Disrupting social plans leads to savings surge

Britons saved almost £4bn as a result of the Omicron variant.

New research[1] has highlighted Britons saved almost £4bn[2] as a result of the Omicron variant disrupting social plans during the festive period.

The identification of the new variant and the subsequent surge in positive cases caused many to put festive plans on hold this year, resulting in 35% of people saving money, with an average saving of £212 per person. 1% of people cancelled bigger plans over Christmas, resulting in savings of over £1,000. Overall UK adults saw total savings amount to approximately £4bn.

Variant’s emergence

The data also revealed that those aged between 25 and 34 saw the biggest savings, with 41% saying they had saved money on socialising during the festive period following the Omicron variant’s emergence. Previous research[3] in 2020 found that 18 to 30-year-olds were the most likely to be saving more money as a result of the pandemic, with almost 48% saying they had put more money aside following the first lockdown.

With the cost of living impact becoming ever more prevalent as we move through 2022, many will no doubt be thankful to have saved a few extra pounds from the festive season. Being in control of your finances enables you to manage them more effectively, and eliminates the pressure of worrying about money as you have the sense of security that comes with knowing how much you have available to spend.

Financial difficulties

There will always be times throughout the year when expenditure will vary, so having well managed finances will allow you to be prepared, regardless of what changes may happen along the way. If you have money set aside for emergencies, you’re far less likely to experience financial difficulties or have to borrow at a high interest rate if things go wrong or your circumstances change. Knowing you’ve got some money tucked away might help you sleep better at night too.

Saving regularly is a good way to build up an emergency fund. You’ll find that if you get into the habit of saving each month your savings will soon mount up. There isn’t a one-size-fits-all approach to emergency savings because everyone’s expenses, income and priorities are different. Your end goal ideally should be to set aside between three to six months of your expenses.

Source data:
[1] YouGov research conducted for Quilter. Total sample size was 2069 adults. Fieldwork was undertaken online between 23rd – 25th December 2021. The figures have been weighted and are representative of all UK adults
[2] YouGov research conducted for Quilter. Total sample size was 2069 adults. Fieldwork was undertaken online between 23rd – 25th December 2021. The figures have been weighted and are representative of all UK adults. Total savings calculated by Quilter using median savings figure. Total UK adult population calculated by Quilter using ONS estimated population data Estimates of the population for the UK, England and Wales, Scotland and Northern Ireland – Office for National Statistics (ons.gov.uk).
[3] Survey conducted by Toluna on behalf of Quilter between 27-30 April 2020 with 1014 UK adults

“Time is money”

Five principles of investing everyone should know.

Are your investments working as hard as they could be? With so many options out there, it can be confusing. We can help you navigate your options and provide a personalised recommendation based on your investment goals.

The following five principles will help you get on top of some key issues that affect everyone who invests their money.

1. Set investment goals

Successful investing begins by setting measurable and attainable investment goals and developing a plan for reaching those goals. Keeping your plan on track also means evaluating the progress on a regular, ongoing basis.

Whatever your personal investment goals may be, it is important to consider your time horizon at the outset, as this will impact the type of investments you should consider to help achieve your goals.

Committing to investment goals will put you on the path to building further wealth. Investors who make the effort to plan for the future are more likely to take the steps necessary to achieve their financial goals.

2. Invest as soon as possible

It’s easy to say that it is better to invest early, but why? The benefits of investing early are numerous and should not be overlooked. However, the benefits that come with starting your investment portfolio as soon as possible will also depend on your attitude towards investment risk and how patient you can be. It is no secret that the well-known proverb ‘time is money’ could not ring more true in today’s society.

You might be inclined to ask yourself the following questions: ‘Why bother investing early?’ ‘What difference does it make?’ And ‘Why should I invest now instead of next year or beyond?’ The answer is that time allows you to take more calculated risks.

If you invest early and incur a loss, you have more time to make up for the loss on investment. Whereas an investor who starts investing at a later stage in life will get less time to recover any losses. Thus, with early investments, your investment has the opportunity of more time to grow in value.

