The Buzz.

Read the latest pension news and retirement planning tips, from our team of personal finance journalists, investment professionals and money bloggers.

When will my pension balance recover?

Pension funds across the UK and worldwide are still experiencing a decline from their all-time highs. Find out how and when they might recover.

You might be looking at your pension balance and wondering why the performance is yet to recover from the impact of things like COVID and the Russian invasion of Ukraine. Globally, pension balances dropped -13% in 2022 and 300 of the world’s top pension funds are reporting the largest fall in the value of their assets in 20 years. But why are we still seeing low performance over a year on?

In this article, we explain why pension funds across the UK and worldwide are still experiencing a decline from their all time highs, and how and when they might recover.

Why are pension balances down?

Pension balances are down because they invest in a range of assets such as company shares and bonds, both of which are still down from their all-time highs of 2021.

What’s happened to company shares?

Following COVID, various central banks were printing money to help their economies. This resulted in a huge increase in the cost of goods and high inflation.

In response to high inflation, and to help consumers, central banks around the world raised interest rates. However, those high interest rates increased the cost of borrowing and, as a result, the value of company shares decreased. While the cost of borrowing is high, companies aren’t able to access money to invest as much in growth.

What’s happened to bonds?

When interest rates are high, bond prices tend to go down. Existing bonds that are already in circulation - those which your pension fund’s invested in - are less valuable as they aren’t earning as much interest as new bonds. Whereas new bonds are reflecting the current high interest rates.

So both the value of company shares and bond prices have fallen at the same time, which is very rare.

What’s happened in 2023 so far?

The good news is, we’ve seen some recovery. The main US stock market, the S&P 500, is up between 15-18% on average thanks to some companies in the AI and technology space. These companies, including Apple, Google and Nvidia among others, are referred to as the ‘Magnificent Seven’ because of their high valuations. Most pension funds will be invested in the S&P 500 and so have experienced some of this recovery.

However, other assets that pensions are invested in - the FTSE 250, which is a UK index of companies listed on the London Stock Exchange, and the bonds market - remain flat or down for the year so far. Most pension funds are diversified which means they’re invested in a range of stock markets and bond markets around the world. This is to limit the impact of the most severe market movements, and is why some pension funds may have seen some, but not full, recovery.

When will pensions see a full recovery?

Interest rates need to come down again - in order for companies to grow, they need access to more investment. At the moment, they can’t invest in growth as the cost of borrowing and other forms of capital is so high.

When will interest rates come down?

It’s important to remember that high interest rates do serve a purpose. Interest rates were increased to help us cope with high inflation by making our money go further on everyday spending like groceries. The idea is that consumers will spend less and save more if interest rates are high. Once there’s less demand for goods and services, prices - and then inflation - will eventually fall. The good news is that inflation is trending downwards. In January, the UK rate of inflation was 10.1% and the latest data from August shows it has fallen to 6.7%.

Until inflation decreases, it’s unlikely that UK policy makers will decide to lower interest rates. Generally speaking, a smaller inflation rate of 2% and an interest rate above 0 are considered a good thing for economic stability. Financial experts have predicted a lower interest rate from Spring 2024.

Key takeaways

Pension balances are down worldwide, including in the UK.
Two of the main things pensions invest in are company shares and bonds, which are lower in value than their all time highs in 2021.
We’ve seen some recovery due to AI and technology companies boosting the US stock market - of which lots of pension funds are invested in.
It’s unlikely pension funds will totally recover until interest rates come down. In the UK, experts have predicted a lower interest rate from Spring 2024.

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.

What happened to pensions in August 2023?

Find out how the performance of your pension plan’s directly impacted by the performance of its investments.

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

August’s typically a quiet month for financial markets, yet this year’s been anything but. High inflation, rising interest rates and geopolitical risks are causing investors to be on edge. This means that company share prices have been moving up and down sharply. And pension savers may have seen their balance move considerably.

It’s important to remember that seeing your balance go up and down’s a normal part of investing. There will always be periods of uncertainty, but over the long term, history has shown us that markets tend to trend upwards. This means that pension savers who stay invested for the long term should still be on track to reach their retirement goals.

In the wider pensions industry, there were a few notable developments this summer. With economic uncertainty widespread, all eyes are on the UK government. The cost of living crisis, the debate over the State Pension triple lock, and the Mansion House Reforms could all impact pensions.

Read on to discover how markets have performed this month and whether the impending government’s Mansion House Reforms are a good idea.

What happened to stock markets?

In UK stock markets, the FTSE 250 Index fell almost 3% in August. This brings the year-to-date performance close to -1%.

Source: BBC Market Data

In European stock markets, the EuroStoxx 50 Index fell by almost 4% in August. This brings the year-to-date performance close to +13%.

Source: BBC Market Data

In US stock markets, the S&P 500 Index fell by almost 2% in August. This brings the year-to-date performance close to +18%.

Source: BBC Market Data

In Asian stock markets, the Hang Seng Index fell by almost 8% in August. This brings the year-to-date performance close to -7%.

Source: BBC Market Data

The government’s Mansion House Reforms

These reforms could well affect pension savers. And not, as the name might suggest, owners of mansions. Mansion House is a historic building in London, occupied by the Lord Mayor of London. It’s the traditional venue for the Chancellor’s speeches on the economy and financial services. The reforms are named after the Chancellor Jeremy Hunt’s Mansion House speech.

What are the Mansion House Reforms?

On 10 July, the Chancellor announced a series of changes to the UK financial services sector. Especially impactful for pension savers! The full list of changes announced in the Mansion House Reforms is quite extensive. Here’s the highlights that have been making headlines:

Boosting outcomes for pension savers. Making it easier for higher-growth and higher-risk companies to get the funding they need to grow. How? By encouraging pension funds to invest in unlisted (private) companies.
Encouraging companies to grow and list in the UK. Attracting more businesses into the country. How? Making it easier for companies to list on the London Stock Exchange.
Delivering a Smarter Regulatory Framework. Simplifying financial regulations, without reducing security. How? The words “radical overhaul” have been used by the government. In other words, less red tape.

How could the Mansion House Reforms impact my pension?

For UK pension savers, there’s been a couple of recommendations that could be impactful. First, reducing the lower age limit for Auto-Enrolment from 22 to 18 years old. Second, removing the Lower Earnings Limit for ‘qualifying earnings’. This would mean Auto-Enrolment contributions are made from the first pound of earnings, rather than only from hitting the ^{_lower_earnings} income threshold. The government believes these measures will give a big boost to retirement outcomes for workers.

One of the key proposals of the Mansion House Reforms is the Mansion House Compact. It’s a pledge made by nine UK pension providers to invest at least 5% of their default funds, usually where most savers are automatically enrolled by their employers, in unlisted companies by 2030. Unlisted companies are businesses that aren’t traded on a public stock exchange. They’re often seen as being riskier than listed companies, but that risk has the potential for higher returns.

Reaction to Mansion House Reforms

The reforms are still at the consultation stage, so it’s possible that some of the proposals may change before they’re implemented. So far the proposed reforms have been met with mixed reactions. Some experts believe that they’ll lead to pension innovation and reformation, while others believe that they’ll have a negative impact on savers.

The reforms aim to make it easier for pension funds to invest in riskier assets to boost returns for savers. Concerns have been raised that these reforms could lead to higher investment losses for savers as well as higher fees. Earlier stage businesses are generally considered to be riskier, and many of them could fail. If investment losses occur, pension savers wouldn’t get the higher retirement income that the government’s suggesting they’ll get.

At the same time, investing in private companies usually comes with higher costs for pension savers. Private companies are less accessible than listed companies. Therefore, pension providers (and the savers using them) often bear hefty management and consultant fees when including private companies in their investment mix.

At PensionBee, we don’t currently have any plans to offer this type of investment to our customers. But we’ll continue to watch the progress of the reforms and keep you informed on how they develop.

This is part of our monthly pension update series. Check out the next month’s summary here: What happened to pensions in September 2023?

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

E20: What to do when someone dies with Simon Levy, Justin Harper and Jaypee Soule

Find out how to financially prepare for your own death and what to do when a loved one passes away.

The following’s a transcript of our monthly podcast, The Pension Confident Podcast. Listen to episode 20 here, watch on YouTube, or scroll on to read the conversation.

PHILIPPA: Welcome back to The Pension Confident Podcast. My name’s Philippa Lamb. Now, as we all know, there are only two certainties in life - death and taxes. We’ve talked a lot on the podcast about taxes. So today, we’re going to talk about the one no one really wants to talk about - death. And more specifically, how to avoid all the financial complications that your death, or the death of someone close to you, can leave behind.

Sorting out the admin when someone passes away can be a slow, expensive business if they didn’t have good arrangements in place. So, we’re going to talk about how you can streamline that process by doing a few simple things in advance, right now. And to talk us through that we’re joined by three expert guests.

First up, with the Free Wills Month campaign coming up in October, what better time to speak to one of the solicitors involved? Simon Levy from Frank Brazell & Partners. Welcome Simon.

SIMON: Hello, nice to be here.

PHILIPPA: Next up, Justin Harper, CMO of the independent life insurance broker; LifeSearch. Nice to have you with us.

JUSTIN: Hello, delighted to talk about this important topic.

PHILIPPA: It is, isn’t it? And finally, from PensionBee, we’ve got the Head of Second Line Compliance and the former Chairperson of the company’s Death Committee, Jaypee Soule. Hi Jaypee.

JAYPEE: Hi, lovely to be here.

PHILIPPA: The Death Committee sounds very sinister. I think we’re gonna have to ask you about that later. It’s not as bad as it sounds?

JAYPEE: It’s not as bad as it sounds.

PHILIPPA: The usual disclaimer before we start, please remember that anything discussed on the podcast should not be regarded as financial advice. And when investing your capital is at risk.

Just to open with, I have personal experience of this myself. I had to organise my mother’s funeral last year. I was amazed by how expensive everything was. Have any of you had experience of this?

JAYPEE: I have, last year as well.

PHILIPPA: Sorry to hear that.

JAYPEE: And it’s really, really expensive.

PHILIPPA: Yeah. Justin, have you ever had to do this?

JUSTIN: Yes, I have. When my father passed away. So, it was expensive and you don’t realise what other expenses are incurred at the same time. It’s not just a funeral. There are other things, too.

PHILIPPA: Yeah. According to SunLife, it can all wrap up to about £9,200, which is a lot of money, isn’t it Simon?

SIMON: It’s a lot of money. We’re sometimes appointed executives, so we have to arrange funerals for people. And there was one person I arranged for, from a hospice. He had hardly any money. The cheapest funeral we could arrange, because he had hardly any money to leave, was about £2,500 and that ate into most of what he had.

FINANCIALLY PREPARING FOR YOUR OWN DEATH

PHILIPPA: Yes, we’ll talk more about funerals later. First though, thinking about how you can prepare in advance. Should we start with what we can do to help out our loved ones? How can we make their lives as easy as possible, basically, from a financial perspective? Justin, we hear this term ‘estate planning’ used a lot, don’t we? When we talk about leaving things behind. What does that actually mean? What’s your estate?

JUSTIN: Your estate, very simply, is everything you own. So it’s the money you have, your property, which is usually your home, your possessions and your investments. Everything you own, that’s your estate. Estate planning’s around how you want to organise your estate and who you want it to go to when you die.

PHILIPPA: Ok, and Simon, can we have a definition right at the top of executor and beneficiary, because we hear those words a lot too.

SIMON: If you write a will, you have to appoint somebody - one or more persons and sometimes an organisation if you like - to administer the will and to put into effect your wishes. That person’s called the executor, or the executors, because they execute your wishes. The people who you leave things to - who you leave your Picasso to if you like - would be the beneficiary.

PHILIPPA: Got it. Ok, always good to kind of get the basics out of the way. Keeping all the paperwork organised is really the first step, isn’t it?

SIMON: Yes, my first instruction to everybody I write a will for is - don’t lose the will! It sounds silly, but you’d be surprised. People think that once you’ve done your will, that’s it and they forget about it. And then 20 years later, either they want to change it and they can’t find it, or they die and nobody else can find it.

PHILIPPA: Ok, got it. So Jaypee, how about tips for the best way to keep our money and assets organised? Because it isn’t just the will, is it? It’s everything to do with our financial situation. And I’m thinking keeping your paperwork in good order right from the start has got to be really helpful.

JAYPEE: Definitely. I always say, make sure a close loved one or someone you really, really trust, knows where to find all your paperwork. Or you could use, you know, a password saver software where you can keep all of your passwords. Because I think that’s usually the difficult thing. The last thing you want is people not being able to log into your social media accounts or your bank accounts or email, and the likes.

PHILIPPA: The other thing that comes to my mind is, I mean, you touched on this a bit, is having honest conversations with family and letting them know your plans. I think a lot of people just don’t talk about it all, do they? Is that your experience?

JUSTIN: Yes, in a previous organisation I worked for, we did some research about this called The Last Word, which is about people having that difficult conversation. And very, very few people have had that conversation. So it leaves a real sense of doubt and worry for their dependents on those difficult moments.

PHILIPPA: Did you get into why?

JUSTIN: One reason is that you might be fearful of upsetting someone. There are a certain proportion who do fear they’re tempting fate by talking about death, but it’s gonna happen!

JAYPEE: It’s a very, very touchy subject to discuss because people don’t want to talk about death. So, I’d joked around before my mum passed and I kind of said, ‘make sure you get your affairs in order so that it’s easier’. And she’s like, ‘are you trying to get me out of here or something?’ But no, I just wanted her to be more organised.

PHILIPPA: Yeah, and as you say, you mentioned social media accounts and online stuff. I use a password vault for that because all my passwords are alphanumeric strings, like we’re always told they should be. And so obviously they’re impossible for anyone else to know or access. The one I use, and I’m sure it’s true for most of them, you can set up so that someone gets access to that vault on your death. But I’m not sure most people do that. Because the other question on my mind, and actually I must admit, I hadn’t really thought about this before, is email and social media accounts. What happens to them when you die?

JAYPEE: Some social media platforms do something, but you have to let them know the person’s passed away, because otherwise they would have no idea. And they give you two options. So you could either take the page down completely or you can memorialise the page. So it can be done, but I think what’s important is making sure people who are close to you can get access to your social media in order to report it.

PHILIPPA: So that’s a thing to set up in advance, isn’t it? Because there’s no way I’m logging into anyone’s social media account to do the things you’ve just described. So that needs to be set up in advance?

JAYPEE: It does, yeah.

PHILIPPA: And presumably the same thing applies with personal online stuff that, to be honest, you don’t want shared? Setting up protocols for accounts to be obliterated and erased on your death.

JAYPEE: Absolutely. Again, those are things that people don’t think about. And they probably should. Like emails - for older people or old school people, like me - your email tends to have loads of documents and other important stuff you’ve had over the years. I don’t think anybody ever goes into the email and cleans it out. You could have your entire life’s secrets, so to speak, in your personal email. Most importantly, perhaps you should write a list of things that you’d like people to do for you.

PHILIPPA: So Simon, beyond these key practical steps around data, what else can you do to prepare on the legal front? I suppose I’m thinking about things like trusts and powers of attorney, and things like that.

SIMON: Well, lasting powers of attorney are very useful tools.

PHILIPPA: Can you just explain what they are?

SIMON: Yes, certainly. A will only takes care of things after you die. Lasting powers of attorney envisages a time where, if you lose your mental faculties, somebody can look after your affairs. If you do lose your mental faculties and you haven’t got a lasting power of attorney, it’s very difficult for a spouse or children as the bank won’t deal with them.

PHILIPPA: Yes, that’s the difficulty, isn’t it? There’s two sorts in the UK, aren’t there?

SIMON: Indeed, there are two sorts. There’s finance and property, and there’s health and welfare. The finance and property one deals with monetary matters, and the health and welfare deals with things like care homes. Which care home you should go to, operations, whether you turn machines off, etc.

PHILIPPA: So, essentially you pick a person you trust. You don’t have to have both. You can have one just for financial matters or for health or for both. It doesn’t have to be the same person, does it?

SIMON: It’s a bit like executors - you can have as few or as many people as you like.

PHILIPPA: I mean, this sounds great in the sense that we never really know what’s ahead for any of us, do we? So it sounds like a smart idea. And as you say, it makes things so much easier for our family because they know they can look after us properly and access money for whatever it might be. So, I’ll tell you something else I came across and that was a letter of wishes form - what’s that?

SIMON: A letter of wishes is exactly what it says. It tells people what you would like to happen. If you have something which is very valuable -

PHILIPPA: So, say it’s your Picasso?

SIMON: Yes. You want to make sure it gets to your favourite person and if it’s in the will, then they can sue if it doesn’t come to them. But a letter of wishes is different. If you have personal effects, which aren’t particularly valuable, but you’d like them to go to somebody and you don’t want to specify everything in the will - you keep a list that says ‘I would like this to go to this person’. But nobody can legally enforce those wishes.

PHILIPPA: So, thinking about my earring collection. It’s not valuable, but I like them. If I wanted to leave them all to specific nieces or something, that would be a letter of wishes thing, rather than doing a long list in my will?

SIMON: If it’s not that valuable, I’d think it’s probably easier to just put it in a letter of wishes. You can write that you want these earrings to go to this person - otherwise the will becomes long.

PHILIPPA: Got it.

JAYPEE: Also, I think a letter of wishes can cover things like how you want to be buried or say, the type of casket that you want, or what you want to wear.

PHILIPPA: Music at your funeral, that sort of thing?

JAYPEE: Music at your funeral, sitting arrangements, all the things that you wouldn’t put in a will.

PHILIPPA: Ok, well since you mentioned funerals, what about prepaying for your own funeral? I’ve got some data from the Financial Conduct Authority (FCA) that says over 200,000 people prepaid for a funeral plan in 2021. Has anyone around the table done that? I’ve not done that.

JAYPEE: No, but I think it’s a brilliant idea.

PHILIPPA: No downsides?

JUSTIN: There are some things you need to think about. First of all, you need to have the money up front. One thing to be aware of is, if you’re going to move or move abroad, then sometimes your plan won’t come into effect. And also, you’re choosing a funeral director, typically. So, you’re working with them and choosing your funeral with them. Although some have a network of funeral directors across the UK. So one to be wary of, but a very good idea to make sure that legacy and debt, as such, doesn’t fall upon your loved ones.

PHILIPPA: And again, I think it’s important to tell someone. There’s no point doing that if your family doesn’t know you’ve done it.

SIMON: It’s worth noting as well that, if you die and there’s money in your bank account, the banks will allow you to pay for the funeral from those accounts.

PHILIPPA: Ok, so it’s not as if the people left behind have to struggle and think, ‘well, I just don’t have the money for that’.

SIMON: These days most banks will release money to pay for the funeral.

PHILIPPA: Ok, that’s good to know. Justin, it seems to me this might be a good time to talk about the pros and cons of life insurance. I mean, what exactly is it? I know it sounds like a basic question, but how does it work? Why should we consider it? Because, obviously, it’s a thing you have to pay for.

JUSTIN: It is indeed. So we’re all gonna die, we know that. The wonders and benefits of life insurance are simple. You pay a small amount of money every month and then at the end, either when you die or at the end of the term, you get some money back. The insurer pools all the different premiums from all the different policy holders. So they have that big money in case you die. So, you can take out a policy today and if you die tomorrow, as a result of an accident, it’ll pay out the full amount. Those are the sort of things you can’t save for, so insurance plays a valuable role.

PHILIPPA: Simon, I want to talk about tax, which is the other certainty in life. Because this brings us to inheritance tax, doesn’t it? Obviously, it’s lovely when you’re left something from a loved one. But, who has to pay inheritance tax? How does that work?

SIMON: Anybody who has an estate under ^{_iht_threshold} doesn’t have to pay inheritance tax.

PHILIPPA: So this is everything? Everything you own that adds up to that?

SIMON: Whereas if you live in London and you own a garage, you’re probably over the ^{_iht_threshold} limit. So, once you become liable for inheritance tax, you’re taxed at ^_higher_rate. Now there are exemptions. If you leave any money to charity, that’s not taxable. If you leave money to a spouse, that’s not taxable either. When Mr Osborne was Chancellor, instead of raising the level, because it’s been that ^{_iht_threshold} level for over 10 years now, it’s been frozen until 2028, so more and more people are caught by it.

PHILIPPA: As house prices rise?

SIMON: Yeah. So, instead of raising that level, he brought in this idea that if you leave your property, in which you have resided in, to a direct descendant, then you get basically an extra £175,000. So your inheritance tax limit can be up to ^{_higher_rate_personal_savings_allowance},000. And it’s important to know that if you leave it to a spouse and you don’t use up your level of inheritance tax, then that rolls over. So if you have a house which you’re going to leave to your children and your spouse has died before you, then there’s in effect a £1 million exemption.

PHILIPPA: Ok, but how about legacies? If you think, ‘I’m going to divide up what cash I have on my death between my loved ones’ and you want to leave, say, ^{_starting_rates_for_savings_income} or ^{_money_purchase_annual_allowance}, whatever it is. If you want to leave it to someone, do they have to pay tax on that?

SIMON: Normally speaking, the tax is paid from the estate and then you divide up the legacies afterwards.

PHILIPPA: OK, got it. Jaypee, pensions are important here, aren’t they? Because they fall outside of your estate. You can’t put them in a will, is that right?

JAYPEE: Your pension isn’t usually covered by your will. It sits outside of your estate. So, it’s important to make your pension provider aware of what you’d like to do with your pension if you pass away. At PensionBee, you can log into your online account - what we call The BeeHive. In your account settings, you should be able to put down who you’d like - and it could be one or more people - to get your pension. You need to make them aware, because the decision of who your pension goes to is at the absolute discretion of the pension provider. So, it’s important to go and add your beneficiaries to your account. Make sure we know who you want your pension to go to.

You can mention your pension in your will if you want to eliminate any doubt over your wishes, but it’s recommended that you still contact your pension provider to add your beneficiaries to your policy.

PHILIPPA: And you can leave your pension pot to more than one person, can’t you? It doesn’t just have to be one.

JAYPEE: Absolutely, you can leave it to as many people as you like.

PHILIPPA: So what happens if you don’t do that and you die? And there’s your pension pot, which might be a very considerable sum of money, if you’ve had a pension for a long time. Where does that money go?

JAYPEE: It remains unclaimed.

PHILIPPA: In your experience, are there lots of occasions where people haven’t specified who they want their pension pot to go to?

JAYPEE: Absolutely. I think the majority of people don’t think about it.

PHILIPPA: You’re kidding me! So, people save their whole lives and the money just sits around when they’re gone?

JAYPEE: If you haven’t specified a beneficiary, it doesn’t mean that the money’s gone. We’ll wait to hear from a family member and that’s why it’s important to have experts in the committee, because then we do a fact finding exercise to make sure that we can gather as much information as possible to figure out who you’d have wanted your pension to go to.

