This podcast isn’t personal advice. If you’re not sure what’s right for you, seek advice. Tax rules can change and benefits depend on personal circumstances.
This podcast isn’t personal advice. If you’re not sure what’s right for you, seek advice. Investments rise and fall in value, so investors could make a loss. Tax rules can change and any benefits depend on your personal circumstances.
Full podcast episode transcript
[0:09] Susannah Streeter: Hello and welcome to Switch Your Money On with me, Susannah Streeter – Head of Money and Markets at Hargreaves Lansdown.
[0:14] Sarah Coles: And me, Sarah Coles – Head of Personal Finance – and we’re joining you at what is a pretty exciting time for us, because we have a brand new, shiny Savings & Resilience Barometer.
I know getting excited about data is a bit tragic, but there’s so much interesting stuff in there, including some alarming pension gaps and a huge divide across the country.
[0:33] Susannah Streeter: Yes, I know you’ve been knee-deep in this report for a while, so you can’t wait to share, which is why we’re calling this episode of the podcast, ‘Pensions and Money Gaps.’
[0:42] Sarah Coles: Yes, Helen Morrissey – our Head of Retirement Analysis – will be explaining and exploring the pensions gap with us, and Nathan Long – a Senior Analyst at HL – will be exploring some of the most interesting findings in the Barometer.
[0:53] Susannah Streeter: But, before we get stuck in, we should take a quick whistle-stop tour of what’s moving markets at the moment.
And, unless you’ve been living deep underground – or in total radio silence for the past few weeks – you can’t have missed Donald Trump being sworn in as the 47th President of the United States, and there are already signs that this could be a somewhat unpredictable presidency!
[1:14] Sarah Coles: Yes – even the swearing in ceremony had some of the former presidents looking less than pleased, but what does it mean for the markets?
[1:21] Susannah Streeter: Certainly, some of the volatility we’ve already seen on financial markets is likely to continue as speculation swirls about Donald Trump’s trade polices as he’s returned to the White House for a second term. There’s inevitably a lot of focus on what the impact could be for the global economy when higher tariffs are introduced. His pledge to take back the Panama Canal – and a pledge to expand US territory – is likely to spark fresh concerns about rising geopolitical risk.
It’s not surprising that gold prices have crept back up – given that, in times of
uncertainty, it’s tended to do well. It had a stellar run in 2024 – and, although returns may not continue at this pace, it could enjoy support.
[2:03] Sarah Coles: So, we should probably talk about his tariff plans. On the face of it, they’re going to increase inflationary risks around the world, aren’t they?
[2:09] Susannah Streeter: Yes – more tariffs on goods imported into the US could push up inflation by raising prices in American shops. This, in turn, could add to the clamour for higher wages. His plan to curb immigration – reducing the available labour – could also push prices up. Already, concerns for these policies will drastically limit the Federal Reserve’s capacity to reduce interest rates has rattled bond markets and pushed up some government borrowing costs.
[2:39] Sarah Coles: So, given how connected the world economy is, this is gonna have an impact on the UK, isn’t it?
[2:44] Susannah Streeter: If widespread tariffs are introduced, the dollar could strengthen further, which risks importing inflation to other countries, including the UK. Many wholesale markets are priced in dollars, which will be more expensive if the greenback takes on more muscle – pushing up prices. If countries hit back with tariffs on imports from the US, that could raise prices again. But there is also the possibility that global firms cut prices to try and stay competitive, which could have a downwards impact on inflation.
Longer-term, there is a risk that the dollar could weaken if trade wars erupt and lead to weakness in demand for American-made goods – and slower growth in the US – which may prompt the Fed to lower interest rates.
For now, the pound has been pushed lower against the dollar to trade at levels not seen since the Autumn of 2023. This has been a tailwind for the UK stock market recently, particularly for the larger multinationals, and there could be fresh potential ahead.
[3:49] Sarah Coles: What about other companies in the US?
[3:54] Susannah Streeter: Trump’s tariffs may help manufacturers focused on the US domestic market. Smaller American companies may also be beneficiaries, as they benefit from US supply chains being beefed up. If the Fed, as expected, goes slow with rate cuts, higher rates for longer could help the US financial sector, given that Trump is also expected to be keen for more deregulation.
Companies operating in the gig economy have been under pressure during the Biden administration, because new rules could make it harder to classify workers as independent contractors – so they could benefit from lighter-touch regulation. However, technology stocks have come under pressure recently amid speculation about interest rates which could continue – and also speculation about what could be in store if Chinese firms manage to develop low-cost, large language models in terms of artificial intelligence.
[4:52] Sarah Coles: To what extent could Trump’s return affect interest rate decisions at the Bank of England?