Not only is time your best friend when you’re investing, but you’ll also reap the benefits of something called ‘compounding’. To paraphrase Ben Franklin: Your money makes money. And then you make more money on the money your money makes. The longer your money can benefit from the power of compounding, the bigger your gains will be as time goes on.

3. Invest regular amounts

By investing regularly, you benefit from highs and lows in the market – called ‘pound cost averaging’ – and this helps cut down the risk of investing when the market is high. Dips in the market, particularly in the early years, could even work to your advantage provided you have committed to investing for a lengthy period.

If your chosen investments have become cheaper to accumulate it means your investment buys more shares or units to keep for the long term. By investing regular monthly amounts, rather than a larger lump sum in one go, you end up buying more shares or units when prices become cheaper and fewer when they become more expensive.

Although it might sound quite technical, it essentially means adding money on a regular basis into your investment. This is an effective way to invest because if you keep buying when the market falls you could, over time, turn volatility to your advantage.

4. Diversify your portfolio

Diversification is spreading investment risk, the goal being to increase your odds of investment success. Your investment portfolio risk tolerance should be split across different types of investment, so your money is less likely to be affected by any single event or economic development.
A simple example might be splitting £10,000 between shares in FTSE100 companies and shares in small companies, government bonds and corporate bonds. Diversification is important in investing because markets can be volatile and unpredictable. While individual asset classes can suffer declines, it’s very rare that any two or three assets with very different sources of risk and return, like government bonds, gold and equities, would experience declines of this magnitude at the same time.

Where possible, always make investment decisions and portfolio allocations based on your personal circumstances and goals. Accordingly, asset allocations in a portfolio should not only be guided by your risk tolerance and its ability to guard against market volatility, but also by the stage of life you are at.

5: Resist the urge to panic sell

What this means is that your ability to cope with short-term volatility in your investments is just as important as the choices you make at the outset of your investment journey. But if, say, there is a stock market correction, resist the urge to sell up immediately; instead sit tight and ride out any downward movement before looking for opportunities to exploit if they arise later.

The fear of incurring major losses could make it extremely tempting to sell your investments. Yet while this may temporarily alleviate your nerves, doing so could put a significant dent in your long-term gains. Investment trends show that leaving your money invested increases the chances of it growing and building your wealth pot.

If you invest for the long term, any short-term volatility shouldn’t affect your ability to reach your investments goals over time. Keep calm and carry on building up your investments. History has shown that over long enough time periods, no matter what challenges the global economy has faced, markets recover from significant downturns.

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED. PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.

Invest your way out of inflation

Why now is the time to make sure you protect your wealth.

The word ‘inflation’ had barely featured in the market’s vocabulary in the last three decades until it suddenly started to come back with a vengeance in 2021. As higher inflation looks set to persist in 2022, finding ways to generate a return on investments greater than inflation will be a key investment theme – otherwise your wealth falls in real terms.

Spending spree

There are two basic reasons why inflation has been increasing: supply and demand. Starting with the latter, consumers have been on a spending spree after having spent a large proportion of time during 2020 and 2021 at home bingeing on Netflix.

The main reason for the current rise is due to the global price of energy. This has meant higher energy and transport bills for businesses, many of whom pass on the extra costs to their customers. Supply problems and higher shipping costs are also continuing to have an impact on businesses.

Healthy economy

Central banks kept saying that inflation was ‘transitory’, but this now seems to have been replaced by the word ‘persistent’. The result is that inflation will remain high on the economic agenda in 2022.

Inflation is a measure of how much prices have gone up over time. It’s the rate at which cash becomes less valuable – £1 this year will get you further than £1 next year. It tends to be a good sign in a healthy economy, but too much of it can be hard to reel in and control.

BoE forecast

The Bank of England (BoE)[1] expects inflation to reach over 7% by spring 2022 and then start to come down after that. That’s because most of the causes of the current high rate of inflation won’t last. It’s unlikely that the prices of energy and imported goods will continue to rise as rapidly as they have done recently. And this means that inflation will eventually decline.

