This podcast isn’t personal advice. If you’re not sure what’s right for you, seek advice. Tax rules can change and benefits depend on personal circumstances.
They discuss how market volatility following global trade tensions tested pension investors’ nerves, why taking a long-term investing approach matters, and what those closer to retirement can do to manage risk.
Use the player icons above to listen on your favourite podcast app, or read the full transcript below.
This podcast isn’t personal advice. If you’re unsure what’s right for you, seek financial advice. Pension and tax rules can change, and benefits depend on personal circumstances. Investments can fall as well as rise in value, so you could get back less than you invest.
Full podcast episode transcript
[0:10] Sarah Coles: Hello and welcome to the Switch Your Money On podcast from Hargreaves Lansdown. My name’s Sarah Coles – the Head of Personal Finance.
[0:15] Helen Morrissey: And I’m Helen Morrissey – Head of Retirement Analysis.
[0:18] Sarah Coles: And I dunno about you, Helen, but I cannot believe it’s already December. So, it’s easy to keep looking ahead – we like to power on and keep focusing on the future – but it actually can be quite valuable to take stock of what the year has brought and what we can learn from it.
So, this week, we’ll be drawing out some of the ‘Themes’ of 2025 – and we’re going to do what we can to not mention The Budget!
[0:37] Helen Morrissey: Absolutely.
[0:39] Sarah Coles: So, Helen, what’s your first big theme for pensions and pensioners?
[0:43] Helen Morrissey: So, it’s been a really busy year for pensions – and I have been quite spoilt for choice in trying to narrow it down. I guess, when I think of all the things that I’ve been asked most about, I do think I need to pick up on the investment market turbulence that we had earlier on in the year, in the wake of Trump’s tariff announcements... I think I do need to mention that. And I know that we’ve had several periods of market volatility in recent years. But I did get a lot of queries about the potential impact that this could have on people’s pensions, and whether they needed to do anything about it.
[1:15] Sarah Coles: Yeah – I mean, I think it is really very hard to keep calm when you see markets going down – and, of course, when people have got... you know, the pension’s pretty lumpy part of their assets, so it can be hard to take that longer-term view and not focus on that short-time [s.l. income 1:28], isn’t it?
[1:29] Helen Morrissey: Absolutely. I mean, it can be really hard to hold your nerve in that kind of situation, as you don’t know what the long-term impact of these things can be.
It’s just really important to try and remember – as you’ve just said – pensions are a long-term game, and you do need to take that long-term approach when it comes to them. Try and avoid kneejerk reactions that you might come to regret – and, by that, I mean things like switching your investment, or stopping contributing to your pension altogether. These are all actions that can mean that it takes longer for your pension to recover when things do get better.
[2:05] Sarah Coles: I suppose it’s easier to take that long-term view when you’ve got a long term – but I suppose things were that little bit more crunched for people who were quite close to retirement.
[2:13] Helen Morrissey: Yeah – absolutely. So, what I would say to that is that, if you are in what’s known as a ‘Lifestyling product’ – and close to retirement – what you’ll find is that you are being transferred out of equities... you might not have been affected by that market turbulence as you thought you would be.
If possible – if you have seen a drop in your fund and you’re worried about it – you could maybe look at delaying retirement until things settle down – and, if you are in income drawdown, then you might actually consider maybe taking less income for a while.
It’s one reason why it’s a good idea for people in retirement to hold between one and three years’ worth of essential spending in cash savings. This can actually provide an income during market downturns, so you don’t need to sell out of investments during these difficult times.
Those in the market for guaranteed income have also got good value from annuities, with incomes hovering close to all-time highs this year. But if you do find that you are concerned about the impact of market turbulence, it might make sense to talk things through with a financial advisor to give yourself a bit of peace of mind.
[3:19] Sarah Coles: Yes – it’s one of those things... when you’re thinking about your personal finance, you tend to things that are close to you – but, actually, big things like the market – they also have an impact on you.
And, actually, I wanted to go ‘Big picture’ with my first thought for 2025 as well, because, really, the bigger picture of inflation and interest rates do affect your personal finances.
So, inflation’s actually been trending up for much of this year. So, it started at 3% in January – it fluctuated slightly in the spring, and then it hit 3.8% in September. So, there is an idea that this might be the peak. So, it fell to 3.6% in October, but it’s worth bearing in mind that it’s not just that individual figure that counts – it’s the cumulative effect that matters over time.