PHILIPPA: Yeah, so again, it’s another instance of where, if you’ve got a pension, you need to be telling your loved ones that you’ve got one.

JAYPEE: Absolutely, you need to let them know you’ve got one. I’d say just add their names and make sure you keep it updated. That’s very, very important.

PHILIPPA: Just back to tax, Jaypee. What are the tax implications of leaving your pension to someone?

JAYPEE: If you’re younger than 75 and you haven’t started drawing down from your pension, then all of your pot can go to a loved one completely tax-free. If you’re 75 and above, then you get charged tax on the marginal rate of the beneficiaries income tax.

PHILIPPA: Ok, so if the person getting the pension pot’s paying tax at the minimum rate, that’s what they’ll pay tax on?

JAYPEE: That’s right.

PHILIPPA: Ok, and if they’re a higher rate taxpayer, that’s what they’ll pay?

JAYPEE: That’s what they’ll pay.

WILLS, WILLS, WILLS

PHILIPPA: Let’s move on. Let’s talk about wills. Simon, as I understand it, only 44% of people have one. I’m confidently expecting that everyone around the table’s got one. Yeah, everyone’s nodding. That’s good! I’ve got one. But lots of people don’t have one. Can we just start with a legal definition of what a will is? What counts as a will?

SIMON: A will, basically, is your desires after you die. And for it to be legal, it has to be dated, signed and witnessed by two people. It can be written on anything. The danger of wills is ambiguity. So you have to be clear on what you want. What you don’t want is - if you leave everything to be divided amongst your children, and suddenly somebody else pops up and says, ‘I was a child of the person’.

PHILIPPA: So you’re essentially saying you can write your own? Because obviously there’s a cost attached to getting someone else to do it. Is that a good idea, really?

SIMON: Well, I’m saying because of the problems that can arise, the answer is, I would’ve thought, probably not. Look, it can be better than nothing. But on the other hand, it can cause lots of problems.

PHILIPPA: I’m thinking of Aretha Franklin. She had a whole bunch, as I understand it, of handwritten wills. There was one stuffed down the back of her sofa or something! And there was huge amounts of conflict about which of her kids inherits this, presumably, enormous estate. That did make me think it’s probably not such a good idea. Or at least if you do write one yourself, again, it needs to be kept somewhere safe, right?

SIMON: Yes, you’ve got to know where it is.

PHILIPPA: Absolutely, ok, I’m going to ask, how did you two do your wills? Justin?

JUSTIN I did a combination. I downloaded my own and we wrote it as a family when our children were born. So, that was an important point in our lives as we needed to understand what happens to our kids should either of us pass away. And then we did seek legal advice as well, which was very affordable and gave us real peace of mind. And we have updated it as well.

SIMON: Yes, unlike puppies, a will isn’t for life. You have to keep looking at it every few years to make sure it’s still applicable.

PHILIPPA: I’m going to ask you about that in a second! But first I want to ask Jaypee how she did her will?

JAYPEE: At a solicitors.

PHILIPPA: Yeah, me too. And it wasn’t cheap, I have to say. But, there’s Free Wills Month, isn’t there? Which we definitely do need to talk about. That’s in October, how does that work?

SIMON: Well, the Free Wills Network has two months of the year - October and March - when there’s a Free Wills Month. And you can apply if you’re over 55 to get a will done for free. During the rest of the year, there are charities where anybody of any age can apply to get a will done for free. You just have to fill in a form with a solicitor and you can do that the whole year round. The caveat is that the wills have to be, what we call straightforward or simple wills.

PHILIPPA: So no complicated trust funds then?

SIMON: It’s up to the solicitor to decide what they think is complicated or not. My normal measuring stick is that it should take half an hour of instructions and then half an hour to draft. If it takes longer than that, I’d say to you that we’d normally charge this amount, the Free Wills Month will pay us that amount and this is the difference. Do you want to carry on or not?

PHILIPPA: And if people want to do this, if they’re thinking ‘ok, I’m listening to this podcast and I should definitely make a will’, then next month’s a good month to do that? They just Google ‘Free Wills Month’, do they?

SIMON: They do. There are various solicitors who join in for those particular months.

PHILIPPA: Let’s go to intestacy. People dying intestate, with no will. What happens?

SIMON: Well, there are laws of intestacy. These days, if you have a spouse, they get the first £250,000 and half of the rest of your property. If you don’t have a spouse, the rest of it goes to your children first. If you have children and they die before you, then it goes to their children. But if you haven’t got children, then it goes to your parents. If you haven’t got parents, it goes to your siblings. And if your siblings have died then it goes to their children.

PHILIPPA: I’m guessing this all takes a long time, though. Is that right, Jaypee? If people die intestate? As you say, there are protocols around who gets what. But I bet it’s not quick, is it?

JAYPEE: No, it’s not.

PHILIPPA: What sort of time are we talking about?

JAYPEE: I mean, it depends on how quickly they can get us what we require. Because our goal is to figure out what our customer would’ve wanted for their pension. At PensionBee, we’ll contact really close family members and ask, ‘what would this person have wanted?’ Was there something that they were paying off? Is there anyone that’s financially dependent on them? Because if there’s no will, then we don’t know what you would’ve wanted for your money.

PHILIPPA: Because it’s interesting, looking at some data from the National Wills Register, which says 49% of people said their parents didn’t leave any instructions. 58% of people hadn’t talked about this at all and said they were unlikely to do so in future. Which doesn’t sound like a good idea, does it? I mean, if you’re not talking about it, you probably do need to be talking about it. And as I said, less than half of all the adults in this country have actually made a will at all. So there’s a long way to go on this, isn’t there Simon?

Actually, as we’re talking about the National Wills Register, that brings me to an interesting point. It’s all very well writing a will and putting it in a box, but what if people can’t find it? Can you register it?

SIMON: If you can’t find a will and you know there was one, there’s a presumption that the person has destroyed their will and therefore they will die intestate. It’s a rebuttable presumption.

PHILIPPA: So you can argue it?

SIMON: You can argue it. But, if you want to change your will or get rid of it, you can just destroy it and you won’t have that will anymore.

PHILIPPA: So what’s the most sensible, safe thing to do with your will when you’ve written one?

SIMON: Everybody has their own ideas on this, I think. You can store it in some places, but they’ll charge you for doing it. I can’t see the point. My old partner used to say, ‘get a tin box and put it in there’.

PHILIPPA: That sounds very low tech?

SIMON: Yeah, well he was very low tech! But on the other hand, we have a safe in one of our offices where some people ask us to store their wills. We can do it, but we can also get burgled or flooded or whatever - the same as anybody else can as well. And also, if you put it with your solicitor, how are your loved ones going to know where your will is?

JAYPEE: Quite a few people leave video wills.

PHILIPPA: This is new to me! What’s a video will?

JAYPEE: So, it’ll be a video of themselves saying this is what I’d like. I’ve heard of people doing it, but I’ve never actually processed one myself. So I wonder whether it would have the same validity as having a proper written will. I doubt it would?

PHILIPPA: That’s a good question for Simon?

SIMON: I’m sure it’ll come, that you’ll be able to do wills online or whatever, but at the moment, as far as I know, it has to be a document that’s signed and witnessed.

JUSTIN: I think it just reinforces the importance of not only making a will but also having that conversation as well. And yeah, you’re right actually, Jaypee. We don’t quite have a tin box, but we’ve got an expandable folder where literally all our documents for the household live.

PHILIPPA: I was gonna say - I don’t want to be nosy but, where’s your will?

SIMON: I think the idea of the tin box was in case there was a fire.

JUSTIN: Yeah that makes good sense.

PHILIPPA: I keep mine in a fireproof box. But I keep a copy with my solicitor too.

JUSTIN: One of the advantages of having professional advice is, at least they’ve got it. But you need to tell somebody.

PHILIPPA: What about you, Jaypee? Where’s yours?

JAYPEE: At home.

PHILIPPA: Just kicking around at home?

JAYPEE: Just kicking around, so maybe I need to think about investing in a tin box!

JUSTIN: There’s a really good idea from Age UK actually. So, they offer a whole host of guides and support, but one of the things I stumbled across there the other week was something they call a LifeBook, which is exactly that. So it’s a very simple, online, downloadable document, which you can either print off or send to your dependents. It captures all your personal details, all your financial details, your bank accounts - not the passwords - but the bank accounts. And at the end, it offers you the opportunity to leave a message to your dependents as well. All in one simple document. It’s a great tool.

PHILIPPA: That, I’ve got to say, sounds like a great idea.

WHAT TO DO WHEN A LOVED ONE DIES

PHILIPPA: We need to wrap this up. But I do want to just get into that big question of if you’re having to deal with someone’s estate and there’s no will. Maybe the admin and the paperwork is all just in chaos. What are the things you actually have to do, legally or rationally? You have to register the death, don’t you?

SIMON: You have to register the death, yes.

PHILIPPA: And where do you do that?

SIMON: At the registry for the local authority.

PHILIPPA: And then you can get death certificates?

SIMON: You’ll get the death certificate in most instances, unless there’s any problems with the death or anything.

PHILIPPA: And you have to pay for those, don’t you?

SIMON: There’s a fee, yes.

PHILIPPA: In my experience, you can do nothing without death certificates. No bank, financial institution or pension fund will talk to you until you have one. So that’s a requirement.

JAYPEE: A death certificate is the first document that we would want to see when someone passes away, because it’s evidence that the person has passed away.

PHILIPPA: So Simon, you mentioned the Tell Us Once service. This is a government service, and I think there’s various commercial ones as well. I used this. It’s absolutely brilliant. Can you just explain how that works?

SIMON: Yes, you just go online and put in the details of the death, and it tells all the government departments with which the deceased was connected to, so the Department for Work and Pensions (DWP) and the Passport Office etc, that they’ve passed away. So you don’t have to inform them all separately.

PHILIPPA: And it also, from memory, covers things like Council Tax. So it’s anything in the public sector, isn’t it? And, obviously, when you think about it, there’s a lot of stuff. We’re all very embedded in the public sector. All those organisations - the Tax Office, everyone, they know that someone has passed away. I personally did find that incredibly helpful because tracking down how to contact those organisations, and then having to say again and again and again, ‘my mum has passed away’, it’s a really terrible thing to have to do. There’s enough people to tell as it is. But it’s important to understand there’s no equivalent for financial institutions, is there? So your banks, your building societies and utilities - that’s right isn’t it, Jaypee? You just have to phone them up. There’s no quick way that I missed?

JAYPEE: Not that I’m aware of. You just have to contact the financial service provider, let them know what’s happened, provide the death certificate and ask what the requirements are to get the proceeds paid out, and then follow that all the way through.

PHILIPPA: Legacies can’t be paid out, Simon, can they? Until you have a grant of probate. Now, what’s that exactly?

SIMON: Well, again, it depends on how big the estate is. So, if you have a very small estate - for example, if you die and you’ve ^{_isa_allowance} in one bank account. Then you probably won’t need to get a grant of probate. Because the bank will allow the executor to withdraw that money on production of the death certificate -

PHILIPPA: And spend it on a funeral or legacies or whatever?

SIMON: Provided they sign an indemnity so the bank won’t be liable if somebody else comes along and has a different claim. But, when there’s a substantial amount of money involved, the executor won’t be able to get their hands on the money without a grant of probate. The grant of probate’s just a small document saying, ‘this person has died, the probate has been granted, this is the executor, the gross estate is £1 million and the net estate is £800,000’. And that’s all it says on it.

PHILIPPA: This does make me realise, as we said at the top, that getting organised is going to save you or your loved ones a lot of aggravation when the time comes. And the conversation we’re having is really embedding that idea for me. Because it just goes to show how much there is to think about. And also, the sense I get is that most people don’t know this stuff. Is that your sense?

SIMON: Yeah, I think most people don’t know about most things until they actually come into contact with it. So if somebody close to you passes away, then you start realising what you need to do.

PHILIPPA: At the worst possible time.

JUSTIN: When you’re in bereavement, as I’ve been and you’ve both been, you’re just not in a mental state to deal with any financial or practical matters. It’s difficult enough as it is dealing with the emotions. So, by actually putting some plans in place and communicating those plans, I think you’re really looking after your loved ones once you’ve gone.

PHILIPPA: Thanks everyone. As we say, this can feel like a difficult subject to talk about. But as we said at the start, it’s one of life’s certainties, and getting organised and knowing that you’re making everything easier for your loved ones after you’ve gone, it’s a nice feeling.

Next month, we’ll be talking about building financial confidence.

Finally, before we go, please remember anything discussed on this podcast should not be regarded as financial advice on when investing your capital is at risk. Thanks for listening.

Risk warning

What happened to pensions in September 2023?

Find out how the performance of your pension plan’s directly impacted by the performance of its investments.

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

It’s a time of transition, both in nature and the financial landscape. One positive development is that food prices fell for the first time in two years in September. This is welcome relief for families and businesses that have been struggling with the rising cost of living.

However, there are also some concerns, such as the possibility of ‘stagflation’ in the UK economy. Stagflation is a period of high inflation and low economic growth. It can be a difficult time for businesses, as they may have to raise prices to cover their costs, but consumers may have less disposable income to spend.

Read on to discover how markets have performed this month and whether the UK economy’s on course for stagflation.

What happened to stock markets?

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

Source: BBC Market Data

In European stock markets, the EuroStoxx 50 Index fell by almost 3% in September. This brings the year-to-date performance close to +1^{_personal_allowance_rate}.

Source: BBC Market Data

In US stock markets, the S&P 500 Index fell by 5% in September. This brings the year-to-date performance close to +12%.

Source: BBC Market Data

In Asian stock markets, the Hang Seng Index fell by almost 4% in September. This brings the year-to-date performance close to -1^{_personal_allowance_rate}.

Source: BBC Market Data

Is the UK economy being squeezed?

The UK economy has been struggling under the weight of high inflation, rising energy prices, and supply chain disruptions. These factors are squeezing businesses and consumers, and raising fears of a recession. But does this spell an incoming period of stagflation?

What is economic stagnation?

Gross Domestic Product (GDP) is the value of all goods and services made in a country, usually calculated annually or every three months. It’s commonly used to estimate a country’s economic health, as either growing or shrinking in value. To measure economic growth, GDP is compared to previous levels of trade.

Economic stagnation is a period of slow or no economic growth. This can lead to high unemployment, low wages, and a decline in living standards. Economists generally consider a GDP growth rate of less than 2-3% annually to be stagnant.

An economic cycle is the fluctuation between periods of expansion (recovery) and contraction (recession) of an economy. To prevent stagnation during economic cycles, policymakers may tighten monetary policies.

What is high inflation?

Inflation’s the general increase in the price of goods over time. It is measured as a percentage change in The Consumer Prices Index (CPI), which is a basket of commonly purchased items or services. High inflation affects the affordability of these goods for households.

The Bank of England is the central bank of the UK. It is responsible for setting monetary policy, which is the use of interest rates and other tools to influence the economy. The government has tasked the Bank of England to keep inflation at around 2% per year.

What are the signs of stagflation in the UK economy?

Stagflation is a situation where an economy is stagnant (not growing) paired with high inflation (rising prices). This is a problem because it makes it difficult for people to make ends meet. When prices are rising and the economy isn’t growing, people have less money to spend on essentials. So how is the UK economy performing?

Is the UK headed for stagflation this autumn?

The UK’s economy is weak, inflation is over three times the Bank of England’s target, and unemployment is rising. These factors suggest the UK may risk stagflation.

Economic stagnation: A GDP growth rate of less than 2-3% annually is considered stagnant. In Q2 2023 the UK’s GDP increased by 2.5%, an improvement from 1.4% economic growth in Q2 2022.
High inflation: The Bank of England has a 2% inflation target. The UK’s current rate of inflation has fallen to 6.7% in the 12 months to August 2023.
Rising unemployment: Experts suggest a healthy economy maintains an unemployment rate between 3-5%. In Q2 2023 the UK’s unemployment had risen to 4.2%, an upswing from a 3.8% unemployment rate in Q2 2022.

The UK’s economy is growing marginally and the Bank of England is raising interest rates to combat inflation. These factors suggest the UK may avoid stagflation.

No recession: Currently, the UK economy ranks sixth in the world by GDP. A recession is defined as two consecutive quarters of negative economic growth. As the UK economy hasn’t contracted, it’s not currently in a recession.
Interest rates: The Bank of England has raised interest rates 14 times over two years in an effort to combat inflation. Already there’s been a significant drop in the rate of inflation from the 41-year high of 11.1% in October 2022.

It’s too early to say for sure whether or not the UK will enter a period of stagflation. However, the Bank of England’s actions will be crucial in determining the outcome.

This is part of our monthly pension update series. Check out the next month’s summary here: What happened to pensions in October 2023?

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

Six ways to start talking about money

Money has long been seen as a taboo subject. Here are six tips to help you talk about your finances.

What does the Auto-Enrolment extension mean for you?

Younger workers will soon get the chance to top up their pensions - Here’s how.

If you have a workplace pension, then you’ll usually be paying at least 5% of your qualifying salary into a pension. In real terms, you’re only actually paying 4% yourself as the government is paying the other 1% in the form of tax relief. Thanks to Auto-Enrolment, if you’re eligible, your employer must pay a minimum of 3% too. Some employers will go above and beyond the statutory minimum so it’s always worth asking your HR department.

Often, employer contributions can be overlooked, probably because that cash has to be ‘locked away’ until you’re at least 55 (rising to 57 from 2028), but over a working lifetime that will amount to a lot. If you’re on a salary of £33,000, which is the UK’s average salary, then that’s £29,700 over 30 years.

On top of that, the money will be invested by your pension provider, where it has the opportunity to grow over time and benefit from compound interest as well as investment growth. Your contributions will also benefit from tax relief, so if you’re a basic rate taxpayer, a £100 contribution would become £125, including the basic rate tax top up.

What are the proposed Auto-Enrolment updates?

The current Auto-Enrolment rules mean that full-time and part-time employees are automatically enrolled in their workplace pension scheme if they:

work in the UK;
earn more than £10,000 a year;
aren’t already a member of a suitable workplace pension scheme; and
are at least 22 years old, and haven’t reached State Pension age.

However, in September, legislation was passed enabling the government to reduce the minimum age from 22 to 18. This law, passed as ‘The Pensions (Extension to the Automatic Enrolment) Act 2023’, also means workers can build up pension savings from the first £1 they earn, rather than on amounts over the current lower earnings limit of £6,240. This will enable more people to build up bigger pots.

What do these new pension rules mean?

If you’re aged 18 to 22, you’ll be automatically enrolled into a pension by your employer.
Your employer will pay a minimum of 3% of your salary a year into a pension on any earnings you make up to £50,270.
There will no longer be a lower earnings limit of £6,240.
If you earn £22,000 at age 18 and pay into a pension then at least £1,760 a year will be going into your pension pot. Over four years that’s an extra £7,040 (including tax relief), before compound interest and any investment growth. Use PensionBee’s Pension Calculator to work out how much income your pension pot could generate in retirement.
The above changes are due to be introduced in 2024 however the government’s currently consulting with employers and pension providers.

What’s Auto-Enrolment?

Automatic Enrolment or ‘Auto-Enrolment’ is legislation that was introduced in 2012 and was phased in, starting with larger employers. Now all employers have to set up a workplace pension for all of their eligible employees. You can choose not to save into your company pension - and give up the free money from your employer - but you have to sign an opt out form. The government says that in the 10 years since the introduction of Auto-Enrolment, 10.7 million people have been automatically enrolled into a pension. Plus, the average earner’s pension savings have also gone up by 50%.

Someone who saves into a pension their entire career - which is now more likely thanks to Auto-Enrolment - will see their pension savings rise by 85%.

When can I start saving into a pension?

At the moment, the minimum age for Auto-Enrolment is still 22, but you can choose to start contributing privately into your pension sooner. Although The Bill was passed, the government will have to consult on how it’ll implement the changes, and when is best to introduce it.

If you’re 21 or under and earn £6,240 or more in a tax year, you have the right to opt into your workplace pension scheme. If you choose to opt in, you’ll be entitled to the minimum level of employer contributions. If you earn less than £6,240 you can still ask your employer to give you access to a pension to save into. They have to do this, they just don’t have to make any employer contributions.
Before Auto-Enrolment was introduced, 55% of employees saved into a workplace pension - now it’s 88%.
An estimated £33 billion more was saved into pensions in 2021 compared to 2012 - that’s in real terms so taking account of inflation and what was already being saved.
Women, young people and lower earners have gained the most with 89% of women saving into their workplace scheme, compared to under 60% in 2012. A further 86% of 22-29 year olds are pension savers, compared to 35% in 2012.

Samantha Downes is a Financial Journalist and has written for most national newspapers and women’s magazines. She is also the author of two finance guides and has set up the Substack PumpkinPensions to help guide people looking to save more towards their future.

Risk warning

What happened to pensions in October 2023?

Find out how the performance of your pension plan’s directly impacted by the performance of its investments.

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

With the Autumn Budget due in November and a general election on the horizon next year, all eyes are on the UK government. There’s growing speculation that the current government may permanently change the State Pension ‘triple lock‘. This is a policy that guarantees that the State Pension will rise each year by the highest of three measures: inflation, average earnings growth, or 2.5%.

Introduced in the 2011/12 tax year, the triple lock has been a popular policy with pensioners as it’s helped to ensure that their incomes have kept pace with the cost of living. However, the triple lock has come under criticism from some who have claimed it’s become too expensive for taxpayers to maintain, particularly in light of recent economic volatility.

If the State Pension keeps rising as intended, it could cost the taxpayer more than education, policing and defence combined by 2025. The government could alter it to a lower rate, or even abolish it altogether, to save taxpayer money.

Keep reading to find out how markets have performed this month and why the State Pension triple lock is making headlines again this Autumn.

What happened to stock markets?

In UK stock markets, the FTSE 250 Index fell by almost 7% in October. This brings the year-to-date performance close to -9%.

Source: BBC Market Data

In European stock markets, the EuroStoxx 50 Index fell by almost 3% in October. This brings the year-to-date performance close to +7%.

Source: BBC Market Data

In US stock markets, the S&P 500 Index fell by over 2% in October. This brings the year-to-date performance close to +9%.

Source: BBC Market Data

In Asian stock markets, the Hang Seng Index fell by almost 4% in October. This brings the year-to-date performance close to -14%.

Source: BBC Market Data

Triple lock: set to rise, or under threat?

Under the triple lock policy, the State Pension should increase each April by the highest of the following three measurements:

inflation, as measured by the Consumer Price Index (CPI) in the September before;
average earnings growth, as measured by the Office for National Statistics (ONS) in the September before; or
2.5%, as the minimum annual increase.

This annual increase applies to both the basic State Pension (pre-April 2016 retirees) and the new State Pension (post-April 2016 retirees).

How much could the State Pension increase by?

In April 2023, the State Pension increased by 10.1% due to the rise in inflation. This resulted in:

the new State Pension increasing to £203.85 a week (equivalent to around £10,600 a year) for the 2023/24 tax year; and
the basic State Pension increasing to £156.20 a week (equivalent to around £8,122 a year) for the 2023/24 tax year.

