The Treasury Select committee met yesterday to hear more evidence on the future of the Lifetime ISA.

The committee first met in February and had a range of speakers to discuss the viability of the product, which pays an annual bonus to savers of up to £1,000.

Much is up for discussion, including the extreme solution of abolishing the product altogether.

So what is the Government thinking on this? The committee heard evidence from MP Emma Reynolds, the economic secretary to the Treasury. 

Unfortunately, her comments didn’t provide much information on whether the LISA will be improved upon. 

Reynolds told the committee: “Any changes that could be made to improve that situation would cost money. That money would have to be found from somewhere else.”

What is the Lifetime ISA?

The Lifetime ISA or LISA is designed for people who wish to save a house deposit for their first home purchase. Alternatively, savers can use the LISA as an alternative (or addition) to a pension. 

If the saver doesn’t use it for a house deposit, then the money can’t be withdrawn until they turn 60. 

Savings of up to £4,000 a year get a 25% bonus – up to £1,000. But any withdrawal made that doesn’t include the above reasons incurs a 25% penalty. The problem here is the penalty is made on the whole amount, not just the bonus. This means in effect someone who takes money out gets less back than they put in. 

But although this aspect has drawn many critics, who have called for the penalty to be lowered to 20% – which would negate the losses – Reynolds, told the committee this was a feature not a flaw of the product. 

She told the committee: “Having rules around a penalty if you withdraw are in line with unauthorised withdrawals of a pension. The penalty of withdrawing your pension earlier is much heavier than the 25% in this case.  

“We can’t have a risk-free option of investing for the long-term, but if you take your money out, there is not a charge. We would not have that situation.”

The LISA also presents first-time buyers in areas such as London and the South East with an issue because the cap on property purchase prices is £450,000 – which prevents some savers from using the product in areas where prices are very high. 

Future of the LISA

Brian Byrnes, head of personal finance at finance app Moneybox, spoke exclusively to Mouthy Money yesterday ahead of the next committee. You can hear him explain all about the LISA – its past and its future – in the latest Mouthy Money podcast episode. 

Having given evidence at the committee hearing in February, Byrnes told the podcast that Moneybox anticipated some action from the Government on the LISA in the next Autumn Budget, later this year. 

On the back of the committee hearing, Byrnes added: “Yesterday’s Treasury Select Committee session highlighted the continued debate around the future of the LISA. While it’s encouraging to see it on the agenda, we believe now is the moment to take action. 

“Small, pragmatic changes – such as increasing the property price cap and adjusting the unauthorised withdrawal penalty – would ensure the LISA continues to deliver for first-time buyers in a fast-changing economic landscape. These aren’t radical changes – they’re common-sense updates that would make a great product even better.”

Byrnes also highlights a less-well-understood issue for the LISA – why major legacy banks don’t offer the product.

“It’s also important to clear up a common misconception: banks don’t avoid offering the LISA because of mis-selling concerns,” he says. “The reality is that administering a LISA is significantly more complex than other ISAs due to the need for real-time connections with HMRC. 

“For many larger institutions with legacy tech infrastructure, this operational burden – combined with the £4,000 annual contribution limit and lower average income of LISA savers – makes it commercially challenging. By addressing these barriers, we can unlock greater provider participation and wider access.

Ultimately Byrnes believes the LISA is a good product worth improving. 

“The Lifetime ISA (LISA) has been one of the most impactful financial products introduced in recent years, helping young people across the UK take control of their financial futures – particularly when it comes to buying their first home. Since its launch in 2017, the LISA has empowered a generation to build long-term savings habits, with the confidence that they can work towards both homeownership and long-term financial security.

“At Moneybox, we’ve seen this impact first-hand. Over the past year alone, we’ve recorded a 34% increase in customers opening a LISA. Importantly, 80% of our LISA savers earn £40k or less, demonstrating how vital this support is for those who need it most. These are hardworking individuals striving for financial independence, and the LISA is giving them the boost they need to get on the property ladder.

“While much focus is rightly placed on increasing housing supply, this remains a long-term goal. In the meantime, we urge the Government to invest in near-term, practical solutions that support aspiring first-time buyers today – helping them save, build deposits, and access affordable mortgages.

“We encourage policymakers to build on the solid foundation already in place and future-proof a product that is delivering real, measurable impact for young people nationwide.”

SAVING THE LIFETIME ISA: LISTEN TO THE FULL PODCAST EPISODE

Photo by cottonbro studio

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Financial advice has a reputation for being largely inaccessible to young people. But do you even need it with a wealth of financial information available online? Mouthy Money investigates.

In an era of rising living costs, shifting job markets, and economic uncertainty, the question of whether young people – those under 45 – should seek financial advice is more relevant than ever.

For many in the UK, money management is a DIY business, with budgeting apps and online forums stepping in where traditional guidance once stood.

Yet, as financial decisions grow more complex and consequential, the case for getting professional financial advice does grow.

This feature explores what financial advice entails, when it’s worth seeking, its potential drawbacks, and the persistent “advice gap” that leaves many young Brits underserved.

What is financial advice?

Financial advice is a professional service aimed at helping individuals manage their long-term wealth more effectively.

Delivered by qualified, regulated financial advisers, it goes beyond generic tips or casual suggestions from friends.

