The Buzz.

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

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

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

HOLLY: Hi, Philippa.

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

MARTIN: Thank you. Happy to be here.

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

How does inflation eat away at our money?

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

MARTIN: Morning maths!

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

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

PHILIPPA: Yeah.

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

PHILIPPA: ^{_lower_earnings_limit} from Holly. Martin?

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

PHILIPPA: So, you’re saying £130?

MARTIN: Yeah, £130.

PHILIPPA: Holly wins!

HOLLY: Yes!

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

HOLLY: In five years.

PHILIPPA: I know, it’s a lot.

HOLLY: That’s hardcore.

Shopping around for the best rate

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

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

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

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

PHILIPPA: They’ve captured you already.

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

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

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

PHILIPPA: Really?

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

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

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

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

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

Building an emergency fund

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

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

PHILIPPA: Immediately.

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

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

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

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

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

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

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

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

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

State benefits that are impacted by savings

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

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

PHILIPPA: Just remind people what Pension Credit is.

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

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

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

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

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

What are the rules on cash savings?

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

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

PHILIPPA: This is National Savings?

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

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

PHILIPPA: Yes, globally.

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

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

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

PHILIPPA: So, this isn’t a jam jar?

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

PHILIPPA: And that’s currently?

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

PHILIPPA: Which is most of us.

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

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

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

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

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

PHILIPPA: Over the long-term.

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

Small steps to save for your future

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

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

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

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

Are pensions ‘hot’?

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

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

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

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

PHILIPPA: When you’re old and needy.

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

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

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

PHILIPPA: Yeah, that’s a good point.

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

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

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

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

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

MARTIN: Yeah, exactly right.

HOLLY: And blow up horribly!

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

The case for personal pension saving

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

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

PHILIPPA: When you say diversified, you mean?

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

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

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

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

MARTIN: Oil.

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

MARTIN: That’s right.

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

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

PHILIPPA: Personal choice.

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

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

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

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

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

PHILIPPA: “What does this mean?”

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

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

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

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

HOLLY: It’s locked away.

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

PHILIPPA: Is that right?

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

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

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

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

PHILIPPA: OK, Holly, go for it.

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

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

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

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

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

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

HOLLY: More jam jars.

PHILIPPA: More jam jars.

HOLLY: Kitchen’s getting very busy, Philippa.

Final thoughts

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

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

PHILIPPA: The safety cushion.

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

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

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

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

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

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

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

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

HOLLY: Thank you for having me.

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

Risk warning

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

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

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

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

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

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

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

Company shares in 2024 (as at H1)

What are company shares?

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

Global stock markets

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

Source: BBC Market Data

PensionBee’s equity plans

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

Bonds in 2024 (as at H1)

What are bonds?

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

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

Global bond markets

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

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

Source: Morningstar

PensionBee’s fixed-income plans

PensionBee’s money market plans

Have a question? Get in touch!

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

Risk warning

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.

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

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

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

Triple lock State Pension protection

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

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

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

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

Stock market movements

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

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

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

No plans to re-introduce the lifetime allowance

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

Pension system overhaul

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

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

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

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

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

The value of pensions

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

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

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

Key points

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

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

Risk warning

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 05/12/2024

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

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

What is greenwashing?

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

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

The FCA’s measures to tackle greenwashing

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

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

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

What are the new SDR labels?

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

Label: Sustainability focus

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

Label: Sustainability improvers

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

Label: Sustainability impact

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

Label: Sustainability mixed goal

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

The impact of the FCA’s actions

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

Where to learn more about socially responsible investing (SRI)

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

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

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

Risk warning

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

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

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

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

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

What happened to stock markets?

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

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

Source: BBC Market Data

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

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

Source: BBC Market Data

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

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

Source: BBC Market Data

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

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

Source: BBC Market Data

How did the investment landscape shift in 2023?

Inflation and interest rates seesaw

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

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

Company shares divided opinions

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

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

Bonds on the mend

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

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

What does this mean for pensions?

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

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

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

Have a question? Get in touch!

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

Risk warning

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.

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

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

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

Here’s what you had to say about PensionBee

We love hearing your feedback

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

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

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

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

Risk warning

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

This article was last updated on 22/11/2024

Self-employment comes with tremendous freedom but it can also mean more financial responsibilities. If you’re a sole trader or director of your own company, chances are your financial priorities are, in no particular order: chasing up invoices, paying invoices, liaising with an accountant and dealing with bank admin. As this list isn’t exhaustive, it’s no wonder self-employed workers are those least likely to pay into a pension.

The Office for National Statistics (ONS) found that self-employed workers aged 35-54 are more than twice as likely to have no pension than workers who are employed by a company. This is a shame because there are many financial benefits to saving into a pension aside from building a healthy retirement fund.

Pensions equal free money

Anyone employed by a company, age 22 or older and who earns over ^{_money_purchase_annual_allowance} a year will be paying at least 5% of their qualified earnings into a workplace pension, unless they’ve opted out. Under these rules, known as Auto-Enrolment, an employer has to set up a pension for its eligible employees and also commits to topping that up with an amount worth at least 3% of their qualified earnings. While that ‘free money’ might not be available if you’re self-employed, there’s one big advantage to setting up a pension - you don’t pay tax on the money you pay in.

Self-employment pension rules explained

• You can receive tax relief on pension contributions of up to ^{_annual_allowance} gross a year (known as the annual allowance), or 10^{_personal_allowance_rate} of your salary for the tax year 2024/25.
• A basic rate taxpayer gets a ^{_corporation_tax} tax top up, so for every £100 they put into their personal pension, HMRC adds an extra £25. If you’re a higher or additional rate taxpayer, you can claim further relief through your Self-Assessment tax return.
• Any unused annual allowance from up to the previous three tax years can be put into the pension. This is called ‘carry forward‘ and can be up to £180,000 on top of your current year’s annual allowance.

How do I pay into a pension if I’m self-employed?

There are several different types of pension and how you set up your pension will depend on your own circumstances. Below are some things to consider.

• How you like to manage your money/savings: do you want to spend time managing some of the money in the pension yourself, or do you want it all managed for you?
• How much do you plan to pay in?
• How near are you to retirement?
• What type of company set up do you have: are you a sole trader or do you run your business through a limited company of which you’re a director?

What type of self-employed pension should I have?

There are two main types of pensions: workplace pensions which we’ve already mentioned, and personal pensions. If you’re self-employed, a personal pension will normally be your best option. It’s easy to set up a personal pension. These come in three main types:

• an ordinary pension scheme;
• stakeholder pension; and
• a Self-Invested Personal Pension (SIPP).

What type of personal pension should I choose?

Personal pensions are offered by most pension companies.

• Stakeholder pensions have capped charges but have a more limited choice of investments.
• An ordinary personal pension will give you a choice of investments, these will normally be managed funds which include a mix of shares and other stock market listed assets. You need to compare charges and fees when considering which type of personal pension to pay into.
• If you’re a more active investor, for example, you already own some shares and dabble in the stock market, then a Self-Employed Personal Pension (SIPP) may be worth considering. SIPPs can include collective investments, such as unit trusts or investment trusts. They can also include property and land and some SIPPs will allow you to invest in residential property through real estate investment trusts (REITs); these are also a collective investment, including the shares or assets of a number of companies.