[4:59] Susannah Streeter: Policymakers at the Bank of England will be assessing the potential inflationary risks from Trump’s presidency. However, recent data pointing to stagnation in the UK economy – and a surprise dip in inflation – has raised expectations for rate cuts at the February meeting of policymakers.
There’s also a chance that tariffs are not as punitive as the markets currently expect. If the policies are more targeted, inflationary risks could subside in the US and further cuts could be priced in.
[5:30] Sarah Coles: And we’ve seen bond markets go on quite a volatile ride recently, with government borrowing costs soaring – so what’s the latest?
[5:37] Susannah Streeter: Worries about the inflationary impact of Trump’s tariff plans have been gripping the bond markets recently, pushing up the yields on government debt. They have eased off a bit – particularly here in the UK, with more interest rate cuts expected. Bond investors are likely to stay highly vigilant about what’s ahead.
[5:54] Sarah Coles: And finally, Susannah, what could Trump’s policies mean for prices at the pumps?
[6:01] Susannah Streeter: Given the ‘America First’ mantra, this Trump presidency is likely to place emphasis on energy independence and continue the increased pace of drilling permits, and accelerate the production of fossil fuels.
If the US produces more oil, it theoretically could boost the supplies on world markets and lower prices, but it’s unlikely to happen in the short term. Energy companies will be keen to ensure a balance of oil on world markets to stay profitable.
Trump has pledged to bring about an end to the war in Ukraine – although this looks ambitious in the short term! A truce has the potential to ease supply concerns in the market, if some sanctions on Russia are lifted.
[6:45] Sarah Coles: There’s an awful lot of change to watch for, and not just in the markets. There’s a bigger financial world out there – and, to help us understand it, HL has published its latest Savings & Resilience Barometer.
Now, if you’ve not come across this before, it’s a huge piece of analysis we do every six months in partnership with Oxford Economics. It brings together 16 separate measures from official datasets, including the Wealth and Assets Survey from the Office for National Statistics.
We use Oxford Economics modelling to bring that data right up to date, and then we build a clear picture of people’s financial resilience – from how much debt they have and how much they hold in savings, to whether they’re on track for a reasonable retirement income, how much of their home they own, and whether they invest.
[7:23] Susannah Streeter: It is a massive piece of work – and Nathan Long is in the driving seat for us. So, let’s bring in Nathan to explain what this set of data has uncovered.
So, Nathan, I think you have some good news for us?
[7:38] Nathan Long: Hi, Susannah. The Barometer reflects the fact that wages have been rising faster than inflation. In fact, lots of the gains were made at the start of last year, when the amount of money people have after tax and inflation jumped, but it has stayed higher ever since. It means households have more money left at the end of the month. On average, it’s gone up from £92 in 2019 to £196 at the end of 2024.
[8:14] Sarah Coles: I know you measure the wriggle room in people’s budgets as a sign of resilience in itself, but it also means they can save more too, doesn’t it?
[8:20] Nathan Long: Yes – people are saving a bigger percentage of their income, on average, than they have for the past couple of years. Advisers tend to recommend that households have enough cash to cover between 3-6 months’ worth of their essential spending – and hold that as an emergency fund whilst they’re still working.
The number of months’ worth of essentials that can be covered with emergency savings has risen from 2.6 months in 2019 to 5.6 months today. So, from less than the recommended level to well above the minimum.
[8:57] Susannah Streeter: I know from previous Barometers that this isn’t the case for all households, is it? Those on higher incomes tend to be able to save more.
[9:05] Nathan Long: Exactly – and it’s the same again this time. So, if you take those on higher incomes – so households earning between £51,000 and £116,000 – they’ve seen a 30-percentage point rise in the proportion with enough emergency savings – whilst those with less than £26,000 actually saw the proportion meeting that level fall.
[9:32] Sarah Coles: And the gap between the higher and lower incomes isn’t the only striking gulf in this Barometer – so there are really big differences across the country.
[9:39] Nathan Long: Yes. This was something we delved into in far more detail this time round – so going into individual boroughs and civil authorities.
[9:48] Susannah Streeter: Why is it important to look so closely at each area?
[9:52] Nathan Long: The point of the report isn’t just to expose the vast gulfs in resilience between different pockets of society. The results are fed into the Government – and a host of other organisations – to help inform the support that they offer in each local area. In the areas with the biggest challenges, there is the hope that a joined-up approach – backed with this holistic picture of people’s finances – will make a difference.
There’s also a power in knowing why you face specific money challenges – so why it may feel impossible to get onto the property ladder in some areas, or why you tend to carry a credit card debt from one month to another. By understanding your risk, it helps you establish your priorities.
[10:33] Sarah Coles: Bearing all that in mind, there were some massive differences across the country, weren’t there?