Advisers assess your personal circumstances such as your income, debts, goals, and risk tolerance and provide tailored recommendations. These might include investment strategies, pension planning, mortgage options, or tax-efficient savings schemes such as ISAs.

In the UK, financial advisers must be regulated by the Financial Conduct Authority (FCA), ensuring they meet strict standards of competence and ethics. If you meet an adviser, they should be listed on the FCA’s register.

Advice can be ‘independent,’ covering the full market, or ‘restricted’, focusing on specific products or providers.

For young people, who may be navigating their first big financial milestones, this bespoke guidance can clarify a maze of options, whether that’s buying a home, starting a business, or planning for retirement decades away.

Mouthy Money spoke to a professional financial planner to get some insights into when a young person might need advice.

Katrania Lowers, a financial planner at Colmore Partners, explains: “Financial advice for young people is often misunderstood as something you only need ‘when you’re older’ or ‘when you’re rich’.

“But the reality is, the earlier you get clarity, the more control you have – especially at key moments like receiving an inheritance, coming into significant income, or starting a business.

“These are important points where the wrong move can be costly, and the right one can set you up for long-term security.”

Ask our experts your money questions

When should young people get financial advice?

For many under-45s, financial advice might seem like a luxury reserved for the wealthy or older generations.

Yet, certain life events and circumstances make it not just useful, but essential. Here are some key situations where seeking advice can pay off:

1. Inheritance

Receiving a lump sum, whether from a grandparent’s estate or a family windfall, can be overwhelming.

A 30-year-old inheriting £50,000 might wonder whether to invest it, pay off student loans, or save for a house deposit. But Lowers points out that mistakes are often made by young people who leave it too late to seek advice on inheritance.

Lowers explains: “People often think advice should come after the money lands. But in reality, the most powerful advice happens beforehand – when there’s time to understand the responsibilities that come with wealth, not just when it finally lands in their lap.

“Inheriting assets can be emotionally and financially complex, and without guidance, people risk making poor decisions or missing important planning steps – especially around tax, investing, or preserving family wealth.”

An adviser can map out tax implications (like inheritance tax thresholds) and suggest growth-oriented options, ensuring the money works harder over time.

Lowers adds: “Inheritance is seldom just about the money. It’s about stewardship. If someone doesn’t feel confident or equipped when they become a custodian of family assets, it can lead to stress, guilt, or worse – mismanagement.

“Getting advice early gives young people the language, tools and mindset to make thoughtful choices when the time comes; and having access to the wider family planner, who they already know and trust, means there’s already a sounding board in place when those imminent decisions need to be made.”

2. Business success

Young entrepreneurs are a growing force in the UK, with start-ups thriving in tech, creative industries, and beyond.

A 35-year-old who’s turned a side hustle into a £500,000-a-year business faces unique challenges: managing cash flow, structuring investments, or planning an exit strategy.

Financial advice can help balance personal wealth with business growth, while navigating tax reliefs such as Entrepreneurs’ Relief.

This can also be relevant for someone who isn’t necessarily an entrepreneur, but maybe joined a very successful business at an early stage and received some remuneration in the form of shares in the business.

3. Employment success

High earners – think City bankers, tech professionals, or NHS consultants in their early 40s – often juggle hefty salaries with big responsibilities.

A parent earning over £100,000 can face significant tax hurdles, especially given that marginal tax rates soar above this income level.

They might need advice on maximising pension contributions, mitigating income tax, or diversifying investments beyond a workplace scheme.

4. Other milestones

Life doesn’t wait for middle age. Buying a home, starting a family, or even planning a career break can benefit from expert input.

Financial advice doesn’t just cover investments and pensions. Mortgage advisers and insurance brokers are both services that young people can call on at key moments in their lives.

The former are one of the most popular routes when it comes to finding a mortgage for buying a home.

The latter can provide key help when someone is considering life insurance, income protection and other insurance options.

Lowers agrees with this sentiment: “Advice for young people doesn’t always have to be formal or product-led. Often, it’s about education or even just a safe space to ask ‘basic’ questions.

“For most young people, especially those still building their financial base, the right kind of advice might look more like a gentle steer – helping them understand pensions; why protection is important when they take out a mortgage, start a family or get a job; or how to use their money as a tool rather than something that disappears every month.”

In short, financial advice isn’t just for the grey-haired.

Whenever money gets complicated – or the stakes get high – young people stand to gain from a professional steer.

The drawbacks of financial advice

Despite its benefits, financial advice isn’t a silver bullet, and for many under-45s, it comes with major hurdles that make it less appealing.

Here’s why it might not always fit:

Cost: Advice doesn’t come cheap. Fees can range from £75 to £250 per hour, with comprehensive plans costing £500 to £2,000 upfront.

Ongoing advice might carry a percentage charge – typically 0.5% to 1% of your assets annually.

For a 32-year-old with £20,000 in savings, paying £200 a year might feel disproportionate, especially when free resources exist. However, doing it DIY does come with its own risks as you’ll be making decisions without personalised input from a professional.

Minimum net worth barriers: Many advisers target clients with significant wealth – say, £100,000 in investable assets – leaving younger people with modest portfolios out in the cold.

A 25-year-old with £5,000 in a Stocks and Shares ISA will struggle to find an adviser willing to take them on, as the fees wouldn’t justify the time spent.

This exclusivity can make advice feel elitist, rather than accessible.

