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What past market volatility has taught us about investor behaviour

Tue, 21 Apr 2026 23:00:03 GMT

What past market volatility has taught us about investor behaviour

The current situation in the Middle East has led to market volatility. While it might seem new, similar movements have happened before, and looking at how these events have affected investor behaviour could be useful.

At the end of February 2026, the US and Israel launched strikes on Iran, which have further escalated. The uncertainty caused by the war has affected market confidence, leading to falling prices.

The Middle East is a large exporter of oil, and the war has resulted in prices rising, which is likely to affect businesses and consumers around the world. In addition, the Strait of Hormuz, an important waterway for trade, has been affected by the conflict, which may harm international supply chains.

These external factors may be affecting the value of your investments.

Market volatility refers to changes in the value of assets

In simple terms, market volatility refers to the value of assets changing. When markets are experiencing greater volatility, prices will rise or fall more sharply than usual. Volatility can be affected by many factors, such as geopolitical tensions, economic news, investor sentiment, and interest rates.

While volatility can seem concerning and unusual, it’s a normal part of investing. Indeed, even over the last 20 years, investors have experienced many periods of high volatility, including during the 2008 financial crisis and the Covid-19 pandemic.

If you look at the performance of market indices, you’ll see they are not straight lines. Prices naturally fluctuate, and there will be points where they shift sharply. While performance cannot be guaranteed, markets have historically recovered from dips over a long-term time frame.

In many cases, staying the course, rather than reacting to market movements, is the best course of action. However, high levels of volatility may trigger some investors to act in a way that doesn’t align with their long-term strategy.

Here are two types of investor behaviour to be mindful of during volatility.

1. Panic selling

When you’re worried about losing money, you might feel as though you need to react. So, investors might be tempted to panic sell portions of their portfolio amid market volatility. As mentioned above, markets have recovered from downturns in the past, and by panic selling, investors could turn paper losses into real ones.

There might be times when selling assets and adjusting your strategy is appropriate. However, these decisions shouldn’t be driven by emotions, like panic. Instead, assessing your personal goals and circumstances could help identify where you might make changes.

2. Following the crowd

When things seem uncertain, it can feel comforting to do what other people are doing. This can lead to an investor mentality of following the crowd. It might feel comforting, but it could also lead to inappropriate decisions.

While an investor might make a decision that’s right for them, it could be inappropriate for you because you have very different circumstances or goals.

So, if you feel tempted to alter your investments, it may be worthwhile assessing what’s driving the decision. You might be influenced by the actions of someone you know or by reading news articles that suggest other investors are reacting to market volatility.

We can answer your investment questions

If you have questions about your investment portfolio and how the current situation might affect you, we can help. Please get in touch to speak to one of our team.

Please note: This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Investment market update: March 2026

Tue, 07 Apr 2026 13:17:15 GMT

Investment market update: March 2026

Conflict in the Middle East caused market volatility throughout March 2026. Find out what other factors may have affected your investments.

While the ongoing uncertainty may feel unsettling for investors, remember that your strategy reflects your long-term goals and considers periods of volatility.

Oil prices rising and ongoing uncertainty led to stock markets falling

On Saturday, 28 February, the US and Israel began strikes on Iran, which led to markets falling when they opened on Monday 2 March.

The FTSE 100 recorded its biggest loss since November 2025 when it fell 1.2%, with airlines, luxury goods makers, and banks particularly affected. In contrast, defence stocks increased, including the UK's BAE Systems, which was up 7% at the start of trading.

It was a similar picture in Europe. The main indices in France, Germany, Italy, and Spain were down 2.2% or more. When markets opened in the US, the Dow Jones Industrial Average and the wider S&P 500 both dropped 1%.

As the Middle East is a major oil-exporting region, conflict there led to prices rising. Deutsche Bank stated Brent crude was up 8.4%, though it added it was only the 38th largest oil spike since 1990.

The volatility continued on 3 March, with the FTSE 100 recording the biggest daily loss in 11 months when it fell 2.75%. Germany’s DAX (-3.6%), France’s CAC 40 (-3.5%), and Italy’s FTSE MIB (-3.9%) also suffered losses.

Asia-Pacific markets weren’t immune to the effects of the war in Iran either. Japan’s Nikkei index fell 3.6%, and South Korea’s KOSPI was down 12% on 4 March due to concerns about shipping through the Strait of Hormuz, a key sea passage for trade, particularly for oil.

On 11 March, the International Energy Agency proposed the largest release of oil reserves in history to bring crude prices down. The news led to Asian shares climbing, with the main indices in Japan and South Korea rising by 1.4%.

However, energy fears continued to influence European markets. On 16 March, the FTSE 100 was down by 1.9%, and the index’s 2026 gains were wiped out on 20 March.

Markets briefly rallied on 23 March following news that negotiations would take place between the US and Iran. However, there were conflicting reports that led to confusion. Despite this, US markets improved, with the Dow Jones up 2%, and construction equipment firm Caterpillar leading the way with a 4.4% rise.

The Office for National Statistics said the UK economy stagnated in January 2026. The data suggests the economy was weakening even before the effects of the conflict in the Middle East were felt. Furthermore, inflation in the 12 months to February 2026 was 3%, stubbornly sticking above the Bank of England’s (BoE) 2% target.

The British Chambers of Commerce commented that the UK is stuck in a “low-growth pattern”, after the 2026 GDP forecast was downgraded from 1.2% to 1%. The organisation said the revised estimate reflects weak productivity, subdued investment, and cautious consumer spending.

At the start of March 2026, Chancellor Rachel Reeves delivered the government’s Spring Statement. In it, she said inflation would fall faster than expected, economic growth would pick up in 2027 and 2028, and there was headroom in the budget.

However, the calculations were made before the conflict in the Middle East began, which is expected to affect the economic outlook.

For instance, rising energy prices could influence inflation. Indeed, the Office for Budget Responsibility estimated the Iran war would add 1% to UK inflation this year. In turn, high inflation may lead to the BoE increasing interest rates, which would place pressure on consumers and businesses.

Data from S&P Global’s Purchasing Managers’ Index (PMI) was positive for the manufacturing and service sectors.

In February 2026, the manufacturing PMI continued to grow, recording a reading of 51.7 – a figure above 50 indicates growth – and a rise in business both at home and abroad. The service sector fell slightly compared to the previous month to 53.9, but still shows growth.

In contrast, the construction sector fell to 44.5 in February, which marked 14 consecutive months of contraction.

Europe

Across the eurozone, the annual inflation rate was 1.9% in February 2026, up from 1.7% a month earlier, and very close to the European Central Bank’s (ECB) 2% target.

The ECB opted to hold interest rates in March, but warned that uncertainty could lead to higher inflation and pose risks to economic growth, which might lead to higher interest rates in the coming months.

The European Commission consumer confidence survey highlights this fear among consumers, with the reading falling amid worries that the Iran war could drive up energy costs.

The S&P flash report on output in the eurozone fell to 50.5 in March, down from 51.9 in February. The reading represents a 10-month low, and it is close to the 50 mark, which signals stagnation.

As expected, inflation in the 12 months to February 2026 remained stable at 2.4%.

However, data from the Bureau of Labor Statistics was less positive. The US economy lost 92,000 jobs in February, which could be a sign that the market is cooling, and the ongoing conflict might lead to businesses taking a more cautious approach in the coming months.

A consumer sentiment survey carried out by the University of Michigan indicates that the Iran war is already influencing how confident people feel about their financial future. The reading fell from 56.6 in February to 55.5 in March.

Please note: This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Explained: Why your pension could become liable for Inheritance Tax

Thu, 19 Mar 2026 07:00:03 GMT

Explained: Why your pension could become liable for Inheritance Tax

Next year, a significant change to how pensions are treated when calculating Inheritance Tax (IHT) could mean more families become liable for the tax. Here’s what you need to know to understand if your estate could be affected and how you might mitigate a potential bill.

Currently, pensions are usually outside your estate for IHT purposes. As a result, your pension might provide a tax-efficient way to pass on wealth to your loved ones.

This will change on 6 April 2027, when most unused pension funds and pension death benefits will be included in IHT calculations.

According to HMRC (25 November 2025), the changes mean around 10,500 estates will become liable for IHT where previously they would not have been. In addition, it’s estimated that around 213,000 estates will now face a higher IHT bill.

Even if you have an existing estate plan in place that considers IHT liability, it may be worthwhile reviewing it in light of the changes.

The Inheritance Tax nil-rate band is £325,000 in 2026/27

To understand whether you’ll be affected by the IHT changes, you need to start with when you pay IHT.

Roughly 1 in 20 estates are liable for IHT, and if the total value of your estate, which includes property, savings, investments, and personal possessions, is under certain thresholds, no IHT will be due.

In 2026/27, the nil-rate band is £325,000. If the value of your estate is below this threshold, it won’t be liable for IHT.

In addition, the residence nil-rate band is £175,000 in 2026/27. Most estates can use this allowance if they leave their main home to a direct descendant. However, the residence nil-rate band may taper if your entire estate is worth more than £2 million.

If you’re married or in a civil partnership, you can pass on your entire estate to your partner without the assets being liable for IHT, and you can also pass on unused allowances. As a result, a couple planning together may be able to pass on up to £1 million before IHT is due.

While the threshold may seem high, once you factor in large assets, such as your pension or property, it may be easier to exceed it than you expect.

Furthermore, the IHT thresholds are frozen until at least April 2031. So, if the value of your assets rises, your estate might be pushed past the IHT threshold without you realising.

The good news is that there are often steps you can take to mitigate an IHT bill, including when the rules change and your pension is added to the calculations.

3 ways you might mitigate an Inheritance Tax bill on your pension

1. Spend your pension

Perhaps the simplest way to avoid paying IHT on your pension is to spend it. After working hard to save for this chapter of your life, you could find you’re in a position to make some indulgent purchases, from exotic holidays to golfing equipment.

Remember that your pension might need to provide an income for the rest of your life, and it’s not uncommon for a retirement to span several decades. So, it’s important to balance spending now with long-term financial security, which a financial plan may help you achieve.

2. Purchase an annuity

If you have a defined contribution pension, you can access it in several ways. One option that could be effective from an IHT perspective is purchasing an annuity.

An annuity is a financial product you buy that then provides an income for the rest of your life. In some cases, the income provided may increase in line with inflation or a portion may continue to be paid to your partner if you passed away first.

You can use all or part of your pension to purchase an annuity. As the money is taken out of your pension, it’s effectively removed from your estate, which might reduce IHT liability. However, there is a risk that you’d pass away before getting the money back through the income.

Buying an annuity is often an irreversible decision, so it’s important to weigh up all your options when accessing your pension.

3. Pass on pension wealth to loved ones during your lifetime

If passing on wealth to loved ones is important to you, you could do so during your lifetime.

Gifting wealth from a pension could support your beneficiaries and potentially reduce an IHT bill by reducing the value of your estate.

However, not all of your gifts are considered immediately outside of your estate when calculating IHT. In some cases, gifts may be included in the calculations for up to seven years after they are given; these are known as “potentially exempt transfers”.

Some gifts are immediately outside of your estate for IHT purposes, making them useful if you want to mitigate an IHT bill. In 2026/27, they include:

An annual exemption of £3,000, which can be given to one person or split between multiple people. If unused, your annual exemption can be carried forward for one tax year.
Small gifts of up to £250 to as many people as you like, so long as you haven’t used a different allowance on the same person.
Wedding gifts of £1,000, rising to £5,000 for children and £2,500 for grandchildren or great-grandchildren.
Regular gifts that are given from your surplus income, such as paying into your grandchild’s savings account each month or helping with your family’s living costs. These gifts must be made regularly and come from your income, rather than depleting your capital. If you intend to use this exemption, it’s important to keep a record, so a clear pattern can be established.

Another factor to consider is how you’ll be taxed when withdrawing money from your pension. If your total income exceeds the Personal Allowance (£12,570 in 2026/27), withdrawals may be subject to Income Tax.

As a result, large withdrawals for gifts could be taxed and potentially push you into a higher tax band.

Again, it’s important to consider your long-term financial security. Gifting too much could leave you in a financially vulnerable position later in life. Making gifts part of your wider financial plan could give you confidence in your finances now and in the future.

Contact us to discuss your estate plan

There are other ways you might reduce or mitigate a potential IHT bill, such as passing on wealth through a trust or leaving a portion of your estate to charity.

Please get in touch to talk about your objectives and how we could help you create an estate plan that’s tailored to your needs.

Please note: This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

The Financial Conduct Authority does not regulate Inheritance Tax planning or trusts.

Investment market update: February 2026

Wed, 04 Mar 2026 11:23:30 GMT

Investment market update: February 2026

In February 2026, ongoing uncertainty around trade tariffs and concerns about the impact of AI adoption on business profits affected the markets. Read on to discover some of the factors that may have affected your investment portfolio.

Markets reached record highs but were affected by AI concerns and trade tariffs

The FTSE 100, an index of the largest companies listed on the London Stock Exchange, was off to a great start in February – it closed at a record high of 10,341 points on 2 February, with a range of sectors performing well, including retailers, banks, airlines, and hospitality.

Similarly, Asian markets reported a welcome uptick on 3 February. Japan’s Nikkei index reached a record high after closing almost 4% higher than its opening level. In addition, India’s Sensex index was up 2.8% after the country struck a trade deal with the US.

However, on 4 February, AI fears affected investors.

Worries that the adoption of AI would harm software and data companies led to a sell-off in European and Asia-Pacific markets. However, the CEO of Nvidia, a leading AI company, Jensen Huang, dismissed the concerns, stating they were “illogical”.