In April 2024, the State Pension in theory should increase by 8.5% because of the rise in average earnings. This would result in:

the new State Pension rising to £221.20 a week (equivalent to around £11,502 a year) for the 2024/25 tax year; and
the basic State Pension rising to £169.50 a week (equivalent to around £8,814 a year) for the 2024/25 tax year.

Why’s the triple lock under threat?

In October, during the Conservative Party conference Prime Minister Rishi Sunak announced the scrapping of the high-speed northern rail line due to spiralling costs. With the Autumn Budget around the corner, the Chancellor Jeremy Hunt is under pressure to cut public spending and there are two key benefits at risk.

First, freezing working-age benefits to save £4 billion. This would be a controversial move during a cost of living crisis. It could also be seen as a political betrayal of the government’s promise to “level up” the country.

Second, altering State Pension benefits. For the ^{_tax_year_minus_three} tax year, the government intervened and suspended the triple lock guarantee - saving an estimated £3 billion. If the government were to alter State Pension benefits further, this would have a significant impact on the retirement incomes of older people.

Is the triple lock policy fair?

One of the main arguments in favour of scrapping the triple lock is that it’s unfair to younger generations. The UK’s State Pension works like a cash machine, where taxpayers deposit money through National Insurance contributions and retirees withdraw money through State Pension entitlement.

This model becomes problematic when combined with an ageing population and falling birth rate. The cost of funding the State Pension will fall increasingly on younger generations, who will have to pay higher taxes during their working life without any guarantee of receiving State Pension benefits when they retire.

Am I on track to retire comfortably?

Currently both eligible men and women can claim their State Pension benefits from the age of ^{_state_pension_age}, but for those born after 5 April 1960 it’ll rise to ^{_pension_age_from_2028} by 2028. It’ll eventually rise to 68, affecting those born after April 1977. You can discover if you can afford to retire before your State Pension age with our State Pension Age Calculator.

Even if the triple lock is kept, it’s important to remember that it doesn’t guarantee a comfortable retirement. According to the Pensions and Lifetime Savings Association’s (PLSA) Retirement Living Standards you’d need £23,300 a year to afford a moderate retirement if you’re single and £34,000 a year as a couple.

There are several ways to save for retirement without relying on the State Pension, including your workplace pension or saving into a personal pension. Aiming for a happy retirement? Become a pension pro in just 30 minutes, with our Pension Academy video series hosted by Patricia Bright, a lifestyle and finance influencer.

This is part of our monthly pension update series. Check out the next month’s summary here: What happened to pensions in November 2023?

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

E22: Why is renting so expensive? With Jenny Lamb, David Byers and Becky O’Connor

Find out what's caused recent rental price increases.

The following’s a transcript of our monthly podcast, The Pension Confident Podcast. Listen to episode 22, watch on YouTube, or scroll on to read the conversation.

PHILIPPA: Hello and welcome to what’s now the award-winning Pension Confident Podcast. We’re so proud to tell you the series has just won two silver awards at the 13th Europe-wide Lovie Awards including the ‘best podcast’ category. A big thank you to the judges and of course to everyone who voted for us.

My name’s Philippa Lamb. This time we’re looking at renting. Why has it become so expensive to rent a home in the UK?

Since November 2021, rents have gone up every single month and in the last year they shot up to their highest level on record, with average private rentals costing nearly 12% more than just a year ago. Now, some tenants are having to spend more than half their take-home pay on rent and evictions are climbing. So how did we get here? What can you do if you’re struggling to pay and what needs to change to make our housing market fit for purpose?

Here to share their expertise on those crucial questions, we have three guests. Jenny Lamb is Policy Officer for UK housing charity; Shelter. Welcome Jenny.

JENNY: Hi, thanks for having me.

PHILIPPA: From The Times, Deputy Property Editor; David Byers. Hi David.

DAVID: Hello.

PHILIPPA: And back with us, broadcast queen; Becky O’Connor - PensionBee’s own Director (VP) Public Affairs. Welcome, Becky.

BECKY: Thanks. Hi.

PHILIPPA: As usual before we start, please do remember that anything discussed on this podcast should not be regarded as financial or legal advice, and when investing your capital is at risk.

PHILIPPA: Now, just to give us an idea of how much rents have ramped up I thought I’d start by asking all of you when you were first renting, can you remember what proportion of your monthly income you were spending on the rent? Becky?

BECKY: Yes, I can. And if we’re talking take-home pay, then it was nearly a quarter of my take-home pay that I spent on my one room, in a house share, with five people.

PHILIPPA: I think mine was about a third, Jenny?

JENNY: Mine was also about a third. I was 19 and had a telesales job which paid £6.55 per hour. I’m one of those people who keeps everything. I have all my payslips from all that time ago. I don’t know why, but luckily it managed to make itself useful. So yeah, the rent cost £500 per month. I was splitting it with one other person. So I was taking home around £900 per month.

PHILIPPA: So it was a lot, even then?

JENNY: Yeah, that was in 2010.

PHILIPPA: David?

DAVID: Mine’s slightly skewed by the fact that I started out working for a local newspaper in Gloucester, where I was earning £10,500 per year in 2001. I think my rent was probably about 50%, I’d have thought.

PHILIPPA: That high?

DAVID: So, I lived in Cheltenham. It’s my own fault. I chose to live in Imperial Gardens, Cheltenham. So it was an expensive flat on a crap wage. It wasn’t pretty.

WHAT’S HAPPENING IN THE RENTAL MARKET AND HOW’S IT AFFECTING US?

PHILIPPA: OK. Let’s look closer at what’s actually happening in the rental market right now and, of course, how it’s affecting all of us. David, tell us what’s happened to rents nationally and regionally recently.

DAVID: According to the latest Hampton figures, the rental growth in the year to September in Great Britain is 11.7% and there are great regional nuances in that. So in Britain, the average monthly rent for all properties is £1,300. That’s nationally. In Greater London, where there’s a great shortage of properties, that figure’s risen by about 15.7%. And in outer London, it’s risen by 16.2% in one year. So those rental rises are incredibly large at the moment, year-on-year.

PHILIPPA: Yeah and, as you say, there are huge disparities. Average figures aren’t actually that helpful are they? But we’ll get into why we’re seeing these rises in a moment. Becky, before we do that, how much of their pay are people spending now on rent? Do we have a sense of that?

BECKY: It’s pretty normal now for people to be spending half of their take-home pay on rent. We just gave examples of how much we spent initially and a third is challenging to live on, particularly if you’re going through different life phases and you’re still renting. So if you have children and you’re still renting, if you’re spending half your money on rent, that becomes less tolerable because your costs will be going up. So it’s not just the scale, the proportion of someone’s take home pay that’s going on rent - it’s also the other things that are happening in their lives, the other demands on their income and the cost of living crisis, of course. So there’s pressure from everywhere.

PHILIPPA:Yeah, absolutely. Obviously, this is about tight supply and I know we’ve got figures that say an average of 25 people look at each rental property, and that number was just eight in 2019. So supply is tight, but why is supply tight David?

DAVID: Well, there’s a combination of things. The origins of the crunch go back, perhaps 20 years, when first time buyers increasingly struggled to afford to buy a home as prices accelerated away from them. So, the number of private renters has gone up from two million in 2000, up to 4.6 million in 2021 to 2022 according to the English Housing Survey. So that’s the first big pressure. A huge increase in the number of renters and the ratio of renters to properties has ballooned.

And about 10 years ago, there was a big influx of buy-to-let investors who were meeting some of that rental demand. But that’s now fallen away for a couple of reasons, which I’m sure we’ll get into later. But one of them is increased tax charges from 2016 onwards, when George Osborne introduced a growing number of tax restrictions on landlords, in the hope that some of them would sell up, to free up stock for first-time buyers.

PHILIPPA: And did they?

DAVID: Some of them sold up. Quite a lot of them absorbed the charges. A lot of them put up rent. And many of a landlord’s properties, I think it’s fair to say, don’t necessarily correlate with the sort of properties that first-time buyers are looking for. So George Osborne’s maths didn’t exactly work out. But more recently, and this is the cause for this massive recent increase, landlords have had these huge mortgage rises and they’re passing those rents on to tenants. This shortage of stock added to that means you’ve got this big increase in rents, particularly in urban areas.

PHILIPPA: OK. So, there are way more people renting and all sorts of difficulties for landlords in affording their mortgages, if they have mortgages on the property. A whole array of problems. Jenny, we should talk about evictions. How are these evictions, and of course, the high rents we’ve been talking about, affecting homelessness figures?

JENNY: Homelessness is on the rise and it has been for a while now. At any one time, on the streets of England, there are about 3,000 people sleeping rough, but that’s the absolute tip of the iceberg. Most homeless people are either ‘hidden homeless’ - so they may not want to be on the street, so they may spend their nights on public transport, in abandoned and disused buildings, somewhere out of sight, so they still have nowhere to go. Or they could be sofa surfing with friends and family, knowing full well that they’re outstaying their welcome. Or they could be in temporary accommodation provided by the local authority. There are now record numbers of people in temporary accommodation. There’s 271,000 people living in temporary accommodation and 130,000 of those are children.

PHILIPPA: But presumably, as you say, with the ‘hidden homeless’, we don’t really have any sense how many people are sofa surfing do we? Or how many people are actually homeless?

JENNY: Not a clue. There may even be people who are homeless who don’t really consider themselves to be. Some people staying with friends who are thinking, ‘this is a temporary arrangement while I get on my feet. I’ll sort something out’. But those people are technically homeless, they have no security in their homes, they can be asked to leave at a moment’s notice and they may end up on the street.

DAVID: I was gonna say, there’s also one other quite interesting side issue which is Ukrainian refugees. And many of them are coming to the end of their host family periods which lasted six months to a year. And I spoke to someone recently who said, ‘now the host family, according to the government guidelines for the scheme, say they don’t have to look after us anymore - we’ve got to go into the rental sector’. And the figures, for how much it costs to rent a property, are now so far beyond what Ukrainian newcomers can afford. I know this affects a small number of people, but for people entering the rental sector for the first time in the UK, it’s a massive shock.

JENNY: It’s, as you say, a small number of people, but it’s indicative of how the system works.

PHILIPPA: And of course, what a lot of people have done, not just refugees, but all sorts of people, have moved away from where they were living to lower rent areas, haven’t they? Do we have any sort of picture on that?

DAVID: There are quite a lot of pressures on the rental sector outside of the prime areas. London’s a really good example of this. Figures from SpareRoom; the flatshare site, show that the price of renting a room in some London postcodes has risen by 50% in a year. And those areas are absolutely all over the place. So W8, which is a posh postcode, roughly speaking, has had this 45% increase, but less affluent postcodes, like SE28, have seen a 36% increase. And that’s because a lot of people from affluent postcodes are going to more affordable postcodes and driving up the costs of rent there. And of course, if you go into tourist towns, a colleague of mine went to Frome in Somerset recently, then you have this whole other issue of second homeowners who’ve moved out into the countryside, eaten up properties, and driven up rent and housing prices in those areas.

PHILIPPA: Yeah, I wanted to ask you Becky about this, because, obviously, we’ve had changes in working patterns too. People don’t have to go to the office or their workplace every day in the way that they used to. So that has freed up people, not just in the pandemic, but after, to live very remotely from where they’re working. Is this another push for that as well? Because you can move somewhere cheaper, can’t you?

BECKY: You can, but not everyone can. And I think, although we saw people taking the opportunity to move further away from the office because they didn’t need to be in it, we’ve also since seen some people having to move back. Because they’ve actually been asked to come back into the office and they weren’t expecting it, and it’s caused huge upheaval. So that’s creating demand for those areas that are commutable.

PHILIPPA: And Becky, I’m interested to get into what this really means for all of our finances, because obviously, it’s not just about paying rent. What if you don’t have any spare money because you’re paying so much rent and you’re not saving any?

BECKY: Yeah. I think it’s fair to say that because of rising rents and because of the rising cost of living more generally, people have been thrown into survival mode with their finances. Which is exactly where you don’t want to be if you’re trying to build long-term financial resilience, and do all the right things such as prioritising your pension, and saving for children’s university costs. All those things that us in the financial services industry tell people to do all the time. They can’t be on your radar if all you’re doing is week-to-week budgeting. So it’s having an impact. We, at PensionBee, have seen that’s counterintuitively caused an increase in pension contributions for some people because they’re a lot more focused on where the opportunities are. But that, you know…

PHILIPPA: Is the lucky few?

BECKY: Exactly.

PHILIPPA: Jenny, I think, mentioned older renters and I’m interested in that because we’re seeing a lot more older people renting now than we have done before, aren’t we? And if you’re already retired and renting, you’re coping with this rising rent and you might be on a fixed income. That’s a big problem, I’m guessing?

BECKY: First of all, the idea of a renter has completely changed. We used to see people leaving university, going into flatshares with their friends, building up their deposits, having a bit of fun along the way, then buying a house and doing everything in the ‘right order’. You have kids, you’ve got your mortgage and it’s a 25-year mortgage, so you can manage it. So lovely. And of course, that doesn’t happen in the same way anymore. What we see is that people miss that opportunity to buy a home for themselves because they just can’t afford it. And that moment where they could buy disappears into the past. And then it’s, ‘OK, I’m renting now’.

It then makes it very difficult for somebody to build their pension while they’re paying the rent, which is rising. And then they reach retirement or the retirement years, and they don’t have a big enough pension, but they still have the housing costs from the rent. What this is doing is - they’re having to work for longer, so that retirement becomes something that just isn’t going to happen because the only way you can afford your rent and you can afford to stay in that home is to keep working.

PHILIPPA: Yes, indeed.

DAVID: There’s some good figures on this from back in July actually, from the English Housing Survey analysis by Hamptons. They think that 11.5% of all retirement age couples will be in the private rental sector by 2033. And that’s compared to 5.7% last year. That’s a rise from 400,000, roughly, to about one million. One of the things that’s interesting about this is if somebody dies and has a property, they pass on the value of that property to somebody. If more and more older people are being swept into the rental sector in retirement, inheritance will not be passed down, and so there’s all sorts of interesting, fairly profound intergenerational ramifications with that.

PHILIPPA: I think what we’re understanding from this conversation is that this is a structural problem, isn’t it, on many levels? It affects landlords, doesn’t it? Because a lot of them have looked at their properties as alternatives to, or side by side with, their pension funds.

BECKY: Yeah. That’s a key reason why people have invested in buy-to-let properties over the years. They’ve felt that property has been more tangible and more secure than pensions which have, as an industry, had its fair share of scandals over the years, which has put people off. People have looked at property and thought, ‘oh well, we can touch this, we can feel this, we’re more in control of this than a pension fund, so we’ll go there’. That equation now doesn’t necessarily stack up for all the reasons David was mentioning earlier. What that does mean is that there are an awful lot of people who are landlords, who own a rental property and they’ll need to realise that investment, and that means selling it. So, that means potentially evicting tenants.

JENNY: What I’d want landlords to understand is - this is a serious job. It’s a very, very serious job because this might be your property, but it’s somebody else’s home. So many children now are living in the private rental sector and we know how important a secure home is. So you’re, kind of, indirectly taking on the burden of responsibility for someone’s entire future. For their prospects, for their mental health, for their physical health. To be a good landlord is a hard job and it should be because these are people’s lives.

WHAT ARE YOUR RIGHTS AS A TENANT OR LANDLORD?

PHILIPPA: That’s a really interesting take on it. And actually, it brings me really neatly to the next thing I wanted to ask you - what are your rights as a tenant, and as a landlord? The first question in my mind is, can you challenge a rent increase if your landlord says, ‘I want to put your rent up’?

JENNY: You can. The first message that I’d like to get out there is that everyone is shocked to find that there’s no limit on the amount a landlord can put the rent up by. There’s no limit.

PHILIPPA: No cap?

JENNY: No cap. The increase should be guided by market prices. If you think that your rent increase is disproportionate, then you can go to a First-tier Tribunal to challenge it.

PHILIPPA: Does that cost you?

JENNY: It doesn’t, but there’s a risk involved. First of all, your rent could go up instead of down. If you’ve miscalculated and the tribunal decides, ‘oh, actually, the landlord could be asking for more’, then your rent will go up instead of down. The second barrier, I think, is that it’s just a massively stressful thing to do. People work, people have kids, they aren’t really expecting to have to challenge their landlord in a tribunal to be able to stay in their home. The third barrier is Section 21 notices because you can challenge your rent increase, but you’re probably going to get evicted for it.

PHILIPPA: And there won’t be anything you can do?

JENNY: Nothing you can do about that.

PHILIPPA: Thinking about tenants. As you say, some perfectly well-intentioned landlords are struggling with their finances, particularly if they’re retired, they may be on fixed incomes. You know that these are not all profiteering, bad people. But, if the property that you’re paying a lot of rent for isn’t being repaired, can you withhold rent?

JENNY: Never withhold rent! This is one of my biggest messages. I wish everybody knew this. It seems completely counterintuitive because you think, essentially, ‘I’m a customer paying for a service that I’m not receiving. I wouldn’t be paying for a bad service in any other walk of life’. In any other kind of business arrangement, you wouldn’t be paying for a poor service, but it’s not the same in the rental market. It’s not a bargaining chip! If you withhold your rent, the landlord may take steps to evict you.

JENNY: With a Section 21 notice, you can also add on a money judgement so they can pursue you for the lack of income. And then you’re essentially left with nowhere to go. So, although it seems fair and proportionate to withhold your rent, it always makes things worse.

There are other ways to tackle this. The first thing I’d recommend is to just approach them civilly, don’t assume they’re not going to do anything. Speak to them on a one-to-one basis and just explain the situation, and ask for them to do the repairs. If they don’t, you can make a complaint to your local council. They should send an Environmental Health Officer out, who should inspect the property. This, in itself, is risky as well.

PHILIPPA: Ok. So yeah, as you say, this isn’t great news. I’m just going to ask you before we move on - if you’re struggling to pay your rent, where can you go? Is there any assistance for you?

JENNY: So, if you’re struggling to pay your rent, there are a number of things that I’d recommend you do, first of all. So the first thing, I’d say, is talk to your landlord. It’s scary, none of us want to do it, but explain your circumstances. Explain, if they’re wanting to put the rent up, for example, explain what’s affordable for you. See if you can negotiate with them. See if they might drop the rent if you’re between jobs or if you’re expecting your circumstances to change. Explain that to them, see if you can negotiate a lower rate and then, get it put back up at some point.

The second thing I’d say is make paying your rent your priority. We talk a lot about people having to make completely inhumane decisions between heating and eating. But it’s heating, eating and paying the rent. And there are certain debts that are a priority, that can result in you losing your home, and rent is the most obvious one. So, prioritise paying your rent and then, you might want to look into other ways that you can subsidise your income. If you’re on benefits, check your benefit entitlement because it could be that you’re entitled to something that’s not loudly advertised.

PHILIPPA: Yes, because a lot of benefits still go unclaimed, don’t they?

JENNY: Absolutely. So check that, make sure that’s all squared away. You can also speak to your energy providers. Citizens Advice can be really helpful in telling you where you can save on other bills. You might be eligible for Council Tax relief or, at least, a bit of help there, or with your gas and electric, TV and broadband, that kind of thing. There are also charitable grants that might be available to you.

PHILIPPA: How would you find out?

JENNY: There’s a brilliant charity website called Turn2us which has a grant search. It asks you a few questions about your circumstances and it tells you what you might be eligible for. They also have a benefits checker calculator as well. So put your circumstances in there, they might be able to tell you if you’re owed more. If you’re working, there may be an industry-affiliated charity, like for catering, or bar work, or something like that.

PHILIPPA: Hardship funds, that sort of thing?

JENNY: And then you can always ask your local council. Discretionary housing payments are available, although they’re decreasing, they’re shrinking, they’re disappearing.

PHILIPPA: And these are one off payments to tide you over?

JENNY: A discretionary housing payment is a one-off payment to, basically, avoid homelessness. In a nutshell - speak to your landlord, make yourself a household budget. I’m not advocating that people cut their costs elsewhere because people are cut to the bone, but just be mindful that there could be something cheaper and there could be some help.

PHILIPPA: That’s really helpful, Jenny. Thank you.

HOW CAN THE RENTAL MARKET WORK BETTER?

PHILIPPA: I think we all understand, if we didn’t understand at the beginning of this podcast, that we need to see some change to make the rental market work better for everyone. So, should we move on to that? We’ve got the Renters (Reform) Bill, haven’t we? Tell us about that.

JENNY: So the Renters (Reform) Bill was a manifesto promise of the Conservative Party, a promise upon which they were elected.

PHILIPPA: We still don’t have it, do we?

JENNY: We’ve been talking about this since, well, since before I’ve been working at Shelter, but very recently we’ve just had its second reading. The Renters (Reform) Bill is a raft of different policy measures, but the main one is the abolition of Section 21 notices.

PHILIPPA: Which I’m assuming Shelter would welcome?

JENNY: We’d welcome that, yes. We’d be very pleased to see that happen. It doesn’t mean that landlords won’t be able to evict tenants. There’s another type of notice that can be used. It’s called a Section 8 notice and, really, the main difference between the two notices is with Section eight, you have to give a reason. And there’s a list of preset reasons that you can give.

PHILIPPA: So it’ll do away with Section 21, and it does away with fixed-term assured tenancies as well?

JENNY: It does. A strange by-product of getting rid of Section 21 is that everyone will be in a periodic arrangement known as a periodic rolling tenancy.

PHILIPPA: And what does that mean?

JENNY: So, now when you enter into a tenancy agreement - you have a fixed-term for normally a year, then when that year’s finished, your tenancy automatically turns into a periodic one, where you roll over month by month and you’re not tied in for another fixed-term. Some landlords will represent it as, ‘oh, your tenancy is coming to an end. You must re-sign for a new fixed-term’. That’s not what the law says. Some people like that added security, but it doesn’t suit everybody. It doesn’t suit someone who’s living in really dire conditions; with black mould on the wall and their kids are sick, and they want to get out. They can’t be trapped in a fixed-term. So a periodic arrangement gives them more freedom to move if they need to.

The other by-product of this is, during a fixed-term tenancy, you can’t put the rent up. In a periodic arrangement, you can put the rent up using a particular type of notice, a Section 13 notice. And that mechanism is limited to once a year. So, abolishing Section 21 means the end of fixed-terms, means the standardisation of periodic tenancies and it also means that rents can only go up once a year. So, it has a, kind of, knock on effect that we’re hoping might do some work in slowing down rent increases. And because a landlord won’t be able to evict a tenant just for refusing to pay a rent increase, then hopefully it has a slowing effect on how rapidly rents are rising.

PHILIPPA: It’s sounding like a step in the right direction when it finally comes into law. David, what about affordable housing? We hear a lot about that, don’t we? But there’s nowhere near enough affordable housing being built, is there?