What happens to my tax?

When you set up a personal pension your pension provider will claim back the tax relief for you, and reinvest it back into your pension. Most basic rate taxpayers usually get a ^{_corporation_tax} tax top up and higher and additional rate taxpayers can claim a further ^{_corporation_tax} and 31% respectively through a Self-Assessment tax return. The tax incentive is offered because the government wants to promote saving for later life.

A pension is a long-term savings plan which comes with some risk. Because pension savings are invested, they have the potential to grow into a large sum or fall in value over time.

Do I need to have a special pension if I have a limited company?

If you run a limited company, you can pay into a pension in two different ways:

• personally, using the salary your limited company pays you; or
• direct, as an employer.

If you pay into a pension as an employer then any payments are considered a business expense, so they can usually be offset against your company’s corporation tax bill. It’s worth noting that if you’re paying your pension through your salary, dividends don’t count as earnings and are taxed separately.

Limited companies can use pension contributions to offset their tax and the ‘carry forward‘ rule means you can backdate any of your unused annual allowance from the previous three tax years.

How much tax can I save by contributing to my pension?

If you’re a company director of a limited company you can pay up to ^{_annual_allowance} and offset your corporation tax bill, corporation tax is ^{_corporation_tax}. If you’re a sole trader or have a PAYE salary paid through your company, you can claim extra tax relief if you fall into a higher tax bracket by completing a Self-Assessment.

{{dark-cta}}

How do I choose a pension?

Not all pensions are the same, although you’ll have the same tax benefits regardless of which provider you go with. You’ll need to look around and compare different pension providers, or if you have a financial adviser it may be worth seeing if they can offer pension advice, although you’ll have to pay for this.

Other things to consider are:

• minimum contributions - some providers will have a minimum contribution level;
• ability to pay in lump sum or stop and start my contributions - if you’re not paid a regular salary you may only want to make one payment a year;
• charges for managing my money - this might be an annual fee or a management fee; and
• what type of plan you want to invest in - does the provider offer a sustainable investment option?

Saving on National Insurance

Employers don’t have to pay National Insurance on pension contributions. This is another reason why it may be more tax-efficient to pay into a pension directly from your limited company rather than personally through a salary.

Do I get a State Pension if I’m self-employed?

You’ll need to have at least 10 qualifying years of National Insurance contributions to be eligible for the UK State Pension, and you’ll need 35 years in total to receive the maximum State Pension amount.They don’t have to be 35 years in a row and if you qualify, you’ll get the full new State Pension which is currently £221.20 per week. You’ll usually need to pay your National Insurance contributions through your Self-Assessment tax return. Self-employed workers will need to pay the Class 4 National Insurance rate.

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

Risk warning

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 26/04/2024

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

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

1. Contribute to a Junior ISA

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

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

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

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

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

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

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

4. Splurge on a wedding gift

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

5. Contribute to a child’s pension

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

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

6. Make sure you pass on your pension

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

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

7. Keep your will updated

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

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

Risk warning

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

This article was last updated on 05/02/2026

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

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

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

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

1. Life expectancies are increasing

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

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

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

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

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

Pension Life Expectancy Tables

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

2. Your pension has longer to grow

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

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

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

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

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

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

4. Your employer will keep topping up your pension

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

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

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

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

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

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

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

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

6. Delaying your State Pension can boost your payments

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

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

If you reached State Pension age before 6 April 2016

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

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

If you reached State Pension age after 6 April 2016

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

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

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

How long can I defer my State Pension?

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

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

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

The fluctuations in your investments, such as your pension, are influenced by both ‘micro’ and ‘macro’ factors. Each pulling or pushing your investments in their own way. Imagine your investments as a small boat in a vast ocean. Two sets of waves affect them: tiny ripples and big waves.

Tiny ripples are micro factors. These are close-up details, from the profitability of the companies you’re invested in to whether those companies have released new products. By investing in many companies, known as diversification, your investments are less shaken by the rise or fall of a few outliers.

Big waves are macro factors. These influence how the whole economy moves, and could be things like interest rate changes or geopolitical tensions. They affect everyone in the ocean, not just your boat. Macro factors can have a big impact, even on diversified investments. For this reason investors tend to keep an eye on trends in the global economy.

Keep reading to find out how markets have performed this month and what key trends could shape the global economy, and your pension, in 2024?

What happened to stock markets?

In the UK, the FTSE 250 Index fell by almost 2% in January.

Source: BBC Market Data

In Europe (excluding the UK), the EuroStoxx 50 Index rose by almost 3% in January.

Source: BBC Market Data

In North America, the S&P 500 Index rose by almost 2% in January.

Source: BBC Market Data

In Japan, the Nikkei 225 Index rose by over 8% in January.

Source: BBC Market Data

In the Asia Pacific (excluding Japan), the Hang Seng Index fell by over 9% in January.

Source: BBC Market Data

Key trends to watch in 2024

The value of a company is influenced by its performance, which in turn is impacted by the wider economy too. Here are five key trends that could shape the global economy, and your pension, in 2024.

1. Elections making headlines

The year ahead promises to be monumental for global politics. Almost half of the world’s population will cast their ballots in national elections. That equates to over four billion people across more than 50 democratic countries.

Elections likely to gain significant news coverage include:

• Russia’s presidential elections in March;
• India’s parliamentary elections in April and May;
• EU parliamentary elections in June;
• US presidential elections in November; and
• the UK’s general election, which is set to take place at some point in 2024.

The outcome of these elections will shape international trade and the global economy for several years to come.

2. Growing geopolitical tensions

There has been a rise in global tensions and conflicts. The world is facing the highest number of violent conflicts since the Second World War, with around two billion people living in these areas of conflict. Russia’s ongoing war against Ukraine has cast a long shadow on the global economy. When the full-scale invasion began two years ago, a series of economic shocks unfolded.

With the international supply of key exports restricted or suspended, prices rose sharply causing inflationary pressures on households. Central banks began raising interest rates and companies suffered under these uncertain conditions. We’re still experiencing a slow recovery from this. It’s difficult to predict the long-term effects of the latest conflicts in the Middle East and how long those shocks might last. This adds an additional layer of uncertainty to the global economic outlook.

3. Falling inflation

The global economic recovery remains slow, according to the International Monetary Fund. In the UK, inflation was at 4% in the 12 months to December 2023. This is double the Bank of England’s target of 2%. In February 2024, the Bank Rate was maintained at 5.^{_corporation_tax} for the fourth month running. This remains the highest it’s been since 2008.

This is being mirrored in other major economies, such as the Federal Reserve in the US which currently has rates between 5.^{_corporation_tax} and 5.5%. Experts anticipate the UK’s Bank Rate will drop to 3% and inflation will fall to 2% by the end of 2025. This slow and steady approach aims to give the UK economy a soft landing in the next two years.

4. Renewables gaining traction

The push for cleaner energy sources is expected to accelerate in 2024. Companies and governments are setting increasingly ambitious decarbonisation targets, with some US utilities aiming for 8^{_personal_allowance_rate} carbon reduction by 2030, exceeding previous net-zero by 2050 goals. Renewable energy costs are falling, making them increasingly competitive with fossil fuels.

