it’ll not increase the annual tax-free personal allowance for those receiving the State Pension. The State Pension is currently £11,502 (2024/25) and the personal allowance is £12,570 (2024/25). This could mean pensioners end up paying income tax on their State Pension as it rises each year.

Stock market movements

With polls and markets predicting a Labour victory in advance of the general election, Labour’s win has so far not rocked stock markets. This means the value of your private pension or other investments may not have fluctuated too much over the past few days in response to the news.

Obviously no one can predict where markets will move next as more Labour policies are clarified or implemented. More details about the new government’s tax, spending and economic growth plans should be revealed in the Autumn Statement. This is likely to take place any time between September or November.

There are a record number of elections taking place worldwide this year, including the US presidential election, that could also impact global stock markets.

No plans to re-introduce the lifetime allowance

The Conservative party scrapped the pension lifetime allowance (LTA) in the Spring Budget 2023. Before it was scrapped, the LTA meant you could save a total of ^{_lump_sum_death_benefits_allowance} into pensions before facing tax penalties. Labour originally said it’d reintroduce the LTA however then-shadow Chancellor Rachel Reeves later made a u-turn. There was no mention of the LTA in the Labour manifesto - although of course this doesn’t mean it’ll never be reintroduced again.

Pension system overhaul

The Labour government plans to undertake a pensions review to look at where improvements can be made in the current system. Liz Kendall is the UK’s Secretary of State for Work and Pensions under the new Labour government.

Becky O’Connor, Director (VP) Public Affairs at PensionBee says: “Labour’s commitment to a comprehensive review of the pensions and retirement savings system is promising and could provide a real benefit to millions of pension savers.”

The Prime Minister has said Labour will adopt ‘reforms to workplace pensions to deliver better outcomes for UK savers and pensioners’. This review will consider what further steps are needed to improve finances in retirement but there is no further detail on this yet.

It’s also expected the new Labour Government will continue with plans already in place to extend Auto-Enrolment in 2024. This means the age at which employees will automatically be enrolled into a workplace pension scheme will fall from 22 to 18. The result could mean that people start paying into pensions from a lower age, allowing more time for contributions to grow over time.

It’s also possible that ‘pot for life’ and the much-delayed pension dashboard will be included in Labour’s pensions review. However, neither policy was mentioned in their manifesto.

The value of pensions

The Labour party ruled out increasing income tax or National Insurance in its manifesto. However, nothing was said about Capital Gains Tax (CGT) or taxes on dividends. The CGT allowance has already dropped in early 2023 from £12,300 to £3,000. While the dividend allowance has fallen from ^{_tax_free_childcare} to ^{_higher_rate_personal_savings_allowance}.

Meanwhile, the personal allowance has been frozen at £12,570 since 2022 and is likely to stay at this level until 2028. The amount you can earn tax-free from savings has been frozen at ^{_basic_rate_personal_savings_allowance} for basic rate taxpayers and ^{_higher_rate_personal_savings_allowance} for higher rate taxpayers since 2015.

To keep more of your money, consider putting savings into ISAs or pensions. With ISAs, gains from savings or investments are tax-free, whereas a pension will reduce your income tax bill on the way in and any investment growth can build up tax-free. When you later come to withdraw money from your pension in retirement, the first ^{_corporation_tax} is tax-free before income tax may be due. Remember, you can contribute up to ^{_annual_allowance} a year (2024/25) into a pension and still receive tax relief.

Key points

triple lock on the State Pension has been maintained;
annual tax-free personal allowance remains at £12,570 (2024/25);
no reintroduction of the LTA;
no increase to income tax or National Insurance;
Auto-Enrolment extension likely; and
further reforms to workplace and personal pensions are anticipated.

Elizabeth Anderson is a Personal Finance Journalist and Editor (Daily Mail, Times Money, Metro and i paper).

Risk warning

How is the FCA cracking down on greenwashing?

How is the FCA tackling greenwashing in the sustainable investment sector? Learn about the FCA’s new rules on product labels, marketing materials, and disclosures.

This article was last updated on 05/12/2024

As sustainable and ethical investing continues to grow, so does the threat of greenwashing. On 31 May 2024, the Financial Conduct Authority (FCA) stepped in, introducing their anti-greenwashing measures.

Keep reading to find out how the FCA is tackling greenwashing.

What is greenwashing?

Greenwashing is where companies present themselves as environmentally responsible or sustainable through misleading or false claims. Greenwashing threatens consumer trust and undermines the integrity of the sustainable investing market. Regulation from the FCA is crucial for several reasons:

to protect consumers;
to maintain market integrity; and
to make an environmental impact.

