The Financial Services Compensation Scheme (FSCS) has revealed the outcome of their research into how the cost of living crisis is affecting pension savings.

The FSCS conducted continuous consumer research between September 2022 and February 2023, polling a total of 4,479 UK adults aged over 18 - 2,974 of them with a pension. Because claims involving pensions and investment advice are, according to the FSCS, now the most common ones they receive and often the most complex and costly to resolve - they focused their research on the impact that the current economic conditions are having on consumers’ behaviour towards their pensions.

The findings showed that as a result of the cost of living crisis, 26% say they are taking more risks with their money to gain a better return - in those aged under 35 this increases to 45% and to 36% in wealthier households. Additionally, under-35s are significantly more likely to be relying on their savings (60%) than the average for all adults which is 46%.

Nearly a fifth (18%) of those with a pension have stopped contributions altogether in the past few months, and a further 5% have cut their contributions. The FSCS point out that “Although this could provide a temporary relief and help households cover day-to-day costs, a prolonged reduction in pension contributions can derail retirement plans. In addition to missing out on investment growth derived from compound interest, people who stop contributing to a workplace pension also lose contributions from their employer and tax relief.”

Conversely, 64% of those with a pension have kept their contributions unchanged over the past few months and 13% have increased the percentage they contribute - with 87% of those likely to keep the contributions the same in the next six months.

The FSCS believes this means that these consumers are likely to think they have already absorbed the impact of the cost of living crisis when it comes to their pension contributions.

The key take-aways from the research are that consumers are taking action in how they manage their finances in response to higher prices and a squeeze in their real incomes. This includes taking more risks with their money in order to gain a better return and adjusting contributions and making other decisions about their pensions, with some of those eligible opting to access their pots.

The FSCS issues a reminder that the risk of consumer harm can be very high when it comes to pensions and investments because of the amounts at stake and also because of the complexity of the products and the lack of knowledge among consumers and any disruption to pension savings could have consequences for their retirement income plans.

Analysis by leading specialist employment law firm GQ Littler, of NHS data for the year ending September 2022, showed an 11% increase in the number of fit notes issued by medical professionals.

Healthcare professionals issue fit notes - also known as medical statements or a doctor’s note - to employees once they have been off work for seven consecutive days. Prior to this they can self-certify their absence from the workplace.

A fit note gives a medical assessment as to a person’s fitness to work - or not - and advises whether a person is “not fit for work” or “may be fit for work taking into account the following advice”. If the latter option is given, the healthcare professional may suggest some of the following options for the patient and their employer to consider for helping them return to work:

• Returning to work gradually, for example starting part time
• Temporarily working different hours
• Performing different duties
• Having other support

Until recently, fit notes could only be issued by GPs but in July 2022, legislation was changed to also allow nurses, occupational therapists, pharmacists and physiotherapists to certify fit notes - this was designed to alleviate pressure on GPs.

The research by GQ Littler showed that the issuance of fit notes hit a record high of 10.4 million in 2021/2022 and they have put this down to a number of reasons:

• During the pandemic fit notes became difficult to obtain and employers were therefore more lenient in their requirement for them
• The economic climate and repercussions of the pandemic has led to more mental health related absences
• There has been an increase in illnesses as restrictions eased and people mixed more
• Employers required employees to attend the workplace again once COVID restrictions ended

Sophie Vanhegan - Partner at GQ Littler said:

“Employers are now back to following their policies of requiring fit notes for longer periods of absence.”

“The cost-of-living crisis and challenging economic climate is also having an effect on the mental health of employees, which could lead to an even further rise in the number of fit notes issued for mental health related absences.”

She therefore suggested:

“It’s essential that companies take a proactive approach to supporting employee health and mental wellbeing at work to try to minimise employee sickness absence. Offering workplace support and encouraging open dialogue about health issues can help to flag issues early on, before they develop into long-term absence issues.”

The Protection from Redundancy (Pregnancy and Family Leave) Bill passed successfully through the House of Commons on 3^rd February 2023.

