The Buzz.

Instead of setting up a private pension, many small business owners see their business as their retirement fund. Technically, you can use your small business to fund your retirement - there aren’t any laws which prohibit this. If you’re able to sell your business when you want to stop working, you could then use the money as retirement income. Or to top up your State Pension payments.

While it’s possible, it’s not always the best idea to rely on your business alone to generate your retirement income. There are pros and cons, considerations and tax benefits that you may miss out on when prioritising your business over setting up a pension.

What are the risks of using your business as a pension?

There’s no reason not to use your business as a pension, but it’s important to be aware of the risks.

• No one can predict what might happen with the economy - small businesses may be hit by anything from changing markets and supply chain issues to a loss of customers or even a global pandemic.
• It can be hard to predict the value of your business - looking into the future, it’s not always possible to know how much your business will be worth when you retire. Which makes it more difficult to then budget for how much money you have to live off.
• There are no guarantees you’ll be able to sell your business - or make a profit on it, and if this happens and you don’t have a back-up option, such as a pension, you could have a lot less to live off than you planned for.
• The money from your business may not be enough - depending on the lifestyle you want, your business may not cover the living costs needed for your ideal retirement.

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What are the benefits of a pension as a business owner?

Most employed workers are eligible for Auto-Enrolment. Which means they have a workplace pension set up for them which benefits from tax relief and employer contributions. But self-employed workers and small business owners can also benefit from saving into a private pension. Here’s how.

• Tax relief on personal contributions - usually basic rate tax payers get a 25% tax top up from the government. For example, if you made a £100 contribution, HMRC would add £25 making it £125. Higher and additional rate taxpayers can also claim further tax relief. However, this has to be claimed through a Self-Assessment tax return.
• You can pay into your pension from your limited company - if you make employer contributions from your limited company directly to your private pension, you won’t have to pay National Insurance (NI) on the contribution. The current NI rate is 15% (2025/26) - by contributing directly to your pension (rather than paying it as a salary) your company could save up to 15%.
• Lower your corporation tax bill - pension contributions from a limited company are treated as an allowable business expense. This means they can be offset against your business’s Corporation Tax bill which could save your company up to 25% in Corporation Tax.

It’s worth keeping in mind that tax relief is only available on your net relevant earnings and dividends aren’t included in this. If you have a small salary but large dividends, it could be a better option to make employer contributions from your company. Watch the video below to find out more.

Is a pension a better product for Inheritance Tax planning?

Until recently, pensions were a great tool when it comes to paying less Inheritance Tax (IHT). Most pension pots could be passed to a beneficiary when a person dies without the money being subject to IHT. If you were to pass your business onto your beneficiaries, the money would usually be counted as part of your estate and therefore subject to IHT.

However, the rules around pensions and IHT are set to change from April 2027 when unused pension funds are set to be included in a person’s estate.

What are the alternatives to using a business as a pension?

How you fund your retirement will be completely down to your personal circumstances and the kind of retirement you’re hoping for.

You could choose to rely on your business for this, or use one (or more) retirement products alongside it. Having one or more other savings vehicles as well as your business can give you more options.

As well as a private pension, you could also use property, investment accounts or ISAs which are another tax-efficient way to save. The key to retirement planning is to choose products that work for you and your long-term goals.

Rebecca Goodman is an award-winning Freelance Journalist. For the past 15 years she’s been working for national newspapers and magazines including The Guardian, The Independent, The Times, The Mail on Sunday, This is Money, and MoneySavingExpert. Her work is driven by wanting to help people to make their money work harder, exposing wrongdoing in the financial services industry, de-mystifying money issues, and sharing great easy money-boosting tips.

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.

‍PHILIPPA: Hi, welcome to another listener story bonus episode. I’m Philippa Lamb, and if you’re new here, or maybe you haven’t subscribed to the podcast yet, why not do it right now so you never miss an episode? Recently, we’ve been really enjoying hearing listeners tell us about their savings and retirement stories.

This time we’ve got Sanna’s story. Like so many of us, she’s doing a balancing act. She’s looking after her family finances, she’s buying her first home, and she’s trying to save for her retirement. As usual in these bonus episodes, we’re going to see if we can pull out some useful money lessons for the rest of us.

Rachael Oku’s back with us. She’s going to help with that. She’s VP Brand and Communications at PensionBee. Hi, Rachael, welcome back.

RACHAEL: Hi, thank you.

PHILIPPA: Just before we get into it, here’s the usual disclaimer. Please remember, anything discussed on the podcast shouldn’t be regarded as financial advice or legal advice. And when investing your capital is at risk.

So let’s start by hearing Sanna. She’s going to tell us about the arrival of her daughter and the dream of owning a home and how they shifted her financial priorities in the past few years.

Homebuying vs. saving for retirement

SANNA: My name’s Sanna. I’m married with a 2-year-old daughter and I currently work part-time. My current approach to saving for retirement has taken a bit of a back seat, so especially since I fell pregnant.

Our focus has really shifted towards trying to buy a home, which has been quite difficult in the current economic climate. But I’ve been trying to save quite diligently for a deposit trying to cut back where we can. But that means I haven’t contributed much to my pension pot, unfortunately.

We’ve had to make some major life decisions, especially during maternity leave and returning to move back with family to try and save of course, we’re still paying towards our living costs, but probably a lot less than what we would be if we were living and renting somewhere quite close to our offices - which are quite high rental areas.

PHILIPPA: This is such a familiar story, isn’t it, Rachael, having to trade off one financial priority against another, buying a home vs. saving for your retirement. You really feel for Sanna, don’t you? It feels like it’s just getting harder and harder to get on the property ladder. The average age is really high now, isn’t it? Is it nearly 34 now for first-time buyers?

RACHAEL: Yes, it’s close to 34 [years old]. Yeah, you really feel for people like Sanna because it’s very different to my parents’ generation. So I’m almost 40 and parents were having children younger, they were buying property younger, things were a lot more affordable.

I mean, at the time they were still expensive, of course, but they weren’t as out of reach. So now the average age of a first-time buyer in England is close to 34, and the average age that a woman has her first child has gone up to just under 31. So we’re a generation that are doing things later, which does make it challenging.

PHILIPPA: Yeah, so it means these young families, they’re navigating the property ladder at the same time as they’re dealing with childcare costs. So the potential for income disruption is just enormous.

RACHAEL: It’s huge, yeah, definitely.

Rising costs and financial impact

PHILIPPA: So Sanna’s strategy, they’ve moved back in with family to try and save money. It’s something we see a lot of because, as we said, rents are so high, it’s also difficult to save for a deposit. We’ve spoken about this a lot on the podcast. I think most recently in episode 41, we did hear from lots of guests that are doing the same thing. And I know, I think I saw a recent report that said 98% of adults living at home, they can’t afford to leave. So it’s not even just about saving for a deposit, they literally can’t leave.

RACHAEL: Yeah, that’s a really sobering statistic. So yeah, I mean, everything you’ve said, it’s cost of living, it’s rising rents, the availability of affordable housing, and these life pressures mean that sometimes pension contributions can take a back seat. For huge periods of time, but particularly when you’re in this kind of age bracket, let’s say kind of mid-20s to mid-30s, these are quite crucial pension contribution years.

PHILIPPA: This can be particularly bad news for women, right?

RACHAEL: Yeah, because when they’re taking parental leave and having career breaks to raise young children, they can have long-term impacts on their savings. We know that there’s a gender pension gap. Our latest data shows that it’s 37%, so that means that men typically have 37% more money in their pensions than women. The gap only increases the closer they come to retirement.

PHILIPPA: And this is largely because women take time out to raise kids and they stop contributing to their pensions.

RACHAEL: Yeah. 

PHILIPPA: OK, let’s hear a bit more from Sanna. In this clip, she’s talking about the financial pressures of having a family, but also about how central her faith is to all her financial choices.

Faith-driven investing options

SANNA: I think the biggest challenge when it comes to saving [into] a pension, or for retirement, is probably the immediate need to secure a roof over our heads, especially with a child in the picture. I’m relying solely on our own savings. We have no external financial help, so we really are trying to stretch every penny.

Obviously, the cost of living has skyrocketed and that’s utilities, everyday expenses, and of course, nursery fees. I’m hoping the new childcare scheme that’s coming into play will ease things a little bit.

Another factor is our faith influences the type of financial product we can use, so we’re unable to take out a conventional mortgage, so the alternatives that do align with our values tend to be much more expensive and the options are quite limited.

That was actually the deciding factor in me switching my pension to PensionBee because it’s compliant, Shariah-compliant, so it complies with my faith and my values, and I actually take a lot of comfort in knowing that my investments are going to the right place. So when I do eventually start paying in, I can do that with peace of mind.

PHILIPPA: Let’s talk about the cost of living and specifically children first. Just remind us, because we saw changes, didn’t we, quite recently to childcare arrangements?

RACHAEL: Yes, so the expansion has been a real game changer for working parents. So since September [2025], eligible working parents can get 30 hours free childcare a week from when their child is nine months and over.

PHILIPPA: That’s a big change, isn’t it?

RACHAEL: Yeah, so it used to start age three and now it has gone down to nine months. So that’s typically within the realm of time that parents start to begin thinking about going back to work.

PHILIPPA: Yeah, so that’s potentially a huge boost for family finances.

RACHAEL: Yeah.

PHILIPPA: So Sanna also talked about her faith and how it shaped her financial decisions. And of course, millions of people do need to factor that into their finances one way or another. For her, she’s Muslim, so it’s about her investments being Shariah-compliant, so in line with Islamic principles. We have talked about this on the podcast before, actually way back at the beginning, back in episode 6. So just remind me, Rachael, how does that requirement change her financial options?

RACHAEL: Well, there aren’t that many options on the market in the UK, unfortunately. So I think savers like Sanna, they’re quite limited on lots of the financial products that they can choose, including pensions. So our Shariah Plan is only one of a handful on the market, and all of the investments are vetted by an independent Shariah committee. So savers like Sanna can feel really confident [about] their money and the choices they’re making with their money are aligned with their values.

But what I’d say is that the Shariah Plan, any Shariah investments, aren’t just for Muslim people. Anybody can invest in these plans. There are ethical exclusions and they focus on things like tech companies like Apple and Microsoft, for example. These are considered Shariah-compliant. So it isn’t just for people from certain communities or faiths. It’s an investing strategy that could potentially benefit everybody.

PHILIPPA: OK, well, finally, let’s hear from Sanna on her long-term view and where she thinks she might be money-wise, when she does come to retire.

Exploring multiple income streams

SANNA: I’m not sure what my pension income will be when I retire. I do know what it’s currently at. However, because I haven’t obviously paid into that, it’s not - it’s not moved up. Also hasn’t budged since. I probably don’t foresee it being enough, however, especially considering how living costs are only going up.

So that’s why the priority has shifted in terms of getting on the property ladder, because owning a home can eventually lead to opening up other opportunities like equity release or other investments. As it really does feel like we’ll need to start looking at multiple income streams, which will probably be becoming - will become a necessity for a lot of people just to get by, especially in the future, when we do edge closer to retirement age. So I don’t see that changing anytime soon.

PHILIPPA: OK, so two key points there as far as I can see. Sanna wasn’t exactly sure where her pension income potentially is right now, and she talked about this need for multiple income streams going forward. Pension calculators are great for this, right?

RACHAEL: They are, yeah. There are lots of calculators on the market, but the PensionBee one is particularly handy because it helps you to forecast what your savings might be worth when you come to retire, and you can adjust things like how much you’re paying in, how much your employer is paying in, the age you want to retire. And how much you want to retire with as an annual income. And you can adjust these and see how much you should really be saving now to potentially get you there in future.

PHILIPPA: It’s nice, isn’t it, because you can play with numbers and see how if you were able to put a bit more in, what a difference it would make in 10, 20, 30 years. And equally, if you’re thinking, “I don’t want to pay in this much”, what that’ll mean to you. So it makes it really real, doesn’t it?

RACHAEL: Yeah, yeah. Being able to sort of see what you could end up with, I think, is quite motivating. And I think it’s important to do that research and to start thinking about it sooner rather than later, so you can see what you need to achieve.

PHILIPPA: And she talks about these multiple income streams. I mean, what sort of thing might you think about?

RACHAEL: It could be money that she might make from self-employment. It could be a rental property. She might be talking about savings, so investment accounts, ISAs, Stocks and Shares ISAs. Some of these ideas you’re paying money [for] and you’re watching it potentially grow.

RACHAEL: Yeah, yeah. Something that can just sit in the background and make you money while you focus on your day-to-day life. So for Sanna, that’s saving, that’s raising her child and working.

PHILIPPA: Thank you, Rachael.

RACHAEL: Pleasure.

PHILIPPA: Thanks too to Sanna for sharing her story with us. It’s always so fascinating to hear what drives people’s financial choices and where their real lives are at that intersection of money and values. Choosing financial products can be a lot more complex, I think, than just looking at predicted returns.

If you’d like to find out more about pensions and retirement planning generally, head to the show notes on this episode. We have shared a tonne of resources there for you to explore and use.

And here’s a final reminder just before we go: anything discussed on the podcast shouldn’t be regarded as financial advice or as legal advice, and when investing, your capital is at risk. Thanks for being with us.

Risk warning

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

The UK pensions landscape is changing rapidly. As defined benefit schemes decline and defined contribution pensions become the norm, more responsibility than ever is falling on individuals to build the retirement they want.

That’s why the personal pensions market - particularly direct-to-consumer digital platforms - has become such an important part of the system. 

Today, households hold around £4.8 trillion in pension wealth across the UK, with a growing share sitting in defined contribution pensions. Within that, digital personal pension platforms are a fast-growing segment that give savers greater control, transparency, and choice over their retirement savings. 

Alongside a coalition of major pension and investment platforms, PensionBee recently helped commission new research. In it, we examine how this part of the market is evolving - and what needs to change to ensure it delivers the best outcomes for savers.

The findings are clear: while the personal pensions market is growing in importance, the systems that support it are struggling to keep up.

A growing pillar of the pensions system

Direct-to-consumer digital personal pensions have moved from niche products to a mainstream option for many savers. Our analysis estimates that this part of the market held around £139 billion in assets in 2025 - equivalent to roughly 5% of UK GDP. 

Looking ahead, the potential impact is even greater. By 2055, digital personal pension platforms could contribute around £18 billion annually to the UK economy through higher productivity and stronger pensioner incomes. 

For savers, these platforms provide something equally important: flexibility and engagement. They make it easier for people to manage their retirement savings, choose investments, and consolidate multiple pension pots in one place.

This is particularly valuable for groups that have historically been underserved by the traditional pensions system.

Take the UK’s 4 million self-employed workers. Many don’t benefit from automatic enrolment into workplace pensions and instead need flexible ways to save for retirement. Yet only around 20% of the self-employed currently contribute to a private pension. That leaves many at risk of reaching retirement with little more than the State Pension. 

Digital personal pensions can help close this gap by making it easier for people with irregular incomes to save and stay engaged with their long-term finances.

The transfer system holding savers back

But while the technology powering modern pensions has moved forward, the infrastructure behind the scenes hasn’t always kept pace.

One of the biggest challenges highlighted in the report is the current pension transfer process. In theory, transfers are key for allowing savers to consolidate pots, switch providers, and take control of their retirement savings.

In practice, however, the system is often slow, complex, and frustrating.

Under current regulations, pension transfers can take up to six months. In a world where bank accounts can be switched in seven days and ISAs transferred in a matter of weeks, this timeline feels increasingly out of step with modern financial services. 

At PensionBee, we believe savers deserve better. That’s why we’ve been campaigning for faster transfers through our 10-day Pension Switch Guarantee initiative, which calls on the industry to dramatically reduce switching times. 

Faster transfers would make it easier for people to consolidate their pensions, stay engaged with their savings, and ultimately make better decisions about their financial future.

A once-in-a-generation opportunity

The pensions system is approaching an important turning point.

The introduction of Pensions Dashboards - expected to connect schemes from 2026 - could transform how people view and understand their retirement savings. By bringing multiple pensions into one place, dashboards have the potential to dramatically improve engagement. 

But visibility alone isn’t enough. If savers can see all their pensions but still face slow or complicated transfer processes, frustration will quickly follow.

That’s why the report calls for several practical reforms, including: 

• reducing the statutory transfer deadline to 30 working days; 
• introducing a digital-first approach to transfers; and
• creating clearer, standardised processes across the industry. 

These changes may sound technical, but their impact would be significant. A faster, more transparent transfer system would make it easier for savers to consolidate pots, switch providers, and engage more actively with their retirement planning.

Putting savers back in control

Ultimately, pensions belong to the people saving into them. Individuals carry the risk if their retirement savings fall short, so they should have genuine freedom to choose how and where their money’s managed.

Modernising the ‘plumbing’ of the pensions system may not always grab headlines. But it’s essential if we want a system that truly works for savers.

By embracing digital processes, improving transfer timelines, and focusing on consumer outcomes, policymakers and industry leaders have an opportunity to build a pensions system that’s fit for the future - and gives people the control they deserve over one of the most important financial decisions of their lives.

Retirement has many benefits. You can do whatever your budget and health allow, you no longer have to work, and you can now make the rules. 

However, for some people, retirement isn’t always the answer. They may realise they have less money than planned. Or, they could miss the routine or social interaction of a job.

The average retirement age in the UK is around 64.7 for women and 65.8 for men, yet many people choose to stop work before this age. Although you can’t receive your State Pension until 66 (rising to 67 from 2028), you can take most private pensions from 55 (rising to 57 from 2028). This can give you an income while you’re no longer working before you hit State Pension age.

Going back to work after you’ve officially retired, also known as ‘unretiring’, may be by choice or a financial necessity. If you’re considering it, you’re not alone.

One study showed that around 34% have already returned to work because of the rise in living costs, while 29% of UK retirees are considering it. 

But what happens if you go back to work after retiring? Can you still receive benefits such as your State Pension, how much more can you continue to contribute to a private pension, and what are the tax rules?

Can I start working again after I’ve officially retired?

Yes, you can go back to work even if you’ve retired. There are no rules to say you can’t and it’s completely up to you what type of job you go back to. It can be full or part-time, there are no restrictions on the hours you work, and you can choose whether it’s paid or unpaid.

What are the pros and cons of going back to work after retirement?

Before we look at the financial impact of returning to work after you’ve retired, there are lots of positive reasons and a few drawbacks to consider too.

Pros

• Higher income - returning to paid work will give your overall income a boost.
• New skills - if you’re going into a new job, you may learn a new range of skills which can be a great way to keep your brain active.
• Social benefits - depending on the work you’re doing, you might enjoy the social side of interacting with colleagues.

Cons

• Tax and impact on your pension - you may pay more tax if you start earning while taking your pension.
• Health - while many retirees are in excellent health, it’s important to consider the impact of returning to work on your health and wellbeing as you get older.
• Less free time - once you commit to returning to work, you’ll have less free time to enjoy.

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Will I still receive the State Pension if I return to work?

You can still claim the State Pension if you’re working. The current State Pension age is 66, rising gradually to 67 between April 2026 and April 2028.

If you choose not to take your State Pension, you can defer it. In return, you’ll receive larger weekly payments when you do decide to start taking it again.

Note that if you’ve already started receiving your State Pension, you can only defer it once.

Do I need to pay National Insurance if I am earning again?

Once you reach State Pension age, you’re no longer required to pay employee National Insurance contributions (NICs) on the money you earn. 

Will I still be able to take my pension if I return to work?

If you’ve stopped working, retired, and then go back into full or part-time paid work, this may have an impact on your pension. Contact your pension provider to see where you stand, as what happens will depend on things like how much you now earn and your existing pension pot.

You can continue to receive your pension if you want to. But, the money you receive will typically be added to your earnings and counted towards your overall income. This may push you into a higher tax bracket, so you may have to pay more Income Tax. 

Can I put the same amount of money into my pension if I go back to work?

You can continue taking money from your private pension and go back to work. However, if you want to keep making contributions to your pot, there may be a change to the amount you can put away. This is down to the ‘annual allowance’.

The annual allowance is the limit on the gross amount that can be saved into a pension each tax year without incurring tax charges.

The current standard annual allowance for pension contributions is £60,000 (2025/26) - this includes personal, employer and any third party contributions.

But if you’re already flexibly taking money from your pension and want to continue making contributions to the pot, your annual allowance will normally be reduced. This is known as the money purchase annual allowance (MPAA) which is set at £10,000 (2025/26).

However, there are many options when it comes to where to put any extra money you’re earning. You could be using it for everyday living costs, putting it into a savings account, investing the money, or gifting it to relatives, for example.

Summary

Nothing stops you from returning to work after retiring. Whether you miss the routine and social side of work, or you want to earn some extra cash, you’re free to return to work in whatever role you want, full or part-time.

Before you take the plunge, it’s important to keep in mind that you may pay more tax. And, if you’ve already accessed your pension, your tax-efficient contributions could be reduced.

It’s also worth asking yourself whether you’re happy to lose some of the freedom you’ve enjoyed having given up work. 

As long as you’ve considered these factors, returning to work can be a great way to supplement your income, spend time with other people, and perhaps even learn some new skills.

Rebecca Goodman is a freelance personal finance journalist.

Risk warning

Please note that tax rules change regularly, and the actual tax benefits you receive will depend on your individual circumstances. If you’re not sure, please seek professional advice.

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.

If you’re self-employed, seize the chance before the end of the tax year to claim expenses, make the most of pension tax relief and stash cash where the taxman can’t touch it.