Trust and complexity: Some young people hesitate because they don’t trust advisers (memories of mis-selling scandals such as PPI linger) or find the process intimidating.

Others worry about being pushed into products they don’t need, such as costly insurance policies.

And for the digitally savvy, the rise of robo-advisers – cheaper, algorithm-driven alternatives – can seem a more appealing fix than face-to-face meetings.

These drawbacks highlight a tension: while advice can be transformative, its structure often caters to older, wealthier clients, not the cash-strapped or early-career crowd.

The advice gap

This mismatch feeds into a broader issue known as the “advice gap”. This is the divide between those who need financial guidance and those who can access it.

For young people, the gap is stark. A 2023 FCA survey found only 8% of UK adults under 45 had sought regulated financial advice in the past year, compared to 20% of over-55s. Cost, awareness, and a lack of tailored services were cited as key barriers.

The implications are serious. Without advice, young people risk under-saving for retirement (exacerbating the UK’s pension crisis), mismanaging windfalls, or missing out on tax breaks.

Lowers says the real challenge is access: “Many don’t know where to go or assume they can’t afford it – which feeds into the advice gap. If we want to change that, we need to make financial advice or guidance more accessible, more flexible, and more in tune with the reality of someone navigating first-time milestones, not just six-figure portfolios.

“Financial coaching is becoming more and more popular, and I can see why. It offers guidance in which AUM doesn’t matter and the ability to meet minimum initial or ongoing fees isn’t even a consideration – it appeals to the wider population, including younger people. Whilst it isn’t advice, I do believe this will start to bridge some sort of gap.”

The rise of ‘finfluencers’ on TikTok and Instagram – some offering dubious tips – further muddies the waters, filling the void with unregulated noise.

So, what’s being done? The UK Government and regulators are stepping up. The FCA’s 2022 Consumer Duty rules push advisers to prioritise clients’ needs, making services more transparent and outcome focused.

Meanwhile, the Money and Pensions Service (MaPS), a Government-backed body, offers free guidance through Moneyhelper, targeting younger audiences with tools such as pension calculators and debt advice.

Innovations such as ‘simplified advice’ are also growing. In 2024, the FCA proposed lighter-touch models – think low-cost, digital-first advice for basic needs such as ISAs or small investments.

Firms including Wealthify and Nutmeg already offer ‘robo-advice’ at a fraction of traditional upfront fees.

Yet, progress is slow. Closing the gap requires more advisers but the UK has just 28,000, down 10% since 2015.

Better financial education in schools, and a cultural shift to see advice as a young person’s tool, not a retiree’s privilege.

To seek or not to seek?

For young people under 45, financial advice isn’t a one-size-fits-all solution. If you’re navigating a windfall, scaling a business, or earning big, it can be a game-changer, offering clarity and long-term security.

But for those with tighter budgets or simpler needs, the costs and barriers might outweigh the perks – especially when digital tools and free resources abound.

The advice gap remains a sticking point, and while regulators and the Government are chipping away at it, young Brits must weigh their options carefully.

Ultimately, the decision hinges on your circumstances, goals, and willingness to invest in your financial future. In a world of uncertainty, a little expert help might just be the edge you need – or a cost you can skip until the stakes rise higher.

Photo credits: Pexels

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This was not a full Budget. Chancellor Rachel Reeves reiterated her commitment to one major fiscal event annually, but it included significant policy shifts affecting public finances, welfare, and defence. 

Rachel Reeves has ruled out tax rises for now, but a number of tweaks and buried items in the Government’s documents suggest more could be on the horizon.

Below is a detailed breakdown of the key points and their implications for UK households and taxpayers.

Rachel Reeves downbeat economy

The Office for Budget Responsibility (OBR) revised its 2025 GDP growth forecast from 2% to 1%, citing global trade tensions, including new 25% US tariffs on cars and parts, and a slower domestic recovery. 

Inflation is projected at 2.8% in 2025, with the Bank of England maintaining interest rates at 4.5%. Longer-term forecasts show slight improvement, with growth rising to 1.9% in 2026 and averaging 1.7-1.8% through 2029. 

The OBR estimates real household disposable income could increase by £500 annually by 2029-30, compared to the previous government’s final Budget, assuming tax thresholds are adjusted.

Public sector net borrowing is expected to fall from £112 billion in 2025-26 to £58 billion by 2029-30, reflecting tighter fiscal control. 

However, the OBR notes this trajectory leaves limited room for economic shocks, with debt peaking at 96.8% of GDP in 2027-28 before declining slightly.

Fiscal discipline 

Rachel Reeves adhered to her fiscal rules: balancing day-to-day spending with revenue and managing debt levels. 

Without adjustments, the budget would have faced a £4.1 billion deficit by 2027-28. Instead, measures secure a £6 billion surplus in 2027-28, rising to £9.9 billion by 2029-30. 

This ‘headroom’ is narrow, with the OBR warning it could vanish if growth falters further or external pressures mount.

Welfare cuts

Welfare spending faced significant reductions. From April 2026, new claimants of health-related Universal Credit will receive £50 weekly instead of £97, with payments frozen until 2030. Under-22s will be ineligible for this element. 

Existing claimants retain £97 weekly until 2030, though a severe conditions top-up is planned. 

The standard Universal Credit allowance will rise from £92 to £106 weekly by 2029-30, a £14 increase over five years. These changes are projected to reduce welfare spending by £3.2 billion annually by 2029-30. 

