An introduction to financial wellbeing
An introduction to financial wellbeing
Hello and welcome to today's presentation.
My name's David Rickus and I'm part of the presentations team at Legal & General, I'm your host for today's presentation and I'll be joined by my colleagues Charlotte and Colin. Today's presentation is an introduction to financial wellbeing and we're going to be discussing four main topics; ways of looking after your financial wellbeing, how the things that can impact your wellbeing may change over time. We'll look at the pension gender gap and we'll finish by looking at how you can create and stick to a household budget.
Today's presentation will last around 30 minutes. Unfortunately, we're unable to take questions. However, you'll find support and the resources that we speak about today. At our Go&Live hub, which you'll find at legalandgeneral.com/fw. If you have a question about your individual pension plan then please call our helpline on 0345 070 8686. Please note that call charges vary and calls may be monitored and recorded.
I’d just like to cover some important points before handing over to Charlotte and Colin to introduce themselves.
This is a general education presentation and shouldn't be regarded as financial advice. It's based on the 2023/24 tax year and the law, tax rates and any allowances may be subject to change in the future. Your investments may go up and down in value, they aren't guaranteed and you may get back less than you've paid in. So, I'll hand you over now to Charlotte and Colin to introduce themselves.
I'm Charlotte and I work in the presentation team along with Colin and David, and I enjoy talking about financial wellbeing because it's a topic that I think everybody can relate to regardless of their circumstances. I think it's also a topic where we're always learning, so we're always learning something new about our financial and our mental wellbeing, as life changes.
Thanks Charlotte. Hello, I'm Colin. I've actually been on a financial wellbeing journey myself recently. I've been working with a money coach and I'm looking forward to being able to share some of my own personal experiences.
Okay. Thank you both. So, let's start with our first topic today, which is looking after your financial wellbeing.
So, Charlotte, what can prevent members from addressing their wellbeing?
I think there can be an element of fear sometimes about looking at our finances. I think especially if it's something you're worried about, it's most likely then you're going to be nervous about facing it. And sometimes it's just due to lack of time. Sometimes we don't allow ourselves the time that we need to look at our finances. I think sometimes it can also be quite complex, depending on the area of your finances you need to look at. And we know from speaking to people about pensions that they find that quite complicated. And there are other topics similarly that are complicated to understand, like mortgages.
Okay. Thank you. So financial wellbeing is a term that some audience members might not be familiar with?
What do we mean when we use that term?
Well, at Legal & General, we think it means being prepared for the unexpected. So, managing shocks, we think it's also about being able to meet your financial goals and the ability to make choices that allow you to enjoy life not just now, but also in the future. We find it's really important to support our pension scheme members with this topic. And we have dedicated resources called Go&Live the Financial Wellbeing Hub that can support our pension members with looking at the different issues that may arise.
Thank you, Charlotte. And could we just look in a little bit more detail at some of the things that can have a negative impact on our members financial wellbeing?
Well, to give some examples of the things that can have an impact, it could be something like a change in circumstances. So something that comes out of the blue, whether that be ill health, a separation, it could even be a bereavement or a change of job. I think another thing that springs to mind is the rising costs. So probably all of us are impacted by that and the price of everyday items that all of us are buying have gone up and perhaps we weren't expecting that. So that can impact on our financial wellbeing. I think another area is mental wellbeing and we know that having, mental health issues can impact on the way that you deal with your finances. Actually lots of people are affected by things like the rising cost of living, which is then having that effect and impact on their mental health. Dealing with debt is very stressful, we know that some debts are manageable, but there is some unmanageable debtand that can impact on our mental health as well. So, I guess those two things are very interlinked.
Thank you, Charlotte. I think it's important for our audience members to be aware that there's quite a lot of support available to them in this area. Could you just outline some of the things that are available?
Yeah, sure. So, there is lots of support, which is great news. So, there's Go&Live, which is Legal & General’s financial wellbeing hub with a whole host of information ranging from retirement planning, dealing with family finances, debt and managing money day to day. On Go&Live sits our Rewirement podcast series that's presented by Angellica Bell, and this covers a range of different topics and can help members with different issues and certainly something worth listening to.
There's also support that's free from the government in the form of the MoneyHelper site, and this is a free government guidance service that has brought together the Money Advice Service, Pension Wise and the Pensions Advisory Service and lots of impartial, really good guidance that sits here that can help members with a whole host of different financial topics and moving onto mental wellbeing.
The NHS does provide a site called Every Mind Matters and this can provide practical support to help people with managing anxiety and stress and if you're looking at your pension and wanting help and support with this, then we do provide a platform called Manage Your Account, which members can manage their own pension scheme.