DAVID: There isn’t, and actually I just wanted to add something. I think the one thing that we really lack is that there’s no competition for this appalling system at the moment, whereby landlords are responsible for the wellbeing and future of their tenants. And so what I’d like to see is a growing subsidy scheme for build-to-rent. These are basically institutional, purpose-built rental buildings without landlords. Builders like Uncle, Greystar and Quintain - which own the whole of the Wembley estate. The problem with these buildings is that, yes, they don’t have landlords, so there’s much greater security for the tenants, which is a good thing. So tenants will always be able to stay in their properties. But the problem is, because land is so expensive in cities, these institutional builders can only build if they build small properties and they charge high levels of rent.

So if there was a subsidy scheme, some sort of government scheme which subsidised and helped these institutional builders, encouraged them into the market, you get all of these purpose-built rental properties. They’d be able to charge reasonable rents and they’d be able to build properties suitable for families. Because at the moment, they’re suitable for young professionals and urban dwellers, not families. So I think competition is a good thing. If you’re a landlord, you want tenants in your property. And if the tenants are all going to that Quintain developer down the road, you’re gonna work harder, you’re gonna charge more reasonable rents, you’re gonna remove the mould from the wall. But, there’s no competition, so the sector is totally broken.

BECKY: Bringing it back to pensions just because everything can be brought back to pensions - the kind of institutions that David is mentioning, actually, can be pension fund managers. And in fact, Legal & General, which is a very big pension provider, does offer the kind of private rental accommodation that we’re talking about. But for all the reasons David said, it’s on a scale which is too small at the moment to change the culture around renting. But it can be a pension fund investment that then supports the retirement of people through the rental income that’s coming back into the fund and going back to the pension savers.

PHILIPPA: In the same way that they invest in commercial property?

BECKY: Exactly. So it can be a very beautiful circle, but it would require that subsidy to kick-start the market.

JENNY: For us at Shelter, social housing is the way forward. Talking about affordable rents is fine, but they can be up to 80% of market rent. They’re still not affordable for the people who need things to be affordable. Social housing, we believe, where there’s more support for people and more security - we think is more of a solution. Because for the end of the market that we support, home ownership is well beyond their reach and social housing would be the ideal solution to alleviate some of this pressure on the private rented sector.

PHILIPPA: OK. On that thought, I’m gonna wrap this up. And I’m sorry because I know there was so much more that we could talk about, but thank you very much everyone. All sorts of useful things to hear there. Thank you.

BECKY: Thank you.

JENNY: Thank you.

DAVID: Thanks.

PHILIPPA: Once more before we go. Please do remember that anything discussed on the podcast shouldn’t be regarded as financial advice or legal advice. And when investing your capital is at risk.

Next month, we’re going to be talking about financial mistakes and how to avoid them. Don’t miss it because our expert guests will be sharing their own financial blunders. Listen in for the lessons they learned and how they bounced back. In the meantime, you can check out our podcast feed right now for plenty of bonus content.

We’d love it if you’d leave us a review. If you listen on Spotify, there’s a new way to do that. Just tell us your thoughts in the box right below the episode description. It’s as simple as that. Thanks for listening. See you next time.

Risk warning

How PensionBee’s plans are performing in 2023 (as at Q3)

Find out the performance of the PensionBee plans at the end of Q3 2023, 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 2023 (as at Q2).

Broadly speaking, global stock markets suffered in Q3 of 2023 (the period between July and September), after strong gains in the first half of the year. The value of UK government bonds also trended downwards, as interest rates continued to increase. Shares in energy companies were resilient in Q3, as investors sought refuge in sectors that were seen as being more insulated from the rising interest rates and inflation that were dampening optimism in the broader investment market.

In contrast, the value of stocks in other sectors fell during this period, including the big players in the technology sector, known as the ‘Magnificent Seven‘. The Magnificent Seven comprises Apple, Microsoft, Amazon, Alphabet (Google’s parent company), Nvidia, Meta (Facebook’s parent company), and Tesla. These companies make up the holdings in some of our PensionBee plans too. Although these companies have been some of the best performers on the stock market in recent years, they came under pressure last quarter as investors worried about the potential impact of a recession on their earnings.

The outlook for global bond and stock markets for the remainder of the year is uncertain, but there are positive signs. Inflation may be starting to peak, and if central banks slow the pace of interest rate hikes, this could boost investments.

Keep reading to find out how global markets and our PensionBee plans have performed over 2023 so far.

2023 figures cover the period between 1 January and 30 September 2023.

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 2023 (as at Q3)

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 goes bankrupt. Company shares are also known as stocks or equities, and they’re commonly traded on stock markets.

Global stock markets

When businesses have to pay higher interest rates on their loans, it can eat into their profits and reduce their share price. Also, when investors can get a guaranteed return on their money with cash savings or bonds, they may be less likely to invest in company shares, which can also drive down share prices.

Despite the rising interest rates and other challenges facing the global economy, there have been some successes in global stock markets. As the ‘artificial intelligence gold rush‘ is underway, the big technology companies have positively contributed to many investments.

Index	Investment location	Performance over 2023 (%)	Equity proportion (%)
FTSE 250 Index	UK	-3.^{_personal_allowance_rate}	10^{_personal_allowance_rate}
Euro Stoxx 50 Index	Europe	+10.^{_personal_allowance_rate}	10^{_personal_allowance_rate}
S&P 500 Index	North America	+11.7%	10^{_personal_allowance_rate}
Hang Seng Index	China	-10.^{_personal_allowance_rate}	10^{_personal_allowance_rate}

Source: BBC Market Data

PensionBee’s equity plans

Plan	Money manager	Performance over 2023 (%)	Equity proportion (%)
Fossil Fuel Free Plan	Legal & General	+9.1%	10^{_personal_allowance_rate}
Shariah Plan	HSBC (traded via State Street Global Advisors)	+19.7%	10^{_personal_allowance_rate}
Impact Plan	BlackRock	-8.6% ^	10^{_personal_allowance_rate}
Tailored (Vintage 2061 - 2063) Plan	BlackRock	+9.2%	10^{_personal_allowance_rate}
Tailored (Vintage 2055 - 2057) Plan	BlackRock	+9.2%	10^{_personal_allowance_rate}
Tailored (Vintage 2049 - 2051) Plan	BlackRock	+8.7%	96%
Tailored (Vintage 2043 - 2045) Plan	BlackRock	+7.5%	85%
Tracker Plan	State Street Global Advisors	+8.^{_personal_allowance_rate}	8^{_personal_allowance_rate}
Tailored (Vintage 2037 - 2039) Plan	BlackRock	+5.7%	72%
Tailored (Vintage 2031 - 2033) Plan	BlackRock	+4.4%	59%
4Plus Plan	State Street Global Advisors	+3.4%	52% ^^

^Performance from inception (on 15 February 2023) to 30 September 2023.

^^Equity % at 30 September 2023, as changes on a weekly basis due to actively managed components.

Investment performance is taken from money manager factsheets. To view the factsheets, please visit our Plans page. All performance is reported in gross figures and may not take account of fees associated with certain investments. Past performance is not an indicator of future performance. Capital at risk.

Equity content refers to the amount of exposure each plan has to global stock markets and other listed risk-on assets, such as property and commodities.

Bonds in 2023 (as at Q3)

What are bonds?

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. This type of investment is considered to be lower risk than company shares, because you usually know how much money you’ll get back. Bonds can be a good option for people who are approaching retirement and need a steady stream of income. Bonds are also known as fixed-income securities.

Global bond markets

Interest rates and bond values have an inverse relationship, meaning that when one rises in value the other falls. Central banks have been raising interest rates aggressively in an effort to combat inflation but, there are signs that inflation may be starting to peak. For example, the UK’s rate of inflation fell to 6.7% in September 2023, a substantial drop from the 40-year high of 9.6% in October 2022, which is good news for bonds.

Fund	Source	Performance over 2023 (%)	Fixed-income proportion (%)
Schroder Long Dated Corporate Bond Fund	Morningstar	-3.8%	10^{_personal_allowance_rate}

ource: Morningstar

PensionBee’s fixed-income plans

Plan	Money manager	Performance over 2023 (%)	Fixed-income proportion (%)
Pre-Annuity Plan	State Street Global Advisors	-3.4%	99%
Tailored (LifePath Flexi) Plan	BlackRock	+2.5%	6^{_personal_allowance_rate}
Tailored (Vintage 2025 - 2027) Plan	BlackRock	+3.2%	^{_scot_top_rate}

PensionBee’s cash plans

Plan	Money manager	Performance over 2023 (%)	Fixed-income proportion (%)
Preserve Plan	State Street Global Advisors	+3.3%	96%

Summary

You may find yourself wondering how inflation could impact your retirement savings or even rethinking your pension savings during the cost of living crisis. PensionBee customers can have peace of mind knowing that our pension plans are being managed by some of the world’s biggest money managers. Again, it’s worth remembering that it’s normal and expected for pensions, as long term investments, to go up and down in value over time.

Try our inflation calculator

A rise in inflation happens when the price of goods such as food, transport and living costs, like electricity, rise. Changes to inflation not only impact what you can afford today but also what you can afford in the future.

Savings like your pension aren’t immune to these changes and if your pension value remains the same, this decreases your purchasing power in the future, which over time could mean that your pension savings might not get you as far as you’d hoped. Use our Inflation Calculator to find out how your pension could be impacted.

This is part of our quarterly plan performance series. Check out the next quarter’s summary here: How PensionBee’s plans are performing in 2023 (as at Q4).

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

Bonus episode: Mortgages vs. pensions update

In this episode we’re revisiting the popular debate: should you pay more into your mortgage or your pension?

The following is a transcript of a bonus episode of The Pension Confident Podcast - Mortgages vs. pensions update. You can listen to this bonus episode or scroll on to read the conversation.

PHILIPPA: Hello and welcome to a bonus episode of The Pension Confident Podcast. Today, we’re revisiting a popular debate: should you pay more into your mortgage or your pension?

The cost of living crisis and high interest rates are creating a major mortgage crunch for borrowers. According to debt charity StepChange, people with a typical-sized mortgage are now paying £300 more every month than they were in September 2022.

We’ve spoken about this on the podcast before. In episode four, former Host; Peter Komolafe was joined by CEO and Founder of The Humble Penny; Ken Okoroafor, former CMO at HABITO; Abba Newbery and PensionBee’s VP Brand and Communications; Rachael Oku. They discussed the pros and cons of investing in property and pensions, because one in four of us is planning to use property investment to fund our retirement. Does that sound like you? Listen up as our guests share their thoughts.

PETER: The question is, do you believe that from a financial point of view, long-term, that paying off your mortgage, faster and quicker, is a better retirement solution than a pension? I’m going to start with you, Rachael.

RACHAEL: So, I think the desire to use your property to fund your retirement’s quite a common one. But I think sometimes people overlook the practicalities of that. I think if you’re an investor, you have buy-to-let properties, then it’s quite different. You sell them off, maybe as you approach retirement, or you keep generating that additional income. But when you’ve got on the ladder and you’ve finally ended up in your dream home, the thought of actually having to vacate that when you get to 55,65 or whenever it is that you want to retire, I think can actually be quite difficult for some people. Because if you want to free up some or all of the money, you can’t stay in the property, usually. And I think that presents some challenges, especially when someone has worked for their whole life and they’ve finally achieved it. I think downsizing just isn’t always what people actually want to do by the time they retire. And then, of course, if you’re unfortunate enough to be coming up to retirement age when the market is in a decline or it’s dipping, then you’re quite hamstrung on what your options are. If you need that immediate cash, you may have to sell your property for a reduced price whereas a pension would still have more opportunity to grow.

PETER: What about you Abba, what do you think? Do you think that property may be a potential faster or better way of actually acquiring a pension fund versus maybe a tandem approach?

ABBA: I think lots of things related to this question. I think the first thing is we’re talking about retirement as if it’s something that’s going to happen at 60 or 65. It’s not. If you take the statisticians’ [view], the generation of these guys sitting next to me are going to live to 90+, probably to 100. So, your attitude towards pensions and saving, I think, has got to fundamentally change. I grew up with parents who taught me that you’re going to get a final salary pension, so don’t worry about that. You’re going to get a State Pension, don’t worry about that. And that was kind of the 80s generation, so pour everything into property. If you’re thinking about retirement being something to do at 65, you now need a pot of money that’s going to last you for another 35 years, practically half the life you’ve already lived, again. And so, I don’t think of it as a binary question. And I totally agree with your point about downsizing. I think one of the real fundamental blockers in the property market at the moment, which is hindering first time buyers’ getting onto the market and holding up the prices, is people living in their big family homes, that they now no longer need. But yes, older people aren’t selling their homes as their retirement fund, and that’s in part because they’ve got their final salary pensions, they’ve got the state-funded pension. But that’s not going to be the same for my generation or for your generation going forward, which may end up being a very good thing.

PETER: What about you Ken?

KEN: Obviously property gives you this gratification. You can see it, you can touch it, you can even paint it. You can shift rooms around, you can do whatever you want. We need to get better at helping people visualise the benefits of their pensions. So, helping them to actually see, like, “Man, this is really worth my while”. Because a lot of people say, “Nah, forget that. Pension? No way man! Not putting money into that”, because they see it as “I can’t access the money, so therefore there’s no point”, when in actual fact, that’s an advantage.

PHILIPPA: If you’re thinking about using property to fund your retirement and you can afford to increase your mortgage payments to pay it off earlier, you might be tempted to do that. Sounds straightforward, but there are some things to be aware of, let’s hear what the guests had to say on that.

PETER: Why was paying off the mortgage the most important thing for you?

KEN: For me, that mental freedom was a big thing. The second was, it reduced our cost of living and gave us more financial freedom. Essentially for us now, it’s Council Tax, it’s light and heat, and things like that, and obviously travel and the things we find to be fun. But beyond that, our cost of living is much lower and it’s giving us that capacity to take more risks than we would have if we had something hanging over us.

ABBA: You’re in a fantastically fortunate position. But for most people, the struggle is to get on the property ladder. The struggle is paying into a pension and saving up for the deposit on a house. So actually, I guess, possibly because the average age of our customer is 42, we’re seeing that end of the struggle more than the overpaying struggle.

PETER: Ken just mentioned there, obviously paying off his mortgage allows him a little bit more freedom. I wonder, is that something that would appeal to you in your own personal circumstances at all, Abba?

ABBA: No, I’ve chosen not to pay off my mortgage early. I think the opportunity to use your house as leverage is important. And the lifestyle I’ve chosen to live with my family means that, yeah, I could have bought a much smaller house and be mortgage-free, but I’ve chosen to live a slightly different lifestyle. I’m incredibly lucky. I live in London; I own a house in London. I’ve seen an enormous increase in that property. I managed to get on the ladder about 20 years ago. So, I’m a very, very lucky person.

PHILIPPA: So the temptation might be to pay more into your mortgage - and stop paying into your pension - until you’ve paid it off. But Rachael Oku had thoughts on why it’s important to keep up those pension contributions.

RACHAEL: Investment growth is one of the key aims of investing. You want your pension and any savings to grow over time. But with pensions, that’s only really part of the story, there are lots of incentives. So, if you have a workplace pension, your employer, as you said, with Auto-Enrolment, is obliged to contribute. So, you’re effectively getting free money from your employer, which is why you shouldn’t opt out unless there are extenuating circumstances and you really, really have to. But your pension will grow a lot faster if you remain opted in. And then there’s also tax relief that you get on your personal contributions. So, most basic rate taxpayers will get a ^{_corporation_tax} tax top up. So, if you paid £100 into your pension, the government would add £25 and you’d have ^{_lower_earnings_limit}. So over time with regular contributions that just snowballs. It just grows and grows, and then you also get tax-free withdrawals when it comes to taking out your pension. So, from the age of 55, the first ^{_corporation_tax} of your pension - you can withdraw as a tax-free lump sum. There are also incentives when it comes to passing on your pension. So, pensions sit outside your estate for inheritance tax purposes, which means unlike the cash in your bank account, you don’t have to pay tax on it in the same way. So, with a pension, if you pass away before you’re 75, your beneficiaries can, in most circumstances, take that tax-free. And then if you’re over 75, your beneficiaries will pay tax at the nominal rate. And that’s with defined contribution pensions, which most modern workplaces and personal pensions are.

PHILIPPA: And finally, Abba Newbery shares her tips on the pros and cons of investing in property and what to think about if you’re buying your first home.

PETER: So Abba, I was going to ask you, when you invest in pensions and global markets, you typically get a little bit of diversification because you’ve invested in different areas. With property, it’s almost as though you’re putting your eggs all in one basket. Are there any other risks for the property side of things that you can think of, or that come to mind that you think might be important to this conversation?

ABBA: I guess if you look at it holistically and you see property as a long-term investment, it’s a pretty darn safe, long-term investment in this country. So obviously, particular postcodes haven’t all seen the same kind of increase. But if you’re looking to borrow over 25 years - for most people in those 25 years, that house that they live in has grown in value, if you kind of look retrospectively. As you said, it’s 10^{_personal_allowance_rate} every 10 years. I think you said that Halifax said it was 20^{_personal_allowance_rate} in 20 years. So yeah, property’s a reasonably safe investment. Obviously, that does mean you’ve got to keep up your mortgage repayments and that kind of stuff, and with that comes, you know, if the roof blows off or the boiler blows up, that becomes your responsibility. So, having your emergency fund is pretty important. And obviously picking the right area with the right kind of school because, I guess the other thing that’s quite interesting about property is we have this notion of a property ladder in the UK. Where you buy your first house, then you buy your next house and it’s bigger, and of course, that very notion costs you a lot of money. Be it more remortgaging costs, conveyancing costs, legal work costs and obviously Stamp Duty. So I guess if I was going to give someone advice, which I’m not allowed to do - buy the biggest house that you can in the best area that you can and then try and never move. Then put that money that you would have paid on Stamp Duty to the next house, into overpaying your mortgage or into your pension. But don’t keep moving because it costs a fortune!

PHILIPPA: We hope that’s been helpful. Stay tuned for all that’s coming up on The Pension Confident Podcast including our next episode, where we’ll be talking more about property. This time we’ll be looking at the rental market. Why is the cost of renting a home so high? And can you even afford to rent?

Stay on top of all your financial questions by subscribing to The Pension Confident Podcast and we’d love it if you’d give us a rating and a review while you’re there. We always want to know what you think of our series - and what you’d like us to cover next! Thanks for listening and you can catch the next episode on 26 November.

Risk warning

How the Autumn Statement 2023 impacts your pensions and savings

Find out what changes were announced during the 22 November Autumn Statement, and what it could mean for your pension.

Chancellor Jeremy Hunt’s Autumn Statement 2023 revealed ambitious pension plans, building on radical pension changes announced in the Spring Budget 2023.

Here are the Autumn Statement 2023 key points at a glance:

‘triple lock’ on the State Pension maintained for 2024, meaning full State Pension of £11,502.40 in 2024;
one pension pot for life on the way;
National Insurance payments cut for self-employed;
National Insurance contributions for employed were reduced from 12% to 10%;
plans to tax inherited pensions scrapped; and
increase in living wage to £11.44 from April 2024, boosting financial security for many.

Triple lock on State Pension maintained for 2024

The full State Pension will rise by around £900 to £11,502.40 in the 2024/25 tax year (£221.20 a week). For tax year 2023/24 it’s currently £10,600 a year or £203.85 a week.

The 8.5% increase means the government has stuck to its triple lock promise, which is to ensure that the State Pension rises in line with the largest of these three figures:

average earnings;
inflation; or
by 2.5%.

According to the Office for National Statistics (ONS), figures show that the annual growth in employees’ average total pay (earnings) was 8.5% in May to July 2023, which has determined the triple lock rate.

There had been concerns the government would look to reduce the State Pension increase, as official figures showed inflation slowed to 4.6% in October 2023. But with a General Election expected in 2024, it would have been a brave move to tinker with the triple lock and may have risked alienating retired voters.

One pension pot for life

The government hopes to introduce one pension ‘pot for life’ to solve the problem of workers having numerous workplace pensions throughout their career. The idea is that when employees switch jobs, they’ll be able to choose where their pension contributions are paid – rather than being bound by their new employer’s chosen pension scheme. It means pension providers will have a greater incentive to compete for customers, which could benefit savers by reducing fees and offering wider investment choice. PensionBee research suggests 76% of people would consider having their own ‘pot for life’ pension, so the move would likely be popular.

The government’s now launching a consultation on how the lifetime provider model could work, so don’t expect changes to happen any time soon. But for people engaged with their pensions and savings, this plan to simplify the pensions market is good news. It will also reduce the chances of forgetting about a pension. It’s estimated there’s around £27 billion sitting around in pensions that people have lost track of.

The news is particularly welcome due to lack of progress in the government’s Pensions Dashboards, which would allow people to access information about different pensions in one place. The dashboard was first mentioned in 2019 but has since seen a string of delays and may not be available until late 2026.

Reduced National Insurance bills

Cuts to National Insurance aennounced in the Autumn Statemnt will benefit many employees and self-employed workers. National Insurance isn’t the easiest tax to understand, particularly for freelancers and the self-employed who currently have to pay two separate National Insurance charges in order to access the State Pension and other benefits.

The three key changes are summarised below.

Class 2 National Insurance abolished.

A flat-rate compulsory charge of £3.45 a week is currently paid by self-employed people earning more than £12,570 through Class 2 National Insurance. This will be abolished from April 2024, saving self-employed people £179.40 a year.

Class 4 National Insurance rate reduced.

Class 4 National Insurance contributions on earnings between £12,570 and £50,270 will be cut from 9% to 8% from April 2024. This will mean savings of up to £377 a year for self-employed people.

Class 1 employee National Insurance cut.

Employees will benefit from a drop in their National Insurance rate from 12% to 10% on earnings between £12,570 and £50,270 from January 2024. This means someone on average earnings of £35,000 will save £449 a year, while those earning £50,270 and above will save £754.

“These measures offer a meaningful boost to take-home pay. This could enable workers to save more of their money for the future,” says Becky O’Connor, Director (VP) Public Affairs at PensionBee.

Plans to tax inherited pensions scrapped

The government had planned to tax inherited pensions when someone dies under the age of 75. It was today announced that the government will no longer make this change from April 2024 and that such pensions will remain tax-free. This is particularly good news for people whose estate is liable for inheritance tax, as it provides the option to pass on savings tax-free through a pension.

Minimum wage increase

The minimum wage rate (known officially as the National Living Wage) will see a rise of almost 10% from the current £10.42 to £11.44 from April 2024. The new rate will be a welcome addition to the pay packets of workers across the UK. In addition to increasing take-home pay, it’ll also mean more money going into your pension through Auto-Enrolment – increasing long-term financial security.

In summary

The 2023 Autumn Statement means workers’ take-home pay will increase next year, along with pensioners who will benefit from an increase in the State Pension.