Worries around AI intensified on 11 February when California-based firm Altruist Corp launched an AI service that it said could help advisers create personalised tax strategies. The announcement led to shares dipping for wealth managers, insurance firms, and price comparison sites.

On 12 February, the FTSE 100 reached another record high as it surpassed 10,500 points for the first time. This time it was lifted by shares in Schroders soaring by almost 30% in the first hours of trading after the asset management firm accepted a takeover offer from US investor Nuveen.

On 16 February, the BBC reported that the UK government was weighing up increasing defence spending at a faster pace than expected. The government previously set a target of spending 2.5% of economic output on defence by 2027, rising to 3% by the next parliament. The news led to defence stocks rising, including Babcock (2.5%), Melrose (2.2%), and BAE Systems (1.3%).

US trade tariffs have affected businesses and markets globally throughout 2025 and into 2026. On 20 February, the US Supreme Court ruled against the president’s economic policy of global tariffs, stating that Donald Trump had exceeded his authority by invoking emergency powers to impose them.

Following the announcement, the US Customs and Border Protection agency said it would stop collecting tariffs imposed under the International Emergency Economic Powers Act from Tuesday, 24 February.

This led to market volatility as investors and businesses assessed what the announcement would mean for them.

Further uncertainty followed on 24 February when Trump’s new global tariff was introduced. The new tariff is being applied under the 1974 Trade Act, which allows the president to impose a charge for 150 days without congressional approval. The changing situation places pressure on businesses exporting to the US.

Inflation in the UK fell to 3% in the 12 months to January 2026, according to the Office for National Statistics (ONS). Prime Minister Keir Starmer said the fall would “ease the burden on people”.

Despite the inflation dip, the Bank of England chose to hold its base interest rate. However, it’s expected that a rate cut will happen in the coming months as inflation stabilises to support the economy.

Official GDP data suggests the UK economy grew by 0.1% in December 2025, and real annual GDP per capita grew following a period of no growth in the previous year. Chancellor Rachel Reeves commented that she expects stronger economic growth in 2026.

The UK posted its largest budget surplus since monthly records began in 1993. According to the ONS, the January surplus was £30.4 billion, compared to an expected £24 billion, which provided a boost to the chancellor ahead of the Spring Statement set to be delivered in March.

Readings from various S&P Global Purchasing Managers’ Indices (PMI) – which measure economic health based on surveys of purchasing managers – were positive.

The manufacturing PMI hit a 17-month high with a reading of 51.8, surpassing the 50 mark that indicates growth. The PMI reported high sales volumes to Europe, the US, China, and several emerging markets.

The construction sector posted a PMI reading of 46.4 in January. While the figure indicates contraction, it is an improvement on previous months and could signal that the worst of the downturn is over.

The service sector PMI reading was 53.7. This is the fastest pace of growth recorded in almost two years.

Overall, the PMI data could support the chancellor’s assertions that economic growth will improve in 2026.

Europe

Figures from Eurostat show inflation across the eurozone fell to 1.7% in the 12 months to January 2026, taking it below the European Central Bank’s (ECB) 2% target.

The ECB opted to hold interest rates as inflation stabilised.

Economic data suggest the eurozone continues to face challenges. S&P Global’s manufacturing PMI recorded a reading of 49.5 in January, just below the 50 mark that indicates growth.

In addition, figures released by Eurostat show industrial production was down by 1.4% in December when compared to the previous month in the eurozone, and by 0.8% across the EU. The largest monthly decreases were recorded in Slovakia (-4.9%), Germany (-2.9%), and Spain (-2.6%).

However, the Sentix index, which measures investor morale, increased for the third consecutive month in the eurozone, which could suggest investors feel optimistic.

Inflation in the US fell by more than expected to 2.4% in the 12 months to January 2026. The news could mean the Federal Reserve is more likely to consider a cut to its interest rates in the coming months.

The Bureau of Economic Analysis reported economic growth of around 0.35% in the final three months of 2025, and an annualised rate of 1.4%, below the estimated 2.5%.

Figures from the Bureau of Labour Statistics indicate that US employers are feeling confident. In January, businesses hired 130,000 more workers, which was stronger than expected after the White House warned the number could fall because of its deportation program.

While positive, the Guardian noted that these figures may be revised downwards. Indeed, in 2025, the total new jobs for the year were revised significantly downwards to 181,000 from the initially reported 584,000.

Asia

Japan just avoided a technical recession – defined as two consecutive quarters of economic contraction. After the economy contracted by 0.7% in the third quarter of 2025, GDP figures showed weak growth of 0.1% in the following quarter. The news led to Japanese investment markets dipping, including the Nikkei 225 index (-0.24%) and the broader Topix index (-0.8%).

While China’s GDP was significantly higher at 4.5% in the final quarter of 2025, it was weaker than in previous years, partly due to trade frictions with the US. However, the country did hit its official 5% annual target.

Please note: This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

5 useful options that could protect family wealth while using equity release

Wed, 18 Feb 2026 10:00:43 GMT

5 useful options that could protect family wealth while using equity release

Your home may be one of your largest assets. However, the wealth tied up in your property is usually inaccessible.

You may have considered unlocking some of its value to supplement your retirement income or support your loved ones. Equity release has become increasingly popular for people looking to access their property wealth later in life.

In fact, the Equity Release Council (5 November 2025) states that total lending through these schemes rose to £639 million in Q3 2025. This is up from £636 million in Q2 2025, and 4% higher than the same period in 2024.

While equity release can potentially help you achieve your financial goals, it can also reduce the overall value of your estate over time, meaning you may leave less to your loved ones after you die.

Thankfully, there are several practical ways you can manage these risks and protect your family wealth, all while making use of your home’s value.

Continue reading to discover five options that could allow you to use equity release while safeguarding your legacy.

1. Take a “no negative equity guarantee”

One of the main risks involved with equity release is “negative equity”. This is when the total loan amount plus accumulated interest exceeds the value of your home, often due to falling house prices or compounding interest.

Fortunately, many modern equity release plans include a “no negative equity guarantee”.

This ensures that the amount you owe will never exceed the value of your home when you sell it, even if property prices fall or interest accumulates.

With this guarantee, you could help protect your loved ones from unnecessary debt and provide reassurance that your home will cover the loan.

Moreover, you could make decisions more confidently, knowing your property can’t leave your beneficiaries liable for more than its value.

While this guarantee won’t prevent the loan from reducing the overall value of your estate, it can give you the peace of mind of knowing your loved ones won’t face a shortfall if they need to sell the property to repay the debt.

2. Make interest payments

Some equity release plans allow you to make regular interest payments. Even paying a seemingly insignificant amount each month could limit the loan’s growth over time.

Reducing the balance in this way could even help you preserve more of your home’s value for beneficiaries.

For instance, if you pay just a portion of the monthly interest, you could significantly slow the compounding effect on the loan, leaving more equity in the property for your family when they eventually inherit and potentially sell it.

3. Choose an option with inheritance protection

Certain equity release schemes allow you to protect a percentage of your home's value specifically for your beneficiaries.

This inheritance protection can ensure that a portion of your property will stay reserved for loved ones, regardless of how much interest you accumulate on the loan.

While this may limit how much you can borrow, it can give you certainty that some of your estate will remain preserved.

As an example, you could allocate 25% or 50% of your home’s value to remain untouched. This could, in turn, offer confidence that your family will receive at least something after you’re gone.

4. Borrow a smaller amount

It can be tempting to take as much as possible from your home’s value through equity release. Yet, borrowing less could help you maintain some of the value of your estate.

Indeed, you could carefully determine your needs and the potential interest over time, allowing you to strike a balance between your financial goals and the future needs of your family.

Even a slight reduction in the initial loan amount could make a meaningful difference for your beneficiaries further down the line.

5. Gift some of the wealth to your beneficiaries

It might also be prudent to consider giving some of the money you unlock from equity release directly to your loved ones.

Doing so could allow you to witness the benefits of your support now, such as helping to pay for a child’s first home or funding higher education.

This approach could also reduce the overall exposure of your estate to Inheritance Tax (IHT). However, it’s also vital to think about the tax implications of gifting wealth unlocked via equity release.

Gifts you make are still subject to the usual gifting allowances.

For instance, you can give up to £3,000 each tax year without it affecting your estate for IHT purposes.

You can make larger gifts, but if you pass away within seven years of making them, they could become liable for IHT. The rate of IHT they’re subject to is usually measured on a sliding scale known as “taper relief”.

As such, it’s important to plan the size and timing of these gifts. We can help to ensure your approach to gifting aligns with your overall goals.

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate estate planning or tax planning.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

Think carefully before securing other debts against your home.

Equity release will reduce the value of your estate and can affect your eligibility for means-tested benefits.

Remember that taper relief only applies to gifts in excess of the nil-rate band. It follows that, if no tax is payable on the transfer because it does not exceed the nil-rate band (after cumulation), there can be no relief.

Taper relief does not reduce the value transferred; it reduces the tax payable as a consequence of that transfer.

Investment market update: January 2026

Tue, 03 Feb 2026 14:59:39 GMT

Investment market update: January 2026

Geopolitical tensions and threats of trade tariffs continued to impact global investment markets at the start of 2026. Read on to find out what factors may have affected your investments at the start of 2026.

Markets experienced highs, but geopolitical tensions continue to cause volatility

On 2 January, the first day of trading in 2026, the FTSE 100 – an index of the largest 100 companies listed on the London Stock Exchange – hit a new high and exceeded 10,000 points for the first time, getting the year off to a good start for investors.

On 5 January, headlines about the US’s strike on Venezuela and the capture of the country’s president, Nicolás Maduro, affected markets.

Some investors sought “safe” assets, which led to gold rising by more than 2%, while defence stocks in Europe climbed. In addition, shares in US oil companies jumped, including Chevron (4.4%) and ExxonMobil (2%).

There was good news from UK retailer Next on 6 January. The company beat expectations over the Christmas period, with sales £51 million higher than anticipated. The 2.8% boost in its stock value led to the firm becoming the top riser on the FTSE 100.

The UK’s FTSE 100 wasn’t the only index to perform well at the start of January. The German index DAX hit 25,000 points for the first time on 7 January.

However, rising geopolitical tensions between the US and Europe led to European markets opening in the red on 8 January and losses across the Asia-Pacific region earlier in the day. The fall occurred following meetings between the US and Denmark about the future of Greenland, over which US President Donald Trump has said he wants control.

News of a potential deal between mining giants Rio Tinto and Glencore sent ripples through the London stock market on 9 January. Glencore, which would likely be acquired if a deal went through, saw shares increase by 8%. Meanwhile, Rio Tinto, the likely buyer, saw shares fall by 2.6%.

Trade tariffs and threats of them affected markets throughout 2025, and this trend looks set to continue into 2026.

On 13 January, Trump threatened countries doing business with Iran with a 25% tariff as Iranian authorities cracked down on nationwide protests. Among the top export destinations for Iranian goods are China, the UAE, and India.

The following day, Trump announced further plans to impose new 10% trade levies on goods from Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands, and Finland from 1 February, which would rise to 25% on 1 June. The president said the tariffs would remain in place until the countries supported his goal to acquire Greenland.

The news led to markets falling in Europe when they opened, including the UK’s FTSE 100 (-0.48%), France’s CAC (-2.1%), and Germany’s DAX (-1.35%). Among the sectors hit hardest were European car manufacturers, such as Mercedes-Benz (-6%), BMW (-4.8%), and Volkswagen (-3.5%).

In contrast, defence stocks, such as Germany’s Rheinmetall (3%), the UK’s BAE Systems (2%), and Italy’s Leonardo (3%), were up.

US markets were closed on 14 January to mark Martin Luther King Day, but the Dow Jones dropped by 1.4% when markets reopened on 15 January. Similarly, the S&P 500 and technology-focused index, the Nasdaq, both fell around 1.6%.

After days of uncertainty, Trump pledged not to use force to take control of Greenland on 21 January, and dropped the threat of tariffs, which calmed the markets.

In the 12 months to December 2025, UK inflation increased to 3.4%, which may affect the Bank of England’s decision on whether to lower interest rates in the coming months.

Data from the Office for National Statistics shows the UK economy expanded by 0.3% in November, which was better than economists expected. In addition, figures were revised upwards from -0.1% to 0.1% for September.

Insight from S&P Global’s Purchasing Managers’ Index (PMI) was also positive. UK factories grew at their fastest pace in 15 months in December. Rob Dobson, director at S&P Global Market Intelligence, said the delivery of the government’s Budget in November had helped to end uncertainty that was affecting businesses.

Europe

Data from the European Central Bank shows eurozone inflation dropped to 1.9% in the 12 months to December 2025, just below the bank’s 2% target.

S&P PMI data for the eurozone showed the pace of growth slowed in December, but the bloc still posted its strongest quarterly performance in two and a half years. The economy has now grown for seven consecutive months, and S&P Global said the overall “picture looks good”.

US inflation remained unchanged at 2.7% in the 12 months to December 2025.

Figures released in January 2026 show the US trade deficit shrank in October, thanks to a jump in exports and a fall in imports. According to the US Census Bureau, the deficit fell to $29.4 billion (£21.5 billion). That marks a fall of 39% when compared to a month earlier and is the lowest trade deficit recorded since 2009.

While seemingly good news for the US economy, Bloomberg noted there have been larger monthly swings than usual due to the implementation of tariffs.

Updated official figures suggest many more jobs were lost in October than were first estimated. Data now indicates that jobs fell by 173,000, compared to the initial estimate of 105,000. Job losses may suggest a lack of confidence among businesses.

US company Alphabet, the parent company of Google, reached a valuation of $4 trillion (£2.92 trillion) for the first time on 12 January. The news followed a report that Apple had chosen Google’s Gemini as the foundation for its AI model in the future, leading to a boost in its share price.