Now Colin, I know that recently we've been talking as colleagues about the rising costs of living and the impacts and the need to think about our futures. Could you just describe something that you found particularly helpful about taking that time out to look at your own finances?
Yes, certainly, Charlotte. So, as I mentioned at the outset, I've been working with a money coach and I've been on a financial wellbeing journey. As part of that journey, I've gone through the process of making a budget, so tracking what's coming in and what's going out. I feel I've got on top of my finances, I've got much greater clarity of my finances. The great news linking back to what you said about the link between mental wellbeing and financial wellbeing is it's actually had a knock on effect on how I feel. So as well as being in control of my finances, I'm also feeling better in myself. Oh, that's great. Thanks for sharing, Colin.
Okay, thank you both. Moving on to our next topic today, which is looking at how financial wellbeing challenges can change over the course of your working life. Colin it may seem an obvious question, but why is it important for audience members to have an awareness of this?
I think it's important to recognise that things do change throughout your working life, your circumstances will change, and you might also undergo significant life events, and these changes can have an impact on your finances.
So, I think it's important to recognise the full range of things that you might need to think about as you work through your employed life.
Okay, great. Well, if we break this down a little then. What are the typical challenges that someone in the early part of their working life might face?
So, we start with the important topic of family, it can be early for a lot of people, but over time, people do start thinking about getting into relationships. They might want to get married or enter into a civil partnership, possibly further down the line. They might also want to take care of children. And all of those things have a financial cost and you obviously need some money to pay and meet those costs. If we talk about things like housing, that's a massive issue for young people. I've got two sons myself who are of an age where they might look to buy a property and they are doing their very best to save up money for a deposit.
A lot of young people will rent. I myself, when I left university, went into a city down south and shared accommodation with colleagues and had that rental experience. And of course it's important to know the full cost of the rent that you're being charged and is there any upfront cost? Will it cover things like bills or do you have to meet those yourself. It’s a good idea to take meter readings to make sure you don't pay for anything that you didn't actually use. And also good idea to have a good look at the inventory and make sure exactly what you're responsible for. Because once you've left the rental agreement, you might find that you get charged for any missing or damaged items. And then if we look at the subject of money.
A few things I just want to mention here, one thing I would say is it's very important for young people to understand the employee benefits that are offered to them within the workplace. So, if you are over age 22 and you earn more than £10,000 and you haven’t reached state pension age, you will of course be automatically enrolled into a pension scheme after three months’ worth of employment. But I think people going into those pension schemes perhaps don't investigate everything. They perhaps just think I'm in a pension, life's good, I don't need to find anything more out. But I would encourage people to find out a little bit more. It's a good time to get into good savings habits, both for the short term and the long term. So, the long term would probably be something like the pension, the short term might be more around the housing deposit and of course some people will have to pay off student loans and that could be a significant expense.
Okay. Thank you, Colin. And how might these typical challenges change as audience members move into the middle part of their working life?
Well David, this is something I know a lot about, as you can probably imagine. Sometimes people in their mid working life are referred to as the sandwich generation and I myself, I think, Charlotte and yourself, we've got children that we have to look after and we have responsibility for. And but we've also got ageing parents as well. And there's a balance really between looking after our children, looking after ourselves and looking after our parents as well. So let's go through those areas again. If we start with the family, if we're thinking about children, you might be helping them towards the cost of housing, the bank of mum and dad or bank of parents, if you will.
You want to protect them on your death. So, it's important to think about life cover. And of course, if you're in a workplace pension, the value of the pension is payable on death. So very important to nominate beneficiaries.
It might be a significant other. But of course that money could pass down to children and you can nominate children.
When we go up a generation, we think about older people, there may be some care requirements and I know that we've had some personal experiences of that within the team, recently. The great news is that we offer a free Care Concierge service through the Financial Wellbeing hub, that can help people source care for themselves or for a loved one.
And I think we talked about the two, the younger generation and the older generation. But of course, the other important thing is to look after yourself. So get into good habits, both financial habits, but also lifestyle habits. So, get a good night's sleep, take some exercise, take breaks, look after yourself, because ultimately, if you're not looking after yourself, you're not going to be able to look after anybody else.
Thank you, Colin. And for members who are approaching the later stages of their working life, what are the typical wellbeing challenges that they might face?
Yes, so I'll run through those three areas again. So, if we start perhaps with family. Again, a will is very important.
Of course that's important at any stage in life, really. Just to have something that states, if something happens to you, where would you want that money to be passed on to. And actually, my parents have made a will, and they’ve told me where it is as well, which is a good idea. So if anything happens to them, I know where to go.
People start thinking about powers of attorney because they might be concerned about losing capacity. And another thing I think people in that stage can start think about is inheritance tax planning. So how to pass on wealth and avoid inheritance tax.