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

Risk warning

What happened to pensions in April 2023?

Find out how the performance of your pension plan’s directly impacted by the performance of its investments.

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

This April had all eyes carefully watching the banking sector, after three midsized US banks recently collapsed in the space of five days. To prevent contagion across the financial system the Federal Reserve had to consider tougher rules for regional banks. The coverage from news outlets drew several parallels to the 2008 financial crisis which led to the Great Recession. As fears of history repeating itself were felt strongly, investor confidence dropped and so did many global banks’ share prices.

Fortunately, these fears didn’t materialise. Instead, global markets seem to have adopted a “let’s get on with it” attitude. In some markets, including the UK, consumer confidence is returning. In the US, earnings season, where publicly-listed companies publish their progress and profits in the first three months of the year, is off to an improved start, signalling more market resilience than expected. Broadly speaking, the incoming results across various sectors have been resilient despite the current market pressures. The rise in stock markets has been partially attributed to resurging technology companies, as tech giants Alphabet and Microsoft performed better than expected in the beginning of 2023.

Keep reading to find out how markets have performed this month.

What happened to stock markets?

In UK stock markets, the FTSE 250 Index rose by 2.6% in April, bringing the year-to-date performance over 3%.

Source: BBC Market Data

In European stock markets, the EuroStoxx 50 Index rose by over 1% in April, bringing the year-to-date performance to almost ^_ni_rate.

Source: BBC Market Data

In US stock markets, the S&P 500 Index rose by 1.5% in April, bringing the year-to-date performance close to 9%.

Source: BBC Market Data

In Asian stock markets, the Hang Seng Index fell by over 2% in April, bringing the year-to-date performance close to 1%.

Source: BBC Market Data

Will the momentum last?

With April demonstrating market resilience, the question to ponder’s whether it’ll last. Investors remain jittery and sizable stock market swings in a single day still abound. It’s not yet clear whether central banks’ long-standing war on inflation has been won, or whether interest rates will need to rise further and stay higher for longer, thereby dampening growth. There are also geopolitical concerns, with many commentators speculating that the transition to a global world order that sees China increasing in prominence could disrupt economic activity. So pension savers may still need to contend with fragile markets for some time and be prepared for a change in market performance and investment returns.

This is part of our monthly pension update series. Check out the next month’s summary here: What happened to pensions in May 2023?

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

Why’s the war in Ukraine still impacting my pension?

On 24 February 2022, Russia attacked Ukraine and triggered a domino effect of global events that we’re still experiencing today.

Russia’s ongoing invasion of Ukraine is a humanitarian crisis, with a wide reaching impact on people’s lives and global economies through chronic supply chain disruption. Ukraine’s one of the world’s top agricultural producers and exporters, with yellow fields of grain under a blue sky even symbolised in their national flag.

Since the conflict began, on 24 February 2022, a series of economic shocks have unfolded. With the international supply of key exports restricted or suspended, prices rose sharply causing inflationary pressures on households and central banks raising interest rates, companies suffered under these uncertain conditions and share prices dropped.

And how does this impact my pension savings? In the aftermath of a global pandemic, Russia’s actions created the perfect storm for market volatility. And your pension, like all investments, has not escaped these global shocks and will likely have experienced some turbulence in the past 18 months.

Here’s our breakdown of the domino effect of events from the Russia-Ukraine war in 2022 and how this has, and may continue to, impact your savings in 2023:

Broken supply chains of key commodities

Commodities are basic goods and resources, such as: energy, food, and metals. In the global economy, countries trade commodities with each other. Supply chains are the network that convert raw materials in one country into a consumer product in another. For example, wheat from Ukraine goes through a supply chain to become cereal in the UK.

As supply chains are exposed to different countries, they’re vulnerable to breaking at different points of the process. When supplies are limited, prices go up reactively. Both Ukraine and Russia are leading producers of key commodities, as such their inability to produce goods because of the conflict has created a supply chain blockage at the source.

Supply chain disruption of agricultural goods

As one of the world’s principal grain exporters, Ukraine has an established reputation as the ‘breadbasket of Europe’. In 2021, a year before the war began, Ukraine supplied 9% of wheat, 12% of corn, and 46% of sunflower oil global exports. Another leading grain provider’s Russia. In 2022, the supply of both countries’ agricultural goods were severely impacted.

When the military occupation began, many Ukrainian farms were destroyed and methods of exporting goods were obstructed. On the other side, the international community put Russia under sanctions to reflect its disapproval. While the causes differed, the results were the same - supplies of key commodities were lost from markets and prices started rising.

Europe’s move away from Russian oil

Russia’s the second largest producer of crude oil in the world, after the United States. In 2021, European countries made up more than half of all crude oil exports from Russia, mainly distributed through gas pipelines Nord Stream 1 and 2. Consequently, Russia and Europe were highly dependent on each other, one for income and the other for energy.

After the military occupation, many countries pledged to end or reduce their reliance on Russian oil in an effort to weaken the Russian economy. In reaction, the price of Russian oil dropped suddenly as demand shrunk, while other suppliers raised prices to compensate for increased orders. This pushed the cost of crude oil higher, before supply chains healed.

UK government’s response to high levels of inflation

Inflation’s the rate at which the cost of things goes up each year. Here in the UK, the government measures inflation using the Consumer Prices Index. This compares prices of basic goods and services each year (everything from bread to energy bills). From this, it can understand the change in household costs.

The UK’s central bank, the Bank of England, sets a target of 2% for annual inflation. It’s important for inflation to be stable: both for businesses to set their prices and consumers to plan their spending. Supply chain shocks from the Russia-Ukraine war caused everyday prices to rise dramatically, leading to interventions from the UK’s independent energy regulator, the Office of Gas and Electricity Markets (Ofgem), and the UK’s central bank, the Bank of England.

Ofgem’s price cap in global energy crisis

Since 2019, Ofgem sets a limit on what energy suppliers can charge households for their energy usage. Reviewing wholesale energy prices it adjusts the Energy Price Cap twice a year, usually with new rates taking effect in April and October.

Many households in the UK have seen dramatic rises in their energy bills due to volatile movements in the global wholesale market. This means providers are paying more for gas and electricity, which’s passed on to customers. The energy supply problems have significantly contributed to these higher prices.

Bank of England’s measures under inflationary pressure

Central banks exist to ensure the economy’s healthy and growing. When inflation is too high, they may raise interest rates to lower it. This can take time and have other effects like: making it more expensive to borrow money for a loan or mortgage and better interest rates for cash savings. If inflation and interest rates aren’t controlled, a recession can occur.

After the pandemic, the demand for oil and gas increased as restrictions were lifted. However, the conflict caused a disruption in the global supply of agricultural, energy, and industrial goods from the affected region. As supplies were limited, prices then rose reactively. This created inflationary pressures in the UK and beyond.

Company shares suffer in volatile conditions

Shares are portions of company ownership that are bought and sold on stock markets. There are many events, big and small, that can impact the value of an individual company’s share price. Stock markets reflect broad economic themes: downwards indicates pessimism, upwards signals optimism, and volatile movements up and down suggest uncertainty.

It’s normal for the value of investments to go down as well as up each day as the markets fluctuate. Naturally, it’s most concerning when markets appear to be trending downwards for a sustained period of time. The most severe kind of market downturn’s referred to as a ‘bear market‘. In June 2022, many stock markets announced they’d entered a bear market.

Ripple effect through Europe and beyond

The assault on Ukraine had a swift and severe impact on markets, as they reacted to an unfolding story of economic shocks: broken supply chains, rocketing energy prices, high inflation levels, raised interest rates - all leading to low growth projections and fears of a recession. Many consumers, companies, and countries were left poorer as a result.

In the first six months of 2022, markets were most volatile. However, a slow recovery was underway as companies acted fast to mend supply chains and governments intervened to shield consumers from unaffordable energy costs. Though inflation and interest rates are harder problems to resolve, many European stock markets rebounded a year later.

The winners and losers of 2022

Measuring company performances by industry, only the energy sector experienced significant growth last year. The geopolitical uncertainty over energy supply led to soaring prices. In the S&P 500 Index, energy producer Occidental Petroleum was the best performing US company in 2022, with a 1^_ni_rate rise in its share price.

One of the hardest hit industries has been the technology sector. Companies reliant on consumer spending often suffer the most during economic downturns. In the NASDAQ Index, fintech loan provider Affirm Holdings was the worst performing US company in 2022, with a 9^{_personal_allowance_rate} fall in its share price.

The invasion of Ukraine’s impact on PensionBee investments

It should be noted that other global events contributed to 2022’s volatility, such as ‘zero COVID-19 policy’ lockdowns in China, disastrous floods in Pakistan, and political instability in the UK. However, Russia’s attack on Ukraine remained a significant influence on stock markets throughout last year. And while the present day shows clear signs of recovery on all fronts, the scars of this run deep.

Is the ongoing conflict in Ukraine affecting my pension balance?

When you invest in your PensionBee plan, by transferring old pensions or making [contributions]/uk/contribute), you’re buying units in a diversified fund. If you own 100 units in your plan and each unit is worth £1.25, then your pension balance is ^{_lower_earnings_limit}. So, if the unit price drops to £1.10 and you have 100 units, your pension balance becomes £110.

Remember, unit prices go up as well as down, and reflect the health of the market on any given day. The principle is, that if the value of the underlying companies you’re invested in fall, then the value of your plan falls too. Where the money ‘goes’ is that your portion of that company has decreased in value and the value of the unit price goes down with it.

In 2022, a mixture of geopolitical struggles, high inflation, and supply chain issues created the perfect storm of market volatility, which impacted both company shares and bonds. Consequently, the value of your units in 2022 may have gone down. As this is a global issue, transferring to another provider won’t recover your market losses.

How exposed is my PensionBee pension to Russia?

As of writing, our Fossil Fuel Free, Shariah and Preserve Plans have no exposure to Russian companies. While our Tracker, 4Plus, Pre-Annuity and Tailored plans have minimal exposure to Russia - less than 0.4% to be precise. However, our pension plans do continue to be impacted by the global stock markets’ turbulence since the onset of the war.

Have a question? Get in touch!

If you’re a PensionBee customer, you can read our Top 10 holdings in your pension blog to discover the companies your plan’s invested in, or visit our Plans page to see what investment types and locations your pension’s spread across. You can always send comments and questions to our team via engagement@pensionbee.com.

Risk warning

E17: Should you save into a pension or an ISA? With Claer Barrett, Damien Fahy, Peter Komolafe and Becky O’Connor

Find out how to make the most of your pensions and your ISAs.

The following’s a transcript of our monthly podcast, The Pension Confident Podcast. Listen to episode 17 here, watch on YouTube, or scroll on to read the conversation.

PHILIPPA: Hello and welcome to The Pension Confident Podcast. This is a very special recording because this time, we’re not in a sound studio as usual. Instead, we’re here at White City Place in London. And for the very first time, we’re joined by a live studio audience.

Applause

PHILIPPA: Today we’re talking about the battle between two financial titans. Pensions vs. ISAs. Which one’s the best home for your savings? When we thought about making this episode, the first thing we did was ask our listeners what they thought was the right answer to that question. Before I reveal the results from that poll, let’s welcome our expert panel. First up, please give a warm welcome to the Financial Times Consumer Editor, Author and Host of the Money Clinic podcast; Claer Barrett.

CLAER: Thank you.

PHILIPPA: Next to her, we’ve the Founder of the excellent Money to the Masses website and podcast; Damien Fahy.

DAMIEN: Hello.

PHILIPPA: At number three, we’re very pleased to welcome back an old friend of the podcast. Financial Expert, Author and Host of The Conversation of Money podcast; Peter Komolafe.

PETER: Thank you.

PHILIPPA: And last but very definitely not least, a face and a voice you’ll know from her expert commentary on TV and radio. PensionBee’s own Director (VP) of Public Affairs, Becky O’Connor.

BECKY: Hello.

PHILIPPA: Welcome everyone.

Before we start, a reminder for everyone listening here and at home. Anything discussed on the podcast today should not be regarded as financial advice and when investing your capital is at risk.

HOW PENSIONS AND ISAS WORK

PHILIPPA: Let’s kick off by finding out what most people are doing with their hard earned cash right now. When we asked our listeners that question, 80% of them told us they were saving for their retirement. So Claer, is that about what you’d expect in your experience?

CLAER: Yes and no. It’s much higher than I’d expect in some ways. We know from other statistics that lots of people are finding pension saving to be a luxury at the moment, with the cost of living crisis raging. Putting money aside for years and years, when we’re approaching retirement just seems like a lifetime away and lots of people just need every penny they can get in their pay packets right now. Even if opting out means they’re effectively taking a pay cut because pensions are a part of pay, as I’m sure we’ll get on to tonight.

But what I’m not surprised about, in a way, is the fact that that number’s so high because the best thing that’s happened to pensions in the last 10 years, of course, is Auto-Enrolment. You mightn’t have heard of Auto-Enrolment before, but it’s something that happens when you start a job. When I started my first job, I was given a choice - do you want to be in the pension scheme or not? And I said, ‘well no, because you’re gonna take money off me, and I’m 25 and I’m never gonna get old’. And the thought of pensions and retirement just didn’t really compute. If you’d said to me, ‘would you like some extra money every month just for turning up at work every day?’ It would’ve been a different story. But, Auto-Enrolment has made that decision for around 10 million people in the UK already. So, we can start saving into a pension without thinking about it, without even really knowing what a pension is.

PHILIPPA: Yeah, as you say, starting early, if you can save towards your pension, it maxes out your chances of living well when you’re older. But it can be hard to work out how much you need, can’t it? I’ve been through this myself - trying to work out years ahead, how much do you think you need to spend every year? We asked our listeners what they thought about that. Almost a third thought that they’d need £50,000 a year to live on. Now, that’s a lot isn’t it? Becky, is that what you’d expect? It seemed high to me. It’s a big number, isn’t it?

BECKY: So the Pensions and Lifetime Savings Association (PLSA) is a trade group and they tried to nail exactly what they thought people would need in retirement for different living standards. So they broke it down into minimum, moderate and then comfortable. And needing £50,000 is actually more than the PLSA says you’d need. If you’re a single person hoping for a comfortable retirement, they put that figure at £37,000. If you’re a couple and you want a comfortable retirement, which is the highest living standard, that would be £54,000 roughly. But that would be between you, so around £27,000 each, including the full State Pension, if you were both eligible. If you include the State Pension, that brings down the amount that you’d need as an individual to something more like £17,000 per year.

PHILIPPA: Yeah, and you talked a bit about pension pots there. What’s the typical size of a pension pot? It varies geographically, doesn’t it?

BECKY: It does vary geographically. The PensionBee data that we have from customers puts Northern Ireland at the lowest average and the Southeast and London as the highest average pension pots. Of course it varies by age. So if you’re 20 something, you won’t necessarily have very much in your pension, but if you’re approaching retirement age, then you’d hope to have some more. And so the average across all ages is actually just over £30,000. But if you look at the 55 to 64 age group, which is when you’re really starting to think about retiring, £107,000 is the average. And going back to those income standards in retirement, that would get you just over the minimum.

PHILIPPA: Yes. We all know saving’s smart, but should you put that cash into a pension or an ISA? We’ve got poll data on this too. 30% of the people we polled had only a pension, 2.5% had only an ISA, and over 67% had both a pension and an ISA. So Becky, a lot of people had both. As you said, Auto-Enrolment was the real game changer. How much of a difference did that make on the numbers?

BECKY: Oh massive. So it’s more than doubled, which is amazing.

PHILIPPA: But do people opt out?

BECKY: They generally don’t, which is good and is exactly what Auto-Enrolment was designed to do.

CLAER: And if they do opt out, they get opted back in after three years.

BECKY: Yeah, exactly.

PHILIPPA: I think we all understand the basics of pensions, don’t we? But should we talk a bit more about ISAs Claer? Because there’s various kinds. Should we stick to the main ones for the purpose of this? What are they? How do they work?

CLAER: Yeah, so you get a £20,000 ISA allowance per year that you can pay into a range of different ISAs. I’m sure we’ve probably all got, or have had at some point, a Cash ISA? I’m getting nods. But around half of people in the UK have never heard of the second most popular type of ISA, which is a Stocks and Shares ISA. So with these, you can invest in companies that are listed on the stock market or funds that consist of lots of different companies that are invested on the stock market. I was always put off opening a Stocks and Shares ISA as a young worker because I didn’t know where I could get one, and I also didn’t know how I’d make the decision of what investments to put in it. But nowadays it’s much, much easier with the different investment platforms that you can open ISAs on. There’s even apps where you can open a Stocks and Shares ISA which have made it much more user-friendly for people to find, maybe select a risk weighting that they’re comfortable with, even answer a questionnaire about the sort of investing they’d like to do, and get going.

The other ISA that you’ve maybe heard of is the Lifetime ISA. We’ve got quite a youthful audience here at White City tonight so, if you’re under 40 years old, then you can open a Lifetime ISA as part of your ISA allowance. You can pay in a maximum of £4,000 a year to a Lifetime ISA and you get a 25% government bonus on top. So if you paid in the maximum £4,000, you’d get a free £1,000, which attracts a lot of people. You can use that then to either put towards your first home, so long as it’s worth less than £450,000, which has caught a lot of people out. Or, you can access it after the age of 60 and use it a bit like a pension.

PHILIPPA: Have you got one?

CLAER: I do. I turned 40 just six days after Lifetime ISAs launched. And the great thing for a ‘moderately old person’, like me, is that once you’ve got it open, you can keep paying into it until you’re 50. So I do try and put £333 a month into it, as a direct debit. And importantly, because I know that money’s gonna be locked up until I’m 60, and I’m 45 now, I know that I can live without it. Because if you want to crack open your Lifetime ISA and get the money out - you can, unlike a pension. But you’ll lose that bonus and you’ll also lose some of the money that you put in as a penalty. So you have to be absolutely sure that you can live without it.

PHILIPPA: What about the rest of you? Have you got ISAs?

DAMIEN: I didn’t qualify for a Lifetime ISA. On Claer’s point though, I know people who turned 40 and then put £1 into a Lifetime ISA, because you can open some with as little as £1.

PHILIPPA: Just to get your toe in the door?

DAMIEN: Just to get your toe in the door and then you can decide how you’re going to start using it. So yes I do have ISAs. Actually going back to your stats, I was one of the 2%. I was the person who was only saving into ISAs for years, that was me. And part of that was down to flexibility because I had a young family and there was always that element that I might need to get the money out. And then I started running Money To The Masses. So effectively becoming self-employed meant then that I missed out on Auto-Enrolment. So ISAs, at one point, were a good way for me to start investing. But they also gave me the flexibility I needed, with a young family and if you wanted to buy a house and all those things.

PHILIPPA: Yeah, you feel a bit more agile don’t you? Peter, what about you?

PETER: I do have ISAs.

PHILIPPA: What sort of age did you get them?

PETER: About seven years ago. I don’t qualify for a Lifetime ISA unfortunately.

CLAER: I feel so young!

PETER: ISAs are great because, you know we’re talking about pensions here, and how ISAs and pensions kind of converge, and interact with each other. One of the great things about ISAs and why people often get attracted to them is because you get the flexibility that comes with it. You can access the money as and when you want to, right? But, when you think about using an ISA to generate an income, it’s also tax-free. So you’ve got that added benefit as well, unlike pensions where you’ve gotta pay income tax on it.

PHILIPPA: So Becky, I’m gonna put you on the spot now cause everyone else has said they do have ISAs.

BECKY: Yeah I do have ISAs. My investments are like a wild flower garden. I’ve got bits of money saved everywhere. There’s a bit in a Lifetime ISA, a bit in a Stocks and Shares ISA, some in Junior ISAs for my kids. They’re not all doing well and I’m not contributing to all of them, all the time either, they’re all there - but they’re not pension substitutes. Although with the Lifetime ISA, I do quite like the idea of getting this bit of cash at 60. With a pension you can access it at 55, although that’s going up to 57 from 2028. I just quite like the idea of having this little extra bit saved, because my boys will be a certain age by then, where they might be getting married or buying a house, or something. So that’ll be quite nice.

PHILIPPA: See, this is making me wonder when you all actually started saving? Because as Claer said, you don’t think about it when you’re young. I certainly didn’t save any money until I was about 30, and it wasn’t much then. When did you actually start thinking ‘I need to put some cash away’?

CLAER: I was 29 when I started a pension and that was when I joined the Financial Times Group.

PHILIPPA: So that was a workplace pension?

CLAER: That was my workplace pension. I could’ve been in previous workplace pensions, but my biggest priority when I was younger was saving enough to get a deposit together for a flat. And I managed to buy my first property, very luckily, at the age of about 27 because in those days, you could get a 98% mortgage.

PHILIPPA: And what about the rest of you?

PETER: I didn’t start saving into a pension until I was in my 30s and funnily enough, I’ve been working in financial services for 15 years.

PHILIPPA: So, you knew better?

PETER: I used to work for one of the big banks and back then they had a defined benefit pension, which is one of those ones that gives you guaranteed income for life. I didn’t know it at the time, they didn’t explain it to me. They gave me two options - we can pay in or we can give you the money. So me, being in my 20s, I took the money and it was beer money on the weekends. I found out probably about seven years ago that it was a defined benefit pension and I still kick myself now.

BECKY: You haven’t worked out how much you missed out on though, just to kick yourself?

PETER: I couldn’t face the calculation! Because I was with them for a very long time. So I hate to think how much I missed out on.

BECKY: I can match that, well not quite! But when I joined my old workplace scheme, which was at The Times, it was a hybrid - so it was a part defined benefit and part defined contribution pension. I chose the cautious fund and I was very young. I was 25 and I shouldn’t have chosen that because it grew by about 1% a year during the time that I was there.

PHILIPPA: But, presumably you had no idea what you were doing?

BECKY: No, I didn’t. I mean, luckily somebody did tell me to join the scheme because it was before Auto-Enrolment. So thank you to that person. But I didn’t get information about which type of investment was right for my age.

MAKING THE MOST OF YOUR PENSIONS AND ISAS

PHILIPPA: Yeah, I mean going back to ISAs and home ownership, Becky, when we were talking about this podcast a couple of days ago, you raised this point didn’t you - about the Lifetime ISA being closest to a pension. If you’ve already got a home and you already have a pension, is there any point in having a Lifetime ISA?

BECKY: Yeah, I think it’s something people come up against as a bit of a dilemma. For the reason that I previously gave, it might be quite nice to have a pot that’s coming your way at 60. Obviously with the Lifetime ISA, you have the bonus and with pensions, you have the tax relief. However much you get in tax relief depends on whether you’re a basic, high rate or additional rate taxpayer. So, it depends on your taxpayer status, for one thing, as to which works out better.

There’s an annual allowance on pension contributions. And there’s another kind of loophole, which means you can use a previous year’s allowances on your pension as well, which is worth knowing about, if for some reason you’ve quite a bit of cash coming your way.

CLAER: If you come into an inheritance?