The BoE forecasts the rate to be much closer to their 2% target in two years’ time. But even though the rate of inflation will slow down, the prices of some things may stay at a high level compared with the past.

Purchasing power

Beating inflation means earning higher returns from an investment than the inflation rate in the economy. If your return on investment is less than the inflation rate, this could basically nullify the returns you have earned. Due to various reasons, the purchasing power of money decreases significantly every year.

Investing with inflation in mind is essential for protecting your current and future wealth and involves choosing assets that naturally keep pace with rising prices. These mostly include either real, tangible assets, or investments that pay a variable rate and appreciate or increase over time.

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED. PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.

Source data:
[1] https://www.bankofengland.co.uk/knowledgebank/will-inflation-in-the-uk-keep-rising

Improving your financial health

Staying on track to achieving specific financial goals.

All of your financial decisions and activities have an effect on your financial health. To help improve your financial health during this period of rising inflation and interest rates, we look at three areas that could help keep you on track to achieving your specific financial goals.

Beat the National Insurance rise

The National Insurance rise from April this year is going ahead for workers and employers despite pressure to reverse the decision to increase this by 1.25%, which is aimed at raising £39 billion for the Treasury. From April 2023, it is set to revert back to its current rate, and a 1.25% health and social care levy will be applied to raise funds for further improvements to care services.

One way to beat the National Insurance increase is by taking advantage of salary sacrifice, which means you and your employer pay less National Insurance contributions. Some employers may decide to maximise the amount of pension contributions by adding the savings they make in lower employer National Insurance contributions (NICs) to the total pension contribution amount they pay.

This is also a way to make your pension savings more tax-efficient. If you choose to take up a salary sacrifice scheme option, you and your employer will agree to reduce your salary, and your employer will then pay the difference into your pension, along with their contributions to the scheme.

As you’re effectively earning a lower salary, both you and your employer pay lower NICs, which could mean your take-home pay will be higher. Better still, your employer might pay part or all of their NICs saving into your pension too (although they don’t have to do this).

Review your savings accounts and rates

Money held in savings accounts hasn’t grown much in recent years due to historically low interest rates. But with inflation running higher, your savings are now at risk of losing value in ‘real’ terms as you’ll be able to buy less with your money.

In some respects, inflation can be seen as a positive. It’s a sign of strong economic recovery post-COVID, increasing salaries and higher consumer spending. But it’s bad news for your cash savings. Relying solely or overly on cash might prevent you from achieving your long-term financial goals, which may only be possible if you accept some level of investment risk.

In an environment where the cost of living is rising faster than the interest rates received on cash, there is a danger that your savings will slowly become worth less and less, leaving you in a worse position later on.

If you have money in savings, it is important to keep an eye on interest rates and where your money is saved. Rates are low and you will lose money in real terms if inflation is higher than the interest rate offered on your savings account or Cash ISA.

Shift longer-term savings into equities

During times of high inflation, it’s important to keep your goals in mind. For example, if your investment goals are short term, you may not need to worry much about how inflation is impacting your money. But if you’re investing for the long term, inflation can have a larger impact on your portfolio if it’s sustained – although high inflation that only lasts for a short period may end up just being a blip on your investment journey.

If you have large amounts of money sitting in cash accounts one way to beat inflation is to invest some of your money in a long-term asset that will appreciate with time, thus increasing your buying power over time. There are many ways to invest your money, but most strategies revolve around one of two categories: growth investments and income investments.

Historically, equities have offered an effective way to outperform inflation. Cyclical stocks – like financials, energy and resources companies – are especially well-suited to benefit from rising prices. These sectors typically perform better when the economy is doing well, or recovering from a crisis.

Depositing funds into your investment portfolio on a regular basis (such as monthly from salary) can help you invest at different prices, averaging out the overall price at which you get into the market. Known as pound-cost averaging, this can help you smooth out any fluctuations caused by market volatility over the long term. While volatility will always exist, it can be managed and reduced by taking this approach.