Asia

Japanese stocks made their strongest start to a year in several decades.

The Topix index and the Nikkei 225 increased by 3.8% and 4.3%, respectively, during the first two days of trading. According to Bloomberg, that’s the strongest start to a new year since at least 1990. The rise is linked to a new prime minister, who, it is hoped, will embrace looser fiscal policy to stimulate the economy.

There was also good news for Chinese car company BYD. The firm officially overtook Tesla as the top seller of electric cars in the world. In 2025, BYD delivered 2.26 million electric cars, up by 28% when compared to 2024 following aggressive expansion into the European market.

Please note: This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

How much should you contribute to your pension?

Fri, 02 Jan 2026 09:05:32 GMT

How much should you contribute to your pension?

A third of people don’t know how much they need to contribute to their pensions every year to create a comfortable retirement, according to a MoneyAge article (11 November 2025).

Striking the right balance with pension contributions is important. Contribute too little, and you could leave yourself short in retirement. If you contribute as much as possible to your pension now, you might miss other goals or place pressure on your day-to-day budget.

So, asking “how much should I be paying into my pension each year?” is sensible.

You might have read answers to this question that apply a general rule to everybody, such as a certain percentage of your income or a target amount you should have at a particular age.

However, the reality is that there isn’t a simple answer that can be applied to everyone. A range of factors, from your current age to your desired retirement lifestyle, will affect how much you need in retirement.

Here’s a step-by-step guide on how to calculate what you may want to add to your pension.

Review your current pension and other assets

If you’re already contributing to a pension, or have in the past, gather your statements so you can understand your current position. The savings you’ve already made will act as a foundation for your future contributions.

Don’t forget to check for lost pensions. According to Pensions UK (24 October 2024), as much as £31.1 billion is sitting in unclaimed pension pots across the UK. Take some time to check if you’ve got any gaps – you might find a lost pot that could boost your retirement.

In addition to your pension, you may have other assets you plan to use to fund retirement, such as savings or investments held outside a pension, which you may want to include in this step.

Decide when you’d like to retire

When you want to retire will have a direct effect on how much you’ll need to save. If you hope to retire early, keep in mind that you’ll need to create an income for longer, and you may not receive any State Pension until you’ve been retired for some time.

Set out your desired retirement lifestyle

To accurately set a pension target, you need to understand what kind of lifestyle you hope to enjoy in retirement. If you’re envisioning plenty of luxury holidays, a new car every few years, and trips with friends, you’ll need to save more than if you’re happy with a more moderate lifestyle.

With a lifestyle set out, you can start to consider how much you’ll need as a regular income to maintain it. Remember to factor in unexpected costs and the effect inflation is likely to have on your cost of living.

With an estimated required annual income, you can work out how much you’ll need in your pension by considering how long you’ll spend in retirement.

It’s wise to look beyond the average life expectancy, as doing so could leave you facing financial difficulty if you live for longer. The Office for National Statistics life expectancy calculator (14 February 2025) suggests a woman aged 65 has an average life expectancy of 88. However, there’s also a 1 in 4 chance she’ll celebrate her 94th birthday.

Review how your pension will grow

The good news is you don’t need to contribute the total amount you need to secure your desired lifestyle.

First, your pension contributions benefit from tax relief at your marginal rate of Income Tax.

Assuming you don’t exceed the pension Annual Allowance (£60,000 in 2025/26 or 100% of your annual income, whichever is lower), you’d only need to contribute £80 to increase your pension by £100 as a basic-rate taxpayer. If you’re a higher- or additional-rate taxpayer, the amount you’d need to contribute would fall to £60 and £55 respectively.

Second, your pension is usually invested with the aim of delivering long-term growth.

As you’ll often be investing through a pension for decades, the compounding effect of investment returns can help your pension grow significantly over time.

However, it’s important to note that investment returns cannot be guaranteed.

Assess how much your pension contributions need to be

With all this information, you can work backwards to calculate how much you’d need to add to your pension each year to achieve your desired lifestyle.

Using a cashflow model as part of your financial plan can help you bring all this data together and visualise how your wealth might change. For example, you might model how your pension would grow if you increased your contributions by 2% compared to 4%.

You can also model other scenarios, such as the age you’ll retire and changing your income needs.

Regular pension reviews can help make sure you’re on track. The outcomes of a cashflow model cannot be guaranteed, but it can be useful when you’re trying to answer the question “how much should I contribute to my pension?” and others like it.

Work with us to create a retirement plan

Calculating how much you should contribute to your pension each year is just one part of your retirement plan. You might also need to know how the money will be invested when it’s in your pension, or how to access the savings when you’re ready to create an income.

We can work with you to create a complete retirement plan to prepare for the next chapter of your life.

Please note: This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

The Financial Conduct Authority does not regulate cashflow modelling.

Investment market update: December 2025

Fri, 02 Jan 2026 09:01:01 GMT

Investment market update: December 2025

After a year filled with uncertainty and rising trade tensions, markets were calmer in December 2025. Find out what may have affected the performance of your portfolio at the end of the year.

Market volatility eased in December 2025

Markets were downbeat at the start of the month. Most European markets were in the red on 1 December, including Germany’s DAX (-1.2%), France’s CAC 40 (-0.55%), and the UK’s FTSE 100 (-0.13%).

The Bank of England (BoE) carried out stress tests on 2 December, which all major banks involved passed. This led to bank stocks rising, including Lloyds (1%), Barclays (0.95%), and HSBC (0.7%).

American technology firm Oracle Corporation missed its revenue forecast and hiked expenditure plans by $15 billion (£11.3 billion). This led to the company’s shares dropping by 15.7% when trading started on 11 December – knocking almost £100 billion off the company’s market capitalisation.

The news dragged down other AI stocks as well, including Nvidia, which became the biggest faller on the Dow Jones Industrial Average index after it tumbled 2.7%.

Despite the concerns about AI, the Dow Jones Industrial Average hit a record high after rising 0.95% on 11 December following news that US interest rates had fallen.

On 17 December, the FTSE 100 was up 1.6% following a bigger-than-expected drop in inflation, leading gains in European markets.

With Christmas nearing, festive optimism swept through London. On 19 December, the FTSE 100 closed at an almost record high, with leading firms including Rolls-Royce (2.7%) and precious metal producers Endeavour Mining (3.1%) and Fresnillo (2.8%). However, housebuilders and retailers suffered falls.

UK inflation slowed to 3.2% in the 12 months to November 2025, according to the Office for National Statistics. The news led the BoE’s Monetary Policy Committee to vote to cut the base interest rate from 4% to 3.75%, with further cuts anticipated in 2026.

The headline GDP figure was weak in the UK. The economy unexpectedly shrank by 0.1% in October, according to official data.

In addition, UK unemployment hit a four-year high of 5.1% in the three months to October. This could signal a weakening economy.

However, forecasts suggest the economy could pick up in 2026. The Organisation for Economic Co-operation and Development (OECD) expects the UK to be the third fastest-growing economy among G7 members in 2026, falling behind only the US and Canada.

This view is supported by a return to growth in the manufacturing sector.

According to S&P Global’s Purchasing Managers’ Index, manufacturing grew for the first time in a year. The reading came ahead of the Budget, when uncertainty was likely to have been playing on the minds of businesses, so the improvement is particularly encouraging.

Sadly, it’s a different picture for retail.

The Confederation of British Industry (CBI) reported that retail volumes fell at an accelerated pace in December despite the festive season, and firms don’t expect any relief in the opening months of 2026.

Europe

The European Central Bank (ECB) opted to hold its interest rates in December as it noted that it’s on track for inflation to settle around its 2% target.

The ECB also raised its growth forecast for the economic bloc, driven by rising domestic demand. The bank now expects GDP to rise by 1.4% in 2025 and 1.2% in 2026.

An industrial recovery is likely to play a crucial role in the higher GDP forecasts. According to Eurostat data, industrial output increased by 0.8% in October as businesses benefited from trade uncertainty fading and falling energy costs.

However, not every part of the region is as optimistic.

The German Ifo Institute’s business climate index fell in December, despite analysts predicting a rise. The gloomy outlook is linked to two years of economic contraction in manufacturing, confidence in the service sector falling, and unhappy retailers facing lower-than-expected sales in the lead-up to Christmas.

US inflation unexpectedly fell to 2.7% in the 12 months to November 2025. Experts had predicted inflation would be 3.1%.

While falling inflation is good news for struggling families, rising unemployment could suggest further difficulties ahead. The unemployment rate hit 4.6%, amid apprehension about the strength of the US economy.

However, job growth was higher than anticipated in November. A total of 64,000 jobs were added, against the predicted 40,000.

The economic news led to the Federal Reserve cutting the base interest rate by a quarter of a percentage point. The base rate is now at its lowest point since 2022.

President Donald Trump permitted technology giant Nvidia to ship H200 chips to China in exchange for a 25% surcharge for the US. The move could allow Nvidia to win back billions of dollars in lost revenue, which led to its shares rising by 2.3% on 9 December.

While good news for Nvidia, the move has been criticised for being an “economic and national security failure” by some Democratic senators.

Asia

The International Monetary Fund (IMF) raised its growth forecast for China. The organisation now expects the country’s economy to grow by 5% in 2025 and 4.5% in 2026, thanks to lower-than-expected tariffs on Chinese exports.

However, the IMF also urged China to fix “significant” imbalances in its economy, primarily by shifting from export-led growth to domestic consumption.

The positive news from the IMF was supported by official trade data.

China’s trade surplus hit $1 trillion (£0.74 trillion) for the first time in November 2025, as the economy appeared to shrug off concerns about the impact of trade with the US. Exports grew by 5.9% year-on-year in November following a 1.1% contraction in October.

Please note: This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

The value of your investments (and any income from them) can go down as well as up, and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Investment market update: November 2025

Thu, 18 Dec 2025 07:00:12 GMT

Investment market update: November 2025

One of the biggest factors affecting investment markets in November 2025 was concern about an AI bubble. Despite this, there were still market highs recorded during the month.

Remember to consider your risk profile when you invest and review your portfolio’s performance with a long-term outlook.

AI concerns led to volatility throughout November 2025

With UK chancellor Rachel Reeves set to deliver a fiscal Budget at the end of the month, speculation led to market volatility on 4 November. Indeed, the FTSE 100 fell during a speech Reeves delivered, but clawed back most of the losses, with shares in housebuilders rising.

On 5 November, worries that AI stocks were overvalued led to global volatility.

In Europe, the falls were modest, with London’s FTSE 100 down 0.1%, and Germany and Spain’s main indices both declining by 0.8%. The falls were more dramatic in Asian markets, including Japan’s Nikkei (-2.5%) and South Korea’s KOSPI (-2.85%).

The US technology-focused index, Nasdaq, was also down 2%. All of the “Magnificent Seven” – seven of the largest and high-growth companies in the world, made up of Nvidia, Amazon, Apple, Microsoft, Tesla, Meta, and Alphabet – suffered falls.

On 7 November, Wall Street continued to fall amid economic and valuation worries. The Dow Jones index, which consists of the 30 largest US companies, was down 0.45%, while the broader S&P index fell 0.6%.

The Financial Times calculated that $750 billion (£566 billion) was wiped off major AI stocks – including Nvidia, Meta, Palantir, and Oracle – in the first week of November.

Hopes that the US government shutdown was coming to an end led to both US and European markets rising, including London’s FTSE 100 hitting a new high on 10 November.

The rally continued in London, with the FTSE 100 hitting a record high on 12 November, nearing the 10,000-point mark for the first time. The biggest riser was energy company SSE. Its share prices jumped 11% after the firm announced a five-year investment plan.

Concerns about an AI bubble reared again on 14 November, with indices down globally, and the tech sell-off continued on 15 November.

Google’s boss warned that “no company is going to be immune” if an AI bubble burst happens. The FTSE 100 fell 1%, with mining companies Fresnillo (-6.4%) and Endeavour Mining (-4.7%) among the biggest losers. It was a similar picture across the wider European market, with the main indices in Germany, France, Italy, and Spain all experiencing volatility.

There was some investor relief on 20 November when AI firm Nvidia revealed its sales were up 62% year-on-year. The company beat expectations and reported revenue of $51.2 billion (£38.6 billion) from data centre sales in the third quarter of 2025. The firm expects revenue to reach $65 billion (£49 billion) in the final quarter of 2025.

The news led to Asian-Pacific markets soaring, including Japan’s Nikkei (2.6%), South Korea's KOSPI (2%), and Taiwan's TW50 (3.6%). Wall Street also rallied, and the Nasdaq was up 2.18%.

The UK’s Budget also affected markets, particularly the FTSE 100.

Ahead of the speech, it was reported that UK banks would be spared a tax raid, which led to shares in the sector jumping on 25 November. Among those benefiting were NatWest (2.2%), Barclays (2.9%), and Lloyds Bank (2.95%).

Betting companies didn’t fare so well. The chancellor revealed a new tax hike on gambling firms, which led to shares sliding on 27 November. Rank Group told its shareholders it expected a hit of around £40 million to its annual operating profit, leading to shares falling by 10%. Similarly, Evoke shares fell 5% after it estimated duty costs would increase by around £125 million a year.

Inflation in the 12 months to October fell to 3.6%, suggesting it has peaked.

The Bank of England (BoE) opted to leave interest rates where they are, but the latest inflation data suggests a cut could happen before the end of 2025 or at the start of 2026. Indeed, Goldman Sachs predicts interest rates will fall to 3% by July 2026.

Economic growth was disappointing. Between July and September 2025, GDP increased by just 0.1%. Once GDP is adjusted for population growth, it remained unchanged when compared to the previous quarter. The figure is the slowest quarterly growth recorded since the short recession experienced in the second half of 2023.