The clock is ticking down until allowances reset after 5 April, but there’s still time to shrink your tax bill and pocket more of your profits.

‍1. Work out income and expenses

Start by adding up all the income you have received and the money spent on allowable expenses. This can also help spot any unpaid invoices you need to chase, and track down  expense receipts. Once you’ve worked out your profit for the year, you can plan how to make the most of the money.

‍2. Tot up your taxes

Make sure you’ve set aside enough money to cover any tax due for the 2025/26 tax year that ends on 5 April. Depending on your turnover for the previous 2024/25 tax year, you may have to make a payment on account before the end of July, in addition to any tax bill at the end of January. 

Planning ahead for tax payments will bring peace of mind, and avoid any panic when the bills are due. Plus, if you pop the money in a high interest savings account, you could earn some interest on top.

‍3. Bump up pension payments

If you can afford to, increasing your pension contributions can help slash your tax bills and boost your retirement savings at the same time. Plus, once you put money inside a pension, you won’t have to pay any Income Tax, Dividend Tax or Capital Gains Tax (CGT) on the returns, and 25% of any withdrawals are tax-free (from the age of 55, rising to 57 from 2028 and up to a maximum of £268,275).

As a sole trader, for every £1 you pay into a pension, you automatically get 25p added in basic rate tax relief. If you’re a higher rate or additional rate taxpayer, you can claim another 25p or 31p respectively in tax relief via your Self-Assessment tax return, bringing down your tax bills. 

Most people can put a maximum of 100% of their earnings during the tax year into a pension while still getting tax relief - this is capped at £60,000 a year (2025/26).

If you have a limited company, you can make employer contributions into a pension. These count as business expenses that can be deducted from your profits, potentially saving up to 25% in Corporation Tax.

The drawback to most pensions is that your contributions get locked away until you reach 55 (rising to 57 from 2028), which isn’t ideal if you get hit by unexpected bills or need to invest in your business. 

By checking your profits towards the end of the tax year, you can work out how much you can afford to pay into your pension. 

‍4. Claim expenses and buy equipment

Every penny you claim in allowable expenses will reduce your profits, and therefore cut your tax bill. So, if for example you have equipment that needs replacing or upgrading, consider buying it before the end of the tax year, so you can deduct the cost. 

Under the annual investment allowance (AIA) for example, you can claim tax relief on qualifying plant and machinery, such as tools, computers and commercial vehicles but not cars. You can deduct the full cost worth up to £1 million from your profits in the year you bought it, rather than having to spread the cost over several years. The AIA can be used by sole traders as well as limited companies. 

Make sure you meet the small print - for example, business equipment must be ‘wholly and exclusively’ for the purposes of your business, and something that you do actually need, whether right now or soon. 

Then identify other allowable expenses you could claim, such as software subscriptions, professional indemnity insurance, any uniform or other clothing required specifically for your work or membership fees. Sadly, you can’t claim for all memberships (gym, anyone?) only for professional bodies listed by HM Revenue & Customs (HMRC).

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5. Use your ISA allowance

Alternatively, Individual Savings Accounts (ISAs) offer more flexibility, which can be handy if you might need to whip money out. 

Currently, you can put up to £20,000 each tax year in ISAs (2025/26), whether as cash savings or invested in stocks and shares, and make withdrawals whenever you want. As with pensions, any returns on money inside ISAs are tax-free. 

If you want to take advantage of your ISA allowance, you need to do it soon, because this is a ‘use it or lose it’ situation. ISA allowances can’t be carried over. However, as of 6 April, you’ll be able to use next year’s (2026/27) ISA allowance. 

If you’re under 40, you can divert up to £4,000 of your ISA allowance each tax year into a Lifetime ISA (LISA), where the government will add a 25% bonus, up to a maximum of £1,000. 

LISAs do have strings attached. You can only take money out to buy a first home for under £450,000 or after the age of 60. Otherwise, you’ll have to pay a 25% penalty, which works out as larger than the original government bonus.

LISAs can work well for retirement saving if you’re self-employed and a basic rate taxpayer, because you won’t miss out on higher rates of tax relief, but you have the flexibility to make withdrawals if really needed, albeit with a 25% penalty.

6. Consider donating to charity

Feeling generous? If you donate to charity as a taxpayer, and sign a Gift Aid declaration, the good cause can claim basic rate tax relief. 

The advantage to higher rate and additional rate taxpayers is that, as with pensions, you can claim extra tax relief through your tax return and so cut your tax bill. 

‍7. Mop up miscellaneous tax allowances

And finally, it’s worth checking whether you can also take advantage of any other tax allowances before the tax year ends. 

• Personal Allowance - you can earn £12,570 per year before paying tax.
• Trading Allowance - you can earn £1,000 per year before paying tax for self-employment, hiring personal equipment or for casual services.
• Property Allowance - you can earn £1,000 per year in income from property before paying tax. 
• Dividend Allowance - you can earn £500 in dividends per year before paying dividend tax. 
• Personal Savings Allowance - you can earn £500 (basic rate tax payers) or £1,000 (higher rate taxpayers) in interest per year before paying tax.
• Marriage Allowance - you can transfer up to £1,260 of your Personal Allowance to your spouse or civil partner each tax year.
• Tax-free Childcare - you could get up to £2,000 per year in government top ups.
• Junior ISA - you can save up to £9,000 into a Junior ISA a year per child.
• Capital Gains Tax Allowance - you can earn £3,000 in capital gains per year before paying tax.
• Inheritance Tax (IHT) annual exemption - you can give away up to *£3,000 per year in ‘gifts’ without it being added to your estate and therefore subject to IHT.

*The rules around IHT and gifts are complex. For more details, visit GOV.UK.

Faith Archer is a Personal Finance Journalist and Money Blogger at Much More With Less. Check out Faith and Lynn’s videos about spending during lockdown and after lockdown.

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.

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This is part of our monthly series. Catch up on last month’s summary here: Your January 2026 market update: gold reached an all-time high and Trump tariffs briefly spooked investors

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It’s difficult to write a market update for February without starting at the end.

Last month was already mixed for markets across the world. That was before the joint US-Israel military action in Iran on 28 February, the very last day of the month. The ramifications of this conflict for economies around the world are yet to be fully understood, but there’ll likely be ripples across markets.

Looking back to before the start of the conflict in the Middle East, we’d seen patchy performance in the US. Tech stocks slipped over concerns around Artificial Intelligence (AI). Meanwhile, trade uncertainty returned as US President Donald Trump introduced new tariffs. That came in the wake of the Supreme Court ruling his previous taxes illegal.

Otherwise, markets around the world remained buoyant, particularly in the UK and Asia.

Find out what happened in markets last month, including what the Middle East conflict could mean moving forwards, uncertainty in the US over AI and tariffs, and why performance was brighter elsewhere.

The headlines: mixed market performance around the world in February

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Dips in Silicon Valley companies and political turmoil created uncertainty in the US. Markets often react to such events, offering an explanation for why performance on the S&P 500 (an index of the 500 largest public companies in the US) was so uneven.

Fortunately, it wasn’t all bad news. Positive data in the UK bolstered the FTSE 100, an index of the UK’s 100 largest public companies, which reached yet another record-high. These companies drove growth on the FTSE 350 too.

Elsewhere, Japan’s Prime Minister, Sanae Takaichi, secured a landslide win after calling a snap election in January. That drove the Nikkei 225 index up by more than 5%. Asian stocks performed well as a whole, particularly in South Korea.

This varied performance is another example of why diversification can be useful. Investing across industries and geographies can see short-term dips offset by gains elsewhere.

The PensionBee plans are well-diversified and contain investments from a range of sectors and regions.

This graph doesn’t reflect the impact of the military action in Iran and the escalating conflict across the Middle East - find out more below.

Conflict across the Middle East sets market volatility in motion

When looking back at February market performance, the arguably most important day of the month to consider is the final one.

Following the collapse of diplomatic talks, the US and Israel carried out joint military strikes across Iran on Saturday 28 February. These killed the country’s Supreme Leader, Ayatollah Ali Khamenei, and other high-ranking officials. 

The move sparked unrest throughout the Middle East. In response, Iran launched strikes against US bases in countries across the region, including Bahrain, Kuwait, Qatar, the United Arab Emirates, and Saudi Arabia. Conflict also spilled into Lebanon, reigniting warfare between Israel and Hezbollah, an organisation with close ties to Iran.

Markets reacted with increased volatility over the following days. Many global markets recorded swings in value, influenced by uncertainty over what might happen next.

It also caused a rise in oil and gas prices, with many of the biggest exporters in the world affected by the conflict. Many economies depend on these resources, so this will likely affect a range of countries.

However, as markets were closed over the weekend until Monday 2 March, these movements weren’t included in the February data.

We’ll explain the impact of the conflict in next month’s update. In the meantime, read our explainer of the Middle East conflict and what it might mean for your investments.

The Supreme Court rules President Trump’s tariffs to be illegal 

February was very mixed in the US. Early on, the Labor Department announced that job growth was better than expected in January.

2025 was the weakest year for US job growth since the Covid-19 pandemic. So, the 130,000 jobs added to the economy and a fall in the unemployment rate to 4.3% was very welcome.

However, this early optimism was somewhat dampened by tariff uncertainty.

On 20 February, the Supreme Court ruled that US President Trump’s trade tariffs announced in April 2025 were illegal. 

The Supreme Court said that the US President needed congressional approval to put the tariffs in place.

In response, he announced 10% tariffs on all imports under a never-used trade law, effective for six months. He also announced plans to increase this to 15%, the maximum allowed under the law. 

However, when these came into effect on 24 February, it was at a flat 10% global rate, with no directive to increase it.

Markets were jittery over these developments. In the wake of the Supreme Court’s ruling, markets rose. But these gains were quickly wiped off after President Trump announced the new tariffs.

AI uncertainty and wobbles in tech stocks

There was also uncertainty in the technology sector in the US, especially around AI.

The so-called ‘AI bubble’ - which suggests that AI companies are overvalued - hasn’t exactly burst. But markets were nervous around tech and AI stocks:

• IBM shares fell by 13% as Anthropic said its AI bot, Claude Code AI, could replace certain coding languages;
• Californian technology giant, Nvidia, had its worst day since April 2025, despite announcing strong Q4 earnings; and
• the tech-heavy Nasdaq stock market index had its worst month since March 2025.

All these developments contributed to flat performance in the US.

There was positive market news from around the world

Despite uncertainty in the US and geopolitical conflict late in the month, there was still good news for global markets.

In the UK, the FTSE 100 reached another all-time high on 26 February, boosted by a rally in Rolls-Royce shares. And, the UK market felt the positive impacts of year-on-year inflation falling from 3.4% to 3.0%, marking a slight slowdown in rising prices. 

The UK government also posted a record budget surplus of £30 billion. That was most welcome news for Chancellor Rachel Reeves, ahead of presenting her Spring Statement on Tuesday 3 March.

Elsewhere, the landslide election victory for Prime Minister Sanae Taikachi drove a rally in the Japanese market. For a country with an economy that’s in desperate need of revival, this was a positive development. Taikachi will now need to follow through on promises to get the economy moving.

Asian stocks also performed well as a whole. With expanding AI infrastructure in the region, investors looked to get in on the growth. In particular, South Korea drove this performance. Its national index gained around 18% this month, taking it to 46% year-to-date.

Of course, with the implications of the conflict in the Middle East, markets may find March to be harder. But for now, February will be recorded as a positive month for these nations.

Risk warning

As always with investments, your capital is at risk. Past performance is not an indicator of future performance. 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.

This year’s International Women’s Day theme is ‘Give To Gain’. The idea is that when people, organisations and communities give support, women’s opportunities grow.

That principle also applies to pensions. Retirement savings don’t build in isolation. They reflect pay, time spent out of work, access to education, and the support people receive at different stages of life.

In the UK, the gender pension gap remains significant. By midlife, women often have far less saved than men, largely due to lower earnings, career breaks and part-time work. PensionBee research shows this gap stood at 37% in 2025.

For years, the focus has been on women’s ‘confidence’ around money. But evidence suggests the gap is rooted in structural and social realities.

A University of Edinburgh study found women approaching age 60 hold around 75% less in private pension savings than men, pointing to long-term pressures such as lower pay and unpaid care. Research from University College London (UCL) also shows women in their early 30s are paid less than men in similar roles, even with comparable qualifications and experience.

We need to change the narrative. For too long, the responsibility has been placed squarely on women’s shoulders - to earn more, save more, negotiate harder. But pensions don’t simply reflect personal choices. They reflect the economic systems women move through every day.

Here are five sources of support that shape women’s pensions over time.

1. What employers can give: transparent pay and pension contributions

Workplaces play a significant role in shaping long-term financial security. For many people, a workplace pension is the main way they save for retirement, with contributions linked to salary and supported by employer payments.

Because of this, the decisions employers make around pay, progression and flexibility can have a lasting impact on women’s pensions.

Small differences in earnings or time out of work can build up over the years, but supportive workplace policies can help close that gap.

Employers can make a meaningful difference by:

• offering fair and transparent pay structures;
• supporting career progression at all stages of life;
• providing flexible and part-time roles with opportunities to grow; and
• helping employees stay enrolled in pension schemes during key life moments.

Workplace pensions also include employer contributions, which is money added on top of an employee’s own savings. Staying enrolled means benefiting from that extra support, which can make a significant difference over time.

When workplaces recognise different life paths and provide the right support, they can help more women build strong and secure retirements.
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2. What partners can give: shared financial responsibility

Financial outcomes are often shaped at home as much as at work. Many women take time out of paid work or reduce their hours to care for children or relatives. While these choices can make sense for families, they can also reduce pension contributions over time.

Time out of the workforce usually means:

• lower earnings;
• fewer pension contributions; and
• slower long-term growth.

That’s why shared financial responsibility can make a real difference. When partners support each other financially, it can help protect both people’s long-term security.

Support might look like:

• sharing childcare costs so both partners can keep working;
• taking paternity leave or sharing parental leave;
• contributing to a partner’s pension during career breaks; or
• making sure pensions are included in financial planning and, if needed, in divorce settlements.

There are also practical steps that can help. For example, the partner who claims Child Benefit for a child under 12 usually receives NI credits, which count towards the State Pension. If the wrong partner claims, those credits can be missed.

It’s also possible to pay into a non-working partner’s pension. Up to £2,880 a year can be contributed, topped up to £3,600 with tax relief, even if they have no earnings.

Pension Sharing Orders (PSO), meanwhile, may allow part of one partner’s pension to be transferred to the other after a divorce. Since pensions are often one of the biggest assets in a relationship, including them in settlements can help create a more balanced financial future for both people.

3. What the State can give: protections and policies

Government policies also play an important role in shaping pension outcomes. The State Pension forms the foundation of many people’s retirement income, and the rules around it can help soften some of the gaps caused by life events.

For example, National Insurance (NI) credits can protect State Pension entitlement during periods when someone isn’t working. This can include:

• time spent caring for children; or
• time spent caring for a family member who’s ill or disabled.

These credits recognise that unpaid work still has value. Without them, many carers would see their State Pension reduced simply because they stepped away from paid work to support others.

Auto-Enrolment has also changed the way people save for retirement. By automatically enrolling eligible workers into pension schemes, it’s helped millions start saving without having to take the first step themselves.

More changes are on the way. The government has passed legislation to expand Auto-Enrolment to younger and lower-paid workers, which could help more women start saving earlier in their careers.

But gaps remain. Many part-time and self-employed workers still miss out on workplace pensions, and NI credits aren’t always easy to understand or claim. That means there’s still a role for policy, employers and the wider system to do more.

Policies like these show how support can be built into the system. When the rules recognise different life paths, they can help create more equal outcomes in retirement.

4. What communities can give: knowledge and mentoring

Financial confidence doesn’t always develop on its own. Many people grow up without learning about pensions, investing or long-term saving. 

That’s where communities can make a difference. When people share knowledge, experiences and encouragement, financial confidence tends to grow.

Support can come from many places, including:

• financial education programmes;
• mentoring at work;
• community groups;
• online learning platforms; or
• open conversations with friends and family.

Talking about money can feel uncomfortable, but it can also be powerful. A single conversation can lead to a new habit. A piece of advice can lead to a long-term financial decision.

Over time, those small moments of support can add up. When knowledge is shared, more people feel able to plan, save and invest for the future.

5. What independence can give: flexibility, control and momentum

Not everyone has a partner to share financial responsibilities with. Many women live alone, are single parents, divorced, widowed, or running households on one income. Others are self-employed, freelancing or managing irregular earnings.

In these situations, financial planning can look very different. There may be no second income to rely on, no shared bills, and no partner’s pension to fall back on. That can make retirement saving feel more challenging.

Community and structural support matter, but they can take time to change. Sometimes the most powerful shift comes from feeling able to take small, practical steps yourself.

Independence can bring flexibility and control. Without needing to coordinate finances with someone else, many women can shape their saving plans around their own goals, timelines and priorities. Small actions, taken consistently, can build real momentum.

That support might come from:

• speaking to an Independent Financial Advisor (IFA) or guidance service;
• setting a regular ‘money date’ to review income, spending and savings;
• dedicating time each month to learn something new about money, such as budgeting, pensions or investing;
• automating small pension or savings contributions; or
• using tools that help track progress over time.

For single-income households, the focus is often on consistency rather than perfection. Small, regular contributions, made when possible, can still build momentum.

Support multiplies over time

This year’s International Women’s Day theme reminds us that support compounds over time. It doesn’t just help in the moment, but it can shape financial outcomes for decades.

Fair pay and workplace pensions can strengthen savings. Shared responsibility at home can balance retirement security. State policies that recognise unpaid care can narrow gaps. Communities that share knowledge can build confidence. 

And personal habits, built slowly and consistently, can turn small contributions into meaningful pots.

No single action will close the gender pension gap. But layers of support, built up over time, can start to change the picture.

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.

This article was last updated on 11/03/2026

Markets are reacting with increased volatility after military intervention by the US and Israel in Iran has led to broader conflict across the Middle East. 

Here’s a brief summary of what’s happened so far:

• Following the collapse of diplomatic talks, on 28 February the US and Israel carried out military strikes across Iran to halt its nuclear ambitions and spark internal political change. Iran’s Supreme Leader, Ayatollah Ali Khamenei, and other senior leaders were killed. 
• Conflict quickly widened across the Middle East, as Iran retaliated with strikes targeting US bases across the region, including Bahrain, Kuwait, Qatar, the United Arab Emirates, and Saudi Arabia, as well as ships passing through the Strait of Hormuz. Iran also fired missiles at Israel, although these were largely intercepted.
• A drone attacked a UK-owned RAF base in Akrotiri, Cyprus, with two more intercepted. This prompted the British Prime Minister, Keir Starmer, to permit the use of British military bases for defensive purposes, and to send a Navy warship to Cyprus. 
• Regional conflict spread to Lebanon, reigniting warfare between Hezbollah (an organisation with close ties to Iran) and Israel.
• Oil and gas prices rose significantly as production was disrupted in the region. Oil reached almost $120 a barrel on 9 March in response.
• Mojtaba Khamenei, son of Ayatollah Ali Khamenei, was named as Iran’s new Supreme Leader.‍
• Energy prices - and stock markets - have since calmed as US President Donald Trump indicated that the US operations might be close to finishing after calling them “very complete” and “very far ahead of schedule”. 
• However, messages have been mixed. The US Secretary of War, Pete Hegseth, said that Tuesday 10 March would be the “most intense” day of US strikes.

Geopolitical conflicts and events like this create uncertainty over what might happen moving forwards.

This usually affects markets too, although reactions can vary. This often causes increased volatility as investors make changes to their portfolios during these periods as they seek to understand the longer-term implications. 

History shows that markets typically rebound as the situation stabilises, highlighting the market’s long-term resilience. Markets may react more strongly to conflicts impacting energy prices, or involving key global regions. 

As a result, you may also have seen an impact on your investments. However, periods of market volatility are often short-lived. 

The Financial Conduct Authority (FCA) encourages people to stay patient and remain invested. It highlights that if you sell when the market is down, you’ll likely suffer a loss in the value of your investments, and might miss out on any increases in value in the future if markets recover.

Rising energy prices and global market uncertainty  

The initial reaction was muted when markets re-opened following the start of the conflict in early March. The US-Israel strikes on Iran were broadly expected, given the build-up of military presence and the exchange of threats between the nations. 

Since then, the global stock markets have responded more strongly, as conflict in the Middle East has intensified and concerns have grown over how long it’ll last. 

The market reaction also reflects the risk around energy supply disruption. The Middle East region is key to many global energy supplies and shipping routes, so the wider macroeconomic impact of rising energy prices could have a knock-on effect on inflation and interest rates.

In response to the US and Israel’s military intervention, Iran carried out strikes on US bases in countries in the Middle East. Many of these are OPEC (the Organization of the Petroleum Exporting Countries) members. QatarEnergy, one of the world's biggest exporters, halted gas production following military attacks on its facilities.

Alongside these strikes, Iran attacked oil cargo ships in the nearby Strait of Hormuz. This waterway is crucial to the global economy, with about 20% of global oil and gas exports usually travelling through it. 

Traffic effectively came to a halt with a warning from Iranian leaders not to follow that route, and insurers cancelled coverage for ships.

Since then, the US has introduced government-backed shipping reinsurance. Lloyd’s of London, a leading insurer provider, has said it'll also continue to provide cover.

