The following is a transcript of our monthly podcast, The Pension Confident Podcast. Listen to episode 37, watch on YouTube or scroll on to read the conversation.
Takeaways from this episode
- Financial engagement is essential - staying engaged with your finances can significantly impact your retirement savings, potentially saving you up to _higher_rate_personal_savings_allowance,000 over your lifetime.
- Visualising the ‘future self’ - imagining yourself as retired can be tricky, but using tools that help visualise your future can help you make better financial decisions today.
- Simple actions matter - small, consistent actions, such as reviewing pension contributions and fees, can lead to significant improvements in retirement savings.
- Automation helps - automating savings can simplify the process and encourage consistent saving without the need for constant decision-making.
- Setting realistic goals - establishing achievable financial goals rather than overly ambitious ones can help maintain motivation with retirement planning.
- Education and resources - using available resources, such as PensionBee’s Pension Calculator, can empower individuals to make informed decisions about their pensions.
PHILIPPA: Hi, welcome back. Today, we’re exploring a simple question: the most effective way to max out your chances of retiring comfortably. It might not be what you’re thinking because it’s not about trying to chase down a six-figure salary or taking huge investment risks - it’s actually just about always paying attention to your finances.
Ignoring what’s going on with your money, it can cost you. New research from PensionBee shows that ‘financial disengagement‘, as it’s known, that can cost savers as much as _higher_rate_personal_savings_allowance,000 over their lifetime. So, serious money.
But when did you last check on your savings? Do you actually know how much you got set aside for retirement? Small decisions made today could transform your future because they give your money time to grow. And here’s the good news: staying engaged isn’t that hard.
In this episode, we’re going to show you how to do it. I’m Philippa Lamb. Just before we begin, if you haven’t subscribed to The Pension Confident Podcast yet, why not click right now so you never miss an episode.
We’re talking about how to be ‘financially engaged’. Here with me, I have Bola Sol, she’s a Financial Adviser, Money Columnist and Author. Neil Bage is a Behavioural Expert and Co-Founder of Shaping Wealth. And from PensionBee, Head of Consumer PR, Laura Dunn-Sims. Hi, everyone.
ALL: Hi.
PHILIPPA: Here’s the usual disclaimer before we start. Please do remember, anything discussed on the podcast shouldn’t be regarded as financial advice or legal advice. When investing, your capital is at risk.
Common financial pitfalls
Now look, everyone, before we start telling people they need to pay more attention to their finances, I’m going to freely admit I haven’t always done this. I’ve definitely buried my head in the sand about money - more than once! How about you? Have you always been good?
NEIL: No.
PHILIPPA: I’m glad. I’m feeling better already.
NEIL: It’s difficult. We have a gazillion competing priorities in life - money is one of them. Unfortunately, it’s the one that often falls by the wayside because, let’s face it, it’s a bit difficult, it’s a bit complex.
PHILIPPA: It feels that way, doesn’t it?
NEIL: Yeah, that’s right.
PHILIPPA: Laura, you do this stuff for a living. Have you always been a good girl about it?
LAURA: No, I’ve not. When I first left university, my first job, I actually opted out of my workplace pension because -
PHILIPPA: - I did this, too.
LAURA: Yeah, I wanted the extra money and I had no idea of the benefits of saving into a pension. I wouldn’t do it now, but yeah, lesson learned.
PHILIPPA: Yeah, I didn’t even bother to respond. I got an email, and “would like to be?”, and I didn’t. And so, of course, it never happened. Bola?
BOLA: No. [In my] mid-20s, I took a contracting job, which means I didn’t get permanent benefits as a permanent employee. I just didn’t think about my pension. I was all thinking “oh yeah” getting all the cash for a few years. Not once did I think about my pension - but I do think about it more now.
PHILIPPA: Well, yeah, as time goes on, I think we all think about a bit more. But I mean, this is the trick, isn’t it? Starting early. It’s like you say, we’ve all got our reasons for not keeping a closer eye on our money: life is busy, pensions can feel confusing, I mean can you even remember your login details?