Additionally, rising concerns about climate change and energy security are prompting a shift towards renewable options. As the clean energy sector continues to prove its potential, it’s attracting the significant investment needed for expansion.

5. Artificial Intelligence booming

The Artificial Intelligence (AI) revolution is underway. The bad news is that over the next five years 14 million jobs will be replaced by new technologies, according to The World Economic Forum. The good news is that an AI gold rush is widely predicted.

By 2032, experts predict that AI-powered digital advertising will generate a staggering $192 billion annually, while the market for dedicated AI servers could reach $134 billion. These figures underscore the vast potential of AI to revolutionise industries from marketing to healthcare. Those investing in these AI companies could financially benefit from this.

In summary

The past four years have been wildly unpredictable. 2020 and 2021 rocked our small boat with broken supply chains, a devastating pandemic, and stalled growth. Then came the rollercoaster of 2022 and 2023, with inflation spiking, energy prices sent us into rough seas, and the recovery felt shaky. But here is the good news; the outlook for 2024 and 2025 appears stronger. This could be the period we start to regain a more solid economic footing.

Inflation, while still high, is finally cooling down. Supply chains are healing, and growth, though slow, is back on track. The next two years are crucial. It’s all about stabilising prices, reviving growth, and finding that “pre-pandemic normal” for interest rates and inflation. Central banks and governments will be juggling inflation control with economic support, a tricky balancing act.

Even so, geopolitical and economic tensions around the world remain high. With elections looming in several countries, including the UK, there’s still potential for future turbulence. In any case, pension saving is usually a marathon and not a sprint. It’s worth remembering that it’s normal and expected for pensions to go up and down in value over time.

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

Have a question? Get in touch!

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

Risk warning

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 is part of our quarterly plan performance series. Catch up on last quarter’s summary here: How PensionBee’s plans are performing in 2023 (as at Q3).

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

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

2023 figures cover the period between 1 January and 31 December 2023.

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

Company shares in 2023

What are company shares?

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

Global stock markets

Stock markets underwent a dramatic reversal in Q4 2023. Early concerns about inflation and interest rate hikes caused an initial downturn, but positive economic indicators sparked a significant rally in the latter months. Most stock market indices experienced substantial gains, making up for recent losses and approaching record highs. The technology sector was a key driver, with several prominent companies fueling most stock market surges. This positive quarter exemplifies the dynamic nature of many stock markets and underscores the importance of long-term investing.

Source: BBC Market Data

PensionBee’s equity plans

^Performance for Q4 2023 only. Fund inception date was 15 February 2023, so calendar year reporting data is not available.

^^Equity % at 31 December 2023, allocation changes on a weekly basis due to the plan’s actively managed component.

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

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

Bonds in 2023

What are bonds?

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

Global bond markets

As interest rates peaked in 2023, bonds started looking attractive again. After years of negative returns, the fixed income offered by bonds provided a safe haven in the volatile market. Investors, seeking stability, flocked to bonds. For some, it was a welcome respite from the stock market’s recent rollercoaster.

Source: Morningstar

PensionBee’s fixed-income plans

PensionBee’s money market plans

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

This is part of our quarterly plan performance series. Check out the next quarter’s summary here: How PensionBee’s plans are performing in 2024 (as at Q1).

Have a question? Get in touch!

Do you want to know more about your pension plan with PensionBee? Check out our blog on the Top 10 holdings in your pension and see which companies you’re investing in. You can check out our Plans page to learn how your money is invested in different assets and locations. You can always send comments and questions to our team via engagement@pensionbee.com.

Risk warning

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.

We strive to deliver a product that helps fulfil our mission to enable everyone to look forward to a happy retirement. Over the years, we’ve launched a host of features to support our customers no matter where they are on their retirement journeys. From the Inflation Calculator; to help you see how inflation impacts the value of your pension pot over time, to Easy bank transfer; which makes contributing to your pension faster and more convenient to name but a few.

In this series, we’ll be showcasing some of our recent innovations that make saving, planning and adjusting for life in retirement easier.

Add non-PensionBee pots to your Retirement Planner

Our Retirement Planner is built to show you how much income you could have in retirement based on the age you hope to retire at and your desired annual retirement income. It’ll also help you understand how much you need to save and how long your pension could last. When you’ve got multiple pension pots spread over different pension providers it can be difficult to fully understand how much income you could expect to receive in retirement.

Get a full picture of your retirement income

With our new feature, you can add the values of up to five additional pensions from other providers into the Retirement Planner. If you have pensions from previous jobs or even your existing workplace pension, you can now see your combined retirement savings all in one place, rather than just your PensionBee pension savings.

How do I add my other pensions?

Log in to your BeeHive through our website or app and open the ‘Analytics’ tab. In the app tap ‘Retirement Planner’ after you open the ‘Analytics’ tab.

All you need to know is the name of your other provider(s) and how much is in your pension(s) with them. If you don’t see the name of your provider listed just select ‘Other’. Once you’ve added that information, your projected retirement income will be automatically adjusted!

Combining your pensions has many advantages, so if you’re ready, you can transfer your other pots and manage them in one place. You can do this from the Retirement Planner by selecting the ‘Transfer my other pensions’ button. You can also tap the ‘Funds’ tab in the app or the ‘Transfers’ tab when logging in through our website.

{{main-cta}}

Discover great content in our app

At PensionBee we share lots of pension news, insights and educational content via our blog; The Buzz, Pensions Explained, Pension Confident Podcast and YouTube channel, so there’s always a reason to come back and see what is new. That may include how your pension is impacted by changes in legislation or tips to help the self-employed with their retirement savings.

Whilst we’ve long produced lots of helpful content, we wanted to make it even more accessible to customers who access their accounts via the app. If you use the PensionBee app, you may have noticed that we’ve started to introduce some of our blog articles, videos and The Pension Confident Podcast for you to read, watch and enjoy whilst using the app.

What you’ll discover

There’s plenty of great content to get stuck into. Each week we feature hand-picked articles. You can find out how the latest change in interest rates impacts your pension, learn how you can get financially fit and much more.

With our app’s podcast player, it’s easy to listen to the latest episode of The Pension Confident Podcast. You’ll hear from our host Philippa Lamb each month and get insights from a panel of financial experts. Our podcast digs into topics that really matter, from common financial mistakes and how to avoid them, to whether you should save into a pension or an ISA. Each episode includes links to articles via the show notes and resources to explore topics in more depth as well as the episode’s transcript.

Where can I find the ‘Discover’ tab?

You can find the ‘Discover’ tab by opening the PensionBee app and tapping the ‘(?)’ icon in the top right-hand corner. From here you can read, watch and listen to our content whenever you want.

Check back in the app regularly to discover new content. We feature new articles each week and the latest episode of The Pension Confident Podcast each month. But watch this space, we’ll be bringing more exciting changes to your reading, watching and listening experience in the app this year to help you build your pension confidence to save for and manage life in retirement.

Future product news

Keep your eye out for our next product update. We’ve got more great new features in the works that we’re looking to bring to you throughout the rest of the year. We’ll let you know what they are, how they can help you save for a happy retirement and how to get started.

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.