BECKY: Exactly. And that can be quite handy at that point. With a Lifetime ISA, as Claer said, the limit in a year’s £4,000. So it’s a slightly lower limit. I’d personally like to hedge my bets, which is why I’ve got a wild flower garden.

DAMIEN: Can I just add two things to that? Obviously if you’re in a relationship, each of you can have a Lifetime ISA, so you’re getting double bubble. So, why wouldn’t you do it? And the other thing is your point about carry forward on pension contributions. I don’t know if anyone here runs a business, but the one thing I would say is, you have to have the pension open from the three year period. Even if you’re not gonna be able to contribute much into it, you’d need to open a pension and put something in it, so that it’s there. Because you have to have had that pension in place so the rules can be used. So even if you’re thinking about some point in the future, have a look at the rules and you may have to think about opening a pension if you haven’t already got one.

PHILIPPA: Peter, a few weeks ago I saw a blog of yours about common mistakes that people make when it comes to ISAs? Do you want to run us through those?

PETER: One of the key things that people often make a mistake on is not understanding what type of ISA they want to go for. I think it’s really important to understand how they work. Cash ISAs, Stocks and Shares ISAs, Lifetime ISAs. Particularly when it comes to things like Stocks and Shares ISAs, you can’t get away from the immutable fact that you’re going to have some investment risk with it and you shouldn’t underestimate that. It’s a great vehicle in terms of potential growth, but the downside to that is also very, very real. And, you’ll probably be able to speak to this as well, Damien - a lot of the time people will think, with a Stocks and Shares ISA, that it’s going to grow - and you can have a Stocks and Shares Lifetime ISA as well. I see a lot of people looking to get on a property ladder with a Stocks and Shares Lifetime ISA, that want to buy a house in three years time. And I think the risk is too high. Do you want to potentially lose your deposit on the stock market? I think that’s really important to understand - what type of advice you’re actually using.

The second one’s that £20,000 to a lot of people, they think, ‘I’m never gonna have that much money so I won’t even bother’. And I often say to people, don’t think about £20,000. Yes, that’s the limit that you’ve got, but if you’re able to contribute £1,000, £2,000, £5,000 into it, that’s what you should aim for.

CLAER: I’ve only ever done it once - been able to save £20,000 in a year.

PHILIPPA: It’s a lot of money.

BECKY: I’ve never done it.

PETER: I’ve only been able to do it last year.

PHILIPPA: Because psychologically, there’s this idea that’s what you need to put in. But as you say, you don’t. It’s like you said Damien, you put your toe in the water with these things and it’s always worth doing isn’t it? It doesn’t really matter how much it is.

PETER: It’s amazing when you go back over what you’ve saved. You think it’s small amounts of money. It’s £1,000, £2,000, £3,000 here and there, but you extrapolate that over five to 10 years and it’s a lot of money.

PHILIPPA: Getting back to the pension vs. ISAs thing. When we polled our listeners, a big majority told us they had both. Is that the best idea?

CLAER: I think it’s a very worthy aspiration. Instagram has been a massive influence on how we learn and educate ourselves about personal finance, and YouTube as well. We’ve got lots of excellent influencers here in the audience tonight. But one of the mistakes that people make after looking at people talking about investing and ISAs on Instagram is that they overlook the benefits of their company pension especially. Because we don’t have people from the company pensions team or HR on Instagram saying, ‘hello everyone, let me tell you a little bit about this company pension thing’. And Perhaps we should.

So, I always say to people, before you start thinking about Stocks and Shares ISAs and Lifetime ISAs, you need to ask one question to your employer which is, what’s the match on staff contributions to the pension scheme? Because that, in my book, is what I call the ‘free money’. So if you pay in, say 5% of your salary, it seems like a wrench but they might match it with 10%. They might pay in the bare minimum and only do Auto-Enrolment. But the only way you’ll find out is either by asking, or when you turn up on the first day, they’ll give you the booklet about the pension scheme and you’ll normally have a choice about things like how much money you want to put in. And often when you’re starting a new job you’ll say, ‘oh well the minimum’s 3% so I’ll tick that’. But people don’t realise that if they were to tick a slightly higher percentage, there could be a lot more money on the table from the employer as well.

PHILIPPA: If you find that you cannot keep up your contributions to your pension or your ISAs, what should you focus on? Presumably your pension?

BECKY: If you’ve got stacks of debt that you’re struggling to pay off, then pay off the debt. And then it so depends on circumstances but you do want some short-term savings as well. That buffer’s really important, particularly if life’s very marginal.

PHILIPPA: Yeah. What do the rest of you think about that?

DAMIEN: So whatever you’re putting away, whether it’s into a pension or other savings, it’s not an on/off thing. You can dial down and dial back up. And I’ve used that analogy before - it shouldn’t be like a light switch, not on/off, but like a dimmer switch. So you can turn it down when you need to, but then turn it back up at a later point. If you turn it off, it becomes much more difficult to turn it back on. It’s a mental thing.

I’m gonna give you insight into my own life. I’ve been living like it’s been December 2023 and beyond for about the last year and a bit because I could see what was coming in terms of mortgage rates. And I could see what was gonna happen in terms of lots of things with the economy, which I’ve talked about on my podcast. So I’ve been putting money away in the short term to balance out the fact that my mortgage has now gone through the roof. I was one of those people whose fixed rate mortgage just happened to be coming up at this point and that’s just bad luck. So I’ve put money away at the expense of my pension because it’s no good having a pension if I haven’t got a roof over my head. So you have to be flexible. What ended up happening is, the money I set aside was more than I needed. So I can now take some of that money and put that into investments and other things. So it’s again, about having a plan, it’s not about turning on and off. That’s my view and that’s how I dealt with it.

PETER: I would agree. And there are some really good points in there because everyone has different circumstances. I always say this, what’s gonna help you sleep better at night? If, like Damien said, you’re at this point, where actually, the roof over your head’s the priority, then you have to make a tough decision. And it may be that the right decision at the time is to turn it off and stop contributing to your workplace pension. But you have to be mindful that you’ve got to turn it back on again at some point. Because you’re right, it’s psychological. Once it’s turned off, people get accustomed to the money that’s now available. And you just forget. And it’s very, very easy to do that.

PHILIPPA: Okay, let’s move on to some specific scenarios and look at our pension vs.ISA question from the point of view of different sorts of people. Personally, as I said, I’m self-employed, 4.2 million people in the UK are also self-employed. So panel, what do you think’s the best way for someone who’s self employed? We’ve touched on this a bit, but specifically, if you’re self-employed and are interacting with these products, what do you need to think about?

CLAER: If I can go first, I think the hardest thing for people who’re self-employed is feeling confident enough to lock money up, where you can’t get to it. That’s one of the reasons that pension saving among the self-employed is so low. But also, if you think about how your earnings can fluctuate when you’re self-employed. The luxury of having a salary where you’re getting the same amount of money hitting your bank account every month, where you don’t have to phone up your employer repeatedly to say ‘hello, can you pay me?’ - which is the life of the self-employed. Late payments are an absolutely massive problem for small businesses and for self-employed people. You may not get paid for something for months, so if you don’t have short-term savings pots to raid, then you’re gonna be in trouble.

So what I advise friends who’re self-employed to try and do, is to separate money when it comes in. So, say you’re paid £1,000 for a job, then you’d probably wanna put at least 20-25% of that money away for the tax bill that’s eventually gonna arise. That trips up a lot of people. But then maybe put another 10%, as Damien was saying, into an accessible place where you can reach it. Maybe an ISA, maybe premium bonds? You could win a tax-free prize while it’s sitting in there. But then if you can live without it for a year, then it’ll give you more confidence that you could actually lock it up into a pension, or invest it for the long term using a Stocks and Shares ISA. I think the biggest irony for a lot of self-employed people and business owners is, that by law, you’ve got to set up a pension for your staff and Auto-Enrol them, but often you don’t have enough money to set one up for yourself.

DAMIEN: Yeah and I’m nodding Claer, because you’re describing the world that I inhabit. So when I talk about my scenario, it’s because I’m technically a business owner. My staff are Auto-Enrolled and they all get the match on pension contributions. But then for me, as somebody who runs a business, you’re focused on the business and your staff, and you sometimes then have to take a step back and go, ‘well there’s something beyond this, I’ve got a family, I’ve got a future and I don’t wanna do this forever’. And so, there’s a point where you have to start doing exactly what Claer suggested and you have to start trying to put more money away each month.

PHILIPPA: I’m thinking about other specific scenarios. I’m thinking about age, have we got anyone in the audience who’s nearing retirement? No one looks old enough for this, surely? With less time to maximise gains, pensions or ISAs, what should it be?

CLAER: I think that everybody needs to take a longer term view of how long their money’s gonna be invested for, regardless of the tax wrapper that it’s in. Whether that’s a pension or an ISA. What’s becoming the norm nowadays is that you don’t take all of your money out of the stock market at the point at which you retire. You leave it invested and you manage those investments and hope that you can generate enough income to live off those investments for longer and not exhaust them. Whereas, if it was just cash and you were taking £20,000 of cash every year and inflation was eating it away, eventually it’s gonna run out and it’ll run out much quicker. We need the skills to manage investments in our retirement, and this is yet another thing that we don’t get taught how to do. It’s actually much more difficult than just finding the cash to accumulate into pensions over time. I even doubt my own ability to be able to manage investments when I’m in my 60s and my 70s, and I’m somebody who’s quite interested in investments and the stock market. But it’s just another thing that we’re gonna have to do. It’s another fact of life.

Whereas I think for generations passed, it’s been the idea of pipe and slippers. There’s a fixed endpoint to work and then you cash in your pension, you buy an annuity, you get that guaranteed income for life and you don’t have to worry about all of this stuff anymore. You’ve got that certainty baked into your retirement. And that certainty, unfortunately, is what the new system of pensions has made us relinquish. But I don’t think that a lot of people have woken up to that yet.

DAMIEN: And I don’t think there’s anything wrong with running your money for your working life and then deciding you don’t want that stress, because there’s a stress that’s associated with it. Also, when you make decisions yourself with your own money, there’s no fall back. So you might want somebody to come in and have an alternative view, and give you advice. Just because you made one decision at retirement, it may get to a point where you might actually decide you want to have an annuity. Decisions can change throughout your retirement and therefore getting financial advice is one of the things that I think people will do more regularly through their retirement as they live for longer. So I think it’s a valid point.

PETER: You need to have a plan and the plan should look something like - understanding when you get to that retirement date, what do you actually need in terms of money? Are you in that middle phase where you need £X amount of money? What does your State Pension bring in? Then also having a look at, if you’ve got a pension and an ISA, how they act differently when it comes to the tax that you have to pay. From a financial planning point of view, you might decide, well actually let’s take money from the ISA first because it’s tax-free. You can kind of manage your tax payment to the government in that way and leave the pension until much, much later on. When does your State Pension actually kick in? There are so many variables to consider at that point.

BECKY: I would just say though, that financial advice comes at a cost and it’s one that a lot of people can’t actually manage even with the pension pot size that they might have when approaching retirement. So there’s something called Pension Wise, which is a free government guidance service, which is actually really good. It’s not full-on, very detailed financial advice that you’d expect from an Independent Financial Advisor, but it does go into some detail and it’s personalised.

PHILIPPA: Yeah. If only as a guide to thinking, ‘do I actually need to shout out for advice’?

DAMIEN: Yeah, and actually back to your original question, when you get older does the pension become more attractive? Well in very simple terms, you’re closer to the point you can actually access it and you get tax relief on the way in so, on a very basic level, it does. The numbers suggest it.

PHILIPPA: Thinking about other scenarios and people wanting to leave money, it might be for loved ones, it might be for good causes. What’s the easiest way to do this? Pensions or ISAs? Again, I’m back to that.

CLAER: Well, I think if you went to go and see a wealth manager, they’d all say spend the pension last. But also, at the moment and I say at the moment cause I think it’ll probably be taken away in the future, there are amazing tax benefits if you leave somebody your pension. Now, you can’t leave somebody a pension in your will, you have to fill in what’s called an expression of wish form. Now, I mention this because like any pension that you’ve got anywhere from any company, even old ones - you might have started your first job aged 21 and thought, ‘oh well if I die, I’ll pledge for my pension to go to my lovely boyfriend’. But then, by the time you start your third or your fourth job, you might have split up with him. You know, the relationship could be toast. But if you don’t go back to that pension provider and say, ‘actually I’d like to update my expression of wish form because I’m now married to Peter and I’d like him to get my pension’, then he won’t. So it’s well worth thinking about.

But say for example, I leave you my pension, and you can leave anyone your pension. It doesn’t have to be somebody you’re married to. My pension will go seven ways between my three stepchildren and my four nieces and nephews. If you want the money to go to them, there are massive tax advantages in passing it to them. In some cases, if you die before the age of 75, the money will go to them tax-free or they’ll only have to pay the marginal rate of tax that they pay when they access the pot. Now there are lots of different rules and regulations that surround this, but that’s the main reason that people are shoving loads and loads of money into pensions, if they’re wealthy enough to do so. Because they’re seeing it as something that’s outside of inheritance tax and it’s a really great, tax efficient way of passing money on to the next generation.

PHILIPPA: So, that’s a better idea than setting up Junior ISAs for them?

CLAER: Well it could be, but of course you’re relying on the rules not changing and plenty of people, not just me, have noticed that this is quite a big kicker to the wealthiest. And in a cost of living crisis, in a divided society where the gap between the haves and the have-nots is just getting bigger and bigger by the day - should we be giving these massive advantages in the tax system to people who’ve already had so many advantages and so many privileges in life? I think that, regardless of your political persuasion, you could say that maybe that’s a step too far.

AUDIENCE QUESTIONS

PHILIPPA: We’re coming to the end of our time, I’m sorry to say. I wanna wrap up with some questions from the floor. We’ve got roving mics so if anyone’s got a question, show me a hand. Okay, I think I can see someone in the middle there. Tell us your name and your question.

LAURA: Hi, I’m Laura.

PHILIPPA: Hi Laura.

LAURA: My question is, so I have a Stocks and Shares ISA, can I also have a Lifetime ISA as well, or can you just have one, or can you have two Lifetime ISAs? How does it all work?

PETER: Right, the ISA rules can be very, very confusing sometimes. So if you have a Stocks and Shares ISA, you can have that and you can also have a Lifetime ISA invested in Stocks and Shares as well. That’s completely fine. What you can’t do, is have a Lifetime Stocks and Shares ISA open with X provider and then go open another one with Y provider in the same tax year. So you’ve gotta be sure in terms of who you’re choosing to allocate. You can have a Stocks and Shares ISA, just a normal one, and a Lifetime ISA that’s invested in Stocks and Shares as well. That’s completely fine and within the rules.

PHILIPPA: Have you got one Laura?

LAURA: Yeah I’ve got a Stocks and Shares ISA but not a Lifetime ISA, but now I might be convinced to get one.

PHILIPPA: Any other questions? Hi.

EDYTA: Hello, I’m Edyta. When I talk about finance with people at work, a lot of people would say ‘why would I contribute to a pension?’. But maybe 30 years down the line everything goes mad, crazy and I’d rather use this money now and maybe invest in properties or businesses and things like this. Nobody has a crystal ball so I’m not asking for predictions, but maybe just your take on why we think pensions are important?

PHILIPPA: Yeah, that sort of anxiety about the future - it’s a good point.

DAMIEN: Can I answer that one on the basis of the uncertainty of the future? So if somebody’s saying why would I not just go and take that money and start a business? The thing is - when you’re contributing to a pension, or Stocks and Shares ISA, you’re investing. So why would you try and create the next Facebook when you can invest in the one that already exists? And all the other mega companies out there that are on the stock market. So if you think about investing, what you’re really doing is taking a stake in a lot of these companies as you’re buying shares. So, people think that their money’s dead when they put it into these vehicles. But it’s not, it’s growing. So when you’re investing, you’re sharing part of the success of lots of companies.

PETER: I’ll add to that and I’ll also share some of my own experience because I thought exactly like this. There’s probably one fact that I’ve come to realise now that I’m 43 and that is that the wrinkles creep up on you just like that. One minute they’re there and you just don’t know how they got there. But when I was in my twenties, I thought I could conquer the world. I thought I was gonna be a massive rap star with loads of money and Lamborghinis and Ferraris.

PHILIPPA: There’s still time!

PETER: I’m 43, I’ve given up on that - my mate’s still going though! But the thing is right, we all think like that when we’re much, much younger and that’s youthful exuberance, right? But you can do the two things at the same time. Contributing to your pension doesn’t mean that it’s going to stop you from pursuing what you want to pursue. You can do both.

PHILIPPA: Are you convinced at all?

EDYTA: Yeah, I am. I think it’s just more from the perspective of - if it’s not there anymore then you cannot really access it.

PHILIPPA: But it sounds quite tempting, doesn’t it? Spend some, save some?

EDYTA: Yeah, I do both.

CLAER: Can I try and convince you a little bit more? I’d say like with both pensions and ISAs, you’re getting the most bang for your bucks. I’ve tried to explain pensions before to a group of school children, like a supermarket meal deal. So, you’re putting in the sandwich but then you’re getting the free money, which is the contribution from your employer, and that’s the drink. And then, because you’re not paying tax on any of that money and it can grow tax-free, that’s the packet of crisps that the government’s throwing in. So if you just take your sandwich - you don’t get the government top up, you don’t get the employer top up. You’ve then got less to try and invest in the other things you’ve talked about. Property being one of them. Well, you know the problem with property is that the government’s gonna come along and take quite a few bloody bites out of the sandwich in the form of things like capital gains tax and tax on rental income. So I like to put in the full sandwich, drink and crisps into my pension, and think, ‘okay, this is the most bang I can get for my buck. And that’s before we start thinking about investment growth.

BECKY: I think if your whole approach is patient and ‘I’m in this for the long haul, and slow and steady wins the race’, then that should give you a bit of comfort that you’re doing the right thing for yourself and you’re not missing out on anything more exciting. Because it probably doesn’t really exist. Pensions are the most exciting thing you can invest in!

PHILIPPA: I’m saying nothing! I think we’re gonna wrap this up now. Really useful questions, really useful answers, thank you panel. I know our studio audience would like to thank you too. So let’s have a round of applause please.

Applause

PHILIPPA: Now, if you’d like to hear more from our guests, Damien’s podcast, Money to the Masses is out every Sunday and you can find it, of course, on all major podcast platforms. Claer’s brand new book, What They Don’t Tell You About Money and Peter’s brand new book, The Money Basics are both out now!

Now for everyone listening here or indeed at home, please remember, as I said earlier, anything discussed on the podcast should not be regarded as financial advice. And when investing, your capital is at risk.

Next time on the podcast: you’ve spent all those years saving up towards a happy retirement, you’re ready to retire, but how do you access all that hard earned cash? We’ve touched on this today. We’ll discuss the best time to access your pension, and the best ways to take it along with all the ins and outs of pension withdrawal. So join us for that one. In the meantime, please do rate review and share this episode and keep up to date with everything going on at PensionBee.com/podcast. Thank you.

Risk warning

Improve your financial wellbeing - find the right life insurance with LifeSearch

Learn why we've partnered with LifeSearch, a leading independent life insurance broker, to help you find the right financial cover to protect you and your family.

This article was last updated on 24/06/2025

Our customers’ financial wellbeing is important to us at PensionBee and goes directly to our mission ‘Our mission is to build pension confidence’. When it comes to planning for your retirement, setting up and contributing to a pension is the most essential financial product you can have in place. It’s important that when you stop working you have enough money to cover your daily living costs as well as any other financial expenses which help you fulfil your retirement goals, which may include travelling the world or simply living without financial worries.

However, pensions aren’t the only product that can help you with your financial wellbeing. Life insurance is another important financial provision that enables you to save for retirement, knowing you and your family are covered should the unexpected or the worst happen. We’ve partnered with LifeSearch, a leading independent life insurance broker, who can help you find the right financial cover for you and your loved ones.

Financial protection for you and your family

Life insurance can be a critical source of financial support for you and your family should you experience a significant life event such as being unable to work due to injury or when you pass away. There are many types of products that fall under the ‘life insurance’ umbrella, such as mortgage life insurance; which will cover any outstanding mortgage payments should you pass away before a mortgage is fully paid, critical illness cover; which pays out a lump sum if you’re diagnosed with a life-changing illness and are unable to work and income protection; which can cover a substantial proportion of your income during periods you’re unable to work due to sickness or injury.

Unfortunately, many people in the UK aren’t financially well-protected. Research by Direct Line Group found that only 35% of people have life insurance coverage despite six-in-ten agreeing it would benefit their family. Similarly, other research has shown that, again, only 35% of UK adults have made a will. Without a will, your assets and property may not go to who or where you want. Having the right financial protections in place can bring you some peace of mind that any outstanding financial commitments can still be met should the unexpected happen.

Financial products that work together

Life insurance and pensions can work together to provide financial protection for different life stages and events. Upon your death your pension will usually go to your beneficiaries, however, its value may not be enough to cover any financial commitments, such as mortgage payments, you may leave behind which your family would be left to pay. So, whilst a pension will help meet your costs in retirement, life insurance can help protect your loved ones from facing financial difficulties and ensure the full burden of responsibility for meeting payments doesn’t fall on your family.

The need for life insurance is highlighted more clearly in certain life circumstances. For example, in the case of a pension, if you meet the criteria for ill-health retirement before you turn 55 and are unable to permanently work again you may be eligible to withdraw from your pension early, however, your pension at that point may not be large enough to ensure you don’t run out of money whilst in early retirement. Similarly, the COVID-19 pandemic saw an increase in demand for income protection insurance, where the insurance covered periods of unemployment that many people experienced.

Partnering with LifeSearch

Working with LifeSearch means partnering with a leading independent life insurance broker who shares our concern for helping customers improve their financial wellbeing. With our mission to help make pensions simple so that everyone can look forward to a happy retirement, life insurance too can play a role in helping customers become more financially confident.

Finding the right life cover can help you save towards your retirement knowing you and your loved ones are protected should life throw the unexpected at you. LifeSearch’s dedicated to finding the right life cover that suits its customers’ needs, plans and budgets, having protected over 1.9 million customers since 1998, putting their needs and not those of the insurers first.

Learn more about what LifeSearch offers and how it can help you find the right financial cover for you and your family.

Risk warning

What happened to pensions in February 2023?

Find out how the performance of your pension plan’s directly impacted by the performance of its investments.

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

In the UK, inflation levels (10%) are beginning to simmer down while interest rates (4%) are approaching their boiling point. The good news for savers is that both are expected to steadily decline over the course of 2023. There’s bad news for those craving salads this Spring, as many British supermarkets are limiting the sale of certain fruit and vegetables. Why? The BBC reported that bad weather conditions in growing regions of Spain and Morocco are to blame for the food shortages. Another blow to shoppers filling up their baskets in the cost of living crisis.