The FCA’s measures to tackle greenwashing

On 31 May 2024, the FCA introduced their long-awaited guidelines and reporting standards. This signalled a clear commitment to protect consumers and promote transparency. The finalised guidance states that sustainability references should be:

Correct and capable of substantiation - factually accurate and supported by robust, relevant and credible evidence that is regularly reviewed.
Clear - transparent and straightforward, with the meaning of all terms generally understood by the intended audience.
Comparable - fair and meaningful whether in relation to a previous version of the same product or service or to a competitor’s product or service.
Complete - considering the full lifecycle of the product or service and not omitting or hiding important information that might influence decision-making. This extends to not highlighting only positive sustainability impacts where this disguises negative impacts.

These changes are vital in creating a more environmentally responsible economy. Companies and consumers both stand to benefit from a more trustworthy and transparent marketplace.

What are the new SDR labels?

The FCA’s new sustainability labels aren’t for all financial products. For example, they won’t be used on pensions for now. However, you might start seeing these on certain investment funds from 31 July 2024. Here’s a breakdown of what they are and what they include.

Label: Sustainability focus

For: Products that are environmentally or socially sustainable, determined by a robust, evidence-based standard of sustainability.

Label: Sustainability improvers

For: Products that have the potential to become more sustainable over time, determined by their potential to meet a robust, evidence-based standard of sustainability over time.

Label: Sustainability impact

For: Products that seek to achieve a predefined, positive, measurable environmental and/or social impact.

Label: Sustainability mixed goal

For: Products that meet or have the potential to meet a robust, evidence-based standard for sustainability, and/ or invest with an aim to achieve positive impact.

The impact of the FCA’s actions

Concerns over climate change have fuelled demand for impact investing among pension savers. Our research found that some future retirees could be at risk of homelessness due to climate change. Retirees may need an extra £25,000 in retirement savings to pay for climate-related food costs.

Where to learn more about socially responsible investing (SRI)

You can visit our Plans page to learn how you can invest in line with your values and discover our available SRI plans including our Shariah-compliant plan and our Climate Plan.

Discover more about SRI and impact investing with PensionBee via our helpful blogs, videos and podcast.

We’d love to hear from you. You can always send comments and questions to our team via engagement@pensionbee.com.

Risk warning

What happened to pensions in December 2023?

How did the stock market perform last month, and over 2023 as a whole, and how does that impact your pension plan? Find out all this and more.

This is part of our monthly pension update series. Catch up on last month’s summary here: What happened to pensions in November 2023?

2022 ended with stock markets bruised and battered, grappling with inflation’s relentless grip on the global economy. Enter 2023, a year that promised little but delivered much - surprising experts and investors alike. It was a tale of two halves, marked by unexpected pivots and record-breaking rebounds.

In the first half of 2023, a recovery began. This was cut short in March when three midsized US banks collapsed within a week. The coverage from news outlets drew several parallels to the 2008 financial crisis which led to the Great Recession. As fears grew, share prices shrunk. But by May it was back to “business as usual”.

In the second half of 2023, the rollercoaster effect returned. Earnings season in July, where publicly-listed companies publish their performance, signalled more market resilience than expected. By October, concern over central banks raising interest rates returned and share prices dipped again - only to rebound to greater heights.

Keep reading to find out how global stock markets performed in 2023 and what investors can hope for as we begin 2024.

What happened to stock markets?

In UK stock markets, the FTSE 250 Index rose by a remarkable 8% in December. This brings the 2023 performance to +4.4%. This is a favourable performance when compared to the UK’s largest market stalwarts, known as the FTSE 100 Index, which delivered a 3.8% return to investors in 2023.

While the +4.4% return is encouraging, it’s worth noting the FTSE 250 currently only has a cumulative 5-year return of +12.5%. This raises questions about whether December marks the start of an upward trend, or was only a temporary boost to an otherwise gentle growth path.

Source: BBC Market Data

Across the English Channel, the EuroStoxx 50 Index rose by over 3% in December. Unlike the FTSE 250, it wasn’t a December surge that defined the year, but rather a marathon of ups and downs. By the end of 2023, the index had a performance close to +19.2%. This level of annual growth is rarely seen outside of the US.

Over the past five years we’ve seen the EuroStoxx 50 rise by 50.7%. This demonstrates an underlying strength and innovation within the region’s corporate landscape, hinting at potential for further growth once the dust settles on recent economic volatility.

Source: BBC Market Data

The biggest stock market present in the majority of investment savings (including UK pensions) is the S&P 500, based in the US. This is because historically it has outperformed other stock markets by a wide margin. The S&P 500 Index rose by over 4% in December, bringing the 2023 performance close to +24%.