Making regular contributions to your pension is a crucial way to save for a happy retirement. However, life can be unpredictable, and there may be times when you find yourself unable to maintain a consistent level of contributions. If you’ve stopped your pension payments and are looking to catch up, don’t panic – it’s never too late to get back on track. Here are a few things you can do.

Assess your financial situation

You might have lowered, or stopped your pension contributions altogether, for a couple of reasons. Maybe you’ve taken some time out of work, have been juggling other rising costs or, prioritising paying off debt. So take some time to go through your finances and understand all of your incomings and outgoings. Firstly this will enable you to prioritise your regular payments such as housing, travel and food. And secondly, it’ll help you identify where you might be able to cut back in order to resume your pension contributions.

Increase your contributions

If you’re able to, you might want to consider increasing your pension contributions gradually to get back on track. If you’re employed, you might be able to increase the percentage of your salary you contribute each month. Since Auto-Enrolment was introduced in 2018, the minimum employee contribution is 5% of qualifying earnings with employers needing to contribute a minimum of 3%. However, your employer might agree to pay more into your pension if you increase your contributions. This is known as ‘contribution matching’. Check your employee handbook or speak to your company’s HR department to find out more.

Consider a lump sum payment

If you’re returning to work after some time off, or have recently come into some money, you might want to consider making a lump sum payment to make up for missed contributions. If you’re closer to your desired retirement age, or are planning on retiring early, paying in a lump sum is a great way to give your savings a boost. You can use our Pension Calculator to check your pension forecast and discover if you’re on track to meet your goals.

Use carry forward and make the most of pension tax relief

In the current tax year you can contribute up to ^{_annual_allowance} to your pension. If you use up all of your annual allowance in one year, it’s possible to contribute more to your pension with unused allowances from the previous three tax years and still receive tax relief. Claiming tax relief on pension contributions for previous years is relatively straightforward as long as you were a member of a pension during that time. Before you get started, make sure you’re clear on the carry forward rules.

Four ways to catch up on pension payments

Using our Pension Calculator, we’ve done some modelling to showcase how the average person might make up for five years of missed pension payments. These calculations are based on a 40-year-old with an annual salary of £40,000 and a current pension pot of £30,000.

The following scenarios are for illustrative purposes only and assume: - pension experiences investment growth of 5%, inflation of 2.5%, and an annual plan fee of 0.7^{_personal_allowance_rate}; - salary experiences annual growth of 3.1% and inflation of 2.5%; and - contributions to their workplace pension (when making them) are 8% of their gross salary.

Some employers may enrol you in a defined benefit pension scheme, or not enrol you at all. If you’re unsure which type of pension you have, you can always ask your employer for more information. Learn about the eligibility criteria for Auto-Enrolment.

1. Scenario one

This scenario assumes you re-enrol into your company’s pension scheme from Year 6, after opting out for five years. The below graph shows the difference between:

• remaining opted out;
• opting back in from Year 6; and
• what your pension would look like if you’d remained opted in.

2. Scenario two

This scenario assumes you re-enrol into your company’s pension scheme from Year 6, after opting out for five years. And you make a lump sum payment of £2,400 (before tax relief) that same year. The below graph shows the difference between:

• remaining opted out;
• opting back in from Year 6 and making a lump sum; and
• what your pension would look like if you’d remained opted in.

3. Scenario three

This scenario assumes you re-enrol into your company’s pension scheme from Year 6, after opting out for five years. And you start making additional personal contributions of £200 (before tax relief) per month from Year 6. The below graph shows the difference between:

• remaining opted out;
• opting back in from Year 6 and making additional personal contributions; and
• what your pension would look like if you’d remained opted in.

4. Scenario four

This scenario assumes you re-enrol into your company’s pension scheme from Year 6, after opting out for five years. Plus you make a lump sum payment of £2,400 (before tax relief) in Year 6 and you start making additional personal contributions of £200 (before tax relief) per month from Year 6. The below graph shows the difference between:

• remaining opted out;
• back in, making a lump sum payment and making additional personal contributions; and
• what your pension would look like if you’d remained opted in.

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.

For the most part, nobody likes uncertainty. It can get in the way of progress and stop us moving forward with plans for the future – and these don’t get more important than retirement plans. With a general election on the way, there’s been a lot of guesswork in the world of pensions as to what impact it’ll have on our retirement savings.

With polls heavily suggesting a Labour win later this year, all eyes have been on the party’s Plan for Financial Services. This document answered some, but not all, of the questions around how it might act should it win. Let’s take a look at what a potential change in government could mean for your pension.

1. The Lifetime Allowance

In last year’s Spring Statement the Conservative Party announced it would be scrapping the Lifetime Allowance. This change is due to come into effect in April 2024. The Conservatives intended to encourage inactive individuals to return to work and remove the incentives to stop working. Labour has previously stated it would reverse this decision and reinstate the Lifetime Allowance should it get the opportunity. However, readers of the latest plan may have noted its exclusion, suggesting it might be subject to review.

2. Mansion House Reforms

There’s unlikely to be much divergence between the main parties on the Mansion House Reforms. Announced by Chancellor Jeremy Hunt in July 2023, the reforms are designed to seek ways to incentivise pension funds to invest more in the UK. In its latest plan, Labour announced it would create a British ‘Tibi’ scheme (akin to the French version which has created a €5 billion fund of institutional investment for French tech companies). If this were to happen in the UK, we could see increased investment into companies identified as having high growth potential. How would this impact pensions? Well, it would give UK pension funds, and with them its pension savers, an opportunity to invest in Britain’s most promising businesses.

3. Changes to Auto-Enrolment

A Conservative-backed bill has previously suggested changes to Auto-Enrolment which included:

• lowering the minimum age from 22 to 18 - giving young workers the opportunity to start saving four years earlier; and
• removing the qualifying earnings band - meaning contributions could be paid from the first pound earned.

Labour looks keen to expand Auto-Enrolment. This won’t come as much of a surprise as Labour initially developed Auto-Enrolment legislation as part of the Pensions Act 2008, before it was rolled out by the Conservative and Liberal Democrat coalition government from 2012-2018.

4. The State Pension and the triple lock

As we know from PensionBee’s Pension Confidence Index, the State Pension is an important factor for many of the UK’s pension savers. So the triple lock is a hot topic for any government, incoming or otherwise. Last year, the Chancellor maintained the triple lock and the State Pension will rise by 8.5%, in line with average earnings, from April. So the Conservatives have protected it for now but Labour’s position is unclear.

Last year, Deputy Leader of the Labour Party; Angela Rayner failed to confirm Labour’s commitment to the triple lock. While more recently Shadow Secretary of State for Work and Pensions; Liz Kendall stated there were no plans to change the triple lock. With the State Pension creating a sizable burden on the public purse, the triple lock is likely to continue to face scrutiny.

5. ‘Pot for life’ or lifetime pensions

Last year’s Autumn Statement saw the Chancellor unveiling plans for a ‘pot for life’. This would give employees the power to choose their own pension provider. Plus, it would help solve the problem of multiple small pots. Meanwhile, Labour has announced it’ll give the The Pensions Regulator new powers to bring about consolidation on certain defined contribution schemes. It has also criticised the delays to the Pensions Dashboards – which are designed to give savers access to all of their pensions data in one place. After several delays, the current timeline puts launch at 31 October 2026.