This turbulence has caused oil and gas prices to rise significantly. As many world economies rely on oil and gas, higher energy costs could in turn affect production prices for other goods, leading to higher inflation (the rate of change of prices). If inflation picks up, this may make central banks less likely to cut interest rates in the months ahead.

Oil prices have fallen since reaching almost $120 a barrel, falling back below $90. However, this is still higher than before the start of the conflict.

As a result of increasing energy prices, we’ll likely see oil and gas company stocks rise in value. Conflict can cause swings in the value of stocks across other industries, too. Defence stocks tend to perform well, with an increase in demand.

At the same time, investors may move towards traditionally safer assets like gold, bonds, or currencies perceived as ‘safe havens’. Meanwhile, other industries can suffer losses. For example, travel stocks could struggle as flights are cancelled in the Middle East.

The value of staying patient during periods of volatility

You might feel concerned about what could happen next. In reality, we won’t know for some time yet. 

As markets come to terms with these events, volatility may well continue. But it’s worth remembering that such periods are often short-lived.

Think back to the market volatility we saw in 2022 after Russia’s invasion of Ukraine.

Markets reacted after the invasion, with the S&P 500 (an index of the 500 biggest companies in the US) falling by more than 7% in the following weeks. Meanwhile, oil prices reached as much as $139 a barrel, as Western nations put embargoes on Russia, one of the biggest oil exporters in the world.

Yet, just over a month later, the index had rebounded, even increasing in value above where it had been before the invasion, as shown in the graph below:

For context, oil was still trading at more than $100 a barrel by the end of March.

The recovery from this market fall was fairly swift. But if you’d sold your investments during the dip, you’d have missed out on the subsequent recovery. If you’d instead stayed invested, you’d have seen your investment value rise back up when the market did. 

While past performance isn’t an indicator of future results, historical events and data can help to provide context.

What this volatility might mean for your investments

It’s worth bearing in mind that markets have consistently been resilient over decades. Whether it’s recessions, political shocks, pandemics, or conflict like this, history shows us that markets can recover from such dips, regaining losses and growing in value in the long term.

Consider this table which shows the 5, 10, and 20-year performance of the S&P 500:

As you can see, the market’s long-term performance - both the average annual and total returns - has been strong. That’s despite experiencing various shocks over the period, from the dot-com bubble in the early 2000s, to the 2008 financial crash, all the way to the Russian invasion of Ukraine in 2022. After each of these events, the market continued climbing.

Even though dips in value can be unsettling, they still pale in comparison to what the market’s delivered over the long term.

Nothing is guaranteed, and past performance is not an indicator of future performance. Your investments can go down as well as up in value and you may get back less than you invest. But if you make changes now, you could lock in a loss that would have likely recovered over time.

By staying invested, you could be well-positioned to benefit when the market does recover. In fact, you may be able to make the most of lower prices, too.

Summary

Market volatility is a normal part of investing. Learning how it works and understanding how your pension is invested can help you navigate it. You can check where your money’s invested on our Plans page or log in to your online account (your ‘BeeHive’) to see your specific plan.

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.

The way pensions are treated for Inheritance Tax (IHT) is due to change from April 2027. These changes could affect how some people think about retirement and estate planning.

Currently, pensions can be used as a tax-efficient way to pass money on after death. But under the new rules, unused private pension money and certain death benefits will be included when calculating IHT.

While the new rules will only apply from April 2027, some people are already making changes, to avoid landing their loved ones with bigger tax bills.

Research by PensionBee found that more than half of respondents said they were considering changes to their financial strategy with:

• 26% saying they’d draw money from their pensions earlier; and
• 24% saying they’d look to alternative savings vehicles such as Individual Savings Accounts (ISAs) or annuities.

What exactly is Inheritance Tax?

IHT is usually paid after someone dies. It's based on the value of their ‘estate’. This means their property, money, and possessions, minus any debts - above certain thresholds. The standard rate is 40%.

At present, around 5% of deaths result in an IHT bill. However, frozen thresholds, rising house prices, and proposed changes to pension taxation mean this could rise to almost 10% of estates by 2030, according to the Office for Budgetary Responsibility (OBR).

Currently, most people can leave up to £325,000 free from IHT. This is known as the nil-rate band.

There's also a £175,000 residence nil-rate band if you leave your home to direct descendants, such as children or grandchildren.

However, if your estate is worth more than £2 million, the residence nil-rate band is reduced by £1 for every £2 above this level. Once an estate reaches £2.35 million, the allowance is removed entirely.

Anything left to a spouse or civil partner is usually free from IHT. Any unused allowances can also be passed on to a spouse or civil partner.

This means married couples and civil partners could potentially leave up to £1 million without paying IHT. However, an unmarried person with no children can usually only leave £325,000 free from IHT.

What currently happens with pensions and inheritance?

Up until April 2027, pensions aren't included when calculating IHT.

This means that if you die with money left in a defined contribution pension, it can usually be passed on without an IHT charge.

That said, inherited pensions aren't always tax-free. Income Tax may still apply, depending on your age at death.

If you die before age 75, withdrawals by beneficiaries are generally free from Income Tax, as long as the funds are paid out within two years of the provider becoming aware of the death. If you die after age 75, beneficiaries usually pay Income Tax on withdrawals at their marginal rate.

Because of this, many people have historically chosen to spend assets that fall inside their estate first when funding their retirement. For example, money from ISAs or proceeds from property. They could then delay withdrawing any pension money for as long as possible.

What's set to change from April 2027?

From April 2027, the government plans to include unused pension money when calculating the value of your estate for IHT.

Pensions left to a spouse or civil partner will remain free from IHT. However, the change could affect people who hoped to pass pension wealth on to children or grandchildren.

If your pension pot pushes your estate above the IHT thresholds, anything above those limits could be taxed at 40%.

If your estate rises above £2 million, this could also reduce or remove the residence nil-rate band.

On top of this, beneficiaries may still need to pay Income Tax on pension withdrawals if you die after age 75. In England, the highest rates are:

• 20% for basic rate taxpayers;
• 40% for higher rate taxpayers; and
• 45% for additional rate taxpayers.

In certain worst-case scenarios, this combination of taxes could lead to very high overall tax rates on inherited pension money. In Scotland, where the additional rate of Income Tax is 48%, the combined impact could be even higher.

It's worth stressing that these figures represent extreme outcomes. Government estimates suggest only 10,500 estates (1.5% of total UK deaths) will become liable for IHT due to the pension changes.

What could this mean for retirement planning?

The proposed changes may affect how some people think about using their pension in later life.

These decisions will depend on personal circumstances, health, family set ups, and other sources of income.

Here are some considerations.

How people may think about funding retirement

If unused pension money becomes subject to IHT, some people may decide to draw on their pension earlier in retirement, rather than relying on other assets.

This might not be right for everyone. Pensions are designed to provide income throughout retirement, and drawing too much too soon could increase the risk of running out of money later on.

Reviewing investment choices

If pension money is more likely to be used during retirement rather than passed on, some people may review how their pension is invested.

For example, they may think about whether their current investment risk level still suits their time horizon and income needs.

Any changes would usually depend on how soon the money is expected to be used and how comfortable someone is with investment risk.

Increasing withdrawals or making gifts

One way people reduce IHT is by spending money or giving it away during their lifetime.

The proposed changes have prompted some wealthier savers to consider withdrawing more from their pensions, either to spend or to pass money on to family members. Pension savings can usually only be accessed from age 55, rising to 57 from 2028, and withdrawals may have tax implications.

Under IHT rules, most lifetime gifts only become fully exempt if you live for seven years after making them. If you die sooner, some or all of the gift may still count towards your estate.

The key risk is balance. Withdrawing or giving away too much could leave you short of income later in life.

Using the tax-free lump sum

Most people can usually take up to 25% of their pension pot tax-free, capped at £268,275 (2025/26).

This can be taken as:

• one tax-free lump sum; or
• a series of instalments, where 25% of each withdrawal is tax-free.

While pensions currently sit outside IHT, this is due to change from April 2027. Some people may therefore choose to access tax-free cash earlier.

Taking money out sooner may give more time for gifts to fall outside the estate, if the seven-year rule is met.

Others may use phased withdrawals to help keep their taxable income within lower tax bands.

Using annuities

An annuity is a way of turning pension savings into a guaranteed income. You exchange a lump sum with an insurer, who then pays you an income for life or for a fixed period.

Using part of your pension to buy an annuity could reduce the value of your estate, and therefore any potential IHT liability from April 2027.

However, the tax treatment depends on how the annuity is set up. Some annuities may fall within the scope of Inheritance Tax, for example where payments continue under a guarantee period after death.

Some people use annuity income to make regular gifts. These may fall outside IHT if they are made from surplus income and do not affect your standard of living.

Marriage and civil partnerships

Anything left to a spouse or civil partner is usually exempt from IHT. This means IHT often only becomes an issue when the surviving partner dies.

Because of this, some unmarried couples in long-term relationships may consider marriage or a civil partnership. This could give the surviving partner more time and flexibility to plan their estate.

Reviewing beneficiaries

The new treatment of pensions could mean more estates fall within the scope of IHT. In some cases, it may also increase the tax burden for the next generation.

In response, some people may consider changing who they leave assets to. However, there are important practical points to review.

First, most pension death benefits are paid at the provider’s discretion and are not governed by your will. If your will was written on the assumption that pension benefits would be paid tax-free, you may wish to revisit it.

Second, it’s important to review your nomination or expression of wish form with your pension provider. This can usually be updated and may be aligned with your will, or reflect different beneficiaries, depending on your circumstances.

Using life insurance

Some families may consider life insurance to help cover a larger IHT bill. A ‘whole of life’ policy is designed to pay a lump sum on death, as long as the premiums continue to be paid.

The policy can sometimes be placed in trust. This means a legal arrangement is set up so that trustees become the policy’s legal owners and manage the payout for the beneficiaries. In many cases, this allows the payout to sit outside the estate. As a result, it may not be subject to IHT and can often be paid more quickly, without going through probate.

This can be important because IHT is generally due by the end of the sixth month after death. Delays in settling an estate could make it harder to meet this deadline. A life insurance payout paid outside the estate may therefore help cover an IHT bill without forcing loved ones to sell assets, such as the family home, in a hurry.

However, whole of life policies can be expensive, and the cost of premiums will depend on individual circumstances.

In the November 2025 Autumn Budget, the government also announced a change to help executors manage IHT on pensions.

• executors may be able to ask pension scheme administrators to hold back up to 50% of a pension pot for up to 15 months after death;
  
• this amount could then be paid directly to HMRC to help settle any IHT due;
  
• this may reduce the risk of executors needing to find the money from other parts of the estate.

The takeaway

From April 2027, the IHT treatment of pensions is set to change. For some people, this could affect how pensions are used in retirement and passed on after death.

If you're likely to be affected, it may be worth reviewing how your pension fits into your wider plans. This could include thinking about withdrawals, investments, or other ways of providing income and support for loved ones.

These are complex decisions with long-term consequences. If you're unsure what's right for your circumstances, you may wish to consider speaking to an Independent Financial Adviser.

Faith Archer is a Personal Finance Journalist and Money Blogger at Much More With Less. You can find her YouTube series on retirement planning online.

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. Tax rules can change and benefits depend on individual circumstances. This information shouldn't be regarded as financial advice.

The following is a transcript of a bonus podcast episode of The Pension Confident Podcast. Listen to the episode or scroll on to read the conversation.

Takeaways from this episode

• The ‘Singles Tax’ is real - single-occupancy living can cost over £10,000 more a year than shared households. In London the premium can reach around £20,000 extra.
• Single incomes face tighter mortgage affordability - the average deposit (around £40,000) can take couples six years to save; whereas for singles, with less disposable income, this could take a staggering 26 years.
• The ‘single supplement’ isn’t just a household cost - everything from the cost of hotels and travel insurance, to gym memberships and art passes.
• Retirement costs singles 44% more than those coupled up - a ‘moderate’ retirement lifestyle costs singles around £31,000 year, compared to £43,000 a year for couples.

PHILIPPA: Welcome back. Now, I know this is a bit of a personal question, but are you single? One in every three households in the UK right now is single occupancy. And here’s the kicker: being single is actually costing you. The so-called ‘Singles Tax’, it’s real. Couples pay less per person on everything, from energy bills to hotel rooms. So if you happen to be single, exactly how much is your relationship status costing you every year? And how can you keep that cost down? That’s what we’re talking about today.

I’m Philippa Lamb. And if you haven’t subscribed to The Pension Confident Podcast yet, click right now and catch every single episode in 2026.

Here to crunch those ‘Singles Tax’ numbers for us, we have Bobby Seagull [MBE], Britain’s favourite Maths Teacher-turned-Broadcaster. He’s written for the [Financial Times] (FT), and you may have seen him on University Challenge, or pursuing love on the Netflix hit series, Indian Matchmaking. He’s also the host of FUBAR Radio’s new money podcast, Broke and How to Fix It.

Emma Barnes, she’s a self-styled real-life Bridget Jones. She’s a former Sales Manager-turned-Content Creator since she became a breakout star of Married at First Sight in 2024. You may have seen her recently in a certain big brand’s Valentine’s ad.

And from PensionBee this time, we’re joined by Valentina Adaldo. She’s a Senior Manager in the Marketing team. She knows all about the added costs of not being coupled up right now.

Welcome, everyone.

EMMA: Thanks for having us.

VALENTINA: Hello!

BOBBY: Hi.

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

Now look, the thing I want to ask you right now, and I know it’s a bit personal, but who’s single right now? 

VALENTINA: I am.

BOBBY: Mine is complicated. In physics, there’s something known as Schrödinger’s cat in a box. So the cat is both dead and alive at the same time. So I’m dating someone, so we’ll see where it progresses.

PHILIPPA: OK, but everyone’s living alone?

EMMA: Living alone.

VALENTINA: No, I live with flatmates.

PHILIPPA: OK, but in charge of your own finances? 

VALENTINA: Yeah, that’s correct. 

PHILIPPA: OK. You know, it’s amazing, we were looking at the numbers on this. Single people can expect to pay over £10,000 more on average every year compared to those who are in shared households. So Bobby, where does that £10,000 come from? How does that break down?

BOBBY: So the ‘Singles Tax’ isn’t actually a government official, like you check your pay slip and “there’s the ‘Singles Tax’, we know you’re not dating anyone, we’re getting back £10,000”. All it is, is like the small penalties of your housing, your bills, your travel. All these are there’s a premium if you live by yourself and you’re not having to share with someone. But again, if you live in the big cities like London, you think about your housing and your travel, they’ll be more expensive. So in London, it’s actually £20,000 additional per year on living and lifestyle costs.

PHILIPPA: Bobby, do we know how much extra single people are paying each year on things like rent and bills?

BOBBY: So in the UK, in 2025, I think unattached Brits - or single people, as I’d like to call them.

EMMA: Yes! Singletons!

PHILIPPA: We need a shorthand, don’t we?

BOBBY: Shall we call them single, singleton?

EMMA: Which is a growing number in itself, right? More and more people are single nowadays. That number is growing.

BOBBY: Yes, it’s a sad state for people’s hearts - and their finances.

PHILIPPA: This is true, but you’re singles, yes.

BOBBY: I think it’s just under £4,000 (£3,844 a year) more on average than couples for household expenses. That’s a huge whack.

PHILIPPA: So you’ve experienced this yourself, haven’t you? I mean, were you aware of it at the time?

EMMA: I used to live in Bristol with a £2,000-a-month property. It was £1,500 a month plus bills, so about £500 a month on bills. That’s £2,000 a month. If I had a partner living with me in that property, it’d half the rent, it’d half the bills, it’d be £1,000 a month of bills. So that’s £12,000 a [year] just in that flat alone before you even start taking into account all your fun stuff, you’re going out, you’re dating, the gender pay gap and things like that. So I can totally see how those numbers are being brought out.

BOBBY: By yourself.

EMMA: Yeah.

PHILIPPA: And as Valentina says, that’s why you’re house sharing, right? Would you rather be living on your own?

VALENTINA: Probably, yes, I’d love to, but location is actually much more important for me right now because I really love London, so you have to compromise in a way.

PHILIPPA: Yeah, and you’re looking at travel costs if you live outside and work in London anyway, aren’t you?

VALENTINA: Yeah, absolutely.

PHILIPPA: But bills are the thing, aren’t they? Because I remember this, and when I had a flat by myself, you’re paying all the bills, at least if you’re sharing. So have you ever done the maths on that? Because you use almost as much by yourself, don’t you, in terms of utilities when it comes to it? Whereas if there’s three or four of you?

VALENTINA: It’s three of us. Actually, it works out quite well when it comes to electricity and internet. However, you’re still in charge of your own grocery shopping or small appliances because, for instance, as your average Millennial, I wanted an air fryer, and they didn’t want that. I had to buy my own air fryer!

PHILIPPA: And do they use it?

EMMA: I bet they use it!

VALENTINA: No, they don’t!

The trade-offs of flatmates vs living alone

EMMA: I’ve lived on my own for about five years now. I’ve recently moved to London, well towards London and Kent, to be in London where my work is now because my role’s changed, my job’s changed since I’m not in a corporate job anymore, and I couldn’t afford to live in London on my own. And the challenge then from going from a place in Bristol where I had a two-bed apartment to then facing a house share in London. I pulled my hair out, so I had to go further outside of London. 

BOBBY: You still have good hair.

PHILIPPA: Great hair. 

EMMA: Thank you! 

PHILIPPA: If you’re not watching this on YouTube, you’re going to have to take our word for it. So have you really noticed it then, even so, moving closer to town because closer to London, everything’s more expensive anyway, isn’t it?

EMMA: Exactly. And really, as a single person, like a couple, a one-bed isn’t really big enough. You kind of need a two-bed because you want someone to be able to come down and stay because I’m single and I have people over all the time and I have friends come down to stay because my social life’s buzzing. I’d like a spare bedroom because that’s what I’ve been used to. But with household costs going up, it’s kind of become unaffordable for me now.

PHILIPPA: So do we have numbers then, Bobby, on the specifics on singletons and bills?

BOBBY: Yes, so across the board, singletons are being penalised. So for rent, it’s 44% more. And Valentina, again, the fact that you’re living with others, you clearly benefit from that. For broadband, it’s 29% more, and even for energy bills, still 15% more. So across the board, being that single person in a household, you’re getting absolutely like...

EMMA: And there’s Council Tax discounts.

PHILIPPA: Is it 25%?

EMMA: 25%, it’s not 50%, is it? 

BOBBY: I know, they can’t do the maths in local councils, can they?

PHILIPPA: I know, that does seem a bit mean, doesn’t it? I mean, there’s one of you. So it seems fair enough. The other thought I had was car ownership. I’m guessing in London, you don’t have a car, right? 

VALENTINA: No, I don’t, no. 

PHILIPPA: Do you have a car?

EMMA: I actually don’t have a car, I just rent one when I need to. But if I had a partner, I’d share a car because it halves the price.

PHILIPPA: But there’s insurance as well, isn’t there? You can end up paying more, bizarrely, if you don’t have so many people on your policy.

EMMA: Oh, really?

PHILIPPA: I discovered this. When I did my own car insurance, which was an absolute mystery to me, but when I put my husband on my car insurance, it went down.

BOBBY: The sneaky tip that some people do is add their parents onto there. 

PHILIPPA: Can you legitimately do that? 

BOBBY: You can, because in theory, as long as they use it occasionally, it’s a legitimate... So obviously, I’m not encouraging people to do anything dodgy, but get Mum and Dad to drive your car occasionally. Maybe you could do some shopping for them, and then therefore, they’ll bring down your insurance premium.

PHILIPPA: This assumes they live locally to you.

PHILIPPA: Thinking about how single people could save in these specific areas, what are we thinking? I mean, I’m intrigued about your streaming services. Should you not all be pooling your streaming services?

VALENTINA: That would make sense.

PHILIPPA: Because I have a bunch of these. We all have a... Well, they’ll have a bunch of these. It’s a lot of money.

EMMA: Sometimes £12.99 now. They’re going up, aren’t they?

PHILIPPA: And you can’t part with them, can you? Once you’ve got them, they’re really hard to give up, aren’t they?

EMMA: So I’ve got them all.

PHILIPPA: OK. So if we think then, we’ve talked about renting, what about home ownership? Is it better if you’re buying? But it seems to me that single people are probably at a disadvantage trying to get onto the property ladder, aren’t they? Because just in terms of getting a deposit together?

BOBBY: It’s just the basics of economies of scale because you got two incomes versus one income. And then if you look at how mortgage lenders, their affordability ratio is obviously, let’s say it’s four times your average income with two people. They may not give four, but it might be three and a half or 3.2 [times]. So again, having one person applying for a mortgage makes it much more tricky.

PHILIPPA: Yeah. And I’m wondering whether women aren’t at a specific disadvantage there because women are often earning less.

EMMA: Yeah, the gender pay gap.

‘Houses before spouses’ movement

VALENTINA: Have you heard about this new movement called ‘Mortgage Mates’, so like ‘Houses before Spouses’?

BOBBY: No.

EMMA: No.

PHILIPPA: Oh, yes!

VALENTINA: Yeah, because it’s pretty much impossible to afford to buy property by yourself, and especially if you’re single. Lots of people are actually pooling resources with friends or siblings. [51%] of Millennials and [84%] of Gen Z are predicting to do so in the future.

EMMA: Wow.

VALENTINA: So that they can buy a property. But that comes with its own set of difficulties.

PHILIPPA: It does.

VALENTINA: Because you have to have a very strict and clear agreement in place with your friends.

EMMA: Of course.

PHILIPPA: As in legal agreement? 