Analysis suggests three million households could lose £1,720 yearly on average, pushing 250,000 people, including 50,000 children, into relative poverty. 

Reeves allocated £1 billion for employment support, aiming to offset cuts by boosting workforce participation.

Rachel Reeves leaves taxes unchanged, for now

No new tax rises were announced, aligning with Reeves’ pledge to avoid mid-year hikes. 

However, measures from the Autumn Budget persist: employer National Insurance rises from 13.8% to 15% in April 2025, and personal tax thresholds remain frozen until 2028-29. 

This fiscal drag will increase the tax burden, with revenue projected at 37.7% of GDP by 2029-30, a post-war high. 

Late payment penalties for self-assessment tax will double to 10% from April 2026, raising an estimated £200 million annually.

In the follow up documents from the Government on the Spring Statement, the Government confirmed it was making rules around late filing of self assessment tax returns harsher, with bigger penalties for late filing.

It also announced that parents who face paying the High Income Child Benefit Charge will no longer have to file a self assessment but instead will be able to use a digital service that repays their child benefit through PAYE. 

Finally, the Government announced it is looking at reforms to the ISA allowance and whether it can be better used to promote private investors and UK growth.

Ask our experts your money questions

Household impact

For households, the Spring Statement offers little immediate relief. Mortgage holders face sustained pressure with interest rates at 4.5% and renters see no respite from rising costs as welfare support tightens. 

The £500 projected rise in disposable income by 2029-30 hinges on future growth and tax adjustments, offering a distant prospect rather than immediate help. 

Low-income families, particularly those on benefits, will feel the welfare cuts most acutely, with the Resolution Foundation estimating a 2% drop in real income for the poorest fifth of households by 2027.

The 2025 Spring Statement prioritises fiscal stability over bold intervention, trimming welfare and boosting defence while holding the tax line. 

For UK households, it’s a lean outlook. Slower growth, tighter benefits and no quick fixes. 

Reeves is betting on long-term discipline paying off, but with global risks looming, the margin for error is slim.

Photo courtesy of HM Treasury Flickr

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Can you feel it? That is the sensation of the world slipping through your fingers.

The Great Financial Crisis, the housing crisis, Brexit, Covid, the cost-of-living crisis, the energy crisis. Any I forgot? It feels as if no matter what we do, we are all just keeping our heads above water.

If, like me, you came of age in the fire and brimstone of the Great Financial Crisis you might well wonder, has everything afterwards been just a total con?

You might have been a student during the turbulent Covid years, now condemned to massive student debt thinking, thinking where exactly did that get me?

Or you could be a parent who gets valuable child benefits while simultaneously being taxed to high heaven, thinking, can’t I just keep more of my own money? 

Maybe you’re the child of a baby boomer, watching them sitting on their pile of cash and home like Smaug and his gold, taking cruises and buying Range Rovers with your ‘inheritance’. 

Perhaps you feel you’ve worked hard to get to where you are today, but you’re crushed by the anxiety of what to do with it now you’ve got it. Least of all you want the Government pinching half of it for its mad pet projects.

And what about a 20-30-something who wants a family, but is locked out of the housing market by decades of bad policy from every political persuasion, vested interest and NIMBY psychopaths of your worst nightmares?

We all have a bone to pick with the system.

Dead-end job prospects. Stagnant pay. £15 olive oil. The Government taking half your money to pay people a ‘state’ ‘pension’ from a fictional ‘fund’ based on lies, damned lies and statistics. Fiddling while Rome burns.

The list of things that have arrived in the 21^st century to truly Screw…Us…Over…is growing by the day. 

We here at Mouthy Money are no longer going to take these affronts lying down anymore.

I’m not gonna leave you alone. I want you to get MAD! I don’t want you to protest. I don’t want you to riot – I don’t want you to write to your congressman, because I wouldn’t know what to tell you to write.

I don’t know what to do about the depression and the inflation and the Russians and the crime in the street. All I know is that first you’ve got to get mad. (shouting) You’ve got to say: ‘I’m a human being, god-dammit! My life has value!’ – Peter Finch in Network (1976).

So, from today, we’re tightening our focus. For those who want to build financial independence, we’re here to help you get rich, or die trying.*

And for those who have already built it, we’re here to help you decide how to protect well-earned wealth and spend it (and not be scared of ashamed of doing so either).

Why we’ve ended up here

Mouthy Money has been around since 2016, focused on telling people’s personal financial stories. We launched a podcast in October 2023, which has gone from strength to strength in the past year.

Increasingly though, and as Chris Tuite joined me as co-host, it has become clear that what really matters to us, and our audience, is that no one is looking out for our long-term financial health. 

Sure, financial firms do what they can. But Government institutions pay lip service, give and take small-time benefits, allowances or bonuses. Tax this, give that. It’s not enough.

The truth is no matter what your situation, there are tools there to help you get wealthier. To live the life you actually want to lead.

The system as it exists is not designed to screw you. What screws you is all the vested interests that come for their slice along the way. It’s time to stop those interests from winning.

From a high street bank that gives you a measly interest rate, to the insurer that hikes your premium without fail every year, or the private equity enterprise behind the vet that bills you for every penny any time your dog has a sniffle – we’ve had enough.

