What is a safeguarded benefit?

A safeguarded benefit is a promise about your pension. It might be a guaranteed income for life, or a guaranteed rate for turning your savings into an income.

Most modern pensions are simply a pot of money with no promise attached. These are called defined contribution pensions, and they’re the kind Chip is built for. Safeguarded benefits are more common in older pensions, often set up in the 1980s and 1990s.

‍

The main types to look out for: 

• Defined benefit (or final salary) pensions. These pay you a set income for life, based on your salary and how long you worked there. The income is guaranteed, so it doesn’t rise and fall with the stock market.
• Guaranteed annuity rate (GAR). A promise that you can swap your pot for a guaranteed income at a set rate. Older rates are often far higher than the rates available today, so this can be very valuable.
• Guaranteed (or protected) pension age. The right to take your pension earlier than the normal age, which is currently 55 and rising to 57 in April 2028. Transferring could mean losing this.
• Guaranteed minimum pension (GMP). A minimum amount your scheme must pay you. You may have this if you were “contracted out” of part of the State Pension before April 1997.
• Other guarantees. Some pensions also include guaranteed growth or bonus rates, or let you take more than the usual 25% as tax-free cash.

‍

Why this matters

Guarantees like these are hard to find anywhere else, and you usually can’t replace them once they’re gone. Giving one up could leave you worse off in retirement. That’s why there are extra rules in place to protect you.

‍

Can Chip accept a pension with safeguarded benefits?

No. Chip’s pension is built for old defined contribution pensions, which are a simple pot of money. We can’t accept a transfer that includes safeguarded benefits or guarantees, regardless of value. If your pension has a guarantee, the safest thing is usually to leave it where it is.

‍

If you’re thinking about moving it

If you still want to move a pension that has guarantees you should consider whether to speak to a regulated financial adviser first. They can look at your situation and tell you whether it’s the right move for you.

In some cases the law requires this. If your safeguarded benefits are worth more than £30,000, you must take regulated advice before you can transfer, and the provider you’re leaving has to check that you’ve done so.

‍

Before you transfer, check for:

• a guaranteed income, or a guaranteed annuity rate
• the right to take your pension before age 55
• a guaranteed minimum pension, if you were contracted out
• exit fees or penalties for leaving
• valuable extras, such as life cover or extra tax-free cash

Your current provider can tell you. You can also check your most recent statement or your scheme booklet.

‍

Not sure what you have?

If you’re not sure what type of pension you have, or whether it comes with any guarantees, ask your current provider. They can tell you for free.

‍

Where to get free help

For free, impartial guidance, you can contact MoneyHelper, which is backed by the government.

To find a regulated financial adviser, you can use the directory on MoneyHelper, or check the Financial Conduct Authority register to know whether a firm or advisor is authorised by the FCA.

If you’re 50 or over, you can also book a free pension appointment with Pension Wise.

Many couples do not share a bank account. Some claim to be blissfully unaware of their partner’s penchant for purchasing campervans and coffee machines.

But, in all seriousness, do you actually know how much (or little) your partner has stashed in their pension?

In my experience, most couples don’t know the size of their personal “pensions gap”. Most of us have a ragtag collection of pensions from previous jobs and millions of people have lost track of one or more of these. But the higher earner is likely to have the lion’s share of the pension savings — especially so if the couple have children.

The person with the smallest pension is almost always a woman. It’s not always the case — I am an exception to this rule — but raising a family weighs more heavily on a woman’s lifetime earnings potential.

The associated “gender pensions gap” means that by the age of 55, the average manh as amassed a pot that’s nearly twice as big as the average woman’s.

You might think: “Well, if one of us has an OK-sized pension, we’ll muddle through.”

But there is a powerful case for the higher earner paying into what can be one of the family’s most neglected financial assets — the lower earner’s pension.

Yet, even if couples wanted to do so, there’s a big reason why they wouldn’t: tax relief. If the higher earner can enjoy higher- or additional-rate tax relief on their own pension contributions, why fund contributions for a lower earner, who may only get basic-rate relief? As millions more workers are dragged into higher-rate tax bands, this issue will intensify.