VALENTINA: Legal agreement. 

PHILIPPA: At some point, that arrangement is going to break up. 

EMMA: That causes friction.

PHILIPPA: Then what happens? Because you have to buy out if someone couples up and wants to go, you’re going to have to buy them out.

VALENTINA: Or if they move to a different country maybe, like different paths. 

EMMA: Life moves on.

PHILIPPA: You’d really need to like these people.

VALENTINA: Yeah.

PHILIPPA: We have numbers on this, don’t we? So a couple could say for the average house deposit of... I think the average house deposit is about just over £40,000. So it’s going to take them six years, assuming that each person is putting in half and they’re in full-time employment, they’re on the average salary, so that. But, if you’re single, 26 years! It’s just insane.

BOBBY: I know. Essentially, that’s not going to happen.

EMMA: It’s not happening.

BOBBY: To be honest, if you look at the globe in terms of our demographic crisis, as it were, especially in the West, 2.1 children per family is mathematically meant to be the stable population. But in the UK, we’re 1.4 [children]. That means every generation, we lose a third of the number of people. And that’s partly because 26 years to save for a property. People just, again, that houses before spouses.

PHILIPPA: When we were talking about this episode in advance, we were thinking about who’s most to be living on their own. And you think of young people, don’t you? Largely. Actually, it’s middle-aged and older people are more likely to live alone. And that’s a whole raft of other issues, isn’t it? Because if you did have a partner and they’re gone- relationship break, or died even - that’s a massive financial pivot, isn’t it? Because then you’ve got all the costs based on you did have two and now you have one.

EMMA: And then if you’ve retired, if you don’t have money in your pension that covers both of you or both the housing properties, you’ll have to downsize.

PHILIPPA: I’m thinking lodgers, flatmates, that sort of thing. There’s quite a movement, isn’t there? Particularly with elderly people of getting younger people to move in, which I always thought was a lovely idea.

BOBBY: Yeah, young people, especially in the big cities, they need somewhere to live. Cross-generations, they have company. I think, again, for [having] lodgers, there’s a certain amount that you can claim tax-free. It’ll be the first around £5,000 [Correction: £7,500].

PHILIPPA: It’s a nice idea, isn’t it? On all sorts of levels.

Redundancy when single hits harder

PHILIPPA: We did an episode about redundancy last time around and the shock of losing your job. It’s the same thing again, isn’t it? 

VALENTINA: Absolutely, yeah.

PHILIPPA: If you’re on your own.

VALENTINA: I have a personal experience in that. 

PHILIPPA: Do you? 

VALENTINA: Yeah, because I was made redundant five years ago. And obviously, because you have to rely on your own finances.

PHILIPPA: How did you manage?

VALENTINA: Yeah, it was quite tricky because you don’t have the luxury to pursue your dream job. You have to rush into finding any job in order to survive, whereas couples have income diversification. So if you lose a job or you take a pay cut, your partner can support you with rent and bills. But when you’re on your own, you must have a much larger emergency fund because you need to think about the unexpected.

PHILIPPA: And it’s harder to get that emergency fund together because you’re a single person. 

VALENTINA: Yeah, exactly. 

PHILIPPA: So you get caught in this doom loop, don’t you?

BOBBY: But there’s also the psychological impact of having to make these big career choices without a sounding board. 

PHILIPPA: Absolutely. 

BOBBY: If you’re, again, with me, I’ve been living by myself for many years, my parents, bless them, on WhatsApp, Zoom, anything, I need to learn to be more independent as I go on now. But every day is like, “Mum, Dad, there’s this podcast coming up on Tuesday, and then the afternoon, should I do it?” Whereas with a partner, you can casually have these conversations.

PHILIPPA: You do. It’s like self-employment. I did this myself. That moment when you think, actually, I’m going to stop taking a paycheck. I’m going to be self-employed. That isn’t easy. 

EMMA: It’s a leap of faith. 

PHILIPPA: It’s a leap of faith. You know about this. You’ve done it yourself, haven’t you? Emma, what do you reckon?

EMMA: Yeah, absolutely.

PHILIPPA: How did you feel about doing that?

EMMA: I had an awesome corporate career. I absolutely loved my job, and I’d still be working there now if it wasn’t for this sideways move. They didn’t allow me a sabbatical, I had to leave the business. 

BOBBY: Their loss.

EMMA: I still have a great relationship with my ex-employer! 

PHILIPPA: Shame, though.

EMMA: But my parents, that was one of the biggest things. “What are you going to do? You’re going to come out, you’re going to have no job. There’s going to be no...”. I ended up having to get a lodger, actually. 

PHILIPPA: Did you?

EMMA: When I came out of the show, I didn’t have a job for a couple of months. I was still paying my rent, still paying it. So I ended up... It was only for summer, only for six weeks, but I needed that income. Otherwise, it was [the] Bank of Mum and Dad because I didn’t have a partner to turn around and be like, “oh, can you sort out the food shop?”. You still have to pay for it yourself.

Building your own financial safety net

PHILIPPA: Do we have numbers on financial resilience, Bobby?

BOBBY: Yes, we do. And again, this is lower as you’d expect. But again, 29% of single people aged 18 to 40, so the Millennials and the Gen Z, they’ve got no emergency fund. So the rainy day fund when you lost your job and you need cash to keep you tiding [you] over, compared to 16% of those in relationships. So that’s almost a double ratio.

PHILIPPA: Because the other numbers we’ve got here, and they made me frown and worry, was about single people relying on credit cards for household bills. One-in-ten relying on credit cards for household bills. So what would we suggest they do instead? Certainly not [a] credit card if you can possibly avoid it, right?

EMMA: Get an Excel spreadsheet and start budgeting.

PHILIPPA: Yeah. Talk to your utility company if you’re struggling to pay all those things, rather than racking up credit card debt. 

Holidays and fun budgets for single people

PHILIPPA: More happily, the fun stuff. Holidays, travel. Mind you, having said that, solo travellers, this is the one everyone knows about, isn’t it? The single room, the dreaded single room tax or the single supplement. Have you experienced this?

EMMA: Of course, absolutely. I think naturally me and my friendship group, we tend to book Airbnbs and big houses when we go away, which makes it a little bit cheaper. But for hotels, if you look at a hotel room in London, if you wanted, say, I was still living in Bristol, coming up to London for the night, £120 minimum, probably, for a hotel room? 

PHILIPPA: You’d be lucky. 

EMMA: Exactly. If it was last minute, it’d probably be towards £200, right? If you think of half that, £60 pounds versus £120, it leans with you with booking a hotel versus not, right?

PHILIPPA: Yeah, it really does. And transport is the other thing, isn’t it?

VALENTINA: Yeah, absolutely. And it feels like life is buy one, get one half price for couples, but then full price for singles, right? Even when it comes to travel insurance, for instance, you pay more if you’re travelling by yourself. You have a supplement on singles, yeah.

PHILIPPA: That’s so ridiculous. Because I’m thinking about things like train journeys.

BOBBY: Yes. 

PHILIPPA: Because you can do this like two people travelling, and it doesn’t need to be a romantic relationship. I did it with a colleague when we were doing a lot of work in Manchester. And you have to travel - or at least you did then, I don’t know what the rules are now - you had to travel with that person.

BOBBY: From that terminus station to the - Yeah.

PHILIPPA: So there had to be two of you.

BOBBY: If you have a quarrel in the middle of the journey. 

PHILIPPA: That’s a problem.

EMMA: So if they check the ticket they’re like, “where’s your other person?”.

PHILIPPA: Yes, they actually do. But it can be anyone. And so if you do end up doing regular stuff together, or you can pair up if you know that you’re doing trips, regular trips.

VALENTINA: That’s actually very useful. But for instance, I’m really big into art. I love museums.

BOBBY: Me too. 

VALENTINA: If you want to buy the National Art Pass, it’s much more expensive as a single person. However, if you buy the couple one, it’s like 30% off, but they must be at the same address. I can’t force one of my flatmates to go to random museums with me, can I, right?

EMMA: It used to be with the gym, but they didn’t necessarily check you’re at the same address. So at my old gym, it was quite a fancy gym. 

BOBBY: The fancy gyms, yeah. 

PHILIPPA: I was going to say, my gym doesn’t do that!

EMMA: It was saving about £50 a month off the membership. 

PHILIPPA: Really? 

EMMA: Between two. So there were many non-committal relationships that I knew of. I went on a funny date once. I actually - It was a no-go after that. But he messaged me saying, “do you fancy coupling up on the David Lloyd membership?”. 

PHILIPPA: Really? 

EMMA: And what can you say? I didn’t want to go on another date with them. I don’t want to be in this non-committal relationship either.

PHILIPPA: On the museums and galleries thing, I’m thinking about this because I’ve just renewed a couple of London museum memberships. And the ones where you can take a friend [for] free, strike me as a possible thing for single folk, because if you basically have someone who does like doing that stuff, you could split the cost, couldn’t you? Of one of those because it’s cheaper than you both joining. 

VALENTINA: Yeah, for sure. 

PHILIPPA: And do that thing where someone goes in with you free. But you obviously have to go on the same day. So it’s a bit limited, but it’s cheaper. They’re quite pricey now. They’ve already gone up lately, all those memberships, haven’t they? So you have to think about those quite hard.

VALENTINA: Because obviously, marketing optimises towards couples because they’re chasing the dual income.

EMMA: Two people who buy two coffees.

VALENTINA: So the best product, the best deals, they’re always built for pairs.

PHILIPPA: You’d think that marketing teams would be wising to this, wouldn’t you? With the way the demographics are. 

BOBBY: Was it 8.4 million people live in a single household? So there’s a big market.

PHILIPPA: How are you not marketing to them?

BOBBY: Yeah, hopefully, they’ll listen to this and go like, “we’ll start!”.

PHILIPPA: It’s amazing. Because I was thinking even about Ubers - well Ubers, other cab companies are available - taxis. Night out, if you get one home, you’re paying the whole bill yourself, aren’t you? Which can be pricey if it’s late.

VALENTINA: [In] some countries, you can buy a seat in the car.

BOBBY: In London, you can do that as well. Ride shares. It just takes a bit longer.

VALENTINA: Let’s say you’re going to the airport. That’s a massive cost for yourself. 

EMMA: Yes, that’s good. 

VALENTINA: Can you split that?

PHILIPPA: Yes.

Wedding season costs, pooling gifts, and the cost of dating

PHILIPPA: OK, I’m going to talk about weddings and events because I think we all know that people’s weddings are getting ritzier and ritzier, and abroad, and the money is big and on your own, of course, even more. Tell me your horror stories. I know you’ve all got them.

EMMA: I had six last year, seven the year before, including my own. And we’ve got another five this year. So it’s a serious thought about going.

VALENTINA: For your single friends it’s a lot of money and time. Weddings, baby showers, hen dos, probably second wedding, because I’m at the stage of my life where I’m going to second weddings, even, or divorce parties. 

PHILIPPA: Absolutely, I’m on my second now. Are you pooling on gifts, at least with friends?

EMMA: We have an amazing pool available. All of our 30th birthdays, all weddings, babies, we all pool. When there’s about 30 of us in our school friendship group, everyone always gets a really good sizable chunk of money when you only have to stick in a tenner or something, I think £15 or £20, if they’re one of your best friends.

PHILIPPA: The other thing I was thinking [about], when I think about the times I’ve been single myself, because I was married, then I had a long period when I was single and then married again. So it’s not that long ago that I remember having all this stuff to deal with. And I was a single mother at the time, too. But there’s a pressure to go out more as a single person because otherwise, you’re isolated, aren’t you? Because you don’t go home to a loved one. 

EMMA: Dating is pretty expensive.

BOBBY: Being the mathematical nerd I am, for my eyes only, I have a spreadsheet of all my first dates. 

EMMA: No!

PHILIPPA: You don’t! 

VALENTINA: Spreadsheet?

BOBBY: Yes, and after 10 first dates, I’m like, I’m a mathematician. There’s great data here. I know it’s not very sexy.

PHILIPPA: Are you ranking these women?

BOBBY: Well, if you’ve got data there, you can choose to rank them if you want. Again, it sounds like a lot, but over 14 years, 158 first dates.

VALENTINA: Did you pay for all of them?

BOBBY: So pretty much 99% of first dates. Again, as a guy, you always insist. I always think there’s this charade. If I always want to pay for date one, if they like, “Oh, no, I’d like to pay”, I’d love to see them pretend to pay. But if they don’t even flinch, I see it as a bad sign.

PHILIPPA: It’s a bad sign. What do you two do on dates? Do you offer to split?

VALENTINA: Yes, I’ll say, yeah.

EMMA: I always choose to go to a pub for the first date. They buy the first round, I buy the second round. And if we stay for a third, they can buy the third.

BOBBY: Excellent.

EMMA: That’s a kind of rule.

PHILIPPA: That’s it. That avoiding meals, I think, is an excellent plan. Actually, I went with coffees. You can leave quite rapidly, if you want to.

VALENTINA: I love park dates as well.

EMMA: A dog walk or a park date, that’s good.

VALENTINA: It doesn’t have to be a meal because what if you don’t like them? You’re stuck with them for two hours.

BOBBY: One pro tip is, you know that a lot of London museums have London Lates? So National Gallery, Tate Modern, Tate Britain, and they’re free to enter, and you can buy drinks, but that’s a cheap, great date.

PHILIPPA: That’s an excellent idea.

BOBBY: It’s my number one choice. Of my 158, a lot of them, a sizable minority of them would’ve had that.

PHILIPPA: Dating profiles, some of them, you pay for these dating sites, don’t you? They’re not all free.

EMMA: Oh, my gosh, some of them are about £40 a month. I’m not paying £40 to find a boyfriend. I’m not. It’s crazy.

BOBBY: At one stage, I think a few years ago, I paid £500 for dating apps in a year. Time is money, because obviously, if you have the freemium version of these apps, you would get X now, you get maybe 10 profiles a day, maybe five swipes. Whereas if you pay for the premium, your 15 minutes of swiping, you can be efficient because you can do the filtering for whatever things that you want to filter on.

PHILIPPA: For dating, efficiency is key.

BOBBY: Otherwise, I find like -

EMMA: - let’s not call it too transactional.

PHILIPPA: Because just looping back to the actual cost of dates, I saw a NatWest survey recently, the numbers are high. 43% of people in the UK, so heading for half, spending between £50 and £100 on a date. Now, obviously, it can be more. It’s not going to be less, is it? Even if you go to the pub for two or three rounds of drinks, it’s going to cost you.

BOBBY: I’ve consulted my spreadsheet. I’ve tracked my average price. It’s gone down early. 

PHILIPPA: Is there a graph? 

BOBBY: Yeah, there’s lots of data. This is a rich set of data. Over time, it has ticked down. So in the early days, I’d say £60 to £70 per date. 

EMMA: Wow. 

BOBBY: So it’d probably go for dinner. Now it’s probably come down to an average of £50. But overall, over the course of the 158 dates, about £56 a date. That’s like £10,000 on first dates, and it adds up.

PHILIPPA: That’s quite an investment, isn’t it? 

BOBBY: Again, the way I see it, as long as you’re enjoying the process, having a good time, and eventually you’re hoping it’ll lead to the right person and you’ll feel worth it. But it can feel a bit thankless if you’re going just first date after first date.

EMMA: And you just don’t like them and you just think, “well, if I just spent £30, I could have stayed at home watching TV”.

Saving for retirement while single

PHILIPPA: OK, I’m now going to loop as many years forward and we’re going to talk about retirement. So look, Valentina, you’re the pensions queen. Tell us, single people, we’re going to be at a disadvantage, right, when it comes to saving for retirement.

VALENTINA: Yes, absolutely. A single person spends 50-60% of their income on bills and rent, whereas a couple 30-40% combined. And that’s money that could have gone to your pension fund, right?

PHILIPPA: OK.

VALENTINA: And as mentioned before, you need a much larger emergency fund if you’re a single person. Once again, you could’ve contributed to your pension instead. So that’s why this is where the ‘Singles Tax’ might become much more obvious.

PHILIPPA: OK.

EMMA: I wonder whether that crosses over with the investment gap, gender gap as well?

PHILIPPA: Savers not investors, women, without wishing to generalise, but that does seem to be what the data says, doesn’t it? And I think it’s that about anxiety, particularly if you’re a single person or a single woman, that risk, your appetite for risk, it’s going to be less, isn’t it? Because it’s that thing we’ve talked about that you haven’t got anyone to catch you. 

EMMA: Yeah.

BOBBY: And again, that compounding, if you’re in your 20s and 30s, you’re not saving, you’re not investing. You think, “oh, it’s only a small amount now”. But over the course of 20, 30, 40 years, that compounding impact of being single becomes huge by the time you retire.

PHILIPPA: And when you’re retired, because I’m thinking even then, you’re at a disadvantage, aren’t you? Because the State Pension disadvantages single people.

VALENTINA: Yes, it does. According to the Retirement Living Standards, which show you how life could look like at different price points when you retire, if you want to live a moderate lifestyle, which is basically one trip per year, a couple of dining out per month or one takeaway, actually, per week, you’ll need as a single person [£31,700]. So you’d expect that in a relationship, you’ll need £62,000, right? But it’s actually [£43,900]. The bottom line is, life in retirement is [around] 44% more expensive if you’re a single person.

PHILIPPA: Wow. This litany of disasters we’re talking about for single people .

EMMA: The world’s against us!

PHILIPPA: I can think of lots of good things about being single. I mean I enjoyed being single. I know you don’t want to be single all the time. People don’t necessarily want to be single all the time, but I enjoyed a lot of the years.

EMMA: I don’t want to live with a boy.

BOBBY: They smell and they don’t tidy up. They watch really rubbish programmes.

Money tips for savvy singletons

PHILIPPA: So do we have other useful tips then? As a kind of rounding off of this podcast, of things single people should be thinking about doing money-wise.

BOBBY: Find a buddy. In life, get a travel buddy, a holiday buddy, a wedding buddy, a close friend of yours that you can double up with. They probably will be single because if they have a partner, I don’t think they’ll be too keen on sharing with you.

EMMA: But great for your TV subscriptions. Beg, borrow, and steal. You can always add an extra account on your TV subscriptions.

PHILIPPA: I’m wondering, really, if it shouldn’t be more about what people in couples should do and the way they should think about dealing with their single friends, because choosing venues, holidays, outings on the basis of double-income friends, it’s really inconsiderate, isn’t it? I mean, there probably should be more consideration given by those who are coupled up for the people who aren’t, who are just paying all these bills by themselves. Don’t you think?

EMMA: Yeah, absolutely. Look after us. We’re poor.

BOBBY: And we’re a growing army, 8.4 million of us and every year we’re recruiting more members.

PHILIPPA: I’m not sure if that sounds like a good thing.

EMMA: But be aware, I think budgeting is like, I’ve certainly seen it in the past couple of years. Budgeting is so important when you have a variable income, when you’re single, when you could face singledom, dooming around the corner if you’re reaching the end of a relationship and actually that could come crashing down on you. Make sure that you’ve got a plan for that because it’s visible, the difference.

PHILIPPA: Well you’re right, maybe being a financially savvy singleton is a bit of a superpower. 

VALENTINA: Yeah, it is.

EMMA: Absolutely.

PHILIPPA: Because if you can manage on your own, if you can make it all stack up on your own, if you do couple up, it’s all going to be good. You’re not going to be frightened of it coming to an end, are you? Because you know that you can hack it by yourself. Which I think is a rather nice idea.

EMMA: Yeah, that’s great. 

PHILIPPA: If you’re enjoying the series, please do rate and review it so other listeners like you can find us. If you’ve missed an episode, don’t worry. You can catch up anytime on your favourite podcast app or watch on YouTube.

Next month, we’re discussing the ‘Great Wealth Transfer’ from Boomers to their Millennial children that economists have been predicting and what you can do about it.

And just a final reminder, anything discussed on the podcast shouldn’t be regarded as financial advice or as legal advice. When investing, your capital is at risk. Thanks for being with us. We’ll see you next time.

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.

The following is a transcript of a bonus podcast episode of The Pension Confident Podcast. Listen to the episode or scroll on to read the conversation.

TONY: I work as a handyman, mostly to keep me active and engaged, but to also top up the pension monies being paid to me monthly.

PHILIPPA: Hi, welcome to another listener story. This time, we’re going to hear from Tony, as he tells us about how he’s making his finances add up now that he’s retired. He’s got a lot on his plate. He’s retired, but as he just said, he’s still working as a part-time handyman. It’s a nice mix, but he’s also juggling income from a bunch of places. Pensions, that part-time work, other accounts, too, all with different rules and tax implications. So it’s complicated. He’s going to tell us his own story in a moment.

And then Rachael Oku, who’s VP Brand and Communications at PensionBee, and quite the pension pro herself, she’s going to help me unpack his story and pull out some useful lessons and tips for the rest of us.

Hi, Rachael.

RACHAEL: Hi, Philippa.

PHILIPPA: Just before we get into it, here’s the usual disclaimer. Please do remember, anything discussed on the podcast shouldn’t be regarded as financial advice or legal advice, and when investing, your capital is at risk.

Now, let’s hear from Tony.

The rise of phased retirement

TONY: My approach to saving has always been to understand how much I need to be comfortable in full retirement, and I can turn the handyman job up and down depending on how much additional income I want to earn. The work cycle is a series of peaks and troughs, these representing times of the year to help subsidise holidays, family commitments, etc.