Mouthy Money is not here to break the system open. But we are now here to show you how to win against it and how to work with the companies that actually want to help you. And we might even try to change it for the better while we’re at it. 

Mouthy Money’s new manifesto

Mouthy Money is a money blog dedicated to speaking up about the importance of long-term wealth – how to build it; how to protect it; how to enjoy it.

We want to focus on real money issues and tackle the stigma around the importance of wealth and how people can achieve it responsibly and sustainably, by using the system as it exists to their benefit and promoting change from within.

Our mission is to provide essential information to readers: to help better inform and offer them the power to choose the right path for their own wealth growth, preservation and enjoyment.

We are a team of financial journalists with a deep pool of expertise and experience, from investing to pensions, mortgages, budgeting and more.

We’re very excited for this new chapter in our journey. Get in touch at editors@mouthymoney.co.uk if you’d like to be a part of it.

*When we say make you rich, we mean responsibly over time using legal methods. Don’t go getting any ideas!

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Regrets, I have a few, but unlike Frank Sinatra I often mention mine. When it comes to my finances, there are certainly things I have had to learn the hard way. There are common money mistakes you can easily avoid with awareness and planning, and here are eight of the biggest.

Not paying into your pension 

When you are younger, particularly if you are feeling the pinch, it may be tempting to opt out of paying into an employment pension scheme. But this is a huge money mistake. Many people aren’t saving enough to have a comfortable retirement, meaning they will have to work much longer and have a lower standard of living.

By opting out, you are turning down free money, and what sane person does that? Your employer is obliged to contribute towards your pension fund, but most won’t if you choose to opt out. You also get tax relief on your pension contributions, helping to build your pension pot further.

For more information on pensions, check out this article from Money Helper.

Not having an emergency fund

Putting away money each month into an emergency fund provides a reassuring cushion. Having, say, £1000, tucked away can make those rainy days feel less wet.

Unexpected car repairs, a dentist’s bill, or a washing machine breakdown can all be dealt with without having to use a credit card or take on debt.

Not saving

Once you are paying into your pension pot and emergency fund, having regular savings can provide an even bigger safety net and financial security for unexpected events like illness or redundancy.

Savings can allow you to reach life goals such as buying a home, travelling or putting money towards university costs for your children.

Over time, saving regularly will help you to grow your money too. Do some research to make sure you are getting the best interest rate possible.

Read more from Shoestring Jane
on Mouthy Money

Not budgeting

Creating a written budget of the money you have coming in and what will be going out is the first step to taking control of your finances.

If you don’t make a budget and track your spending, it is hard to know when you need to rein it in and where you can save. It also allows you to work out how much you can afford to put away in sinking funds for things like Christmas, birthdays, car repairs, etc., as well as in longer term savings.

If you don’t know where to start, you can use the free budget planner from Money Helper.

Overspending 

In a world when we are constantly bombarded with marketing, it can be hard to prevent impulse spending. But overspending regularly can make a serious dent in your bank balance and potentially lead to debt.

Tracking every bit of spending you do for a few months will make you super aware of all the occasions when you buy stuff you don’t really need.

You can go old-school and keep a spending book with you, but nowadays it’s easier to do this on your smart phone. Many banking apps have a tracker facility or you can download spending tracker apps.

Not doing your research

When you do need to buy something, a common money mistake is to rush into your purchase without doing some research beforehand to find the best price and any potential discounts.

Shopping around will invariably find you a better price. It takes time and effort, but the savings, particularly on expensive items, make this a good habit to get into.

Not buying insurance

Some things in our lives are too precious not to insure. Your home, for one; there is a reason mortgage providers insist you take out buildings insurance. But what about the contents? If you had a major event like a fire or flood could you afford to replace them? 

Personally, I think it is a mistake not to have home buildings and contents cover. I always add the accidental damage option as well.

Having worked on an insurance claims line in my youth, I know that these are some of the most common events. When my then two-year-old daughter decided to draw on our brand new stair carpet with indelible ink, I was glad I had it!

If you regularly carry items like smart phones, jewellery or laptops away from home, or have an expensive bicycle, you should consider getting insurance for them as well. Make sure you shop around to get the best deal.

I also insure my pets. They are precious to me, and I would hate to be in a situation where I couldn’t afford treatment for a serious or life-long health condition.

However, once you have insurance, never allow the policy to auto renew and shop around every year. 

Being a loyal customer

As well as not allowing your insurance policies to auto renew, it pays to question your loyalty to other businesses. Just because you have always shopped somewhere, it doesn’t mean you are getting the best value for money. Your utility provider may not be giving you the best value for money, nor your bank. 

In fact, you may be offered incentives as well as a better deal for switching banks, broadband providers, insurers and phone providers. This is another area where doing your research can pay dividends.

By avoiding these common money mistakes, you will make the best of your financial situation, increase your wealth and avoid wasting your hard-earned cash.

Have you made any money mistakes which you’ve learned from? Get in touch and tell us about your experiences

Photo credits: Pexels

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Defined Contribution or ‘DC’ is a type of pension scheme commonly used in the UK.

In a defined contribution scheme, both the employer and the employee contribute a specified amount to the employee’s pension pot.

Here are the key points to understand about defined contribution schemes: 

1. Individual Pension Pots: Each employee has their own pension pot within the scheme. 

2. Fixed Contributions: Contributions are fixed and usually a percentage of the employee’s salary. For example, an employer usually contributes a minimum of 3% of an employee’s salary to the pension, and the employee contributes 5%. 