The Protection from Redundancy (Pregnancy and Family Leave) Bill was introduced as a private Members Bill in June 2022 by Labour MP Dan Jarvis. Currently, under Regulation 10 of the Maternity and Paternity Leave Regulations 1999, employers only have an obligation to offer employees on maternity leave, shared parental leave or adoption leave a suitable alternative vacancy (appropriate and on terms not substantially worse than the previous job), if their role is at risk of redundancy.

However, if the Bill is eventually passed and becomes law, it would give the Secretary of State the power to extend the Regulation 10 protections so that it applies to pregnant women, as well as new parents returning to work from a relevant form of leave.

The redundancy protection period would apply from the point the employee disclosed the fact that they are pregnant and would extend until six months after a new mother has returned to work. Therefore if an employee takes the full 52-week maternity leave, they will continue to be protected against redundancy for a further 26 weeks following their return to work, when the child reaches 18 months old.

The Bill would also give the Secretary of State the power to make regulations to expand equivalent protections for those on adoption leave or shared parental leave to extend after those periods of leave have concluded.

Dan Jarvis MP for Barnsley Central said:

“At the heart of this Bill are tens of thousands of women pushed out of the workforce each year simply for being pregnant. I’m proud this new legislation will go some way to providing pregnant women and new mums greater protections in the workplace. I want to thank all those who’ve supported the Bill and I look forward to working with them to ensure it passes into law.”

The introduction of the Bill comes in response to a government consultation which estimated that up to 54,000 women a year felt they had to leave their jobs due to pregnancy or maternity discrimination.

Business Minister Dean Russell said:

“Being an expectant or new parent is already a hugely exciting yet anxious time without the added pressure of worrying whether your job is on the line.

By extending the UK’s world class workplace protections, today’s reforms will help to remove workplace discrimination and provide improved job security for employees at such an important and precious time in their lives.”

Chancellor Jeremy Hunt’s recent budget has pledged to expand the free provision of childcare hours, which the government hopes will reduce the financial burden on parents and help women back into work.

He stated:

“For many women, a career break becomes a career end. Our female participation rate is higher than average for OECD economies, but we trail top performers like Denmark and the Netherlands. If we matched Dutch levels of participation, there would be more than one million additional women working.”

Mr Hunt’s provisions will expand current childcare measures to provide 30 hours of funded childcare from the time when maternity or paternity care ends at nine months, until a child starts school. It will be introduced gradually to ensure there is enough supply.

Presently, families with children aged one and two do not receive support after parental leave ends and before the free 15 hours a week of free childcare is offered for three and four-year-olds (or 30 hours if both parents are in work and earn at least the national minimum wage or living wage. However, neither parent can earn more than £100,000 a year to use the scheme.)

Provision for two-year-olds is currently limited to 15 free hours a week for parents who claim certain benefits.

Under the new rules, from April 2024 parents of two-year-olds will qualify for 15 hours a week of free care. From September 2024 children from nine months will get 15 hours free childcare and from September 2025, all households with children under 5 will get 30 hours of free childcare a week. In all of these cases the households must be eligible i.e. both adults must work at least 16 hours a week.

In his Budget speech, Mr Hunt said:

“I don’t want any parent with a child under five to be prevented from working if they want to, because it’s damaging to our economy and [it’s] unfair, mainly to women,”

Whilst the provisions have mainly been welcomed, some have pointed out the measures do not help anyone struggling with childcare fees right now. Additionally, the schemes only cover the 38 weeks of term time - so although parents can use it across the year, it means fewer free hours a week, as 30 hours then becomes 22 hours.

Others however, argue that this could have a major impact on narrowing the gender pay and pension gap.  Becky O’Connor - Director of Public Affairs at Pensionbee - pointed out:

"Previously, there was a significant gap of two to two and a half years between when a parent would have to go back to work after parental leave and when help with childcare costs would kick in.

“Staying in work for those two years could boost the eventual private pension pot of a parent on an average salary by around £12,000 (£205,000 rather than £193,000). With the impact of better salary progression factored in, this boost could be even greater.”