While many US companies are still floundering, the “Magnificent Seven” carried the S&P 500 to a triumphant finish line, with annual returns ranging from +^{_scot_top_rate} (Apple) to +239% (Nvidia). Over the past five years we’ve seen the S&P 500 rise by 90.3%, one of the strongest global returns.

Source: BBC Market Data

Unfortunately, not every stock market enjoyed modest to magnificent returns. The Chinese-based Hang Seng Index remained stagnant in December, bringing the 2023 performance close to -14%. Although China and the US are the largest economies in the world, the performance of their stock markets have only widened in distance.

After decades of growth, the Hang Seng has failed to maintain that momentum in recent years. Over the past five years we’ve seen the Hang Seng fall by 34%. Reasons for this underperformance vary from a real estate crisis to strained US-China relations.

Source: BBC Market Data

How did the investment landscape shift in 2023?

Inflation and interest rates seesaw

There’s an interconnected relationship between inflation and interest rates; often when one is high, the other will rise and vice versa. Stable inflation and interest rates are integral to growing the prosperity of a country. The difficulty occurs when one experiences instability and becomes too high or low. It’s the job of central banks, such as the Federal Reserve in the US and Bank of England in the UK, to adjust interest rates to temper inflation.

By the end of 2023, it looked like inflation may have peaked. As of December, the UK’s rate of inflation was at a 12-month low of 3.9%, and interest rates were holding steady at 5.^{_corporation_tax}. If central banks continue to pause the interest rate hikes, or even begin lowering rates, this could further boost investments. Conversely, the current appetite for cash savings may lessen if interest rates fall.

Company shares divided opinions

In the face of rising rates and inflation, company shares became very sensitive to economic optimism and pessimism. Usually, public companies announce their performance every three months and investors react to this news, shifting the share price dependent on the update. In 2023, investors also had to consider the impact of the wider economy and interest rates on future profitability and company balance sheets.

Bonds on the mend

Bonds are a type of investment where you lend money to an organisation, like a government or company. In return, they agree to pay you back with interest over a period of time. A bond yield is the annual return that an investor gets from a bond. Due to their historical stability and predictability, bonds are a popular choice for shorter-term investors such as retirees who plan to drawdown in the near future.

As interest rates peaked in 2023, a curious phenomenon arose: bonds started looking attractive again. After years of near-zero returns, the fixed income offered by bonds provided a safe haven in the stormy equity market. Investors, seeking to weather the turbulence, flocked to bonds. For some, it was a return to a long-forgotten asset class, a welcome respite from the stock market’s rollercoaster.

What does this mean for pensions?

2023 was a prosperous year for many global stock markets and many pension savers will have seen growth in their retirement savings. It may well seem we’re now on the path to recovery. Nevertheless, geopolitical and economic tensions around the world remain high, and with elections looming in several countries, including the UK, there’s still potential for future turbulence. In any case, pension saving is usually a marathon and years like 2023 make saving productive in the long run.

You can check out our Plans page to learn how your money is invested in different assets and locations. You can always send comments and questions to our team via engagement@pensionbee.com.

This is part of our monthly pension update series. Check out the next month’s summary here: What happened to pensions in January 2024?

Have a question? Get in touch!

You can check out our Plans page to learn how your money is invested in different assets and locations. You can always send comments and questions to our team via engagement@pensionbee.com.

Risk warning

PensionBee is trusted by over 10,000 UK customers

We’re so pleased to announce that we’ve hit a huge milestone in achieving over 10,000 Trustpilot reviews.

At PensionBee, one of our core values is honesty. All of our colleagues work hard to ensure honesty is at the heart of what we do both internally and when communicating with you, our customers. It’s just as important that we receive honest feedback from you which is why we’re so pleased to announce that we’ve hit a huge milestone in achieving over 10,000 Trustpilot reviews. And we’re thrilled that over 8^{_personal_allowance_rate} of those reviews are 5*!

COO at PensionBee; Tess Nicholson says: “We wouldn’t have the product we have today without having listened to our customers along the way.”

Your feedback is really important to us - not only does each review help us continue to develop our product for you, but they also play an integral role in helping us reach more people and achieve our mission. We want to make pensions simple so everyone can look forward to a happy retirement. Which is why it’s so important to us that you’re able to submit free and open reviews on platforms like Trustpilot, to help other customers navigate the sometimes complicated world of financial services.

Here’s what you had to say about PensionBee

We love hearing your feedback

Customer feedback has always been incredibly important to us at PensionBee. However you choose to get in touch, whether through platforms like Trustpilot or, by speaking to your BeeKeeper, your feedback is always valued.

