October 2024 - Page 2 of 2 - Investing For Tomorrow

Commonly aged between 45 and 54, the sandwich generation often provides financial assistance and physical care for their parents while also looking after their children. Increasingly, this includes young adults still living at home and needing financial support to kickstart their futures. These additional responsibilities can be costly and reduce your ability to take on paid work, making saving time harder.

A unique financial landscape

If you’re part of the sandwich generation, your financial planning might look different from older generations, who, at your age, likely had fewer expenses and more to save for retirement. However, you’re not alone. It’s estimated that two-thirds of people in the UK will care for a loved one at some point, and half will provide care before they turn age 50[2].

Here are some considerations to help you become financially resilient when you’re taking care of yourself and others too.

Joint financial planning

We all have unique situations – no one-size-fits-all approach to financial planning exists. Whatever your financial situation, being transparent with your spouse, partner, family or support unit can help. Talking about your plans – and backup plans – could help you and your loved ones make the future you want a reality.

If you manage finances collectively, ensure your planning considers all the current and future circumstances that could impact your family’s income. This might include speaking with working adult children or extended family living at home to help them understand how they fit into your family’s wider financial goals.

Think long-term

Thinking ahead can help you plan how to support your loved ones best when they need it most. Try writing a list of things you might want to save for or need to prepare for, like parents going into care, university fees or housing costs for your children, and goals for your future.
While some people in the sandwich generation might have to consider working for longer or retiring later, it’s essential to think about the lifestyle you want when you stop working. Ask yourself what actions your 80-year-old self would be grateful for you taking now.

Motivation for the future

A clear, long-term vision can motivate you to take positive and responsible steps for the future. Financial wellbeing research has shown that those with a more concrete vision of their future had less debt and better emergency and long-term savings. Utilising tools to help you picture what your life could look like and tips to help you get there can be beneficial.

Review your budget

With many things to save for, prioritising is key. You could set mini targets to reach by certain points in time for different needs – these should be realistic regarding your budget. Consider your income and how much you can afford to save each month.

It might help to create different ‘pots’ for specific purposes or people, ranging from your own retirement, to funding further education, care, housing deposits, weddings and more. You should also consider building an emergency fund for unexpected scenarios, like losing your job or a boiler breakdown. But it’s also important to factor in money for things you enjoy.

Professional financial advice

Obtaining professional financial advice could help you understand how to balance your competing financial priorities. An adviser can provide tailored recommendations to help you achieve your financial goals while managing responsibilities.

Entitlement awareness

Don’t miss out on any discounts or benefits. For example, households with children might be eligible for Child Benefit or free childcare hours, depending on your circumstances. If you’re providing care for any relatives or loved ones, government help such as Carer’s Allowance and Carer’s Credit might be available.

You’re entitled to one week of unpaid carer’s leave in the workplace every 12 months, subject to conditions[3]. In this scenario, you should check your employment contract in case your work offers any additional benefits or leave. Some employers also offer discounts and deals through voucher schemes, which might mean spending less on groceries or luxury items.

National Insurance credits

If your parents can still carry out babysitting duties, you might be able to pass over National Insurance credits to them to help boost their State Pension. Understanding the benefits available can help you maximise financial support for your family.

Smart debt management

Debt isn’t to be taken lightly, but it’s not always bad. Taking on a mortgage, for example, can give your family the stability of a place to grow and spend time together. However, be careful with what kind of debt you’re taking on. If you’re struggling with debt or loan repayments, many sources of help are available.

Self-care is crucial

Currently, around 8% of the UK population is providing informal care[4]. If you’re one of them, remember to think about your own future, too. People in mid-life who have caring responsibilities are more likely to reduce the amount of paid work they do so that they can provide care. This is also more common among women than men.

Reducing your paid work might, in turn, reduce the amount you have in any workplace pension. It could also lessen your National Insurance contributions which influence your State Pension. Obtaining professional advice before reducing your paid work could help you see the bigger picture and still save for your future while supporting your loved ones.

Looking after loved ones can be challenging but rewarding. Encourage your family to come together to be a source of support and motivation for each other. Remember to take care of yourself while caring for others. Taking steps to strengthen your family’s financial wellbeing can also help build resilience in your own mental wellbeing.

