Covid five years on: How working life and nation's attitude to money was transformed by lockdown

Yet for those who went through lockdowns, there were other changes to their lives that can’t be completely overlooked, because it has such a far-reaching impact. It means that on the understanding that these changes are nothing compared to the grief of those who lost someone, it’s worth examining some of the things that affected our work and money during lockdowns, and what they mean for us now.

For many people, one of the most profound changes was to the world of work. When everyone was forced to work from home, employers realised what was possible, and opened up flexible working more broadly. It also levelled the playing field for those who need to work flexibly – including parents – which meant they were less likely to suffer a pay or promotion penalty if they needed to work compressed hours or from home.

Personally, my life transformed, and I have been able to be around for my children far more, not just in lockdown but right through to today. I had assumed that as they got older, they might need me less, but that hasn’t materialised. Perhaps because of other complications from lockdowns, they have needed the support that flexible working has enabled me to offer.

Sadly, for many parents, the pendulum is swinging back. For younger people hoping to learn from their colleagues, and for those without a suitable environment to work in at home, this is a welcome return to work. But those who need flexibility to make their families function fairly, have been hit hard by the fact that two in five employers who allowed remote working after the pandemic have scaled it back.

How we worked during the pandemic affected the money in our pockets. There were those who lost work as businesses folded, cancelled projects or cut staff, and those who were able to work from home or travel to essential jobs, and saw exactly the same sums coming in. Spending also varied significantly. The HL Savings & Resilience Barometer at the time showed the spending of lower earners dropped just 0.1 per cent - because essentials made up such a large proportion of their outgoings. By contrast, higher earners saw their spending fall by over 10 per cent - because many of the nice-to-haves in their budget fell by the wayside, partly because things like meals out and holidays were out of the question.

Higher earners were able to pay back significant chunks of short-term borrowing – like credit card debt. They also built substantial savings. Lower earners, by contrast, built up far less in savings. However, on average, the HL Savings & Resilience Barometer at the time showed almost 70 per cent of people had enough cash to cover at least three months’ worth of essential spending.

Meanwhile, large numbers of those who had more money and a bit more time on their hands, turned their attention to investment, including share trading. Some of this was focused on less sensible high-risk options like meme stocks and crypto currencies, but for a huge number of others, this was an introduction to sensible investments. HL saw a spike in the number of clients – including younger investors.

In the years since those lockdowns, life has changed significantly. Once we were freed, people started spending. Supply chains remained snarled, and so prices started rising. Inflation shot through the roof, and we saw the onset of the cost-of-living crisis. Lower earners were hit hardest, partly because of the massive rise in the cost of essentials – which dominate their spending. They also had less lockdown savings to fall back on. It's difficult to overstate the impact of the cost-of-living crisis. The FCA found in 2022 that 56 per cent of people were cutting back on food to make ends meet – with 12 per cent cutting so much they were missing meals.

Pay rises since then have seen most people’s finances recover significantly. The Barometer shows that since 2019 the amount of money an average household has left at the end of the month rose from £92 to £196 today. Part of this has been because our incomes have recovered. However, we have also stuck with some of the careful money management we picked up during the tough times. The amount of money we have left at the end of the month has grown faster than our incomes have.

We’re also saving more. However, not everything about our savings is completely healthy. For many people, lockdown was the first time they had enough savings to feel secure, so as they saw their savings dwindle, they felt the absence of these savings more than if they’d never had them in the first place. It means that as our finances have recovered, people have focused on building their short-term savings, rather than looking further ahead.

As a result, while our average savings have grown, the average gap between the pension savings households need for a moderate income in retirement and the level of pension savings they have has widened. Today it’s £82,000 - up over £58,000 since before the start of the pandemic.

And this isn’t because of a shortage of money overall. The Barometer found there were 12.1 million households that weren’t in arrears and had enough emergency savings, who were in a position to build for the future, yet less than half of them were investing. Meanwhile, 12.2 million households didn’t have enough pension savings for a moderate retirement. Within this group, more than half weren’t in arrears and had more than enough savings and investments that could be used to boost their pension.

It means we may need to rebalance - loosening the grip on our savings, and consider the longer term. If you haven’t looked closely at your finances for a while, it’s worth taking stock of your income and spending. If you have had a pay rise ahead of inflation, you may have more wiggle room than you were expecting. You can then work out where gaps have opened up in your financial resilience in tougher times, and what you can do to close them.

We all need enough savings to cover 3-6 months’ worth of expenses while we’re working and 1-3 years’ worth in retirement. We also need cash to cover planned expenses in the next five years. Beyond that, we should consider investment.

You don’t have to choose between your goals. If you have income to put away, you could direct part to a cash ISA, part to a stocks and shares ISA and part into a pension. Equally, an emergency fund, by its very nature, will wax and wane over time, so it’s sensible to build it back up while continuing to invest for the longer term. It usually makes sense to build savings, investments and pensions side-by-side, so you’re stronger both today and tomorrow.

Life expectancy rises

Figures out this week revealed that life expectancy at birth had risen for the first time since the pandemic. In 2021/23, newborn boys were expected to live to almost 79 and girls almost to 83. For those who reached the age of 65 during this period, men were expected to live another 18 and a half years and women 21.

The fact that life expectancy is back on the rise after falling during the pandemic, is a positive for all of us. However, it raises the question of what we’re going to live on as we get older. We may be living until a ripe old age, but with healthy life expectancy hovering in the early 60s, many people will not be able to continue to keep working later in life.

The state pension, meanwhile, has been rising and is expected to continue to do so in order to keep a lid on the cost of the state pension among an aging population. It means we all need to consider how we’ll fund our retirement – especially if there’s an unexpected gap between leaving work and reaching state pension age.