If we look at housing. Obviously some people at that stage would have paid off a mortgage. So that's great news if you have, if you haven't, sometimes people use, for example, the tax free cash sum from the pension to pay off a mortgage. And as you move through the retirement years, you might be considering equity release. So that might be simply downsizing your property in order to release some capital, or it might be that you use some kind of equity release scheme.
And then if we look at the sort of financial side, obviously a key thing and I think this is something you need to think about in your mid-years as well, is that transition to retirement. So actually in your mid-years we have a Midlife MOT course in conjunction with the Open University that can help you take a financial stocktake and start thinking about the retirement you might want to have.
And we also have a Retirement Planning Made Easy course in conjunction with the Open University, that sets out a series of stepping stones for a more financially secure retirement. So really useful courses and we're all going to have to go through that transition to retirement. So I think ultimately we all want to get to a day when we hang up our boots, so to speak, and just enjoy ourselves and relax. And there's some retired people in my estate and I love chatting to them about how they spend their time. So they’re some of the things that people in the later working stage might be thinking about.
And I know that Charlotte, you wanted to share and talk about an important issue that can affect people in the mid working life phase. So, I'll pass on to you, Charlotte.
Thanks Colin. Yes so here I'm going to talk about the menopause and of course the menopause is something that 51% of the population will go through at some stage and there are 34 symptoms of the menopause, so it is important to be familiar with them both for yourself if applicable and of course if you are supporting those around you. And I think if we put that into a financial context as to kind of why we brought that subject up, 20% of women retire early between the ages of 45 and 55 because of managing menopause related symptoms. So it can have some serious consequences for both financial and mental wellbeing.
And of course, we do now know as well that it doesn't just affect people at those particular ages, it can affect people in younger years and we now know about the perimenopause that can affect people in their forties. And I've had personal experience of navigating my way through this and thanks to lots more publicity breaking down some of the taboos associated with talking about it, there's now lots of information available that can support women with understanding kind of what the symptoms are to look out for, but also what those treatment options are as well.
And some good news in terms of the treatments that are available and the cost of those. There's been some changes this year to the cost of HRT. So the NHS now offers a payment, prescription charges, a season ticket that can help people with managing the cost and ongoing cost of treatment on HRT. This is something that costs the cost of two prescription charges, which is £19.30 and women can buy from either the NHS directly on the website or in a pharmacy. And I know from personal experience that that's great news and it means that I know that I've paid that one off cost and I don't need to meet those ongoing costs throughout the year.
Thank you Charlotte. And moving on to our third topic today, which is looking at the gender pension gap. Again, this may be a term that some of our audience members aren't familiar with. So, could you just explain what it is and why it's such an important topic?
So this is about the difference between men and women and their retirement incomes, and it's a really important issue because of course we'll all want to retire at some stage and have an income in the future. So, talking about this is particularly important as the more we can understand it and know what may impact us, the more likely it is that we'll be able to take action and hopefully reduce the impacts of things like the pension gender gap.
Okay, Charlotte it might seem a fairly straightforward question to ask, but why does the gender pension gap actually exist?
Well, there are lots of different reasons that may impact and cause the pension gender gap, but generally speaking, women are still paid less and less likely to be in a senior leadership position, which can mean lower pay. And then, of course, lower pay leads to lower pension contributions to the amount that you are actually building for your retirement. Women are also more likely to take a career break, either for childcare reasons or for, as Colin mentioned a bit earlier in his section about caring for loved ones. And women are more likely to work reduced hours or work part time, something I personally had experience of bringing up a family for many years has meant that my pension contributions were lower, so has had an impact.
Okay, thank you. And what can this actually mean in terms of benefits at retirement?
So just to give an idea of kind of the numbers to bring it to life, there's a 16% gap at the start and this doubles by the time that women reach their forties. By the time that women reach their retirement years, their pension could be 55% lower than a man's. So to bring that into kind of more monetary terms, which I think we all understand a little bit better, generally speaking, on average at retirement age, over the age of 50, men will have around £82,000 in their pension savings, whereas for women it would only be £43,000. So real direct consequences and meaning people could have a lot less to live on as a result. And we know that women live longer as well. So this is a really serious issue.
That is quite a significant difference. So, what can our audience members do if they want to take some steps to try and address this gap?
So, there's lots of different things that people can do to try and help themselves with this issue. And one of them is to keep track of their retirement savings. So use the tools that are available in Manage Your Account. If you’re a Legal & General Pension Scheme member and keep an eye on whether and what you're paying now will give you what you need in the future. This can give you a better understanding of, do you need to make any changes that will improve the picture? And I guess moving on to, you know, filling any gaps if you do have a career break or you do work part time, do consider how you can contribute more if it's possible and you can afford to. Something I'm happy to do for myself and of course do consider generally speaking, whether or not you can speak to your partner and whether or not they can help with those contributions. And you understand, you know, each others contributions, each others pensions savings, and you are actually both on the same page.