Source data:
[1] More than one in four sandwich carers report symptoms of mental ill-health. Data source, Office for National Statistics, January 2019, accessed May 2024.
[2] Will I Care: The Likelihood of Being a Carer in Adult Life. Data source, Carers UK, November 2019.
[3] Unpaid carer’s leave. Data source, GOV.UK, accessed May 2024.
[4] Family resource survey: financial year 2022 to 2023. Data source, GOV.UK, updated March 2024.

THIS ARTICLE DOES NOT CONSTITUTE TAX, LEGAL OR FINANCIAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.

Young employees, mainly those aged 18-34, drive the increasing need for workplace health support. Research indicates that 78% of young workers find health cover crucial, and 64% consider it their most significant benefit, starkly contrasting with the 46% of those over 55 who feel the same[1].
Moreover, 71% of younger workers would hesitate to switch jobs if health coverage wasn’t provided, highlighting its importance in career decisions. Additionally, 66% of this demographic believe that having health benefits would reduce sick days by enabling quicker access to healthcare professionals, thus promoting a healthier, more resilient workforce.

Impact on employee wellbeing and productivity

Including comprehensive health benefits can significantly enhance employee wellbeing and overall productivity. By facilitating easier access to medical care, employees are less likely to experience prolonged periods of illness, allowing them to maintain consistent work attendance and performance.

This support is particularly crucial for younger employees who place high value on health benefits and are more likely to consider these benefits when evaluating job opportunities. Consequently, employers who invest in comprehensive health cover demonstrate their commitment to employee welfare and position themselves as attractive employers in the talent market.

Expectations and employer response

Employers are beginning to notice this shift in expectations. Three out of ten firms report that job candidates’ expectations for health cover are rising. When health cover is provided, employers observe a 37% increase in satisfaction and a 33% boost in productivity. The data clearly highlights the significant impact health benefits have on both employee morale and overall business efficiency.

Mental health a growing concern

Mental health has emerged as a crucial element of workplace wellbeing, particularly for younger workers. Research shows that 76% of younger employees believe that health insurance improves their productivity, and 71% have taken time off for mental health reasons, compared to just 32% of older workers. Alarmingly, 71% of younger UK workers reported experiencing anxiety in the previous year, compared to 32% of those over 55.

Addressing the mental health challenge

As a result, 33% of employers now see rising mental health days as a major challenge. Younger workers no longer view health benefits as a bonus; instead, they expect them as a standard part of their employment package. This shift in perception underscores the urgent need for comprehensive health benefits in the workplace.

The need for accessible health cover

The UK continues to grapple with a workforce sickness epidemic and long NHS waiting times. In this context, providing affordable and accessible health cover at work has never been more important. Employers who wish to attract and retain top talent, maintain a healthy workforce and enhance business productivity must recognise the importance of offering health cover.

Source data:
[1] Opinium research on behalf of Simplyhealth throughout May and June 2024. The first surveyed 500 HR decision makers across UK businesses, while the second surveyed 2,000 employees with a minimum of 100 respondents across business services, construction, manufacturing, professional education, hospitality and leisure, transport, retail, food and drink, and healthcare. 2.81 million not working due to long-term sickness in the UK in July 2024, according to ONS figures.

Whether it’s the chance to pursue further education, embark on a completely new career path or even start your own business, redundancy can serve as a catalyst for meaningful change and growth. As you navigate this transition, your workplace pension is one of the most crucial aspects to consider. Understanding your pension options is key to making informed decisions that will impact your financial stability in the long term

What happens to your pension when you’re made redundant?

If you’ve been made redundant, the workplace pension you have been contributing to remains yours. You won’t lose it due to a change in your employment status. However, leaving a job or being made redundant doesn’t automatically grant access to your pension immediately.
The standard rules on how and when you can access your retirement savings still apply. This generally includes accessing your pension from age 55 (rising to 57 in 2028) and typically taking up to 25% of your pension pot as a tax-free lump sum.

The next steps depend on the type of pension plan you were paying into while employed. Two primary types of workplace pensions exist: defined contribution (DC) and defined benefit (DB) plans. If you’re unsure which type you have, you can ask your employer or check documents from your pension provider, such as your annual statement.

Defined Benefit (DB) pensions

If you hold a DB pension, typically found in the public sector, contributions will stop once you leave the job. The value of this pension pot is usually determined by the length of your employment and your salary.