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

THE TAX IMPLICATIONS OF PENSION WITHDRAWALS WILL BE BASED ON YOUR INDIVIDUAL CIRCUMSTANCES, TAX LEGISLATION AND REGULATION WHICH ARE SUBJECT TO CHANGE IN THE FUTURE. YOU SHOULD SEEK ADVICE TO UNDERSTAND YOUR OPTIONS AT RETIREMENT.

Cost-of-living crunch

Savers still recognise the importance of long-term planning.

Britain’s cost-of-living crunch has hit the country hard, with inflation at its highest level in three decades, petrol prices spiralling, retail price increases rising to their highest levels in ten years and, most recently, Ofgem announcing a 54% price hike in energy bills affecting 22 million households.

Chancellor Rishi Sunak has been forced to announce an emergency £350 of support per household to help with the cost of heating. As a result, almost half (47%) of those not retired say that they cannot afford to save right now due to the rising costs of everyday living, a new survey has revealed[1].

Immediate future

The news comes following widespread reports of many UK households struggling to make ends meet following higher inflationary pressures – sending everyday bills soaring – as the country tries to recover from the effects of the COVID-19 pandemic.

Yet despite the concern about saving for the immediate future, savers are still recognising the importance of long-term planning and having a suitable pension in place for when it comes to retirement.

Relatively comfortable

The survey – which took place at the start of this year – also found that around a third of people with a pension said that they spent some of their time over Christmas reviewing their finances, including their pension (31%). This was especially true for those aged 18-34 years old (41%) compared with those aged 55+ (24%).

Overall, just 5% of Britons describe themselves as being ‘very comfortable’ financially. Two in five (39%) are relatively comfortable, while a third (34%) say they can normally cover essential costs but don’t often have money for luxuries. One in seven (14%) say they can only just afford their costs and struggle to make ends meet, and 3% say they cannot afford their costs at all and often have to go without essentials, like food and heating.

Fundamental misunderstandings

Around a third (32%) of those surveyed said they could afford to contribute more to their pensions now in order to boost their retirement income. But while savers are seeing the value of pensions, the survey discovered that there remains a number of key fundamental misunderstandings by savers about their pensions, with many unsure how their contributions were being invested on their behalf.

The survey also revealed that only a third of people know the minimum contribution rate that people make via Automatic Enrolment. Additionally, around two-fifths (39%) are not sure if the government gives tax relief on their pension contributions and around a third (31%) are unsure if their pension savings are invested in stocks, bonds or other investments.

Source data:
[1] Pensions and Lifetime Savings Association (PLSA) research conducted by Yonder Data Solutions from 10/01/22 to 11/01/22 with a nationally representative sample of 2,093 adults
[2] https://yougov.co.uk/topics/politics/articles-reports/2022/02/04/cost-living-crisis-four-ten-britons-expect-their-h

Getting ready to retire?

Bolstering your retirement lifestyle as you approach retirement.

Have you ever wondered what you need to consider as you approach retirement? Whatever your concept of what is a good pension pot, one certainty is that relying on the State Pension alone will not give you a good enough pension to live on comfortably through your retirement.

‘Will I be able to retire when I want to?’ ‘Will I run out of money?’ ‘How can I guarantee the kind of retirement I want?’ These are hard questions to answer unless you obtain professional financial advice and why you need to start by reviewing your finances sooner rather than later to ensure your future income will allow you to enjoy the lifestyle you want.

After decades of working and saving, you can finally see retirement on the horizon. If you plan to retire within the next five years or so, consider taking these steps today to help ensure that you have what you need to enjoy a comfortable retirement lifestyle.

Taking these actions now could help bolster your retirement lifestyle as you approach your planned retirement date.

8 things to consider as your retirement approaches:

1. Track down your pensions

It’s important to track down all the different pension schemes you’ve previously paid into, so you can be sure you’re claiming everything you’re entitled to in retirement.