The BoE’s data suggests that economic growth will pick up in the final quarter of 2025. The economy is expected to grow by 0.3% between October and December.

Official data also shows the impact of US trade tariffs on economic growth.

In September, the value of UK exports to the US fell by £500 million, or 11.4%, to the lowest level since January 2022. More broadly, UK goods exports fell by £1.7 billion, a 5.5% decrease. This led to the trade deficit widening to £59.6 billion in the third quarter of the year.

However, there was some good news, with UK factory output rising for the first time in a year. S&P Global’s Purchasing Managers’ Index (PMI) was 49.7 in October. While this is still below the 50 mark that indicates growth, it’s heading in the right direction.

Europe

The European Commission has increased its growth forecast for the eurozone economy.

The eurozone is now expected to grow by 1.3% in 2025, compared to the earlier spring forecast of 0.9%. The upward revision was linked to a surge in exports as companies tried to beat incoming tariffs. Looking ahead, the European Commission anticipates growth of 1.2% in 2026 and 1.4% in 2027.

As the largest EU economy, Germany’s economy plays an important role in the bloc. However, it’s a gloomy picture.

The German Economic Council revised its 2026 growth forecast down to 0.9%. In addition, an Ifo report found that German business morale is low, as companies lose faith in the economic recovery.

On the surface, US manufacturing data appears positive, with output and new orders rising, according to S&P PMI data. However, Chris Williamson at S&P Global Market Intelligence said the underlying picture is “not so healthy”. He explained there was an unprecedented rise in unsold stock due to weaker sales, especially in export markets.

Job data also appears positive initially. Official figures show more than 119,000 jobs were created in September, helping to recover from a summer lull. The figure is more than twice the number expected.

However, data from recruitment firm Challenger, Gray & Christmas, suggests the data could be very different in October. The firm suggests job cuts hit a 22-year high as employers embraced AI, which led to employers shedding more than 153,000 jobs in October – up 175% when compared with 2024.

Asia

Economic data from Japan revealed the economy contracted in the third quarter of 2025. The country’s GDP was down 0.4% between July and September when compared with the same period a year earlier. The fall was partly linked to exports falling 4.5% when compared with 2024 amid US trade tariffs.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Explained: The new Cash ISA rules and what they mean for your savings

Thu, 04 Dec 2025 08:32:27 GMT

Explained: The new Cash ISA rules and what they mean for your savings

In the November 2025 Budget, the chancellor revealed new Cash ISA rules that will affect under-65s. The change could affect your savings and wider financial plan.

ISAs provide a tax-efficient way to save and invest, making them an essential part of many financial plans. In 2025/26, you can add up to £20,000 to ISAs and split the money across savings and investments however you wish. This will change from April 2027.

The Cash ISA limit will fall to £12,000 for most savers

The ISA annual allowance will remain at £20,000. However, for most savers, the amount you can place in a Cash ISA will fall to £12,000 in April 2027. So, if you want to use your full £20,000 allowance, you will need to place at least £8,000 in a Stocks and Shares ISA.

According to government figures (4 December 2024), there were around 12.4 million adult ISA subscriptions in 2022/23. Of these, 63.2% were Cash ISAs. As a result, some savers may wish to review their financial plan.

Over-65s will not be affected by the new Cash ISA rules, and will be able to add the full £20,000 allowance to a Cash ISA.

Despite speculation that the tax advantages of ISAs would be changed in the Budget, this didn’t materialise. The interest or other returns your money earns in an ISA will continue to be free from Income Tax or Capital Gains Tax.

Cash savings held outside of an ISA could be liable for Income Tax

Those who want to add more than £12,000 to their savings in a tax year might consider doing so outside of an ISA in light of the changes. This could lead to an unexpected tax bill.

The amount of interest on which tax might be due depends on the rate of Income Tax you pay. In 2025/26, the Personal Savings Allowance (PSA) is:

£1,000 if you’re a basic-rate taxpayer
£500 if you’re a higher-rate taxpayer
£0 if you’re an additional-rate taxpayer.

As a result, you may pay tax on the interest if your savings are not held in a tax-efficient wrapper, such as an ISA.

For example, if you’re a basic-rate taxpayer and receive £2,000 in interest on savings held outside a tax wrapper in 2025/26, you’d be liable to pay tax on the £1,000 that exceeds the PSA at 20%, resulting in a £200 bill.

During the Budget, it was also announced that the rate of tax you pay on savings income will rise by 2% from April 2027. So, if you exceed the PSA in 2027/28, the rate of tax you pay on the portion above the threshold will be 22%, 42% and 47% for basic-, higher-, and additional-rate taxpayers respectively.

Investing in a Stocks and Shares ISA could be right for some savers

There are times when holding money in cash makes sense – for instance, if the money will be used for a short-term goal or held in case of an emergency.

However, investing may be appropriate for long-term objectives, and the new ISA rules could be a useful reminder to check if a Stocks and Shares ISA is suitable for you.

You can invest in a range of assets through a Stocks and Shares ISA and choose a risk profile that suits you. Investment returns cannot be guaranteed, but they have the potential to outpace inflation to deliver growth in real terms.

Indeed, according to figures from Unbiased (4 February 2025), between 2015 and 2025, the average Cash ISA has delivered an average return of 1.21%. The average returns of a Stocks and Shares ISA were 9.64% over the same period.

If the new ISA rules mean you need to adjust your financial plan, you could benefit from moving some of your money into a Stocks and Shares ISA. You should be aware that investing carries risk, and it’s important to understand what level of risk is right for you.

Contact us

If you have any questions about the new ISA rules or would like to talk about other announcements made in the 2025 Budget, please get in touch. We’re here to help you understand what the changes mean for you and your long-term plan.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Why successful investing starts with your mindset, not the markets

Mon, 17 Nov 2025 08:59:54 GMT

Why successful investing starts with your mindset, not the markets

What’s the most important factor affecting the performance of your investments?

Your mind might jump to the ups and downs of the market, and they do have an effect. When share prices rise, so too will the value of your portfolio. However, the markets aren’t the starting point of a successful investment: your mindset is.

Your approach to investing could influence your success.

Short-term market movements don’t always reflect long-term trends

Tracking the markets can be enticing. They are constantly moving, with numerous factors influencing them. Headlines can make even slight adjustments seem dramatic.

It can seem logical to focus on these movements, but doing so overlooks the long-term perspective that benefits most investors. When you look at the market returns over decades, you’ll see that the ups and downs smooth out.

Instead, you're left with a general upward trend. Even when markets have fallen sharply, such as during the Covid-19 pandemic, they have, historically, recovered these losses over a long-term time frame.

Investors who focus on short-term market movements can find it more tempting to make adjustments to their portfolio as they try to time the market (buy low, sell high). As movements are impossible to consistently predict, they’re likely to make mistakes and could miss out on long-term gains as a result.

So, if you shouldn’t be keeping an eagle eye on market movements, how should you approach investing?

Calmness and patience are often essential for long-term investors

An important first step to take is to define why you’re investing. Your reason might affect your investment time frame and the level of risk that’s appropriate for you.

Then, you can create an investment portfolio that reflects your goals, risk profile, and financial circumstances. Your financial planner can help assess what’s right for you.

Next, far from keeping an eye on the markets section of the newspaper, it’s time to be patient. Trusting your investment strategy and taking a long-term approach could lead to better outcomes and stronger returns.

It sounds simple, but embracing this mindset can be more difficult than you expect – it’s so easy to reach for your phone and check your portfolio’s performance or the news. While that might seem harmless, it can trigger an emotional response, from fear to excitement. These emotions mean you’re more tempted to change your investments and potentially miss out on long-term gains.

If you struggle to focus on the bigger picture when investing, you might benefit from:

Reducing media exposure
Setting clear dates when you’ll look at the performance of your portfolio
Going back to your initial investment goal when you’re making a decision
Working with a financial planner who can highlight when short-term market movements might be affecting your emotions.

These simple steps could help you develop some of the most important skills for successful investing: patience, discipline, and emotional control. Adopting a mindset that embraces these attributes could have a greater impact on your returns than short-term market movements.

Taking a long-term approach doesn’t mean you never look at your investment portfolio. Regular reviews are still important. However, look at the performance over years, rather than days or weeks.

Similarly, there might be times when it’s appropriate to make adjustments to your portfolio due to changes in your circumstances or long-term trends, not because of the latest headline.

Get in touch to talk about your investment strategy

If you’d like to work with us to review your current investment strategy or you’re interested in investing for the first time, please get in touch. We can help you create a portfolio that reflects your aspirations and circumstances.

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Investment market update: October 2025

Mon, 03 Nov 2025 09:08:45 GMT

Investment market update: October 2025

October 2025 proved to be a positive month for many investors, with markets reaching record highs. Read on to find out more about what factors may have affected your portfolio’s performance.

Remember to take a long-term view when assessing your investments and consider your risk profile when making decisions.

Markets experienced record highs, but investor uncertainty continued to have an effect

The month started strongly with the FTSE 100 closing at a record high on 1 October. AstraZeneca was the biggest riser, making the pharmaceutical firm the most valuable company listed in London.

In the year to 1 October, the FTSE 100 was up almost 15% and could be on track for its strongest year since 2009, when the market recovered from the financial crisis.

It was a similar picture in the wider European and US markets.

On 2 October, European shares hit a record high. The pan-European Stoxx 600 index increased by 0.7%, driven by gains in German and French companies. Wall Street also reached new heights when it opened, with the S&P 500 index up 0.3%.

Despite the promising start to the month, French stocks fell on 6 October. The market fell when new prime minister Sébastien Lecornu resigned after less than a month in office. The French index CAC 40 tumbled 1.8% as a result.

Signalling that investors may feel nervous, the price of gold surpassed $4,000 an ounce (£3,005) for the first time on 8 October. Gold is often viewed as a “safe” asset, and its price has increased by 50% in the first nine months of 2025.

The soaring price of gold is good news for mining companies. Antofagasta, which operates gold mines in Chile, was the biggest riser on the FTSE 100 after jumping 2.7%.

Trade tariff threats and actual tariff measures have caused market volatility throughout 2025, and October was no different. On 13 October, the US and China threatened to impose tariffs, which led to Asian stocks falling.

On 17 October, anxiety around US regional banks and credit concerns spooked the market. The US S&P 500 index was down 1.2%, and the ripple effect was felt in many other markets.

In the UK, the concerns sparked a sell-off that knocked nearly £11 billion off bank valuations. The FTSE 100 closed 0.87% down, with Barclays (-5.66%), NatWest (-2.88%), and HSBC (-2.5%) among the biggest losers.

There was a similar sell-off in Europe. The Stoxx 600 index (which includes UK banks) was down 2.4%, and around €37 billion was wiped off the value of the European banking sector.

The Asia-Pacific markets weren’t immune. China’s CSI 300 dropped 2.3% and Japan’s Nikkei fell 1%, although the dip in this region was partly attributed to investor caution over profits of AI shares.

Japanese markets quickly recovered on 21 October when Sanae Takaichi won a parliamentary vote to become the country’s first female prime minister. She is expected to push for looser fiscal policy.

The US announced new sanctions on Russia on 23 October, which pushed up the price of crude oil. This led to both BP and Shell shares rising by around 3.5% and the FTSE 100 reaching another record high.

The positive news continued on 24 October. The FTSE 100 broke the record set the previous day and exceeded 9,600 points for the first time. On the back of an inflation report, the US indices – the S&P 500 and the Nasdaq – also broke records.

In addition, Shanghai’s SSE Composite Index increased by 0.7% and reached its highest level in more than a decade. The boost was linked to Beijing stating it would focus on chips and AI to achieve technological self-reliance, which led to stocks in this sector rising.

In the 12 months to September 2025, inflation was 3.8% – stubbornly remaining above the Bank of England’s 2% target.

The International Monetary Fund increased its 2025 UK inflation forecast to 3.4% (up from 3.1% in April), saying the UK was set to have the highest in the G7.

Official figures estimate UK GDP increased by just 0.1% in August. The report suggested there was no service growth, which may reflect business caution ahead of the upcoming Budget.

Data from the Office for National Statistics (ONS) shows the government borrowed £99.8 billion between April and September 2025. This is the largest sum borrowed since 2020 and is £7.2 billion more than the Office of Budget Responsibility forecast in March 2025. The news will add further pressure to the chancellor ahead of the Budget, which will take place on 26 November 2025.

Trade data released in October 2025 was also poor. According to the ONS, the trade deficit widened with exports to the US and EU falling by around £700 million and £800 million respectively in August 2025.

Readings from a Purchasing Managers’ Index (PMI) suggest that businesses may be taking a cautious approach in the lead-up to the Budget.

The S&P Global PMI found that sluggish demand led to a reading of 50.8 in September in the service sector. While the figure remains above the 50 mark that indicates growth, it’s a marked drop from the 54.2 recorded in August.

The manufacturing sector shrank at the fastest pace in five months as factories were affected by subdued domestic demand and falling export orders. The reading of 46.2, which indicates contraction, was also linked to a cyberattack on Jaguar Land Rover that halted production and disrupted supply chains.

Europe

In August, the euro area hit the European Central Bank’s inflation target of 2%. However, it increased to 2.2% in September.

S&P Global’s PMI, which tracks business activity, was positive. The eurozone private sector delivered a reading of 52.2 after rising at the fastest pace in 17 months. Businesses also recorded the strongest increase in new orders in two and a half years.

The EU’s two largest economies, Germany and France, reported sharply contrasting performances. Germany’s output growth reached a 29-month high. In contrast, France posted 14 consecutive months of decline amid political uncertainty.