Meanwhile, the potential of a US recession’s on a knife’s-edge. As the Federal Reserve raises interest rates (4.50% to 4.75%) to balance inflation levels (6.4%), companies are finding their profits squeezed. The success of US stocks in January may’ve only been a flash in the pan, as February saw investor appetite dwindle. Between higher energy prices and lower consumer spending, the food industry’s one example of underperformance, with shares in companies like Domino’s Pizza (-9.6%) and Starbucks Corp (-2.9%) falling in February.

In a nutshell, the shifting fortunes of various industries and regions is another reminder to not keep all your eggs in one basket and ensure your investments are diversified. If you’re a PensionBee customer, you can read our Top 10 holdings in your pension blog to discover the companies your plan’s invested in, or visit our Plans page to see what investment types and locations your pension’s spread across. You can always send your investment comments and questions to our team via engagement@pensionbee.com.

Keep reading to find out how markets have performed this month, and if the FTSE 100’s at an all-time high, why isn’t my pension?

What happened to stock markets?

In UK stock markets, the FTSE 250 Index fell by almost 4% in February, bringing the year-to-date performance close to 4%.

Source: BBC Market Data

In European stock markets, the EuroStoxx 50 Index fell by almost 1% in February, bringing the year-to-date performance close to 9%.

Source: BBC Market Data

In US stock markets, the S&P 500 Index fell by over 5% in February, bringing the year-to-date performance close to 3%.

Source: BBC Market Data

In Asian stock markets, the Hang Seng Index fell by almost 6% in February, bringing the year-to-date performance close to 1%.

Source: BBC Market Data

If the FTSE 100’s at an all-time high, why isn’t that reflected in my pension balance?

The FTSE 100’s a stock market index that tracks the performance of the top 100 companies listed on the London Stock Exchange by market capitalisation, or size. It’s widely used as a thermometer for the UK economy and is one of the most widely followed indices in the world. Some of the volume leaders in the FTSE 100 include: BP, Legal & General, Tesco, and Vodafone.

In 1990, almost a third of UK pensions were invested in UK company shares. However, over the past three decades UK companies have fallen out of favour, with a 90% decline in their weighting in many UK pensions. Money managers have slowly moved away from UK investments as other countries present more growth opportunities for UK investors.

The reason your pension’s unlikely to mirror the movements of the FTSE 100 is because your exposure to those companies is minimal. In fact, even the success of the FTSE 100 can be driven by a few large companies and not reflect a regional trend. So why has the FTSE 100 risen this year? And how does the FTSE 100 compare to the S&P 500 over time?

What’s caused the FTSE 100 to rise?

The beginning of February witnessed the FTSE 100 reach a record high. Companies such as BP (14%), Vodafone (16%), and most notably Rolls-Royce (41%), were among the big winners of early 2023 contributing to this rise. While these FTSE 100 companies are listed on the London Stock Exchange, they often have international operations.

Many UK company shares with overseas trade have benefited from a weaker pound this year. The value of exports from the UK has increased due to the weak pound, making it more affordable for foreign buyers and boosting the volume of business done abroad. The more UK-based index, the FTSE 250, has yet to see the high returns of the FTSE 100.

What stock market index is my pension primarily invested in?

It may surprise you to know that UK pensions are more likely to be heavily invested in US companies than UK ones. This is because one of the core objectives of a money manager’s to maximise investment returns, and pension funds will invest in markets that help them achieve that objective. How does the US stock market index, the S&P 500, compare to the FTSE 100?

Over the past five years, the FTSE 100 Index has grown over 12%, bringing the annualised performance close to 2%.

Source: BBC Market Data

Over the past five years, the S&P 500 Index has grown over 49%, bringing the annualised performance close to 10%.

Source: BBC Market Data

Remember, pensions are a long-term investment. As you can see the S&P 500 has outperformed the FTSE 100 over the past five years. Investing your money across different stock market indices helps shield your savings from the full impact of turbulence of any one market, and gives them more opportunities to grow.

This is part of our monthly pension update series. Check out the next month’s summary here: What happened to pensions in March 2023?

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

The importance of financial inclusion

You’ve probably heard terms such as ‘levelling up’ being used by a lot of politicians during the cost of living crisis. But what is financial inclusion and why is it important?

How the 2023 Spring Budget impacts your pension

Find out what changes were announced during the 15 March Spring Budget, and what it could mean for your pension.

Jeremy Hunt’s Spring Budget, delivered on 15 March, announced some of the biggest changes to pensions since 2014 and brought relief to households struggling with childcare bills.

Budget 2023 at a glance: Key pension changes

Pension Lifetime Allowance abolished
Annual pension allowance increased from £40,000 to ^{_annual_allowance}
Minimum Tapered Annual Allowance increased from £4,000 to ^{_money_purchase_annual_allowance}
Money Purchase Annual Allowance (MPAA) raised from £4,000 to ^{_money_purchase_annual_allowance}
Free childcare for all children over nine months old by September 2025.

Below we cover what this means for your pensions and savings.

Pension Lifetime Allowance abolished

The Chancellor’s ‘rabbit out of the hat’ moment was the announcement that the pension Lifetime Allowance is to be abolished entirely. Currently you can pay a total of ^{_lump_sum_death_benefits_allowance} into pensions before facing a hefty tax charge of up to ^{_pension_release_tax_amount} on withdrawals for amounts above the cap.

Ahead of the Budget, it was rumoured that the Lifetime Allowance would be increased to £1,800,000. But Jeremy Hunt went a step further today announcing that the cap’s to be removed completely from April 2023.

The Lifetime Allowance meant many people nearing the cap were retiring early due to the large tax bill they faced if they continued to work. It was causing particular problems in the NHS, with increasing numbers of senior doctors retiring early rather than face going over the cap.

“The abolition of the Lifetime Allowance (LTA) is a huge and unexpected move. Removing it could benefit many younger workers who are diligently saving into their pensions, as well as older pension savers close to the cap,” says Becky O’Connor, Director (VP) Public Affairs at PensionBee.

You can take up to ^{_corporation_tax} of your pension as a tax-free lump sum. However the government isn’t allowing limitless tax-free cash even after the Lifetime Allowance has been abolished. Instead, the maximum that can be taken as tax-free cash will remain at £268,275 (^{_corporation_tax} of the current Lifetime Allowance).

Annual Allowance increased

The Annual Allowance is the amount you can pay into a pension each year while benefiting from tax relief. It’ll rise from £40,000 to ^{_annual_allowance} starting from next month. Tax relief means that for every £80 you pay into a personal pension, the government adds £20, giving you a total contribution of £100. Higher and additional rate taxpayers can claim back further tax relief through Self-Assessment.

The Annual Allowance includes your own personal contributions as well as contributions from your employer if you’re employed.

Minimum Tapered Annual Allowance increased

The Annual Allowance is much lower for high earners. It begins to taper down once individuals earn above £240,000, and the maximum that can be paid into a pension while benefiting from tax relief drops to £4,000 once earnings hit £312,000.

However, it was announced in the Budget that the minimum Tapered Annual Allowance will increase to ^{_money_purchase_annual_allowance} from next month. Meanwhile the threshold at which the taper kicks in will increase from £240,000 to ^{_adjusted_income}. The £6,000 increase will equate to an additional £2,700 of tax relief to high earners.

Money Purchase Annual Allowance (MPAA) raised

To incentivise “experienced” workers in their 50s and above to remain in work, it was announced that the Money Purchase Annual Allowance (MPAA) is increasing from £4,000 to ^{_money_purchase_annual_allowance}.

The MPAA’s triggered if an older worker (those aged above 55) has already drawn more than the ^{_corporation_tax} tax-free lump sum from their pensions. It restricts the amount you can pay into a defined contribution pension while benefiting from tax relief.

Free childcare from nine months

In line with the end of maternity or paternity leave, the Chancellor announced that the 30 hours free childcare scheme will soon apply from when a child is nine months old. Currently, only 3 and 4 year-olds in England, Scotland and Wales are eligible for 30 hours free childcare during term times.

The funding will provide huge relief for parents as the UK currently has one of the most expensive childcare costs in the world. However, the scheme will be rolled out in phases from April 2024 so parents will not benefit for at least another year.

The government says the additional funding could help more than one million women return to the workforce. This will help narrow the gender pay gap and the gender pension gap as it’s hoped more women will return to work sooner after having a baby.

“It’s usually mothers who take time out after having children. Staying in work for those two years could boost the eventual private pension pot of a parent on an average salary by around £12,000 (£205,000 rather than £193,000). With the impact of better salary progression factored in, this boost could be even greater,” says Becky O’Connor.

In summary

The Spring 2023 Budget will benefit high earners and diligent pension savers who now don’t have to worry about exceeding the pension Lifetime Allowance. Combined with increases to the annual allowances, it means anyone can save more of their income into a pension - benefiting from tax relief and investment growth to help fund a comfortable retirement.

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

Risk warning

E15: How can we achieve financial inclusion? With Nina Mohanty, Emma Barrow and Matt Loft

What's financial inclusion, who's financially excluded and what can financial services do to be more inclusive?

The following’s a transcript of our monthly podcast, The Pension Confident Podcast. Listen to episode 15 here, watch on YouTube, or scroll on to read the conversation.

PHILIPPA: Hello, I’m Philippa Lamb, and welcome back to The Pension Confident Podcast. This time we’re going to be talking about financial inclusion, because more than seven million people are financially excluded in the UK alone. So what does that mean and what needs to happen to make sure that financial services work well for all of us?

We’ve heard a lot of talk from politicians lately about levelling up. Put simply, that’s all about creating opportunities for everyone, wherever they live, and making sure no one falls behind. But when it comes to financial services, falling behind isn’t always about where you live. Sometimes, it’s a system or a service that just isn’t set up to work well for you. Things like payments, savings, credit and even insurance.

So why isn’t it working for you? Well that might be down to your ethnicity, sex, religion, gender or your age. It could even be about your relationship situation or your health status. Lots of factors can play a part, but exclusion can have very serious consequences. So what can be done about it? Helping us level up financial services, today we have three guests. Nina Mohanty’s the CEO of Bloom Money, which is a community saving platform that helps people moving to the UK from other countries to save for their future. Hi Nina.

NINA: Hello. So glad to be here.

PHILIPPA: Emma Barrow’s Head of Communications at the Financial Services Compensation Scheme or FSCS. Hi Emma.

EMMA: Hello. Thank you for having me.

PHILIPPA: And, as always, our third guest is one of PensionBee’s own experts. This time, Chief Design Officer; Matt Loft. Hi Matt.

MATT: Hello.

PHILIPPA: Because we’re talking about money and finance. Here’s the usual disclaimer before we start:

Please remember that anything discussed on this podcast should not be regarded as financial advice and when investing, your capital is at risk.

WHAT’S FINANCIAL INCLUSION AND WHO’S AFFECTED?

PHILIPPA: Now, we’re talking about financial exclusion today. I know we’ve got lots of expertise around the table. I’m wondering if we’ve also got some personal stories. Have any of you ever felt excluded from a financial product or service? Have you Nina?

NINA: Yes. So like many of our customers at Bloom Money, I’m an immigrant myself, to the UK. I come from the United States and was born and raised in California. When I first moved to this country, I couldn’t, for love nor money, get a bank account or a mobile phone contract.

PHILIPPA: Why?

NINA: Because opening a bank account comes with a lot of information requirements. So in the end, I had to actually go to the university where I was doing my masters degree and say, ‘please, could you write me a letter so that I can open a bank account?’ And that was also part of the mobile phone contract situation because when you take out a mobile phone contract, they’ll run a credit check on you, and of course, having just arrived in the country, I didn’t exist.

PHILIPPA: You didn’t have a credit record?

NINA: I didn’t have a credit record in this country. I was saying, ‘please, I just want a phone!’

EMMA: That’s something so simple, right?

NINA: Something so simple.

PHILIPPA: And so essential.

NINA: Exactly.

PHILIPPA: What about you Emma?

EMMA: I’ve got to acknowledge that I’ve been quite privileged in a lot of ways and I’ve not had that kind of experience. When I was growing up, we weren’t wealthy by any stretch of the imagination, but I was never in poverty. So I think my feeling of exclusion has come as I’ve progressed in my life, so as I’ve gotten into a better financial situation than my parents were at my age. That transition from very basic finance; from having a bank account, insurance and accessing credit to things like investments, and pensions. I found that incredibly difficult because culturally, when I was growing up, that just wasn’t a thing in my sphere. Levelling up from very basic finance into more advanced things and being able to grow your wealth through investment, I found that very difficult and felt excluded.

PHILIPPA: You just didn’t know how to do it?

EMMA: I didn’t know how to do it. I still feel today that it’s very hard to access. There’s this gulf between basic finance and savings, and being wealthy enough to be like a high net worth investor. And that middle part’s really difficult. I have felt excluded in that.

PHILIPPA: Yeah. And we are going to talk about financial education because it’s a big issue in this. How about you Matt?

MATT: Yeah, a recent example is how my wife and I were trying to open a joint account, which is something, I thought in the day and age of fintech banks, that would be very simple. Unfortunately that wasn’t the case. We went through a number of banks to try and set this thing up. There was no feedback as to why they wouldn’t give us a joint account; they just flat out wouldn’t allow us. A ‘computer says no’ kind of problem. It’s just really frustrating. I’m born and raised in the UK. I’ve got all of that history here, but still even then, it just wasn’t possible to do.

PHILIPPA: So there’s a few examples of the sort of problems we’re talking about. Emma, financial inclusion’s a bit of an umbrella phrase, isn’t it? What sort of things might it cover?

EMMA: When we think of financial inclusion or exclusion, that being the opposite, there’s two things that you can divide that into. There’s the more tangible and physical ways that people are excluded. They can’t access cash, they can’t access a bank account, they can’t access a phone contract account or get a joint account. Very physical and tangible things that you think should be fixable. They seem really logical. You would think you should be able to fix that.

PHILIPPA: And basic as well.

EMMA: Yeah. You should be able to legislate, you should be able to manage it so that it works. But I think, like my example, there’s the intangible part of inclusion as well, which is that cultural piece. Have you been exposed to that? Have you had the education?

PHILIPPA: So thinking about groups, Nina, as you say, you’re dealing with people who are coming to the country, but there’s a whole array isn’t there? Because it’s people with disabilities, women, people from low income backgrounds, of different religious backgrounds. Lots of different groups.

EMMA: Absolutely. And I think to an extent, I believe everyone’s probably going to be excluded at one point in their life. It mightn’t be a permanent feeling of exclusion. It might be a temporary thing that eventually you can get over. But I do think pretty much all of us will experience it at some point to some level. But as you say, there’s certain groups that are particularly affected by this and on a more long-term basis.

PHILIPPA: So we’re talking about a lot of people, aren’t we? Do we have any sort of sense of numbers?

NINA: I only know that the Financial Conduct Authority (FCA), our regulator here in the UK, recently stated that there are 1.2 million British adults that don’t have a bank account. When you think about that, it’s quite a large number of people just walking around without a bank account.

WHAT BARRIERS DO PEOPLE FACE AND WHAT NEEDS AREN’T BEING MET?

PHILIPPA: We’ve talked about the what and the who. Should we dig a bit more into the why and the how that groups might run into these problems? Some people are excluded because they’ve tried and they’ve been turned away. Others, I think it’s fair to say, are effectively excluded because they choose not to use financial services. Why would people do that?

EMMA: I think some people might be sceptical of financial services. It’s seen as a very wealthy club. In Britain, our culture is not to talk about money. That all means that people, whether it’s an actual choice or it’s more a fear and confidence thing, they do choose to maybe not participate.

NINA: If I could add to that? What we often find in immigrant communities in the UK is people prefer to use cash and they prefer to have it with them. We refer to this mysterious box under the mattress where Granny has all of her cash just sitting there, right? And people say, ‘oh, that’s ages ago now’ and, ‘people don’t do that anymore’. But we still find that people actually do and there’s a certain reluctance to trust financial institutions. When I talk to immigrant communities, often people of colour, they say it’s due to the fact that they’ve been discriminated against in some shape or form in the past. I’ve spoken to people who’ve applied for a loan, they’ve been rejected and because of that there’s this feeling of shame. They say, ‘right, well I don’t want to interact with the bank ever again’. They just decide to live in cash-based economies that aren’t part of our formal economy here. Also, we’ve talked about religion. There’s approximately 3.87 million Muslims living in the UK. So there’s a broad spectrum of reasons why people don’t want to engage with the formal financial system.

PHILIPPA: Yeah, the Shariah thing is interesting. We made a podcast about Shariah finance last year actually. And as you say, loads of financial services are just not set up for that yet. But Matt, I know you’ve done a lot of work at PensionBee about accessibility for people with disabilities, haven’t you? What sort of challenges do they face?

MATT: Sadly, they face similar challenges to those they encounter in other industries. The world has moved online and that brings its own particular challenges. The way technology moves is quite interesting to think about. If you’ve got to go to a building, that’s a mobility issue, if you physically find it hard to get there. If you’re doing something over the phone and you’re hard of hearing, that’s a problem. Now the world has the internet and apps, and if you’re visually impaired, that’s a considerable barrier. So a lot of the work we’re doing at PensionBee’s around trying to utilise the latest technology to help those people because, by and large, having apps and the internet is fantastic. For example, if you do have mobility issues, for instance, suddenly the world’s opened up to you because you have so much power in the palm of your hand. But yes, of course, it’s really dependent on your particular disability and your particular situation.

PHILIPPA: And equally, if you’re a person who doesn’t want to use handheld technology, like phones - I’m thinking of older people here, but it isn’t necessarily older people is it? It can be all sorts of people. That’s an issue, isn’t it? Because obviously bank branches where you can go and talk to someone in the flesh, face-to-face, they’re disappearing, aren’t they?

MATT: They are.

PHILIPPA: There’s a movement towards shared banking hubs, isn’t there? Is that a good solution?

NINA: I think it’s a tough one. I’ll give the example of my Co-Founder and our CTO at Bloom. He’s living in North Wales, in a small village, and he’s gone to look after his Mum and his Grandma. The last High Street bank closed and they said, ‘well don’t worry, we’re going to do a mobile van for you and everyone can do their banking through the mobile van’. And they said, ‘OK, let’s try it’. But the problem is the mobile van, for whatever reason, sometimes can’t make it because there’s traffic or something else, and just doesn’t show up. Or it’s only available on certain days, at certain times. So what happens if you’ve caretaking responsibilities and you can’t make it down to the van, or you’re working during that time and you’re not off shift yet and you can’t go to the van? There are definitely areas for improvement. I’ve seen there’s a partnership with a company called OneBanx where they’re trying to have multiple banks represented in one physical space. I’m very keen to see how that plays out because at least it’s a physical space and people can speak to a human being representative. But that remains to be seen.

EMMA: I think the vans are really a bit mad because, like you say, there’s so many problems with them. And actually, if you just want to do basic cash withdrawals and cash deposits, you can do them in the Post Office. I think there’s about 11,000 Post Offices still in the UK. The van thing’s a bit odd. I think the shared branch idea is interesting. There’s only four of them open. It’s a new initiative and there’s plans to open 38 more. A fairly large number, but similar to your example, I’ve got an Aunt and she’s 90 now, and sadly she lost her two siblings last year. So she’s now left to look after everything. She’s never had children. And as you mentioned about everything moving online, she’s never had the internet and wouldn’t have a clue. She’s never had a mobile phone, not at all. All her bank branches have shut, but she’s stuck in this interesting quandary where she would happily transact over the phone, but how do you find the phone number?

PHILIPPA: Oh yeah.

EMMA: How do you find the phone number when you can’t go to a branch, you haven’t got an app, you haven’t got the internet and you haven’t got a debit card? She’s never had a debit card, she’s never been interested in that. She’s always worked with cash. She literally cannot find that phone number. Finding phone numbers is almost impossible without the internet.

PHILIPPA: Yeah. And the digital thing, there are a lot of people like her, who prefer cash, but a lot of that generation still like cheques and they’re basically gone aren’t they?

EMMA: It’s so bizarre to me. I feel like cheques just passed me by. I feel like I saw one, at one point, in about 2010 and then have just never dealt with them since. It’s really weird.

MATT: Maybe from the Grandparents at Christmas time? You used to be quite appreciative of that. But as the years went on you started thinking, ‘oh no, not a cheque. What do I do with this?’

PHILIPPA: Matt, we spoke a lot in the last episode about the disadvantages that women can face financially depending on their relationship status. It’s the same with accessing finance, isn’t it? 742 million women all over the world are outside the formal financial system. Do we have a number on what’s happening here in the UK?

MATT: I know the difference between pot sizes for men and women is 39% across the UK, which is an incredibly disappointing figure. At PensionBee we’re thinking about that quite a lot at the moment, and what we can possibly do about that. You have to look at the causes of it and that’s actually very difficult to unpick. We do have a gender pay gap, that’s an issue, but it’s not 39%. That’s a huge figure. We know that women are often primary carers, be it for children or for adults. So quite often they drop out of the working environment for some time, if not more permanently. I think it’s a very complicated subject, one that we’re really just trying to get to grips with now.

PHILIPPA: Nina, you talked about credit ratings at the top of the podcast. As you said, it really damages people’s ability to access financial services. That might be because you’ve fallen into debt in the past, which is kind of a separate issue. But it’s that thing about a small credit footprint, I think it’s called. And that’s a lot of people isn’t it?

NINA: Absolutely. I think often about my mother-in-law, she was briefly a farm secretary and then took over running the household, and I believe she had a joint account with my father-in-law. So she never actually established a credit file for herself.

PHILIPPA: So she’s invisible?

NINA: She’s credit invisible. And it wasn’t until one day she decided, ‘I want to have a credit card, I want to have a bit of agency in this household’. The options that were available to her were predatory quite frankly. There are everyday people who are credit invisible because they perhaps have never tried to get credit.

PHILIPPA: Young people for example, when you leave home you’re credit invisible, aren’t you?

NINA: Exactly.

EMMA: And again, culturally, if you grow up in a less wealthy household, credit can be seen, and was definitely seen in my family, as a very bad thing. You didn’t borrow money. You saved and you lived within your means. So when I went to university, I remember being terrified of getting a credit card because it was drummed into me that you don’t borrow money. Because it’s scary and you mightn’t be able to pay it back and then bad things happen.

NINA: Funny that you had that reaction because in my experience, and I’ve spoken about this publicly before because I’ve gotten over the shame of it. When I went to university in the USA, the banks could still set up shop on campus and say, ‘come and get a credit card’ to any random person on campus. Now they can’t anymore thanks to the Credit Act. But I was offered a credit card and I thought, ‘amazing, free money, I love it’. And of course, I didn’t read the small print, which said it’s ^{_personal_allowance_rate} interest, but only for 18 months. And so here I was going, ‘free money, la la’, buying the most ridiculous and unnecessary things, especially since I was living in a dorm, and then realising, ‘uh oh, I have to pay this back’. And by then it had snowballed. I think at its peak, it was about $10,000 of credit card debt. And it followed me around. I’ve talked about this before but there’s so much shame that comes with it. I thought, ‘right, I’m never touching credit again’. But then when I moved here I thought, ‘well I’ve got to get a credit card, haven’t I?’ to build that credit score!

