Bristol Financial Resilience Action Group Webinar Recordings

Hi and thank you for tuning in to the first of 12 financial wellbeing webinars running over the course of the next year. Just briefly introduce myself: I'm Clare and I'm a Financial Wellbeing Analyst at HL. HL's mission is to help people save and invest with confidence and over the last couple of years we've really invested into resources that can help people do exactly that. Our five to thrive framework has been designed with the intention to help people understand the road to financial resilience, there are five pillars; control your debt, protect you and your family, save a penny for a rainy day, plan for later life and finally invest to make more of your money. And importantly this framework can be referred to regardless of age, occupation, or income level and this is what the course has been designed around.

We're providing this financial education course because we think we have a duty to share our expertise, particularly given the tough economic climate that we're living through, where life is more expensive. Knowledge really is power - it is key to people managing their money well and we hope that the information delivered over the next 12 months gives you the tools you need to feel confident with your finances, as well as the know how to build, or perhaps build back up your financial wall of defence following the pandemic and rising cost of living. In today's session we're kicking off with all things debt. It's inevitable that we will all be in debt at some point in our lives, how we manage that debt will have a huge impact on our financial wellbeing and therefore ultimately our general wellbeing. Before I do get started just a bit of housekeeping, so this recording will last for around 25 to 30 minutes. Given that this is a recording if you do have any questions then you will be able to raise those via email, and the email address will be visible at the end of the session. I do need to stress that everything discussed is purely information and not financial advice, and given the time constraints it's not fully exhaustive. But I do hope that what I talk through will enable you to go away and make decisions from a more informed position.

A quick look at today's agenda, we'll be looking at the national picture in light of the cost-of-living crisis before moving on to looking at different types of debt, debt management strategies that can help reduce the cost of debt, as well as the importance of our credit scores. Before drawing to a close with sources of information for further guidance.

So let's start by looking at the nationwide picture. Debt can affect all ages and can be a cause of anxiety if not under control, particularly in the current climate, with increasing interest rates debt could be becoming more costly. Borrowing was a lot cheaper this time last year. Forced saving for many during the pandemic and during lockdowns meant that the UK personal debt bubble shrank for the first time since 2013. But we're actually witnessing a u-turn on that, in the last 12 months the debt held by UK consumers has increased by a staggering £66.4 billion. Now these are astronomical figures, to give you the scale of 1 billion it's unlikely that we'd be able to count to 1 billion during our lifetimes even if we started at birth. Now debt was a cause for concern for some pre-cost of living but in this tough economic climate money anxieties are growing, with over 8 and 10 people somewhat, or very worried about the rising cost of living and that's up from 74% last May. The reality is that as life is getting more expensive, as a result debt in the UK is growing.

Research by the ONS found that 9 in 10 adults report their cost of living has increased, the most common reasons reported for increased costs were price of food shopping, energy bills, as well as increased fuel costs. One in five - so that's around 18% - reported using savings to cover the cost of living and 12% - that's nearly one in eight people - are having to take on debt to cover their essentials. So for many the savings that they had were drawn on to sustain their lifestyle during the pandemic and for those fortunate to still have savings at this current time, these are vanishing. Our money simply isn't going as far, it just isn't buying us as much and as a result shoppers are changing their behaviour. I've noticed over the last year or so that when doing my weekly food shop more and more families going up and down the aisles with their phone calculator out, some even telling the assistant at the checkout to stop at a certain monetary amount because they have a specific budget that they need to stick to. So although inflation has come down from the double figures and is now just below eight percent, that doesn't show the true reality. Actually many food essentials have risen exponentially higher, if you take whole milk that's up 26% in the last 12 months, eggs are up a staggering 37% and olive oil is 46% more expensive than it was 12 months ago. So it's unsurprising that we're all feeling the pinch. If food essentials continue to rise then our budgets are going to shrink and buy us less.

Now the cost of living is leading to unsustainable levels of spending. Our Nationwide barometer research in collaboration with Oxford Economics projected a significant number of households will continue to have unsustainable levels of spending to the end of the year, so you can see that by the end of this year we predicted around 24% of households will still have unsustainable levels of spending and because of that we're going to see an increased credit and debt reliance. What we're seeing is increased credit and debt being fuelled by the cost-of-living crisis, so people are borrowing to fund the daily essentials. Now for lower income households those essentials do make up a larger percentage of their take-home pay. We're also seeing that it's exacerbating parental pressures with households where they have dependent children, children do have an impact on household financial resilience because income is perhaps spread across childcare, utilities, food, mortgage or rent. Households broadly face three options if they have levels of unsustainable spending, that's cutting back on spending, drawing on assets/savings, or taking on new debt - so we do expect debt concerns to mount as we move through the year.

An increased use of credit is happening at a time when borrowing is becoming more costly. Borrowing was a lot cheaper this time last year and in the last 17 months or so the Bank of England has increased the base rate from 0.1% to 4.5% - that's the fastest pace for 27 years. And at 4.5% it is the highest rate since the financial crisis in 2008. We are racking up that interest at a time when we can least afford it. Now the effects felt will differ depending on whether you're a saver, or a spender. Average interest rates on credit cards is at a record high of around 30% and that's an average, and that's the highest since 1998. Do shop around, some credit cards will offer introductory interest-free credit for a time period. Do also consider the affordability and the time period in which you'll have to pay that off. For cash savers it's good news - you should receive a boost to your interest rate if that increase is passed on from the banks, this can be slower in terms of that increase being passed on than the interest rates rising. This won't include those however who have opted for a fixed term rate for cash savings, so if you are opting for a fixed term savings product do consider that if interest rates continue to rise then you could miss out on more interest down the line.

So how does the Bank of England rising the base rate impact your existing debt? Generally interest rates on credit cards are variable so they do go up and down, although they're not explicitly linked to the base rate. Credit card deals have progressively been worsening as interest rates have increased, so this latest hike to 4.5% could mean another increase as it's likely to be passed on from lenders to consumers. But ultimately the cost of borrowing is increasing, you could end up paying more if the interest on your card goes up. The ideal way to use a credit card is to clear the balance in full every month because this way you don't start paying interest, but this isn't always possible. Do bear in mind that rising rates do mean that you'll pay more for carrying a balance, and as we just saw the average credit card rate is now just over 30%.

Those I've spoken to, their primary concern has been the impact on mortgage rates - this is unsurprising because homes are the most expensive thing we typically buy and we borrow for. Those on a variable rate mortgage are vulnerable to increases so that's around 2 million homeowners here in the UK, so as that base rate has been climbing they've faced almost an immediate hit to their income because those products move in line with the increasing interest rate. However those on a fixed deal, which is the majority of mortgage owners, they are shielded for now but when it comes to remortgaging they could be in for a shock as they may have to pay significantly more. The majority of mortgages are fixed but it is worth thinking about when your mortgage is up for renewal, typically you can renew up to six months prior to your expiry date. The average UK house price is around £288,000. If you were lucky enough to remortgage last year at an average interest rate of 2.65% for a two-year fixed deal then your monthly repayments would have been just over £1,300 a month. However, if you have to remortgage this year, just one year later, then your monthly repayments could have jumped by over £400 pounds and remember this is simply the interest, you're not paying off any more of that mortgage debt. Because these are really big sums even an uplift of 0.25%, a fraction of a percentage can have a big impact on that monthly repayment cost. The consensus is that mortgage rates will gradually decline over the course of 2023, but it is going to be slower than first expected as high inflation is being persistent. Some predictions are suggesting that rates might be around 4% by 2024 but this is a forecast and in no way guaranteed.

Moving away now from the cost-of-living update to more general information around borrowing. So let's start by looking at the cost of borrowing and explaining the terminology that's often used. The interest rate is the cost of borrowing and that's typically stated and advertised. As an example if you borrowed £1,000 and the annual interest rate was 10% you'd pay back £1,100. This may differ if you pay it back over a shorter or longer period. APR is the additional percentage rate that differs because it includes the interest rate plus any other costs associated with borrowing. Lenders have to tell you the APR prior to signing the credit agreement and it's always expressed as a percentage of the amount that you borrow. A lower APR means that you'll pay less over the term of the loan, and the APR is used so that you can compare financial products and work out which product is most suitable for you.

Debt is a fact of life, it's important to remember that not all debt is bad, sometimes it can be viewed as an investment into our futures. For example if we want to attend University, or a necessity for most of us if we'd like to get on the property ladder. Good debt is typically planned and budgeted for, however if debt is not managed carefully, or perhaps if you borrow too much and can't pay it off - this could be considered bad debt which could have a negative impact on your day-to-day finances, your well-being and your credit score. Debt can come in different forms such as a credit card, mortgage, or a car loan and it can be useful for various purposes. Everything from an emergency purchase to helping you pursue perhaps a business venture, and if you make repayments on time, debt can work as evidence of good financial planning and responsible borrowing. So what kind of interest rates can you expect with different types of debt? We've just talked about mortgages and the average rate, at present is around 5%, when it comes to overdrafts I was particularly surprised at the rate of interest – the average on overdrafts is around 35%. The average credit card rate we've also looked at, this is around 30%. Personal loans, the interest rate offered varies dependent on the size of the loan but it's around 10% average if you're borrowing £5,000 and the average is around 5.9% for double that amount of money at £10,000. What about payday loans, well payday loans previously had interest rates as high as 1500% but thankfully the FCA brought in a ruling in 2015 to protect the financially vulnerable, and an overall cap now means that people will never pay more than twice what they initially borrowed. The gap between credit card, overdrafts and other interest rates has widened substantially in recent years, and I was most surprised by the overdraft average rate. It's exponentially higher than loans and credit cards, so dependent on the mechanism that you use to borrow the amount of interest charged can vary hugely which understandably will impact your present and future finances.

Let's take a look at a working example. In this scenario the individual is borrowing £5,000 at 10.1%, that's the current average for personal loans. If the individual chooses to repay over a three-year term the monthly repayment is around £160 meaning a total excess cost of around £780, meaning the total repayable for the £5,000 is about £5,780. However if the individual opts to pay back over a longer term of five years, then the monthly repayment is lower at around £105 a month, but the total cost of borrowing that sum of money increases to £1,324 - that's over £500 more to extend the term of the loan by two years. So although the interest rate is the same, in general the longer your loan term the more interest you'll pay, because that interest accumulates over time. The right choice for you will depend on your circumstances and crucially your affordability - a longer term does mean lower monthly payments so you can free up cash for other things.

Another form of short-term borrowing taking the retail industry by storm, that’s particularly capturing the hearts and wallets of many younger generations is by now pay later. It's temptation and it feeds into our need for instant gratification. It's often advertised as a payment method when shopping online, and you can now even use it to pay for takeaway food on popular apps. It encourages impulse buys, feeding our wants typically rather than our needs. Companies loaning the money don't tend to carry out detailed affordability assessments on you, and falling behind on payments will lead to late fees and could result in negative marks on your credit score. Late fees are on the rise. It is much more rewarding if you earn something, if you've saved up for something and you know you've worked hard for it, you appreciate it more. Instant gratification is easy come, easy go. The most important question to ask yourself is you may be able to afford the payments, but can you really afford what you're buying? Remember using buy now pay later to purchase something does mean that your future income will be impacted. If you choose instalments over a period of say three months, that means that for those next three months your income will be impacted, you'll have less money to spend on each of those months. The best course of action here is to implement a time delay, do wait 24 hours and see if you still feel the same before ordering.

Little overspends do add up to big debts - it can be a slippery slope. Hopefully by following a budget and sticking largely to the plan, you'll be able to identify areas where you could avoid wasteful spending, which in turn will encourage good spending habits and help you not live outside one's means. Next month's webinar explores how to be a smart spender and will look at budgeting. If you haven't already please do register, there will be a QR code at the end of this recording.

Should you always pay debt first? What's the priority? Is it long-term debts or long-term savings? Long-term debt is generally defined as outstanding debt of 12 months or longer, and associated with an investment into your future. It’s not always clear-cut, but long-term debts for example mortgages and student loans tend to have much lower APRs than short-term loans. So long-term debt does tend to be cheaper. The decompounding of debt can mean that the value of that debt reduces overtime as inflation rises. It's fundamental that you compare the interest rate on the loan to the realistic potential return on savings. Compound investment growth can make your money grow faster each year, but will it really grow at a faster rate than the cost of the interest? Let's take a look at a working example.