PHILIPPA: OK, so Rachael, Tony is drawing down (as the technical phrase goes) from various different pots, but he’s still earning some income to top it up. This sort of ‘phased retirement’, it’s getting more common, isn’t it?

RACHAEL: Yeah, absolutely. We’ve seen a rise in part-time work and people aged over 65 and not quite ready to fully retire yet. So there are a few things to be aware of. I think the main thing is that if you have a defined contribution pension and you’re drawing down, 25% is tax-free [subject to a cap of £268,275]. So you can either choose to withdraw this as a lump sum or you can take 25% off tax-free on every withdrawal that you make [from 55, rising to 57 in 2028].

PHILIPPA: But the rest?

RACHAEL: But the rest is going to be taxed at your marginal rate. So if perhaps you’re like Tony and you have a few different sources of income, maybe you’re drawing down from your pension, you have a part-time job, you need to be mindful of the tax brackets and maybe timing your withdrawals.

PHILIPPA: But the good thing here is he’s leaving money in his pension, and of course, that continues to grow.

RACHAEL: Yeah, that’s the beauty of drawdown. You’re not withdrawing it all in one go like you would if you were buying an annuity. You’re leaving whatever you don’t withdraw invested. And the longer you’re in the market, the more time or the more opportunity you have for that money to grow.

PHILIPPA: So that’s the advantage, isn’t it? Of continuing to work, even if it’s part-time, you can use that income to live.

RACHAEL: Yeah, pay for your everyday expenses. And then, as Tony said, use your pension for some of the bigger life things that you want to do.

PHILIPPA: Now, it sounds like Tony, like lots of us, wanted to understand how much he needed in cash terms to be comfortable in retirement. And this is always going to be different for everyone, but there are some benchmarks, aren’t there, to help us work out how much that might be?

RACHAEL: Yeah. So Pensions UK do a piece of work every year called the Retirement Living Standards, and they suggest what individuals or couples might need for a minimum, a moderate, and a comfortable lifestyle in retirement.

PHILIPPA: OK. What sort of numbers are they saying?

RACHAEL: So if you’re a single person, it’s around £44,000 for a comfortable retirement. If you’re in a couple, that’s about £60,000. So it’s a slight saving if you’re combining your income with somebody else. 

PHILIPPA: Quite a big saving. 

RACHAEL: Yeah, but it’s clear from these numbers that the State Pension isn’t going to be anywhere near enough.

PHILIPPA: And those numbers, they do assume you own your own home. Is that right?

RACHAEL: They do. They don’t include living costs, whether that’s rental payments or mortgage repayments.

PHILIPPA: So that’s definitely something to think about. Let’s hear from Tony.

Balancing mortgage payments and pension contributions

TONY: Saving has always been a focus in my life, contributing to a pension fund. Any additional monies earned through bonuses, etc., went to savings accounts to earn as much interest as possible. And having a family, pay for any educational needs, etc., that may come up in later life.

When I left the corporate world at the age of 55, the plan was always to pay off the mortgage and draw down on some of the pension monies. Both of my pension funds had small amounts withdrawn, but a monthly contribution is still being made to one fund to help top it up, and of course, get the government tax relief. But I’m also very fortunate to have received monies from my parents’ estate upon their death.

PHILIPPA: So Tony’s talking here about a very common situation: homeowners balancing their pension contributions with their mortgage payments. I mean, we have talked about it a lot of times on the podcast. Can you just run us through the pros and cons of allocating your money to each?

RACHAEL: So paying into your pension has lots of tax benefits, for example. So on the way in, when you’re contributing, you usually qualify for tax relief. And then on the way out, when you’re withdrawing your pension, you can get 25% tax-free [from 55, rising to 57 from 2028]. With property, though, I think there’s a lot to be said for owning your own home and paying off your mortgage and that sense of achievement you have once you’ve done that. But I suppose a pension is a lot easier in some ways to access in retirement. Whereas if you have a property, you’ll need to sell it to access the money or to downsize or take a lodger, do something that will help your property earn you that income.

PHILIPPA: Yes. And it might not be an ideal time for you to sell either.

RACHAEL: No, there’s no way of timing the market. The property market is up and down. And if you really need to sell and retire at a certain point in time, you’re going to have to sell regardless of what the market is doing. So you could potentially lose money.

PHILIPPA: OK. But if you’re loving this idea of paying off your mortgage - and who isn’t - to reduce your housing costs before you retire. If you can, it’s always good to keep on contributing to your pensions, isn’t it? Even through the tough times, even if it’s less than normal, don’t stop.

RACHAEL: Yeah, exactly. I think if you can, try and do both. If you do have to reduce your pension contributions, reduce them. But as you say, don’t stop.

PHILIPPA: You can pop them up again in a better time.

RACHAEL: Yeah, revisit when your finances are a bit more stable.

PHILIPPA: So he also talks about receiving an inheritance. Now, obviously, that’s a bittersweet experience, but great to have. What are the rules there for people to think about?

RACHAEL: Yes, Inheritance Tax can be quite complicated, but there are a few things to remember. So it’s typically only due after £325,000. That’s the current threshold as it stands today [2025/26].

PHILIPPA: So it’s quite a high ceiling.

RACHAEL: It’s quite a high ceiling. And if the estate is worth less than that, which is your property, your savings and investments, any cash that you have, altogether, if that’s less than £325,000, then it should be tax-free. 

PHILIPPA: But if it isn’t? 

RACHAEL: If it isn’t, then 40% Inheritance Tax applies.

PHILIPPA: OK, so it’s a steep tax rate.

RACHAEL: It’s a steep tax rate, and the rules are due to change in April 2027. It’s not 100% clear yet exactly how they’ll change, but it’s been earmarked for some changes.

PHILIPPA: So definitely dig into the details before you make any decisions on that.

RACHAEL: Yeah, absolutely. We’ve got a guide on the PensionBee website in our Pensions Explained section.

PHILIPPA: OK, and we’ll put a link to that in the show notes. There are other ways you can leave money to loved ones, aren’t there?

RACHAEL: So yes, there are other ways to leave money to loved ones. So you can leave money via a pension. If you pass on your pension before the age of 75 and haven’t started withdrawing, your beneficiaries can usually inherit that tax-free. There’s also property, but the rules can be quite complicated. So it’s definitely worth doing your research before you start planning.

PHILIPPA: OK. Now in the next bit, Tony highlights a challenge that I think many retirees face when they start drawing down from their pensions, while at the same time, they’re still trying to make new contributions.

Navigating different allowances for different accounts

TONY: The main thing I find challenging about my personal pension, now that I’ve drawn down some monies, is linked to the amount I can put back into my pension pot. I’ve always wanted to continue contributing to top up the pot and also benefit from the tax efficiencies this offers.

However, as the amount I’m now able to contribute is reduced, I only add a small sum each month. The focus has now been to look at, and set up, high interest bearing accounts such as an ISA and fixed rate options to allow saving fund growth. Also, monitoring the markets for best rates is key to getting the best return.

PHILIPPA: OK, so Tony’s referring there to pension rules changing once you start withdrawing. And this is something that can really easily trip people up, isn’t it?

RACHAEL: Yes, absolutely, especially if they have a defined contribution pension, which is the most common type. So once you start withdrawing and actually accessing your money [from 55, rising to 57 in 2028], the amount that you can continue saving or effectively put back in is restricted by what’s called the ‘money purchase annual allowance’ (MPAA). And that means that instead of having your allowance of 100% of your salary, up to £60,000, that is reduced down to £10,000 [in 2025/26].

PHILIPPA: So for higher earners, that could potentially be a huge drop in how much you can pay into your pension?

RACHAEL: Yeah, absolutely. 

PHILIPPA: OK. 

RACHAEL: So it’s not a bad idea to consider other savings options too, just like Tony is doing. He’s using his ISA allowance, and as it stands now, that’s £20,000 a year [2025/26], which you can use across a range of ISAs, from your Stocks and Shares ISA to a Cash ISA, and also a Lifetime ISA [LISA], depending on how old you are. Because I think that’s capped at 50. You can make contributions into that until you’re 50 years old. But because Tony is over 40, he could open just a Cash ISA or a Stocks and Shares ISA. 

PHILIPPA: OK. 

RACHAEL: And then if Tony’s earning interest on his fixed rate accounts, the ones that he mentioned, he might want to pay attention to his Personal Savings Allowance because that’s the amount of interest that you can earn on your savings before a tax charge is applied. And it depends on which Income Tax band you’re in. But if you’re in the basic tax bracket, you have £1,000 before you need to pay any tax. It’s £500 for higher rate taxpayers. And then there’s no allowance if you’re an additional rate taxpayer.

PHILIPPA: OK. This has been a bit of an issue, hasn’t it? Because we’ve had high interest rates, we’ve had more savers being at risk of exceeding that Personal Savings Allowance and having to pay tax. So it’s really one to watch, isn’t it?

RACHAEL: Yeah, definitely. It’s been a lot easier in recent years to come close to that Personal Savings Allowance of late or to exceed it. So for example, if you save £20,000 in one year at a 5% fixed rate, that could earn you £1,000 in interest, which would be just the allowance for a basic rate taxpayer.

PHILIPPA: Anything else you earned will be taxable? 

RACHAEL: Yeah. 

PHILIPPA: OK. Well, I hope we’re pulling some useful lessons out of this for everyone. We’ve got one final clip from Tony, and in this one, he looks ahead and he thinks about his options as he gets further into retirement and he gets older. Here he is.

Waiting on the State Pension to fully retire

TONY: My desire to stop work isn’t urgent as I really enjoy what I do. The challenge for me is the physical nature of some of the things I do, and I know as I get older, I’ll reduce some of the types of work undertaken. The plan is at least to continue till I’m 67. When at present, this will allow me to take my State Pension. This, combined with existing pensions, will allow me a minimum income of circa £36,000.

Health-wise, I may decide to continue doing some less physical work, as I’ll always need a daily stimulus. I can consider also increasing the drawdown on one of my pensions to increase my income, but understand that this impacts on the pot fund longevity. Also, my wife works in the education sector and is also considering her retirement options. This will also enable a larger joint pension pot to live off.

PHILIPPA: OK, so Tony is looking ahead to receiving the State Pension, and obviously, that’s going to be another source of income for him. We know it’s not a lot of money, so it’s obviously always going to be wise to try and build other savings, too. Just to remind us how the State Pension works right now.

RACHAEL: The State Pension is a regular payment that you receive from the government once you reach the State Pension age, and it’s designed to help support you in retirement. But you don’t automatically qualify for it, you have to make National Insurance contributions (NICs) through your working life. To qualify for the full [new] State Pension, which is approximately around £12,000 a year [2025/26], you have to pay in 35 years’ worth of National Insurance contributions, and to get the minimum amount, you have to pay in 10 years. Both men and women can currently claim this at age 65, but the age is increasing. So for those born after 5 April 1960, as Tony was, it’ll gradually rise until it reaches 67 in April 2028, and then it’ll move to age 68 for those who’re born after April 1977. So it’s something that is gradually increasing month by month.

PHILIPPA: Now, very handily, you can check what you’re going to be eligible for, can’t you?

RACHAEL: Yes, you can check on GOV.UK. There’s a State Pension checker.

PHILIPPA: Now, Tony highlights a really good point about expecting the unexpected, especially in later life. So you can’t take things like your health or your income for granted, can you? You never quite know what’s ahead as you get older. What could listeners do to better prepare their finances?

RACHAEL: Yeah, I think there’s a lot to be said about planning for the unexpected. You know, your life might look a certain way today, and sometimes it can be hard to think about the future and how you’re going to age and how you might be impacted by different things. So that could be changes in your health, your actual ability to work, which Tony does reference. He’s feeling fine now and fit and healthy, but he does expect that the types of jobs he’ll be able to do will change the closer he does get to that retirement. But also factoring in your partner’s retirement plans and having resilience to make any unexpected shocks less damaging. But there are two things that you can consider doing, which is, first of all, knowing how much money you have saved. Perhaps it’s in a few different pots, so it’s figuring out where that money is and how much you have.

PHILIPPA: This sounds really obvious, doesn’t it? But a lot of people don’t know.

RACHAEL: Yeah. 

PHILIPPA: You’ve got fragmented pension pots or savings accounts here and there. Actually knowing how much you’ve got is not quite as straightforward as you might think, is it?

RACHAEL: No, I mean, totally. That’s why PensionBee was set up to help people to bring those pension pots together and to consolidate them. And it’ll get much easier once the Pensions Dashboards are introduced in the next year or two, where people can have a holistic view of all of the pots in their name and link to their National Insurance number. But for now, I think the challenge a lot of people face is remembering that they even had a pension and also who the provider is.

PHILIPPA: And the passwords and all the login details for all these financial products is fiddly, isn’t it?

RACHAEL: Yeah. If you’re Tony’s age and you’ve had a range of jobs through your life, I think the government predicts that the average is about 11 different pensions [throughout] your working life. So that’s quite a lot to keep track of if you haven’t consolidated them. So the first thing is knowing how much you have and where it is. And the second thing is, if you have a partner, to be open and honest with them about what your retirement goals are, how much you think you might need to live your life comfortably, and what your plans are in general for what you want to achieve with your money in retirement.

PHILIPPA: It can feel like a tricky conversation, can’t it? People don’t like talking about money.

RACHAEL: No, they don’t. But I guess the hope would be that when it’s your spouse and you’re planning for your last chapter in life, that it could actually be quite fun because you’re thinking about what you’re going to do when you have some freedom. You don’t have to work anymore. You’ve spent your whole life working and saving, and now this is the fun bit surely. You get to actually plan how to spend it.

PHILIPPA: Yeah, and that information sharing piece is really important, isn’t it? If you’ve both got savings, you’ve both got pensions. You need to be able to know where they are and how to get at them, don’t you?

RACHAEL: Yeah, absolutely. And to have that transparency with each other. The Retirement Living Standards talk about how much you need to live each year as a single person and as a couple. And it’s slightly less if you’re a couple. So I think pooling your finances and being transparent about how much you have as a combined unit can really help.

PHILIPPA: Absolutely. Thanks, Rachael.

RACHAEL: Thank you.

PHILIPPA: Thanks also to Tony, of course, for so generously sharing his story with us. Hopefully, you found some food for thought about your own pension journey there. We’ll be bringing you more of these stories all year.

If you’d like to find out more about pensions and retirement planning, head to the show notes for the episode. We’ve shared a tonne of resources there for you to have a little trawl through, to explore, and to use.

Now, here’s a final reminder before we go that anything discussed on the podcast shouldn’t be regarded as financial advice or as legal advice. When investing, your capital is at risk. Thanks for being with us.

Risk warning

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

Working for yourself has many benefits. But it can also feel relentless, especially in the early years. You're often either doing everything it takes to keep your business running, or managing the people who do it for you.

One survey found that small business owners work significantly longer than employees. Around 25% work more than 50 hours per week, and 96% check emails or deal with business issues outside of regular working hours.

Over time, long hours and constant responsibility can take their toll. Research by Simply Business found that around 80% of small business owners have experienced poor mental health, including anxiety or depression.

Burnout is a real risk, but it isn't inevitable.

By prioritising your wellbeing and making a few simple changes, you may be able to protect your mental health and build a business that feels more sustainable. 

Here are some positive steps that can help.

‍Set clear boundaries between work and home

When you're self-employed, it's easy for work and home life to blur. At first, that can feel like a benefit.

Answering emails while cooking dinner, or opening your laptop in bed, may seem productive. But the downside is that you're never fully switched off.

When work seeps into every part of your day, it becomes harder to rest. Challenges and problems to solve can arrive at any moment, even when you're trying to relax. Over time, that can be draining.

Clear boundaries can help. Try deciding what your working hours are and sticking to them where possible. Switch off work notifications when you're not working. Keep work out of spaces linked to rest, like your bedroom.

Giving yourself proper time away from the business can help you unwind. It also means you're more likely to return with energy and focus the next day.

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Remember your why

Building a successful business is rarely quick. It often takes time, patience and persistence.

Most people start a business for a reason. That might be to work on a passion, gain independence, or solve a problem they care about. When things feel tough, reconnecting with that reason can help.

Keeping your ’why’ in mind can shift your focus away from day-to-day stress and towards your longer-term goals. It can remind you why all that effort matters, even during difficult periods.

Try reflecting on what excited you when you first started out. Holding onto that sense of purpose can help you keep going when motivation dips.

Take care of yourself

Your business relies on you. If you're running on empty, everything feels harder.

Self-care doesn't need to be complicated. It often comes down to a few core areas that support your energy and wellbeing.

• Diet - eating regular, balanced meals can help support your mood and energy levels.
• Exercise - regular movement can help reduce stress and improve sleep.
• Support - friends, family and mentors can offer perspective when things feel overwhelming.
• Interests - time away from work helps you recharge and return feeling fresher.

Take a moment to think about how you’re prioritising each area, and where small, positive changes could help.

Make paying yourself a priority

Paying yourself - in both the short term and the long term - matters more than it might seem, especially when you’re running a small business.

When you’re growing a business, it’s easy to put yourself last. Paying suppliers and staff, keeping customers happy and staying on top of taxes often take priority.

All of those things are important. But it’s just as important to include yourself in your financial priorities. Even during lean periods, paying yourself every month, even a small amount, can help.

It can make your work feel like a fair exchange, rather than something that only takes from you. That shift can help protect your motivation and reduce resentment over time.

Whether you’re self-employed or run a limited company, some business owners also choose to pay part of their profits into a pension.

Pensions are designed for long-term saving and many UK taxpayers also benefit from tax relief when paying into one. Over time, contributing can help your work feel more purposeful, as today’s effort could support your future.

Get help when you need it

Financial stress can weigh heavily on small business owners. Research by Money Advice Trust found that a third regularly lose sleep over their business finances, and another third have used personal money to keep their business afloat.

Getting help doesn't mean you've failed. It can simply mean you're using your time and energy more effectively.

That might include delegating tasks that drain you or fall outside your strengths. Hiring a virtual assistant, bookkeeper or accountant can free up time and reduce mental load, where it's affordable and appropriate.

If you're not sure what to outsource, try tracking how you spend your time for a couple of weeks. You may spot low-value tasks that someone else could handle just as well.

If money worries are adding pressure, it’s important to ask for help. You could start by speaking to your bank, funder or broker. If debt is a concern, a free debt helpline or financial advice line can help you understand your options.

What matters most is not trying to handle everything on your own. Many people find this difficult at times. Talking things through with others can ease the emotional strain and help you find practical ways forward.

Looking after yourself while running a business

Working for yourself can be demanding. But it can also be deeply rewarding.

Avoiding burnout doesn't mean caring less about your business. It means looking after yourself alongside it, so both can grow together. Clear boundaries, support from others and long-term thinking can help you build something that feels sustainable.

Hannah Martin is the Founder of Rich Retiree, an online resource aimed at helping women over the age of 45 prepare for a more rewarding retirement.

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.

Ever had that sinking feeling when an unexpected bill comes in through your letterbox and you hadn’t quite planned for it?

Or felt the pressure to spend when several birthdays and celebrations fall in the same month?

You’re not alone. Many people find that irregular or one-off costs are harder to manage than their usual weekly or monthly expenses. Without planning, these ‘lumpy’ expenses can cause strain and may sometimes lead to borrowing.

They’re predictable, yet still easy to forget about until the moment they’re due. A sinking fund is a simple way to deal with this.

Sinking funds explained

A sinking fund is a pot of money you set aside for a specific purpose.

It’s a way of giving your money a clear goal before it has a chance to disappear into everyday spending. Unlike an emergency fund, which is there for unexpected situations, a sinking fund is focused on one planned expense.

Here’s how it works in practice. Say your car insurance costs £600 a year. Instead of scrambling to find £600 in one go, you save £50 each month.

When renewal time comes around, the money’s already there waiting. There’s no need to juggle your budget, delay other plans, or rely on credit to cover the cost.

Breaking larger expenses into smaller monthly amounts can make saving feel more manageable.

What can you save for with a sinking fund?

One of the most useful things about sinking funds is how flexible they are.

They work best for expenses you know are coming, even if they’re still months away. Taking a bit of time to think ahead can help you spot the costs that tend to catch you out year after year.

Common examples include:

• Annual bills - leasehold service charges, home insurance, boiler servicing.
  
• Car costs - MOTs, servicing, tyres or repairs.
  
• Seasonal spending - Christmas, birthdays or childcare over the school holidays.
  
• Home expenses - redecorating, furniture or general maintenance.
  
• Special occasions - weddings, baby showers or milestone birthdays.

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How to set up your first sinking fund

Getting started with a sinking fund isn’t complicated. A few simple steps are often enough to put a plan in place and build confidence.

1. Pick your goal

The first step is deciding what you’re saving for.

Being specific makes planning much easier. Rather than a vague aim to ‘save more’, choose a clear goal like saving £500 for school holiday activities or £800 for house maintenance. Write down what the money’s for, how much you need, and roughly when you’ll need it.

2. Do the maths

Once you know your goal, you can work out how much to save each month.

The calculation is simple:

Total amount needed ÷ number of months = your monthly saving goal.

For example, if you need £1,000 for Christmas and have 10 months to save, that works out at £100 a month. If that feels like too much, you can lower the goal or give yourself more time. The aim is to choose an amount that fits comfortably within your budget.

3. Keep it separate

Keeping your sinking fund separate from everyday spending is important.

If the money sits in your current account, it’s much easier to spend it without meaning to. You could use a separate savings account, a money management app with saving pots, or even a different bank altogether.