3. Investment Choices: Employees often have a range of investment options to choose from, such as shares, bonds, or funds. The employee can decide how to allocate their contributions among these options. 

4. Market Risk: The value of the pension pot depends on the performance of the chosen investments. Therefore, the employee bears the investment risk. If the investments perform well, the pension pot grows. If they perform poorly, the pot’s value may decrease. 

5. Retirement Benefits: The retirement benefits in a defined contribution scheme are not predetermined. Instead, they depend on the total contributions made and the investment returns on those contributions over time. 

Examples of defined contribution schemes in the UK include personal pensions, stakeholder pensions, and the National Employment Savings Trust (NEST).

These schemes are designed to build up a pension pot that can be used to provide an income in retirement, either through buying an annuity or using income drawdown.

Got a money question? Ask our expert panel 

Photo credits: Pexels

The post Word of the Week – Defined Contribution appeared first on Mouthy Money.

What a difference a week makes. When I wrote my weekly column last week, all was more or less business as usual. One week later, and we’re in the depths of a General Election campaign.

We have had a couple of pensions-related announcements. But so far, I have seen little to suggest our politicians have anything intelligent to say about the issue. Or that they even care, other than to offer politicised giveaways to their respective bases.

Firstly the Conservative Party say it will INCREASE the protection of the State Pension triple lock, calling it the ‘triple lock plus’. This is an obvious sop to wavering older Tory voters.

A triple lock plus would increase the income tax personal allowance in line with inflation and state pension increases, supposedly freeing the benefit from ever triggering income tax charges.

It would see pensioners protected from the fiscal drag everyone has recently suffered from income tax band freezes, and which have no credible end in sight. It is also a remarkable return to unfair privileges for politically useful groups which had been largely scrubbed out of the income tax system in the past decade.

For a benefit that is already very heavily protected, this is quite a lot.

Secondly, the Labour Party, has just reaffirmed its commitment to reinstate the pensions Lifetime Allowance – something that has only just been abolished.

Aside from whatever political machinations are at work with this commitment, it is just reckless policymaking to chop and change at such short notice, leaving large numbers of people in the lurch unable to make long-term plans.

They’ve also said they want to find a way to carve out exceptions for NHS workers (read, well-off doctors), something they previously admitted was extremely difficult to do in practice.

It really underpins the short-termist attitude of our political classes in search of cheap triangulations to win voters. It is absolutely no way to manage a system that needs long-term care and attention.

There is so much else we’re not doing to improve the pension system, and which no one seems interested in discussing.

Take for instance, a major flaw in auto enrolment pensions that sees working people collect an extraordinary number of pensions over the course of a career.

I had one such example drawn to my attention by David Henderson, head of pensions at pension tracing app Penny. Speaking to David on the Mouthy Money podcast, he revealed that one client of Penny had used their service and found 11 lost pensions. 11!

The client, called Gary, had an unusual career in that he contracted into pharmaceutical firms often for short periods of time. But each new job he’d get a new pension and ended up with a mess of pots that he had lost track of.

This is something of an extreme example, but David told me that Gary isn’t even the Penny client with the record number of pots!

So what’s the problem here?

Back in the day we had what were called final salary pensions or ‘defined benefit’. These were pensions that you’d pay into a fixed amount and then receive valuable guaranteed pension income and benefits for life when you retired. These kinds of pensions went hand in hand with the way that people used to work – often staying with one company (or indeed, for the Government) for their entire working lives.

Such pensions were extremely valuable – so valuable that companies (and the Government) found them too expensive to sustain. There is, I believe, just one company in the FTSE 100 that still has such a scheme open, and most Government versions have also fallen by the wayside.

In their place came ‘defined contribution’ or DC pensions. These amount only to what you put into them (typically a minimum of 5% of your salary), with employers obliged to contribute a minimum amount of around 3% of your total salary.

These came hand in hand with auto enrolment, a change to the pension system that saw workers automatically included in company pensions schemes when they started a new job.

But the crux of the problem is that we have a much higher tendency to move jobs than in the past – which leads to everyone having a mess of pension pots, which often end up forgotten or lost.

Solutions, but in the bin

The Government has already suggested a solution to this problem.

In the last Budget, Chancellor Jeremy Hunt announced that the Government would be consulting on the idea of something called ‘pot follows person’ or ‘pot for life’. This is a situation which already exists in Australia, who we have a long-term tendency to follow on pensions policy.

It would make pensions work in the same way a bank account. Instead of getting a new one every time you change job, you get a new one at your first job, then every time you move, you give your new employer the equivalent of a bank account number and sort code, and they just put your contributions straight in there.

This system would simplify the mad proliferation of pots we currently have, but does come with drawbacks.

For one, critics say this would put all the consumer choice onto normal people, who are often not well informed. This could lead to people paying higher charges than necessary or making investment decisions that aren’t right for them.

However, these problems are, for me, an issue of design not overarching aims.

The single biggest problem for all this actually, and the overarching problem with pension policy in general, is the whim of politicians.

The Labour Party (who are likely to be in charge come 5 July) have not made any commitment to this proposed solution. There’s a strong likelihood the whole thing will go in the bin as a new Chancellor comes in with wholly different priorities.