Laura, we do need to do this, though, don’t we? Because you’ve got this new research from PensionBee talking about this _higher_rate_personal_savings_allowance,000 potential loss of being disengaged from your pension. Where does that number come from? How does that work?
LAURA: So, our research found that savers who consistently engage with their pension throughout their working life typically have better retirement outcomes. That’s because small early actions, such as assessing how much you’re contributing or how much you’re paying in fees, that can really make a difference in later life. Basically, the more you know about the pension, the more tangible it becomes, and then you can make more informed decisions from there.
PHILIPPA: And the trick here, I’m going to keep saying this in this podcast, is starting early. Because as we mostly admitted around the table at the beginning, when you start out in work, you’re just not thinking about this, are you? So, just getting your head around the fact that it’s a thing that matters to you, might not matter now, but it’s going to matter later.
Visualising our ‘future selves’
PHILIPPA: Neil, we’re not great at doing that, are we? It feels so far away that you don’t feel you need to keep on it?
NEIL: Yeah. As humans, we have a really interesting challenge with our ‘present self’ and our ‘future self’. And the future self (so, the Neil Bage in the future, right?) it’s a stranger to me. And in order for me to engage with my future self, I need to use my imagination and think “OK, who do I want that Neil to be when I reach 60 or 65”. Or whatever the date is, whatever the age is.
But the challenge in that isn’t only am I relying on my imagination, I’m also trying to weigh up the day-to-day challenges of living life. The bills and the holidays and all of the other things that are competing for my cognitive attention. And so, we’ve always as a species had a really difficult time to put ourselves into a future state and make decisions today that will ultimately benefit me in the future. It’s a notoriously difficult thing for us to do.
PHILIPPA: Yeah, that visualisation. Particularly when you’re in your 20s, visualising yourself in your 60s or your 70s - I mean, it feels almost impossible, doesn’t it?
NEIL: It’s incredibly difficult, and I’d say impossible. There’s a great piece of research by Hal Hirschfield, a Professor in the US, who is one of the world’s leading authorities on ‘future self‘. He created this app where it would age you and then say, “I now need you to make some decisions”. And what they found is people who looked at an aged version of themselves typically invested more money into their pension than someone who didn’t. And it’s not just picturing it, it’s planning for who you want to be.
The other challenge is there’s an amazing psychological phenomenon called the ‘End of History Illusion‘, whereby if you ask people, “are you different to how you were 10 years ago?”, people go, “yeah, I am”. “What about 20 years ago?”, “very different”. “30?” “Oh, I don’t recognise that person.” “Great. How much do you reckon you’re going to change going forward in the next 10 years?”, people will typically say, “not a lot”.
PHILIPPA: Really?
NEIL: It’s called the End of History Illusion because we believe that we’re the finished article today. That’s playing out at the same time. Then when somebody says, “can I talk to you about a pension?”, which is about saving for your future. You’ve got these unconscious conflicts going on all the time.
Overcoming complacency with pensions
PHILIPPA: It’s interesting, isn’t it? The other thing I’m thinking [about], Bola, is if you’ve got a pension, if you’ve been auto-enrolled into a workplace pension, whatever it is, there’s that temptation [to think], “well, job done”, right? And complacency sets in, and you never think about it again.
BOLA: Oh, absolutely, because you tell yourself “it’s being taken care of, so I can’t be asked to look at it”. I have conversations with people and ask [them], “do you know what it’s invested in?”, and they say “I have no idea”, because it takes away, as you said, the stress of competing with everyday life priorities and stuff. So, you think, “look, I’ve got some money in there, not sure how much it is, but it’s doing something”.
The _higher_rate_personal_savings_allowance,000 ‘cost of disengagement’
PHILIPPA: Laura, this is the thing, isn’t it? This is where the _higher_rate_personal_savings_allowance,000 comes in, that if you do think about it early, you can make a real difference to it. Can you talk us through the missed opportunities that people have to engage with this?
LAURA: Yeah, definitely. I think engaging with a pension doesn’t have to be as overwhelming as sometimes we think it can be. It’s really simple steps like understanding what your pension is invested in.
Simple things like moving from a poor performing fund, which might typically be giving you about a 3% annual return a year, to finding a better performing fund, for example, maybe giving you a 7% annual return. Over your lifetime of saving, that can add almost _higher_rate_personal_savings_allowance,000 to your pension.