For example, Starling Bank has a feature called ‘Spaces’, which are essentially pots you can separate money into and label with individual names. The idea is to make the money visible, but not too easy to dip into on impulse.

4. Automate it

Automating your savings can make sinking funds much easier to stick to.

Setting up a standing order for payday means the money moves automatically before you have a chance to spend it elsewhere. Once it’s in place, saving becomes part of your routine rather than something you need to remember every month.

5. Budget for it

When you’re planning your monthly budget, it helps to treat your sinking fund contribution like any other bill.

If you’ve committed to saving £100 a month, that money isn’t available for everyday spending. This might mean making small adjustments elsewhere, but it can lead to fewer surprises and a greater sense of control later on.

Over time, this approach can make budgeting feel calmer and more predictable.

6. Check in regularly

Sinking funds aren’t meant to be set up and forgotten about forever.

It can help to review them once a month to see how things are going. If your income changes or priorities shift, you can adjust the amount you’re saving or the timeline. The goal is to keep your plan realistic and workable, even as life changes.

Managing multiple sinking funds

As you get more comfortable with sinking funds, you might find yourself running more than one at the same time.

To keep things manageable:

• start with the most urgent expenses, especially those with closer deadlines;
  
• avoid setting up too many funds at once, as that can feel overwhelming; and
  
• keep your system simple so it doesn’t start to feel like extra work.

How sinking funds fit alongside other savings

Sinking funds work best when they sit alongside other types of saving, rather than replacing them. 

• Sinking funds - for planned, larger expenses like home repairs or leasehold management fees.
• Emergency funds - your safety net for unexpected events such as job loss, urgent car repairs, or a broken boiler.
• Pensions - for your long-term future and retirement. They’re designed to grow over time, often with tax relief and the benefit of compound interest. Unlike sinking or emergency funds, pension savings are usually locked away until at least age 55 (rising to 57 from 2028).
• ISAs and long-term investments - help you build wealth over time. With Stocks and Shares ISAs, for example, you can invest up to £20,000 per tax year (2025/26) free of Income Tax and capital gains tax (CGT). These accounts are often used for goals that are several years away, like a house deposit or future education costs.

Each type of saving plays a different role. When you have money set aside for the short term, the unexpected, and the long term, it can help you feel more prepared, resilient, and confident about your finances.

Why sinking funds are a good idea

Sinking funds are a simple way to bring more structure and confidence to your finances. By setting aside small amounts regularly, you can prepare for upcoming expenses without the pressure of finding large sums at short notice.

Many people find sinking funds effective because they:

• reduce stress when bills arrive;
  
• make budgeting feel more predictable;
  
• help avoid relying on credit and going into debt;
  
• encourage planning rather than reacting; and
  
• build positive saving habits over time.

Starting small often works best. Pick one expense, work out a monthly amount, and let the habit build from there.

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.

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Being self-employed offers a lot of freedom in how you work - a big reason it’s so attractive to millions of small businesses owners in the UK. Many start as sole traders and later establish their businesses as limited companies. This can mean giving up some simplicity but gaining financially through more attractive tax rules, including when it comes to pension saving. 

The trick is knowing when to switch from sole trader to limited company, when not to, and how pensions could fit into the decision.

What’s the difference between a sole trader and a limited company?

A sole trader owns and runs their own business, with no legal line between you as an individual and the business. It’s usually the simplest way to start trading and most people set up as a sole trader.

A limited company is a business that's a separate legal entity from its owners, also known as the ‘shareholders’. If you’re the sole director and employee, you’re the only shareholder. A limited company has its own bank account and must keep separate business accounts.

When it could make sense to switch from sole trader to limited company

There are certain trigger points you may reach with your business that can make it sensible to move from a sole trader to a limited company.

Consistently high profits

Often, sole traders consider transitioning to a limited company when they start consistently making profits above £40,000 - £50,000 a year. At this stage, you’re getting close to paying higher rate Income Tax of 40%, which kicks in on earnings over £50,270 (2025/26).

In this case, your profits are high enough that paying Corporation Tax, drawing a salary and taking dividends could be more tax-efficient than paying Income Tax and NI on all your profits as a sole trader. These potential tax savings can make the administrative burdens that come with being a limited company worth it.

A high tax bill

A limited company lets you keep profits in the business, which can be handy in managing the amount of personal tax you pay. For example, you can take a small salary - e.g. below the Personal Allowance threshold of £12,570 (2025/26) - then use your business’s profits and pay yourself in dividends at the level you please. This can be a good idea because dividends are taxed at a lower rate than income. Although the Dividend Tax rate will rise for basic and higher rate taxpayers from April 2026.

The table below shows the Income Tax rates for 2025/26, which are currently frozen until April 2031, and the Dividend Tax rates in the 2025/26 and 2026/27 tax years:

Bear in mind that, if you have other shareholders, they’ll usually need to be paid the same dividend per each share they hold in your company as you.

You have an eye on retirement planning

Being the director of a limited company comes with some useful retirement planning advantages. Your pension contributions can be made by the company, and so are treated as employer contributions. This means they’re an allowable business expense, which:

• reduces your Corporation Tax liability (contributions are made pre-tax); and
• avoids Income Tax and NI on the contributions. 

Also, you can usually tax-efficiently contribute up to the annual allowance to your pension each tax year. The standard annual allowance is up to £60,000 and you can receive tax relief on personal contributions up to 100% of your earnings, capped at £60,000 (2025/26).

But directors can also make employer contributions to their pots. So, they can pay themselves a small salary and make tax-relievable contributions on this amount. They can then make further employer pension contributions above their salaried earnings.

It’s easy to pay into a pension as a limited company director: 

• open a private pension, (like the PensionBee self-employed personal pension);
• your limited company makes employer contributions directly from its account to this pension; and
• any investment returns or interest received is tax-free.

The key takeaway

Paying into a pension via your limited company is often more tax-efficient than taking a salary and paying in personally, thanks to Corporation Tax and NI savings. It can also mean you can pay higher amounts into your pension from the business beyond the salary limit that applies to sole traders.

When staying a sole trader (or switching back) may be more suitable

Despite the tax advantages of registering as a limited company, there are circumstances where it may be better for you to stay as a sole trader, or switch back to being one. For example, if you have lower or uneven profits, want to go back to a simpler way of managing your business, or need to take all your profits personally. 

But what does this mean for your pension?

Will my limited company pension be affected if I switch from limited company director to sole trader?

Don’t worry, the pension pot you’ve built up so far as a limited company director will be unaffected.

Can I still contribute to my personal pension as an employer?

As a sole trader, you won’t be able to make employer contributions to your pension. This means contributions will come from your personal income - you’ll get tax relief at your marginal rate on up to 100% of your earnings, capped at £60,000 (2025/26), but no Corporation Tax or NI benefit.

Things to consider before switching from sole trader to limited company

Changing your company structure is quite a big jump for a small business. It’s often worth having a few years under your belt before deciding (though you don’t have to wait). You’ll probably want to ask yourself (and your business) a few questions, like:

• how stable are my profits;
• could moving from sole trader to limited company director save me tax;
• how much control do I want over my business; 
• do I need a level of legal protection, and to limit my personal liability to the business; and
• how much do I want to contribute to my pension each year, and could I pay more in employer contributions as a director? 

Also, what’s most financially important now - total access to your profits for a sole trader or the tax and pension benefits of a limited company - will probably change over time. 

If you aren’t sure, consider modelling the numbers with an accountant or a qualified Independent Financial Adviser (IFA).

Final thought 

Whether sole trader or limited company director, it’s important to set up and contribute to a pension as soon as possible. While cash flow can be tricky as a small business, if you’re able to put away small amounts into your pension these can add up over time. And the longer your money is invested, the more chance it has to grow and the better off you could be when you come to retire.

Laura Miller is a freelance financial journalist.

Risk warning

Please note that tax rules change regularly, and the actual tax benefits you receive will depend on your individual circumstances. If you’re not sure, please seek professional advice.

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.

Having earnings of £100,000 is a significant milestone. You might be very proud of crossing this threshold, as it likely represents a big step in your career.

However, you might not be aware that moving from below the £100,000 line to above it can cost you. That’s because a change to your tax situation can see you pay an effective tax rate of 60%. At the same time, your access to certain childcare benefits is usually reduced.

So, if your earnings are set to or now exceed £100,000, it’s important to be aware of these drawbacks and what you can do about them.

Here’s why.

The 60% tax trap on earnings between £100,000 and £125,140

First, let’s look at the extra tax you might pay when earning more than £100,000 - known as the ‘60% tax trap’.

In the UK, you pay Income Tax on the portion of your earnings that fall into each tax band. The table below shows you the Income Tax rates in the 2025/26 tax year:

So, if you earned £60,000 a year, you’d usually pay:

• 0% tax on your income below the tax-free Personal Allowance;
• 20% tax on £37,700; and
• 40% tax on £9,730.

As you can see, the top headline rate of Income Tax charged is 45%. But there’s an extra rule for high earners that can actually lead you to pay 60% tax in practice.

When you earn more than £100,000, your Personal Allowance is reduced, falling by £1 for every £2 you earn above £100,000. Additional rate taxpayers with earnings over £125,140 have no tax-free Personal Allowance.

The key here is that the earnings that were once below the Personal Allowance are now subject to Income Tax. This is what creates that 60% tax trap.

Here’s an example:

• You earn £100,000 and receive a £10,000 pay rise, taking your annual earnings to £110,000.
• That £10,000 is in the higher rate band, and so is subject to 40% Income Tax - a £4,000 bill.
• However, you also lose £1 of your Personal Allowance for every £2 you earn over £100,000. So, you lose £5,000 of your tax-free entitlement.
• This £5,000 is then also subject to 40% Income Tax - a £2,000 bill.
• In total, you’ve paid £6,000 in Income Tax on that £10,000 pay rise - an effective tax rate of 60%.

As a result, for every £100 you earn above £100,000, you’ll generally lose £60 of it - that’s £40 in Income Tax for being in the higher rate tax band, plus a further £20 due to the tapering of your Personal Allowance. That’s before other deductions for National Insurance (NI) or student loans, too. 

You can see why increasing your earnings above that level might not be as valuable as it seems.

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Losing access to free childcare hours

Alongside facing the 60% tax trap, you could also be punished if you earn more than £100,000 as a parent. That’s because you might also lose access to free childcare hours.

This is a benefit for working parents who:

• meet minimum earnings criteria;
• are on sick, annual, or parental leave, or
• receive certain benefits. 

If this applies to you (or your partner if you have one), you can claim 30 hours of free childcare a week (1,140 hours across 38 weeks of term time). This is for children aged between nine months and four years in England; there are different rules in Scotland, Wales, and Northern Ireland. 

However, you lose your eligibility for this benefit once you (or your partner) earn more than £100,000. Only one partner needs to earn over the threshold for this to happen. 

This is a cliff-edge threshold, too, in that you lose it as soon as you earn £1 over the limit. So, going from £100,000 to £101,000 would see it come into effect, almost overnight.

The cost of childcare varies greatly across England and the UK. But as a guide, the average cost of childcare in the UK is: 

• £138 a week for part-time care (25 hours). That’s £5,244 for 38 term-time weeks.
• £263 a week for full-time care (50 hours). That’s £9,994 for 38 term-time weeks.

These are high costs to incur, and could offset that earnings increase. In fact, if you went from earning £100,000 to £110,000 as in the example above and your child was in full-time care, almost your entire pay rise would go towards paying the cost of childcare.

That’s before you take the 60% tax trap into account, and the fact that you already lose Child Benefit when you (or your partner) earn £80,000 or more, too.

Making pension contributions can reduce your adjusted net income

All in all, earning over £100,000 is never going to be unwelcome. Even so, it’s important to be aware of these various rules that make the pay rise a bit less attractive in real terms.

But while it may all sound a bit doom and gloom, this just underlines the value of planning ahead and finding ways to make the most of your money.

And this is where pensions can be useful.

The key measure of your earnings that matters here is your adjusted net income - that is, your total taxable income minus allowances and any tax relief.

You could reduce this by contributing to your pension. A popular way to do so is via salary sacrifice, lowering your pay in return for a non-cash benefit from your employer. In this case, you and your employer would agree to reduce your salary, and have them pay the difference straight into your pension.

This lowers your Income Tax and NI bill. And crucially, it reduces your earnings, which could take you back below the £100,000 threshold.

Bear in mind that there’s a proposed cap on salary sacrifice pension contributions set to come into place from April 2029. Only the first £2,000 of pension contributions would be exempt from NI. After that, you’d have to pay NI on your contributions - they’ll still be free from Income Tax.

Alternatively, pension contributions made at source - that is, from your salary - aren’t included in your adjusted net income. So, by contributing more of your salary to your pension, you could move back below the £100,000 threshold. This could restore your eligibility for free childcare hours, as well as your Personal Allowance, removing you from the 60% tax trap.

You could benefit from tax relief on your contribution - this is where the government tops up your contribution depending on what tax band you’re in. 

Typically, your pension provider will claim the 20% basic rate tax relief automatically. Then, as a higher or additional rate taxpayer, you could claim a further 20% or 25% respectively on your earnings via Self-Assessment or an adjustment to your tax code.

Think back to the example of the pay increase to £110,000. If you paid £10,000 into your pension, this would be grossed up to £12,500 with basic rate tax relief. As you’re a higher rate taxpayer, you could then claim back a further £2,500. So, that £12,500 contribution would technically only cost you £7,500. 

If your pension contributions are paid gross (that is, before tax is applied) then you don’t receive tax relief in this way. Instead, the full amount goes straight into your pension with no tax charged.

What to think about before you increase your contributions

Contributing to your pension can certainly be effective for managing your tax liability and eligibility for certain benefits.

But before you contribute, it’s worth being aware of a few key points:

• Pensions are for the long term - you typically can’t access your pension before 55 (rising to 57 in 2028), so you’ll need to be comfortable with not being able to access the money until then.
• Tax-efficient contributions are limited - you can usually tax-efficiently contribute up to the annual allowance (£60,000 in 2025/26), and you may be able to contribute more if you have unused allowances from the three previous tax years using the carry forward rule. You can usually only claim tax relief on up to 100% of your earnings for the relevant year in which the contribution is paid (2025/26). High earners may have a reduced allowance, as well as those who’ve already flexibly accessed their pensions.
• Your earnings could fluctuate - the adjusted net income calculation can be complicated, and your total income may shift. So, if you do increase your contributions, it’s important not to treat this as a ‘one-and-done’ event, and instead monitor your situation over time.
• Get help from a professional if you’re unsure - speak to an accountant or an Independent Financial Adviser (IFA) if you want the reassurance that you’re making the right choices for you and your family.

Please note that tax rules change regularly, and the actual tax benefits you receive will depend on your individual circumstances. If you’re not sure, please seek professional advice.

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.

It's been almost impossible to avoid hearing about gold and silver so far this year.

Gold hit the headlines at the end of January as the precious metal reached an all-time high of almost $5,600 an ounce. Silver also climbed to a record level around the same time of close to $120 an ounce. These prices marked the end of an impressive year for both metals, with each increasing notably.

Since then, prices have been volatile, swinging down and then back up over the following days. You may be wondering why this has happened, and whether gold is a good investment.

Find out what’s driven this modern day gold and silver rush, and where we are now.

Uncertainty can push up precious metal prices

Historically, investors have viewed gold, silver, and precious metals as more stable investments.

So, when markets fluctuate or investors think there could be volatility, metals can become more popular.

You can find out more about why investors see gold as valuable during periods of uncertainty on our explainer page. But in a nutshell:

• there’s a limited amount of gold in the world, which is what gives it value;
• it tends to hold this value better than ‘paper’ money, making it a useful hedge against inflation;
• it’s separate from businesses and governments, so isn’t at risk of companies or governments collapsing, like stocks and bonds could be; and
• because of its broad appeal, gold’s fairly liquid, meaning you can usually access the value of your investment easily.

Metals such as silver can also have practical, industrial applications. With a need for silver in many industries, this further pushes up prices.

It’s these factors combined that has led to gold and silver rising in value so much this year.

• Political uncertainty - in particular, the wars in Ukraine and the Middle East and unpredictable US policy created a sense of instability.
• High inflation - inflation has been above target in many economies, especially in the US. This reduces the purchasing power of those country’s currencies.
• A weak dollar - alongside inflation reducing a currency’s purchasing power, the dollar fell in value relative to other currencies. Also, gold and silver are traded in dollars, making them attractive to foreign buyers when the currency is weak.
• Anticipation of interest rate cuts - these can make gold more attractive as interest-paying assets become less lucrative.
• Industrial uses - silver is important for electric vehicle production and Artificial Intelligence (AI) infrastructure.

Altogether, this is what led to the all-time highs we saw at the end of January.

Prices have continued to fluctuate

While gold and silver hit these new highs, prices have been volatile since. In fact, following the records set in January, both gold and silver have fallen in value.

By 30 January, gold had fallen 9.1%, while silver fell even more sharply by 26.7%.

This was in response to the announcement that President Trump had nominated Kevin Warsh to be the new chair of the Federal Reserve (Fed), the central bank in the US.

The Fed chair is responsible for setting monetary policy in the US - in other words, looking after the country’s money, such as managing inflation and interest rates.

Leading up to this decision, analysts speculated about who President Trump might choose. In part, this uncertainty led to the increases in gold and silver prices.

But markets and investors were fairly pacified by Warsh’s appointment. A former Fed Governor, he’s seen as a relatively safe and experienced choice.

These kinds of announcements can influence gold and silver, bringing prices back down.

The opposite is also true, as investors respond to news that creates more uncertainty.

For example, the US downed an Iranian drone flying towards an American aircraft carrier on 4 February. In response, gold rose back above $5,000.

Events like this can create geopolitical tension. So, investors move to gold again for the relative stability it can offer, compared to other investments.

Gold can be a useful investment - but there are no guarantees

All investments can fall in value as well as rise, and you may get back less than you invest. And, past performance doesn’t necessarily show what will happen moving forwards.

Gold and silver each enjoyed strong years. But there’s no guarantee that they’ll continue to rise in value, or be sensible to invest in during periods of uncertainty in future.

That said, precious metals like this could offer a bit of diversification to a portfolio. As they’re often influenced by different factors than stocks and shares or bonds, gains in gold or silver could offset losses when markets are weak.

Meanwhile, company and government-based investments might generate stronger returns when gold falls. Again, this isn’t guaranteed.

PensionBee’s 4Plus Plan invests in gold through exchange-traded commodities (ETCs).

This plan aims to achieve long-term growth of 4% a year above the Bank of England base rate. It’s actively managed, with a team of investment experts keeping an eye on its holdings over time in response to market conditions.

You can find out more about the 4Plus Plan, including its aims and what it invests in, on our website.

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.

You don’t need a Maths degree to know that going to university is an expensive business - and student debts are only set to grow under new rules. The government has announced that university tuition fees in England will increase every year in line with inflation from 2026 onwards.

This means that the current £9,535 tuition fee cap could increase by hundreds of pounds a year, while student living costs continue to climb too. As a result, many families will be looking to save and invest early to help their children avoid leaving university with excessive debt.

How much will tuition fees rise by?

Communications Director at Save the Student, Tom Allingham says: “90% of eligible students take out a loan. But, whereas a tuition fee loan covers the cost of tuition in full, a Maintenance Loan won’t cover, in most cases, your living costs in full.“

The government’s yet to confirm which measure of inflation will be used to calculate the tuition fee increases, but it’s likely to be the RPI All Items Index Excluding Mortgage Interest (RPIX). If so, the maximum tuition fee could rise by around £420 a year to around £9,955.

When fees rise each year with inflation, the cost of university doesn’t just increase once - it compounds over time. For example, if inflation averages 3% annually, a £9,500 university course today could cost nearly £11,000 a year in five years’ time. Parents planning to help with tuition costs may find the total bill far higher by the time their child turns 18 years old, especially for those with young children.

Maximum Maintenance Loans will also increase yearly in line with inflation - although critics have warned that this isn’t enough. Maintenance Loans are designed to pay for students’ living costs, so higher loans help students keep up with the cost of living. But tuition fees are paid directly to the university, so any fee increase simply makes higher education more expensive.

What can parents do to help with rising university costs?

Founder of Pennies to Pounds, Kia Commodore says: “I think I’m close to £90,000 [in debt]. Because I did a four-year degree and I had a lot in Maintenance Loan. It’s a big chunk of money.“

According to Save the Student, in 2025 parents typically give each child an average of £146 a month while they are at university, the lowest figure since 2021. For parents, it often makes more financial sense to focus on reducing the amount of debt their children take on rather than trying to help repay it later.

Once a student graduates from university, their loan repayments are linked to their income, not the size of the debt. This often means that parental lump sum gifts after graduation rarely make a meaningful difference to their child’s monthly outgoings (unless the total debt is wiped out).

Under current rules student debt is written off by the government 40 years post-graduation (previously 30 years). This means a narrow majority (52%) of new graduates are predicted to repay their full student loan, plus any accrued interest, during their working lives.

Many parents are increasingly concerned about their children leaving university saddled with debt before their career has even started. If parents contribute earlier - for example, by helping with living costs during university - this can directly lower the amount borrowed and reduce the long-term interest that builds up.

Don’t neglect your own finances

Start making regular contributions today to ensure you’re on track for retirement. When your pension is in a good place, you’re in a good place.