Colin being a partner of someone that could be impacted by this issue, the pension gender gap, why do you think it's an important issue that we should be discussing?
Well, the pension gender gap actually has an impact on my own personal circumstances. My partner, Angela, has looked after children for a number of years and during periods of childcare. She's not been in paid employment. And of course that has an impact on her retirement savings and essentially on our future. One of the things I was quite concerned about was her state pension forecast. So I actually took the time out to go on the government's website to see what she was forecasted to receive at state pension age. And actually it was a bit better than we thought because during the periods that she was looking after children, she was credited towards the state pension. So state pension provision is reasonably good. But of course my situation in retirement or our situation in retirement is going to depend on both sources of income and we're very heavily reliant on my retirement savings. So it does impact us in real terms. So it can have an impact on men as well as women of course.
Thanks, Colin. Thanks for sharing.
Thank you both. And that moves us on to our final topic for today, which is creating a household budget. Colin what can make creating a household budget quite a difficult thing to do?
Yes, I think it's fair to say that most people wouldn't associate budgeting with being a fun activity. There's a degree of discomfort involved. Potentially. It may involve you looking at your sort of habits and some of those habits you might have developed over a long period of time. But of course, if you do take the time to make a budget, it can help you identify if any of your money's going in an unwanted direction.
Okay. And in terms of creating a household budget when we talk about that, what exactly are we talking about?
So at a very basic level, it's about identifying money coming in and going out. So typically money coming in could be, for example, your salary from paid employment and money going out would be you're day to day living costs. So your bills the money you spend on food, clothing, transport and all the other things that you have to pay for. And of course, we've all seen a rise in those costs recently It may help you identify if there's any sort of unnecessary expenditure. So anyway you could save some money and you might be able to make some small changes. And even small changes can make a difference in the long term. And it is important to recognise that there isn't a one size fits all solution. So we're not suggesting that people should live very, very frugally and not have a balance, not enjoy life and equally it's not something you should feel guilty about. It's more about taking control.
Okay. Thank you. And in terms of the benefits, what can you gain from doing or creating a household budget?
Well, here are a few of the benefits. One is that it might help you avoid getting into debt or if you are already in debt, of course, it might help you pay off that debt more quickly. It can help you to save and even a small amount if you're saving on a regular basis can build up to a reasonable sum of money over time. And another thing that it can help with is, sometimes from day to day, we come up against unexpected events like Charlotte mentioned.
So perhaps your boiler breaks down. You have an unexpected emergency cost and if you are on top of your budget, that can help prevent you going borrowing more money in order to meet that cost.
Okay. Thank you. So creating a household budget can help audience members take control of their money. But what does good look like in terms of having created that budget?
So I suppose at the very basic level, the first thing really is to live within your means. If you're living within your means, that's a great start. But once you're in that situation, that's when you can start to think about managing your money more effectively. So maybe it’s that you can pay off debt more quickly, as mentioned. Maybe it's that you could start some saving. And again, there has to be a balance because you have to have some money for day to day living and we recognise that. But the good thing about having a budget is it gives you a sense of control. It makes you understand your own situation, and that gives you a degree of flexibility because if you know where your money's going and you know how much money you've got in a sense to play with. If you need to make a change. It's a lot easier to do that, than when you have a lack of visibility of your finances.
And myself and Charlotte often talk about the cost of living. Obviously, there's been increases in inflation announced recently. There's also been a rise in interest rates. So Charlotte, I was just wondering if you could share your experience of household budgeting, and whether there are any tools that you're aware of that might help our audience.
So I've had to take a look at my own personal circumstances and consider the rising cost of living, mortgage interest rates going up and do a detailed budget. And there's a really good budgeting tool that sits on the Money Helpers website. Also links from our Go&Live Financial Wellbeing hub that will allow our pension members to do this and it gives a really detailed view. So it’ll give you an opportunity to see, as you said, Colin the things that are coming in and what's going out. And it'll give you more sight so that if there’s anything that you can do to make any, like you said, small changes sometimes that can lead to good results for the future and it's something I found really useful and I feel much more in control as a result,
Thank you both. All that remains is for me to say thank you to our audience for joining us today. You'll find more information and links to websites and resources on our Go&Live Hub: We're always looking to improve these sessions so please if you want to and you have some spare moments, provide us with some feedback on the BrightTalk platform. There's a quick and easy to complete feedback form. We hope you've found today's presentation to be helpful and informative and we look forward to seeing you at another one of these sessions
in the not too distant future. Thank you and bye for now.