So, obviously, we had that big, long period of really super-high inflation, and now we’ve got sort of moderate inflation – but it’s all still really adding up, and so life is getting more expensive.
Obviously, on the plus side, we have seen interest rates gradually fall away – but, up ‘til the final quarter, we saw one cut per quarter – and that has really eased the pressure on anyone who’s borrowing.
Interestingly, the fact there’s been so much competition in the savings market means that the best rates have actually held up quite well – but, on the other side – with mortgages... again, lots of competition, and the rates trending down – we’ve seen mortgage rates fall as well. So, anyone who was in the market for remortgage must be quite worried about it – actually, things have started to look more positive throughout the year.
[4:36] Helen Morrissey: So, that’s a little bit of rare bit of good news there, then!
[4:38] Sarah Coles: Yes! [Laughs] It’s very unlike me to be sharing good news at the moment!
[4:41] Helen Morrissey: [Laughs]
[4:41] Sarah Coles: But I think you have a positive for your second pick as well?
[4:43] Helen Morrissey: I do, actually – yes. So, I will have to go with the announcement of the Pension Commission.
Now, this is the second part of a real long-running pension review – and it’s gonna be looking at the whole theme of pensions adequacy – so it’s whether you’ve got enough to live a decent life in retirement.
Now, it’s not due to report back for a while, but I do still think it’s a hugely important step for pensions. It’s an opportunity to look at what’s been achieved by auto-enrolment so far – and to then put the next steps in place to make sure that people are gonna get good retirement outcomes from all of their hard-earned savings.
Now, we’ve still got a long way to go in regards to pensions adequacy – so the recent data from HL Savings and Resilience Barometer, for instance, showed that only 43% of households are on track for an adequate retirement income – so there’s still a lot for us to go after there.
[5:39] Sarah Coles: And, I suppose, when you talk about automatic enrolment – and there are those automatic enrolment minimums... part of the issue, in terms of adequacy, is whether those minimums are enough for everybody to build the retirement they need.
[5:50] Helen Morrissey: Absolutely! So, as you say, the auto-enrolment minimums... they’re currently set at 8%. Now, there could be many people who that – on top of the State Pension – will give them a pretty good income that they can live on well in retirement – ‘cause they’re kind of used to living on that level of income.
However, if you are a higher earner, you don’t want to be lulled into a false sense of security, potentially – that that 8% is enough – and you don’t want to get to very close to retirement and find that you have been under-saving – and that you can’t replicate the lifestyle that you’ve been used to while you were working in retirement. So, it’s getting people to think about what their retirement should look like, so they can start thinking about how much it might cost.
[6:32] Sarah Coles: I have a feeling that, for you, that will be a theme for next year as well – and, in fact, every year! Just making sure...
[6:37] Helen Morrissey: Every year!
[6:38] Sarah Coles: ...it’s gonna be enough!
So, as part of that review, there was also an idea to look into State Pension age as well.
[6:43] Helen Morrissey: Absolutely – yes, they did.
So, again, I really hope this sets the direction for pensions for the long term. So, we need certainty in the pension system – you know, as I say, it’s a long-term game – you need a level of certainty in there, so people can plan ahead with confidence.
So, this goes from knowing when they can expect to receive their State Pension – as, really, that does form the very bedrock of people’s retirement planning – you know, right through to knowing that they are saving enough in their workplace pension to give them that income in retirement they’re gonna be able to live on.
What I’m also hoping, though, is that the overarching pensions review is going to free pension savers from the whole seasonal speculation around pensions that comes with The Budget.
You know, if we use the most recent Budget as an example... we saw some really damaging rumours – you know, around tax-free cash, for instance – that led to people to try and take it as soon as they could.
Now, the change didn’t happen, but this will have left some people with money that they hadn’t intended to take – that they’re now wondering what to do with. And this kind of speculation – and the impact it can have – is something that we’d like to avoid. I think setting a long-term direction for pensions can, hopefully, help us to do that.
[7:55] Sarah Coles: Well, I think we did really well getting this far without mentioning The Budget – but I know we don’t wanna bang on about it, but it was such a big part of what happened this year to broader personal finances that it is worth mentioning, very briefly.