COO at PensionBee; Tess Nicholson says: “Our motto is never to rest on our laurels, so we never take for granted the importance of focusing on delivering an excellent service.”

Our Customer Success Team works hard to deliver a great service so it’s important that they’re able to see the positive impact that has on our customers. We monitor all of your reviews and take time to celebrate the positives as well as tackling any constructive feedback. Reviews come straight through to our ‘feedback and ideas’ Slack channel where a team of PensionBee colleagues are on hand to action any issues or concerns. We’re always happy to hear ways we could be doing better or, if there’s something missing from our product or website that our customers really want. This helps to keep us on our toes and reminds us that we should always be striving to do better.

We’d love to hear from you! Send any feedback to feedback@pensionbee.com.

Risk warning

As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. Anything discussed on the podcast should not be regarded as financial advice.

Self-employed? How to, and why you should, DIY your pension

If you work for yourself or run your own company, paying into a pension is a very useful tax and financial planning tool.

7 of the best ways of giving money to grandchildren

Here are 7 ways grandparents can pass money to their grandchildren while avoiding inheritance tax and other charges.

This article was last updated on 26/04/2024

The relationship between grandparents and their grandchildren is one of the most special, and grandparents often see it as their role to spoil their grandkids rotten. Whether that’s with sweets and toys when they’re young or with money when they’re older, there’s no questioning a grandparent’s devotion.

But before grandparents let their generosity get the better of them, there are some important tax considerations. If you’d like to give money to your grandchildren above and beyond the usual pocketmoney and birthday and Christmas presents, here are seven of the most tax-efficient ways to provide financial support.

1. Contribute to a Junior ISA

A Junior Individual Savings Account (ISA) is a long-term, tax-free savings account specially designed for children. While grandparents can’t set this up for their grandchild themselves (unless they have parental responsibility for the child), they are free to contribute to it within the child’s annual limit of £9,000 (2024/25). Options include a cash Junior ISA and a stocks and shares Junior ISA, which can’t be accessed until the child turns 18.

2. Gift up to £3,000 a year, every year

Each tax year everyone can give away up to £3,000 worth of money gifts without their value being added to an estate or incurring gift tax. This ‘annual exemption’ is usually more beneficial than the small gifts allowance of up to £250 per person as you’re unable to give gifts worth both £3,000 and £250 to the same person.

Another good thing about the annual exemption is that if you don’t use the full £3,000 in one year, you can carry it forward, but it must be used in the next tax year or you’ll lose it.

3. Consider a larger gift, if the circumstances are right

You can, of course, always gift cash worth more than £3,000 to your grandchild in a tax year, however it may be subject to inheritance tax if you die within seven years. If you’re a young grandparent or are in exceptional health this ‘potentially exempt transfer’ could be worth considering, especially if you don’t have a large enough estate for inheritance tax rules to apply. There’s usually no inheritance tax to pay if the value of your estate is less than ^{_iht_threshold} or if you leave everything to your spouse or civil partner.

However, if you do pass away within the first three years of giving a large money gift and you exceed the inheritance tax threshold, ^_higher_rate will be charged on such gifts. If you die within three to seven years of giving the gift, inheritance tax will be charged on a sliding scale known as ‘taper relief’.

Years between gift and death	Tax paid
less than 3	^_higher_rate
3 to 4	32%
4 to 5	24%
5 to 6	16%
6 to 7	8%
7 or more	^{_personal_allowance_rate}

4. Splurge on a wedding gift

In addition to the annual exemption on gifts, a grandparent can also give a wedding or civil ceremony gift to the value of £2,500 per grandchild. While this may not be so relevant for grandparents with younger grandchildren, it’s a good ace to have up your sleeve when the time comes.

5. Contribute to a child’s pension

Just like a Junior ISA, parents and legal guardians can set up a pension for a child which will automatically pass to them once they reach 18. Anyone can contribute to a child’s pension to a maximum of £2,880 a year, which the government tops up to £3,600 thanks to tax relief (2024/25).

Although it may seem like a long time until your grandchild will benefit, paying into a pension is a great way to ensure they have financial security for their entire life. It can also encourage grandchildren to prioritise their pension and start saving from an early age, once they start working. And with the benefits of tax relief and compound interest, which can turn a small savings pot into a significant amount when left untouched, it’s one of the most tax-efficient ways to save for their future.

6. Make sure you pass on your pension

Before you die you can determine who stands to inherit your pension by telling your pension provider the names of your beneficiaries. You can nominate as many people as you want and can choose how much you want each beneficiary to have. Naming your grandchildren is a great way to ensure they receive some of your money after you’ve gone. And, as pensions are considered to sit outside your estate, your beneficiaries won’t have to pay any inheritance tax.