Short-term debt is usually the most expensive. Prioritise the costliest debt prior to savings, short-term debt is usually anything payable in less than a year such as credit card debt or unsecured loans. Now scenarios will differ but let's take an individual paying £1,000 into savings, perhaps putting some money away for emergencies. If they achieve 3% interest in a year that will earn them £30 bringing the grand total to £1,030 in savings. If they instead had used that £1,000 to pay off a loan that had 16% annual interest they would have saved themselves £160. It's a no-brainer. Controlling debt is pillar one on the road to financial resilience as outlined in our 5 to Thrive blueprint.

If you find yourself in a position of short-term debt there are a few debt reduction strategies that you can try. Firstly a personal loan could be used to consolidate existing debt - that's using a bigger loan with a lower interest rate to pay off higher interest debt. Make sure you check the rate of interest. Typically this would be used for unsecured credit card debt which is likely to have a much higher APR. Balance transfer credit cards help pay off outstanding debt by moving the balance from one card to another, some cards may offer an introductory 0% interest for a set period of time and that means that you can help to reduce the monthly payments and clear the debt quicker if you're just paying off the sum borrowed and not having to pay any interest. Credit unions are an alternative and they will offer lower rates to those with a poorer credit history. And it goes without saying that with any of these strategies, it's fundamental that you budget properly, assess your incomings and outgoings, and identify what's an affordable monthly repayment and don't over stretch yourself.

Debt has a ripple effect across your financial life, including your credit score. Now your credit score is an assessment of how good you are at managing debts and it's what lenders use to assess the risk of lending to you. The information held on your credit file and your credit application form might be used to decide whether to lend to you, how much to let you borrow, and how much interest to charge you. It's a way of lenders calculating the risk of lending you money and a higher score means a better chance of acceptance and more favorable interest rates, because they see you as less of a risk in terms of repaying that money. For those of you who may not know your score, you can check it for free with one of three agencies – Equifax, Experian, or TransUnion. Every money contract that you enter into includes a critical search, that also can include when you open a bank account with an overdraft facility.

The last six years’ worth of financial decisions will be held on your credit file. That will include financial associations such as a partner’s spending habits, shared utility bills can also sometimes create a financial link. So it's important to check that you're not associated with any previous partners, or perhaps old housemates. If you are then do let the credit reference agencies know and they will break that association. If you need to improve your score there are a couple of things that you can do. Firstly check all of your personal information on the file is correct, including checking for any fraudulent activity. Make sure you're registered on the electoral roll as this can help with identity checks. Do get your name on some bills, so if you're living at home with your parents, perhaps because you've recently graduated, then paying your phone bill monthly via direct debit can be proof that you're a good candidate for credit. Ensure your bills are paid on time because this is fundamentally what lenders are trying to assess, and not doing so will lower your score. And then the final thing to be aware of is your credit utilisation - do try and keep this below 25%. That's how much of your credit limit that you use, as an example if you have a credit card with a limit of £2,000 don’t spend more than 25% so £500 pounds before paying it off.

The three next steps are food for thought. Firstly, do create a budget, details of your incomings and outgoings - writing them down in black and white really does help you identify where you could reduce spending. Perhaps you don't have any debt but with the rising cost-of-living, you're finding that your income isn't spreading as far as it used to. Are there ways that you could perhaps free up some money - it might be selling unwanted goods, clothes or unused mobile phones that are sat in a drawer, that could be used to pay down debt. And if you do have debt, do prioritise the most costly.

Problematic debt will vary on an individual basis and debts will need to be broken into priority rank based on consequences if they're not met. Specialist help is available for problematic debt. If you are concerned there are multiple national debt charity associations with a host of resources online, as well as offering free impartial guidance so do reach out to Citizens advice, or Step Change who offer a wide range of debt solutions to help everyone no matter what they're dealing with, including debt management plans. Do act as quickly as possible and don't ignore a potential problem - do reach out if in doubt.

Thank you very much for taking the time out of your day to listen to this video. Everything discussed was information and is not to be construed as financial advice. Please do take a couple of minutes to read through the important investment notes on screen.

Thank you again for listening, if you do have any questions please do reach out via the email address on screen. As mentioned earlier on in the session, next month's session will be on how to be a smart spender. If you haven't yet booked your place, do scan the QR code with your mobile phone and register for the webinar taking place in July. Thank you for listening and enjoy the rest of your day.

So once again thank you for everyone that has joined in today, I can still see a couple more people joining in, but we'll go ahead and get started into today's session.

In terms of today's session, my name is John and I'm a financial well-being specialist at HL and this is the second of this 12-part series of well-being webinars.

The first session looked into the topic of controlling debt which is the first part of HL’s five to thrive framework which looks into building financial resilience. The other stages of this framework covers protection, potentially for you and your family, building an emergency fund also known as a rainy day fund to help with those unexpected costs, also planning for later life thinking about for example retirement, and then the final five to thrive framework is investing to make more of your money.

Today we'll be building on what's already been covered and the topic of focus for today is how to be a smart spender. The framework itself of the five to thrive is what we'll be building upon throughout the 12-month series.

Today the session itself is purely on information only basis and therefore it's not to be considered as financial advice. The session itself will last approximately 30 minutes, therefore providing time at the end to help and answer any questions that you may have so please just use the Q and A function on your screen to ask any questions. The session will be recorded and also circulated once taken place, so do feel free to listen back along with the option to listen back to our first session and then also future sessions as well - any should be available on the website that you have access to.

So, with today, what we'll be looking at in today's session is covering first of all understanding our pay packet and a few key areas surrounding what our pay slips may mean and also the tax brackets that we may be subject to. Secondly, we'll be looking into a few areas on money management, some tips that we can go ahead and think about potentially bringing in on a day-to-day basis and then also some cost saving tips that we can also think about as well. The final aspect and the final concept we'll be looking into is money mindset and what this then may mean for us.

So, first of all, understanding our pay and what this actually means on a monthly basis can help to then build those foundations in terms of what we then may have for spending and then potentially for saving as well. What we're going to look at first of all is the various tax rates and thresholds that are currently in place and there have been some key changes over the past 12 months. Not only to tax brackets but also to thresholds, and the November 2022 budget introducing important changes which to most may not seem like a big deal but the subtlety of freezing allowances and thresholds will actually lead to millions of people being pulled into the income tax and higher rates of income tax brackets. Over the coming years this will help to raise billions of pounds of additional tax revenues, however the pain for taxpayers will intensify so long as inflation remains high and wages climb to keep pace with prices. This means that more people will potentially be paying tax even though their standard of living may have actually gone down.

We can start to see using this graph the various taxation bands which apply to income for this tax year and what we can see first of all is on the left hand side the first £12,570, known as the personal allowance, doesn't actually attract any income tax and then the earnings over this, known as the basic rate of income tax thresholds, from 12,570 up to 50,270 is at that basic rate of income tax with National Insurance of 12%. Once income has exceeded the basic rate income tax threshold - essentially over £50,270 - then you start to begin paying a higher rate of income tax - currently at 40% and up to £100,000 this essentially applies.

What we can then see is actually a 60% income tax threshold, and we'll touch upon this in a moment, and then from there £125,140 and upwards then this begins to be the additional rate of income tax threshold. This 60% threshold may be puzzling to see with this eye watering amount of 60% income tax, however it requires a bit of explanation due to the quirk. Essentially, if income breaches the £100,00 threshold the tax-free personal allowance, what we touched upon at the start, starts to taper down at a loss of £1 for every £2 that the income may be over £100,000. And, as a result, this would then be subject to the higher rate of income tax at 40%.

Now, we'll just have an example to try and help explain how this works. So, let's say we've got an individual earning £100,000, they have a bonus payment of £1,000 this means this amount is taxed at 40% initially so that £1,000 taxed at 40% means a £400 tax bill with regards to that. But what will also happen is that the individual would also lose £500 of their tax-free personal allowance. Now, this £500 would then be taxed at their higher rate, I.E 40%, so therefore an additional £200 income tax due to the 40% income tax on the £500, on top of the £400 being the 40% of the £1,000 on that bonus. So, what this then means in practice is that £600 tax is essentially having to be paid on that extra income of £1,000. Therefore, the effective rate being 60%. And as we know the personal allowance is £12,570 based on these rules, the tax-free income entitlement therefore becomes obsolete when earnings are above £125,140 and it's at this point the additional rate of income tax threshold applies.

And what we can start to understand is that as a consequence of people's earnings increasing to keep up with inflation, but with thresholds remaining static this will result in a higher tax bill for many individuals. And what we can start to see is how these tax freezes and squeezes may result for many individuals. That frozen cash value of income tax means that more people are being dragged into higher rates of income tax and currently 1 in 10 people are paying a higher rate of income tax. However, this is estimated to be in 2027/ 2028 in fact, doubling to 2 in 10 people as they're being dragged in with wage inflation with the threshold staying the same.

There has been also that reduction to the starting point of the additional rate of income tax threshold decreasing from previously last tax year £150,000 down to that 125,140 as we saw in the previous table. Also, that freezing of the personal allowance, that tax-free amount, the freezing of that threshold means that many are paying tax on a bigger proportion of our income and that personal allowance has not moved with inflation for the past two years. So, what that starts to mean is that, unfortunately, the reality is that our income is diminishing because people can be impacted by these higher taxes. And this is actually at a time where standard of living is potentially dropping.

There's also capital gains tax and dividend allowances that have been slashed this year and will be halved again next tax year. With that in mind, the tax year of 2023/2024 is essentially one of the most important in a generation with these decreasing tax allowances and the freezing of thresholds meaning ISAs, individual savings accounts, and potentially pensions can be more valuable as tax-free rappers; helping potentially your money to work as hard as you do.

Now what we've looked at is the changes to these allowances and had a bit of an understanding of the tax thresholds but what we can also see is what this may look like on a monthly basis from our pay packet. So, having an understanding of the pay slip is potentially key.

This is a simplified payslip, many payslips looking fairly similar to the above but we can start to pull out a few key figures. Initially, gross pay this is the amount you can see on the top left-hand side- this is the amount of money an employee earns for the time that they have worked, and it could include salary over time or bonus. Employee taxes, the current employee taxes are essentially total amount of taxes for that period. And then deductions, what are the deductions, and the value is essentially a total of other deductions that an individual may have. Now this could be, for example, a share save scheme, and these will be detailed in a separate section on the payslip. The net pay, that top right-hand side - this is perhaps the most important figure, as this is what goes into your bank account. It's essentially what's left after your gross pay once taxes and deductions have taken place; essentially that disposable income.

The second section that's highlighted is looking at the earnings section, reference salary or ref salary is looking at salary pre-reductions. These reductions could include, for example, pension salary sacrifice or any taxable benefits in kind, all taxable benefits in kind have essentially been subject to PAYE tax via payroll, and we can see these shown as a negative in order to essentially reduce your gross pay as you receive the benefit instead of having it as a pay paid out to you. Once these figures are taken into account, we can then see them bring out the gross pay - that green highlighted figure - of what we looked at initially as well. We can then see the next section giving a breakdown of employee taxes, potentially income tax and National Insurance.

And then the final area showing the tax code and the basis that it's then calculated from. And it can detail how much tax-free income you may have applicable to yourself and the letter revealing that you may well be entitled to the standard tax-free allowance. If you have different letters or different figures you can always check on the HMRC website what these may then stand for. But also, the payslips do differ from employer to employer so do be mindful that they may well be laid out differently to how you can see it on the screen, but hopefully they'll show the main figures that we've looked at as well. If you do have any queries on your payslips, do consider speaking to your payroll team to try and gain that creative clarity on what they could be representing there.

So, that concludes our first section. We're just going to look into now this topic of managing money. We can think about different ways we can do this to help us become more of a smart spender.

Firstly, budgeting. It is potentially the cornerstone of Financial Health and the phrase ‘a budget is telling your money where to go not wondering where it went’ really resonates. Planning ahead combined with consistency enables us to choose how we spend our money to ensure we can do what we love today and tomorrow. And with budgeting there are negative connotations because people associate budgeting with having to restrict oneself. In fact, creating a plan enables you to spend more on what you love, prioritizing spending on what you enjoy.

The QR code in the central area of the screen helps you to go to a link towards the household planner budgeting tool from HL. And this cool tool can be really useful in putting a plan in place to understand what are your outgoings and incomings on a monthly basis, helping you to achieve your goals once you've worked out potential shortfalls or ways that you can then pick within that budget. So, it can be really useful - if you wanted to use that QR code do just use that via scanning on screen.

If, for example, we may well be in a budget deficit after going through, for example, a budget calculator there could be some easy aspects to try and move us in the right direction and potentially cut back on our spending. Thinking about things like additional purchases that we may be able to go ahead and switch from everyday habits to more infrequent purchases. Such as switching from purchasing a flat white from every day, or perhaps twice a day, to potentially once per week as a treat or alternatively taking in a flask of coffee to work as an alternative. Another area is understanding what are the costs of food and necessities, something where inflation has hit considerably and having that understanding of potentially looking at different supermarkets to purchase for example your everyday goods could also help save money on that ongoing basis. Is there potential for reductions that you could potentially have access to, so having that understanding as well.