And this is ultimately what is broken about our pensions system. It’s not that we don’t have solutions. It’s that our leaders are fickle and short-termist. Pensions policy is something that needs – like a pension – management over decades.

Otherwise we’ll just end up back where we started (and where we are now) – with an incomplete mess that just generates more problems than it solves.

For more, listen to the latest Mouthy Money podcast episode, where editor Edmund Greaves talks about tracking down lost pensions with David Henderson, head of pensions at Penny.

Photo credit: HM Treasury Flickr.

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Brits need to save more for retirement. We all know this. Why, then, are so many of us still not saving?

When MRM’s 2024 Money Matters Index landed last week, I was shocked to read that less than half of people have a pension (45%).

This seems, in large part, because short-term financial pressures are dominating people’s thinking.

When it came to immediate priorities, at the top, half (50%) said paying bills comfortably, two in five (38%) said paying for a holiday and one in four (24%) said paying off credit card debt.

With bills continuing to climb, having enough money to start saving and investing for retirement was a priority for just 15% of people. Being in the position to retire early was important for only 13% of respondents.

If you know you need to squirrel more away for retirement but don’t feel able to due to other financial commitments, then don’t fear.

We’re here to tell you how you can save more – without falling behind on your short-term priorities.    

The science behind pension saving

First, why do so many people struggle with pension saving? I spoke with two behavioural finance* experts to find out.

Stuart Erskine, director at Flat Mountain Consultancy, a business helping financial advisers to deepen their understanding of their clients’ behaviour and decision-making processes, explains that financial decision-making can be significantly impacted by behavioural theories.

“Like other types of scarcity, poverty can adversely affect cognitive decision-making abilities through mechanisms such as ‘hyperbolic discounting’,” he says.

‘Hyperbolic discounting’ is a concept where individuals tend to favour immediate rewards over future benefits, leading to decisions such as spending disposable income now rather than saving it for a more substantial reward in the future.

“This tendency becomes more pronounced when considering immediate financial needs versus long-term savings,” he adds.

Marliane Owen, from Be Onpoint Consulting Ltd, a company that works with pension schemes to ensure their communications consider the human behind the decision, agrees: “One thing that plays a massive part in retirement planning, or lack of retirement planning, is our connection with the future. We’re geared to look after ourselves in the present. From an evolutionary perspective, this makes sense, as we need to survive for tomorrow.”

The current cost-of-living crisis might exacerbate these issues, influenced by what is known as a ‘scarcity mindset’.

Erskine explains this mindset focuses on immediate shortages rather than future opportunities, potentially leading to poor financial choices, such as resorting to high-interest payday loans and neglecting savings.

Erskine says: “There’s a lot of evidence to suggest that a scarcity mindset can lead to poor decisions – think things like visiting pay day lenders and paying high interest rates. It can almost mean that people aren’t inclined to save.”

Overcoming psychological barriers

But how do we overcome these issues? Erskine highlights the importance of starting with small, manageable actions.

He points to the success of a South American initiative led by Jorge Bolivar Almela at Savinco.org, which helped lift communities out of poverty.

The program encouraged individuals to save minimal amounts, such as 10p per week. This ‘Saving for Learning’ initiative also allowed participants to borrow funds to start microbusinesses, provided they committed to saving, regardless of the amount.

 “Initiatives like this are effective because they shift people’s mindset about money,” Erskine remarks. “It demonstrates that even those who believe they cannot save can start with very small sums.”

Owen says that another trick is to connect with your future self.

“There have been lots of studies on people’s brains which show that, actually, the bit that thinks about the future, and your future self, is the same bit of the brain that thinks about strangers. This means there is a massive disconnect between who we are now and who will be later.”

“A good idea is to ask yourself – where will I be in 10 years’ time? Who will I be? Will I be the same person with have the same values, the same thoughts?”

According to Owen, studies have shown that people who seek to connect with their future selves in this way can go on save more over a period of 10 years

It’s also worth thinking about gamifying saving. “You could try something as simple as starting a savings competition with a family member or friend”.

This doesn’t even need to be for your pension, you could challenge yourself to set aside £20 or £30 in a month for a rainy-day fund to help you get into a savings mindset.

Owen adds: “Things like this help people hold themselves accountable but also normalise speaking about money, which I think is quite important.”

Financial education – lessons for a lifetime

Erskine, along with financial expert Owen, believe that enhancing financial education is crucial for better planning, especially for retirement.

“Opting to save into a pension is a decision that benefits greatly from financial education. It might not change a person’s overall mindset, but it can alter their approach to specific financial actions,” Erskine concludes.

But it can’t be one size fits all, according to Owen.

“There’s a lot of emotion attached to how we manage our money that’s unique to us as individuals. And that’s another reason why people struggle to think about money in the future.”

There are numerous charities and organisations campaigning for the UK Government to improve financial education, but there are things you can to do help improve your money knowledge today.

For example, ask your employer if they offer financial education as part of your employee benefits package. Failing that, Money Helper is a free, government-run organisation that has plenty of great resources available on pensions and money more generally.

When you think about it, pension saving isn’t all that different to going on a diet. If you cut too many calories early on, you’re likely to run out of steam week one. In the same way, saving little and often – and making it enjoyable – will be a far more sustainable way to reach your retirement goals.

*The Oxford Dictionary defines behavioural finance as the study of the role played by psychological factors in financial decision making.