So, I think one of the impacts of it is that tax really dominated conversations like never before in the run up to the Budget – and it wasn’t just conversations about one or two taxes – it was literally every form of tax was in the debate.
But, obviously, one of the really big ones – that has actually come to fruition – is talk around Income Tax – and one of the things that’s happened is that freeze that’s in place now to tax threshold is now in place until 2031.
So, as part of looking into the cost of all of this, the Office for Budget Responsibility says the personal allowance would have been £17,470 by 2031 – so that’s around £5,000 higher than it’s going to be – and the higher-rate threshold would actually be £70,370 – so that’s around £20,000 higher than the threshold – and it just means that people will have had pay rises... they might just have kept pace with inflation in these pay rises – but, as a result, some people have gone into a higher tax bracket – and that doesn’t just mean paying higher Income Tax – of course, it has an impact on lots of other taxes as well.
So, there’s a reason why everyone’s been talking about Income Tax – and, of course, talking about how to avoid paying more than their fair share – which is one of the reasons why a lot of people have been looking into tax-efficient saving and investment – things like, you know, ISAs and pensions. They’ve been real hot topics of conversation – ...
[9:21] Helen Morrissey: Yeah.
[9:21] Sarah Coles: ...and, of course, we’ve seen a lot of people go into them.
[9:23] Helen Morrissey: Absolutely.
[9:24] Sarah Coles: So, I think your last pick – thought I hate to say it – was also a bit Budget-y too!
[9:28] Helen Morrissey: It was, really. Yeah – no – we couldn’t get away from The Budget – you are right.
So, I mentioned the amount of rumour-mongering that went on in the run up to The Budget. But, you know, every so often, there can be a bit of space for a bit of a surprise – and this did come about with an announcement regarding the taxation of the State Pension.
So, what’s come out of The Budget is that people who are solely reliant on the State Pension will not have to pay tax on it for the remainder of this parliament. So, this addresses concerns that the State Pension has been rising in line with the triple lock... it was getting ever, ever-closer to that personal allowance, and it was due to breach that threshold for paying basic rate tax in 2027-2028.
Now, the Government is looking at the best way to remove the admin burden from pensioners in this position. So, it might also be the case that some of the tax bills received – once the State Pension had breached that personal allowance – would be quite small in the coming years, and it could, potentially, cost more to collect than they’re actually worth – so that might have been one factor behind the Government deciding to do down this route. And so, the Government has given this what they’re saying is a ‘Temporary tax reprieve’ while they work out some of the options on how to collect this tax efficiently.
[10:46] Sarah Coles: So, I can’t imagine, for a second, that that’s put the debate around all of this to bed. So, do you think it might be that this is a temporary reprieve... becomes permanent – or do we just really not know at this stage?
[10:58] Helen Morrissey: Personally, I can’t see them waiving the tax on a permanent basis – I don’t think so. You’ve got to think about, ‘Would this be fair on all of those pensioners who already pay tax because they’ve saved into a workplace or personal pension?’
You also have to think that, if the State Pension does continue to rise in line with the triple lock, we could start to see potential tax take around that rising quite quickly. So, I think the Government will want to collect it at some point.
[11:30] Sarah Coles: I think... you know, if I was to speak to the people who collecting their pensions that I know... I think they’d all be quite happy to help the Government out by just not paying the tax on it. That would work for them, ...
[11:39] Helen Morrissey: Absolutely.
[11:39] Sarah Coles: ...but not sure that would make any of the sums add up.
[11:41] Helen Morrissey: [Laughs]
[11:41] Sarah Coles: One of the things that we’ve talked about – in relation to The Budget ad nauseam, really – is the fact that the speculation – some of it – did have some quite damaging effects. But not all of it was negative, because there were also plenty of people who actually starting to think about tax properly for the first time – and making some sensible [s.l. ‘Mary Repps moves.’ 11:58]
So, Budget rumours actually sparked a record tax year so far for the number of people paying into HL SIPPs, Stocks and Shares ISAs, Cash ISAs, Junior ISAs, and Lifetime ISAs. So, there’s a lot of people thinking about all the best ways that they can save tax.
It’s also been a record for the number of people paying into a combination of both Cash and Stocks and Shares ISAs with HL – so that’s actually up 91% from the same time, a year early. And one of the great things about ISAs, at the moment, is that you can actually choose... you can divide your money between the two and pick the option that’s right for you. So, it’s great to see people embracing this as an option for themselves. And also, the number of people maxing out their HL ISAs – so that includes both Cash and Stocks and Shares.