[10:37] Nathan Long: Yes – some of them won’t come as a huge surprise. The home counties are the home of overall higher resilience – and that owes something to higher rates of home ownership. It also helps that those households have higher incomes and more money left over at the end of the month. In fact, they have, on average, £361 left, which is £165 higher than the national average.
At the other end of the spectrum, the lowest Barometer scores were in Hull, where households have an average of £65 left at the end of the month – the lowest in the country. They also fare poorly in all sorts of other areas – from their emergency savings to how on track they are for their retirement income. The fact it’s home to lower incomes is no surprise because low incomes are strongly correlated to lower resilience.
[11:30] Susannah Streeter: Of course, going into more detail exposes the differences in each area. I know London was striking for this, wasn’t it?
[11:38] Nathan Long: Yes. A lot of the London boroughs are around the bottom of the league table for resilience, but then other boroughs fared much better. In fact, when you measure the percentage of people with enough cash at the end of the month, London local authorities make up all of the top 10.
[11:55] Sarah Coles: And, of course, home ownership drags London scores down, doesn’t it? – because properties are so expensive and so many people rent.
[12:01] Nathan Long: Yes – home ownership matters too, especially as we approach retirement. It’s one reason why local authorities in the home counties do best for retirement resilience, while London and other cities – where more people rent – have lower scores.
London dominates the list of areas with low levels of home ownership. Manchester centre is the worst place for home ownership levels outside of London.
Lower home ownership in cities – they have 54% home ownership compared to 68% in rural areas. That’s one reason why, overall, being in a city is likely to mean you have lower resilience. City local authorities make up 26% of all local authorities, but over half of the 50 lowest scoring ones. It means you tend to have stretched finances in the short term and face a housing issue in retirement.
[12:55] Susannah Streeter: And I know we’ll be talking to Helen about the pension findings, but these varied across the country, didn’t they?
[13:04] Nathan Long: Yes. So, in the top 10 local authorities for retirement resilience, 49% are on track for a moderate retirement income, compared to 24% in the bottom 10.
The organisations where people work feeds into this, which is one reason why Yorkshire & The Humber – where there’s a higher proportion of people who work in the public sector – retirement resilience is higher.
[13:34] Sarah Coles: Thanks, Nathan – there’s so much data in this report. And, of course, we have the findings on our website – so you can drill down into resilience in your area and the areas of your own finances you’re more interested in.
[13:43] Nathan Long: Yes – I know I’m biased, but I’d say it’s well worth a look because it can tell you so much about your money.
[13:49] Susannah Streeter: Thanks, Nathan. Of course, a big part of that picture is pensions, so let’s bring in Helen Morrissey – our Head of Retirement Analysis.
[14:11] Helen Morrissey: Thanks, Susannah. When we look at how well-prepared people are for retirement, then we’ve got a bit of a miserable picture, I’m afraid.
The latest Barometer stats show that only 36% of households are on track for a moderate retirement income. It means the median pension gap – measured by subtracting what people have put away in their pension from the amount they should have done to be on track – increases to over £31,000. That has quadrupled since 2019.
[14:42] Sarah Coles: That’s pretty shocking, Helen. Why is that happening?
[14:47] Helen Morrissey: It is largely down to inflation increasing the amount that is needed for a moderate retirement – plus they have to save for retirement while their day-to-day finances have been squeezed, which hasn’t been easy for everyone.
[14:59] Susannah Streeter: So, when we were talking to Nathan, he mentioned that financial resilience can differ depending on where in the country people live. I would imagine you’ve seen similar differences in the retirement data?
[15:12] Helen Morrissey: You are absolutely right. When we look at Wokingham – the most finically resilient area – they’re pretty much on track for a moderate retirement. Their pension gap is only around £260. When we compare this to one of the less financially resilient areas – Nathan mentioned Kingston upon Hull – then we see their pension gap is much wider at over £54,000.
[15:38] Sarah Coles: That makes for some tough reading, Helen. You mentioned inflation having been a big factor in people’s retirement savings falling behind, but is there anything else?
[15:46] Helen Morrissey: I think Nathan may have mentioned this earlier, but things like home ownership play an enormous part in people’s later life resilience. If you’re paying rent throughout your life, then that is going to impact your ability to save for retirement – and it’s also going to push up your outgoings once you get there too. It could be a key factor behind some of the London areas having sizeable pension gaps.
[16:09] Susannah Streeter: But what can people do about this? Any top tips for trying to make up the gaps?
[16:15] Helen Morrissey: I’ve always got top tips for this one. I think the key thing is not to panic. The worst thing you can do is stick your head in the sand and try and ignore it. Gather together all your pension paperwork – so you’ve got a sense of how much you have – and then you can run it through an online pension calculator, so you’ve got an idea of how much that will give you in retirement.
[16:38] Sarah Coles: I suppose, once you know what you’ve got, you can put a plan in place. Also, you may find the situation isn’t as bad as you think it is?