It’s worth remembering that your pension won’t always pass to your beneficiaries though, and this will depend on how old you are when you die, whether you’ve started drawing your pension and the type of pension you have. You can find out more in our ‘pension rules after death’ article, and add your beneficiaries in the Account section of your BeeHive if you’re a PensionBee customer.

7. Keep your will updated

While it can be morbid to think too long about what will happen to your money and possessions after you die, writing a will is really important if you have specific wishes. If you don’t write a will, and have it validated, your money, property and possessions will automatically go to your next of kin such as your spouse or civil partner or the next closest relative after that. In such a scenario grandchildren can often be overlooked.

Just as important as it is to create a will, it’s also important to keep it up to date. Making sure you add the name of each new grandchild can make the process of dividing your estate much more straightforward after you’re gone. If you want something specific to go to a particular grandchild, such as a sum of money towards their first car or first home, it’s a good idea to write it down.

Risk warning

This information should not be regarded as financial advice. As always with investments, your capital is at risk.

6 reasons why you should delay taking your pension

Find out the benefits of delaying taking your pension and how this could help boost your retirement income. Discover how you can calculate your life expectancy based on national averages and learn the rules on deferring your State Pension.

This article was last updated on 05/02/2026

While working until your late-60s or early-70s may seem like a long way off on one hand, on the other it can have many benefits for your mental and physical wellbeing. It can also help boost your finances in later life, ensuring you’ll have enough money in retirement.

As it is, retirement ages are already increasing. The current State Pension age for men and women is 66, rising to 67 by 2028. That might already mean you need to wait until your late-60s to give up work.

You can currently access your workplace or personal pension around a decade earlier at 55, but this is rising too. From 2028, you’ll need to be 57 before you can access your fund, as allowed under the pension freedoms.

Whether you decide to keep working as normal until then, work part-time, or retire gradually, here are just six of the reasons why you might want to consider delaying taking your pension.

1. Life expectancies are increasing

Based on the latest data from the Office for National Statistics (ONS), men aged 65 in the UK in 2023 can expect to live for a further 19.8 years on average, while women of the same age can expect to live for another 22.5 years. This means that, on average, individuals will need their pension savings to last for at least two decades after they reach State Pension age, and more than three decades from the time workplace and personal pensions are accessible.

20 to 30 years is a long time to depend on your retirement income, especially if you haven’t saved enough during your working life. But, the longer you wait until you take your pensions, the longer you can expect them to last.

Use our online Pension Calculator to see what your retirement income might be and how long it’ll last, depending on factors such as:

your current age and when you hope to retire;
how much you have in your pensions now; and
how much you and your employer pay into your fund.

You can also change these factors and see the impact of increasing and decreasing these figures.

Pension Life Expectancy Tables

Thanks to a handy tool from the ONS, you can also calculate your life expectancy based on national averages. From there you’ll be able to get a better idea of how long your pension will need to last. Depending on your predicted life expectancy, you might want to consider delaying taking your pension.

2. Your pension has longer to grow

Whether you decide to keep working and paying into your pension or simply leave your funds untouched for a few years once you’ve retired, keeping your pension invested for as long as possible can bring great benefits in the long term. Compound interest, for example, accumulates over time and can turn a small savings pot into a significant amount when left untouched.

Plus, when you eventually come to access your pension (from 55, rising to 57 in 2028), you’ll be able to take higher payments as it won’t have to last quite as long. If you want to give your savings even more time to increase in value, flexi-access drawdown could be a good option as you’ll be able to withdraw lump sums whenever you need them, while keeping the rest of your pension invested.

Choosing to keep your pension invested can be particularly useful if you’re due to retire during an economic downturn and have seen your pension balance fall. Depending on your circumstances, you may decide to keep your savings invested to allow time for the markets - and your pension balance - to recover.

3. You can maximise your investment potential before moving to safer assets

As you approach retirement, some pension plans will automatically derisk your investments by switching what you’re invested in. Assets like company shares (also known as equities) and commodities (like oil), for example, are closely linked to market performance. So, while they can make great investments early on in your career, they can become riskier the closer you get to retirement. If the markets were to take a sudden turn for the worse, your pension balance could be affected and there might not be enough time for it to recover before you retire.

But, if you plan to retire later, you may be able to maximise your investments and stick with those higher-risk options for a few extra years. The switch to cash or fixed interest assets usually happens five to ten years before retirement so you should contact your pension provider well in advance to see if they can adjust your investments.