Gabriella Griffith is a freelance business journalist having worked across The Times, Sunday Times, The Telegraph and City AM. She also hosts the Find Your Business Voice podcast and co-hosts the Big Fat Negative podcast. She has a particular passion for start-up and SME stories, personal finance and women’s health.

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 06/04/2025

If you’re fortunate enough to receive a bonus on top of your salary, you might be wondering if it’s worth paying it into your pension and putting that money towards your future retirement.

According to new analysis by PensionBee, just £200 extra could add between £305 and £521 to your pension pot, depending on how far off you are from retirement. By doing this each Christmas, a 25-year-old today could accumulate an extra £16,483 by retirement or an impressive £32,970 with larger contributions of £400 each year.

In this article, we’ll look at whether you can pay your bonus into your pension, what to consider and how to do it.

Can I pay my bonus into my pension?

If you’re one of the 9.6 million people currently enrolled in a defined benefit pension scheme, you won’t be able to pay your bonus into your pension. This is because your retirement income is based on your salary and the number of years you work at your employer, rather than a pot that you pay into.

However, if you’re enrolled into a defined contribution pension - which most modern workplace pension schemes are - you do have the option of paying a cash bonus into it.

How do I pay a bonus into a pension?

You can pay a cash bonus into a defined contribution pension using a process called ‘bonus sacrifice’ (similar to a ‘salary sacrifice‘). It involves paying all or part of your bonus into your pension rather than receiving it in your bank account.

You’ll need to instruct your employer to pay your bonus into your pension for you, as they won’t do this automatically.

Of course, you can receive your bonus into your bank account and then pay this into a pension, just like a regular pension contribution. However, you’ll lose out on the income tax and National Insurance (NI) savings offered by a bonus sacrifice. More on this below.

{{main-cta}}

What are the pros and cons of paying a bonus into your pension?

A major benefit of directing your bonus immediately to your pension (via bonus sacrifice) is that it’s tax efficient. You don’t pay income tax or NI on the portion of your bonus that you contribute to your pension since it doesn’t count towards your income. This means you’ll receive the full amount without losing any value.

This can be particularly effective if you receive a large bonus or a bonus that pushes you into the next income tax band.

However, you can only contribute 10^{_personal_allowance_rate} of your salary or up to ^{_annual_allowance} into your pension each tax year (^{_current_tax_year_yyyy_yy}). You might be able to pay in more if you ‘carry forward’ unused contributions from the previous three years. So bear this in mind if you receive a large bonus or already make large contributions. When bonus or salary sacrifice is being used, it can’t reduce earnings below national minimum wage.

You’ll also need to bear in mind that your bonus usually won’t count as income if it’s sacrificed to your pension. This could affect the amount you’re able to borrow on a mortgage, since loan amounts are usually calculated as a multiple of your annual salary.

Since you won’t have to pay income tax on your bonus if it’s paid immediately into your pension by your employer rather than to you in cash, bear in mind that you won’t receive an additional ^{_corporation_tax} tax top up on your bonus contribution (unlike your personal contribution from your salary). This is because with a bonus sacrifice, your employee has agreed to reduce your pre-tax salary, so it’s treated in the same way as an employer contribution. For tax relief to apply, the payment must be net of income tax, rather than a gross payment.

Additionally, any other benefits that are calculated based on your salary could be impacted.

Paying a bonus into your PensionBee pension

Your PensionBee pension is considered a personal pension, which means you pay into it directly from your bank account - not from your employer. So your bonus can’t be sacrificed to a PensionBee pension unless you have arranged with your employer that they’ll send it (subject to our usual processing requirements).

However, if you’ve already received your pension and it’s too late to sacrifice it, you can put it into your PensionBee pension as a normal contribution.

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.

There’s a growing recognition that you can align your investments with your values. But what’s the impact of Environmental, Social, and Governance (ESG) factors on pension investments?

What’s ESG investing?

ESG investing involves evaluating companies based on three factors:

• Environmental - assessing a company’s impact on the environment. This includes carbon emissions, waste management, and resource utilisation.
• Social - examining relationships with employees, suppliers, customers, and communities. With a focus on labor practices, diversity, and community engagement.
• Governance - evaluating corporate leadership, executive pay, audits, internal controls, and shareholder rights.

Incorporating these factors helps investors identify companies that are both:

• financially sound; and
• committed to sustainable and ethical practices.

The rise of ESG in pension funds

More pension funds are adopting ESG criteria in their investment strategies. This is driven by a growing awareness of:

• climate change;
• social issues; and
• the long-term benefits of sustainable investing.

Research suggests companies with strong ESG practices are often better positioned for future challenges. These companies are therefore more likely to achieve better long-term performance.

{{main-cta}}

Impact on pension performance

ESG factors can impact pension investments and influence performance in several ways:

• Risk management - companies with poor ESG practices may face a number of penalties. Examples include regulatory fines, reputational damage, and operational disruptions. These can all negatively impact financial performance.
• Long-term returns - companies committed to ESG practices are often more innovative and adaptable. This could potentially lead to better long-term financial returns.
• Investor demand - the growing trend around ESG is driving companies to improve their practices. With this they hope to potentially enhance their market valuation.

Challenges and considerations

Despite the benefits, incorporating ESG factors into pension investments presents challenges. This type of investing is still fairly new so there’s less data available, processes are newer and guidelines are still being developed. Pension fund trustees need to ensure they aren’t compromising financial returns while balancing these factors.

The future of ESG investing in pensions

The momentum behind ESG investing in pensions is expected to continue growing. Institutional investors are increasingly recognising their role in promoting sustainability and ethical practices. By focusing on ESG factors, pension funds can achieve two things. Firstly, they’re contributing to positive societal outcomes. And secondly, they’re fulfilling their primary objective of securing financial returns for beneficiaries.

ESG investing represents a significant shift in the approach to pension fund management. By considering environmental, social, and governance factors, pension funds can:

• align their investment strategies with broader societal values;
• potentially enhancing long-term performance; and
• contribute to a more sustainable future.

PensionBee offers customers a pension plan that selects investments using ESG criteria. The Climate Plan invests in more than 800 publicly listed companies globally that are actively reducing their carbon emissions and leading the transition to a low-carbon economy.

View our pension plans page to learn more about the Climate Plan and the other plans we offer.

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 06/04/2025

Are you one of the many people in the UK who find themselves lost when it comes to managing money? You’re not alone. In fact, a third of adults have either less than ^{_basic_rate_personal_savings_allowance} in a savings account or no savings at all. This translates to nearly 23 million people having little to no financial backup.

Getting started can feel daunting, especially if you’re short on extra cash or lacking confidence. Budgeting can help you see where your money goes and how much you can save each month. If you aren’t sure where to stay, here are eight steps to build a budget.

1. It starts with switching banks

If you’re serious about improving your budgeting and spending habits, the first step might just be to switch banks. Many people open their first bank account as teenagers and stick with it for decades. In fact, over half of Brits have never switched their current account. But why stay stuck with a bank that doesn’t meet your needs?

As technology advances, some traditional high street banks are simply falling behind. This is where smart banks like come into play. With instant notifications for every transaction, you can track your spending in real-time, allowing you to make informed decisions about where to cut back or spend more.