While the PMI data suggests businesses are confident, unemployment figures released by Eurostat indicate many firms are being cautious. Across the eurozone, unemployment increased by 0.1% to 6.3% in August.

Highlighting the far-reaching impact of US trade tariffs, Switzerland cut its 2026 economic growth forecast to 0.9% against the 1.2% predicted in June 2025. The Swiss government noted that exports have been affected by tariffs, creating a ripple effect across the broader economy.

Inflation in the US in the 12 months to September 2025 was 3%. The figure is slightly lower than expected and could add to the pressure the Federal Reserve is already facing from the US president to cut interest rates.

PMI data for the US service sector fell to 54.2 in September but remained in growth territory.

However, a survey conducted by recruitment firm Challenger, Gray & Christmas suggests that business uncertainty may be causing firms to halt hiring plans. In the nine months to the end of September 2025, 205,000 fewer jobs were created when compared to the same period in 2024.

Asia

Takaichi, Japan’s new prime minister, could be welcome news for investors. She is expected to embrace government spending, lower interest rates, and adopt a looser approach to monetary policy than her predecessor. It’s hoped that this will encourage businesses to invest and support economic growth.

While China’s GDP growth of 4.8% year-on-year between July and September 2025 might seem high compared to other economies, it’s the slowest pace recorded in a year. In addition, hopes that the economy could reduce the impact of tariffs by moving away from exports to domestic consumption were tempered when retail figures remained weak.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

3 reasons why pension consolidation could boost your retirement income

Mon, 27 Oct 2025 08:44:35 GMT

3 reasons why pension consolidation could boost your retirement income

Increasingly, UK savers are losing track of their pensions. In October 2024, research by Pensions UK found that the total value of lost pension pots had risen by 60% since 2018.

Losing track of your pensions can be costly. Across the 3.3 million pension pots considered lost, the average fund value is £9,470 – rising to £13,620 for those aged 55 to 75.

By consolidating multiple workplace and private pensions into fewer schemes – or even just one – you could make it easier to track and manage your retirement savings. Additionally, bringing multiple pots together may help you grow your funds more efficiently and reduce your administration fees.

Generally, you can consolidate any defined contribution (DC) schemes, regardless of whether they are workplace or private pensions. However, pension consolidation may not always be appropriate, with a variety of fees, rules, and the potential loss of benefits to consider.

Read on to discover three reasons why pension consolidation could boost your retirement income, and when consolidation might not be appropriate.

1. It’s often easier to manage your pensions and calculate whether you’re on track

By bringing more of your pension pots together under one provider with a single set of rules, features, and benefits, you may be able to simplify your pension management.

According to an August 2022 study from Standard Life , the average person in the UK changes jobs every five years. As a result, people often accumulate multiple workplace pensions throughout their working life – making it easy to lose track over the years.

With fewer pension providers, policy details, and fund values to keep track of, you can reduce the administrative burden of managing multiple pensions. This helps you maintain a clear view of your total retirement funds and monitor how well your investments are performing, while reducing the risk of losing money in forgotten pots.

With a greater understanding of how much you currently have, you can more easily determine how much you need to grow your funds to achieve your retirement goals.

2. Your money could have higher growth potential if it’s all invested in one place

Generally, investment options vary from one pension to another. While some older pensions may be limited to investment funds managed by the provider, others could offer a wider choice and more flexibility for you to decide where your pension is invested.

Some schemes may perform better than others, delivering a higher rate of return on your pension savings. Additionally, having a larger pot may present more investment opportunities, with some requiring a minimum investment size.

Plus, since your investment returns compound over time, consolidating your pensions could enable them to grow more quickly.

Indeed, by moving more of your funds into a pension that offers potentially higher returns, you could accelerate your pension’s growth. According to HM Treasury in May 2025, the average earner could boost their retirement savings by £6,000 through consolidating their funds.

3. You might pay reduced fees

When you have several pension pots, you could unnecessarily pay duplicate fees. Each scheme generally comes with varying administrative charges, ranging from less than 0.5% to more than 1% of your fund. Typically, older pensions are likely to have higher fees.

While individual fees may sometimes appear nominal, the amount you’re charged is likely to grow as time passes and your fund value increases. Considering you could be paying such fees across multiple schemes and over several years, the total charges paid over your lifetime can be significant.

However, some schemes may also charge an exit fee. For pensions set up before 31 March 2017, you could be charged up to 10% of your fund. If you set up your scheme after this date, or are aged 55 or over, exit fees are capped at 1%.

As a result, consolidating your pension pots can boost your retirement savings by reducing your costs. However, choosing which plan to transfer your funds into requires careful consideration.

The benefits of pension consolidation depend on your circumstances

Consolidation isn’t appropriate for everyone. In some cases, partial consolidation can be a good option, whereby you bring some of your funds together while leaving other pots separate. For some people, consolidation might not be necessary at all.

Smaller pension pots

If you have pots worth less than £10,000 and plan to withdraw from them before retirement, it could be worth leaving them separate from your other funds because of the “small pots exemption”.

As of 2025/26, you can generally draw down up to three of these pots in your lifetime without triggering the Money Purchase Annual Allowance (MPAA). This allowance permanently reduces the amount you can pay into your pension tax-efficiently from £60,000 to £10,000 a year.

Defined benefit schemes

If you have a defined benefit (DB) pension, consolidation is unlikely to be a sensible option. Unlike DC schemes, DB pensions generally offer a guaranteed retirement income based on your salary and years of service with your employer.

In fact, you may be required to seek advice from a qualified financial adviser before transferring funds out of a DB scheme that contains over £30,000.

Your current workplace pension

If you and your employer are still contributing to a workplace pension, it may be worth keeping that scheme open. By closing it to consolidate with other funds, you’ll likely surrender your employer contributions, which may prove significant over time.

Protecting scheme benefits

In some cases, your pension schemes may offer valuable guarantees or benefits that are more common with older schemes, such as:

Guaranteed annuity rates
The ability to access your funds before age 55, although this is rare
Flexible ways to take retirement or death benefits.

If it’s not possible to consolidate your other pensions into your preferred scheme – for example, if your employer is contributing to a different pot – it might be worth leaving your funds where they are.

It’s often worth seeking advice before consolidating

While pension consolidation may deliver a range of administrative and financial benefits, creating a strategy for bringing multiple pots together can be complex.

There are a variety of rules, fees, benefits, investment opportunities, and personal factors to consider before consolidating. In fact, in September 2025 IFA Magazine reported that poorly informed pension transfers made in the year to 30 June 2025 may have cost savers £1.7 billion.

By seeking guidance from a qualified financial planner, you could help determine the most effective consolidation strategy for your needs and circumstances. Get in touch to learn more about how we can support you in boosting your retirement funds.

Please note

This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

Workplace pensions are regulated by The Pensions Regulator.

The Financial Conduct Authority does not regulate tax planning.

Investment market update: September 2025

Mon, 13 Oct 2025 10:10:54 GMT

Investment market update: September 2025

There were ups and downs for investors during September 2025, with disappointing economic data dampening the market at times. However, some positive outcomes also emerged. Read on to find out what might have influenced your investment portfolio’s recent performance.

Investors turn to gold as market uncertainty continues in September 2025

The price of gold reached a record high of $3,508.50 (£2,600) an ounce on 2 September. Gold is often viewed as a “safe” asset, so the rising value could signal that investors are feeling nervous about the outlook for the equity market.

As gold prices rose, markets in the UK, Europe, and the US declined.

On 2 September, the FTSE 100 fell 0.43%. Among the biggest losers were retailers Marks & Spencer (-3.6%) and Sainsbury’s (-2.5%), and housebuilders Taylor Wimpey (-3.4%) and Barratt Redrow (-2.5%).

Similarly, key indices fell in Europe and the US, including Germany’s DAX (-1%), Spain’s IBEX (-0.9%), Italy’s FTSE MIB (-0.9%), and the US’s S&P 500 (-1.2%).

Shares in airlines tumbled on 4 September after Jet2 told investors it expected earnings this year to be on the lower end of forecasts. The announcement sent the company’s shares down 14% and had a knock-on effect on other airlines, including easyJet (-4.2%) and IAG (-2.3%).

Rising tensions between Russia and Europe led to defence company BAE Systems’ share price rising 2.9% on 11 September. The jump made the company the biggest riser on the FTSE 100, which gained 0.37%.

On 11 September, hopes that the US Federal Reserve would cut interest rates lifted the major Wall Street indices, including the Dow Jones (0.5%) and S&P 500 (0.25%).

Then, on 24 September, after President Donald Trump said that Nato aircraft should shoot down Russian aircraft entering its airspace, European defence stocks jumped. The two biggest risers on the FTSE 100 were Babcock International (1.9%) and BAE Systems (1.5%). Other companies whose share prices increased included France’s Thales (1.7%), Germany’s Rheinmetall (1.4%), and Italy’s Leonardo (2.8%).

After signs that the US trade war had eased in August, Trump unveiled new tariffs on 26 September.

From 1 October, medicines and pharmaceutical goods will face a 100% tariff when entering the US. Unsurprisingly, this caused shares in firms within this sector to fall, including AstraZeneca (-1.4%). The US will also impose tariffs of between 25% and 50% on other goods, including heavy-duty trucks and kitchen cabinets.

Official data for July showed GDP was unchanged from the previous month.

The inflation rate for the 12 months to August was 3.8%, prompting the Bank of England to keep interest rates static.

UK borrowing costs reached a 27-year high in September due to higher interest rates on national debt. The additional cost ate into the headroom available in the November Budget, placing pressure on the chancellor, who reportedly needs to plug a £50 billion gap in the public finances.

The effect of Trump’s trade war was also visible in the figures released in September. According to the Office for National Statistics, the trade deficit widened by £400 million to £10.3 billion in the three months to July 2025.

Data from S&P Global’s Purchasing Managers’ Index (PMI), an economic indicator, painted a weak picture for the manufacturing sector. The PMI reading was 47 in August (readings above 50 indicate growth). This was the 11th consecutive month the PMI remained below 50.

However, the PMI data wasn’t all negative. The service sector hit a 16-month high in August 2025 with a reading of 54.2. Encouragingly, sales to the EU and US rose, which could suggest long-term growth.

Technology investors welcomed the news that US tech giant Nvidia pledged to invest £2 billion in UK firms, which could boost the sector.

Europe

Inflation across the eurozone was 2.1% in the 12 months to August 2025, only slightly above the European Central Bank’s (ECB) target of 2%. Cyprus recorded the lowest inflation rate in the European Union at 0%, while Romania had the highest rate at 8.5%.

The ECB raised its eurozone growth forecast for this year to 1.2%, up from 0.9% in June. However, it tempered this rise with a slightly lower forecast of 1% for 2026.

The bloc also received other positive news. HCOB’s eurozone manufacturing PMI was 50.7 in August, a 14-month high. Meanwhile, unemployment dipped to a record low of 6.2% in July, according to data from Eurostat.

The European Commission’s economic sentiment tracker improved in September, suggesting greater confidence in the outlook after the EU struck a trade deal with the US.

This month also saw an interesting initial public offering for investors. Swedish fintech company Klarna is set to debut on the New York Stock Exchange with a value of more than $14 billion (£10.9 billion).

US inflation continued to be above the Federal Reserve’s 2% target at 2.9% in the 12 months to August 2025. This was partly due to businesses passing on the cost of tariffs to consumers.

The data led to the Federal Reserve cutting the interest rate by 25 basis points, and economists expect further cuts before year-end.

Job data from the Bureau of Labor Statistics may suggest that businesses aren’t feeling confident enough to hire new employees. The US economy added only 22,000 new jobs in August, well below the expected 75,000.

Alphabet, Google’s parent company, reached a new high on 15 September after shares increased by almost 4%, pushing its value to $3 trillion (£2.2 trillion) for the first time.

News was less positive for Tesla. The company’s share of the US electric vehicle market fell to 38%, down from more than 80% at its peak, amid rising competition.

Asia

The effects of Trump’s trade war were evident in official figures from China.

Chinese export growth slowed to a six-month low in August. Exports increased by 4.4% year-on-year, down from 7.2% in the previous month. Shipments to the US fell 33%, and a 22.2% rise in exports to Southeast Asian nations wasn’t enough to offset the decline.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

How pension and Inheritance Tax policy changes could affect your legacy

Mon, 01 Sep 2025 15:28:25 GMT

How pension and Inheritance Tax policy changes could affect your legacy

From April 2027, pensions are expected to fall within your estate and could be liable for Inheritance Tax (IHT). That date might seem far away, but the policy change has the potential to significantly affect your estate plan, so thinking about it now could be useful.

While the policy change is still in the initial stage, the government has signalled that it intends to move forward with the plans.

Under current rules, your pension usually falls outside of your estate when calculating a potential IHT bill. As a result, pensions are often used in tax-efficient strategies to pass on wealth to loved ones.

The inclusion of pensions may mean some estates might need to consider IHT for the first time, or that estate plans need to be updated.

In 2025/26, the nil-rate band is £325,000. If the total value of all your assets, including your pension from April 2027, exceeds this threshold, your estate may be liable for IHT.

The good news is that there are often steps you can take to reduce an IHT bill, which an estate plan could help you identify.

Most pensions are set to be liable for Inheritance Tax, but there are some exceptions

The current proposals suggest most pensions are set to fall within the IHT net from April 2027, including defined contribution pensions, defined benefit pots, workplace pensions, personal pensions, and self-invested personal pensions.

However, there are some exceptions, including pensions that provide an income during your retirement years and certain types of annuities.

In addition, if your pension has a death in service benefit, which may provide your spouse, civil partner, or dependent children with a lump sum or regular income if you pass away, this is expected to be outside of your estate for IHT purposes.