It’s those simple things like perhaps you’ve changed jobs. You have an old pot that you haven’t thought about for a few years, you find it, you consolidate it into one pot if that makes sense to do so. And then you’re only paying one set of fees instead of two. Then from there, you can start planning and making those decisions in the future that helps retirement feel so much more tangible.
How can we make the numbers feel real?
PHILIPPA: In terms of ‘the how’ you do all this, thinking that most people are definitely not experts on pensions. You’re thinking, “OK, I should be - I don’t even know how good my fund is. Is this a good thing? What I’ve got now? Should I be somewhere else?”. How do you make those decisions? Where do you start with that?
LAURA: So, your pension provider should be able to help provide a ‘fund sheet‘, which would give you an overview of performance. There’s also the government’s MoneyHelper website, they give free, impartial advice. So, they can help you navigate that a bit more.
There’s lots of great educational tools like pension calculators, where you can play around with your contribution amounts, change the age you want to retire at, and then that can really help you give a personalised view of what saving for retirement could look like for you.
PHILIPPA: They’re quite fun, aren’t they? In that whole thing of being, “if I could save a bit more now, I could have a yacht when I’m 70!”. But I think as part of the visualisation process that you were talking about, I think they’re pretty good for that, don’t you?
NEIL: Anything that I can look at, anything I can engage with, that allows me to put a piece in the jigsaw puzzle (if you like) is helpful. And the more it feels real, the more it feels achievable, the more likely I am to then engage with it. The more I see something and I go, “I’ll never, ever do that, I’ll never reach that figure” - it becomes a barrier to entry for any of us. That’s no different to other walks of life.
You don’t really need to go to the gym and pay £50 a month for gym membership if you’ve never been to the gym. Because the likelihood is you’re not going to stick it out. Because you’ll go to the gym, you’ll forget how difficult it is. You’ll see all these other people around you pumping weights and doing all the things, and you go, “oh, I’m not like them”. And so, you retreat from that.
That’s the same as our money life. It’s no different. If you see something that you go, “but that’s not me”, it makes it notoriously difficult to engage with it. It needs to feel real.
PHILIPPA: So, this is setting realistic goals then, not setting some crazy aspirational thing and then thinking, “I’m going to fail before I’ve even started”. I mean the gym is a great analogy, I think. That whole thing, you walk in, and think “this is just never going to be me. These people are so fit and gorgeous”.
NEIL: That’s why I’ve never joined a gym. It’s never me.
PHILIPPA: You see, I go all the time.
BOLA: I go. I just stare at people in the corner like, “wow! Maybe one day I’ll be there, but I’m just going to stay over here for now”.
PHILIPPA: Yeah, at least you’re going, Bola, right? I mean, you can be one of those people, I think.
Transitioning from an ‘immediate return’ to ‘delayed return’ environment
PHILIPPA: I wonder as well, with pensions, I mean, old age, no one’s looking forward to it, right? We push it away. Why would you want to think about it? Isn’t that another barrier? You’re talking about financing a time of your life that you don’t really ever want to get to.
NEIL: Look, inertia is a really powerful issue - or challenge - for all of us. But deep rooted behind this is a bigger challenge that we never address. It’s the elephant in the room, right? So, let’s talk about it.
Human beings have been around for five and a half million years. We’ve been evolving for five and a half million years, and we have a fine-tuned sense of how to engage with the world around us. We’ve developed the most amazing skills to communicate with each other, to spot danger, to spot threats, to lean in when people need help, to lean back when you feel that you’re in danger - all that type of thing.
But during this period that we’ve evolved, things have been invented that we as a species have had to try and adapt to. And one of them is money - money is an invention. And the thing is, we’ve been around for five and a half million years. Money has been around for 2,000 years. So, it’s a relatively new thing for the human brain to navigate. So, pensions [are] a nuanced element of our money story.
