Understand Your Options: Savings, Pensions and Investments Explained

As the Autumn Budget approaches, many of us might be thinking about how we can make our money work harder in future. Building financial confidence starts with understanding your options - savings, pensions and investments each play a role, but they do very different jobs.

At first glance, the variety of products and terms can feel overwhelming. Below we take a brief look at how each of them works and how they might fit into your wider financial picture.

1. Savings – your financial safety net

Sometimes referred to as rainy-day funds, savings give you stability and peace of mind. They’re the funds you can turn to when life brings an unexpected expense like your car breaking down, or when you’re working towards something in the near future, like a holiday or a house deposit.

Recent findings from the Financial Conduct Authority highlight that a healthy emergency fund can make longer-term decisions feel less pressured.¹

Here, the aim predominantly is to keep your money safe and easy to reach as and when you need it, rather than focusing on high returns or long-term investment.

Key points to remember:

• Savings accounts, including Cash ISAs, offer a secure place for your money. Fixed-term options can provide a better rate, but you’ll need to be comfortable locking funds away for a set period. Compare these with easy-access accounts.
• Always read the terms and conditions carefully, including any early withdrawal or redemption clauses, to make sure your savings remain accessible when you need them.
• Interest rates change, so check whether your money is keeping pace with inflation.

Think of your savings as your foundation. Without that base, it’s difficult to build confidence in longer-term plans like pensions and investments.

2. Pensions – planning for your future

Pensions are designed for the clear purpose of providing income in later life. They come with valuable tax advantages and, if you’re employed, an employer contribution too (unless you choose to opt-out). That’s effectively free money for your future self!

There are three main types of pension to consider:

• Workplace Pensions

Thanks to the government’s automatic enrolment rules, most employees are now enrolled in a workplace pension. You and your employer both contribute, and you receive tax relief on your payments.

The Pensions and Lifetime Savings Association (PLSA) notes that for many people this is the simplest and most effective way to start saving for retirement.² You can currently access your pension from age 55, rising to 57 in 2028. The earlier you start saving into a pension, the greater the benefit of long-term compound growth.

As a young person just starting out on your career, you may feel you cannot afford to save hundreds of pounds into a pension each month, but even £10 or £20 per month will make a difference over your working lifetime.

• Personal Pension

A personal pension plan can be a good option if you are not eligible for a workplace pension if, for example, you’re self-employed, a contractor, or between jobs.

You can choose where your money is invested, which can appeal to people who are self-employed, have multiple pension pots, or want a more hands-on approach.

The Financial Conduct Authority (FCA) reminds savers that more choice also brings more responsibility. Investments can rise and fall, and you might get back less than you put in.

• Lifetime ISAs (LISAs)

Although technically a savings product, a Lifetime ISA can play a part in long-term planning. You can currently open one between the ages of 18 to 39, contribute up to £4,000 each tax year, and receive a 25 per cent government bonus.

You can use it to buy your first home or access it from age 60, yet whilst a LISA can complement a pension, it shouldn’t replace one. It’s also important to note that the contribution limits are lower, and early withdrawals may attract penalties.

3. Investments – helping your money grow

Investing is about putting your money to work for the longer term and aiming for growth that, ideally, beats inflation. You can invest through a pension, a stocks and shares ISA or directly through investment accounts.

However, it’s important to note and accept that values can go down as well as up. In other words, understanding that risk and reward go hand in hand.

A few guiding principles:

• Think long term: time helps smooth out market ups and downs. At Stringer Mann, we refer to this as ‘time in’ rather than ‘timing’.
• Diversify: spreading your investment strategy can help to reduce risk.
• Watch costs: charges can eat into returns over time. If you are using the services of a financial planner, understand what you are paying for and what might be liable for add-ons, such as meetings.
• Review regularly: as your goals and circumstances change, so should your approach. Again a financial planner will work with you on this and organise regular reviews with you.

A good financial planner will take the time to understand your attitude to risk and recommend suitable options. The right mix of products will depend on you, your goals and your circumstances and not a ‘one-size-fits-all’ approach.

Building financial confidence

Financial confidence isn’t about knowing everything. It’s about understanding enough to make sound choices and knowing where to find reliable guidance.

In turn, financial planning is as much about peace of mind as it is about numbers. Knowing that your savings are secure, your pension is on track, and your investments are aligned with your goals can make decision-making far less stressful.

At Stringer Mann, we believe confidence grows from clarity. When you understand your options, the choices you make today can build a stronger, more secure tomorrow.

If you would like to find out more and book a no-obligation meeting, please get in touch.

The value of an investment with St. James's Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.

The favourable tax treatment given to the ISA may not be maintained in the future, as this is subject to changes in legislation.

Please note that St. James's Place does not offer easy-access savings accounts or cash ISAs.

Please note that SJP do not offer a Lifetime ISA.

Although the content of the article was correct at the time of writing, the accuracy of the information should not be relied upon, as it may have been subject to subsequent tax, legislative or event changes.

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 ¹ Financial Lives 2024: Key findings from the FCA’s Financial Lives May 2024 Survey