EMMA: It’s weird.

NINA: It was a bit traumatic actually, applying for that credit card and thinking, ‘oh gosh, I’ve got to lock it away or put it in a drawer so I don’t use it’.

EMMA: I remember when my boyfriend and I bought a house together, we’ve had the house for a long time now, but I remember when we were buying that house, he didn’t have the best credit rating. In a prior relationship, his ex-partner had got into debt from what I remember. I remember the worry and the panic of thinking, ‘are we going to be able to buy a house?’. And he was worried about whether it would affect my credit rate because I’d, by that point, worked on it. To be fair, I didn’t really understand how it would impact me. That’s the other thing, again, going back to education and understanding feels like a bit of a dark art sometimes - a credit rating. People don’t really understand how those joint relationships affect it. If you’ve got into bad credit, how do you get out of it? If you’ve got no credit rating, how do you build it? It does seem to be a knowledge gap for sure.

PHILIPPA: And that’s going to apply to all sorts of people. Divorced people and newly independent people. As you say, this business of being affected by previous relationships that you mightn’t have had the agency about. Is there anything to be done about that? What do you do about it?

NINA: I wish I had a magic wand.

EMMA: I was going to say, that’s why we’re discussing it, right? Because it’s really hard.

PHILIPPA: I mean, can you engage with the credit agencies? You can look at your credit score.

EMMA: I genuinely don’t know, beyond checking my credit score, how I would go about fixing it.

NINA: I think one of the things that I’ve had to do, I’ve talked often about how I’ve money dates with myself and they’re the most dreaded dates.

PHILIPPA: This isn’t a fun date?

NINA: Maybe I’ll pour myself a glass of wine and say, ‘right, let’s just get through this’. But I came to realise that one of the credit rating agencies, I have no idea why, said I had a terrible credit rating and the other two said I was in good standing. I started going through and I realised that it had my address as a place that I lived three or four years ago. So whatever was going on with that particular residence was negatively affecting me. There’s usually a link on the websites of the credit rating bureaus where you can file a correction. It’ll take ages and it’s very paperwork heavy, but I highly recommend having a quick audit and looking to make sure. Sometimes there are duplicates or if you have a common name, you might be confused with someone else. So it’s always worth doing that and just having a quick check to make sure that everything is above board, and as it should be. But I don’t think there’s a silver bullet for it.

EMMA: And even accessing those credit agencies can feel hard, because it’s not always obvious that there’s a free way of doing this stuff and the first thing that’s presented to you is…

NINA: Pay £15 a month!

EMMA: Yeah, for each single agency and like you say, there’s three main ones in the UK. That itself can feel like a barrier to a lot of people. That’s going to be £70 before we’ve even started.

PHILIPPA: That’s the thing, low income. This is a running issue with all these exclusion issues. Because now I’m thinking about contents insurance. I was reading the other day, about three million British households, this is social housing, don’t have contents insurance. But they’re twice as likely to be burgled than people living in privately owned homes. It just highlights how vulnerable people are.

EMMA: So the FSCS can actually compensate for insurance failures, like if an insurance company goes out of business. It wasn’t contents insurance, but we had a failure about a year and a half ago now, at a large insurer that went out of business, and there were about 120,000 policy holders on the books. It was motor insurance, rather than contents. But it actually transpired, as we went through this failure, that most of them were motorbike insurance. So motorbikes, scooters, mopeds, that kind of thing. And again, as we dug into it further, those policy holders had been insured by that company because it was by far the cheapest and they literally couldn’t afford another policy. Digging into that further, they were using that policy for business. They were using it because they were takeaway drivers, bike couriers, etcetera. So that insurer went pop, we could pay people what was left of their premiums. So if they had a years cover and they had six months left, we’d give them that money back, but then they couldn’t access insurance because there was no other provider offering anywhere that value.

PHILIPPA: That’s a market failure.

EMMA: Overnight, they were excluded from not only being able to insure their vehicle, but being able to work because of that one failure. Like you said, those are the people that don’t have the resilience to change that situation, get another job or whatever. I think insurance’s a very hidden expense. We don’t talk about that with exclusion a lot, but it’s really important.

PHILIPPA: Particularly when you’re high risk.

HOW DO WE IMPROVE ACCESS TO FINANCIAL SERVICES FOR THOSE IN GREATER NEED?

PHILIPPA: Matt. we’ve laid out a lot of problems here, haven’t we? Should we talk about solutions? Financial education, it’s a running theme on this podcast. We’re always happy to talk about it again because it’s really important isn’t it? We’ve got 11 million adults in this country with what’s called ‘low financial resilience‘. That’s the sort of thing we’ve been talking about, there’s just no cushion when things go wrong. 12 million are lacking the digital skills to access the sort of platforms and products that we’ve been talking about. That’s open banking, using a phone, apps, all that sort of stuff. It’s a big problem, isn’t it?

MATT: It’s a huge problem, absolutely. Where do I start unpicking that one really?

PHILIPPA: Should we start with the government? I’ve read their latest report on this. Financial inclusion is supposedly a priority, isn’t it? They’re talking more in that report about financial education for kids. Is it happening?

MATT: Not that I’m aware of. I haven’t been to school since the eighties and nineties. I’m aware that it’s supposedly better than it was then. Financial education back then started and ended with adding and subtracting. There was really nothing beyond that.

PHILIPPA: I mean this is the road we’re on, isn’t it? App-based financial services. We’re doing everything on our phones. There’s no turning that around, is there? But as you say, the pitfalls are there. The opportunities for fraud, people making mistakes and digging themselves into holes that they don’t really fully understand. On the other hand, of course Matt, forms and paperwork, they had their problems too, didn’t they? And they still do.

MATT: Exactly. Yeah. We’ve subtly changed where the problems lie and how we understand them, but they still exist. I think overall it’s extremely positive what’s happening in the technology space. Internet and app-based access to finances. But it does come with certain risks and I think just general understanding and knowledge about what it is you’re playing with here. Because it can feel like playing. You download an app, you’ve tried it out and then suddenly you’ve done something you didn’t fully understand. You’ve accepted the terms and conditions and off you go. And yes, there quite often aren’t the guide rails in place to help you understand what you’re doing.

PHILIPPA: That’s the balance isn’t it? Obviously PensionBee has an app. All organisations in this space have the same issues, you want to make it convenient, quick and easy to use, but those safety nets do need to be there don’t they? For you and for the customer.

MATT: Absolutely, yes.

EMMA: I think what you said about terminology’s really, really important and that’s something that we’ve. . .

PHILIPPA: Jargon. We’ve done a podcast about that too.

EMMA: So a lot of companies, ours included, have gone through the Plain English Campaign and Crystal Mark. We’ve been working with a company called Plain Numbers recently, which is the numerical equivalent of that, which is helping people to understand when we give them compensation calculations and things like that. But what I found really difficult goes right back to what we said at the beginning. Financial services is full of, at a very senior level, wealthier people from wealthier backgrounds and higher educated backgrounds. Getting them away from the mindset of - big complicated language equals higher value, ‘I look better, I sound more important’, is so difficult. I think that’s why your fintech companies have done, in my view, a better job of that because they tend to be founded and run by younger people, less are from those wealthy backgrounds, less are from those traditional industries. You’re more aware of the benefits of doing this stuff well.

MATT: We see that at PensionBee for sure. When we get feedback from people, it’s not, ‘oh your app’s fantastic, I can do this and that’. It’s, ‘oh, you explained this in a way I understood’. How simple is that? So much of the finance industry still communicates in a b2b fashion. When actually they should be working b2c.

PHILIPPA: Business to business rather than business to customer? Talking of jargon!

MATT: Sorry. You see, it’s so easy to do!

EMMA: It’s so easy to do though. A lot of people have worked in financial services for a long time. I remember when I first got my job at The Building Society, which is the first financial services company I worked for. The very first thing I was asked was, ‘how did you get this job? You’ve not worked in finance before’. And it really opened my eyes to that revolving door of people who have always worked in the industry. And it wasn’t meant maliciously, it was a genuine question. The thought process was that most people tend to go into the industry fresh out of university, then that’s all they’ve ever done. I think that’s why using jargon becomes so easy because they’ve been doing it for so many years, and then they’re trying to include people who’ve never been through the door.

PHILIPPA: So that’s a recruitment issue, isn’t it, for everyone in this sector? It can’t just be people who come from those sectors. There has to be people that don’t because otherwise, how else are you going to help others that just don’t know what those terms mean?

NINA: If I can just add to that note of who’s actually building the product. I think a lot of the problem is about who’s making the decision about what a product or service is going to look like. And Emma, you’ve spoken about Progress Together. This idea of having a more diverse workforce in financial services that actually reflects the broader population. I think often about different financial exclusions. We haven’t talked about gambling, right? That was a shock to me when I moved to this country. The betting shops are everywhere. The number of people who’re at risk, or have terrible credit scores and can’t get a mortgage because they’ve gambling transactions in their bank accounts. They can find it really difficult to come back from that. Well, someone, I assume, at Monzo Bank had lived experience of that and built a feature where you could actually block gambling transactions. That’s now become ubiquitous across banks in the UK. I think often about same-sex couples who’re trying to get a loan for surrogacy or adoption. We often don’t think about these things if we’re not part of that community. If we had more same-sex couples working in banks who understood that, actually, it’s really hard to fund something when the NHS isn’t covering it and, for example, they just want to have a child. How’re we going to build that product for them? I’m very, very bullish on this idea of a more diverse workforce that can build better outcomes for everyone else.

PHILIPPA: OK. As you say, lots of work still to be done, but a great discussion to remind us all just how important financial inclusion is. Thank you everyone.

NINA: Thank you so much for having us.

MATT: Thank you.

EMMA: Thank you.

PHILIPPA: A final reminder. Everything you’ve heard on this podcast should not be regarded as financial advice. And whenever you invest, your capital is at risk.

Next time - how the pensions industry is trying to be a force for good in society. We’ll be talking about impact investing. What it is and which companies are leading the charge on the world’s greatest environmental and social issues. And Nina is cheering in the background. She’s a big fan.

Further ahead - we’re looking forward to seeing you at our live podcast recording on Thursday 4 May. It’s at White City Place in London. We’ll be talking about saving and whether your money’s better off in an ISA or a pension. We’ll be joined by special guests: Founder of Money to the Masses; Damien Fahy, Financial Expert and Host of The Conversation of Money Podcast; Peter Komolafe, and Consumer Editor of the Financial Times and Presenter of the Money Clinic Podcast; Claer Barrett. Don’t forget to sign up for your free ticket via the Eventbrite link in the episode description. In the meantime, please rate, review and share this episode, and subscribe on your podcast app so you never miss another one. Thanks for being with us.

Risk warning

How PensionBee’s plans are performing in 2022 (as at Q4)

Find out how global stock markets and our seven PensionBee plans have performed over 2022.

This is part of our quarterly plan performance series. Catch up on last quarter’s summary here: How PensionBee’s plans are performing in 2022 (as at Q3).

2022 was a year of economic turmoil, the biggest annual drop since the 2008 financial crisis. Many customers were worried about their pensions due to market volatility, so in response we created monthly market summary blogs to help you understand the reasons why your pension balance was changing. We’ve also continued producing our regular quarterly performance blog, which compares the performance of our plans against each other, and the market.

Keep reading to find out how global stock markets and our seven PensionBee plans have performed over 2022. Please note, we now have eight PensionBee plans available after the introduction of our new Climate Plan.

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

Company shares in 2022

Global stock markets

There were several factors causing financial challenges to the world’s economy in 2022: Russia’s ongoing invasion of Ukraine and China’s ‘zero COVID-19 policy’ lockdowns were among the most fiscally disruptive events. As the affected industries (agriculture, energy, and manufacturing) faced supply chain issues, the costs associated rose. Some companies found it difficult to reach the same level of profitability they had enjoyed in the past, which led to a decrease in the value of their shares, resulting in a drop in indices and investments (like pensions).

Index	Investment location	Performance over 2022 (%)	Equity proportion (%)
FTSE 250 Index	UK	-^_basic_rate	10^{_personal_allowance_rate}
S&P 500 Index	North America	-^_basic_rate	10^{_personal_allowance_rate}

Source: BBC Market Data

PensionBee’s equity plans

Plan	Money manager	Performance over 2022 (%)	Equity proportion (%)
Fossil Fuel Free Plan	Legal & General	-9%	10^{_personal_allowance_rate}
Shariah Plan	HSBC (traded via SSGA)	-16%	10^{_personal_allowance_rate}
Tailored (Vintage 2049 - 2051) Plan	BlackRock	-14%	97%
Tailored (Vintage 2055 - 2057) Plan	BlackRock	-13%	^_rate
Tailored (Vintage 2061 - 2063) Plan	BlackRock	-13%	^_rate
Tailored (Vintage 2043 - 2045) Plan	BlackRock	-14%	87%
Tracker Plan	State Street Global Advisors	-^_ni_rate	8^{_personal_allowance_rate}
Tailored (Vintage 2037 - 2039) Plan	BlackRock	-16%	73%
Tailored (Vintage 2031 - 2033) Plan	BlackRock	-16%	61%
Tailored (Vintage 2025 - 2027) Plan	BlackRock	-17%	^{_scot_top_rate}
Tailored (LifePath Flexi) Plan	BlackRock	-17%	36%
4Plus Plan	State Street Global Advisors	-8%	^{_corporation_tax} ^

^ Equity % at 31 December 2022, as changes on a weekly basis due to actively managed components.

These tables don’t include fees that may be associated with certain investments. Investment performance may differ slightly from the information provided on the factsheets, due to minor timing and methodology variations. To view factsheets, please visit our Plans page.

Bonds in 2022

Global bond markets

Historically bonds have been seen as ‘safe assets’, however in 2022 they brought unwanted volatility to at-retirement portfolios. Bonds thrive on market stability as they aim to provide moderate growth for investors. However, recent surges in inflation and rising interest rates have pushed bonds between the proverbial rock and a hard place.

Fund	Source	Performance over 2022 (%)	Fixed-income proportion (%)
Schroder Long Dated Corporate Bond Fund	Morningstar	-35%	99%

Source: Morningstar

PensionBee’s fixed-income plans

Plan	Money manager	Performance over 2022 (%)	Fixed-income proportion (%)
Pre-Annuity Plan	State Street Global Advisors	-33%	99%

Cash in 2022

Global cash performance

Cash savings are often the least volatile among the three most common asset types (cash, company shares, and fixed income). However, there’s a downside to holding your savings in cash as inflation erodes the value of your money over time. In the UK, the rate of inflation peaked at 10.5% in December 2022. If you’re worried about the impact of inflation on your pension pot, we’ve launched our inflation calculator to help you understand how your pension could be impacted in the long-term.

Benchmark	Source	Performance over 2022 (%)	Cash proportion (%)
Sterling Overnight Index Average	Bank of England	+1%	10^{_personal_allowance_rate}

Source: Bank of England

PensionBee’s cash plans

Plan	Money manager	Performance over 2022 (%)	Cash proportion (%)
Preserve Plan	State Street Global Advisors	+1%	10^{_personal_allowance_rate}

Summary

We’re currently in a bear market. The good news is global markets have recovered from every bear market in history. Moreover, the value of most global markets not only recovers, but typically goes on to reach new highs. Even the biggest market crash since the Great Depression, the 2008 global financial crisis, was followed by the longest period of sustained growth in market history until the COVID-19 pandemic struck markets in 2020.

You may find yourself rethinking your pension savings during the cost of living crisis, or worrying about whether you’re making the right choices. PensionBee customers can have peace of mind knowing that our pension plans are being managed by some of the world’s biggest money managers. Again, it’s worth remembering that it’s normal and expected for pensions to go up and down in value over time.

This is part of our quarterly plan performance series. Check out the next quarter’s summary here: How PensionBee’s plans are performing.

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

Thank you! Your submission has been received!

Oops! Something went wrong while submitting the form.

Sustainable Investing

Technology

Women and Finance

Latest news

PensionBee calls for pension transfer reform to cover the whole industry, not just part of it

PensionBee has today called on the Financial Conduct Authority (FCA) to ensure that proposed reforms to pension transfers apply across the entire UK pensions market - warning that anything less would entrench a two-tier system and fail consumers

Steven Kennedy

12 Feb 2026

Press

Gold soars - should you add it to your pension? PensionBee comments

With the gold price at a record high and mounting concerns growing over stock market concentration and volatility, PensionBee offers three key considerations if you’re thinking about adding the yellow metal to your pension.

Adam Cooper

30 Jan 2026

Press

Lifetime ISA changes - PensionBee urges the government not to forget retirement savers

Proposed changes to the Lifetime ISA (LISA) may simplify support for first-time buyers - but risk abandoning thousands of savers who have used the LISA to save or supplement their retirement, PensionBee warns.

Adam Cooper

29 Jan 2026

Press

PensionBee comments on FCA’s plans to modernise and improve efficiency in the pension transfer system

PensionBee responds to today’s consultation from the Financial Conduct Authority, that sets out reforms to modernise the pension transfer process.

Steven Kennedy

11 Dec 2025

Press

Recent articles

Your January 2026 market update: gold reached an all-time high and Trump tariffs briefly spooked investors

Here's a recap of how the markets moved in January and some of the big investment stories, including gold, Trump’s tariff announcements, and the current state of the AI bubble.

Matthew Batsman

12 Feb 2026

Why pensions deserve your attention during divorce

Divorce often centres on the family home and immediate costs, so pensions can be overlooked. Yet they’re often one of the most valuable assets and can shape your financial security for years to come.

Veronica Morozova

11 Feb 2026

What should you do with a redundancy lump sum?

Redundancy can be a turning point, and a lump sum can offer a vital financial cushion. Learn how it’s taxed and the key ways to use it wisely - from paying off debt to boosting savings or your pension.

Emma Lunn

03 Feb 2026

Money milestones: what women should check at 25, 35, 45, and 55

Money milestones look different at each life stage. Here's what women should check as they move through their career, family life, and retirement.

Katie Sims

02 Feb 2026

3 pension saving tips from Warren Buffett

Warren Buffett is undoubtedly one of the most successful investors of all time. And in his final letter to his shareholders, he shared some savvy tips for pension savers.

Matthew Batsman

30 Jan 2026

How PensionBee's plans are performing in 2025 (as at Q4)

Find out how PensionBee’s plans performed over Q4 2025, and what drove the performance across different regions.

Hyunyoung Roh

28 Jan 2026

A milestone moment for pension switching and why the work isn’t done yet

Thousands backed PensionBee’s call for change, triggering government action on faster, safer pension transfers.

Lisa Picardo

27 Jan 2026

Updating your PensionBee app - what’s changing and what you need to know

We've started rolling out a refreshed PensionBee account, the ‘BeeHive’. Learn what's happening and why.

Charles Kelton

26 Jan 2026

E46: How to bounce back from redundancy with Jimmy McLoughlin OBE, Eleanor Mills, and Emma Ferenc-Bachelor

Where do you see yourself in five years? In a rapidly changing world of work, that’s becoming harder to answer. If you find yourself looking for work after redundancy, our panel has expert tips for how to bounce back.

The Pension Confident Podcast

25 Jan 2026

Greenland and market volatility: what’s happening and what it means for your pension

President Trump’s desire to take control of Greenland for the US - willingly or otherwise - has dominated the news so far this year. Here's what it means for your investments.

Matthew Batsman

23 Jan 2026

When the State Pension meets the tax threshold and what it means for you

One of the key announcements from the government’s Autumn Budget was that Income Tax thresholds will remain frozen until at least 2031.

Ruth Jackson-Kirby

20 Jan 2026

Be pension confident!

Combine your old pension pots into one new online plan. It takes just a few minutes to sign up.

Combine your old pensions into one simple plan

Invest with one of the world’s largest money managers

Make paper-free online withdrawals from the age of 55

Pay just one simple annual fee

Sign up in minutes
Transfer your old pensions into one new online plan
Invest with one of the world’s largest money managers
Pay just one simple annual fee

Get started

Capital at risk

The Buzz.

Why are pension balances down?

What’s happened to company shares?

What’s happened to bonds?

What’s happened in 2023 so far?

When will pensions see a full recovery?

When will interest rates come down?

Key takeaways

What happened to stock markets?

The government’s Mansion House Reforms

What are the Mansion House Reforms?

How could the Mansion House Reforms impact my pension?

Reaction to Mansion House Reforms

Have a question? Get in touch!

FINANCIALLY PREPARING FOR YOUR OWN DEATH

WILLS, WILLS, WILLS

WHAT TO DO WHEN A LOVED ONE DIES

What happened to stock markets?

Is the UK economy being squeezed?

What is economic stagnation?

What is high inflation?

What are the signs of stagflation in the UK economy?

Is the UK headed for stagflation this autumn?

Have a question? Get in touch!

1. Listen first

2. Find a safe environment

3. Start small

4. Make time

5. Be open, honest and non-judgmental

6. Start today

If it’s not safe to talk

What are the proposed Auto-Enrolment updates?

What do these new pension rules mean?

What’s Auto-Enrolment?

When can I start saving into a pension?

What happened to stock markets?

Triple lock: set to rise, or under threat?

How much could the State Pension increase by?

Why’s the triple lock under threat?

Is the triple lock policy fair?

Am I on track to retire comfortably?

Have a question? Get in touch!

WHAT’S HAPPENING IN THE RENTAL MARKET AND HOW’S IT AFFECTING US?

WHAT ARE YOUR RIGHTS AS A TENANT OR LANDLORD?

HOW CAN THE RENTAL MARKET WORK BETTER?

Company shares in 2023 (as at Q3)

What are company shares?

Global stock markets

PensionBee’s equity plans

Bonds in 2023 (as at Q3)

What are bonds?

Global bond markets

PensionBee’s fixed-income plans

PensionBee’s cash plans

Summary

Try our inflation calculator

Have a question? Get in touch!

Triple lock on State Pension maintained for 2024

One pension pot for life

Reduced National Insurance bills

The three key changes are summarised below.

Plans to tax inherited pensions scrapped

Minimum wage increase

In summary

What happened to stock markets?

Will the momentum last?

Have a question? Get in touch!

Broken supply chains of key commodities

Supply chain disruption of agricultural goods

Europe’s move away from Russian oil

UK government’s response to high levels of inflation

Ofgem’s price cap in global energy crisis

Bank of England’s measures under inflationary pressure

Company shares suffer in volatile conditions

Ripple effect through Europe and beyond

The winners and losers of 2022

The invasion of Ukraine’s impact on PensionBee investments

Is the ongoing conflict in Ukraine affecting my pension balance?

How exposed is my PensionBee pension to Russia?

Have a question? Get in touch!

Put your pension
in the palm of
your hand