It’s an even worse deal for non-earners. The higher earner can pay a paltry £2,880 per year into their pension (topped up to £3,600 with tax relief). Introduced in 2001, this threshold has scandalously never increased with inflation. If it had, it would be around double this level by now.

Sir Steve Webb, the former pensions minister and partner at pension consultancy LCP, has a bold request for the new chancellor: let’s change pensions policy to make it more attractive for couples to even out their pension saving by making higher-rate tax relief transferable.

“We don’t need yet another report on the gender pension gap, we need some action to close it,” he says.

Changing tax relief rules to incentivise higher earners to divert pension savings into their partner’s name is one of the only meaningful ways to close it. Crucially, this would benefit couples that stay together, and those who split up.

“It is far better for women to have decent pensions in their own right while part of a couple than to hope that pension sharing after a relationship breaks down will do the job,” he says.

Webb is urging the government’s Pensions Commission to consider the dramatic rise in the number of single pensioners. The number of divorced over-65-year-olds has trebled in the space of two decades (see chart). Technically, pensions should be part of divorce settlements, yet only 13 percent of divorcing couples consider pensions in financial settlements, according to L&G.

In fact, solicitors tell me the new “no-fault” divorce rules discourage couples from pursuing the admin hassle of a pension-sharing order in their desire to achieve a quick uncontested split.

But that’s assuming you’re married. The number of cohabiting adults has nearly doubled to 5.4mn over the past two decades. Nowadays, nearly 15 per cent of all couples who cohabit are over 50, up from just 2.6 per cent.

Solicitors tell me that when relationships break down, older women in this position are flabbergasted to learn they’re entitled to nothing from their partner’s pension or future earnings (the myth of the “common-law partner” has a lot to answer for). The government recently launched a consultation into this problem, but that won’t yield quick results. Webb notes that pensioner poverty is rising fastest among the divorced and those who have never married, and women are the worst affected.

Changing tax relief to incentivise couples to build up pensions more equally while they are together would help to address this, but why would any chancellor agree?

“The question to ask is, what would happen otherwise?” Webb argues.

If one half of the couple benefits from the tax relief that the other half would have received anyway, there’s no additional cost to the taxpayer. And if the lower earner ends up with a much better pension, they’ll be less likely to claim means-tested benefits in future should the couple split up.

But even if you are married and stay together, another emerging risk is that your future pension could die with your partner.

The person whose name is on the pension is solely responsible for deciding how this money will be invested or accessed. Presently, record numbers of retirees are trading their defined contribution pension pots for annuities, but two-thirds of those sold are single-life policies. Buying a joint-life policy would leave a widowed partner with an income after the policyholder dies, but many shun this as it reduces the amount of income paid out every year.

All of the UK’s big workplace pension schemes are currently designing “default” retirement journeys for members who do not make an active choice when accessing their pots. Many industry watchers fear that if single-life annuities become the default, the potential damage to women’s pension prospects in later life will be even more acute — something that must not be allowed to happen.

We may wait in vain for policymakers to address any of these risks. So, here are three basic things couples could do this weekend to boost their joint pension prospects.

First, check your state pension forecast — if the lower earner has missing years of national insurance contributions, it could be worth paying to top these up and boost their state pension in retirement.

Second, if they work, they should email HR to ask if their employer will match any extra workplace pension contributions (this is worth doing even if they only get basic-rate tax relief).

And third, make sure you’re each other’s “nominated beneficiary” on all of your pensions. This takes less than a minute to sort on most workplace pension apps, but considerably longer if one of you dies without doing so.

Pensions might not sound like the most romantic of topics, but there’s a lot to be said for caring about a more secure retirement for your partner.

What is behavioural investing?

Behavioural investing looks at how emotions and psychological biases impact the decisions we make as investors.

Instead of always being rational, we’re often influenced by fear, greed, overconfidence, or herd mentality – all of which can lead to poor investment choices.

Even experienced investors fall into these traps. The key is recognising your own behavioural patterns and learning how to work with your psychology, not against it.

‍

Why does psychology matter in investing?