Starling, for example, has a Bills Manager tool to help you manage upcoming payments with autopay and centralised bill tracking, so you always know what’s leaving your account. You can also set aside money in ‘Spaces’, which are separate pots for specific expenses like holidays or groceries - and even personalise them with nicknames and images.

2. Do you know where your money is going?

Some monthly expenses are fixed, like utility bills and rent, while others, such as groceries and entertainment, can change. By categorising your spending, you can identify areas to cut back and save more. There are various apps available that can help you track your money and even automate savings based on your budget.

Apps like Emma can be used to help build your credit, save more, and spend less with an all-in-one financial membership. Utilising Open Banking, you can track all your accounts in one place, budget effectively, monitor unnecessary subscriptions, and optimise your everyday banking.

3. Clear your debt to zero

Before you can build wealth, it’s important to eliminate debt. Start by listing all your debts, excluding any mortgage balance or student loans, to see what you owe across financial providers. There are two popular methods for tackling debt: the ‘snowball method’ and the ‘avalanche method’.

The snowball method focuses on paying off your smallest debts first, which can provide quick wins and motivation as you eliminate balances. While the avalanche method prioritises debts with the highest interest rates, potentially saving you more money in interest over time.

Use tools like ClearScore to see if you’ve missed any payments, as this can impact your credit score. With a clear plan and progress tracking, you can work towards being debt-free. Knowing your credit score and report helps you understand how lenders view you and how to access the credit you deserve.

4. Create an emergency fund

An emergency fund is a savings account for unexpected costs, such as car repairs or job loss. Experts suggest saving three-to-six months’ worth of living expenses to build a strong safety net. But, the UK Savings Statistics found that two-thirds of Brits believe they wouldn’t be able to last three months without borrowing money.

It’s best to keep your emergency fund in an easily accessible account, such as a high-interest savings account, so you can access it quickly when needed. If you’re just starting out, aim to save at least ^{_higher_rate_personal_savings_allowance} to ^{_basic_rate_personal_savings_allowance} for your emergency fund and gradually increase it over time.

In the UK, savings interest may be taxed. For the ^{_current_tax_year_yyyy_yy} tax year, the Personal Savings Allowance (PSA) allows you to earn interest on your savings without paying tax. The amount you can earn tax-free depends on your income tax rate:

• ^{_basic_rate_personal_savings_allowance} for basic rate taxpayers;
• ^{_higher_rate_personal_savings_allowance} for higher rate taxpayers; and
• £0 (nothing) for additional rate taxpayers.

This is where Premium Bonds could become especially advantageous. You can save up to £50,000 and the prizes you may win don’t count towards your Personal Savings Allowance. For more certain rates of return, you could use a Cash ISA which allows you to save up to ^{_isa_allowance} each tax year.

{{main-cta}}

5. Set realistic short-term goals

Short-term savings goals are financial targets you hope to reach within one-to-five years. These might include saving for a holiday or a new gadget. It’s important to figure out how much you need to save and when you want to achieve it. For example, if you want to save £3,000 for a new car in a year, you’ll need to put aside about £250 each month.

To help grow your savings, consider using high-yield savings accounts or Cash ISAs, which usually offer better interest rates than standard accounts. Setting up automatic transfers to your savings account each month simplifies the process and keeps you on track. Regularly checking your progress can keep you motivated and allow you to make any adjustments needed to reach your goals.

6. Consider your long-term goals

Long-term goals are financial aims you want to achieve in five or more years. These might include saving for retirement, a home deposit, or just building up your personal investments. It’s important to start investing early, as this can help your money grow faster over time.

To get the best from your investments, consider making regular contributions - even if they’re small. These can grow over time thanks to compound interest. It’s also important to know how much risk you’re comfortable with, as this will help you decide on your investment approach.

Setting clear financial targets is important, whether it’s a specific amount for retirement or the price of a home you want to buy. Regularly check your investments and goals to make sure they still fit your situation. Remember, investing takes time and patience, so stay committed to your plans and be ready to adjust as needed.

7. Don’t neglect your pension

It’s essential to plan ahead for retirement by understanding your pension options and how much you will need to live comfortably. There are three main types of pensions in the UK:

• the State Pension;
• workplace pensions; and
• personal pensions.

To receive the maximum State Pension amount, you’ll need to have 35 ‘qualifying’ years based on your National Insurance (NI) contributions. You can use the gov.uk State Pension calculator to check your NI contribution record. Currently, both men and women can claim their State Pension from the age of ^{_state_pension_age} (rising to ^{_pension_age_from_2028} in 2028).

A workplace pension is a pension that’s arranged by your employer. Contributions are taken directly from your wages and paid into your pension. Employers now have to automatically enrol most of their employees into a workplace pension scheme, and employers are also obliged to make a certain level of contributions. The minimum employee contribution is currently set at 5% of your ‘qualifying earnings’, while the minimum amount your employer has to pay is 3%.

When you pay into a personal pension, also called a private pension, your pension provider will claim tax relief on your behalf and add it to your pot. At PensionBee, we’ll add your ^{_corporation_tax} tax top up to your balance automatically. For example, if you pay £100 into your pension, you get an extra £25 as tax relief, so a total of ^{_lower_earnings_limit} is invested in your pension. If you’re unsure how much to save, you can use our Pension Calculator to see if you’re on track for the retirement you want.

8. Review and adjust your budget regularly

Creating a budget is just the first step; maintaining and adapting it over time is what keeps you on track. Life circumstances change - whether it’s a new job, an unexpected expense, or a change in your goals - and your budget should be flexible enough to adapt.

Set aside time each month to review your financial situation. Compare your actual spending to your budget, identify areas where you may have overspent or saved more than expected, and adjust accordingly. This is also a great time to revisit your financial goals and make sure they’re still realistic and aligned with your priorities.

Consider using budgeting tools like MoneyHelper’s Budget planner or spreadsheets to track your monthly progress. By staying proactive and making adjustments as needed, you can ensure your budget works for you, no matter what changes life throws your way.

Summary

Managing your finances is a personal journey and there’s no one-size-fits-all approach. By using this checklist, you can take stock of your current situation and take actionable steps towards improving your financial health. Remember, each small step counts, and progress is what truly matters.

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’re on the brink of retirement! After years of hard work and saving, it’s exciting to think about the next chapter. But with the demands of work and family, retirement planning can sometimes take a back seat in our busy lives. But now is the perfect time to refocus your energy. You may well be on track with your plans. If not, don’t panic, there’s still plenty of time to make adjustments.

Here’s a simple 10-point checklist to help you prepare for a happy retirement.

1. Aim to be debt-free

As you look ahead to retirement, it’s wise to focus on becoming debt-free if you can. With just ten years to go, reducing any existing debts will mean less of your retirement income is spent on interest payments. This is the ideal time to prioritise paying off high-interest debts like personal loans and credit card balances. If you have low-interest debts, such as a mortgage, you might choose to manage that over time during your retirement if the terms are reasonable. Imagine how freeing it’ll feel to step into retirement without the burden of debt.