Also, with mobile phones, potentially a contract has just finished or is potentially going to finish or you're already on a SIM only contract but there could be the option to change to a cheaper SIM option available helping to, once again, reduce monthly outgoings. And then also thinking about the potential loans that you may have already or credit card facilities or overdrafts, is there potentially a cheaper alternative which could help you save money in the longer term. Some of these aspects can be time consuming, such as shopping around to find the best deals, however, that time could potentially help us save over the longer term and potentially switch that budget deficit around and for example turn it into a budget surplus.

So, what we can start to understand is if we have, for example, a budget surplus, we can start to think about setting goals and think about where this surplus could be best used. Firstly, a goal that could be set could be either setting an objective or two that we may be looking to achieve. But we need to make sure that these goals are realistic and within our grasp. One could be thinking about an emergency fund, so the third section of HL's five to thrive and we'll be touching upon this in the later sessions. But with regards to that it could help us to then build a pot for unexpected costs rather than having to rely on additional loan facilities.

We can then also think about the type of way we may be saving to achieve those goals and what our time frames are and our needs versus wants. Then also thinking about the type of accounts that we may be saving in, so trying to be as smart with regards to that. Potentially as we mentioned at the start now more than ever it could be useful to look into different accounts such as an ISA, an individual savings account and also a pension for the longer term because they're able to go ahead and provide a tax efficient wrapper.

That allows us to have an understanding of potentially budget deficits and surplus, but we can also think about where our spending is coming from and how this is broken up on a monthly basis. And one example is via a smart spending system. Now, this isn't the status quo in terms of figures but it's an example of how to carve up your income to encourage a good balance between current needs, wants, and also your future self.

Firstly, you may well have income going into your main current account which you then have the option to split up. Now, this could for example be going into an essential expenditure, in terms of the percentage of your income, and this could include things like rental mortgage costs, utilities, food perhaps, and then also you could if you wanted to include things like gym memberships if you've felt that that was an essential priority. But of course, this would differ from person to person. Your future self, this could be thinking about trying to pay off any debt that you may have, also contributing for example into your pension, or also thinking about building that pot for a rainy day, and also saving and investing for the future. And then the fun you, thinking about a spending account that you may put a percentage of your income in each month for your wants, I.E for a holiday or potential hobbies that you have or for example eating and drinking out. Then this could be the most popular way for us to spend our disposable income.

With that in mind we can also start to think about some top tips for being a smart spender. And six quick tips to think about, the first one is understanding that you can build saving into your budget. And if this is done at the outset of that money being paid in it can help us to maintain these contributions into a savings account, rather than leaving it for example to the end of the month.

Also, the second area of making it potentially difficult to actually go ahead and spend, for myself it's actually thinking about out of sight out of mind. Therefore, having a separate savings account to my current account creates a time delay if I'm attempting to use my savings for example impulse purchases. And therefore, that actual transactional occurrence of transferring from my savings account into a current account means that I actually have time to think and understand is that purchase actually a need or a want.

The third area is this topic of rounding up, and some of you may be fully aware of this service, many spending accounts and current accounts that you may have, may have this feature with their mobile banking app. And this is where, for example, if you were to spend 70 pence what will happen is the account will round it up to a pound and therefore that 30 pence will go into a savings pot for you. And it's actually quite surprising at how quickly this could build up and actually the notice in terms of the little difference that you may then have on your day-to-day spending as well.

The fourth is looking at automating your spending, so thinking about having a direct debit for example set up on your payday going into a separate account. Or actually even better does your employer offer salary linked saving where it can be deducted prior to that money actually going into your spending account. Something that some employers do offer so do you have that understanding of the benefits within that?

And then also sometimes actually spending in cash, if you were to go out for the day or evening setting a budget and taking that cash with you therefore making sure potentially you don't spend any more. I'm sure many of us have potentially been in that situation where potentially using contactless or tapping away with our debit card, is an easy way to go ahead and spend more than you realize.

And then finally reviewing that budget on a regular basis, of course the budget should be flexible and do review it if your income changes or if there's personal circumstances that may change. But if you're able to review it on a regular basis it allows you to keep on track of what's going on that monthly aspect.

We can then start to understand of potentially being a bit more savvy with that cash that you may have. And firstly, when spending understanding the possibility of the use of cashback sites on expenditure each month, or even rewards that are available due to loyalty. That could then help you to build up another small savings pot via the rewards that's on offer there. Also, thinking about your direct debits, do you have potential subscription services that you may be paying for and aren't needed. And then also understanding, once again, those impulse buys: is it a need versus a want on an ongoing basis with regards to that spending. If you then got cash savings, thinking about that separate account versus a current and savings account. But then also the interest with regards to the cash that may be within those accounts. Trying to earn potentially the best interest that you may be able to achieve and when we're trying to mitigate the impact of inflation, could that money be trying to work actually a bit harder than it is at the moment. And there are different interest rates potentially available, and you could potentially look outside of your current account in order to try and achieve those as well.

Another area to think about is something called salary sacrifice, some of you may have come across the term, but it's a savvy way to take up some alternative benefits while actually being liable for potentially less tax. The main one is actually generally offered via an employer, and this is the opportunity to put money into a workplace pension scheme for example. Allowing you to save for retirement in a tax efficient way. With that in mind, the way that salary sacrifice works is that you give up a portion of your earnings in return for a non-cash benefit, for example from your employer, and a deduction reduces your salary and because your income is lower, the amount of income tax and National Insurance you may be subject to could also be lower. With regards to a pension, an example of this for example is a basic rate income taxpayer, could be having a hundred pounds by a salary sacrifice going into your pension. Now on that you'd have a saving of 20% income tax and 12% National Insurance and therefore the actual cost to you could actually be £68. Rather than looking at a traditional method of contributions into the pension which could actually to have a hundred pounds going into the pension cost £80. Due to the fact that with salary sacrifice you also get the National Insurance saving, it also may mean as well for child voucher schemes, unfortunately they are closed to new members, but if you still have these in place if you're a parent who joined the scheme and still has it in place and you're still with that employer then they can also have that potential tax efficiency for those vouchers.

Other benefits that could be within included in salary sacrifice could be things like cycle to work schemes, potentially car allowances, and gym memberships. But do have an understanding if they are offered via your employer as it does differ on an individual basis and also the company basis as well. There are a few benefits, for example of salary sacrifice as we've looked at, therefore being able to potentially pay less income tax and National Insurance and also have access to these benefits. Potentially making things a bit more affordable on an ongoing basis, do however be aware of the potential cons. And it could reduce your taxable salary which could then have an impact on your borrowing purposes. It also could have an impact on things like insurance, if it's based on that salary or actually is it based on your reference salary, so do check directly with your employer if you've got any questions there.

It’s also worth understanding that, for example, by contributing into your pension, especially a topic since the changes to tax thresholds for example, perhaps even avoid having to pay that higher rate of income tax you could potentially have the income and the contribution levels be chained via salary sacrifice as well. The key thing if you are thinking about contributing into the pension, it is important to know that money in the pension cannot be accessed until from the age of 55 at present increasing to 57 from 2028.

So, hopefully that's given an insight in terms of tips and areas to be set upon with regards to your cash savings and spending that you may have, and we can then start to think about this final topic of your money mindset. And when we're thinking about being a smart spender a key area is how we purchase and the impact that it may have. And this comes from our mindset.

Imagine being first of all in a relationship with money, what would happen if you were to ignore it. And what you've got is you've got that opportunity to invest time into it to nurture it and to make it work for you and get the best out of it. One area is via awareness and having that awareness that our decisions around money can be emotional and therefore it's not always a place of logic. If you're able to have that awareness it can then have that also impact going forwards for yourself of just being aware of where those decisions come from.

It may be that you're subject to impulse spending and therefore by having that dopamine hit from spending, it may mean that you potentially are subject to impulse spending on a more regular basis because that's something that you get from it. But that impulse spending habit could potentially be more short-lived, and therefore one way to try and counteract that is via implementing a time delay, to try and create those better habits. And one is asking yourself if you would still want that product or what you're looking to purchase in 24 hours time for example. So having that self and questioning when you're coming to make that purchase. Once you have that understanding of money mindset and how it may go ahead and impact your behaviour with money, that awareness can help you break down the habits that you've potentially built up over the longer term. And it may take time but it's worth understanding that understanding your habits and building your own money mindset and potentially changing that, could help yourself now and also in the future.

We can then also start to think about savings goals to try and build financial resilience and time frames to potentially look at. And when thinking about time frames, potentially more shorter-term goals, could be anything from zero to five years, which could include things like a rainy-day fund for those unexpected costs and potentially more cash savings that are available there.

More medium-term goals, which is anywhere from five to fifteen years and with HL when we are thinking about potentially looking at our goals and potentially investing, a house view is investing for at least five years. And then the longer term, the longer-term goals that you may have, for example either as on an individual basis or on a family basis, which could be, for example, saving for retirement and planning for later life. Which once again is another key pillar of HL’s 5 to thrive which will be also covered in later sessions.

This quote from a top investor Warren Buffett, is regarding do not save what is left after spending but spend what is left after saving. And hopefully by following a budget and largely sticking to the plan, you'll be able to put aside some money for savings goals. Remembering the best way is to build saving into your budget. Now different savings pots are required for different needs, and therefore do think about time scale and the requirements in terms of values for each as well. But having those goals set out and then have that budgeting aspect in place and also looking at your own money mindset can help you to potentially achieve those.

And just to conclude we've got a few key steps to think about going forwards. First one regarding that money mindset, this is your emotional triggers but holding yourself accountable to your goals and sticking to your budget can potentially help going forwards. By making that smart spending potential plan creating a budget and writing it all down in black and white, which you can then revisit regularly, is also another key area.

Then also thinking about potentially managing any debt, prioritize any high cost debt that you may have first, something that we looked at in last month's session with my colleague Claire. So do refer back to this session if you haven't watched it or if you'd like to have an understanding of how to go ahead and prioritize debts. Typically prioritizing shorter term high-cost debt for example credit cards or overdraft facilities, which typically are the most expensive, can have that impact of trying to go ahead and pay off the costliest debt that you may have. There are consolidation strategies potentially having that all combined into one to pay off, and then thinking about going forwards making sure that there are potentially goals that you've gone ahead and set out and making sure that they're realistic. But building that plan in place can then hopefully allow you to achieve your savings goals, both for the potential shorter term and longer term.

In addition to these key points to take away, just wanted to bring a couple of resources that are available to you if you do feel that potentially there are some problems with regards to that and you wanted just some additional help. For example, if you were in a period of difficulty. And these are a couple of resources, one of which is Step change which is a free charity that can help to provide debt advice and support, so if you do potentially feel like speaking to someone, they'd be able to help potentially think about consolidating debt into potentially one payment; making it a bit easier on an ongoing basis. Also, money helper, which is actually a government-backed service can also help. Not only on potential issues of debt but also other money matters as well.

I hope this session has been useful, this does go ahead and conclude the second part of the 12-month series on building financial resilience.

If I just ask you to take a moment to read through the important notes on your screen. I do hope it has been useful and helped to provide some information to help you go ahead and make better informed decisions.

If there are any questions, we will take a look into these shortly so please use the Q and A function on your screen if you have any there. But I hope it's been of use, and I'll also be popping up a QR code which will allow you to register for next month's session which is regarding navigating the cost-of-living crisis.

So, thank you very much I hope it's been of use if there are any other questions please get in contact with us but I hope it's been of use for everyone today thank you very much and have a great rest of your week.