Under current rules, beneficiaries don’t usually pay IHT on inherited pensions, but they may pay Income Tax in some circumstances. Assuming this doesn’t change, it could mean inherited pensions are subject to double taxation as they’ll be liable for both IHT and Income Tax.

The changes could significantly reduce how much you leave behind for loved ones, and could mean that passing on wealth through a pension no longer makes sense from a tax perspective.

3 ways you could pass on wealth and reduce Inheritance Tax

If you’d previously planned to use other assets to fund your retirement so you could pass on your pension tax-efficiently, your wider financial plan may need to change as a result of the incoming policy.

For example, you might choose to deplete your pension during your lifetime and pass on different assets to loved ones now or in the future. Here are three alternative options you might want to consider.

Gift assets to loved ones during your lifetime

One option is to pass on assets now. This could provide support for your loved ones when they need it most, such as when they’re buying their first home or are paying a child’s school fees.

However, there are two key things to be aware of before you start gifting assets.

First, review your financial plan to ensure you’ll still be financially secure in the long term after gifting assets.

Second, not all gifts are immediately outside of your estate for IHT purposes. Some may be considered part of your estate for up to seven years after they were gifted; these are known as “potentially exempt transfers”.

Gifts that are immediately considered outside of your estate include:

Up to £3,000 each tax year
Small gifts of up to £250 per person each tax year, so long as you have not used another allowance on the same person
A wedding gift of up to £1,000, rising to £2,500 for grandchildren or great-grandchildren and £5,000 for children
Regular payments to another person that are from your regular monthly income. For example, you may pay into a savings account for a child or cover the rent of an elderly relative.

So, you might want to make gifting part of your financial plan to make the most of gifts that are immediately exempt from IHT.

2. Place assets in a trust

A trust is a legal arrangement where assets are held on behalf of beneficiaries. For IHT purposes, you may use a trust to remove some assets from your estate. In some cases, you might still retain control or benefit from the assets.

There are several different types of trust, and it’s important to ensure yours is set up correctly, as it may not be possible to retrieve assets once they have been placed in a trust. Seeking professional legal and financial advice could help you assess if a trust is the right option for you before you proceed.

3. Take out life insurance to cover an Inheritance Tax bill

A life insurance policy won’t reduce the amount of IHT your estate is liable for, but it can provide your loved ones with a way to pay the bill.

You’ll need to pay regular premiums to maintain the cover. When you pass away, your nominated beneficiary will receive a lump sum, which they can then use to pay the IHT due. It could reduce stress for your loved one at a difficult time and help ensure your estate is passed on intact.

It’s important that the life insurance is written in trust. Otherwise, the payout could be considered part of your estate and lead to a larger IHT bill.

Get in touch to talk about your estate plan

Whether you’re starting from scratch or have an existing estate plan that you’d like to review, we can help you assess what the upcoming changes mean for you and the legacy you want to leave behind. We can work with you on an ongoing basis to ensure your estate and wider financial plan continues to reflect current policy and your needs. Please get in touch to talk to us.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate Inheritance Tax planning or trusts.

Investment market update: August 2025

Mon, 01 Sep 2025 15:24:33 GMT

Investment market update: August 2025

While global government policy – particularly US trade tariffs – continued to influence the value of investments in August 2025, many markets experienced less volatility compared to the start of the year. Read on to discover what factors may have affected the performance of your investments in August 2025.

Hopes of a peace deal between Russia and Ukraine boost markets

On 31 July, Donald Trump, the US president, signed an executive order imposing reciprocal tariffs of up to 41% on certain trading partners. The effect of this influenced market movements at the start of August.

On 1 August, Asian stock market indices, which track the performance of a selected group of stocks, fell. South Korea’s KOSPI was down 3%, while Japan’s Nikkei decreased by 0.4%.

The uncertainty also affected European and US markets. Even though the UK has a trade deal with the US, the FTSE 100 was down 0.5%, while the Dow Jones (-1.1%) and S&P 500 (-1.2%) both fell when Wall Street opened in the US.

There was good news for investors in the UK market on 6 August. The FTSE 100 reached a new closing high after it increased by 0.24%. Among the biggest risers were insurer Hiscox (9.4%), precious metal producer Fresnillo (8.8%), and drinks company Diageo (4.2%).

Ahead of US-Russia talks about the war in Ukraine, European stocks cautiously increased on 11 August. The FTSE 100 was up 0.3%, Germany’s DAX and France’s CAC both edged up almost 0.2%, and Italy’s FTSE MIB increased by 0.45%.

The MSCI’s broad All Country World Index, which tracks stocks from 23 developed and 24 emerging markets, hit an all-time high on 13 August. One of the driving factors was the hope that the US will cut its base interest rate in September.

Further speculation that Russia and Ukraine would strike a peace deal fuelled European stock markets on 19 August. Europe’s Stoxx 600 index increased by 0.6%.

In the first half of 2025, European defence companies saw stocks increase due to rising tensions. With investors hoping for de-escalation, defence stocks, including BAE Systems (-3.6%), Rheinmetall (-4.2%), and Thales (-3.5%), fell.

Despite official data showing inflation was higher than expected in the UK, the FTSE 100 hit another record high on 20 August following a jump of 0.67%.

Inflation in the UK continued to rise in the 12 months to July 2025. Official data shows it was 3.8% and the highest annual reading since early 2024.

Despite persistent high inflation, the Bank of England opted to cut the base interest rate by a quarter of a percentage point to 4%. However, the central bank noted that inflation could slow the pace of further cuts.

Overall business activity is improving, according to a Purchasing Managers’ Index (PMI), which provides insight into economic conditions.

S&P Global’s August PMI recorded the strongest rise in UK business activity in the year to date, with a reading of 53 (a figure above 50 indicates growth) compared to 51.5 in July.

However, PMI data wasn’t as positive for the construction sector. In July, the reading was 44.3, suggesting contraction at the fastest pace in five years. Builders reported a decline in housing projects, which could suggest the government is struggling to hit housebuilding targets.

A report from the British Chambers of Commerce demonstrates the effects of trade tariffs. Goods exported to the US slumped by 13.5% in the second quarter of 2025. The figure is the lowest level in three years, when the Covid-19 pandemic severely disrupted trade.

There was some good news for investors from British fossil fuel giant BP.

BP revealed the largest oil and gas discovery in 25 years off the coast of Brazil. The news was followed by a statement from the company, which said, subject to board approval, it would raise quarterly dividends by at least 4%.

Europe

Eurozone inflation remained stable at 2%, though it varied significantly across the bloc from Cyprus at 0.1% to Romania at 6.6%.

PMI figures from Hamburg Commercial Bank paint an optimistic picture for the EU economy.

As the largest economies in the EU, the performance of companies in Germany and France is important, and both strengthened in August. Germany’s PMI improved for the third consecutive month with a reading of 50.9. While France is just below the 50 mark, which indicates growth, with a reading of 49.8, it’s the highest figure so far in 2025.

Across the eurozone, PMI data shows the manufacturing sector increased production at the fastest pace in more than three years. The reading suggests businesses may be feeling more optimistic as uncertainty around trade tariffs settles.

Economists predicted that US inflation would increase, but it remained stable at 2.7% in the 12 months to July.

Weakening demand for US exports due to tariffs has been linked to manufacturing slowing and the trade deficit narrowing.

A PMI conducted by the Institute of Supply Management shows new orders fell in July. Some companies blamed the disruption and confusion caused by changing trade policy.

In addition, the US trade deficit narrowed as companies rushed to import goods into the US before tariffs were applied. The gap between exports and imports was $60.2 billion (£44.5 billion) in June 2025 after a decline of $11.5 billion (£8.5 billion) when compared to May 2025.

There was some good news in the form of PMI data. According to S&P Global, US business activity hit an eight-month high.

US company OpenAI, the group behind ChatGPT, is in talks about a share sale that would value the company at $500 billion (£370 billion). The company isn’t listed on the stock market, and the talks are focusing on a potential sale for current and former employees, who could potentially make large returns by selling the shares on the secondary market.

Asia

China’s exports increased by 7.2% year-on-year in July 2025. The figure was higher than expected and is due to manufacturers taking advantage of a trade war truce between China and the US.

However, while exports increased in July, the ongoing trade war is harming China’s economy. Chinese industrial output increased by 5.7% in July, the slowest rate since November 2024 and below the 6% expected.

The largest automaker in the world, Japanese company Toyota, warned it would take a $9.5 billion (£7 billion) hit from Trump’s tariffs. As a result, it has cut its operating profits for the current financial year from £19.2 billion to £16 billion.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

How to remain calm amid Autumn Budget speculation

Mon, 11 Aug 2025 08:13:50 GMT

How to remain calm amid Autumn Budget speculation

The importance of remaining calm is often something that’s talked about when discussing investment market volatility. But there are other factors outside of your control that might lead to emotional decision-making, including uncertainty about the upcoming Autumn Budget.

Chancellor Rachel Reeves is expected to deliver an Autumn Budget at the end of October. Despite being weeks away, there’s already speculation about higher taxes and allowances being slashed.

With rumours featuring in the headlines, it can feel like you should be doing something to prepare for the potential changes. However, making knee-jerk decisions before changes are confirmed could harm your long-term financial plan.

For example, ahead of the 2024 Autumn Budget, there were attention-grabbing headlines suggesting the pension tax-free allowance would be scrapped. It led to some people taking a lump sum from their pension, even when it hadn’t been part of their financial plan. When the announcement didn’t materialise, some were unable to cancel the withdrawal or place the money back in their pension.

As pensions provide a tax-efficient way to invest, those who acted on speculation may pay more tax overall or find their pension now falls short when planning for retirement.

So, read on to discover some tips for remaining calm in the run up to the Autumn Budget.

1. Tune out the noise

It’s easier said than done, but try tuning out the noise in the lead-up to the Budget.

Reducing how much you’re exposed to speculation could reduce stress and mean you’re less likely to make decisions that could harm your long-term financial plan based on rumours.

That doesn’t mean you have to turn off the news completely. Simply being mindful of where the updates are coming from or only reading the headlines once a day could minimise the pressure you might feel.

2. Check where your news is coming from

Sometimes updates can make it seem as though a rumour is confirmed, particularly if you’re getting your news from social media.

So, before you respond to news or even worry, take some time to fact-check the source and understand if the reported change is speculation.

3. Consider what changes could mean for your financial plan

Headlines about changes may sound like they’ll affect everyone, or use average figures to highlight the potential implications. However, as financial circumstances and goals vary significantly, taking some time to understand what it means for you could be important; you might find an announcement won’t affect your long-term financial plan at all.

For instance, there are suggestions that the amount you could place into a Cash ISA may be reduced. That might seem like something you should worry about, but if you use your ISA to invest, it may have little effect.

Similarly, headlines might read that changes to Inheritance Tax (IHT) mean the average bill will increase by 10%. Yet, your estate might not be liable for IHT, or your existing estate plan could mitigate the effects.

Your financial planner is here to help you understand what speculation and confirmed changes could mean for you.

4. Remember, changes often don’t come into effect immediately

Often, an Autumn Budget announcement isn’t implemented immediately.

For example, in the 2022 Autumn Budget, it was announced that the Capital Gains Tax annual exempt amount would be reduced from £12,300 to £3,000. It fell to £6,000 in April 2023, and then to £3,000 in April 2024.

As a result, you usually have time to understand what the changes mean for you and carefully consider how you’ll respond before they come into force.

This isn’t always the case, and sometimes changes, including tax hikes, may be implemented right away. When this happens, it can feel like you need to act immediately. However, taking a step back to weigh up your options and speak to your financial planner, rather than making a snap decision, is often still valuable.

5. Contact your financial planner

If you're tempted to make changes to your financial plan because of speculation, your financial planner could help you assess if it’s the right decision for you.

Remember, we’ll be here to help you navigate Autumn Budget announcements that might affect your financial plan. If changes happen, we can work with you to review and update your long-term plan to ensure it continues to reflect current legislation and your circumstances. Please get in touch if you’d like to talk to one of our team.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate estate planning.

Investment market update: July 2025

Fri, 01 Aug 2025 10:43:05 GMT

Investment market update: July 2025

The US struck trade deals with several countries in July 2025, leading to markets rising and putting an end to some of the uncertainty that had plagued investors for months. Read on to find out what else may have affected your investments recently.

While it might seem like 2025 has been a poor year for investors, due to geopolitical tensions and trade wars, the figures paint a different picture.

In the first half of 2025, the FTSE 100, an index of the 100 largest companies listed on the London Stock Exchange, gained 7.2%. It’s the best performance in the first six months of the year since 2021. The data shows how markets often bounce back following short-term market movements, as the index fell sharply in April due to US tariff announcements.

Remember, while markets typically deliver returns over a long-term time frame, they cannot be guaranteed, and it’s important to invest in a way that reflects your risk profile and goals.

Trade deals lead to market rallies in July 2025

While uncertainty affected markets in July 2025, there were also several record highs.

On 3 July, it was announced that the US and Vietnam had struck a trade deal. In addition, US data showed 147,000 new jobs were created in June. The good news led to global stocks reaching a record high, according to MSCI.

US President Donald Trump previously set a deadline for trade deals. As this date approached on 7 July and countries without a deal faced high tariffs, shares on key US indices dipped slightly. The Dow Jones Industrial Average fell 0.16% and the S&P 500 was 0.3% lower.

With the trade deal deadline looming, Trump announced a pause on the levies for 14 trading partners to give countries time to negotiate with the US. It led to Asia-Pacific indices rising, including Japan’s Nikkei 225 (0.3%), South Korea’s KOSPI (1.9%), and China’s CSI 300 (0.8%).

