Every week, we pull together the most relevant stories for your personal finances.

Summary

💼 Small differences in pension fees can add up to tens of thousands of pounds by retirement - what to check in your own pension

📈 The number of ISA millionaires has hit a record high - what it shows about long-term saving, even if you can't use the full allowance

🏠 The Government has announced a new first-time buyer scheme with a 2.5% deposit - what's known so far and what's still to be confirmed at the Budget

🗣️ This week we asked a financial expert: I can't afford to save anywhere near the full £20,000 ISA allowance - what should I consider when deciding whether an ISA is still worth using?

💼 A small difference in pension fees can add up to tens of thousands of pounds

Which? has looked at how pension charges affect the size of your pot over a lifetime. Fees come straight out of your pension, so they're easy to overlook. Their illustration assumes £250 a month paid in (including tax relief) from age 25 to 66, with investments growing 5.5% a year before charges. With a 0.5% annual charge, the pot would reach about £392,000 by 66. With a 1% charge it would be about £345,000, a gap of roughly £47,000, and with 1.5% it would be about £305,000.

🤔 What this means for you

These are illustrations, not forecasts. Workplace default funds have a charge cap of 0.75%, stakeholder pensions are capped at 1% or 1.5% depending on when they were set up, older schemes may charge more, and SIPP’s have no legal cap. As a rule of thumb, Which? says combined platform and fund charges of 0.45% or less are generally cost-effective, while anything above 0.6% is on the expensive side.

It's easy to overlook what you pay, but it isn't hard to find out. Your online pension account, annual statement or provider's website should show it, and the "Key Features" document sets out the charges. If you're over 50, your "wake-up" pack will have it too. It helps to look at your total annual charge, which is the platform charge plus the fund charge plus any adviser fee, and at any extras such as service fees (typically £20 to £120 a year). Older plans may also charge to transfer out, although exit fees have been banned for personal pensions set up since 31 March 2017.

A lower charge isn't automatically better, and it isn't the only thing to look at. Cheaper and more expensive funds can invest in very different ways, and some older schemes include valuable guarantees you'd lose by moving. Moving a pension also carries investment risk, so it's worth understanding what you would be giving up before you change anything.

‍Worth knowing:

The figures assume steady growth and regular payments for over 40 years, which few people achieve. The real difference for you depends on how much you pay in, how long you save and how your investments perform.

‍Not sure what you're paying in pension fees? A Bippit financial expert can help you find out what your pension charges are and talk through what to consider before changing anything.

📈 The number of ISA millionaires has hit a record high

Figures obtained through a Freedom of Information request to HMRC show that 7,730 people had ISAs worth £1 million or more in 2023-24, the latest year available. That's up from 5,070 the year before, a rise of more than 50%. ISAs let you shield up to £20,000 a year from tax, with no limit on the total you can build up over your lifetime.

🤔 What this means for you

Very few people can put away £20,000 a year, and you don't need to. The allowance is a ceiling for each tax year, not a target, and growth or interest on whatever you do pay in is free of UK tax. What these figures really show is the effect of a tax-free wrapper over a long time, rather than a pot that's within everyone's reach.

If you're deciding whether and how to use an ISA, there are a few things worth considering. One is how long you could leave the money untouched, since time gives investments longer to recover from falls. Another is the difference between the two types: cash ISAs don't fall in value but may not keep up with inflation over many years, while stocks and shares ISAs can rise and fall, and you could get back less than you put in. It's also worth thinking about how an ISA fits alongside your emergency savings and your workplace pension.

‍Worth knowing:

From April 2027, the annual cash ISA allowance will be cut to £12,000 for under-65s, with the Government hoping more savers will choose stocks and shares ISAs.

🏠 A new first-time buyer scheme with a 2.5% deposit is due to be confirmed at the Budget

On 26 September, the Government announced "Your First Home", a new equity loan scheme for first-time buyers in England. Full details are due to be confirmed at the Budget on 28 October. The scheme is for buyers of new-build homes from developers that have signed up to it.

🤔 What this means for you

The scheme is expected to support a 2.5% deposit, alongside a Government-backed equity loan of 20%, which comes with an initial interest-free period. That would leave a mortgage of around 77.5% of the purchase price. The Government says buyers could save "hundreds of pounds per month" compared with a 95% mortgage. A household income cap and local property price caps will apply, and developers will have to contribute to help cover the cost. The length of the interest-free period, the caps and the start date haven't been announced yet.

There's nothing to apply for yet, and the terms could change at the Budget. As an illustration only: on a £200,000 new-build, a 2.5% deposit would be £5,000, a 20% equity loan would be £40,000, and the mortgage would be around £155,000. That's well below the £190,000 a 95% mortgage would need on the same home, although the equity loan would still need to be paid back.

If you're saving for your first home, there are a few things worth considering as more detail comes out. One is what happens when the interest-free period ends, since the rate and length haven't been announced. Another is how the equity loan would be repaid. With equity loans in general, the amount you repay is usually linked to the value of the home rather than the amount you originally borrowed, but this scheme's terms haven't been published.

It's also worth checking whether the income and price caps would apply to you, whether there are new-build homes in your area from developers signed up to the scheme, and how the monthly cost compares with other routes such as Shared Ownership, First Homes or a standard low-deposit mortgage. You'd still need to pass a lender's affordability checks.

‍Not sure which route to your first home suits you? A Bippit financial expert can help you compare low-deposit options and think through what to consider as more details are confirmed.

Ask a financial expert

"I can't afford to save anywhere near the full £20,000 ISA allowance - what should I consider when deciding whether an ISA is still worth using?"

It's a good question to ask, and you're far from alone. Most people don't use the full allowance. The £20,000 is a limit for each tax year, not a target, and you can pay in as much or as little as you like. Whatever you do put in benefits in the same way, because growth or interest inside an ISA is free of UK tax.

The record number of ISA millionaires shows what tax-free growth can do over many years, but it's a very small group, and most got there through stocks and shares over a long time. For most people the more useful question is what an ISA could do for the amount you can afford to save.

There are a few things worth thinking about. How long could you leave the money alone? The longer the time, the more room there is to ride out falls in the market. Would you need to get at it in the short term? How would you feel if the value of your savings fell for a while? Stocks and shares ISAs can go down as well as up, while cash ISAs don't fall in value but may not keep pace with inflation over many years. It's also worth looking at how an ISA fits alongside your emergency savings and your workplace pension.

A Bippit financial expert can help you think through these questions for your own situation.

Questions (to ask your financial expert)

How do I find out what I'm paying in pension fees, and what should I think about before changing anything?

How do I decide between a cash ISA and a stocks and shares ISA?

I'm saving for my first home - what should I think about when comparing a low-deposit scheme with a standard mortgage?