Hi and thank you for tuning in to the third webinar of this 12 webinar Financial wellbeing course. A gentle reminder that the webinars will take place on the first Thursday of every month and you do need to register for each one individually. To briefly introduce myself I'm Clare and I'm a Financial Wellbeing Analyst at HL, I’ve spent the last seven years speaking to both individuals and employers about the rollercoaster that is personal finances, delivering financial education up and down the country. HL’s mission is to help people save and invest with confidence and over the last couple of years we've really invested into resources that can help people do exactly that. Our five to thrive framework has been designed with the intent to help people understand the road to financial resilience. There are five pillars; control your debt, protect you and your family, save a penny for a rainy day, plan for later life and finally invest to make more of your money. And importantly this framework can be referred to regardless of age, occupation, or income level and this is what the course has been designed around. We're providing this financial education course because we think we have a duty to share our expertise, particularly given the tough economic climate that we're living through. Knowledge really is power and it is key to people managing their money well and we hope the information delivered over the course of the next few months gives you the tools you need to feel confident with your finances, as well as the know-how to build or build back up your financial wall of defence. Following the pandemic with the rising cost of living. In today's session we're looking at how we can best navigate the rising cost-of-living but do bear in mind it's a really fluid situation, the landscape is constantly changing - just today there has been another interest rate rise announced by the Bank of England. The one thing that does appear to be consistent is people's concerns around life getting more expensive. We're all feeling the pinch though the pressure and pain points will differ on an individual basis, because very much like the pandemic the distribution of the cost-of-living crisis across society is unequal. Before I do start just a bit of housekeeping, this video will last for around 30 minutes and I do need to stress that everything discussed is purely information and not financial advice. Given the time constraints it's not fully exhaustive but I do hope that what I talk through will enable you to go away and make decisions from a more informed position.

A quick look at today's agenda. So starting with an economy update we'll begin with the bigger picture so exploring the causes behind the cost-of-living crisis and the stark reality that many nationwide now face. From here we'll hone in on why the Bank of England is increasing interest rates and what this means for savers, spenders and borrowers. Could there be light at the end of the tunnel? Inflation is falling, it's dropped below double figures and that's in large part due to decreasing energy costs so we'll look at what that means for the Ofgem energy price cap and your bills. The rising cost-of-living means our income isn't stretching as far, we'll also spend some time identifying different ways to cut costs. I want to be upfront, I'm afraid there isn't a miracle hack, it is going to be a case of collective power when making various lifestyle tweaks so it will require a little bit of what I call ‘life admin.’

For context I think it's important that we explore how we find ourselves in the dismal depths of a cost-of-living crisis. Ultimately it's the result of multiple factors, high inflation combined with low wage growth which have been exacerbated by short-term factors such as the Ukraine war. Altogether it's resulted in a perfect storm so we'll talk through each factor briefly and just how they've played a role. A major contributor is inflation, in July last year it breached double digits and it's stubbornly remained there until April this year when it dropped to 8.7% and it dropped again in the year to June to 7.9%. This is the biggest drop since the cost of living crisis began but we can't breathe a sigh of relief just yet. Unfortunately falling inflation doesn't necessarily mean falling prices. This drop in inflation was largely informed by decreasing wholesale energy costs and falling petrol prices, many other costs are still rising - it's just that they're rising perhaps at a slower pace than they were before. At 7.9% it's still four times what the Bank of England targets which is 2%. A bit of inflation is generally considered to be a good thing because it encourages purchases, which in turn boosts businesses and economic growth. If prices were constantly falling then we would all put off buying items, delaying that purchase in hope of getting it for a lower price and that would reduce the amount of money in circulation within the economy. In the current climate though record high inflation means that we can buy less, which means less money is being pumped into the economy and it also has consequences for our standard of living. Another major factor that led to the cost-of-living crisis was the increased demand for oil and gas last year which led to increased wholesale prices which had a knock-on impact for transport and household energy bills. As I alluded to in the introduction wholesale gas prices fell sharply at the beginning of this year which will be passed on to the consumer in the coming months so I'll expand on the Ofgem energy price cap and what it means for our utilities over the coming slides. Energy and food prices further escalated due to Russia's invasion of Ukraine in February. Add to that that our wages aren't keeping pace with inflation, our purchasing power is declining because essentials are becoming more and more costly, which translates to less money being pumped into the economy as we all individually adapt to our shrinking income. You'll also remember that back in September last year tax rises were announced, including a 1.25% national insurance increase - that all fed into inflation at that point in time, even though just two months later some of those changes were reversed including that NI uplift. Brexit amplified the inflationary impact, heightening supply chain issues that we experienced during the pandemic, which at the time were simultaneously worsened by recruitment struggles caused by the ending of free movement for EU workers which we saw come together in a labour shortage - particularly with a shortage of HGV drivers. Interest rates are rising for borrowers which means higher cost of debt, particularly those unlucky enough to have refinanced their mortgage recently or be looking to do that in the next 12 months and we'll look at that in more detail shortly.

There's a fair bit of economist terminology being banded around in the headlines and on the news as to where the economy is headed. Hugely talked about at the moment, is gross domestic product commonly referred to as GDP and that measures the size of a country's economy and can therefore be used to measure the different sizes of global economies. The most common way to measure it is by looking at output so that's what's produced by a country and what everyone in the country has spent and that would include household spending, investments such as businesses buying equipment, government spending - and GDP is measured each month so if the figure is higher than the previous month the economy is said to be growing. If the GDP figure drops the economy is getting smaller, so it's regarded as a pretty good indicator of the health of the economy. A recession is generally accepted as when an economy experiences negative GDP for two consecutive quarters - which typically leads to rising levels of unemployment and typical drivers are inflation and economic shock caused by sudden events, for example the coronavirus pandemic which shut down global economies. The UK is not said to currently be in a recession, we did narrowly avoid one at the end of last year. It is worth bearing in mind that recessions are considered an unavoidable part of the business cycle so a contraction can often occur before or after growth cycles, and people will commonly experience a few recessions in their lifetime so they're not a one-off event. The most recent recession was actually during the beginning half of 2020, during the peak of the Covid-19 pandemic. Before that there was one around the credit crunch in 2008/2009, as well as one under Margaret Thatcher's administration. Another word that you may have heard banded around is ‘stagflation’ and that's a combination of the words stagnation and inflation - and that means that the economy is stagnant, it's not growing and the prices of goods and services are inflated. Now when both happen at the same time and persist we have stagflation. As to whether the UK is heading for a recession, or in stagflation the answer depends and differs on which economist you ask, but there are headlines suggesting that if we continue to see increased interest rates that a recession could be looming down the track.

Now we know what's caused the cost-of-living crisis let's move to the impact that it's having on personal finances. Nationwide the cost-of-living is leading to unsustainable levels of spending - our nationwide research shows 26% of us, so that's one in four households are spending more than we're earning so we're at risk of running up debt. It's inevitable that we will all be in debt at some point in our lives, not all debt is bad - it's a necessity for the majority of us when we're looking to buy a property or to attend University but what we're seeing is an increased credit and debt reliance fuelled by the cost-of-living crisis. So people are borrowing to fund the daily essentials. Now the application across society has been incredibly unequal, there is real concern for low-income families who are faring the worst because essentials make up a much bigger proportion of their take-home pay. There's also concern for single-person households and those larger families with dependent children because there's less wiggle room in their take-home pay to absorb these higher costs - though nobody is escaping unscathed. Research by the ONS found that 9 in 10 adults report their cost-of-living has increased. The most common reasons reported for those increased costs were the price of the food shop, energy bills and increased fuel costs. 1 in 5 reported using savings to cover the cost-of-living and 12% - so that's nearly 1 in 8 people - are having to take on debt to cover those essentials. For many the savings they had were drawn on to sustain their lifestyle during the pandemic and for those fortunate to still have savings, those are vanishing because our money is simply not buying us as much.

A recent report published by Interactive Investor reveals that household costs are at their highest level for 30 years. This slide is pretty busy so bear with me as I talk you through it. So here we're comparing the proportion of income being spent on three main costs; housing, food and energy and we're looking at 1993, 2008 and today 2023. So today an average of two-thirds of our income is spent on those essentials, leaving just 34% spare cash to spend on everything including hobbies, socialising, going on holiday, commuting to work, saving for your future. A similar amount of spare cash to the days of 1993, although housing costs are now higher than food costs, which is a reverse of what we saw in the 90s. House prices are at a historic high compared to wages. The eagle-eyed of you will notice that 30 years ago the average house price was just 4.3 multiples of salary, today it's closer to 8 times salary. Rising house prices mean it's harder for first-time buyers to get on the property ladder due to affordability. It's unsurprising we're feeling the pinch, if we rewind to 2008 households had an average of nearly 48% spare cash after paying energy, housing and food costs.

The Bank of England confirmed another interest rate rise today up to 5.25% so a 0.25% uplift. That is the 14th rise in 20 months, and rates are at their highest level for 15 years. Why is the bank raising interest rates and making debt more costly at a time when people's income is being attacked on all fronts? Because rising interest rates is the main tool that the bank has at their disposal to dampen persistently high inflation. The theory is that by raising interest rates it becomes more expensive to borrow money so people are less likely to spend, if people and businesses spend less then demand will decrease and prices will fall, which will result in lower inflation. Now the impact of rising interest rates, the effects felt will differ depending on whether you are a saver or a spender. Average interest rates on credit cards are at a record high - around 30% so do shop around, some credit cards will offer introductory interest free credit for a time period. Do also consider your affordability and the time period in which you'll have to pay that off. For cash savers it's good news, you should receive a boost to your interest rate if that increase is passed on from banks. It's really important that you shop around for the best interest rate for your cash savings, you're unlikely to find the most competitive rates at high street banks along with your current account. When I had a look earlier this week we're seeing easy access rates of around 4.63% and one year fixes at just over 6%. It's always tempting to wait in hope of another hike but with so many rate rises priced into the fixed rate market, it may be worth considering taking advantage of a deal while they're offering the kinds of rates we haven't seen for a decade. Just be mindful that if you opt for a fixed rate you're locking your money away until the end of that term - so only lock away what you can definitely afford to lock away and you won't need access to. At the moment we're not seeing much difference in rates between a one-year fix and a five-year fix, those interest rates are pretty similar so do your research and don't unnecessarily lock your money away for a longer period than you need to.

Generally interest rates on credit cards are variable they go up and down although they're not explicitly linked to the base rate. Credit card deals have progressively been worsening as interest rates have increased and this latest hike to 5.25% could mean another increase and it will likely be passed on from lenders to consumers. The cost of borrowing is going up and it means you could end up paying more if the interest on your card goes up. The ideal way to use a credit card is to clear your balance in full every month and that way you don't pay any interest - you can set up a direct debit. Now that isn't always possible, just be mindful that rising rates means you may pay more for carrying a balance. Clients and friends that I've spoken to, their primary concern has been the impact of rising rates on mortgage rates, unsurprisingly because houses are the most expensive thing that we buy and we typically borrow for. Those on a variable rate mortgage are really vulnerable to increases that's around 2.4 million homeowners, as the base rate has been climbing they've faced almost an immediate hit to their income because those products move in line with the base rate. So unfortunately the announcement today does spell more misery for them. Those on a fixed deal are shielded for now, however when it ends they could be in for a shock because they'll be paying significantly more. The majority of mortgages are fixed but it is worth thinking about when your mortgage is up for renewal. Typically you can renew up to six months prior to your expiry date. The average UK house price is around £288,000. So if you were lucky enough to remortgage last year at an average interest rate of 2.65% for a two-year fixed deal your monthly repayments would have been just over £1,300. If you're refinancing just one year later your monthly repayments have jumped over £400 and remember this is simply interest, you're not paying off any more of the mortgage debt. Even a fractional uplift of 0.25% like we've seen today can have a significant impact due to the big sums of money typically involved.

The big question everyone is asking is whether there are more rises on the horizon. With inflation remaining well above the Bank's 2% target it's likely, and economists are split, some are predicting that the base rate could peak at 5.75% others are predicting 6%. When will they come down is usually the second question and unfortunately there's no real way of knowing this for certain. But until inflation lowers it's unlikely that we will see the base rate decrease, as we heard earlier this is because higher interest rates discourage spending which should lead to lower prices and lower inflation. The consensus is that mortgage rates may gradually decline over the course of 2024, but it will be slower than first expected because high inflation is sticking around. Some predictions are suggesting that rates could be around 4% but that will be towards the end of next year and that is a forecast so it's in no way guaranteed. So what can you do if your remortgage is looming? If you're already on top of expensive short-term borrowing and have an emergency savings safety net, you could consider overpaying your mortgage. You can usually overpay by up to 10% a year within the terms of the deal but check the small print to make sure that you won't face any additional charges. It may be tough to find extra cash right now but if you get a pay rise or perhaps receive any lump sums you could choose to put that into repaying the mortgage. Another possibility is considering extending your loan term, lenders have agreed with the government that borrowers will be able to extend their term for six months without going through the approvals process and without impacting their credit record. It's worth bearing in mind that you will be repaying for longer so although monthly payments will be lower each month you'll pay more overall. If you end up extending the mortgage term permanently, you'll need to think about the potential implications so for instance on your future savings. Switching to interest only for a period is another option that would decrease your monthly payments because you'll only be paying the interest and you won't be paying off any of the loan. The government has arranged to make this easier to do on a temporary basis so you can do this for up to six months without affecting your credit score, however this will either mean you need to extend your term when you switch back or you make higher monthly payments so it is one for careful consideration. Do speak to a mortgage advisor if you have any queries with regards to that. Looking at it from another perspective, are there ways for you to generate more cash to help meet the rising cost of the mortgage? For example do you have a spare room and could you rent it out? In some cases selling up and downsizing could be an option to reduce monthly outgoings. And if you have no other options left you can ask your lender for help - they may be prepared to change your payments or arrange a payment deferral. It is in their best interest to work with you to find a way to help you make the payments, they may be more flexible than you would think, just be mindful that this will affect your credit score and will raise your costs at a later date but it will certainly do less damage than missing payments without notice.