If you’re unsure where to start, the UK government offers a pension tracking service to help you find lost pensions.

2. When can you access your pensions?

Since April 2015, pension freedoms have given savers in defined contribution (DC) schemes greater access to their cash, allowing flexible withdrawals from the age of 55.

3. What’s your pension’s value?

The easiest way to find out how much your pension is worth is to check your pension statements. Whatever type of pensions you have, you’ll receive an annual pension statement from your provider.

In it they’ll tell you how much your pension is currently worth and what it’s expected to pay out at your retirement date.

4. Get a State Pension forecast

You can call the Future Pension Centre and ask for a State Pension statement. Your statement will tell you how much State Pension you have built up so far based on the National Insurance contributions and credits that are on your National Insurance record at the time your statement is produced.

Contact the Future Pension Centre for questions about the State Pension or to ask for a statement. Telephone: 0800 731 0175, or from outside the UK: +44 (0)191 218 3600. Or obtain a forecast online at https://www.gov.uk/check-state-pension

5. Getting investment advice

If you are close to, or at retirement, you may want to reevaluate your plans. If you have access to other savings and investments, you might want to consider using these before accessing your pension.

If you have other investments or savings, such as Individual Savings Accounts, stocks and shares, bonds, funds, property, etc, it’s worth checking their value as you approach retirement age as they can support you in addition to your pension.

6. How will you access your pension?

When it comes to deciding how to use your pension pot, there’s no one ‘right answer’. There are more pension options than ever thanks to the pension freedoms that allow savers access to every penny of their retirement savings.

Your options may include taking a regular income or lump sums and keep investing the remainder in the stock market, or cashing in the entire amount. You can also choose to swap the money for a guaranteed income via an annuity.

7. How is your pension invested?

Pensions may be for the long term, but it’s important regularly to review where your money is being invested. You need to keep a close eye on which funds your retirement savings are in so that you can check you’re comfortable with the risks involved.

You should also keep a close eye on how much you’re being charged, as fees can have a big impact on the amount you end up with at retirement.

8. The benefits of advice

Pension advice is important because pension products can be complicated, and life can be unpredictable. Professional financial advice will help you make the right decisions about your money and your future.

Retirement planning is important because it can help you avoid running out of money in retirement. You need to know how much you’ve got, how to access it and when you can afford to retire comfortably.

Pension freedoms

You work, you save and then you retire.

A full and happy retirement is a priority for many. But no two people are alike. A ’one-size-fits-all’ system cannot accurately account for everyone’s individual lifestyle choices, so it makes sense that the way you prepare for your future is likely to be different from others.

On the surface, retirement planning hasn’t changed all that much over the years. You work, you save and then you retire. But while the mechanics may be the same, today’s savers are facing some challenges that previous generations didn’t have to worry about.

Golden years

First of all, life expectancy is longer, which means you’ll need your money to last longer. This is compounded by the fact that more companies are moving away from defined benefit pensions –which guaranteed you a certain amount of money in your golden years – to defined contribution plans, which are more subject to market ups and downs.

So, how can you have the retirement you’ve always wanted? Retirement is inevitable, but that doesn’t mean you have to stop living. Your retirement should be a time for enjoying your life and the things you most enjoy doing.

Working lives

However, some people are unprepared for retirement due to high debt levels at the end of their working lives or because they were not saving enough during their careers. Sometimes, people are forced into retirement through circumstances outside of their control.

Some people might choose to live off their savings entirely, while others may choose to supplement their income with rental properties. Still others might prefer to have a mix of sources for retirement incomes.

Pension money

Whatever the case, being aware of the options available today can help you prepare for your future in an effective way. With the introduction of pension freedoms, there is no onus on us to cash in our pensions at set ages, and instead we can take our pension money any way we choose. But, with this freedom also comes responsibility, and for some, uncertainty.

Some people find they don’t have a clear plan for what they want from their retirement, and many underestimate how much money they will actually need when they do eventually retire. The reality is our goals are all very individual, but whatever it is you want from your retirement, it pays to plan ahead.