Defined Contribution (DC) pensions

For those with a DC pension, the primary change is that your employer’s contributions will cease. Unlike a DB pension, you may be able to continue making personal contributions.

What can you do with your workplace pension?

Depending on your circumstances and the type of workplace pension you have, several options are available.

Continuing contributions

If you have a DC pension, you might be allowed to continue making contributions and benefit from any applicable government tax relief. The value of any tax relief will depend on your individual circumstances. Remember, you won’t receive further employer contributions after leaving your job.
All contributions, whether from personal, employer or third-party sources, count towards your annual allowance, which is £60,000 for the 2024/25 tax year.

Contributing your redundancy payment to your pension

You may be able to pay a portion of your redundancy payment into your workplace pension, typically applicable to DC pension schemes. This usually requires an agreement with your employer. Note that your redundancy payment might be subject to tax, with the first £30,000 usually being tax-free. Any portion paid into your pension will also count towards your annual allowance.

Transferring your pension

You might consider transferring your pension pot into another workplace or private pension, usually reserved for DC schemes. However, combining pension pots isn’t suitable for everyone, as you could lose features, protections or benefits. Always compare products before making a decision, as the value of your combined pension pot can fluctuate.

Withdrawing your money

Depending on your pension scheme’s rules, you can generally withdraw money from your pension pot if you’re aged 55 or over (rising to 57 in 2028). However, withdrawing from your pension requires several factors to be considered. If you stop working, this might affect your entitlement to the full State Pension if you haven’t accumulated enough qualifying years of National Insurance contributions. Also, taking a flexible income from a DC pension while continuing to work may reduce the amount you and your employer can contribute without facing tax charges due to the Money Purchase Annual Allowance (MPAA).

Leaving your pension as is

You can opt to leave your pension untouched until your retirement age, ensuring you keep your login details and personal information up-to-date. This helps you maintain track of your savings. Update your details by logging into your pension account or contacting your provider.

Take your next steps with confidence

The right option for you depends on various factors, including the type of workplace pension scheme you have. Pension schemes are legally required to provide specific information about your scheme. Understanding your options can give you a clearer idea of what will happen to your pension if you’re made redundant, allowing you to focus more on your future plans.

A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS THE PLAN HAS A PROTECTED PENSION AGE).

THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.

YOUR PENSION INCOME COULD ALSO BE AFFECTED BY THE INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS.

This study also highlighted that six million individuals with multiple pension pots may be at greater risk, as half of the respondents believe scams are becoming increasingly difficult to identify.

The complexity of managing several pension accounts can leave individuals more susceptible to fraudulent schemes, as it becomes challenging to keep track of all the details.

Scammers take advantage of this confusion, making it harder for people to discern legitimate communications from deceitful ones. This growing difficulty in identifying scams calls for heightened awareness and stronger protective measures to safeguard pension savings.

Rising threat of pension scams

However, the awareness of reporting a scam is worryingly low, with only 32% of people knowing the proper channels. However, this figure improves significantly to 55% among those who consult financial advisers. This discrepancy underscores the importance of professional financial advice in mitigating the risk of scams.

The research further uncovered a high prevalence of various consumer scams. A significant 42% of respondents reported phishing attempts, 36% encountered scams imitating reputable brands and 24% experienced refund scams.

Younger people at higher risk

Interestingly, younger individuals between the ages of 18 and 34 are more susceptible to scams than the general population. The study found that 13% of this age group had been targeted, in contrast to 7% of the wider public.

The evolving tactics of scammers make it increasingly challenging for consumers to avoid falling prey. With the growing number of people managing multiple pension pots, keeping track of their finances has become more difficult.

Protecting your pension

To safeguard against pension scams, hanging up on unsolicited cold calls is crucial. Recognising unexpected contact as a potential red flag can also help avoid hasty and ill-informed decisions. Additionally, verifying firms on the Financial Conduct Authority (FCA) registry provides an extra layer of security.

Remaining vigilant and informed is essential in this climate of sophisticated scams. Consumers must take proactive steps to protect their hard-earned savings.

Source data:
[1] LV= Wealth and Wellbeing Research Programme, quarterly survey of 4,000 UK adults 12/08/24.