Investing is emotional. Seeing your portfolio rise feels great. Watching it fall? Not so much. But reacting impulsively to short-term market movements can quickly derail your long-term strategy.

When markets dip, panic selling can lock in any losses. When markets surge, FOMO can push people to chase risky trends, and the instant market coverage we can access is driving these trends.

Understanding how your brain responds in these moments can help you stay calm and make more rational decisions.

‍

The most common behavioural investing mistakes 

Here are some of the biggest traps to look out for:

• Panic selling – Selling your investments when markets fall, locking in losses and potentially missing out on the recovery.
  
• Overtrading – Constantly buying and selling, thinking you can ‘time the market’. This often racks up fees and most of the time underperforms long-term strategies.
  
• Confirmation bias – Only seeking information that supports what you already believe, and ignoring anything that challenges your view.
  
• FOMO (Fear of Missing Out) – Jumping on hype trends or following the crowd into hot stocks without doing your own research.
  
• Recency bias – Placing too much importance on recent events and assuming they’ll continue, like believing a falling market will never bounce back.

‍

How to avoid behavioral investing mistakes

If you want to avoid these common mistakes, make sure you:

• Have a plan – Create an investment strategy that aligns with your goals, time horizon and risk tolerance, and stick to it – especially during periods of market noise.
  
• Automate your investing – Using regular contributions and pound-cost averaging takes emotion out of the equation and helps you invest consistently.
  
• Zoom out – Always take a long-term view. Markets fluctuate in the short-term, but historically, they trend upward over time.
  
• Stay informed (not obsessed) – Stay educated, but avoid doom-scrolling financial news. Not every market dip needs a reaction.
  
• Review, don’t react – Instead of making snap decisions, schedule regular check-ins on your portfolio to assess and rebalance if needed.

‍

Understanding investment fees & costs

When you invest through a platform, there are often platform fees charged to cover running costs. This is often a very small fee — with Chip, it’s 0.25% of your portfolio value (or 0% with a ChipX subscription*). 

In addition to your platform fee, there will also be an ongoing management charge from the fund provider, if you choose to invest in investment funds. 

The costs of these can vary, and generally, passive index funds are lower cost, and actively managed funds are a little more expensive, as someone is actively adjusting the funds investments. 

We will go into investment fees and costs in more detail in the following guide. 

*A monthly or annual ChipX membership fee is required and fund management charges apply.

The 2025/26 tax year ends at midnight on 5 April 2026 and your annual ISA allowance will reset for a new tax year.

If you have any ISA allowance remaining (you can check this in your app) and want to make a deposit within the 2025/26 tax year, here’s the deadlines you need to know.

‍

Deposit before:

• 23:00 on Tuesday 31 March 2026 — Stocks & Shares ISA

• 23:00 on Thursday 2 April 2026 — Smart Cash ISA  

Deposits that successfully make it into your Chip ISAs before these deadlines will count towards your 2025/2026 ISA allowance.

Any further deposits into your Cash ISA beyond these deadlines, may still successfully land in your balance, but we can’t guarantee it. Successful deposits made before 23:59 on Sunday 5 April will count towards your 2025/2026 ISA allowance.

But please note that there can be unexpected delays, often caused by banks limiting deposits out and circumstances outside of our control. Your deposit is only valid when it reaches our banking partner—see more below.  

‍

Next year will be the last year you can use your full allowance in cash

In the 2025 Autumn budget the government announced that 2026/27 will be the last year where you put your full £20,000 annual ISA allowance into cash.

From April 2027 onwards you will only be able to put £12,000 of your total £20,000 annual allowance into cash (unless you’re over 65).

So, bear in mind if you do like to put your full allowance into cash, you’ve only got one more year to fill it up.

‍

Best ways to deposit

Our most popular option for transferring into your ISA is through connected bank transfer. Simply follow the instructions in the app to connect to your provider.

You can also make a manual bank transfer into your Cash ISA, which is best used for making deposits over £5,000.

In most cases, for both of these methods, your money arrives in seconds, but it can take up to two hours.

‍

Looking to transfer from another ISA?