The good news continued the following day. The FTSE 100 climbed 1.23% to close at a record high. Mining stocks led the way with Glencore, Rio Tinto, and Anglo American all up more than 3.5%.

On 14 July, European markets opened lower after Trump threatened to impose a 30% tariff on EU imports in August. The pan-European Stoxx 600 index was down 0.6%. Falls were also recorded on the main indices for Germany, France, Italy, and Spain.

There was further positive news for investors of stocks on the FTSE 100 index on 15 July. It hit 9,000 points for the first time after a rise of 0.2%. The UK was one of the few countries to have a trade deal with the US, and UK stocks benefited from trade tensions as a result.

The US and Japan reached a trade deal on 23 July. Under the deal, Japanese goods will incur a 15% tariff at the US border compared to the 25% Trump had previously threatened.

On the back of the news, Japan’s Nikkei index jumped 3.75%. Carmakers in particular saw rises, including Toyota (14.5%), Honda (10.8%), Subaru (16.8%), and Mazda (17.75%).

There was yet more trade deal news on 28 July when an agreement between the US and EU was announced. Indices across the EU were up as a result, including Germany’s DAX (0.8%), France’s CAC 40 (1%), and Spain’s IBEX (0.8%).

With the Autumn Budget due in October, Reeves faces increasing pressure as key data released in July 2025 was negative.

Indeed, the Office for Budget Responsibility (OBR) said public finances are in a “relatively vulnerable position” with risks posed by tariffs, defence costs, and an ageing population. Based on current tax and spending policy, the organisation said public debt was on track to hit 270% of GDP by the 2070s. The projection would see public debt almost triple compared to the current level.

The concerns around public debt were further highlighted when UK borrowing increased to £20.7 billion in June 2025 due to interest payments rising. Worryingly, the figure was £3.5 billion more than the OBR’s forecast and could prompt the chancellor to raise taxes or cut spending.

In addition, data from the Office for National Statistics shows the UK economy shrank in May for the second month running. The 0.1% contraction was driven by a slump in industrial output.

The rate of inflation also unexpectedly increased to 3.6% in the 12 months to June 2025. It’s the third consecutive monthly increase and was the highest rate recorded since February 2024.

While the Bank of England’s Monetary Policy Committee didn’t meet to discuss interest rates in July, member Alan Taylor signalled a cut was likely in August. He said the “deteriorating” UK economy warranted a deeper interest rate cut than financial markets currently predict.

A Purchasing Managers’ Index (PMI) measures economic activity, and a reading above 50 indicates growth. In June, S&P Global’s PMI data for the UK found that the:

Manufacturing sector continued to contract with a reading of 47.7, but hit a five-month high
Construction sector was also contracting, but reached a six-month high with a reading of 48.8
Service sector posted its strongest growth in 10 months with a reading of 52.8, and improvements in order books indicate further growth in the months ahead.

So, while there are setbacks for many UK businesses, the figures suggest there’s movement in the right direction.

Europe

The eurozone hit the European Central Bank’s (ECB) 2% inflation target in the 12 months to June 2025.

Over the last 12 months, the ECB has cut its base interest rate by a quarter percentage point eight times, taking the policy rate from 4% to 2%. Despite speculation that there would be a further cut when inflation hit its target, the central bank opted to leave the rate as it was.

S&P Global’s PMI suggests the manufacturing sector across the eurozone continues to contract. However, the data indicates it may have turned a corner as the reading in June 2025 was the highest in 34 months and only just below the 50 mark at 49.5.

As the bloc’s largest economy, Germany’s exports are essential and ongoing challenges could dampen growth this year, though the new US-EU trade deal may ease some of the pressure.

A Destatis report found that German exports fell by 1.4% in May when compared to a month earlier. Exports to the US played a significant role as they were down 7.7% month-on-month and 13.8% lower than the same period in 2024.

Germany’s central bank, the Bundesbank, said the country’s exporters were losing competitiveness and called for urgent reforms to improve the business climate, including reducing barriers for skilled migrants and enhancing tax breaks for private investment.

Official data from the Bureau of Statistics shows that inflation increased in the 12 months to June 2025 to 2.7%. The figure is above the Federal Reserve’s 2% target.

Tariffs and uncertainty continued to leave a mark on the US’s trade deficit.

In May, the trade deficit widened by 18.7% when compared to a month earlier, according to official data. The deficit now stands at $71.5 billion (£53.5 billion) as exports dropped by 4%.

The consumer sentiment index from the University of Michigan suggests people are feeling more optimistic. The reading in July was 61.8, up from 60.7 in the previous month. It was the highest score since the trade wars began five months ago.

American chipmaker Nvidia became the first listed company to reach a valuation of $4 trillion (£3 trillion). The company announced it would build high-powered systems to train its AI software, which led to shares soaring. As of the start of July, the company’s shares have gained 22% in 2025.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Investment market update: June 2025

Mon, 21 Jul 2025 08:01:40 GMT

Investment market update: June 2025

Trade tariffs continued to affect investment markets in June 2025, though uncertainty did start to ease. However, rising tensions in the Middle East may have affected the performance of your investments. Read on to find out more.

Remember, it’s often wise to take a long-term view of your investments when reviewing returns, rather than focusing on short-term market movements.

In June, the Organisation for Economic Co-operation and Development (OECD) cut its global growth forecast to 2.9% in 2025 and 2026, down from 3.1% and 3% respectively, on the assumption that tariff rates in mid-May are sustained.

The OECD said: “Substantial increases in barriers to trade, tighter financial conditions, weaker business and consumer confidence and heightened policy uncertainty will all have marked adverse effects on growth prospects if they persist.”

Similarly, the World Bank lowered its growth forecasts for nearly 70% of all economies. It estimates that the 2020s are on course to be the weakest decade for the global economy since the 1960s.

Trade tensions ease, but uncertainty in the Middle East leads to volatility

On 2 June, a European market sell-off started in early trading as investors continued to react to the trade war. Stock indices, which track the largest companies listed on each stock exchange, were down, including Germany's DAX (-0.25%), France’s CAC (-0.5%), and the UK’s FTSE 100 (-0.27%). Markets in the US also opened lower, including the S&P 500 dropping 0.3%.

However, there was some good news in the UK. Following the announcement of a new defence review, stocks in the sector jumped, with Babcock, one of the largest Ministry of Defence contractors, leading the way with a rise of 3.8%.

Germany’s sluggish economy received a boost on 4 June when a tax relief package worth €46 billion between 2025 and 2029 was unveiled. It led to the DAX rising 0.9%.

After weeks of tit-for-tat tariffs between the US and China, a trade deal was struck on 11 June. The US said a 55% tariff, inclusive of pre-existing levies, would be placed on China. The deal led to Chinese stocks rising. Indeed, the CSI 300 index, which tracks the largest stocks on the Shanghai and Shenzhen markets, was up around 0.8%.

Despite poor economic data from the UK, the FTSE 100 closed at a record high on 12 June. Among the top risers were health and safety device maker Halma (2.8%) and Tesco (1.8%).

In contrast, European markets dipped, with the DAX (-1.35%) and CAC (-1%) both falling.

The Iran-Israel crisis led to stock markets falling when they opened on 13 June. In London, the FTSE 100 was down 0.56% and almost every blue-chip share was in the red. It was a similar picture in Europe and the US, with indices dipping.

On 24 June, Donald Trump, president of the US, declared there was a ceasefire between Iran and Israel. It led to geopolitical fears easing and markets rallying around the world. However, some fears remain.

UK economic data released in June was weak.

Data from the Office for National Statistics (ONS) shows the UK economy shrank by 0.3% in April. This was partly linked to trade tariffs as exports of UK goods to the US fell by around £2 billion.

In addition, the ONS revealed the rate of inflation remained above the 2% target at 3.4% in the 12 months to May. The news led to the Bank of England’s Monetary Policy Committee voting to hold interest rates.

However, think tank the Institute for Public Policy Committee said the central bank was harming households by not cutting the base interest rate. It also added that GDP was lower than expected because interest rates have been kept too high for too long.

A Purchasing Managers’ Index (PMI) involves surveying companies to create an economic indicator. A reading above 50 suggests a sector is growing.

In June, PMI readings for May show the manufacturing and construction sectors were contracting, but they had improved when compared to a month earlier, leading to hopes that a corner has been turned. In addition, the composite PMI, which combines service and manufacturing surveys, moved back into growth.

Europe

Eurostat figures show the rate of inflation across the eurozone fell to 1.9% in May, down from 2.2% in April, taking it below the European Central Bank’s (ECB) 2% target for the first time since September 2024.

In response, the ECB lowered its three key interest rates for the eighth time in the last 12 months.

There was also positive news from PMI data. The eurozone continues to hover just above the 50 mark that indicates growth, and German business activity returned to growth in June. As the largest economy in the eurozone, German activity is important to the bloc, and factory orders were also higher than expected.

Ireland is leading the EU in terms of growth. The country had expected its GDP to grow by 3.2% in the first quarter of 2025, but exceeded this with an impressive 9.7% boost. The jump was linked to strong exports in pharmaceuticals and other key sectors as companies tried to get ahead of tariffs.

In the 12 months to May 2025, the rate of inflation in the US increased slightly to 2.4% and remains above the Federal Reserve’s target of 2%.

A PMI conducted by the Institute of Supply Management shows the US manufacturing sector is slipping due to tariff uncertainty. Indeed, 57% of the sector’s GDP contracted in May, up from 41% in April.

The data from the service sector was also negative, with figures showing it contracted in May for the first time in June 2024, and new orders fell at the fastest rate since December 2022.

However, separate data suggests that businesses are feeling more optimistic about the future.

The National Federation of Independent Business’s Small Business Optimism Index increased three points in May. It was the first rise since Trump took office at the start of the year thanks to trade talks taking place between the US and China throughout June.

The US economy also added 139,000 jobs in May. The number was slightly higher than forecast and could suggest that businesses feel confident enough to expand their workforce.

Asia

Data from China showed it wasn’t immune to the effects of the trade war.

China’s National Bureau of Statistics data shows inflation was -0.1% in May as prices dropped. Deflation affecting the country highlighted the importance of the US and China reaching a trade deal.

In addition, manufacturing activity in May shrank at the fastest pace in two and a half years. Firms were hit by falls in new orders and weaker export demand. The PMI reading was 48.5, down from 50.4 in April.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

The age you can access your pension may rise. Could it affect your retirement?

Mon, 07 Jul 2025 14:57:55 GMT

The age you can access your pension may rise. Could it affect your retirement?

In April 2028, the age you can usually access your pension, known as the “normal minimum pension age” (NMPA), will rise from 55 to 57. So, if you hope to retire at 55, you might need to update your retirement plan.

Even if your planned retirement date seems far away, creating a plan now could help you bridge a potential shortfall so you’re still able to give up work when you’re ready to.

As well as the NMPA, the State Pension Age is set to rise. From 6 May 2026, the age you can claim the State Pension will gradually increase from 66 to 67 in 2028 for both men and women. So, you might also need to factor in creating a larger income from your pension or other assets for an additional year before you can claim the State Pension.

Understanding your potential later-life income could help keep your retirement on track, even when policy changes.

Thousands of retirees could be affected by the change to the normal minimum pension age

According to government figures published in October 2024, the median expected age to retire in the UK is 65. If you’re among those who expect to retire at this age, the change to the NMPA may not affect you.

However, with around 10% expecting to retire before the age of 60, thousands of workers could find they need to delay their retirement if they can’t access their pension when they expect.

So, if you hope to retire at 55 or even earlier, here are four important steps that might allow you to do so.

4 steps you could take to prepare for the pension change

1. Check the details of your pension

While the NMPA applies to most pensions, there are some exceptions.

If you have an older workplace or personal pension, it may have a “protected pension age”, which might give you the right to access your savings earlier. So, it’s worth checking the details of your pensions before you make changes to your retirement plan.

2. Calculate your retirement income needs

The retirement lifestyle you want will affect how much income you need, and at what point you can afford to retire.

Thinking about your desired retirement lifestyle now could help you assess how you might retire at 55 if you cannot create an income from your pension straight away.

You might also want to consider how you’ll retire. More people are choosing to phase into retirement by gradually reducing working hours or moving to a role with greater flexibility.

According to a September 2024 article published by Global Recruiter , almost half of workers aged over 50 start to phase into retirement. Most of these workers plan to phase into retirement over a long period, such as 10 years.

A phased retirement might mean you’re able to move away from your current role sooner, so you have more time to focus on what’s important to you.

3. Consider all your assets when making a retirement plan

Often, when you think about creating a retirement income, your focus is on your pension. However, other assets, such as savings, investments held outside of a pension, and property, may be useful, especially if you want to retire before the NMPA.

As your financial planner, we could work with you to create a long-term financial plan that brings together different assets to support you in reaching your retirement goals.

4. Schedule regular reviews

There are two key reasons why regular retirement plan reviews are important.

First, your circumstances and goals might change. Second, further changes in government policy could affect your retirement plans in the future.

Regular reviews provide an opportunity to ensure your plan is still appropriate and reflects your wishes and pension policy.

A retirement plan could keep your finances on track

Changes to the NMPA don’t automatically mean you need to update your retirement plan. However, being informed could offer peace of mind as you move towards the exciting milestone.

Working with a financial planner could help you assess how you’ll create an income once you step back from work and identify potential gaps. Please contact us to talk to one of our team about your retirement.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

How technology could be harming your investment decisions

Wed, 11 Jun 2025 08:10:50 GMT

How technology could be harming your investment decisions

Technology has made it easier than ever to invest and review the performance of your portfolio. Yet, it could also be harming your decision-making skills and the way you approach managing your finances.