Photo credits: Pexels

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From the great gender pension chasm to shifting food shopping habits and women afraid of investments – here are our favourite must know money stories this week to help you get your head around your personal finances. 

Women miss out in “great gender pension chasm” 

Women’s private pension pots in the UK are worth 35% less than those of their male colleagues by age 55, according to a major government study. 

The data shows that, on average, for every for every £100 accumulated in men’s private pensions, women have just £65, leading to the possible loss of thousands of pounds of retirement income. 

Lower overall earnings, time off for childcare and other caring duties, along with the greater numbers of women in the part-time workforce, are all thought to be factors of the imbalance. 

While previous studies have revealed a gender pension gap, this is the first time the Government has revealed the true scale of the problem, reports Miles Brignall for The Guardian. 

The pensions minister, Laura Trott, said: “The success of automatic enrolment has transformed the UK pensions landscape and brought millions of women into pension saving for the very first time. However, while the participation gap has closed, the wealth gap persists. 

“The publication of an official annual measure will help us track the collective efforts of government, industry and employers to close the gender pensions gap.” 

Massive shift in food shopping habits 

There has been a significant shift in our food shopping habits since the pandemic, based on data compiled by analyst firm Kantar, reports Daniel Thomas for BBC News. 

Based on Kantar’s findings, the BBC identified five ways shopping habits changed due to soaring food prices and the cost-of-living crisis.  

• Shoppers now have less frequent supermarket visits, but data shows higher volume of sales – indicating higher spending overall.  
• The shift to online has slowed with only 11.7% of UK grocery spending online, down from 15.4% in February 2021. While many older people gave up shopping online after the lockdowns, people also enjoy taking a trip out to shops and seeing other people now. 

• Shoppers are swapping established brands for cheaper supermarket own-label products to combat food prices and their fastest rate rises in 45 years. 
• Sales at discounters such as Aldi and Lidl have soared, as customers look to save. 
• Shoppers are increasingly turning to loyalty schemes for discounts, as supermarkets revamp their loyalty cards to offer in-store or personalised deals. 

Three in four women too nervous to invest 

74% women do not invest and are therefore missing out on building wealth and long-term financial security, according to investment firm Wealthify. 

By comparison, 58% of men said they are not investors, suggesting men are less nervous about dabbling in the stock market, writes Ruth Emery for MoneyWeek.  

However, Wealthify data shows 61% of women have definite future savings goals, compared to only 49% of men.  

The research found that women did not invest because they were too nervous, lacked confidence and did not know where to start, ultimately preferring to leave their money in cash savings accounts instead.  

Kalpana Fitzpatrick, digital editor of MoneyWeek says: “But with interest rates on these accounts lagging behind inflation, it means they are not only losing out on the power of compounding, but they are also missing out on potentially hundreds of pounds in returns over the long-term.” 

Findings from another survey by Boring Money reveals a £599bn gap between men and women’s holdings in stocks and shares, ISAs, investment accounts, and private pensions. 

Photo Credits: Pexels

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It is increasingly important to understand the current environment and take better control of your daily finances. 

Here are some of our favourite stories and explainers about last week’s Budget to help you work out what the Chancellor’s changes mean for your money.

What the Budget means for you

Rupert Jones has produced a nice summary of the measures for The Guardian, outlining what they mean for people on a range of incomes.

Here are some of the key highlights…

Energy bills: Chancellor Jeremy Hunt took a U-turn on the plans to reduce energy bills support. He announced that the £2,500 annual cap under the Government’s energy price guarantee scheme will continue until the end of June.

Pensions: Hunt abolished the lifetime allowance, which capped how much you could save into your private pensions before incurring a tax charge. The previous cap was a little over £1.07m. That cap has now been removed.

The Chancellor also increased the amount you can pay into your pensions each year by £20,000 to £60,000.

The Chancellor also offered a boost to people who had taken a lump sum from their pension but wanted to continue to save into it. Before last week, these people could only save £4,000 a year into their pension instead of £40,000, like everyone else. But the new rules mean they can now save up to £10,000 a year without penalty.

Free childcare plan: ‘Why do we have to wait?’

Of course, the other major announcement was a significant boost to free childcare provision.

Last week the chancellor extended phased-in free childcare support offering 30 hours for children over nine months old. Meanwhile, the current system allows working households to claim 85% of their childcare costs – a maximum of £646 for one child, or £1,108 for two or more children per month – which will increase to £951 and £1,630 respectively.

While the Chancellor’s childcare plans were widely welcomed, Daniel Thomas, writing for BBC News, reveals how some parents may have to wait up to two years for their full entitlement.

One parent told BBC: “In terms of a vision [this policy change] is positive. But we still feel we’re in a challenging position.”

While these parents agree that the move is beneficial, it still leaves them financially stretched for another two to three years.

Chancellor Jeremy Hunt admitted that UK has one of the most expensive systems in the world. The government will provide £4.1 Billion by 2027-28 to combat this and will substantially raise the hourly rate for providers to deliver free hours.

Nurseries have long complained that this rate is too low, which prevents them from affording to offer free childcare hours, and might lead to charging parents extra to cover their losses.

Christine Farquharson, a senior research economist at the IFS said that 30% mums with a 0–4 year-old are in no form of paid work, and half of them cite childcare as one piece that could help solve the puzzle.

Photo Credits: Pexels

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