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1. Start when your kids are young

Engineering Manager at PensionBee, Stewart Tywnham says: “We saved for both our eldest, basically from when they were born. We were putting something like £25 a month into an Individual Savings Account (ISA), the price of a takeaway pizza.“

Finding spare cash out of your income once your child, or children, goes to university can be difficult. You might be overpaying on your mortgage to become debt-free faster, or catching up on pension contributions ahead of your planned retirement. So, if you want to help them, the key is to start investing when your child is younger - preferably soon after they’re born.

One of the most effective ways is investing through a Junior Stocks and Shares ISA (JISA). Parents (and other family members) can save up to £9,000 a year per child and the growth is completely tax-free (2025/26). The account belongs to the child and becomes accessible to them when they turn 18 years old - just when they might need money for living costs at university.

If you were to contribute £750 a month (which equals £9,000 a year) from your child’s birth until they turned 18 years old, the total contributions would amount to £162,000. Assuming an annual growth rate of 5%, and paying 1% annual charges, the pot could grow to £235,211 over 18 years. Such a sum could potentially cover both university and a house deposit for your child.

Even if you managed to contribute a more modest £100 a month, the pot could grow to £31,362 over 18 years (assuming a growth rate of 5% and 1% annual charges). That’s enough to give your child over £10,000 a year for the duration of a three-year university course.

2. Take advantage of Premium Bonds

Premium Bonds can be a useful way for parents to save for their children’s university costs. Instead of earning interest, each bond is entered into a monthly prize draw for tax-free prizes of up to £1 million. This offers savers the chance of higher returns than a typical savings account while protecting the capital.

Each individual in the UK - both adults and children - can hold up to £50,000 in Premium Bonds. You can buy Premium Bonds in your child’s name, but you’ll need to oversee the bonds until your child reaches the age of 16, when ownership of the account’s transferred to them.

One key advantage of Premium Bonds is flexibility. Money can be withdrawn at any time, making them handy for covering university expenses such as accommodation, travel, or course study materials.

While the initial deposit is backed by HM Treasury and the prizes are tax-free, Premium Bonds don’t guarantee growth. Any returns depend entirely on winning prizes and it’s possible to win nothing. For this reason, they’re best used alongside other savings or investment options, such as ISAs, to balance capital preservation, accessibility, and potential growth.

3. Consider other tax efficient investments

Beyond Junior ISAs and Premium Bonds, parents can consider several other investment options to save for their child’s university costs. A Stocks and Shares ISA allows you to invest £20,000 a year and any growth in the account’s tax-free (2025/26). Through this account you can invest directly in:

• company shares;
• exchange traded funds (ETFs);
• government bonds;
• index funds; and
• many other types of investments.

One advantage of using an ISA in a parent’s name is that the parent retains full control of the account, even after the child turns 18. Unlike a Junior ISA, which automatically transfers ownership to the child at adulthood, an adult ISA allows parents to decide when and how to withdraw funds to pay for university costs.

Investing doesn’t have to be expensive or complicated. Parents can make contributions into a low-cost global index fund and benefit from diversification across a spread of countries and industries. Through the power of compound interest, even a lump sum contribution when they’re first born could snowball into a sizable gift by the time they reach university age.

General investment accounts (GIA) are another option, especially if you’ve already used up your ISA allowance and have money spare to invest. Parents can invest in the same range of assets as commonly available in ISAs. The key difference is that investment gains above your allowance are subject to Capital Gains Tax (CGT).

Summary

With tuition fees and the cost of living continuing to rise, planning ahead isn’t just sensible - it’s essential. But saving for your child’s education doesn’t have to come at the expense of your own financial goals. By getting started early and making the most of government allowances, even small, regular contributions can grow into a substantial fund over time.

Listen to episode 42 of The Pension Confident Podcast where our expert guests debate whether parents should pay for their children to go to university. You can also watch on YouTube or read the full transcript.

Emma Lunn is a multi-award winning Freelance Journalist. She’s written about personal finance for 20 years, with a career spanning several recessions and their consequences. Her work has appeared in The Guardian, The Mirror, The Telegraph and MoneyWeek. Emma enjoys helping people learn to manage their money well, in both the short and long term.

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.

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The following is a transcript of our monthly podcast, The Pension Confident Podcast. Listen to episode 44 or scroll on to read the conversation.

Takeaways from this episode

• Over a third of people have used Buy Now, Pay Later - with 41% of those reporting at least one late payment in the past year.
• Average December spending rises by around £700 per person - a 30% increase compared to other months, with many taking six months or more to pay off holiday debts.
• Many users underestimate the true cost - research shows Buy Now, Pay Later increases weekly retail spending by about $60 on average.

PHILIPPA: Welcome back. Today, we’re looking at the cost of convenience. From Buy Now, Pay Later plans to click-to-buy product tags on Instagram and TikTok, technology makes it super easy for us to shop 24/7.

More than a third of us have used Buy Now, Pay Later, but 41% of those shoppers reported late payment in the last year alone. And what about the long-term debt that you can stack up?

Some experts think all this convenience is blinding us to the psychological and financial consequences of click-to-buy. Today, we’re going to talk about that, and we’re going to share some steps you can take to protect yourself.

Alice Tapper is here with me. She’s the Founder of life and money platform, GoFundYourself, which is also the title of her book. She’s a determined campaign for stronger regulation in the Buy Now, Pay Later industry.

To shed light on the psychology of retail and spending, Tim Hogg is back with us. He’s a Behavioural Economist and Director at research and ratings agency, Fairer Finance.

And from PensionBee, Head of Content Marketing, Dani Skerrett. Hello, everyone.

ALL: Hello.

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

Now look, I know you’re all financially savvy people, but I’m going to ask you: have you ever used Buy Now, Pay Later?

DANI: Yeah.

PHILIPPA: You have?

DANI: Yeah.

PHILIPPA: Often?

DANI: I went through a few years of using it quite often, yeah. I think I started in a similar way to most people by buying a big high-value item -

PHILIPPA: OK.

DANI: - a piece of furniture. Then I found myself using it quite a lot for silly things, really.

PHILIPPA: How did that go? Did you manage to make the payments?

DANI: Yes, I’d say on the late payment thing you mentioned, I think a lot of people fall into that without realising. I think with the app that I was using, when you pay in three instalments, it automatically comes out. If you pay in 30 days, it doesn’t automatically - you have to physically go on and make the payment.

PHILIPPA: So you don’t necessarily know -

DANI: - so that tripped me up -

PHILIPPA: - do you?

DANI: Yeah, exactly.

TIM: That was my recent experience as well. I use it occasionally. I was setting up with a new retailer, clicked the ‘buy in three’ [option], went through the whole thing, getting approved, clicking all the forms, saying I’d read stuff that maybe I probably hadn’t read in great detail. Yes, yes, yes, put in my address, it gets delivered.

Then I realised I’d never actually set up the repayment plan, and it never told me to do that in that journey. I had to re-log into the app, which is a bit of a faff, and then find out how to put my Direct Debit details in and everything like that. That was a real faff, and I thought, “actually, this is why loads of people end up missing their payments. It’s not because they can’t afford it, it’s just because it’s a bit more friction”.

ALICE: It’s also new. I think so many of us - It’s a relatively new credit product, and there are lots of different providers that do things slightly differently. I’ve used it. I used it when I just bought a house. Life was very expensive, and it’s incredibly useful for those large purchases that you’re going to make one-off, and cash flow is a bit tight for a few months, and it’s actually a really good way of spreading the cost. I’m sure we’ll talk about the pros and cons of it, but I think it can be really useful.

Spending season is here

PHILIPPA: Of course, the timing of this episode, it isn’t any coincidence, Black Friday sales going on right now. Next month, there’s Christmas. Then there’s the January sales. Should we just get a sense of the impact that seasonal spending can have on us? I mean, Alice, how much more do we tend to spend at this time of the year?

ALICE: On average, if you look at the average person, we’re spending about £700 more in December, which is about 30% for most people. It’s a huge increase in the average spend. I think there’s also a huge amount of pressure that lots of us feel to make, particularly with people with kids, to make it this magical time.

PHILIPPA: That probably underrates it, doesn’t it? Because it’s not like we do all our Christmas spending in December.

ALICE: No, exactly.

PHILIPPA: People shop earlier and earlier, don’t they? There’s a long lead up to Christmas now, isn’t it? When you’re probably spending more in the few months in the run up.

ALICE: Well, I think ideally we probably should think about budgeting for Christmas over the year. I think the reality is actually it’s quite difficult to do. The research finds, I think it’s around 50% of people who say that they’re going to use a Buy Now, Pay Later product are probably going to spend the next six months actually paying it off, if not even more than six months.

Actually, it’s July before maybe you’ve paid off your Christmas debt. We’re then even thinking about saving up for Christmas. It’s caught in this cycle. I think it can be really difficult to manage the pressures of Christmas.

PHILIPPA: Yeah, and by that time you’re managing summer holidays. Before you know it, you’re looking at the next Christmas, aren’t you? But the pressure, you may talk about the pressure to make Christmas special. I mean, that’s a big deal, isn’t it? Particularly for families with kids. But generally, the marketing hype around it, I mean, everything urges you to treat yourself, doesn’t it?

DANI: You’re going out to eat more, you’re spending more on drinks, you’re catching up with friends and family, and you want to let people know during that time of year that they’re valued and that you want to spend time with them -

PHILIPPA: It’s true!

DANI: - That’s a pressure, too. It’s not actually just buying presents.

TIM: The other thing about Buy Now, Pay Later is that many more people are Googling the Buy Now, Pay Later providers at the start of December. You see it in the data. It’s like, as Christmas approaches, we know what’s going to happen. We know we’re going to spend more money than maybe we do on another month, or maybe that we can afford. We start Googling how we’re going to be borrowing the money pretty early on.

ALICE: I think something as well is worth noting, and I’ve just really noticed this change, even in just the last six months, that Buy Now, Pay Later providers are working hand in hand with retailers to market products. Even on the Tube, on the way here, I see adverts from one Buy Now, Pay Later provider basically saying, “you can buy everything through us”.

It’s priming us to make all of our shopping choices through Buy Now, Pay Later providers. Because they’re not Buy Now, Pay Later providers are also just payment platforms. You can also pay immediately and pay upfront through them. It becomes this really neat way to make it seem like it’s an innocent payment choice.

PHILIPPA: It’s convenience again, isn’t it? It’s that thing we’re talking about. It’s just seamless. It’s easy. We’re busy. Let’s do that. As you say, particularly if you’re confronted with the advertising the way to work, it feels like a problem solved, doesn’t it?

ALICE: Absolutely. It’s so integrated into the shopping experience in a way that credit cards aren’t necessarily.

£30 bill, or pay £10 today?

PHILIPPA: Do we know how many of us will get into debt to cover the spending that we choose to make over this season?

ALICE: Of those who are actually intending to use credit, 40% are going to use Buy Now, Pay Later. But I think it’s about 50% of us on average that will put some cost of Christmas on a form of credit. It’s just become so incredibly normalised. I started campaigning for more regulation around Buy Now, Pay Later about five years ago. At that point, it was only one-in-five of us that would probably be using Buy Now, Pay Later to pay for Christmas. It’s become massively normalised just over the last five years.

PHILIPPA: That’s interesting, isn’t it? Presumably, thanks in major part to those marketing campaigns we’ve just been talking about.

ALICE: Absolutely. There’s been so much talk about regulation, but at the same time, that hasn’t come into place yet. But they’ve done a fantastic job of capitalising on the moment of relatively limited regulation around marketing and things like that to make us so aware of these providers.

PHILIPPA: And the cycle is, Tim, that whole post-pandemic, it’s five years ago now, but that whole, “you deserve it, cost of living crisis, special times need to be special”. I mean, these firms have leveraged all that, haven’t they? Or it feels that way to me.

TIM: Yeah, there’s a couple of key behavioural things going on with Buy Now, Pay Later. So firstly, it’s free, right? And we just know that that’s going to be impactful in terms of what we choose to buy and how we choose to buy things, right? So the fact that you don’t pay any more if you pay back on time is really important.

The other thing is that because it splits up a big cost into smaller costs, like research shows that just psychologically, we just feel like it’s less expensive. It seems really daft, doesn’t it? I’m looking at a £30 pair of shoes or whatever. If it says first payment’s £10, even though I know [this], I’m an Economist, I should know this, right? I know that I’ll pay three times £10. That’s £30 in total. Research shows that I just feel that that’s actually cheaper.

PHILIPPA: It’s not now, is it? You’re paying £10 now.

TIM: I’m paying later and it’s just £10 now.

DANI: I completely agree with that because in [preparation] for this podcast, I looked at my Buy Now, Pay Later app on the last purchase. It was a £30 product from Boots and I paid [for] it over three months. Why did I do that?

It’s free for you, but someone’s paying

ALICE: Just to say, it’s actually not free. I think we think it’s free -

PHILIPPA: I wanted to ask you that because ‘it’s free’.

ALICE: - but it isn’t.

PHILIPPA: It can’t be free, surely. How do these companies make money?

ALICE: No. Two ways that it’s essentially paying for itself. One is that Buy Now, Pay Later providers are charging the retailers a percentage on what you’re spending, between 2% and 5%, which is quite -

PHILIPPA: From your point of view, do you care if the retailer is paying? Except that -

ALICE: But that cost is obviously being passed to the consumer. Then the other way in which it’s paying for itself is that we know that Buy Now, Pay Later gets people to spend more money. There’s a study from Harvard in 2022 that found that on average, it’s about $60 more per week, a permanent increase in spending, predominantly on retail for people that are using Buy Now, Pay Later. We know it gets you to spend more money.

PHILIPPA: That’s a lot, isn’t it?

ALICE: That’s covering the cost of it. Otherwise, retailers wouldn’t use it. It’s huge. It’s a massive, massive increase. From a behavioural science perspective, I think it’s also worth just noting that it’s effectively decoupling the pain of paying. When you pay for something with cash, if you hand over a £20 note, it effectively triggers the pain receptors in your brain. It feels painful. When you use Buy Now, Pay Later, you’re deferring that payment, so you’re just getting the pleasure of spending the money. It’s a really, really clever way of manipulating your brain into thinking that this is a totally, well, cost-free way of having something now.

TIM: Which is why some debt advice charities advise people to pay in cash wherever possible. That’s increasingly becoming less possible. But if you can pay in cash, you feel the pain more and you end up spending less.

The evolution of frictionless spending

PHILIPPA: It’s interesting because obviously, we’re under this constant temptation to spend. It seems to me in a way that we weren’t even 10 years ago because it’s so easy, isn’t it? Smartphones, it’s smartphones, isn’t it? Because I often just walk out of the house with nothing except keys and a smartphone. I pay for pretty well everything on my phone, and I’m guessing most people do.

ALICE: Yeah, I do. I never use cash, I have to say. I think also what’s changed is just the retail environment. Obviously, online shopping has been around for ages now, but it’s now not only going onto a website to spend money, it’s within your social media apps, it’s on TikTok. Everything is just so, so integrated and jumbled up into this online shopping mess. It’s so easy to be able to just click a button and split a payment. I think it’s no wonder that we’re all struggling with this sense of impulse control in a way to money.

PHILIPPA: Even if you’re physically shopping in a shop, you’re wandering around, you see stuff, you buy. If you’re just waving your phone at the till, that doesn’t feel like spending in the same way, does it? It’s a really different - Even handing over a credit card or a debit card, a bit of plastic, somehow to me, it’s a different psychological contract.

TIM: It’s less friction if you’re not having to put in a pin number as well. The whole process has become lower friction. You’re not forced to feel the pain, as you were saying, and you’re not forced to reflect so much on exactly what you’re doing with your cash.

DANI: It’s a different shopping experience. When you’re on Instagram, they’re completely tailored to what you’ve looked at before - the people you follow, the style. If you get a Marks and Spencers advert, it’s a coat that you probably - That’s your style. You’ve liked a different image before. Because when you walk into a shop, it’s not tailored to you. You have to search. You have to go and find what you like.

PHILIPPA: I’m really interested in exactly how we got here because it does feel to me like this has really ramped up in very recent years. But Alice, give us a bit of history on it, because credit cards, I was interested, 1966 was the first time we had them in the UK. Which obviously it was a long time ago. We didn’t get debit cards until 1987.

ALICE: Yeah, the concept of borrowing has obviously been around for ages. But in terms of [how] we’re looking at frictionless spending and how that’s evolved, it really is only in the last 70 years. So as you said, we’ve had credit cards launched in the UK in 1966. Then online shopping and retail and the ability to check out online seamlessly, well, Shopify in 2006. Apple Pay, which obviously many of us are so familiar with, as you were saying Philippa, the ability to just tap and go.

Also, what’s worth noting is the contactless amounts we’ve seen massively increase. It’s possible to spend thousands now just with a tap. So yeah, Apple Pay came in 2015. Snapchat introduced the ability to make purchases in 2018. Instagram integrated payments in 2019.

In the last five or six years, we’ve seen Amazon Live. So live streaming, a bit like TikTok Shop, selling as they - reminds me a bit of QVC. It’s the new QVC, I guess, on TikTok. But you can pay on your phone while you’re watching it, as opposed to having to send a mail order form off. And YouTube shopping more recently. TikTok Shop has exploded, I think, in the last year.

Where’s the regulation?

PHILIPPA: It’s rolling at an extraordinary pace, isn’t it? You’re talking about Apple Pay. Apple Pay, the start of all this in a way, that’s only 10 years ago. So you wonder where it’ll go. Talk to me about regulation? Because I’m guessing regulation hasn’t caught up.

ALICE: It’s really interesting. The Consumer Credit Act, which forms the foundation of a lot of the way in which credit products are regulated, was put together in the 1970s. It served us well up until more recently, and up until the existence of Buy Now, Pay Later. It’s what means, for example, that when you see an advert for a credit card, it tells you what the Annual Percentage Rate (APR) is going to be and things like that.

It also means you’re protected. If things go wrong, there’s the consumer ombudsman and so forth. With Buy Now, Pay Later, there’s a sneaky little loophole that means that because it’s 0% or free, and because they’re relatively short-term, it doesn’t fall under the regulator’s remit, so it’s unregulated.

PHILIPPA: Completely unregulated?

ALICE: It is. If it’s 0% and if it’s short term, it’s unregulated. That’s changing. As of next year in July, that’ll be regulation day, and Buy Now Pay Later providers will have to stick to certain rules. I’ll say I started talking about the regulation of Buy Now, Pay Later about five years ago, and it was a Wild West. It’s changed significantly since then. Buy Now Pay Later providers are acting responsibly on the whole -

PHILIPPA: So they’re self-regulating to a degree?

ALICE: They are. Absolutely. It’s improved.

PHILIPPA: Presumably because they saw this coming down the road.

ALICE: Completely, yeah. I saw anecdotally some horror stories of teenagers getting debt collection letters five years ago. That obviously wouldn’t happen now.

PHILIPPA: Horrifying.

ALICE: But we’re seeing better protection in the form of affordability checks, which is obviously super important. Protection from the Consumer Ombudsman should come into play in my view, and also reporting to credit reference agencies. Because one of the risks of Buy Now, Pay Later is that there are so many providers out there. It’s very possible to rack up debt across different providers.

PHILIPPA: Yeah.

ALICE: And there’s no communication behind the scenes between different providers to check if you can actually afford it, or maybe you’ve got £1,000 of Klarna debt, but ClearPay are saying, “oh, go for it”. That’s the risk, and we want to see regulation that means it’s treated like any other credit product. There’s affordability checks, and so on.

PHILIPPA: Do we know how much that’s happening? I’m guessing there are people who’ve racked up vast amounts of debt, a lot of people.

ALICE: I’ve gathered about 200 personal experiences from people who had actually got into really, really difficult situations, either 18 year olds who had received a debt collection letter for a scrunchy, they’d forgot to pay back from an online retailer -

PHILIPPA: Wow!

ALICE: - all the way through to people, as you described, who hadn’t really realised that they needed to set up maybe a Direct Debit or made the payment on time. They then had their mortgage application and things like that.

I think an important point, if I can just add, is that the way that these Buy Now, Pay Later products have been packaged doesn’t really feel like debt. It doesn’t feel like credit. They feel like vehicles to purchase things or payment providers. I think that makes people feel a little bit more at ease with using them, but maybe actually it’s worth being aware that it’s a form of credit.

PHILIPPA: Yeah, Tim, that must be a big part of it.

TIM: Yeah, definitely. I mean, even on the details of it as well, there was one survey earlier this year that showed that one-in-two people who used Buy Now, Pay Later, didn’t know that there would be late fees if they missed a payment. This is the key ‘got you’ moment that people have got to watch out for, and maybe half of people aren’t aware.

There’s a lot in terms of awareness and in terms of providers sending better and better communications to people just before a payment is due. Then if you miss one, immediately telling them. Do you want to do something about that? Pretty quickly so they don’t miss another one and so on. There’s a lot that needs to be done on that.

Don’t let technology push you into high spending

PHILIPPA: Because there’s so much regulation can do, it seems to me, to separate us from this convenience. But then the technology doesn’t let you go, does it? Off the back of one of the podcasts we did earlier in the year, we had a fantastic guest who said, “look, if you want to rein in your spending, put stuff in the basket, don’t buy it. Wait 24 hours or whatever, and then consider, do you really want this stuff or not?”

It’s remarkably effective, I think. I was doing that. Then, of course, what you get is you get basket reminders, don’t you, in your email? “Items in your basket”. I mean, it’s amazing. They hunt you down, don’t they?

TIM: Yeah. In general, we want to make good decisions easier for ourselves and bad decisions harder. We’re probably in a really good place to judge what is going to be a good decision for ourselves if you step back and think about it. Maybe a good decision is spending less on online retail and maybe using less Buy Now, Pay Later.