You can easily transfer an ISA from another provider into Chip’s Cash or Stocks & Shares ISA.

Transfers don’t affect your annual £20,000 ISA allowance, as your allowance applies to new money only, so you don’t need to factor this in regard to the end of the tax year. You’re free to initiate a transfer anytime you like.

Make sure you check our list of approved Cash ISA providers we accept transfers from.

Unfortunately, we are unable to accept transfers from providers not on this list at the moment, but we are adding more all the time.

‍

Having trouble depositing?

If this is your first ISA deposit, we’ve found our members have the most success making a first deposit of less than £1,000.

Keep in mind that your bank may limit daily transactions on transferring money from your current account to your ISA.

These limits can vary drastically between providers, so check with your bank if you’re looking to move larger amounts.

You may have also set your personal limits on daily transfers, so adjust these accordingly if you haven’t already.

There may also be additional security checks on larger transactions, so factor this in and try and plan ahead.

‍

“I’m lost, what’s an ISA?”

ISAs are tax-efficient savings and investment accounts that offer tax-efficient exemptions on interest and returns earned within the account.

However, you are limited to depositing £20,000 within a given tax year (which runs April to April). This is your ‘annual ISA allowance’ and it is available on a use it or lose it basis.

You can learn more about ISAs in our quick guide here.

‍

It’s simple with Chip

Navigating ISAs is easy with Chip. You can have a Cash ISA, Stocks & Shares ISA or both; all accessible in one easy-to-use app.

Our flexible Smart Cash ISA allows you to make unlimited withdrawals and deposits without affecting your £20,000 allowance. Providing penalty-free access to your funds, whenever you need them, with all the tax advantages.

Our Stocks & Shares ISA allows you to effortlessly set up recurring deposits, which are then invested directly into the funds you've selected. This ensures your money is consistently working for you in your chosen investments to build wealth tax-free.

What is Aggressive Investing?

Aggressive investing is a strategy focused on maximising returns by taking on higher levels of risk. It typically involves investing in growth-oriented assets such as:

• Equities, especially small-cap or emerging market stocks
• Sector-specific funds (e.g., technology, biotech)
• High-yield bonds or other speculative fixed income
• Venture capital or early-stage companies (for more advanced investors)

The goal is capital appreciation, even if it means weathering greater volatility in the short term. This strategy is often favoured by investors with a long time horizon and a higher tolerance for market fluctuations.

Characteristics of Aggressive Investing:

• High potential for long-term growth
• Greater short-term volatility
• Less focus on income or capital preservation

‍

Pros & Cons of Aggressive Investing

Pros of aggressive investing include:

• Higher potential returns over the long term
• Capitalises on economic growth and innovation
• Suited to long-term investors who can ride out volatility

Cons of aggressive investing include:

• Greater risk of short-term losses
• Emotional discipline required during downturns
• May underperform in stagnant or declining markets

‍

What is Defensive Investing?

Defensive investing seeks to protect capital and reduce risk, especially during market downturns. Defensive strategies often prioritise stability and income over growth. Common defensive assets include:

• Blue-chip or dividend-paying shares
• Government and investment-grade bonds
• Cash or near-cash equivalents

This approach is typically chosen by those nearing retirement, or those who are more risk-averse, and prefer predictable returns.

Characteristics of Defensive Investing:

• Lower potential returns, but reduced risk
• Focus on capital preservation and income
• More resilient during economic slowdowns

‍

Pros & Cons of Defensive Investing

Pros of defensive investing include:

• Lower volatility and steadier returns
• Capital is more protected in downturns
• Often generates consistent income (e.g., dividends, bond yields)

Cons of defensive investing include:

• Lower potential for long-term growth
• May underperform in bullish or high-growth markets
• Overly conservative positioning may not keep pace with inflation

‍

When Might Each Style Be Appropriate?