Let's now look at how you can cut costs. I think it's really important to set the scene here, so when it comes to cutting costs there are no miracle hacks - it is going to be a case of trimming the fat. Going back to your budget and looking at all the areas and ways to reduce costs because every little will help. Small tweaks together will have that big impact. Now last month's session was hosted by my colleague John where he explored budgeting which is the cornerstone of financial health, including how you can spend smartly to enable you to prioritise the things that you enjoy with examples of popular budgeting methods so do go back and review that video if you haven't already.

Starting with food costs - so the headline inflation statistic of 7.9% doesn't show the true reality. The cost of many essentials is higher, there's a difference depending on what we choose to have for breakfast if you like low-fat milk on your morning cereal it's up an eye watering 28.5% on last year compared to just a 15.3% percent hike felt by toast eaters. Now the most well-known indicator of inflation is the CPI - that stands for ‘Consumer Price Index’ and it measures the percentage change in the price of everyday household items each month to the 12 months prior and it includes food, clothing, cars. In fact that basket is constantly updated to reflect shopping trends, so in 2021 gold chains were out and hand sanitizer went in. The most recent change is adding frozen berries and removing alcohol pops because apparently we're no longer drinking those. If you go on to the Bank of England's website there's actually an inflation tool that enables you to find out how the price of something has changed, and you can go back hundreds of years. So for instance you can find out what goods and services that cost £10 back when King Henry VIII was on the throne in 1530, what they would cost today and the cost today is around £7,160. Shoppers are changing their behaviors, I've certainly noticed when during my weekly food shop more and more families are going up and down the aisles with their phone calculator out, some even telling the assistant that the checkout to stop at a certain monetary amount because they have a specific budget that they need to stick to.

There are ways to reduce your food bill and it doesn't have to involve eating less. Now maybe not all of these tips are suitable for you, it is a case of picking and choosing where you can make a tweak and what works for you and your family. First up is yellow sticker shopping - time your trips to the supermarket to benefit from discounted items nearing their sell by date. Typically supermarkets will reduce these items at the same time every week. Often many of those products can be frozen so you can actually stock up your freezer and eat those over the coming weeks. Try going meat or fish free once or twice a week, that will shave a few pounds off your total bill. A really key tip is planning your weekly meals and only hitting the shops once a week, write a list and stick to it, avoid dipping into convenience stores because those top-up shops are expensive. And just be mindful that if you live within a city centre and you are having to shop at those express stores, the costs at those stores prior to the cost of living items typically run at a much higher price point because the overheads of those stores because of their location are much higher - so if you can get out of the city centre to a lower cost supermarket perhaps once a week that is going to be -a way to certainly save some money. There's an app called trolley.co.uk launched back in 2021 and it's the largest online supermarket app which compares the cost of items at over 16 stores. The stores include Asda, Tesco, Aldi, Waitrose, Sainsbury's, Morrisons, even Amazon - the idea is to help shoppers save money. Perhaps particularly helpful if you're fortunate to have a selection of supermarkets on your doorstep and you've got the luxury of picking where you go, and also helpful if you're looking to purchase branded items such as toiletries which typically run at a higher cost - you can actually check where those may be on offer. Swap takeaways for fakeaways. Over lockdown a lot of popular restaurants released the recipes to their cult classic dishes - I actually recreated the pollo pesto pasta from a well-known speedy pizza chain and can confirm it tasted near enough exactly the same. Another option is to swap supermarkets, so if you've previously shopped at Waitrose or M&S, then do try swapping to Lidl or Aldi - and make sure that you join loyalty clubs for extra savings. I'm sure many of you have noticed that actually Tesco in particular and Sainsbury's, if you're not one of their loyalty members you can often pay twice the amount of money for one product and so it is worth signing up. If you fancy a night out or you want to avoid cooking then check online for restaurant vouchers. There are also apps like First Table. First Table enables you to book the first table at a restaurant and it means you get 50% off the food bill for up to four people. You eat the exact same menu, you just get it for less because you're eating at an earlier time.

Some other ways to trim the fat - so do consider these additional tips. Millions of Brits are overpaying for their mobile phones - we are continuing to pay our contracts long after we've paid off the handset. I actually changed phone contracts last year and found that my provider bettered a deal because I had found one online which saved me £21 a month on what they had automatically offered. So they did meet that price but I had to do the research myself. When it comes to mobile phone contracts check your usage for data and only get what you need, because we're also guilty of overbuying gigabytes of data. Also consider whether you could save yourself money by swapping from contract to sim only if you're happy with your current handset. For any necessary purchases use cashback sites, you'll earn money on your spending, everything from food shopping, to insurance, or hotels, electronic items - you find the website through the cashback site, make the purchase and it will do the rest. Do review your direct debits, perhaps you could share a TV subscription service with additional family members to share the cost. Swap telecoms or broadband providers, these tend to be competitive markets and many will offer loyalty perks or price matches. Cut out needless travel, try and walk or car share where possible. Have a clear out - so sell any unwanted clothes, or unused gadgets lying around - I sent off an old mobile phone handset at the beginning of the year which was lying in a drawer doing absolutely nothing and I got a small cash sum paid directly into my bank account.

There may be some light at the end of the tunnel, so households should see a significant fall in energy bills from the 1st of July - last month. By now you'll all have heard of the Ofgem energy price cap, its name is slightly misleading, it's not a cap on total cost but instead a cap on the rates providers can charge per kilowatt of energy. So the figures that you can see, if we take August 2021 - that cap of £1,277 a year is for typical household usage so your bills could be less or more dependent on the amount of energy used. The 54% increase to the Ofgem price cap in April 2022 drove UK inflation up by a massive two percentage points - driving and influencing that cost-of-living crisis that we're currently experiencing. Now I mentioned at the outset that we've seen decreasing wholesale energy costs from the start of this year - they've been falling quite sharply and that means that actually in July the cap decreased meaning the average household will now pay around £2,074 a year for their gas and electricity. However it is important to point out that the government support has come to an end so we may not feel that as much as we think when it comes to our purse strings. You'll remember that there was a £400 payment paid to everyone, it was broken down into £66 instalments which were automatically deducted from our utility bills, now that came to an end in April this year - so although the price cap has decreased we may not notice it as much as we expect to because the government support has been withdrawn. There may be further welcome news down the track with experts forecasting that energy bills could drop again in October this year to around £1,860. That's likely to generate mixed feelings among consumers because although it's moving in the right direction, those costs are still far higher than they were pre-pandemic. So with that being said, there are a few tweaks that you can do at home to reduce your bills. Now firstly I'm sure we've all heard this before but do turn any appliances off standby - I was surprised to learn that leaving a fully charged phone plugged in still uses power. Consider getting an energy consumption meter that can help you keep track of your usage identifying the small changes that can have the biggest impact, and you can also set a daily amount and be notified when you're approaching it. A really great tip is turning down the water flow temperature on your boiler - this can save you 6%-8% on your bills. It controls the temperature that the water is heated to, before it comes out of the tap and typically the pre-setting is far higher than it needs to be and we all end up cooling it down with cold water. So why pay extra to heat it up in the first place? There's also everyday things that you can do only boiling the kettle with the water that you need - not overfilling it, and using the microwave for cooking things like vegetables instead of the hob, because it's quicker, it's more energy efficient.

Here's some further tips to keep your finances on track. Ultimately we want to make sure your money works as hard as you do. With our money not stretching as far it's best to get ahead of any potential overspends, which means reviewing your incomings and outgoings. Do get into the habit of reviewing your budget regularly, it does need to flex with income changes or big life events. Do set short-term achievable goals and if you're in a fortunate position where you can still afford to put money away then pay your savings first. That means building saving into your budget. Set up a standing order to move the money on payday, or even better, does your employer offer salary link savings where the money is deducted prior to it hitting your bank account? Then make it difficult to spend those savings, so if you're likely to dip into your savings for impulse purchases then keep the money in an account which is hard to access, or with an alternative provider to your current account if you think you might dip into it without noticing. Think out of sight out of mind - that very much works for me. To avoid impulse purchases which for me may happen if I'm scrolling on my phone during the evening - create a time delay, hold off 24 hours and ask yourself if you still need it and 9 in 10 times you won't. Do shop around, use comparison sites and do your research - could you buy those big items such as electronic items online and save yourself money? Also be clear about your needs versus your wants to help avoid those impulse purchases. Do you understand your own money mindset? John will have touched on this topic last month - that's your emotional relationship with money that influences how you make daily financial decisions, so whether you may treat yourself when you're happy, or perhaps spend when you're bored. Once you've got consciousness of those behaviours, actually it can help ingrain healthier money habits helping you to build your financial resilience. And then when it comes to budgeting don'ts - do not ignore a budget deficit because those little overspends can add up to big debts.

If you'd like further information there is a whole host of sources and impartial guidance available. Where to look is going to depend on your individual circumstances and priorities. If debt is a concern please do reach out to one of the organisations on screen – Step Change or Moneyhelper. Debts will need to be broken into priority rank based on consequences if they're not met, but specialist help is available for problematic debt so if you're concerned do reach out to Step Change or a national debt charity association because they will have a whole host of resources and offer free and impartial guidance. Moneyhelper is a government-backed organisation and there is a huge array of information online, everything from starting out investing, to what you need to know about compound interest, to what you need to know about pensions - so do reach out if you're in doubt.

That brings this session to a close. A final slide from our Compliance Team please do take a couple of minutes to read through the important investment notes - they reiterate that this session was purely information and not to be construed as financial advice.

Thank you for taking the time out of your day to listen to this session. I do hope you found it informative. September’s session will focus on financial insurance and the important role it plays in providing a plan B and protecting your loved ones. If you haven't registered already, you can do so by scanning the QR code on your phone and registering your details. Thank you for listening and take care.

Okay, we’ll make a start there. Hi, everyone and thanks for coming along to this session for the Bristol Financial Resilience Action Group, in which, this time we’ll be focusing on financial protection. By this, we might, typically, refer to insurance policies that protect us in certain circumstances. However, there’s lots of different actions we can take which, ultimately, help boost our resilience in case of shocks or specific events.

My name’s Alex, and I’m part of the Workplace Financial Wellbeing Team at Hargreaves Lansdown or HL, so me and my colleagues spend most of our time speaking to HL’s clients mainly about their workplace pensions as well as other opportunities they might have to save and invest.

So, protection through insurance policies, it can take a bit of a back seat in discussions surrounding personal finances but, before we think about investing our money, we really need to ensure that we have solid foundations to build from, and that’s where insurance policies can really come in.

So, just a bit of housekeeping before we get started. The presentation, it should last about 30/35 minutes in length and that means, hopefully, we should have some time at the end, if anyone has any questions. You might see that there’s a Q and A function available within Zoom, so do feel free to use that if you’ve got any queries, and I’ll do my best to answer those for you at the end.

This session will also be recorded, and it will be circulated, so there will be a chance to listen back to it after, if you’d like to, or if you have any colleagues, for example, who weren’t free to attend today.

Finally, I’ll also just mention that I’m not a financial adviser, and that this session is intended as information as opposed to financial advice. If you are, ultimately, unsure about making financial decisions, whether that’s on things like financial protection or otherwise, then you should ask for financial advice.

In terms of what we’ll cover in the session today, we’ll start off with considering when you might need financial protection and its purposes. We’ll then look at, not all, but some of the key forms of financial insurance that’s available and how they operate and, after this, we’ll just review some of the important considerations alongside insurance which will help us stay resilient. And, towards the end of the session, we’ll focus on the importance of having a will in place as well as protecting ourselves against financial scams.

The main trigger for looking at protecting yourself is often down to the number of people that are dependent on us. Our dependents normally refer to a partner or a spouse or our children, however, there could also be others who might depend on us, including financially.

Equally, you need to look out to support you have available, should you be unable to work. So, people with no or limited numbers of dependents and strong support networks might feel that there’s actually less need for protection. So, whether we have any liabilities or debts, such as mortgages, loans, credit card debts might also influence our need for protection as well as any potential state benefits in the event we’re able to work, for instance, too.