2. Find any missing pension pots

Did you know that the average UK worker holds about 11 jobs over their lifetime? This can lead to multiple pensions with various providers, making it easy to lose track of them. If you’ve moved homes or changed jobs, you might not even remember where all your pensions are. You can use the government’s free Pension Tracing Service to help you track them down. By entering basic information about your previous employers, you can find the contact details of your pension providers. You’ll need to reach out to each one individually to check the value of your pots and update your contact information.

3. Consolidate your old pensions

Once you’ve tracked down your missing pension pots, consider consolidating them into a single plan. Planning for retirement can be difficult when your pensions are scattered across various providers. It can make simple tasks - such as seeing the total value of your pension pot or how much you’re paying in fees - unnecessarily complicated. A simple solution is to combine your pensions into one online plan. Having your pensions in one place could make them easier to manage and help you to make more informed choices when it comes to saving for retirement.

4. Review your pension investments

As you get closer to retirement, it’s important to reassess your pension investments. When you’re younger, your pension contributions may be invested more in company shares (equities) for growth. These investments are usually higher risk as they fluctuate with stock market movements and other changes in the economy. With 10 years until retirement, it’s often wise to shift towards lower risk investments like bonds (fixed-income). This strategy can help shield your savings from market fluctuations as you approach retirement. Many pension schemes offer a ‘default fund’ where your savings are automatically adjusted to lower-risk investments as you get closer to retirement. But it’s worth checking how your fund operates to ensure it aligns with your retirement goals.

{{main-cta}}

5. Assess your financial position

Now that you have a clearer idea of your pensions, it’s time to assess your overall financial position. Think about what income you’ll need in retirement and where that income will come from. Your income from pensions - across any workplace pensions, personal pensions and the State Pension - is only one piece of the puzzle. You may have savings accounts, like a Stocks and Shares ISA, or even income from a business or rental property.

6. Use a Pension Calculator

Consider using a pension calculator to check your progress. This handy tool estimates your projected retirement income based on factors like how much you’re saving and how many years you have left until retirement. With our Pension Calculator you can set a retirement goal and see if your savings seem to be on track. Don’t forget about the State Pension, which depends on your National Insurance (NI) contributions and qualifying years. You can visit gov.uk to check your NI contribution record. Just answer a few straightforward questions to find out how much State Pension you could get, when you can claim it and how you could increase it.

7. Top-up your pension savings

Are you on track to meet your income goals? If you are, that’s great news! Just remember to stay consistent and avoid becoming complacent. If you’re not on track, it might be time to increase your contributions to cover any shortfalls. But don’t worry, you still have time to turn things around. As you progress further along in your career, your earnings may be at their peak, allowing you to contribute more to your pension. Plus, if your expenses have decreased - perhaps your kids have grown up and your mortgage is nearly paid off - you may find you have extra funds to stash away into your pension.

8. Explore your retirement income options

When the time comes to retire, depending what type of pension you have, you can usually choose what to do with your pension. This might include taking out a lump sum when you turn 55 (rising to 57 from 2028) or buying an annuity. You could just decide to leave it invested and take regular drawdowns as your income. It’s vital to think carefully about which option suits your needs, as this is a significant decision that can impact your financial future. If you’re uncertain, it could be beneficial to discuss your choices with a qualified Independent Financial Adviser (IFA) who can provide personalised guidance.

9. Write a will and nominate beneficiaries

Have you thought about your estate? In the UK, your ‘estate’ is the value of all your financial holdings, including: cash, debts, investments, and property. This is used to calculate the amount of Inheritance Tax (IHT) that’s payable by your beneficiaries. These are the people you’d like to inherit your estate and they’re usually named in your will. But, pensions usually sit outside of your estate and, in most cases, won’t count towards your IHT threshold when you die. But, this is set to change in 2027. You can nominate your pension beneficiaries with your pension provider.

If you’re a PensionBee customer, you can easily add beneficiaries by heading to the ‘Account’ section of your BeeHive. Simply fill in some details about your chosen people or charities (or a combination) who you’d like to receive a portion of your pension when you die. You can spread it across different beneficiaries and customise the proportion of your pension that goes to each, in the form of a percentage. It’s important to regularly review your nominations and keep them up to date. Once we have been notified of your passing, we will begin our review of any death benefits payable from your plan with a view to identifying and agreeing on final beneficiaries as quickly as we can.

10. Book a free Pension Wise appointment

Finally, if you’re still feeling uncertain about your retirement plans, consider booking a free appointment with Pension Wise, a service from MoneyHelper, once you turn 50. This government service is designed to help you understand your options as you approach retirement. The best part? The appointment is completely free and impartial, giving you the chance to ask any questions you may have without any pressure.

If you’re aged under 50, the MoneyHelper website provides a wealth of useful information related to pensions and broader financial matters.

Summary

The 10 years before your retirement provide a great opportunity to review your finances, check your progress and make any adjustments necessary. Here’s a reminder of the 10-point checklist:

1. aim to be debt-free;
2. find any missing pension pots;
3. consider consolidating any old pensions;
4. review your pension investments;
5. assess your financial position;
6. use a Pension Calculator to track your progress;
7. top-up your pension savings if you can;
8. explore your retirement income options;
9. write a will and nominate beneficiaries; and
10. book a free Pension Wise appointment.

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

Please note that during July 2024 pension balances have been experiencing some volatility; to learn more you can read: Why have financial markets been volatile this summer?

Following the Labour Party’s victory in July’s general election, Rachel Reeves was appointed as the Chancellor of the Exchequer by the Prime Minister, Sir Keir Starmer. This makes her the first woman to hold the office in its over 800-year history.

But Reeves isn’t the only historic nomination under the new government. Since the turn of the 21st century, the UK government has had 10 Chancellors. Sounds like a lot? In that same timeframe there’s been 15 Pension Ministers. The newest incumbent, Emma Reynolds, has been appointed to hold two important roles simultaneously. She’s been designated as the Parliamentary Under-Secretary of State for Pensions and the Parliamentary Secretary for the Treasury.

By holding both positions, Reynolds will have the opportunity to contribute to pension policies and broader economic matters. This should promote a more integrated approach to tackling financial concerns, like the maintenance of State benefits, in the UK.

Keep reading to find out how the pension landscape may change under the new government.

What happened to stock markets?

In the UK, the FTSE 250 Index rose by almost 7% in July. This brings the year-to-date performance close to +1^{_personal_allowance_rate}.

Source: BBC Market Data

In Europe (excluding the UK), the EuroStoxx 50 Index remained flat in July. This brings the year-to-date performance close to +8%.

Source: BBC Market Data

In North America, the S&P 500 Index rose by over 1% in July. This brings the year-to-date performance close to +16%.

Source: BBC Market Data

In Japan, the Nikkei 225 Index fell by over 1% in July. This brings the year-to-date performance close to +17%.

Source: BBC Market Data

In the Asia Pacific (excluding Japan), the Hang Seng Index fell by over 2% in July. This brings the year-to-date performance close to +2%.

Source: BBC Market Data

Changes to pensions under the new government

With a joint ministerial role across both the Department for Work and Pensions (DWP) and HM Treasury, Emma Reynolds is set to conduct a comprehensive review of the UK pension landscape, fulfilling a promise made by the Labour Party during their election campaign.