Your investment style should reflect your risk tolerance, financial goals, and investment time horizon. Here's when each style might be appropriate:

Aggressive investing might suit you if:

• You have a long investment horizon (10+ years)
• You’re comfortable with market ups and downs
• You’re focused on long-term capital growth rather than short-term stability

Defensive investing might suit you if:

• You’re closer to retirement or need access to funds in the short term
• You value stability and lower risk over high returns
• You’re more focused on preserving wealth or generating income

‍

Combining strategies: a balanced approach

Many investors don’t choose just one style, they blend aggressive and defensive investments to match their personal investment risk profile. This is known as a diversified or balanced portfolio.

For example:

• Investors with a long horizon might lean 80% aggressive / 20% defensive.
• Those approaching retirement may prefer 30% aggressive / 70% defensive.

Over time, investors often shift toward a more defensive posture as their financial needs change, this is called life-stage investing or glide path investing.

‍

Is aggressive or defensive investing right for me?

To decide which strategy suits you best, consider the following questions:

• How comfortable are you with investment losses in the short term?
• When will you need access to your invested money?
• Are your goals growth-oriented, income-focused, or a mix of both?

There’s no “one-size-fits-all” answer, many investors adjust their portfolios based on their life stage, financial goals, and evolving risk tolerance.

If in doubt, seeking independent financial advice can help tailor a strategy to your unique circumstances.

‍

Aggressive and defensive strategies summary

Understanding the difference between aggressive and defensive investing is a foundational step in building an investment plan aligned with your goals. Both strategies serve a purpose and can play a role in a well-rounded investment portfolio.

A bear market is a period when a major market index, such as the UK's FTSE 100 or the US's S&P 500, falls by 20% or more from its recent highs. This market environment is characterised by widespread pessimism. Investor confidence is low, leading many to sell stocks, which in turn pushes prices down further. This is the direct opposite of a bull market, where prices are rising and optimism is high.‍

‍

When are we in a bear market?

Bear markets can only be identified retrospectively, once a market index has fallen more than 20%. It is a backwards-looking label rather than a real-time indicator. 

However, certain economic signals often precede or accompany a bear market. These can include:

• Slowing economy: Key indicators like rising unemployment, a drop in corporate profits, and reduced consumer spending often signal an economic downturn that can lead to a bear market.
• Rising interest rates: Central banks, such as the Bank of England, raise interest rates to combat inflation. This can make borrowing more expensive, cooling the economy and sometimes triggering a market downturn.
• Geopolitical events: Major global events, such as wars or energy crises, create uncertainty and can cause investors to sell off assets in a flight to safety.

‍

How long do bear markets last?

There are different types of bear markets, and typically recovery times differ depending on the cause. Research from Goldman Sachs¹ identifies three distinct categories of bear market based on historical stock market data:

• Structural bear markets such as the Global Financial Crisis in 2007-2008 are triggered by a market imbalance and ‘bubbles’. By far the most severe type, average declines are around 60% and recovery time is around a decade. 
• Cyclical bear markets are tied to rising and falling economic cycles, and can be triggered by economic headwinds such as rising interest rates, impending recessions, and declining profits. Average declines are around 30%, which last an average of two years, and take about five years to fully recover. 
• Event-driven bear markets are triggered by single events such as wars, oil prices shocks, or a global crisis such as the Covid pandemic. Recovery periods are shorter, typically lasting around eight months, with full recovery in around a year. 

‍

What does bearish mean?

If you are a bear in the market, you are a stock market pessimist, and believe that prices are going to experience a downward trajectory. This is the direct opposite of being bullish, which is a belief that prices are heading upwards. 

A bear in the stock market might react differently depending on strategy and risk appetite. Some adopt a very high-risk strategy called short-selling, essentially betting on the falling price of a stock or market index, by borrowing shares from a lender, selling them on the open market, then selling them back to the lender at the (hopefully) lower price and profiting from the difference. 

Other bears might take a more defensive position, moving to ‘safe-haven’ assets such as cash and bonds, in an attempt to preserve or even grow capital during a market downturn.

‍

How to approach a bear market?

There is no one-size-fits-all approach to a bear market event, but for investors with a long-term horizon, the same key principles apply.