In addition, working for a company where your employer is offering benefits such as insurances, means that there is less emphasis on you, as an individual, having to provide these yourself. Even if you do receive financial insurance through work. In lots of cases, this isn’t necessarily sufficient to meet all of your protection needs, so you may need to account for any potential shortfall there too.

So, predicting the future is pretty impossible, but it helps to be financially prepared when the unexpected happens. The sad reality is that 50% of people born after 1960 will be diagnosed with cancer at some point in their lives. If this happens at an age where you’re still working, maybe still paying off a mortgage, or still funding your children’s education, for example and you need a substantial period of time off work, ‘How are you going to continue to meet those costs?’ So, these are the sort of questions we should all consider.

Cancer represents 60% of all critical illness claims, a type of financial insurance we’ll go into more detail on a bit later on. It isn’t just illnesses, but also injuries. So insurance helps you prepare for those future unknowns.

So, next section, we’ll look at the different types of protection available, and a bit more about how they work.

So, financial protection comes in four main forms of insurance; critical illness, private medical insurance, life assurance and income protection and I’ll summarise each one, briefly.

Life insurance or assurance is a monthly premium in exchange for a lump sum payout on death. It can support loved ones, it can pay off debt, or inheritance tax bills. The most commonly cited reason people buy life assurance is to cover the mortgage or their dependents should they pass away, to retain the family home.

Income protection does exactly what it says on the tin, it pays out if you’re unable to work due to injury or illness. Critical illness cover is a long-term insurance policy which covers serious illnesses listed under that particular policy. It differs from income protection, as it pays out a one-off, tax-free lump sum. This could help pay off your mortgage, or perhaps make alterations to your home, if necessary.

Private medical insurance; this can supplement what’s available on the NHS. It allows more choice and flexibility over your care. So, depending on the cover level, you may be able to skip NHS waiting times, or get access to treatments unavailable and through the NHS as well.

So, the common misconception is that, if you have one, then you don’t need the others, when, actually, they all provide a different purpose.

Before we go about purchasing these financial protection policies, we should be having a look at what we have in place already, first. This could include any benefits offered by our employers. So your employers may offer some of these as an additional benefit in the form of financial insurance that help you build your financial security net.

Employers, typically, offer more than just a salary, and they do this to benefit the wellbeing of their staff and, in doing so, it makes them a more attractive employer.

So, if comparing employers in the future, from a financial point of view at least, do look at more than just the salary, but your total compensation for the package, including any of these financial protection policies in place.

There may also be that state support as well available, for instance, when it comes to the death of a spouse or the cost of caring for children. Although we shouldn’t necessarily be reliant on state benefits alone. One reason being that they can change over time, it’s useful to know what support you might be entitled to in various circumstances and where this might leave any gaps in your particular situation too.

‘What will any payments from these financial protection policies be used towards?’ So, this is a key question, as, without understanding this, we don’t really know what the point of covering ourselves is. So, commonly, any protections might help to cover income we’d otherwise have from employment or maybe self-employment whilst we’re sick or for our dependents if we pass away.

In the UK, lots of us have mortgages and, if not now, we may do in the future. Servicing the cost of mortgages and, therefore, securing our homes tend to be our largest ongoing cost. Taking out a mortgage loan can often act as a trigger for viewing protection policies. If you’ve ever taken out a mortgage for a broker, it’s likely that they’ve tried to offer you some kind of financial protection, such as critical illness or life assurance.

So, after these more essential needs, payments from these policies could be used to cover education costs for children, perhaps including university fees as well. We may also want to gift money to our loved ones or maybe charities that we support as well. So, payments could also be used to cover any funeral costs or to clear debt as well. So, lots of different reasons why we might use these financial protection policies.

So, going into each of these policies in a little bit more detail and, firstly, we’ll start off with taking a look at income protection. For income protection, we’ll pay out a regular income in the event we experience injury or illness which prevents us from being able to work.

The policy will usually pay until either we get better and return to work, reach retirement age or at the end of the policy term, if sooner. There’s also, usually, a deferral period as well – so this is the time between you making a claim and the policy coming into payment. Normally, the longer the deferral period, the lower the premiums on income protection policies.

So, where you do have a longer deferral period, it’s important to make sure that you have a bit of a cash buffer to help make up the difference or, if it’s a policy through work, make sure you understand what your company’s sick pay policy is as well.

So, the amount paid out is also linked to your earnings. There’s normally a cap of 75%, and it’s very unlikely that income protection policies will pay out more than this. Typically, however, income protection policies tend to pay out somewhere between 50 to 60% of your earnings and that reduction is there, ultimately, to act as an incentive for us to return to work, if we are able to.

So, you can also customise income protection policies as well to meet your needs. For instance, you could amend the deferral period, select the length of the policy’s term and also have things like indexation on the sum assured to ensure it keeps pace with inflation too.

Where you receive income protection payments through a personal policy, these are free of income tax. If you have one organised through your employer, then they will be considered a taxable income, if it’s done through work.

So, life insurance is probably a form of financial protection that many of us will be familiar with, however, roughly, only one in three of us actually have a life insurance policy. This is despite approximately six in 10 of us agreeing it would be a worthwhile thing to have, according to research done by Direct Line.

The Coronavirus pandemic, however, it did prompt many of us to consider life insurance who maybe previously hadn’t. There is also a considerable gap between the number of men and women who considered life insurance. So, far fewer women have considered taking out a life insurance policy.

There’s two real kind of types of life insurance. The first is what’s known as ‘Term Assurance.’ So, the policy covers you for a fixed amount of time, for example, 20 years. If you survive for the full period, the policy won’t pay out upon death. There may also be a surrender value for some term policies as well, if you do cancel the policy half-way through, for example.

The other type is known as a ‘Whole of Life’ policy, which will pay out upon death, providing all of the premiums have been paid up to date.

So, it is possible to have a life insurance policy written into trust. So a trust is, essentially, a legal arrangement, where a person holds property on behalf of another person or beneficiaries. So, this can be really useful in relation to a life assurance policy, as a lump sum paid out isn’t subject to inheritance tax. It can also be paid out much quicker, without the need to wait for Probate, which could be quite a lengthy process in some cases.

This might be particularly important if the lump sum is being used for an immediate need – such as a mortgage repayment, for example.

It’s important to note that, once in a trust, the money is no longer under your direct control.

If you have existing life cover, it’s worth checking whether you believe this is sufficient for your needs, and also whether you’ve provided details of who you’d like to receive the lump sum upon your death. If you’re married, for instance, your spouse won’t automatically receive the benefit unless you’ve nominated them.

If you’ve not done so already, you should complete an ‘Expression of wish’ or a nomination form to avoid any unnecessary delay in your life insurance claim being processed. You can normally change this directly with your life insurance provider at any time as well and, if you do have any policy set up through work, there might be a form that you’re able to get from your HR or your benefits team too.

What we’ll look at next is critical illness cover. This tends to be less commonly offered by employers as standard. One reason that it should be a real consideration, though, is that we’re much more likely to experience a critical illness whilst we’re working than we are to pass away.

It does differ slightly to income protection. So, rather than a regular income, critical illness offers a one-off, tax-free lump sum upon the diagnosis of a specified serious illness, which is listed under the policy details. These types of policies, they can be quite individualistic, so it’s important to check any policy exclusions. Policies will also state how serious an illness needs to be in order to qualify for the lump sum payment and not disclosing underlying health conditions may also lead to an unsuccessful claim as well.

Premiums for critical illnesses don’t always remain fixed. These are often classed as ‘Reviewable,’ meaning the cost of the cover could increase on the policy’s renewal after a period of five years, tends to be a typical amount of time, in which case, the policy will renew, and the premiums will then be reviewed.

So, the lump sum benefit can be used to cover ongoing costs, such as a mortgage but, commonly, it may also be used to help fund any alterations we might need to make to our homes, as a result of an ongoing illness or disability.

The final protection we’ll explore in detail in this section is private medical insurance. This is potentially something we can look to supplement treatments available through the NHS. With private medical insurance, you’ll often find you receive more choice and flexibility and avoid, potentially, longer waiting times.

You may also get access to some treatments which, otherwise, wouldn’t be available, so some specialists can be exclusive to private patients, for instance.

Not all conditions are covered, so it’s important to check the policy notes. You can normally take out quite basic medical insurance, ranging to far more comprehensive levels of cover.

Like with home or travel insurance, for example, there’s likely to be an excess which would need to be paid before the cover kicks in. If private medical insurance is taken out for an employer, this will also be considered a taxable benefit too. So just worth being aware.

Now that we’ve looked over the four or the main types of financial protection, we’ll next review some of the other factors to think about that could help us either secure us, financially, or support our wellbeing a bit more generally.

One of the main reasons we might become under pressure, financially, in the first place, is that we lose control of our monthly outgoings and, where this happens excessively, we could begin to get into deeper and deeper debt. So, creating a budget and being more efficient with our spending, can be really beneficial in the long-term and helps us to clamp down on our unnecessary spending.

So, shopping around for regular spending like our weekly food shop, utility or phone bills, means we can often receive the same goods and services but at a reduced cost.

It might also seem obvious, but many people also forget to cancel things like subscription services they’re no longer using too. If you haven’t reviewed your budget in a while, it’s worth putting some time aside just to review what you’re spending and whether anything can potentially be cut there.

If you have a partner, you might also want to consider, ‘Do they have financial protection through their employer on top of any personal protection policies as well?’

You might consider factors such as you and your partner’s job security and both of your relative health as well and that will help you establish whether either of you are likely to have periods of unemployment or, potentially, time off work.

Do you have any dependents that rely on you, not just financially, but, for example, if you have children, how might they be affected if you were to pass away? Would there be an increased cost in providing care for them, for example?

I’ll speak about this a bit more on the next slide but having an emergency fund should be a priority for shorter-term, unexpected financial shocks. So, a little nest egg that we can put aside, if there is that unexpected cost that pops up.

As I mentioned, in some of the previous sections, where you have financial protection policies, either through work or independently, do check what is and what isn’t included in that cover and that will help you identify if you, potentially, have any additional protection needs that you, then, do need to cover.

In some cases, there may be those state benefits you could become eligible for, in cases of things like bereavement, disability or caring for children. Though there’s a common misconception that the state will look after us in the case that things go wrong and that’s why it’s vital we ensure we have our own provisions in place to fill any potential gaps that state benefits, potentially, won’t do.

Finally, not every benefit available through your employer will be financial protection-related. For example, you may get access to various benefits, such as a health screening or employee assistance programmes which offer support on a range of matters including mental health and wellbeing.

There could also be access to discounts within the local community or support with glasses, if they’re needed for work. Do speak to your employer, and make sure you’re aware of what is available through them.

The recent global pandemic has really highlighted the importance of what we, in the industry, term as ‘An emergency fund.’ An emergency fund is, essentially, rainy-day money for unforeseen circumstances. So, it’s money you put aside for unexpected costs, for example, if you need to repair your car to ensure you can continue getting to work or it can buy you more time by providing a buffer should you lose your job, or potentially become ill and, even if you have something like income protection, there could be that deferral period as well.

If you don’t have an emergency fund, make building one your priority. It’s generally suggested that individuals should save between three to six months’ worth of expenditure, and that’s the bare necessities they need rather than the once in terms of that emergency fund. In most instances, this would be held as cash in an easy access savings account so it can be accessed quickly and without penalty, if it’s needed.

If you manage your finances jointly with a partner, make sure any emergency savings aren’t just held in one person’s name. So, either of you can access the emergency cash at short notice, if required.

So, to find best interest rates for your rainy-day money, you’ll need to look further than your high street bank, necessarily, so do shop around to get the best return on your hard-earned money. The best rates available at the moment on easy-access accounts tend to be around the 5 to 6% mark.

Both your emergency fund and your spending plan should be reviewed at regular intervals to ensure that they still meet your essential requirements. This has been particularly important over the last couple of years with prices of essentials rising, people need to ensure that money they’re saving is still being able to buy them three to six months’ worth of those essentials. If prices have climbed, the chances are your acquired emergency fund might also need to be increased to help reflect the changes in prices too.

So, although financial protection is important, we mustn’t ignore some of the other assets that we have available and maybe, most notably, are pension pots.

If we pass away with pensions held in our name, these can be passed, often, onto beneficiaries, just like with life insurance. We’re able to nominate beneficiaries for our pensions, and these could range from family, could be friends or even charities and you can choose more than just one beneficiary as well.