Reynolds will be joining Liz Kendall, the Secretary of State for Work and Pensions in the Department for Work and Pensions (DWP), and the Chancellor Rachel Reeves in the Treasury. Together they’ll be working towards a wish list of items that previous Pension Ministers have failed to successfully address. Here are nine areas the new Pensions Minister will need to tackle:

1. Initial pension landscape review

The Chancellor, Rachel Reeves, has initiated a thorough review of the UK pension system. The reform will take place in two stages, with a focus on improving pension management in the short and long term. The goal is to boost investment, grow pension pots, and tackle inefficiencies within the sector.

2. Decision on WASPI compensation

The Women Against State Pension Inequality (‘WASPI‘) movement was founded in 2015 to address the disproportionate harm caused by the new eligibility criteria for the State Pension to women born in the 1950s. Many women have complained they’ve been adversely affected due to poor communication from the Department for Work and Pension (DWP).

The Parliamentary and Health Service Ombudsman (PHSO) recommended compensation ranging from ^{_basic_rate_personal_savings_allowance} to £2,950 per woman, which falls significantly short of the ^{_money_purchase_annual_allowance} per woman that WASPI had campaigned for. Now it’s up to the new government to decide how the WASPI women should be compensated.

3. Extension of Auto-Enrolment

The expansion of Auto-Enrolment has already been put into place. These changes include lowering the starting age from 22 to 18 and having pension contributions begin from the first penny earned, rather than the current starting point of ^{_lower_earnings}. This should give young savers a boost in the long term.

4. Help savers understand retirement income options

Under the 2015 ‘pension freedoms’ savers can choose how they withdraw from their pension. But with life spans growing longer, it’s more important than ever for pension savings to support individuals throughout their whole retirement. One idea is requiring pension schemes to clearly outline withdrawal options.

5. Improve self-employed pension saving

Currently just 16% of self-employed workers pay into a pension, causing millions to retire without adequate savings. This has the potential to put additional pressure on the future State Pension, so the government may need to consider how they could expand Auto-Enrolment to engage more self-employed workers.

6. Pot for life reforms

The idea of ‘pot for life‘ is to provide workers with more control over their retirement savings. Traditionally, when someone changes jobs, their new employer selects a new pension scheme for them. Over time, this leads to multiple pension pots scattered across various providers.

It’s already technically possible to ask an employer to pay into a personal pension of your choice, rather than to use the Auto-Enrolment provider offered by them. But, employees rarely ask their employers to do this - and few employers agree. So far, the new government has made no commitment on pot for life.

7. Reallocate funds into the UK economy

The previous government announced plans to stimulate economic growth by encouraging investment in UK companies from UK pension funds. Labour has signalled they support this reform. However, of all the pension recommendations, this policy has been met with a high level of criticism.

8. Reviewing the minimum pension age

Currently the earliest you can access your private or workplace pensions is from age 55 (rising to 57 in 2028); while you’re currently eligible for the State Pension from age ^{_state_pension_age} (rising to ^{_pension_age_from_2028} by 2028). One proposed change is reviewing the minimum pension age, potentially improving retirement fund sustainability. It’s worth noting that such policy moves are often unpopular with the general public.

9. Unveil the long-awaited pensions dashboard

Back in 2002, the Secretary of State for Work and Pensions suggested a web-based retirement planning tool. Fast forward over two decades and this still hasn’t been implemented. The pensions dashboard would allow savers to view their combined pensions information online, helping to reconnect lost pension pots and better plan for retirement.

PensionBee’s VP Public Affairs, Becky O’Connor, commented: “We’re pleased to welcome the new Pensions Minister. This will be a crucial appointment, given Labour’s manifesto commitment to a comprehensive review of the pensions and retirement savings system, a measure that could potentially benefit millions of savers.”

Summary

With the appointment of Emma Reynolds as the Pensions Minister in the new government, there’s a renewed sense of hope for positive changes in the way pensions are managed.

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

Have a question? Get in touch!

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

Risk warning

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.

After a landslide win for Labour in the 2024 general election, Rachel Reeves has been appointed Chancellor of the Exchequer. It’s a milestone moment for British politics as she’ll be the first woman to occupy the position since it was created 800 years ago. A great moment for women, but what does it mean for you and your pension savings?

Labour’s manifesto highlighted a strong focus on economic stability and growth, but now the Chancellor’s been in office for a month, her plans are starting to unfold.

Here’s a summary of what we’ve seen so far and what might be to come.

Winter Fuel Payments

The new Chancellor’s hit the ground running with a big change to Winter Fuel Payments. The allowance applied to everyone over State Pension age (^{_state_pension_age} rising to ^{_pension_age_from_2028} in 2028) before, but will now only be available to pensioners already receiving other state benefits like Pension Credit.

Pension tax-relief

There’s conversation around whether the Chancellor will change how pensions are taxed to help cover the shortfall in the public finances. For example, we may see a change to the amount of pension tax relief savers receive, or to the ^{_corporation_tax} tax-free cash pensioners can withdraw.

The Chancellor’s argued in favour of a flat rate of 33% tax relief for everyone in the past. The Labour party have so far said it’s not policy.

Triple lock State Pension protection

Before the election, Labour ruled out matching the Conservatives’ ‘triple lock plus’ pledge. This would have seen the tax-free pension allowance rise every year in line with the triple lock. It means more pensioners could face tax on their retirement income as the State Pension will continue to rise each year by; inflation, average earnings or 2.5% - whichever is highest.

Gender pension gap

The Chancellor has made no secret of her ambition to drive progress for women, and the role that this will play in Labour’s vision for economic growth.

Possible measures such as better maternity leave, improved conditions for part-time workers and flexible working arrangements could impact the gender pension gap too.

A review of workplace pensions

Labour has committed to a review of workplace pensions and the Chancellor launched a two-part pensions review this month. Whilst the details are yet to be shared, the 2024 manifesto pledged to consider what further steps will improve security in retirement, and increase productive investment in the UK economy.

Pension Schemes Bill

During the King’s Speech in July 2024 the Pension Schemes Bill was announced. It aims to create a private pensions market that focuses on value and outcomes for members.

The bill includes measures to combine “micro” pension pots of less than ^{_basic_rate_personal_savings_allowance} into one place;

• so people don’t lose track;
• to ensure all members are saving into pension schemes that deliver value;
• to focus on poor performing default funds; and
• to require pension schemes to offer a retirement income solution or range of solutions to their members.

Auto-Enrolment changes

The Pensions (Extension of Automatic Enrolment) Act was passed in 2023 but is yet to be applied. It would extend Auto-Enrolment to 18 to 21-year-olds and may get rid of the lower earnings limit. This would mean more contributions but a potential reduction in take-home-pay.

Minimum pension age increase

The minimum pension age is the age at which you can access your pension. It’s currently 55 (rising to 57 in 2028) for workplace and private pensions and for the State Pension it’s aged ^{_state_pension_age} (rising to ^{_pension_age_from_2028} in 2028). The age at which you can access your pension is rumoured to be within the wider pension review. It’s believed that making people wait longer before they access their money could help in making retirement funds more likely to last into the future.

The Autumn Budget is set for 30 October, where we expect to find out how these areas will develop and see new measures announced.

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.