Borrowing, investing, saving, giving, earning - all of these dimensions of our money life bring with it challenges. And when you say “save”, that in and of itself is a difficult thing. When you then go, “oh, by the way, I’m talking about a pension”, it becomes nuanced in a way where people go, “I can’t even save £5 a month to do this, and what you’re asking me to do something, and by the way, I’m not going to see it again for 35 years”.
So, the elephant in the room is we need to get better at addressing people’s money life first before we go down to a deeper level, which is talking about a specific solution, almost in a specific vertical. And if we can lift ourselves up and engage people at that level, I see this time and time again with our clients around the world. It completely transforms the conversation.
PHILIPPA: That’s really interesting. I mean, in the same way, even the concept of saving for the future in terms of human existence is quite a new idea, isn’t it?
NEIL: Of course.
PHILIPPA: Because we were lucky just to get through the day for human existence. So, the idea of “I’m saving for years ahead”, it’s quite a fresh thought, isn’t it? I mean, if we think of ourselves as animals, as you say.
NEIL: It really is. But it is right. If you go back to the five and a half million year timeline, we’ve probably spent 99% of that time in what’s known as an ‘immediate return’ environment. If I was hungry, I ate. If I needed food, I’d hunt. We now live in a ‘delayed return’ environment, where the benefits of what I do aren’t beneficial to me up until some future state. That messes with a brain that has just spent five million years in a world that screams “now”.
PHILIPPA: Get through the day.
NEIL: Now we’re saying, “later”.
PHILIPPA: Yeah!
How to retire with more money
PHILIPPA: Yes. See, I think we’re getting at something here. Now, Bola, tell me, if we’re thinking we’ve understood our difficulties here, the barriers, getting started on this, your tips for this. I mean, how do people - If people are thinking, “yeah, this kind of is me and I know I need to do something” - where do they start?
BOLA: First of all, looking at where you’ve worked before and asking, “did I have a pension there? And do I know where it is now?”. Because I think so many people - we know that there are billions in lost pensions. And instead of feeling like, “oh, I don’t have much to start with”, have you looked into where you’ve worked before and what pensions you have there? I think that’s incredibly important.
It can give people a bit of hope because that’s what I did. It gave me hope to just feel like, “OK, well, there’s a pot of money, and then there’s another lot of money there”. As opposed to before, there [were] maybe five different pots, and I was just like, “this feels quite overwhelming”. That’s what the government website is there for. You can check there.
PHILIPPA: Yes, they can find your lost pensions.
BOLA: Yeah, they can find your lost pensions. Second of all, look into what you’re investing in. Choose a type according to the attitude to risk that you have. I think that’s incredibly important because you may have a higher level of risk at particular stages of your life. I wouldn’t say age, but stages of your life, because you get to a point where you’re like, “OK, I can afford the risk right now”. Then you get to other points where you’re like, “absolutely not. Now is not really the time to be making those big decisions with my pension”. Maybe I’m getting closer to my pension age, I don’t really want to play with that money.
PHILIPPA: Yeah, I want to talk about risk, an appetite for risk a bit later on. The other thing that’s in my mind is contributions - because contributions are contributions, right? They just tick over, we don’t think about it. But there’s that thought as well, isn’t there? That if we’re talking about long-term savings growing with the power of compound interest, that marvellous thing, compound interest over time, even a small rise in how much more you put in your pot can make a huge difference. So, it’s about finding a little bit each month if you can. Those savings, I think, can be helpful, can’t they?
BOLA: Exactly. I speak to people about that a lot. I say, “can you put a bit more in?”. And sometimes I get, “oh, I don’t want to”. I’m like, “you’ll be happier in the future”. It’s so funny because you’re trying to make them see their future self. And funnily enough, what you said earlier, I can’t wait to be older.
PHILIPPA: Really?
BOLA: I know that you can become more unfiltered with age. And I’m just like, “oh my gosh, 70 plus, I’m going to run amok! Just be saying anything I want to”.
PHILIPPA: OK, we’re all back around the table when Bola’s that age and we’ll see what she says. I think, Laura, it’s important to understand, is it? We’re talking about upping our contributions. People think, “well, I just can’t. I just can’t”. We’re all strapped for cash. But it doesn’t need to be a lot, does it? I mean, say you could manage £50 a month more. What’s that going to look like, say, 30 years?