If you have a defined contribution pension, here are six simple tips to consider:

1. Use pay rises as an excuse to save more
2. Pay in more when a regular spend ends
3. Maximise any employer contributions
4. Invest lump sums you receive
5. Put off breaking into your pension pot
6. Be choosy about your investment choices

Looking to build a bigger pension?

Don’t miss the deadline to give your pension savings a boost.

As another extraordinary financial year comes to a close, it’s more important than ever to make good use of your annual pension allowances. Giving your pension savings a boost and assessing where you stand will give you peace of mind that you are on track to enjoying the retirement you are planning for.

The 2021/22 tax year ends on 5 April. Staying on top of your retirement plans is important all year round but with the tax year ending on 5 April, just a few weeks away, it’s a good time to consider if you’ve made the most of this year’s pension tax benefits. If you haven’t, there’s still time for any payments or changes to be processed.

Tax relief

Pension tax relief is an extra amount that’s added to your pension contributions. So it effectively means it’ll cost you less to save more into your pension plan. Although most people receive tax relief on their pension contributions, depending on how your pension scheme works (if you’re part of a salary sacrifice or salary exchange scheme, for example) you might receive tax benefits in a different way. So you should either speak to us or check with your employer if you’re not sure.

The amount of tax relief you receive on your own contributions usually depends on the rate of income tax you pay. For most of the UK, this means basic rate taxpayers (who pay 20% income tax) receive tax relief at the same rate. If you’re a higher rate taxpayer you receive 40% tax relief on contributions that are matched by income taxed at that rate, and the same for additional rate taxpayers at 45%, but you’ll need to claim back anything over 20% from the government unless you pay using salary sacrifice or are a member of an occupational scheme operating the ‘net pay’ method of tax relief.

Annual allowance

If you don’t earn any taxable income, you’re still entitled to receive 20% tax relief on your contributions up to the amount you earn. If you have no earnings, or earn less than £3,600 in the current tax year, you can still receive tax relief on contributions up to £3,600 (i.e. if you pay £2,880 net of basic rate tax relief, an amount of £3,600 is added to your pension). While income tax is slightly different in Scotland, the effect on your pension contributions is broadly the same.

In addition to the tax relief limit described above, there is an annual allowance which is £40,000 for most people. If all contributions combined, including those from an employer, exceed the annual allowance in a tax year, a tax charge will be applied to the excess.

Pension contributions

The annual allowance applies to the total amount of contributions made into all of your pension plans in a tax year – including the ones your employer, or any third-party, makes on your behalf. The good news is that if you haven’t used all of your pension annual allowances in the last three tax years, you may be able to carry them over and use them to pay in more in the current tax year.

When planning to make large pension contributions, spreading them across tax years can make tax sense, for example that will mean higher rate relief is available on the full contributions. Remember that you still can’t contribute more than 100% of your earnings in any tax year if tax relief is to be available on the contributions.

Retirement goals

Most people can contribute up to £40,000 to pensions each year and benefit from tax relief. But if your income rises above a certain level – which is £200,000 for the 2021/22 tax year – this allowance could be reduced or ‘tapered’. The tapered annual allowance effectively reduces the amount of money that can be contributed to a pension by you and / or your employer before having to pay tax.

The taper doesn’t usually apply if your ‘threshold income’ is less than £200,000. If it is above this level, you will need to check whether your ‘adjusted income’ is greater than £240,000 (2021/22 tax year). The annual allowance reduces by £1 for every £2 that your adjusted income exceeds £240,000, to a minimum tapered allowance of £4,000. Without careful financial planning, you could find yourself subject to an unwelcome tax charge.

The importance of financial protection

Millions battling with financial hardship, relationship stress and sleepless nights.

Fear, worry, and stress are normal responses to perceived or real threats, and at times when we are faced with uncertainty or the unknown. So it is normal and understandable that people are experiencing fear in the context of the COVID-19 pandemic.