1. Avoid panic selling: keeping calm in the event of a market downturn is crucially important if prices have already fallen, and selling will simply ‘lock in’ any losses you’re seeing in your portfolio. You risk missing the recovery period, and could derail your long-term goals. 
2. Review your goals: if your financial goals are still years away, you likely have sufficient time to wait out the downturn. Familiarising yourself with the upward trends of the stock market over time can help put things in perspective.
3. Stay diversified: spreading your investments across different asset classes and regions, can help cushion the impact of a bear market, particularly in event-driven circumstances that can be specific to an industry or market region. 
4. Regular investments: continuing to invest a fixed amount, whatever the price, can help smooth out the ups and downs of the market. In a bear market, these investments are taking advantage of lower prices and potentially increasing returns when the market recovers. 

While bear markets can be unsettling, they’re a natural feature of the economic cycle, and can even present opportunities if navigated properly. Historically, bear markets in global markets have eventually been followed by a new bull market and a period of economic recovery, so staying the course if your financial goals allow it can be the best route for investors. 

‍

Why investment fees matter

Investment fees can have a significant impact on your portfolio over time. Where you invest, how you invest, how frequently you invest – these can all impact the annual costs of your investments.

If your portfolio earns a 7% average annual return, and your fees add up to 1%, your real returns are only 6%. 

‍

How investment fees affect your returns

It’s easy to shrug off small percentages, as they may not feel like much. This can really add up over a long-term investment horizon, and consider that compounding works in the opposite direction too.

Lets say you invested £100,000 over a 30 year period, with a 7% average return (before fees):

• 0.25% fees – £761,000
• 1.5% fees – £574,000

By saving on fees, you’d end up with an extra £187,000!

‍

Types of investment fees explained

If you’re using an investment platform such as Chip, the fees you’ll need to be aware of are platform fees, and fund management fees. 

If you’re using a financial advisor, there will be a fee associated with this. 

In some cases, there are direct fees associated with buying and selling assets. This is more common with trading stocks, mutual funds, and foreign investments; and are typically charged per transaction.

‍

Platform or account fees

Platform fees, sometimes called account fees, are charged by your platform operator to cover certain operating costs.

These fees are usually expressed as a percentage of your portfolio value e.g. with Chip, it’s 0.25% on our free investing plan, or 0% with ChipX*. Some providers charge a flat monthly or annual fee e.g. £4.99 per month. 

Historically, DIY investing was dominated by a few providers, who were able to charge higher maintenance fees.

The development of investment platforms, like Chip, give investors an easily accessible experience at much lower costs. 

*A monthly or annual ChipX membership fee is required and fund management charges apply.

‍

Management fees (OCF)

A management fee, or Ongoing Charge Figure (OCF), represents the annual cost of running a particular investment.

Typically these are applied to investments in ETFs and Mutual Funds. These fees are also expressed as a percentage of your portfolio e.g. 0.45%.

Management fees enable the professionals choosing and managing investments on your behalf, while also researching, trading, and monitoring your investments, to work towards getting you the strongest performance.

If you invest using a ready-made solution, sometimes the platform fee and management fee are layered into one, easy to understand fee. 

For example, if you invested in a ready-made fund with an OCF of 0.45%, using a platform that charged a 0.25% platform fee, you may see this expressed as one fee of 0.7%.

‍

Advisory fees

If you use a financial advisor, or advisory platform, there will be an associated fee, on top of your platform and management fees.

This may be expressed as a percentage of your portfolio, or as a flat fee annual, monthly or even hourly fee for services and consultations. 

Robo-advisors are a relatively new form of advice, and generally come at a lower cost to traditional financial advisors. These can be a separate service, or in some cases are built into platforms themselves. 

‍

Trading or transaction fees

Trading or transaction fees are charged when you buy or sell investments. These are more common with individual stocks, mutual funds, or when investing in assets outside of the UK. 

Some platforms offer commission-free trading, while others may charge a fixed fee per trade (e.g. £5–£10), especially for less frequently traded assets.

It’s worth checking whether your platform charges per transaction or offers commission-free investing.

Over time, frequent trading can rack up costs and eat into your returns, particularly if you're making small trades or investing regularly.

‍

Potentially hidden fees

Inactivity fees

Some platforms may charge a fee if your account is inactive for a certain period—meaning you haven't made a trade or deposit in a while.