LAURA: Yeah. If you made a £50 contribution every month for 30 years, that could give you about £27,000 extra in your pot in retirement. It’s a very small action, but it’s the - Because it’s been done over a long period, it’s as we mentioned, compound interest. It allows your money more time to grow and you start almost earning interest on the interest you’re earning.
Yeah, I think it can be really powerful. One thing we sometimes say is sometimes it’s easier to think about it as a percentage rather than, I’m going to add £50 more. If you think I’m going to increase my contribution by 1%, 2%, then you can do that in line with if you have a salary increase or perhaps you have a bonus, and it helps you think about your overall financial position instead of maybe just plucking a number out of thin air because you think £50 sounds good, sort of thing.
NEIL: Laura, you raise a really valid point here. If I use this phrase, “human beings are born as storytellers, we’re not born as calculators“. That phrase is important. In some regards, as you say, OK, then I’m not going to baffle them with numbers. Great. But we can use it to our advantage, because if we say, just increase it by 1%, People go, “oh, that’s a small number. Oh, I could do that”.
So, we’re using it to our advantage to get them to take action. It’s not nefarious in any way. It’s playing on the fact that if you said, “oh, increase it by £50”, they can model £50 in their head. They know what £50 buys. They don’t know what 1% buys because they can’t do the maths. Sometimes we need to be clever in how we communicate with people.
Automate your way to compound interest
PHILIPPA: You can use technology as well, can’t you? To do this stuff for you because I love tech. This whole idea that you can set up all sorts of triggers with your banking. But when your savings get to a certain level, automatically ‘X’ amount goes into your pension or ‘X’ amount goes into some other form of savings. So, that you don’t even have to have that conversation with yourself, and it just does it for you. Do you use those? I think they’re really helpful.
BOLA: Yeah, I do. I know that there’s some apps where there’s things like, “oh, when it rains, put money away”.
PHILIPPA: Oh, that sounds great to me.
BOLA: I didn’t do that. Living in the UK, my friend does that. Living in the UK, I’m like, that is a very risky game because it rains a lot.
PHILIPPA: You say that, but it’s really beneficial, isn’t it?
BOLA: Yeah, exactly. Literally saving for a rainy day. But yeah, I do use some of those.
PHILIPPA: Yeah, I think that’s the thing, isn’t it? Then you don’t run that risk of a year later thinking, “oh, I got that rise, but actually, I’m so used to it now that it doesn’t feel like a rise. I haven’t done anything with that money, and I could have had a year of compound interest on that if I’d done it”. Technology can really help take some of the muscle out of it for you, can’t it?
NEIL: I use an app and I invested a small amount of money in it. I’ve kept it and I use it, and I’ve used it for now for three years. Basically, all it does is it goes into my bank account every week and it does an analysis of what my income is and my expenditure, and it just takes a tiny amount and takes it away from me and puts it into a savings account. And I never see it. I don’t miss it.
I get an email off them saying, “oh, we’ve just taken £43.62”. And you go, “amazing, OK, thanks”. And then I move on with my life. But when you go into the app and you look at how much money you’ve saved, it really is a “oh my word. That’s unbelievable”. And that’s both of them: it’s automating, but it’s also the power compounding - because it’s sitting there now and it’s doing something.
PHILIPPA: I think sometimes we talk about this like, “you should be doing this, you must do this, it’s important to do it”. But I’m not sure we talk enough about how nice it feels when you do. Because it gives you a real - Well, maybe it’s just me.
BOLA: Oh, I get it too.
PHILIPPA: But you stash a little bit of money or you look at your balance. And with apps, obviously, you can check your pension balance whenever you want to. And you do get that little, “oh, that’s nice”.
BOLA: I literally, what you said, I had an app doing that for two years, but I completely forgot about it. One time I was strapped for money and I was like [sliding out] the front door. I felt like I’d won the lottery. Although it was my money.
PHILIPPA: You did it, but it feels like a gift, doesn’t it?
BOLA: It felt great. Yeah, it does.