4. Your employer will keep topping up your pension

If you continue working, your employer will usually be required by law to keep topping up your pension through Auto-Enrolment, provided that you continue to meet the criteria to be auto-enrolled.

You’ll need to make a minimum contribution of 5% of your qualifying earnings, while your employer will pay in at least 3%.

Some employers match pension contributions as well, giving you more of an incentive to pay into your fund. You may be able to take full advantage of this, especially later in your career if your focus is on your pension, rather than your take-home pay.

5. You’ll continue to receive tax relief on pension contributions until age 75

If you keep paying the minimum amount into your pension, in addition to employer contributions, you’ll also continue to receive tax relief. For 2025/26 workers are entitled to claim tax relief on pension contributions up to the higher of £3,600 gross or 100% of relevant UK earnings each tax year.

Your tax relief is related to the Income Tax you pay. Most basic rate taxpayers get tax top ups of 25%, which means that for every £100 they pay into their pensions HMRC effectively adds another £25. Higher and additional rate taxpayers can claim further relief through a Self-Assessment tax return.

You can usually make tax-efficient pension contributions up to the annual allowance. In 2025/26, this is £60,000 for most people. This includes personal contributions, any from a third party (including your employer) and tax relief.

Note that if you have already flexibly accessed your pension from 55 (rising to 57 in 2028), you may be subject to the money purchase annual allowance (MPAA). This permanently limits your tax-efficient pension contributions to £10,000 a year.

6. Delaying your State Pension can boost your payments

As you usually can’t claim your State Pension until around a decade after your workplace or personal pension becomes available, there’s a chance that you might not need it when the time comes. If you have retirement income from other sources or are still working, it could be a good idea to defer your State Pension.

Delaying your State Pension by just a few weeks could result in you receiving a higher weekly State Pension amount, or even a lump sum payment. The amount you’ll qualify for depends on when you reach State Pension age.

If you reached State Pension age before 6 April 2016

Your State Pension will increase by around 1% for every 5 weeks you defer, totalling 10.4% for every full year. For 2025/26, the basic State Pension is £176.45 a week (£9,175.40 a year). If you delay taking your pension for just one year, your State Pension will rise to £194.80 a week (£10,129.60 a year).

Alternatively, you could qualify for a lump sum payment if you start claiming State Pension after deferring for a minimum of 12 months. This will include interest of 2% above the Bank of England base rate.

If you reached State Pension age after 6 April 2016

If you’ve reached State Pension age relatively recently, you’ll see less of an increase as the new State Pension is already higher than the basic State Pension amount referenced above. Your State Pension will increase by around 1% for every 9 weeks you defer, totalling 5.8% for every full year.

If you receive the new State Pension of £230.25 a week (£11,973 a year) in 2025/26, your pension will rise to £243.60 a week (£12,667.20 a year) when you defer for a year. If you’ve reached State Pension age after 6 April 2016 you won’t be eligible for a lump sum payment.

If you receive housing benefit or Pension Credit, it’s worth noting that these benefits may be affected by any additional pension income. But, if you reached State Pension age before 6 April 2016 and qualify for a lump-sum payment, your benefits won’t be affected.

How long can I defer my State Pension?

You can start deferring your pension even if you’ve already started drawing it and can choose to defer it for as long as you want.

If you’re nearing retirement and are thinking about keeping your workplace or personal pension pot invested, it’s a good idea to speak with your pension provider as soon as possible. Some pension schemes may have restrictions or impose fines if you change your retirement date, while others may not offer it as an option. If this is the case, you might want to consider switching to another scheme or pension provider that’s more flexible.

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How much money is enough? Pension tips and guidance

Oct 2021

Pension Basics

This article was last updated on 20/07/2023

‘How much is enough?’ is one of the ultimate questions we can explore about pensions. Also it’s potentially a huge unknown for most people. How much do you have in your pension pot/s now, how much are you contributing on a monthly/annual basis and how much is your employer contributing? What might this be worth in retirement to ensure that you have enough money for the rest of your life? I recently explored this topic with a wide range of financially savvy friends.

I chose people of different ages, backgrounds and, therefore, life stages. There was a person in their 20s all the way through to a person in their 70s. It was fascinating insight into the financial details of people’s lives. And demonstrated perfectly that no individual is the same, with attitudes to how much is enough varying hugely in terms of value and expectation.

As well as asking each case study ‘how much is enough?’, I also asked them if they had any tips for people reading their stories. Tips on how to build a pension, how to keep track of it, and how to get to a position where you’ll have enough along with knowing when you have enough. I want to share these tips with you here, with a reminder of each person I spoke with.