A new survey by YouGov, commissioned by the Advisory, Conciliation and Arbitration Service (Acas) - polled 1,014 employees and found that 3 out of 5 (63%) workers in the UK feel stressed because of the rising cost of living and only 36% of employees do not feel stressed.

Susan Clews - Chief Executive of Acas, said:

"The cost of living pressures are having a huge impact on many people's lives at the moment and our poll reveals that a substantial proportion of workers are feeling stressed as a result.”

She continued:

"Employees should also look after their own mental health and have some coping strategies to help manage stress. Acas has advice that can help to avoid problems building up and lead to improved morale at work."

Acas’ advice for workers to support their own mental health and wellbeing includes:

• talk to people you work with or friends about how you're feeling
• speak to your manager about how you're doing and your situation
• reflect on what helps you feel more positive and what does not
• make time for activities you enjoy
• check with your employer on what support is available at work

To help staff with their mental health, Acas advises employers to do the following:

• be approachable, available and encourage team members to talk to you if they're having problems
• keep in regular contact with your team to check how they are coping
• respect confidentiality and be calm, patient, supportive and reassuring if a staff member wants to have a chat about their mental health
• clearly communicate the internal and external support available to staff
• look after your own mental health and get support if you feel under more pressure than usual – this support could be a colleague at work, a mental health network or a counsellor
• consider offering practical help such as signposting to financial advice or bringing advice providers into work

Susan Clews added:

"Employers that support their employees' mental health at work will be able to spot the signs, help manage them and create an environment where staff can openly talk about anything that is causing them stress. Offering practical tips such as signposting to financial advice can also help.”

Advice from the Health and Safety Executive (HSE) is that employers have a legal duty to protect employees from stress at work, by doing a risk assessment and acting on it.

Companies that have fewer than five workers do not have to have written policies, but those with five or more workers are required by law to write a risk assessment.

They advise that:

“Any paperwork you produce should help you communicate and manage the risks in your business. For most people this does not need to be a big exercise – just note the main points about the significant risks and what you decided.”

To help record any findings they offer a risk assessment template, and on their website there are example risk assessments on stress, that may help employers in small businesses.

Anthony Browne - MP for South Cambridgeshire and chair of the Treasury Select Committee - will put forward a Ten Minute Rule Bill for the second time on 17th March, which proposes giving employees the right to have their employer pay their pension contribution into a scheme of their own choosing, rather than one chosen by their employer.

The bill proposes making what Mr Browne calls a "small legislative change", which will give employees the right to direct their own pension contributions, plus those of their employer, to a provider of their choice - making sure however that the employer’s contributions stay the same value as the contributions it makes to its existing company scheme. In that way those employees who opt out are not penalised. Additionally, if you have multiple jobs, all your employers would pay into your same single pension.

The objective is a pot for life, sometimes known as the lifetime provider model, so that employees have a single pension pot that they can easily manage and know the extent of their savings.

Mr Browne described the proposal as a “small reform that could, over time, be revolutionary, because if an employee moves jobs, they can keep the same pension, and get the new employer to pay into it, rather than being forced to set up a new one”.

He added:

“My proposal would allow people to build up a pot-for-life, and they would choose the provider.”

In an article on Conversative Home, Mr Browne states that in 2020, the Pension Policy Institute (PPI) estimated that there were eight million deferred pension pots, holding tens of billions of pounds of savings. Whilst many of them are small -according to the Association of British Insurers 2.2 million deferred pots contain under £1000 - the PPI estimate there will be 27 million deferred pension pots by 2035. With so many pots, it becomes easier for people to lose track of them, indeed it is estimated there are now 1.6 million pensions that are lost.

Browne’s long-term aim is that it would be the norm for pension savers to have a single pot for life, making it easier for employees to keep track of their savings and to help ensure a comfortable retirement.

Browne also clarified that this proposal is intended as a "supplement to, rather than a replacement for, the different proposals that the government are currently considering".