Understanding ‘risk’ in an investment context
PHILIPPA: The other barrier to all this is investing. We talk about this a lot on the podcast: saving versus investing. Because [with] saving, you feel good about saving, but you can always get your hands on your money. Investing, tying it up, it’s daunting. I mean, it’s an uncertain world. Stuff happens. We know this, job loss, whatever it might be, things that we’re not expecting. Good things, like unexpectedly having all sorts of nice things come to your life. It can be expensive.
That whole idea of, “do I really want my money where I can never get at it?”. I wonder whether we can talk a bit about how to get past that feeling of that being an overwhelmingly permanent final thing to do, particularly women. I think at PensionBee, you’ve got data on this, haven’t they? We’ve talked about it before that women, we like to save, but we like to be able to get our hands on it. How do we do this, Neil? You’re the one who’s going to tell us the psychology behind this. How does that not feel overwhelmingly risky to us?
NEIL: It doesn’t, and we have to accept that it’s overwhelming and risky. Two words. It’s overwhelming because every fibre of your brain is saying, “live today”. I can put my money into a savings account and the bank will say to me, “oh, you’re going to get 1% interest” and I can go, “OK, fine. Will I lose my capital?” “absolutely not”. That gives me a safety barrier. I know that if I put _money_purchase_annual_allowance in, I’m going to get at least _money_purchase_annual_allowance back. Whereas if I put _money_purchase_annual_allowance into a stock market or investment, there’s a risk that I might get none back.
Now, there’s an interesting thing that we can help people with here, and that’s understanding the difference between ‘possibility’ and ‘probability’. We often confuse those two things [interchangeably]. “Is there a possibility that I could lose money in a stock market investment?” “of course”. But it’s highly improbable. In other words, the chance of that happening, statistically, is incredibly slim, almost virtually zero, if you choose the right investment, right?
PHILIPPA: And it’s a long-term investment.
NEIL: And it’s a long-term investment. The only way you’re going to realise its value is if you stick the course. If you allow it to do what it needs to do. And that’s difficult because the roof breaks, the car’s broken down, and whatever, whatever - life happens. But the evidence is crystal clear, the sooner you can start investing in a pension, the sooner you can put your money to work, the more you will get back at the point in life when you need it. Your future self will turn around and say, “thank you so much for doing this for me”.
PHILIPPA: I mean, Laura, that’s the point that we should mention because we’ve talked about keeping an eye across your finances. That’s what the whole episode is about. But if you check your pension balance all the time, for years and years, you’re going to be looking at it at some point, it’s going to go down in value because it’s dependent on global financial situations you have no control over, your pension provider has no control over. So, one day, and it’s probably going to happen more than once, you’re going to look at the number and think, “oh, wow, that’s less than I thought”. Tell us, just reinforce the message, why we shouldn’t worry about that?
LAURA: Yeah, absolutely. I think it’s important to remember that pensions are long-term investments. And particularly if you’ve got a long investment horizon, so you’re not expecting to retire anytime soon, then you have a long time for the market [to] recover and you can weather that market volatility quite well. Typically, as you get older, you can move to a pension that ‘de-risks’. If you’re retiring very imminently, you wouldn’t have big nasty shocks, sort of thing.
PHILIPPA: Yes.
Balancing greed and fear
PHILIPPA: We’re balancing greed and fear, aren’t we? We want great returns on the money, we’re frightened of losing it - and they’re perfectly natural emotions. Thinking about how we make objective decisions, Neil, and we’re back to the whole ‘tell us how to do it’ thing. We’re aware you can feel the fear. When you - Money worries really get you like nothing else. You can really feel the anxiety in your heart, can’t you? When you think, “oh, that’s not as much as I thought it would be”. That’s bad news. And then the temptation to [make] a knee-jerk decision is really there, like a rush to action. How do we train ourselves to be less emotional about this and more rational?
NEIL: Man, that’s the million dollar question, right?
PHILIPPA: It is!
NEIL: It really is, because money is an emotional lightning rod. The second you say “money”, the brain goes into a place of, “oh, we’re going to have a difficult conversation. Do I want to really do this?”.
PHILIPPA: “It’s going to be complex”.