The pandemic and the resulting economic impact has negatively affected many people’s mental health. Nearly half of UK adults (47%) have experienced mental health challenges during the pandemic, with millions battling with financial hardship, relationship stress and sleepless nights.

Life insurance or critical illness cover

New research reveals that only a small proportion of people notify their insurer of a mental health condition in the mistaken belief that it will affect their ability to take out life insurance or critical illness cover. This means they might not have adequate cover or access to support provided by their insurer.

Three in ten (30%) people report that they currently have a mental health condition or have experienced this previously. However, only four in ten 44% have informed their insurer. There remains confusion around what can, or should, be said to an insurer when it comes to physical and mental health.

Ineligible for protection cover

Of those who did not disclose a mental health condition, nearly two-fifths (37%) thought their provider would only be interested in physical illness. Over a quarter (26%) felt it was personal and so would rather not share their condition with their provider. Almost one in five (18%) worried they would not qualify for a policy or would be charged more.

Contrary to these misconceptions, declaring a mental health condition does not necessarily mean higher premiums and it is unlikely to mean someone is ineligible for protection cover. Being open with an insurer means those with mental health conditions are more likely to receive the right support.

Getting the right support

Some people are confused about how mental health conditions affect their critical illness cover or life insurance, which prevents them from getting the right support. Insurers aren’t trying to catch people out – they are there to help.

The challenges of the last 20 months have highlighted the value of protection policies for families and individuals in difficult times.

Source data:

[1] Research carried out online by Opinium Research across a total of 2,002 UK adults (Booster sample of 502 self-employed workers and 1,015 Renters. Fieldwork was carried out between 21st – 27th October).

Mind the pension gender gap

Women are being urged to think about their long term savings.

Imagine reaching retirement age and discovering that, despite years of saving, you don’t have enough money to get by. Worse still, suppose you’re unable to pay for the right kind of care in your old age.

If you and your partner separate or your spouse dies unexpectedly – will you have sufficient funds to see you through retirement? Now, all of these might sound like worst case scenarios but, unfortunately, for women right across the UK one or more of them could become a reality.

Earning trends

Women are still behind men when it comes to retirement savings. The Women and Retirement report[1] has found that if current work and earning trends continue, young women today will need to save an average of £185,000 more during their working life to enjoy the same retirement income as men.

The colossal gender pension gap is made up of a savings shortfall, plus the need to fund a longer retirement because women on average live longer than men. This also leads to higher care costs. Many women will naturally take time off to start a family – resulting in gaps in their work history. And even if women remain in the workforce, some still tend to earn less than men, on average.

Vulnerable situation

21% of women surveyed said they plan to rely at least partly on their partner’s income in retirement. However, this can leave women in a particularly vulnerable situation should they separate from their partner.

Right now, it’s rare for divorce settlements to account for pension assets, which means that women could end up in particularly unstable financial situations following divorce.

Funding retirement

Also, women tend to live longer than men – two to three years, on average. Indeed, this continued rise in longevity means that a 25-year-old man today can expect to live to 86, while a woman can live to 89.

And while rising longevity is of course a good thing, it does raise specific challenges – especially when it comes to funding retirement and old age.

Living longer

Together with living longer women are also more likely to need care when they’re older. In fact, of the 6 million people in the UK over the age of 60 currently living with a disability, 3.5 million of them are women.

And those women who do need care spend on average a year longer in care homes than men. Right now, the average cost of care is £679 per week, which means women would need an extra £35,000 during retirement for residential care costs.

Moreover, as women can expect to live two to three years longer than men, they would also need around £50,000 for their retirement – bringing the total amount needed to match a man’s retirement income to £185,000.

Source data:

[1] Scottish Widows 2021 Women and Retirement Report – research carried out online by YouGov Plc across a total of 5,059 adults aged 18+. Data weighted to be representative of the GB population. Fieldwork was carried out between 23rd March and 3rd April 2021 through an online survey. 5,059 interviews were carried out. The sampling criteria were based on four key metrics: age, gender, region and social grade.