This year, the Department for Work and Pensions’ (DWP) is launching the Pensions Dashboard, which will allow people to see what they have in their various pensions - including their State Pension - in a single place online, at any time they choose. However, according to Browne, this “doesn’t stop millions of pension pots proliferating in the first place.”

Thousands of workers with holes in their UK state pension pots have been given extra time to top up any missing national insurance years between 2006 and 2016.

The deadline, which was originally 5th April 2023, has been extended to 31st  July 2023, while the price of filling any gaps will be frozen at current costs during this period. The move comes as helplines run by the Department for Work and Pensions and HMRC have been overwhelmed, meaning that people cannot get through to access vital information.

In a written ministerial statement, Financial Secretary to the Treasury Victoria Atkins said:

“HMRC (HM Revenue and Customs) and DWP (the Department for Work and Pensions) have experienced a recent surge in customer contact.

“To ensure customers do not miss out, the Government intends to extend the April 5 deadline to pay voluntary NICs (national insurance contributions) to July 31 this year.

“This applies to years that would otherwise have been out of time to pay after April 5, up to and including the 2016/17 tax year. All voluntary NICs payments will be accepted at the existing 2022/23 rates until the July 31.”

The extension now means that many people with gaps in their national insurance contributions (NICs) between 2006 and 2016 and who would not therefore have been on track to get the full state pension, have more time to get the information they need  to decide whether to make any voluntary NICs HMRC. Qualifying years are usually gained through employment or by claiming certain benefits, however those that don’t have enough can pay to fill any missing years.

 Victoria Atkins added:

“We recognise how important state pensions are for retired individuals, which is why we are giving people more time to fill any gaps in their national insurance record to help bolster their entitlement.” 

After the deadline, anyone seeking to contribute will only be able to backfill gaps from the previous six tax years.  This is because "transitional arrangements" which were put in place when the new state pension system was introduced in 2016 will have ended.

According to a survey released last week by the campaign group Pregnant Then Screwed, 11% of parents say that childcare costs are the same or more than their take home pay.

Additionally, the report - which surveyed more than 24,000 parents -  found that amongst those who use professional childcare services such as nurseries and childminders, 22% said the costs are more than half of their household income.

This makes the UK’s childcare costs amongst the top three most expensive in the world, according to data from the Organisation for Economic Co-operation and Development (OECD) - mainly because the government invests relatively little in childcare compared to other developed countries.

The high cost of childcare means that 32% of parents disclosed that they have had to rely on some form of debt to cover the costs and 45% state that they have had to choose between paying for childcare or household essentials. For a huge 76% of mothers who use professional childcare services, it is no longer financially viable for them to continue working.

Joeli Brearley, founder and CEO of Pregnant Then Screwed, said:

“Parents are at the end of their tether. Many have now left the labour market, or work fewer hours, because our childcare system has been abandoned by this government.”

Although childcare costs affect both parents, it is usually mothers whose earnings stop rising so quickly or even fall. Around 1.7m women in the UK cannot work as many hours as they want due to childcare issues and frequently have periods of part-time employment which stops them from advancing their careers and earnings. 

Becca Lyon, Head of Child Poverty at Save the Children UK said:

“The evidence of our broken childcare system is there in plain sight – it is not working for parents, children, or providers. These statistics confirm what we are hearing from the parents we support – many of them would love to get back to work or increase their hours, but they simply can’t afford to.

We need a childcare guarantee – universally accessible, affordable childcare from the end of parental leave to the end of primary school. This would allow all children to benefit from quality childcare and early education and help parents get into work.”

According to new analysis published by the Trades Union Congress (TUC), 3.5 million people did unpaid overtime in 2022, putting in an average of 7.4 unpaid hours a week. The TUC is therefore urging companies to stop relying on staff doing extra hours for free and last week staged their 19th annual Work Your Proper Hours Day.

In 2022, UK employers claimed £26 billion of free labour because of workers doing unpaid overtime, while the government claimed £8.6 billion worth of unpaid overtime from public sector staff last year. One in seven public sector workers (14.8%) did unpaid overtime, compared to one in nine (11.7%) in the private sector.