[12:39] Helen Morrissey: And, if I can just get in my little pensions...
[12:41] Sarah Coles: [Laughs]
[12:41] Helen Morrissey: ...data point in there too, Sarah... The number of people making contributions to their HL SIPP between 6th April and 31st October this year was up 7% on what was already a blockbusting year, last year.
[12:55] Sarah Coles: Yes – I mean, it was pensions’ big, big area this year – but also, obviously, Cash ISAs...
[12:59] Helen Morrissey: Yeah.
[13:00] Sarah Coles: ...because everyone was talking about Cash ISAs – and the future of Cash ISAs. So, the fact that the number of people paying into an HL Cash ISA has more than doubled in a year, it’s gonna owe something to the launch of a new HL Cash ISA last year – which allow people to save in a number of products with several providers, all within that one overall wrapper. But it’s also a sign of the value that HL clients place in tax-free savings options – and their enthusiasm to take advantage of the rules as they stand. So, we are likely to see enthusiasm for Cash ISAs really keep going, up until the point that that allowances cut in...
[13:30] Helen Morrissey: Yeah.
[13:31] Sarah Coles: ...2027.
But I don’t want you to think that stocks and shares and investing is a poor relation to Cash ISAs ‘cause it’s absolutely not the case... not for HL Stocks and Shares ISAs.
So, not only are there 14% more people paying into them than the same period a year early, but it’s actually 4% ahead of the previous record-breaker of 2022 – and that was the peak of the pandemic boom, when everyone was desperately excited about investment.
So, Stocks and Shares ISAs have really been the stealth success story of 2025.
Finally – before we wrap up – I did want to throw in a quick mention of the housing market – because it was actually a really pretty difficult year for property.
So, the stamp duty holiday came to an end in March – and the rest of the year has been really quite sluggish.
So, prices in October were up just 2.4% in a year – so, of course, that’s actually behind inflation. And it’s not just important for people who are buying and selling houses – it also makes a really big difference to sentiment.
If house prices are going up, people tend to feel a bit richer – and they tend to make decisions around investing and spending – and, when those house prices aren’t rising, then they start to feel a little bit more concerned about that sort of thing. So, it’s gonna be really interesting to see if next year’s gonna be more of the same, or whether we’re gonna get some house price movement that will help boost confidence and growth. So, the jury is really out on that one.
So, there’s a lot to look back on – there’s lots that’s changed. We will, of course... Next time we speak, Helen, we’ll be talking about the future – we’ll be talking about next year – but, before we move on, it’s time for the stat of the week.
And only one more – I promise you... one more mention of the dreaded ‘Budget-word.’ For fun, I went through the speech to see what the big themes were.
So, which d’you think got mentioned most?
Was it pensions – was it growth – or was it tax?
[15:08] Helen Morrissey: Oh, that’s a tricky one. I mean, obviously, with me – and my specialist subject area – I’d love to say ‘Pensions,’ but I don’t think it was.
It’s a tricky one between ‘Growth’ or ‘Tax.’ I’m gonna say ‘Growth.’
[15:20] Sarah Coles: Sadly, it wasn’t ‘Growth’ – ...
[15:21] Helen Morrissey: Ah!
[15:22] Sarah Coles: ...it was ‘Tax.’ In fact, there were 70 mentions of tax – so we weren’t just rambling on about it before The Budget – and after The Budget – but during The Budget as well! So, finally, we can put that to bed and never speak of it again!
[15:32] Helen Morrissey: [Laughs] And, just before we go, we just wanted to say nothing in this podcast is personal advice – you should seek advice if you’re not sure what’s right for you.
[15:43] Sarah Coles: Tax rules can change and benefits depend on circumstances. Pension money can’t normally be accessed until 55, which is rising to 57 from 2028.
[15:50] Helen Morrissey: All investments fall as well as rise in value, so you could get back less than you invest.
[15:55] Sarah Coles: So, all that’s left is for us to thank our Producer, Elizabeth Hotson.
[15:58] Helen Morrissey: And thank you very much for listening – we’ll be back again soon. Goodbye!
[16:02] Sarah Coles: Goodbye!