Age 20s

I spoke to Jordon, founder of money saving website Jordon Cox. Jordon says:

“It’s a good idea to keep tabs of how much you have in your pension every once in a while. It’s good to know you’re on track and this can help you decide whether you need to put more or less into your pension to reach your retirement goals.”

Jordon’s right, keep an eye on your pension balance and how it’s growing over time, but maybe don’t check it too often as pension pot values can go up and down with the movement of the markets. I’d suggest comparing your current pension value to what it might be worth in the future when you might be thinking of accessing the money (this is currently age 55, rising to 57 from 2028). This can easily be done using the PensionBee pension calculator. When fully informed you can take action if you need to be adding more to your pot.

Age 30s

Nicola is the founder of Frugal Cottage, a teacher and advocate of FIRE (Financial Independence, Retire Early). Nicola says:

“The best tip I can give is to get started! It can be quite daunting to be planning for a long time in the future, but time will play in your favour. Then, get used to tracking income and expenses; really know where your money goes month to month. Then, start to look at what you want to achieve; I use monthly goals to keep me on track.”

I love this approach and guidance from Nicola who is well on her journey towards financial independence. The tracking of income and expenses is a really important point to make about building up savings for the future. Once you know exactly what you’re spending you can address any overspend with budgeting. And when you have a difference between income and expenditure this money can be directed into short, medium and long-term savings.

Age 40s

Pete is the founder of the Meaningful Money podcast and website. Pete says:

“The question of how much is enough is unique to each individual. Ultimately, it comes down to money in versus money out. If you have more going out than is coming in - as is the case for most of us in retirement - you’ll need to make up the difference by drawing off savings, be that pensions or investments. ‘Enough’, then, means having an amount that you can draw from to fill that gap indefinitely.”

Beware of the Danger Zone (this is the term Pete uses to describe the early retirement years) because this is when savings tend to get most ravaged. The combination of free time, good health and accessible wealth means that this is when the most amount of money gets spent, and if it isn’t managed carefully this can do irreparable damage.

This is essential guidance from Pete for the early years when you might start to access your retirement savings. As already mentioned, this is from age 55, or 57 from 2028 for private pensions and most workplace pensions, however you should check your pension paperwork for more information. If you’re planning to access your pension money earlier you’re likely to use a lot more in your 50s and 60s than later in your 70s, 80s and 90s. You can use a drawdown calculator to help with these calculations.

Age 50s

Faith is a fellow PensionBee ambassador and is the founder of Much More with Less. Faith says:

“Despite being in my 50s I’m still putting lots into my pension, as it gets topped up with free money in tax relief from the government, cuts my income tax bills, and I can get my hands on it if needed in just five years’ time. (Faith can access her private pension at 55 in 2026)

My main tip for retirement saving is to start early and keep plugging away, because those early contributions will be turbo-charged by time.”

Sound guidance here from Faith; the best time to start saving into your pension is as young as possible, the second-best time is now. The benefits of saving in a pension from your 20s will include investment growth over many many years and the benefits of compounding.

Age 60s

Nick is a 65-year-old semi-retired freelance writer. He’s the founder of Pounds and Sense. Nick says:

“If you’re aged 50 or over, you can book a free Pension Wise appointment to discuss your pension options with a trained adviser. Pension Wise is a government service that offers free, impartial guidance about your defined contribution pension options.

Whatever your age, it’s important to think about how much income you will need in retirement and plan accordingly. A recent survey by Which? magazine found that for a comfortable retirement (by no means a luxurious one) couples typically need £28,000 a year and single people ^{_isa_allowance}. Your State Pension will only cover part of this, so it’s essential to ensure you have a large enough pension pot to bring your income up to the required level when the time comes.
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My thoughts as a self-employed person in my 40s

I’ll end this article with a few tips from me, based on experience and learnings with my own pension. I didn’t start saving money into my pension until I was 32. I was a late starter, a huge financial regret. The consequence of this is that I’ve missed out on contributions from myself and my employers for 10 years of my early career, plus the compounding effect of these contributions increasing in value.

Alas, this is the past and there’s nothing I can do to change this. All I can impact is the future! Good life lesson in general is that. I did start to contribute to a workplace pension from age 32 to 37 and built an OK sized pot. I became self-employed aged 37 and consolidated my pots with PensionBee and now add pension contributions on an adhoc basis.

I’ve set up a pot within my Starling business banking for pension contributions. Every time I receive invoice income, I go to my pots section of my app and allocate money across them. Some money goes to the monthly bills/spending pot, some goes to tax, some goes to the holiday pot, and some goes to my pension pot. I then transfer this money over to my pension every few months. I only transfer money into my pension when I’m confident that cash flow is good, for now and for the future. Also when my emergency fund is fully topped up with three to six months of essential expenses.