While this is becoming less common with modern platforms, it’s worth checking the small print to avoid any surprises.

Foreign Exchange (FX) fees

If you’re investing in international assets (like US stocks or global ETFs), your pounds need to be converted into a foreign currency.

FX fees are usually charged as a percentage of the amount converted – often around 0.5% – 1.5%.

This can apply both when you buy and sell, so it’s important to factor these costs into your decision to invest internationally.

Exit or withdrawal fees

Some providers may charge you for withdrawing or transferring your money out of a platform – particularly when closing an account or moving investments to another provider.

These can be fixed fees (e.g. £25 per fund) or a percentage of your balance. 

Checking exit terms ahead of time can save you from unnecessary costs later on.

Bid-ask spreads

This is the difference between the price a buyer is willing to pay (the bid) and the price a seller wants to receive (the ask).

While this isn’t a “fee” in the traditional sense, it can represent a hidden cost – especially with less liquid investments like certain ETFs or niche funds. 

The wider the spread, the more you might lose when entering or exiting a position. 

‍

How to check the fees you’re paying

Most UK investment platforms (like Chip) provide:

• A "fees" or "charges" section on the product/fund page
  
  
• A key facts document (KID or KIID) – this is required for each investment fund or ETF
  
  
• Your account summary or statements – often shows what fees you've paid

‍

Understanding retirement and long term investing

Getting yourself on track to a healthy retirement will require some planning, and a long-term investment outlook. Saving simply isn’t enough once you factor in the effects of inflation on a cash sum. 

The next guide will take you through why long-term investing matters, your investment options for retirement, and some planning considerations to keep you on track. 

‍

We all know that saving is important, yet for many, actually doing it can feel like an uphill battle. Why is it so hard to set aside money, even when we know it’s in our best interest?

To get to the bottom of this oft-experienced conundrum, let’s explore the psychological reasons behind savings procrastination and look at evidence-backed ways to conquer it.

‍

Present bias: The now vs. later dilemma

At the root of savings procrastination lies a cognitive quirk known as present bias, which causes us to prioritise immediate rewards over long-term gains, even when the latter are objectively better.

This is why many of us would rather have £100 today than £120 in a year, despite the fact that waiting would yield more value. Present bias tricks our brain into opting for immediate spending, undermining our ability to save for future goals.

A classic illustration of present bias is the famous Stanford marshmallow test. Conducted in the 1970s by psychologist Walter Mischel, the experiment offered children a choice: eat one marshmallow now, or wait 15 minutes and receive two marshmallows instead.

The test revealed a lot about self-control and delayed gratification. Some children managed to wait for the second marshmallow, while others quickly gave in to the temptation.

Interestingly, follow-up studies found that the children who were able to wait for the second marshmallow tended to achieve better life outcomes, including higher academic achievement and greater financial success.

This experiment encapsulates how present bias works in real life. When faced with the choice of spending or saving, some of us act like the children who opted for immediate gratification, preferring money now, even though we know we could benefit more by saving for the future.

Understanding this bias can help us recognise why we struggle with saving and give us the insight we need to build better financial habits.

‍

Loss aversion

It is natural for us to experience what’s known as loss aversion, where the pain of losing money feels stronger than the pleasure of gaining it. When we save, it may feel like we’re sacrificing our current spending power, even though we’re setting ourselves up for future financial security.

‍

Choice overload

With so many savings options out there—ISAs, pensions, investments—it’s easy to become overwhelmed and opt, instead, for doing nothing at all. Choice overload can create decision paralysis, stopping us from taking any meaningful action toward saving.

‍

Optimism bias

Another common mental block is optimism bias. This is where we overestimate how well things are liable to go in the future.

We might assume that, as soon as we get that promised raise, it’ll be the perfect time to start saving, or to think that a future version of yourself will be better placed to handle difficult financial decisions, which can lead to continuous delays.

‍

Evidence-based strategies to combat saving apathy

Understanding the psychology behind why we put off saving is only half the battle. To make the most of your money, it’s key to apply practical strategies that will break through these barriers.