[16:45] Helen Morrissey: Exactly, Sarah. Having some sense of what you’re on track for can either give you great confidence or else give you time to put a plan in place if you are running behind.
A lot of these online calculators can show you the impact of boosting your contributions over time, so that can be really useful. If you can get into the habit of boosting your contribution every time you get a pay rise, then that can really boost the amount that you save long-term.
[17:11] Susannah Streeter: Any other ideas, Helen?
[17:13] Helen Morrissey: Plenty! Another vital thing is to make sure that you haven’t lost track of any of your old pensions. If you don’t have any paperwork for them, give the government’s Pension Tracing helpline a call. You might unearth a pension that’s worth thousands of pounds.
Once you’ve tracked down all your pensions, then you might find it easier to consolidate them. It can save you time and admin and gives you a real view of what you have. However, before you do so, make sure you aren’t potentially incurring any exit fees or losing valuable benefits, such as guaranteed annuity rates.
[17:49] Susannah Streeter: Thanks, Helen – it’s good to know there are things that people can do. What about their wider finances, Sarah?
[17:59] Sarah Coles: The first step is to work out where you stand. You need to take stock of things like your short-term debts, insurance cover, savings, pensions, and investments.
Some things are more pressing than others – so, if you’ve got expensive short-term debts like credit cards, it makes sense to tackle them as a priority. Similarly, if you don’t have enough emergency savings to cover 3-6 months’ worth of essential spending, then saving is gonna be near the top of the to-do list.
Things like investment are far more exciting, so it can be tempting to jump ahead to those and neglect the boring financial basics. You don’t have to give up on the fun things – just consider them alongside those most pressing priorities.
[18:38] Susannah Streeter: So, once you know what you want to achieve, how do you make it happen?
[18:51] Sarah Coles: It’s about having a map rather than just a destination. So, you know where you want to get to, but it’s just as important to know the first step that you need to take to get there – and then the second, and so on. Don’t just say, ‘I want to spend less’ – say, ‘I want to spend less and I’m gonna start by keeping a spending diary for a month to see where my money is going.’
Once you’ve cut back, this will free up cash to help you meet your other goals.
[19:14] Susannah Streeter: And are there any good ways to make sure you stick with it?
[19:28] Sarah Coles: Yes – don’t try to do the right thing every day. Set it up to happen without you even thinking about it.
If you need to build your savings, set up a direct debit to go into a savings account every month. If you want to start investing, a regular saver is a great option, where your direct debit pays into an investment account – like an ISA, a Junior ISA, or a Lifetime ISA every month. If you want to build up your pension, then look at your monthly contributions. Just do what you can afford, and set it up to come out of your account on payday – before you have a chance to miss it. That way, you automatically do the right thing every month.
[20:01] Susannah Streeter: And, if you’re already an investor, but you want to maximise your chances of having a more resilient future!
[20:09] Sarah Coles: Yes – there’s always more you can do.
[20:15] Susannah Streeter: Thanks, Sarah – there is plenty of food for thought. And, of course, you can find the Barometer report on our website – you can delve into more of the detail there yourself.
Finally, before you go, it’s time for the stat of the week. So, given all of this talk of households, I had a look at some of the data on households – and, in 2023, there were 28.4 million households in the UK. But my question is how much d’you think that has grown since 2013?
[20:52] Sarah Coles: Well, I know it’s on the up. This is something we come across all the time ‘cause there’s so much demand and such a shortfall. But I just don’t know how much, so I’ll say a million!
[21:03] Susannah Streeter: It’s actually more – it’s 1.7 million. And almost a third of them were people living alone. One that’s particularly relevant to us – with teenage sons – is that a third of young men aged 20-34 were living at home with their parents, compared with less than a quarter of young women.
[21:24] Sarah Coles: It means the proportion of my salary I spend on protein powder and instant noodles is never gonna fall!
[21:28] Susannah Streeter: The fun never stops with teenagers. I think how to get grown up children to move out might be a whole other podcast! [Laughs]
Well, that’s all from us this time – but, before we go, we do need to remind you that this was recorded on 27th January 2025 and all information was correct at the time of recording.
[21:45] Sarah Coles: Nothing in this podcast is personal advice – you should seek advice if you’re not sure what’s right for you. Investments and any income they produce can rise and fall in value, so you could get back less than you invest – and past performance is not a guide to the future. Tax rules can change and benefits depend on individual circumstances.
[21:58] Susannah Streeter: Yes – this is not advice or a recommendation to buy, sell, or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.
[22:09] Sarah Coles: So, all that’s left is for us to thank our guests: Helen and Nathan, and our Producer, Elizabeth Hotson.
[22:13] Susannah Streeter: Thank you so much for listening. We’ll be back again soon – goodbye!