I’ve created a pension pot goal, calculated using PensionBee’s pension calculator. I know my current pension value and roughly what that could be worth at my proposed retirement age of 60. I’ve also calculated how much I need to add on an annual basis between now (aged 44) and then (aged 60) to reach my goal.

This all helps me to feel in control and stay on track with my savings and pensions goals. And hopefully I can retire a bit earlier than 60, ha-ha. Wishful thinking!

Risk warning

Lynn Beattie is a PensionBee customer and CEO/Founder of Mrs Mummypenny, a personal finance website. She is also an ACMA management Accountant, previously working in commercial finance for Tesco, EE & HSBC. Lynn is a single mum to three boys, living in Hertfordshire, and is the author of ‘The Money Guide to Transform Your Life‘ published in September 2020.

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Period	Market Event	FTSE World TR GBP (%)	4Plus Plan (%)
4Plus Plan’s inception – 6 Sept 2013	QE Tapering, China Interbank Crisis and its aftermath	-5.44	-2.41
3 Oct 2014 – 15 May 2015	Oil price drop, Eurozone deflation fears & Greek election outcome	-5.87	-1.77
7 Jan 2016 – 14 Mar 2016	China’s currency policy turmoil, collapse in oil prices and weak US activity	-7.26	-1.54
15 June 2016 – 30 June 2016	BREXIT referendum	-2.05	-1.07

Period	Market Event	FTSE World TR GBP (%)	4Plus Plan (%)
4Plus Plan’s inception – 6 Sept 2013	QE Tapering, China Interbank Crisis and its aftermath	-5.44	-2.41
3 Oct 2014 – 15 May 2015	Oil price drop, Eurozone deflation fears & Greek election outcome	-5.87	-1.77
7 Jan 2016 – 14 Mar 2016	China’s currency policy turmoil, collapse in oil prices and weak US activity	-7.26	-1.54
15 June 2016 – 30 June 2016	BREXIT referendum	-2.05	-1.07

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April 13, 2023

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Faith Archer

August 16, 2024

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Lori Campbell

February 28, 2025

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Uneesa Zaman

July 23, 2025

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November 13, 2024

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Capital at risk

The Bank of Mum and Dad in practice

Planning for predictable financial support

Help while your child’s studying

Funding your child’s big adult milestones

Implications of dipping into your savings

Ongoing bankrolling and protecting your financial security

Treating children equally or equitably?

Making sure you’re on the same page

A living versus willed inheritance

Selling and downsizing

Equity release

Lifetime mortgages vs home reversion - what’s best for me?

Relocating and renting out

What happened to stock markets?

‘Pot for life’

Benefits

Challenges

When will we see ‘pot for life’?

Have a question? Get in touch!

Spring Statement 2024 points at a glance:

National Insurance reduction

Child Benefit threshold raised

ISA limit increase

Property tax changes

VAT threshold raised

Non-dom status abolished

In summary

How work culture may change

Financial challenges in midlife

Retirement landscape and pensions

How to top up your pension

1. Combine your old pensions

2. Make the most of your annual allowance

3. Increase your contributions

Some things to remember

Mind the National Insurance credit gap

Can I back date my claim?

How to take action now

What happened to stock markets?

The purpose of AGMs

Company spotlight: Shell

PensionBee philosophy

Have a question? Get in touch!

How does the gender pension gap happen?

What needs to change?

How can we protect ourselves from the gender pension gap?

1. Discuss pensions with your partner

2. Keep track of your pension pots, and be aware of how much you’ve saved

3. Consider topping up your pension using any disposable income

4. Start saving into a pension for your children

5. Make sure pensions are on the table if you divorce

6. Talk to your female friends and relatives about pensions

Customer sentiments on fossil fuel financing

Paris-aligned climate investing

Next steps

Have a question? Get in touch!

The Conservative Party manifesto - what are the changes to pensions?

Triple lock maintained and ‘triple lock plus’ confirmed

National Insurance cuts

Abolish National Insurance for self-employed

Reforms to Child Benefit

What’s missing?

The Labour Party manifesto - what are the changes to pensions?

Triple lock maintained

Reforms to the pension landscape

Increased investment in UK pension funds

What’s missing?

Summary

Have a question? Get in touch!

How does inflation eat away at our money?

Shopping around for the best rate

Building an emergency fund

State benefits that are impacted by savings

What are the rules on cash savings?

Small steps to save for your future

Are pensions ‘hot’?

The case for personal pension saving

Final thoughts

Company shares in 2024 (as at H1)

What are company shares?