So, payments from pensions are usually free of inheritance tax, as they tend to be held in trust, outside of your estate. However, if you die before the age of 75, the benefits will also normally be paid free of income tax as well.

If you die aged 75 or after, your beneficiaries will have to pay income tax on any lump sums – or any income that they receive from your pension and that’s at their rate of income tax.

So, an ‘Expression of wish’. It’s not a legally binding document, however, it means your pension providers are aware of your wishes. Through your pension provider’s online portal or, alternatively, by requesting a paper form, you can make that nomination. So, do get in touch with them, if it’s not immediately clear or if you’re unsure if you’ve already nominated any beneficiaries for your pension.

It’s not normally possible to access your own pension until you reach at least the age of 55 and this is actually due to rise to age 57 from the year 2028 onwards. However, in instances of ill health where you’ll be unlikely to work in the same capacity in the future, you may be able to access your pension earlier. It’s worth thinking about the tax implications and how long you might need the pension to last in this case, though and, for anyone who’s diagnosed with a terminal illness and has been diagnosed with less than one year to live and who’s under the age of 75, it can also be possible to take the full pension out as a tax-free lump sum as well. In some cases, it may be possible to access a pension before the minimum access age, but this is usually for instances of ill health.

Outside of either protection policies or our pensions, it’s also important to think about who you’re due to leave your existing assets to upon death. So, this could include your home, if applicable, which, for many people, will be their largest asset but also any personal possessions as well.

So, half of UK adults do not have a will, according to research by Canada Life and about one in three people over 55 don’t have a will in place either. So, those who don’t have a will set up may compromise how their assets and possessions are treated upon their death and this may not fall in line, necessarily, with their wishes.

So, ‘What happens if you pass away without a valid will?’ Essentially, the rules of intestacy would come into play.

If you pass away, what we call ‘Interstate’, only married or civil partners and some other close-blood relatives can inherit from the estate. The rules of intestacy do vary by whereabouts in the UK you reside, but, broadly, however, where your estate is valued over a certain value and you have both a qualifying partner and children, then the partner would normally inherit all of the personal property and belongings of the deceased, as well as the value of the estate up to a certain threshold too. The remaining estate would then normally be split between the partner and the children.

It’s also possible for grandchildren, parents, siblings, nieces and nephews to benefit under intestacy and that’s where there isn’t a qualifying partner or any children.

Importantly, though, any unmarried partners, relations by marriage, close friends, carers or charities cannot inherit automatically through those intestacy rules. In this sense, the rules of intestacy – they’re quite outdated for a lot of modern families and households.

It may be possible for those who don’t automatically qualify to apply to Court for provision from the estate, but this can often be quite a long and drawn-out process, so ‘Making sure your affairs are in order’ is really gonna be the priority there.

It is worth noting that, when you marry, typically, any existing will would become void at that point and, unless a further will is made, the rules of intestacy would, again, come into play from that point.

It is possible to make wills in contemplation of marriage, that means the existing will remains valid, although specific details of the person you’re marrying would need to be provided in that case. This may be a good option, for instance, if you’re engaged, and you don’t want an existing will to become void once you’ve tied the knot.

For some employers, they may, on occasion, provide access to discounted will writing services but, in any case, it could be worth checking whether a will could be a benefit in your particular situation.

For the final section of the presentation, we’ll just briefly touch upon how you can protect yourself and your savings, particularly from scammers, which is a growing concern, of course, in the digital age.

More than £1.2bn was lost to fraudsters in 2022 and that’s equivalent to £2,300 every minute.

So, anyone can be a victim of a scam but nice people are 10% more likely to be a victim of fraud and this became apparent in a study performed recently by HSBC.

‘What do we mean by ‘Nice?’’ Well, this could mean you’re friendly, kind, cooperative and willing to please, which are all amazing qualities, but qualities that fraudsters also love, especially on the phone.

Scammers may sound like authority figures and, often, it’ll sound so urgent and the findings show that nice people, in these cases, are maybe more likely to oblige.

Looking at some of the common scams, then. A popular scam going around at the moment is someone calling from an unknown number – which is an automated voice, saying that they’re from HMRC, that ‘Legal action will be taken against you’ with the option, then, to press a number on the dial pad to speak with an officer or, in this case, a fraudster.

Another common scam is to receive a text message or email from someone claiming they are from your bank stating that there has been suspicious activity, asking you to click on a link to view it. Clicking on the link sometimes means that they can get your details that way, so worth being very vigilant about clicking on any particular links.

A more recent scam that’s been prevalent is scammers using WhatsApp to send messages to people, claiming to be their child, maybe in a distressing situation and in the need of immediate cash. Although that won’t work on everyone, as not everyone has children, of course, the scam is designed to seem plausible to those who fit the profile and maybe have children who may be travelling or in certain situations like that.

Often, parcel delivery scams include someone pretending to be from your courier saying that they were sorry to have missed you, and to click on a link to organise a re-delivery slot. Unfortunately, the timing of these texts can coincide when we are actually expecting a parcel to be delivered and so we can be more likely to believe it in those cases.

With the cost of living crisis, energy prices being so high, scammers have identified that is a very sensitive area for many people and, therefore, are offering to sell people energy with a cap, maybe much lower than the price that they’re currently paying for their energy. So stay vigilant and make sure that, when we’re looking at anything energy price-related that we’re looking at it at a reputable source.

To help protect yourself from fraudsters, there are lots of things we can do. Firstly, we should be ignoring contact out of the blue. We should be alert, sceptical, and questioning, even if the person on the other end of the phone sounds like an important figure, or the matter sounds really pressing.

So, don’t click on links you don’t recognise as well. Often, if you hover over links on a website, you can see a preview of where you’re being taken – and, if it seems strange or suspicious, it’s best not to touch it. If it’s asking, for instance, to log into an account, make sure that you access the log-in area through a trusted method.

Do use the Financial Conduct Authority’s list to become familiar with common scams. You can also check which firms are regulated by the FCA through the register on the website as well as viewing a warning list as well, so firms to look out for, or potential scammers.

There are some other resources available to help you become more vigilant when it comes to scams. So the FCA ‘ScamSmart’ website can help you spot a scam, highlights and also what else to look out for. You can select the type of contact that you’ve had, and it will tell you what to consider, and could indicate if a perceived opportunity is a scam. It also has an interesting quiz to see if you could spot a pension scam as well.

‘Action Fraud’ is the UK’s national reporting centre for fraud and cybercrime, their website and telephone number are here too and Citizen’s Advice offer a range of assistance from reporting scams, checking for scams and emotional support, if you’ve been affected by scams too. ‘Age UK’ also has lots more information on what to look out for as well as further support.

To help protect yourselves and others, when it comes to websites, emails, phone numbers, calls, or maybe text messages, the Government also has a reporting service. If you, for instance, receive emails which ask you to click on suspicious looking links or complete unsolicited actions, you can forward them to that email address report@phishing.gov.uk.

Finally, we at HL, we have our own security page which looks at various scam threats, how you can protect yourself including online and, if you do invest your money with us either now or in the future, the measures that we take as well as a company to help keep your money safe.

I did talk a bit about the emergency fund or rainy-day fund earlier. However, if you are interested in finding out more about rainy-day savings, this is actually what the next month’s webinar is going to focus on. So, you can book your place now by scanning the QR code on-screen here. If you haven’t tried this before, perhaps and you have a Smartphone, it can normally be done by opening your camera, just focusing on the image there, it will then take you to a Zoom page where you can sign up for next month’s webinar.

Don’t worry if you don’t have your phone to hand, your employer should be circulating the details closer to the time too.

Thank you very much for listening to this webinar. In just a second, I’ll be happy to take any questions anyone might have but, if you are heading off at this stage, though, if you could, please, just have a quick read through the important notes on-screen before you do head off.

Thank you very much.

Hi, and thank you for tuning into the fifth webinar of this 12 Webinar Financial Wellbeing Course.

A gentle reminder that the webinars will always take place live on the first Thursday of every month. You do need to register for each one individually, so there will be a QR code at the end of this for you to register for next month’s session.

I’ve posted a few of these now – but, for those of you who may just be joining us, I’m Clare – I’m a Financial Wellbeing Analyst at HL. I’ve spent the last 7 years or so speaking to both individuals and employers about the rollercoaster that is ‘Personal Finances’ – delivering financial education up and down the country.

In today’s session, we’re focusing on emergency funds – everything you need to know about them.

The pandemic – now, cost of living crisis has really shone a spotlight on the need to be able to withstand income shocks both in the short and long term.

Emergency funds are essential for short-term resilience and, hopefully, by the end of this session, it will be really clear why that is.

Before I do get started, just a bit of housekeeping. So, this video today will last for around 20 to 25 minutes. It is important to remember that anything discussed is purely information, and not to be taken as financial advice.

Given the time constraints, it won’t be fully exhaustive, but I do hope that what I talk through will enable you to go away and make decisions from a more informed position.

A quick run-through of today’s agenda. So, ‘Why is it important to have an emergency safety net?’ We’ll look at how much people tend to hold in comparison to how much people typically need – and then we’ll look at the sensible homes for it, and how you might be able to shrink that essential savings target, if needed.

Given that we’re about halfway through the course, I did think it would be useful to take another look back at the ‘5 to thrive’ framework. These are the 5 pillars that the course and all of the modules are based on – and its 5 pillars to achieving financial resilience.

We’ve already covered pillars 1 – ‘Control your debt’ – and pillar 2 – ‘Protect you and your family.’ So, we’re now looking at starting to build the savings element – and so today’s focus will be on ‘Saving a penny for a rainy day’ – pillar 3 – and, coming up in the next few months, we will be looking in depth at ‘Pension and Retirement Planning,’ before finally looking at ‘Investing.’

Investing plays a really pivotal role in growing our wealth, and we want to make investing more accessible – but, prior to investing, there are some building blocks that people need to secure for their financial resilience – and, actually, these 5 building blocks, we can split into 2 categories.

So, firstly, we’ve got ‘Protect you and your family,’ and ‘Save a penny for a rainy day.’ Those 2 are all about reducing risk. Now, that’s both everyday risk as well as the disastrous sort of risks that we’d all very much like to avoid – and then, the remaining 3 pillars – ‘Control your debt,’ ‘Plan for later life,’ and ‘Invest to make more of your money’ – are all about building a better financial future.

For the rest of today’s session, we will be focusing on pillar 3.

If you haven’t had chance to watch the live videos on pillars 1 and 2, then you can go back and have a look at the video hub where all of the webinars and the recordings are held.

So, let’s start with looking at some figures related to people who’ve had a surprise cost in the last 12 months. This data comes from a bi-annual survey that we run – specifically, it goes out to non-HL clients, and it’s weighted so that it is representative of the nation.

Some quite scary statistics – we found that 4 in 10 had an unexpected cost last year and, actually, that rises to 1 in 2 people if they’re aged between 18 and 34. One of the typical, unexpected expenses – it’s a pretty big range of things – everything from car trouble to house repairs – unexpected bills – and the most frequent costs came in at between 500 to £1,000 – but, actually, 24% of people have had an unexpected expense costing more than £3,000. So, there is a need for some people to have to find £3,000 or more – and that’s a pretty significant sum of money to have to find out of the blue.

For context, households have been in the trenches now for around 2-and-a-half years – first, the pandemic, now cost of living crisis – and, for some, that has meant drawing on savings – so emergency funds may have been depleted. For the less fortunate, worryingly, around 1 in 8 are now taking on debt to fund essentials. So, the likelihood of having a spare £3,000 is pretty slim – but having an emergency fund provides an alternative source of money when you’re hit with a curveball – and, importantly, will enable people to avoid debt.

Once you get into debt, the problem is obviously that you have to start paying the money back – and the interest payment as well – and that can mean that, as budgets are stretched as they are, finding that money – including the interest – can be pretty difficult – meaning people could spiral further into debt. It makes it much harder to make ends meet – so the idea is to build this cash buffer to protect yourself.

It's worth saying that this shouldn’t be your only savings pot – and, by that, I mean that this pot of emergency savings should be held separate to any other savings for things that you might be saving for in the next 5 years or so. So, for instance, if you’re saving for a new car – or a holiday – or perhaps a new kitchen – that all needs to be held in a separate pot. So, at the point in which you’re spending that money – on the new car or on the new kitchen – you don’t eat into your emergency fund savings. If you did that – and then got hit with an unexpected expense – you will have then eroded the pot.

So, how much do people actually hold?

Before we start, I think it’s useful to know that most people don’t hold enough money – and some households will be rebuilding their emergency savings pot if they’ve drawn on it in the last few years.