By occupation, Chief Executives topped the list of those doing the most unpaid overtime - averaging 13.2 hours a week. Teaching staff were next, on 12.1 hours, with Finance Managers putting in 11.3 hours and Managers in production and health care working an extra 10 hours a week.

Despite this, unpaid overtime was lower than the previous year, in 2021.  The number of workers doing unpaid overtime was down from 3.8 million and how many hours of unpaid overtime worked, down from 7.6 hours in 2021.

By publicising Work Your Proper Hours Day, the TUC are encouraging employees to take proper lunch breaks, as well as finishing work on time. To support staff, management are asked to set reasonable workloads and also leave on time, thus setting an example.

TUC General Secretary Frances O'Grady said:

"Few of us mind putting in some extra time when it's needed, but if it happens all the time and gets taken for granted, that's a problem.

"So make a stand today, take your full lunch break and go home on time.

"The best bosses understand that a long-hours culture doesn't get good results.

"So we're asking managers to set an example by leaving on time too."

According to analysis published by the TUC, 23rd February 2023 was first day of this year that the average woman in paid employment effectively stopped working for free - because of the gender pay gap.

Based on analysis of the Annual Survey of Hours and Earnings (ASHE) data from the Office for National Statistics (ONS), women in the UK earned, on average, 14.9% less than men in 2022 - so whilst men are paid from January 1st, women will essentially work for free for the first 53 days - nearly eight weeks - of the year.

The gender pay gap is calculated using median hourly pay for all male and female employees. The median is the middle amount when all wages are listed from smallest to highest, as opposed to the mean, which is found by adding all wages together and dividing by the number of people. The ONS figure is based on hourly pay, rather than weekly or annual pay but this would give a bigger gap as on average women work fewer hours than men.

The figures also exclude overtime and bonuses - although there is evidence of larger gender pay gaps for bonuses than for regular pay - but does include part-time employees, however removing them narrows the gender pay gap to 8.3%.

The analysis shows that the widest gender pay gap is for women between the ages of 50 and 59, at 20.8% - who work the equivalent of 76 days for free, until 16th March 2023. Women aged 60 and over have a gender pay gap of 18.4% and work the equivalent of 67 days for free, until 8th March 2023. 

Once a woman has children, their earnings stop rising so quickly or even fall, as they are still much more likely than fathers to be primary carers for dependent children. They therefore frequently have periods of part-time employment which stops them from advancing their careers and earnings. This is in direct contrast to men who become fathers and even experience a wage ‘bonus’, earning 22% per cent more than similar men without children who are working full-time at age 42.

TUC General Secretary Paul Nowak stated:

“It’s clear that the gender pay gap widens dramatically once women become mums……And both parents need to be able to share responsibility for caring for their kids. Dads and partners need better rights to well-paid leave that they can take in their own right. Otherwise, mums will continue to take on the bulk of caring responsibilities - and continue to take the financial hit." 

The longest wait for Women’s Pay Day comes in finance and insurance where the gender pay gap stands at 31.2% - the equivalent of working free for 114 days, nearly a third of the year. In education, the gender pay gap is 22.2% - the equivalent of 81 days, or more than a fifth of the year.

Paul Nowak added:  

“Working women deserve equal pay. But at current rates of progress, it will take more than 20 years to close the gender pay gap. 

“That's just not good enough. We can’t consign yet another generation of women to pay inequality. 

“It’s clear that just publishing gender pay gaps isn’t working. Companies must be required to publish action plans to explain what steps they’ll take to close their pay gaps. And bosses who don’t comply with the law should be fined. 

“The pandemic highlighted that we can do more to help women balance their caring responsibilities and work. Flexible working is key to keeping mums in jobs and is our best way of closing the gender pay gap. 

“We should change the law so that all jobs are advertised with all the possible flexible options clearly stated. And all workers must have the legal right to work flexibly from their first day in a job.”