1. Embrace automation

One of the most effective ways to beat procrastination is to remove the element of choice altogether. Set up automatic transfers to move a portion of your income to a savings account on payday.

2. Visualise your future self

Research shows that vividly imagining your future self can help counteract present bias. By creating a mental connection with your future self, you’re more likely to make decisions that benefit you in the long run.

3. Start small

Large, long-term financial goals can feel overwhelming. To combat this, use the goal-gradient hypothesis, which shows that people are more motivated when they see progress toward their goal. Start with small, achievable savings targets to build momentum.

4. Use mental accounting

Take advantage of mental accounting, a tendency to mentally separate funds for specific purposes. By creating separate savings accounts or "pots" for different goals, you reduce the likelihood of dipping into your savings.

5. Make saving tangible

Using visual feedback can make the abstract concept of saving feel more real. Tracking your savings progress visually can provide immediate rewards and encourage consistent contributions.

7. Simplify your choices

If you’re overwhelmed by myriad savings options, streamline your choices to reduce cognitive overload. Start with just one or two savings accounts or products to get the ball rolling. You can diversify later as your savings grow.

‍

Building a path to financial wellness

The key to overcoming savings procrastination is to focus on progress, not perfection.

Each small step you take toward saving, no matter how small, is a win. Celebrate your achievements along the way and be patient with yourself as you form new habits.

By understanding the psychological forces behind procrastination and using these strategies, you’re not just building better savings habits, you’re changing your relationship with money.

This shift in mindset can make a world of difference in your financial future.

When it comes to saving money, it’s always important to choose an option that’s right for you. Understanding the different options available can help you choose the best account for your own savings goals.

‍

Easy Access Savings Accounts

‍These accounts are ideal for those who want to save money and earn interest on their savings, but also enjoy access to their money at any time. They allow customers to deposit and withdraw money at will, usually with no penalty. See our Chip Easy Access account.

Interest rates tend to be variable and can be changed at any time (usually with a notice period from the bank). They are a great option for getting interest on money you may want to spend immediately or may need to use because of an unforeseen expense.

‍

Cash ISA

‍An ISA (individual savings account), is a type of tax-free savings account that is available to UK residents. They allow customers to save money without having to pay tax on the interest earned. 

They can be a great way to save for the long term and make the most of your money should earnings from other savings accounts mean you max out your personal savings allowance.

Find out more about our Cash ISA

Chip does not provide tax advice. Tax treatment depends on individual circumstances and may be subject to change in the future.

‍

Regular Savings Accounts

‍A regular savings account is designed for customers who are looking to save a fixed amount of money on a regular basis. They tend to offer higher interest rates than other types of savings accounts in return for regular deposits. Calculate your savings goal.

They are a good option for those who want to save smaller amounts of money, but may not have a lump sum to deposit. However, there are usually restrictions on how much you can deposit and the number of withdrawals allowed, and customers may have to pay a penalty to access their funds. More savings accounts.

‍

Children’s Savings Accounts

‍These savings accounts are for children under the age of 18 and tend to offer higher interest rates than other types of savings accounts. 

They are a great way for parents to help their children save money and learn about personal finance or for parents to start putting money aside for their children's future. Many children’s savings accounts also come with educational resources to help kids learn about saving and managing money.

Not available with Chip

‍

Fixed Rate Savings Accounts

‍These accounts offer customers a fixed interest rate for a set period of time. This is usually between one to five years. This type of account is ideal for those who want to lock in a high-interest rate and can leave their money untouched for a set period.

Fixed-rate savings accounts are ideal for people who want to save for a specific goal, such as a down payment on a house or a vacation. However, customers may not be able to access their funds during this period without incurring a penalty.

Not available with Chip

‍

Remember When Choosing a Savings Account

When looking for the right savings account, it’s important to consider the interest rate, any fees or penalties and any restrictions on deposits and withdrawals. Additionally, comparing different types of savings accounts can help you find one that suits your needs. 

It’s important to consider your own savings goals when looking for the right account. Whether you’re looking for a high-interest account or a tax-free savings option, Chip offers a range of savings account for you.