Our nationwide research shows that an average of 6 in 10 households have 3 months’ rainy-day money – so it’s at the lower end of the recommendation of 3 to 6 months. Of course, this varies hugely from income level – and a household or family make-up – so I’ve separated that data into 4 household types.

Now, there are more household types – of course – but it may be that you can relate to one of these make-ups. So, an average of 5 in 10 – or 1 in 2 single people living alone – will have sufficient cash for 3 months essential expenses. This drops to 2.5 of 10 households, where there’s a single parent and dependent children.

Unsurprisingly, children are expensive and can, therefore, negatively impact financial resilience. Greater short-term resilience among couples – ‘Why do we think that is?’ – well, the likely hypothesis is because there may be 2 salaries instead of 1 to support that household and build savings. We know that there is a price to being single – there is no-one to share the cost with – there’s just one bill-payer.

8 in 10 couples living alone have 3 months emergency cash stashed away – that drops to around 6.5 in 10 households for couples living with children – again, ‘cause of those higher costs.

A lot of us will be building savings throughout our lives, so don’t worry if you need to start from the beginning, if you’re starting from scratch. The first stepping stone is the consciousness – the need to build short-term savings, and then taking that first step.

So, the next question will likely be, ‘How much should you hold – what should you be working towards?’ and it’s generally suggested that individuals save between 3 to 6 months’ worth of essential expenses.

Now, I want to stress that this is the ‘Needs’ – not the ‘Wants’ – it’s the ‘Necessities’ – so it’s easier to achieve than you first may think. Your emergency fund is your safety net – and do remember that this figure won’t be static. You’ll need to review it from time to time to ensure that the amount you calculated still buys you 3 to 6 months’ worth of the essentials.

For example, if you’ve calculated this sum, pre-pandemic – then, given the rise we’ve seen in prices of food and the cost of energy – the likelihood is that sum that you saved – and calculated in 2019 – isn’t going to buy you as much in 2023.

Try and get into the habit of reviewing it in line with any life events, such as moving house – because, if you move house, the likelihood is that your rent or mortgage payments will differ – or, perhaps, if you add to your family, then there’s another mouth to feed.

We often get asked to put a monetary figure on it. Unfortunately, there’s no magic number when it comes to an emergency fund. I can’t give you an exact sum of how much you need to save – and that’s ‘cause the amount you hold as cash will vary, and it will depend on your own circumstances and the lifestyle that you lead.

The figure will likely differ for everyone who tunes into this video – or listen to the webinar – and that’s because we’ll all have different incomes – different overheads – so you’ll need to work through a bit of a process to understand what you need – but also because we’ll all place priority on different things.

So, one person – for instance – might have a child at private school. Continuing to fund their education, they’ll likely regard as essential expenditure – because taking the child out of school and putting them in another one would be really disruptive. For someone else – they might not have children, but being able to go to the gym on a regular basis might be essential for their general wellbeing. So, you can start to see how different those sums and calculations may be just on that one lifestyle difference.

To start calculating your emergency fund figure, you need to look at your household expenses. So, the first steps in this planning process is to work out the costs that are essential – those costs that you cannot back away from, and the things that you need to cover, no matter what.

For example, this is likely to be your rent – your mortgage – food, of course, is essential – utility bills – but something like the Internet might not be essential for everyone. If you need it to work from home – like me – to host webinars – to have a good bandwidth – then it’s likely to make the essential list – but, for someone who has a job away from a computer – who, perhaps, is not based at a desk and doesn’t require the Internet – then it might be categorised as ‘Non-essential.’

There’s no right or wrong – so where you fall on this bracket of 3 to 6 months depends on a whole variety of things. It’s a rule of thumb because it gives you enough money – that, if you get a few unexpected expenses in a row, you should be able to cover those – but, also, if you were to lose your income, then it should provide enough of a buffer while you get back on your feet – it will buy you a bit of time.

Using our nationwide research, we’ve dug into what some could look like for people in terms of what that emergency fund could be.

Now, some of these figures that people need to save – or look to save as a target – may be really off-putting. They may seem really big – and perhaps unobtainable with rising prices. Remember, these are the goal figures – they’re the end target – and it’s unlikely that anyone will have a perfect emergency fund – most people will be working towards one.

Here, you can see we’ve split it into some family make-up examples – to give you a broad outline of what people like you might need across 3 months and 6 months – and we’ve broken it down into ‘Essential’ and ‘Total spend.’

For example, a single adult with children – their essential spend for 3 months is £4,284 – but total spend – so, including the non-essentials – in an ideal world – it’s about £5,643 for 3 months.

To me, what’s immediately clear from these figures is that, for a single-person household, the essentials make up a higher proportion of their total monthly expenditure than for households where there is a couple. This is likely to be because of the two income streams in comparison to one.

There is a price – or some would say ‘Penalty’ – to being single – and that’s because there’s nobody to share the utility bills – Council Tax – food costs – these are all essentials.

If you do have a partner, it’s worth thinking about how much you need to save together – where it makes sense for you to sit on that 3 to 6 months’ spectrum. Please do remember, these are just examples, but they can give you a bit of a ballpark figure to consider saving towards.

Remember, your emergency fund will be very individual to you – and, if you’re starting out, starting small is better than not starting at all on it – so small, consistent habits can have a really big impact, especially over time.

When you are deciding where you might sit on that 3 to 6 months’ spectrum, there are lots of different things that can feed into that. It’s worth considering the sorts of things that could affect you.

So, first consideration is probably the most obvious one – job security. For instance, ‘Does one of your family members work for themselves – are they self-employed – or does one of them have a job that’s perhaps less secure because they – for instance – might have a temporary role covering someone’s maternity leave?’ If so, then they may feel comfortable having more than 3 months’ expenses in the pot.

Likewise, if you have family members who need looking after – and you’re responsible for them, financially – perhaps children – or perhaps, at the other end of the scale, you’re caring for elderly parents – which may mean you need to take time away from work – then, again, it might be a rationale for having a bit more money in the pot.

Your health is also a factor – so, if you know you have health issues which mean that you might have lumpy income – then it’s worth putting a bit more aside.

Life-stage – this is similar to the family considerations – so, thinking about, ‘Where are you right now, and what is essential for you – and for those who are relying upon you?’

Other support – so this is one of those things where – perhaps people that are younger – they have lots of competing pressures on their incomes. They might be paying off student debts – or experience rent for the first time – whilst also trying to save for a property – and this can make saving much harder because, at the same time, they’re also likely to have a lower income – but it could be that there are other forms of support available – for example, parents who could help, if push came to shove. So, they might not want to save 3 months’ essential expenses – including rent – because it might be that moving home is an option that’s still available to them.

Now, we’re going to explore where you may wish to keep your emergency fund. So, your emergency fund should, ideally, be held as cash, and within easy access – so immediately accessible without penalty. Make sure you’re getting the best interest rate possible on your hard-earned money.

So, when comparing saving accounts, there are a couple of terms that you’ll often see – gross interest and AER. So, AER stands for ‘Annual Equivalent Rate.’

Now, the gross interest is the flat rate of interest that you’ll receive. It’s called ‘Gross’ because it’s prior to any taxes being deducted.

AER – or ‘Annual Equivalent Rate’ – is the official rate for savings accounts, and it’s designed to make comparison easier for consumers. It shows what the interest rate – or expected profit rate – would be if it was paid and then compounded once a year.

The really important thing here – to remember – is to always compare like with like – so, if you’re looking at an account with interest displayed as ‘AER,’ compare it with one that’s also using an AER figure – and compare gross with gross.

Ideally, your emergency savings would be held as cash in an easy-access account, so you can access it immediately and without penalty, if it’s needed.

It’s recommended that you hold it under your own name. This is so that you can access it – or, if you’re building one with a partner, it’s worth talking around whether you use a joint account with both names, or whether you split that between individual accounts – so you’ve got some held in one name, and some held in the other partner’s name – and the rationale for doing this is so that you can both access it in times of emergency, if needed.

Overwhelmingly, people tend to keep this money in the high street – with the same bank account that they have their current account with – but this is unlikely to provide the best interest rate for your money.

High-street current accounts may, typically, offer somewhere between 0 to 2% interest, whereas some easy-access savings accounts are offering a little over 5%. Do shop around for the best interest rate. If you get a higher interest rate, it’ll help your money grow – and chances are your emergency fund requirements will grow year-on-year – so getting a higher interest will help do some of the hard work for you in growing that pot.

Newer online banks may feel a little less familiar, but they are still subject to the same rules as the high-street banks that we’re familiar with – they still have to have the same protections in place. You’ll still get the protection from the Financial Services Compensation Scheme – so, provided you don’t have more than £85,000 with any institution, you’d be protected if something were to go wrong.

At HL, we do more than just investments – we do have a cash saving service – Active Savings – so you get access to a range of banks and lenders through one account. So, you upload your money into an interim account – and then, at a click of a button, you can mix and match those products to ensure that you are getting the best rate for your money. There’s no paperwork – it’s simple – it’s hassle-free. I looked last week, and the best easy-access rate was a little over 5%.

This chart just further demonstrates the impact of different interest rates on cash savings.

So, here, we’re talking about the essential expenditure targets we looked at a little earlier on – we’ve taken one adult and then we’ve taken the couple with children.

So, the original sum of money is in ‘Dark blue,’ and then we’re comparing it to 1% interest – that’s in ‘Green’ – and 5% interest is in ‘Blue.’

For the couple with 2 children – who’ve saved 3 months essential expenses, totalling around £6,800 – 1% interest over a 5-year period would enable them to achieve £346 growth.

If they had got that money into an easy-access savings account giving them 5% interest, then it would have grown £1,878. It’s a huge difference – the difference is around £1,500. So, it really does pay to shop around and get the best interest rate that you can – and the longer the timescale that that money is tucked away for, the greater the impact of that compounding interest – which is where you’ll start to earn returns on that past interest.

So, now we’ve looked at ‘What is an emergency fund?’ – ‘How much people might hold’ – ‘How much you might need to hold,’ and ‘How you could go about calculating that.’ Now, we’re gonna look at how you might be able to shrink that savings target further.

Life has got more expensive – our income is being stretched – and, if you looked at those broad figures earlier and thought, ‘Crikey, £3,000 – or perhaps even £15,000 – that’s a lot’ – then go back to your savings target and think about how you can shrink it.

Be ruthless about your needs – so ‘What could you cut down on in an emergency?’ So, an example – using myself – might be that, in an ideal world, I would have a car – but it is actually possible for me to walk to work – or, worst case scenario, I could use public transport. So, it’s those sort of lifestyle changes that you need to consider.

Shop around for absolutely everything – use comparison sites and do your research. So, ‘Could you trade down on food items – could you get cheaper Broadband or a cheaper media package – or could you go without home Broadband, and use the 4G on your mobile phone?’ These are the sorts of questions to ask.

When it comes to your mobile phone, could you perhaps save money by swapping from ‘Pay monthly’ to ‘SIM-only?’ Do check the small print and make sure that you’re not trying to get out of a contract early, which could cause a fee.

Unfortunately, all these sorts of things do require a bit of life admin – but it’s these small tweaks together that are gonna have that big impact.

Consider alternative sources of cash – so, if you need money to fall back on, could you perhaps borrow off friends or family? – which means you wouldn’t need to build quite such a large savings target.

We looked at budgeting a little earlier on in the year, but a budget – or ‘Smart Spending Plan,’ as we’ve renamed it – will identify how you can tighten your belt. Writing everything down in black and white really does help you identify those areas where you can cut back.

It’s a virtuous cycle – budgeting avoids excess spending by highlighting areas of waste – which, in turn, encourages good spending habits to not live outside one’s means – thus avoiding short-term debt – and this, in turn, lowers your monthly outgoings because it creates a margin to live within – again, revealing those areas where spending could be reduced – and, by controlling your spending, you’re increasing your capacity to save and aligning your priorities. This helps you achieve your goals sooner – which, in this case, is building an emergency pot of cash for when life throws you a curveball.

Now, that QR code on-screen – that’s gonna direct you directly through to our household planners – it’s a budgeting tool. Now, this tool is an interactive calculator, which enables you to plug in your outgoings and your incomings, and it will break it down into different categories, helping you plan with your essential spend. Bear in mind that it works with the figures that you enter – it will help with the math, but it will only look at a snapshot in time. So, do get into the habit of revisiting this if your income or outgoings change.

So, that draws this session to a close – thank you for taking the time out of your day to listen to this. There are just a few notes on-screen from our Compliance Department.

Please take a couple of minutes to read through the important investment notes. They reiterate that everything discussed was informational and not to be construed as financial advice.

Thank you again for listening and enjoy the rest of your day.