How do we make those decisions to delay easier? It could be through setting things up on your phone, so it’s harder to spend money on your phone, so you have to go back and use a laptop or whatever. That’s quite a big friction moment. It could be imposing those delays on yourself, but also just talking to people as well, that mutual accountability, it can be really important for people.

PHILIPPA: I was going to say, I think there’s quite a lot you can do with settings, aren’t there? Which I am all over on everything. The whole absolutely not to cookies, the whole making sure that trackers are stripped off all your devices, all those things that make it harder.

ALICE: Unsubscribing, from marketing emails.

PHILIPPA: Unsubscribing from marketing emails. Don’t you get a real dopamine hit when you unsubscribe? When I unsubscribe from things, when they rain me with stuff I don’t want, and then you unsubscribe and you get this lovely clean inbox with all this stuff.

ALICE: It doesn’t last long, that’s the crazy thing. Then you sign up for a 10% off and you’re getting more. I think also it’s important to note that there are obviously lots of things we can do to help ourselves manage our spending. But we often forget that this isn’t just about us vs. our impulse control. Behind the scenes, when you’re hovering over the ‘Pay Now’ button, billions has been invested in trying to get you over the line.

It reminds me of, I always think about in the Devil Wears Prada, she’s talking about the cerulean blue lumpy jumper, and she’s like “what you don’t realise is that this jumper has been chosen for you by this whole invisible machine”. It feels similar to that where billions has been spent in precision engineering and data science and behavioural science to get you to spend money. It’s not as simple as just saying, “have better impulse control”.

Masterclass on proper usage

TIM: All that being said, Buy Now, Pay Later does serve a real purpose. I think it does help a lot of people make those bigger purchases. Also, if your income isn’t constant. One of my friends is a top lawyer, she’s self-employed. She’s probably very well-paid. Actually, because she’s self-employed, her income is very lumpy. She might not get anything one month, then an absolute tonne the next month. Being able to use things to smooth those purchases is really helpful for her.

PHILIPPA: That must be true. I’m wondering whether we shouldn’t have a little masterclass on how to use it properly then.

DANI: Well, I wouldn’t use it as a shopping app because I’ve noticed on Klarna that it’s like Amazon. There’s categories, you can shop through it. So don’t use it like that.

ALICE: Delete the app, I’d say -

DANI: - Not if you have payments on it that you need to repay. But if your balance is clear -

PHILIPPA: - It’s really important not to do that.

ALICE: You don’t have to be constantly bombarded with notifications. Even just doing it analogue and keeping reminders and putting them in your calendar as to when payments are due, I think is essential.

PHILIPPA: Because both of you said that you tripped up over when payments should be made. It’s so easily done. You’re really savvy people. What hope is there for the rest of us?

DANI: Also, maybe set yourself a limit. Everybody’s circumstances are going to be different. But if it’s £500, OK, if an item is over £500, then I can spread the payment. Maybe think of it like that.

PHILIPPA: I like two-factor authentication on payments, which is annoying. This way, you have to do the two steps thing and they WhatsApp you, or they text you, or you have to use an authenticator on your phone. But it does put that hiccup in, doesn’t it? Before you just click and go.

TIM: Yeah, I do, I’m most tempted to make irrational purchases of books on Amazon. I have to factor it, stay logged out. That friction forces me to delay a bit. I mean, I probably do still do the occasional impulse purchase, but it’s going to be much less than one-click buy.

DANI: One step before putting it in your basket on most shopping apps, ASOS Boots, things like that, you can favourite stuff. Maybe that’s a step before putting it in your basket and having a think, just favourite the item. You’ll still get a notification saying, “remember you favourited this”, or “now it’s on sale”. But maybe that’s a nice way of going, “OK, here’s my shopping list. These are the things I like”. A week later, come back and be like, “I don’t need any of these things”, or “I just need that one thing”.

ALICE: Oh, I know. They’re so clever with then sending - I need to turn them off, actually. This is a good reminder. In app notifications, just saying, oh, I got one the other day. It was like, “we really think that you’d like a hot tub”. I was like, “I don’t know how big you think my garden is”.

PHILIPPA: Why would they say that to you?

ALICE: Maybe that’s less effective marketing, but there have been somewhere, it’s like, “oh, you’re absolutely right. I did need that thing”. They’re just so clever. I think I like to try and bring things back as analogue as possible and use wish lists for keeping track of things I want to spend money on. I think also giving yourself permission to have guilt-free spending. I think things like that can help free you a little bit to splurge when you want to rather than controlling all of your spending. I think it would be quite helpful.

PHILIPPA: What do you reckon, Tim?

TIM: Keeping a budget is done by a lot of people and it can be really helpful. That’s one of the things that debt advice charities would advise as well. I think it’s also worth pointing people to free debt advice as well, because often through using Buy Now, Pay Later or credit cards or whatever else, we can end up in a situation where we’re in financial difficulty.

The research shows that when we’re in that situation, we feel things like anxiety and depression. We might even feel embarrassed or even worthless. So there’s some really heavy emotions going on.

Actually, it’s important to realise that actually, that’s entirely normal in that situation, you’re not alone and that you can go and get free help which will help you become debt-free and take control of your finances. There are free charities out there like StepChange, which are really familiar with helping people out of these traps.

ALICE: Can I just mention something else as well? Because I touched on being really analogue. There are also really positive technologies that can steer your decision making in the right direction.

I’m a huge fan of Open Banking apps and lots of banking apps themselves now integrate features that nudge you into automating your savings, for example, or even saying, “oh, you spend a little bit more this month”, or actually turning on the notification so that when you’ve made a purchase through Monzo, so or whatever it is, it actually says you’ve made the purchase. It just gets you more familiar with where your money’s actually going.

TIM: These digital tools are fantastic. I’ve got a budgeting app, and I got one that didn’t allow me to make payments anywhere else. When I go on it, it just helps me budget. It’s not there for me to make payments or to look at things. It’s just there to help me understand what I’ve spent on different things over the course of -

ALICE: - Which one that’s really asking?

TIM: I’ve got Snoop.

ALICE: Oh, yeah, I love Snoop. It’s great. Snoop and Emma are the two I know of. Others are available.

Dopamine hit of saving money

DANI: I think as well with the dopamine hit you get from buying something, you get that from saving.

PHILIPPA: Yes!

DANI: I started a challenge in January on Monzo. Other banks are available. It was a one-penny-a-day savings challenge. I’m thrilled -

PHILIPPA: - Oh yeah?

DANI: - When I look at that pot now. By the end of the year, you’re supposed to have, I think, £648. At this point in the year, I’ve got hundreds of pounds. It started a penny on 1 January, two pennies on 2 January, and it goes up like that -

PHILIPPA: Oh, OK.

DANI: - Now the daily payments are £3, something.

PHILIPPA: It’s a coffee.

DANI: Less than a coffee.

ALICE: It’s so clever.

DANI: It’s completely changed my mindset in terms of saving up for stuff.

ALICE: There’s one with Monzo. For anyone that enjoys the gamification of money, you can use a tool called ‘If This, Then That‘. For example, you can set it so that if it’s raining outside, you automatically save £10 and things like that, which is just - If you find money managing it quite boring and tedious, I think finding ways to actually make it fun. Yeah, why not?

PHILIPPA: But you’re right about the dopamine hit of saving, which I know sounds so hilarious, because how can that compare to going out and buying a handbag or something?

DANI: It really does.

PHILIPPA: But actually, it really does. It’s so weird. I get a sad little hit every month when I see my pension contribution land in the account. It’s really fascinating. It’s just that - Because I’m not one of those people who lives all over my pension balance. I don’t live on the app looking to see what it is. I know some people do and find it very rewarding.

But that, I do. I get a little warm glow. It’s safely gone and stashed. As you say, the saving thing, when you look at those little automated savings pots, I’ve got them set up to small amounts going in and it’s amazing how they rack up.

DANI: Yeah, it is.

PHILIPPA: Then if you don’t look very often, when you do look -

DANI: - it’s a nice treat -

PHILIPPA: - It’s like a lovely win.

DANI: It’s that consistency. We say it all the time about pension contributions, but the same for saving. Consistency and automation are the two biggest things. If you’re listening and thinking, “oh, I want to start saving”, or “I want to start paying off this debt”. If you just start with £10 or whatever, it’s a very small amount, you won’t notice it’ll just start rolling. I think the main thing is [to] just start now.

ALICE: I think also - Sorry.

PHILIPPA: If you don’t see it, you don’t miss it, do you?

ALICE: I think translating because with Buy Now, Buy Later, it’s very obvious what the tangible win of using it is. You’re seeing, “oh, I’m going to get that new top”. Now, I think, if you can also translate the opportunity cost. We’ve said the average increase in spending for the average person that’s using Buy Now, Pay Later, it’s $60 extra per week that the research has shown.

PHILIPPA: I’m still amazed by this.

ALICE: I know.

PHILIPPA: It’s a lot.

ALICE: It’s a lot of money.

PHILIPPA: It’s so much.

ALICE: It’s so much money. That’s three - quick maths, but £3,000-ish a year. I think translating into the opportunity cost of what that means over the course of a year, maybe even over the course of 10 years, it starts to actually look quite scary, which you don’t want to scare yourself into saving. But I think having a more tangible connection to what you could have otherwise can be really helpful.

PHILIPPA: What that money could’ve done for you.

ALICE: Exactly.

PHILIPPA: I’m going to say, I know we’re a pension podcast, I’m going to say, if you’d invest in that way, it would’ve been sitting there rolling for you. So there’ll be even more of it.

Tips for managing seasonal spending

PHILIPPA: I’m just going to wrap this up with [the] best tips. The tip that you’d have for this season right now, reining in your spending.

DANI: Mine’s maybe a bit basic, but Secret Santa. I think, don’t feel like you have to buy a gift for everybody. If you have a big family, Secret Santa’s fantastic. If you have a small family, it’s even better because you can get a really nice gift.

PHILIPPA: Yes. Excellent advice.

ALICE: My mum actually messaged me yesterday, the best message ever, which was, “we’re doing Secret Santa this year”. I was thrilled. I think that’s a massive one. I think also, it sounds really boring, but just planning. Actually sitting down and writing a list of what you’ve got to spend money on, who you’ve got to buy a present for, and thinking really carefully about what the budget is, and then going out and making purchases. I think it’s boring, but really, really important.

PHILIPPA: Yeah. Go on then, Tim.

TIM: Definitely agree with all those. I guess one other thing is if you think it’s going to be really problematic, speak to someone and get help. It’s better to do that now before Christmas rather than wait until January.

PHILIPPA: Yeah, definitely. Thank you all very much indeed. Such a great discussion. I really enjoyed it. I learned loads, as I always seem to do.

If you enjoy these podcasts, we’d love to hear from you. You can contact us on social media @PensionBee or email us at podcast@pensionbee.com with your thoughts and questions! We would really like to hear your thoughts and questions.

If you’re new to the podcast, you can find all the back catalogue episodes on YouTube. They’re in the PensionBee app too, or whatever app you prefer. While you’re there, you could always leave us a review and a rating.

Next week, we’ll have a special episode all about - what else? The Autumn Budget. What does the Chancellor have in store for us? In December, we’ll be rounding off the year with an episode about micro-retirements, and we’ll be looking back at everything we’ve learned this year with a special bonus episode, keeping your finances and your retirement savings on track. Don’t miss those.

A final reminder, anything discussed on the podcast shouldn’t be regarded as financial advice or as legal advice. When investing, your capital is at risk. Thanks for being with us. We’ll see you next time.

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.

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Technology has made shopping easier than ever. With just a few taps on your phone, Buy Now, Pay Later (BNPL) lets you split any purchase into smaller instalments - no interest, no fuss, no pain.

But this convenience comes at a cost. One-in-five of UK shoppers have used BNPL, and 41% of them reported a late payment in the past year. Some experts believe the ease of click-to-buy can make it harder to notice how it affects your mindset and your money. BNPL can feel free at first, even though you’re still borrowing.

Before you buy something next time, it’s worth taking a moment to understand what really happens when you click that ‘pay in three’ button.

Tim Hogg, Behavioural Economist and Director at Fairer Finance, says: “Psychologically, we feel like it’s less expensive. When I’m looking at a £30 pair of shoes, if it says the first payment is £10, even though I know that I’ll pay £10 three times, research shows that I feel like it’s actually cheaper.”

What is BNPL?

BNPL lets you spread the cost of something into smaller payments over a few weeks or months. Unlike credit cards, BNPL is interest-free if you pay on time - which is part of what makes it so appealing.

The BNPL sector has grown rapidly in recent years. What started as a way to spread the cost of big purchases, like furniture, is now often used for smaller everyday buys - from £30 beauty products to clothes and gadgets.

But there’s a catch. BNPL isn’t fully covered by the usual credit rules yet. Because it’s short-term and 0% interest, it’s not covered by the Consumer Credit Act that governs other borrowing. That means fewer protections for shoppers and fewer checks on how BNPL companies operate. New rules are due to start in July 2026, and they should bring BNPL under closer supervision.

How much do we spend at Christmas?

The pressure to spend during the festive season is real. On average, people in the UK spend around £700 more in December than in other months - roughly 30% more. And each year, the shopping season starts earlier, stretching that financial strain across several months.

Research shows around half of us will use some form of credit to pay for Christmas, and 40% will specifically turn to BNPL. Many will still be paying off their festive spending in July - just in time to start planning for the next one.

Why BNPL isn’t really ‘free’

It might feel free, but BNPL has hidden costs. Providers charge retailers between 2-5% per transaction, and those costs are usually passed on to shoppers through higher prices.

More importantly, BNPL can quietly change how we spend. Research from Harvard in 2022 found that people using BNPL spent an average of £50 more per week - a permanent increase in spending, mostly on retail. That’s roughly £2,600 a year.

When you use BNPL, you separate the ‘pain of paying’ from the pleasure of buying. You get the dopamine hit now and defer the discomfort until later. It’s why it’s so effective at encouraging extra spending.

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Seven ways to protect yourself from overspending

BNPL can be handy for spreading the cost of bigger things, but it’s important to use it mindfully. Here are seven steps to help you stay in control.

1. Avoid using BNPL apps as shopping platforms

Many BNPL apps now look more like online stores, filled with offers and recommendations designed to tempt you.

If you have a BNPL app, avoid browsing it. Only use it at checkout when you’ve already decided to buy something.

2. Set a personal spending threshold

Set your own BNPL boundary. For example, you might decide to only use it for things that cost more than £500, or another amount that feels right for you.

This creates a natural pause between impulse and decision. If you wouldn’t normally split a £30 spend into instalments, don’t let the app persuade you.

Alice Tapper, Founder of GoFundYourself, says: “I’m a huge fan of open banking apps that nudge you into automating your savings, or that say you’ve spent a little more this month.”

3. Keep track of payment dates

Even savvy spenders can miss a BNPL payment. Don’t rely on app notifications. Add reminders to your calendar and set up a Direct Debit as soon as you buy.

4. Add friction to the buying process

Enable two-factor authentication (2FA) on shopping and payment apps. Stay logged out so you have to sign in each time. Those few extra seconds of friction are often enough to stop late-night impulse buys.

5. Try the ‘favourite’ strategy

Instead of adding items straight to your basket, save them to your favourites or wishlist. Revisit them a week later - you’ll often find the urge has passed, or that you’re more selective about what you really want.

6. Use open banking apps to stay informed

Budgeting tools can show you where your money’s going and alert you when your spending spikes. Many also let you automate savings, so you’re building financial security as easily as you’re spending.

7. Make a realistic budget

Before the festive rush begins, plan what you’ll spend and how you’ll fund it. Consider Secret Santa arrangements or spending caps. And give yourself permission for some guilt-free spending. Setting aside a small ‘fun’ budget makes your plan more sustainable.

Summary

BNPL can be a helpful way to spread the cost of bigger purchases, but the convenience often leads to overspending. Research shows BNPL users spend an average of £3,000 more per year. To protect yourself and stay in control:

• Don’t browse BNPL apps - checkout only, not a shopping destination.
• Set a spending threshold - only use BNPL for purchases above a certain amount.
• Mark payment dates manually - don’t rely on app notifications.
• Enable two-factor authentication - add friction to impulse purchases.
• Use wishlists first - wait a week before buying.
• Try open banking tools - track spending and automate savings.
• Budget with wiggle room - include some guilt-free spending money.

Listen to episode 44 of The Pension Confident Podcast, where our expert guests unpack the psychology of spending and share practical ways to protect your finances this festive season. You can also read the full transcript.

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.

One of the key announcements from the government’s Autumn Budget was that Income Tax thresholds will remain frozen until at least 2031. This means the State Pension is on course to meet, and potentially exceed, the Personal Allowance.

For many people, the State Pension makes up a large part of their retirement income. As it rises, understanding how tax works in retirement becomes more important.

The Personal Allowance, which is how much you can earn annually before paying Income Tax, has been frozen at £12,570 since 2021. In 2021/22, the full new State Pension was £9,339.20 per year. Today, it’s £11,973 per year (2025/26).

The State Pension increases each year under the triple lock. This guarantees a rise based on whichever is highest of:

• inflation;
• average wage growth; and
• 2.5%.

Even if the State Pension only rises by the minimum 2.5% each year, it’s expected to exceed the Personal Allowance by April 2027.

Who will this affect?

Chancellor Rachel Reeves said she doesn’t intend for people to pay Income Tax if their only income is the State Pension. However, this would apply to a relatively small number of people.

In reality, many people have other sources of income in retirement, such as:

• a workplace or private pension;
• a part-time job;
• interest on savings; and
• investments.

As the State Pension gets closer to the Personal Allowance, even a small amount of extra income could mean you start paying Income Tax.

From April 2026, the full new State Pension is expected to be £12,548. If you’re eligible for the full amount, you’d only need £32 a year of extra income to become a basic rate taxpayer.

There are around 13 million people receiving the State Pension across the UK. The Department for Work and Pensions (DWP) estimates that 8.51 million already pay Income Tax. This includes around 2.5 million people on the pre-2016 State Pension system, who receive both a basic pension and additional State Second Pension (SERPS) income, which can take their total income over the tax threshold.

With the Personal Allowance frozen, millions more people could start paying Income Tax in the years ahead.

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How do you pay tax in retirement?

If your total income goes above the Personal Allowance, you pay Income Tax on the amount above it. How that tax is collected depends on where your income comes from.

If your State Pension on its own takes you over the Personal Allowance, HMRC will usually collect any Income Tax through a Simple Assessment after the tax year has ended. This sets out how much tax you owe and when it needs to be paid.

The Chancellor said that people whose only income is the State Pension shouldn’t pay Income Tax in future. However, the government hasn’t yet confirmed how this would work in practice.

If you receive income from a workplace or private pension, Income Tax is usually deducted automatically by your pension provider under PAYE (Pay As You Earn). This is done through your tax code, which is why it’s important to check your tax code is correct.

If you receive income from other sources and also have PAYE income, HMRC will usually collect all the tax you owe through your tax code.

You will usually need to complete a Self-Assessment tax return if you have:

• self-employed income; or
• total income exceeding £150,000 a year.

How can I reduce my tax bill in retirement?

There are a few general ways to manage your income in retirement that may help reduce how much tax you pay:

• understanding how much State Pension you’re likely to receive;
• making use of tax-free income sources;
• pacing your pension withdrawals once you can access your pension (normally from age 55, rising to 57 from 2028); and
• using your ISA allowance where possible.

Check your State Pension

A good starting point is to get a State Pension forecast on GOV.UK. This shows how many years of National Insurance (NI) contributions you have made and how much State Pension you’re on track to receive.

You usually need 35 qualifying years of NI contributions to receive the full new State Pension.

Look at other income

It can also help to review your other sources of income, such as workplace and private pensions, savings, investments, or part-time work.

Many people have higher income in the early years of retirement, especially if they’re still working or using savings. This can often be a useful time to draw on tax-free income sources.

Use your tax-free pension lump sum

One option is to take small, regular amounts from your tax-free pension lump sum.

You can usually access your pension from age 55, rising to 57 from 2028. Most people can take up to 25% of their pension savings tax-free.

For example, if you have £500,000 in pension savings, you could access up to £125,000 tax-free - either as a lump sum or in portions. Using our Drawdown Calculator can help you understand how much you could take tax-free and how much tax might apply to further withdrawals.

Make the most of ISAs

Any income you receive from ISAs is tax-free. This includes:

• interest;
• dividends; and
• investment gains.

Using ISA savings to top up your income can reduce the amount of taxable income you need to take from your pensions. If you aren’t using your full £20,000 annual ISA allowance (2025/26), you may wish to consider doing so, depending on your circumstances.

The bottom line

Whether you’re in, or approaching, retirement, it’s worth keeping an eye on the impact of the rising State Pension. While frozen tax thresholds may mean more people pay Income Tax over time, planning ahead can help you manage your income more effectively.

Understanding how much State Pension you’re likely to receive is a good first step. Pacing withdrawals and making use of tax-free income sources can also help you keep more of your money over the long term.

Want to explore how your pension could grow? Pensionbee’s Pension Calculator can help you see how adjusting contributions could impact your retirement income.

Ruth Jackson-Kirby is a Financial Journalist passionate about making money matters clear and accessible. She’s written for The Mail on Sunday, MoneyWeek, The Sun, and Good Housekeeping, helping readers navigate pensions and personal finance with confidence. She believes everyone deserves financial security and is on a mission to cut through jargon and make finance relatable.

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.

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