NEIL: “It’s going to be complicated. I’m going to hear jargon. I’m not going to understand. I’m going to look stupid”. All of those things. And risk is an important part of the story here. We need to learn more about money from a personal perspective. What I mean by that is we all have ‘money stories’. We all grow up and hear things about money. “We live our lives hand to mouth” or “oh no, we save because we’re a family of savers”. All of these stories we hear as kids -
PHILIPPA: You get an identity, don’t you?
NEIL: We get an identity, and it’s a ‘money identity‘, and it becomes part of who I am. And the more we can be objective about the decisions we make, the more we can make them based on fact and evidence, the better the decision will ultimately be. We shouldn’t really be making decisions about our long-term financial futures based on our gut or “it feels right”.
PHILIPPA: “I’ve got a friend who’s doing it”.
NEIL: Yeah, exactly. That’s completely subjective. Congratulations. Buy your friend a bottle of champagne and say, “well done”. But the reality is their life is their life and your life is your life.
PHILIPPA: So, countering that fear, that anxiety, I mean, there are rational things you can do. We haven’t talked about ‘diversification’. If you’re worried about risk, if you’re worried about a ‘bad number’ that you’re suddenly seeing on a screen - how do people do that? So they can balance out those risks.
BOLA: Yeah, I think it’s key to invest in different types of assets and ask yourself, “what are you comfortable investing in?”. Maybe also, ask yourself, “what don’t you know?”. Being British, we know about property quite well. But then you want to look at, OK, stocks and shares or bonds, for example, in different ways that you can invest.
And also, different markets. If you invest in funds, maybe you don’t know much about markets in Asia, for example, or America. But this is where you come in, you learn, you ask questions. Then just remember, you can take different percentages. If there’s something that you deem to be safer and you have a better understanding of, you maybe say, “I’m comfortable to put _higher_rate of asset allocation into this one thing and then maybe _basic_rate in another”, and just realise that how that number and what you put in can change over time.
How to make (and keep) good habits
PHILIPPA: Well, we need to wrap this up really now. But before we do that, I’d like to get back to that whole idea of how do we embed these good habits that we’re trying to form because Neil, you talked about the gym. We can think about diets all of us have been on. That whole sense of how do you make saving and investing feel fresh and worth doing for life. Bola, what have you got?
BOLA: Well, automation is important. So, wherever you can automate money and contributions to your pension. Yeah, I’d say that’s key. And potentially, if you can add more in manually yourself, maybe set quarterly reminders on top of the automation, that way you have two different sets of reminders. One that’s happening automatically and one where you can say, “oh, I wonder, do I have a bit more money at the moment to put in?”.
PHILIPPA: I do that. Calendar reminders, that simple. It’s a nice idea, isn’t it? Set them for weekends, though, because if you set them in the week, you don’t do it. I speak from experience here because life gets busy. Then before you know it, you’ve forgotten about that calendar reminder. Laura?
LAURA: When it comes to my pension, I’m going to have a ‘home pot‘ sort of approach. I’m going to have one pot that I keep throughout my career. Then as I go through all my old pots, I’m just going to move into the home pot. The idea is I should hopefully always have only one to two pensions.
PHILIPPA: Yeah, simplification. I guess there’s a lot to be said for that, isn’t there? How many more passwords do we need to remember?
BOLA: Honestly.
PHILIPPA: Yeah, I know. Thank you all very much indeed.
ALL: Thank you.
PHILIPPA: And thanks everyone for listening. It seems to me this is all about looking after the pennies and watching them turn into pounds - eventually.
If you’re enjoying the series, do give us a rate and a review. It really helps us reach more listeners like you. And if you’ve missed an episode, don’t worry. You can catch up anytime on your favourite podcast app, YouTube, or if you’re a PensionBee customer - in the PensionBee app.
Next month, we’re going to be looking at how to stay on top of your finances if you’re shifting careers. You might be reskilling into a whole new line of work, becoming self-employed, maybe in later life, or even starting a business. We’re all having to be more agile in our working lives, and we’ll have plenty of tips and inspiration to help guide you through your next step.
Just a final reminder, anything discussed on the podcast shouldn’t be regarded as financial advice or legal advice, and when investing in capital is at risk. Thank you for joining. 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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