Understanding when and how technology has the potential to negatively affect your investments could mean you’re better able to spot and then prevent it.

Here are five reasons why technology might not be good for your investment strategy.

1. Technology gives you the opportunity to make snap decisions

When you invest, it’s often wise to do so with a long-term goal in mind. A longer investment time frame provides a chance for short-term market movements to smooth out and, hopefully, deliver returns.

So, having a long-term mindset when making investment decisions is often valuable.

Yet, with the ability to change your investments with just a few taps on your phone, it’s easy to make snap decisions based on emotions or your current circumstances. Instead of considering how your action could affect your finances in a decade, technology could allow you to invest in a way that reflects your situation now.

2. The 24/7 news cycle can provoke investor emotions

The world is more connected than ever. In many cases, this is positive, but it means there’s now a 24/7 news cycle that you can access almost anywhere.

Decades ago, you might read about short-term market movements in the morning newspaper. Now, you can track investment volatility minute-by-minute, and find numerous, sometimes conflicting, views on what it means.

This may lead to investors experiencing emotions that result in them acting in a way that doesn’t align with their investment strategy.

For instance, seeing the markets steadily decline throughout the day could make a nervous investor fearful, which results in them selling assets because they’re worried about the value of their investments falling further. Yet, by reacting to the news, they’ve turned paper losses into real ones and may miss out on a potential recovery.

The 24/7 news cycle doesn’t just provoke negative emotions in investors either. For example, you might watch a news segment about the “best” shares and excitedly purchase them.

3. Technology can amplify the urge to check investments frequently

For many individuals, a long-term approach to investing makes sense. So, when reviewing performance, you often want to assess returns over years rather than weeks or months.

While annual or quarterly reviews are useful for keeping your investment goals on track, many investors feel the urge to check their investments frequently. Having access to investment apps on your phone can amplify this and mean it’s simple to check how values have changed several times a day.

Much like the news, having access to this information isn’t automatically bad. However, it can lead to knee-jerk investment decisions that aren’t right for you because you respond based on short-term emotions.

4. Too much choice can feel overwhelming

Investors today can invest in a wide range of assets around the world. On one hand, greater choice means you have more opportunities to find investments that are right for your goals. On the other hand, too much choice can feel overwhelming.

Clearly outlining your goals and understanding the types of investments that are right for you can make the decision feel less daunting. This is a step a financial planner could help you with and then provide ongoing support, so you have someone to turn to if you have questions or can even take a step back from making decisions if you choose.

5. You could be more vulnerable to scams

Fraudsters have always tried to part victims with their money. However, they now have technology at their disposal that could make scams even harder to spot.

From cloning the phone number of a legitimate firm to using AI to create convincing sales materials, it isn’t always easy to spot the red flags. In addition, technology means you can be targeted while you’re on the go. You might be less likely to pay attention to the small details if you open an email on your phone or take a call while walking.

It isn’t always possible to recover losses if you’ve been targeted by a scam, so being vigilant is important. Remember, if you’re unsure if the person you’re communicating with is genuine or you have any doubt about an opportunity, take a step back to reassess.

Get in touch to talk about your investments

If you’d like our support when managing your investments, from understanding if investing is right for you to providing regular reviews, please get in touch. Our tailored financial plan could help you overcome some of the challenges technology might present.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Investment market update: May 2025

Tue, 03 Jun 2025 09:56:52 GMT

Investment market update: May 2025

Uncertainty continued to lead to market volatility in May 2025. However, there was some good news for investors as some markets recovered the losses they experienced in April 2025. Read on to find out more and what factors may have influenced your portfolio’s performance recently.

While market movements may be worrisome, remember, it’s a normal part of investing. Keep your long-term goals and strategy in mind when you review how the value of your investments has changed.

Tariff announcements continued to affect markets towards the end of May 2025

The month got off to a good start for investors – the FTSE 100, an index of the largest 100 companies listed on the London Stock Exchange, recorded its longest-ever winning streak. On 3 May, the index had made gains for 15 consecutive days and almost recovered all the losses that followed tariff announcements in April.

The European markets experienced some volatility at the start of the month as Friedrich Merz lost the vote to become Germany’s chancellor. It led to some calling for a fresh election, and also uncertainty – on 6 May, the German index DAX fell 1.9%.

After a tit-for-tat trade war sparked investor fear in April, many were optimistic when trade discussions between the US and China began on 7 May. Combined with the People’s Bank of China cutting interest rates by half a percentage point, this led to Asian stocks lifting. Indeed, the Shanghai Composite rose by almost 0.5%.

This was followed by Donald Trump, president of the US, announcing a “full and comprehensive” trade deal with the UK. When markets opened on 8 May, Wall Street was up 0.6%.

Hope that other countries will also reach agreements with the US lifted European markets. The DAX in Germany increased by 0.6% to reach a record high, while France’s CAC was up 0.5% on 9 May.

Wall Street surged on 12 May when it was revealed the US and China had agreed to a 90-day pause on tariffs. The Dow Jones Industrial Average (2.3%), S&P 500 (2.6%), and Nasdaq (3.6%) all rallied.

Similarly, when markets opened in Asia, Chinese indices jumped, particularly technology and financial stocks.

However, the positive news didn’t last throughout the month.

On 19 May, credit ratings firm Moody’s downgraded the US’s rating from triple-A to Aa1. The decision was linked to the growing US national debt, which is around $36 trillion (£26.6 trillion) and rising interest costs. The announcement led to global volatility.

What’s more, on 23 May, Trump threatened further tariffs, which led to markets falling.

In a bid to encourage technology giant Apple to make its iPhone in the US, Trump suggested the company could face a 25% tariff. Apple’s shares fell by around 3% before markets opened after the comments were made.

Trump also said EU imports would face a 50% tariff from the start of June. He added he wasn’t looking to make a deal with the bloc, but instead wanted EU businesses to build plants in the US. The news led to falls across European markets, including the DAX (-1.9%), FTSE 100 (-1.1%) and Italy’s FTSE MIB (-2%).

However, just a few days later, on 28 May, Trump agreed to delay EU tariffs and suggested meetings would be arranged to discuss a trade deal.

The Bank of England (BoE) decided to cut its base interest rate by a quarter of a percentage point to 4.25% – the lowest rate in two years – at the start of the month.

However, inflation data may raise concerns for the BoE. While inflation was expected to rise, it was higher than predicted. In the 12 months to April 2025, inflation was 3.5%, with increasing energy costs playing a key role in the rise.

GDP data was positive. The UK grew by 0.7% in the first quarter of 2025, making it the fastest-growing G7 economy. Yet, the think tank Resolution Foundation warned a rebound is unlikely, and it expected April data to be weaker.

The UK unveiled a trade deal with India, covering a range of products from cosmetics to food. The agreement represents the biggest trade deal since Brexit in 2020 and is expected to increase bilateral trade by more than £25 billion over the long term.

While many businesses are worried about the potential effects of trade tariffs, aerospace and defence firm Rolls-Royce said it could offset the impact. CEO Tufan Erginbilgic said the company expected to deliver an underlying operating profit of between £2.7 billion and £2.9 billion in 2025 on 1 May, which led to share prices increasing by 2.7%.

The firm benefited from a further boost of 4% on 8 May when the UK-US trade deal was announced.

However, other firms aren’t expected to fare as well.

Drinks company Diageo, which produces around 40% of all Scotch whisky, predicts it will lose around £150 million due to tariffs.

Europe

Inflation in the eurozone continued to hover above the 2% target at 2.2% for the 12 months to April 2025.

Eurostat lowered its estimate for economic growth in the eurozone in the first three months of the year to 0.3%. In the first quarter of 2025, Ireland boasts the fastest-rising GDP (3.2%), while contractions were measured in Slovenia, Portugal, and Hungary.

Unsurprisingly, the European Commission also cut its growth forecast for the eurozone in 2025 from 1.3% to 0.9%. It said this was “largely due to the increased tariffs and the heightened uncertainty caused by recent abrupt changes in US trade policy”.

HCOB’s PMI output index for the eurozone fell from 50.9 to 50.4 in April – a reading above 50 indicates growth. While still growing overall, it’s notable that France’s private sector contracted for the eighth consecutive month and Germany’s output barely rose. However, there was a strong increase in Ireland, and Spain and Italy also expanded.

There is potentially good news on the horizon. Germany’s factory orders jumped by 3.6% in March as companies tried to get ahead of tariffs.

Trump's tariffs, which aim to reduce the trade deficit, have initially, at least, had the opposite effect.

As businesses tried to stock up before new tariffs were imposed on goods from abroad, the US trade deficit reached a record high in April. The deficit increased by $17.3 billion (£12.8 billion) to $140.5 billion (£104 billion).

GDP data also suggests Trump's policies are having a negative effect on the economy. In the first three months of 2025, GDP fell by 0.3%; this is in stark contrast to the 2.4% rate of growth recorded in the final quarter of 2024. It marks the first time the US economy has shrunk in three years.

The University of Michigan’s index of consumer sentiment indicates households are worried about their finances. Americans are concerned about potentially weakening incomes, with the index falling 26% year-on-year.

Tariffs are expected to affect a range of businesses, including the car manufacturing sector.

The three big US car manufacturers – General Motors, Ford, and Stellantis – all have some manufacturing facilities in Mexico or Canada that serve the US market and are likely to be affected by trade tariffs.

General Motors expects tariffs to cost the company as much as $5 billion (£3.7 billion) this year. Similarly, Ford has said tariffs will cost around $1.5 billion (£1.1 billion) in profits this financial year and has suspended its guidance while it seeks to understand the full impact of consumer reaction and competitive response.

Asia

At the start of the month, the Bank of Japan cut its economic growth forecast for the fiscal year ending March 2026 from 1.1% to 0.5%. The bank cited trade policies as the reason for the fall.

Indeed, GDP for the first quarter shows Japan’s economy contracted by 0.7% due to a decline in exports and private consumption as households cut back their spending.

Trade between China and the US fell sharply in April. Shipments to the US fell 21% year-on-year, and imports declined by 14%. However, the data suggests that Chinese manufacturers have found alternative markets. Overall exports jumped by 8.1% compared to the forecast rise of 1.9%.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

4 useful insights from a decade of Pension Freedoms

Wed, 14 May 2025 10:04:33 GMT

4 useful insights from a decade of Pension Freedoms

A decade ago, the introduction of Pension Freedoms shook up retirement planning and gave retirees more options than ever.

Before 2015, if you had a defined contribution (DC) pension, the common route was to use the money accumulated to purchase an annuity. The annuity would then provide you with a regular income, usually for the rest of your life.

While an annuity can be valuable in some circumstances, it isn’t flexible.

To give retirees more choice, Pension Freedoms were introduced in 2015. If you choose, you can still purchase an annuity, but you might also opt to withdraw lump sums from your pension or take a flexible income that you’re in control of.

You may also mix the options. For instance, you may take an initial lump sum to kickstart retirement, purchase an annuity to create a base income, and withdraw a flexible income when you need to.

So, with a decade of Pension Freedoms data and experiences to draw from, what insights could be valuable when planning for your retirement?

Pensioners could be missing out on returns by withdrawing a tax-free lump sum

One of the key changes in 2015 was the ability to withdraw 25% of your pension tax-free (up to £268,275 in 2025/26) when you turn 55, rising to 57 in 2028.

The good news is that, despite fears of reckless spending, figures suggest most retirees aren’t immediately withdrawing this lump sum. According to Royal London data published in March 2025, just 8% of people took their tax-free lump sum within six months of turning 55.

However, more than half of retirees choose to withdraw the lump sum at some point. The most common reason was to pay off a mortgage or reduce other debt, which could provide greater financial security over the long term.

Yet, around a quarter of people taking the tax-free cash simply deposited the money in the bank.

While having accessible cash might feel reassuring, leaving it in your pension, where it’s likely to be invested, could yield higher returns over a long-term time frame when compared to a savings account.

You don’t need to withdraw the 25% lump sum in one go to benefit from the tax-free cash. You can also spread it across multiple withdrawals. So, if you don’t have a clear plan to spend a lump sum, leaving it in your pension might make financial sense.

Over-50s are worried about running out of money in retirement

As you're in control of how you access your pension savings, there is a risk that you could withdraw too much too soon, either by taking a large lump sum or withdrawing an unsustainable regular income.

While figures suggest most retirees are taking a measured approach, 42% of over-50s told Royal London that they worry about running out of money in retirement.

There are several ways to alleviate your fears and have confidence in your retirement finances.

One option might be to purchase an annuity to create a base income.

According to statistics from the Financial Conduct Authority (FCA), retirees are often choosing flexi-access drawdown over purchasing an annuity.

Indeed, in 2023/24, 68% of retirees accessing a pension worth between £100,000 and £249,999 did so by taking a flexible income. In contrast, just under 20% purchased an annuity. While an annuity isn’t right for everyone, it could offer peace of mind.

Another option is to work with a financial planner when you take a flexible income. We could help you assess your pension and other assets to understand what a sustainable income is for you.

Retirees could face an unexpected tax bill

While you may have retired, you could still benefit from considering your tax liability, including Income Tax.

If your total income, including withdrawals from your pension and the income you receive from the State Pension, exceeds the Personal Allowance (£12,570 in 2025/26), you may be liable for Income Tax. Managing your withdrawals could help you avoid an unexpected tax bill or being pushed into a higher tax bracket.

Yet, the Royal London research found just 4 in 10 people considered the tax implications of withdrawing a taxable lump sum from their pension.

Most retirees aren’t seeking advice or guidance

The FCA data indicates that just 30% of people accessing their pension for the first time took regulated financial advice.

In addition, the Royal London survey suggests that 1 in 5 people didn’t speak to anyone about their pension or use any tools, such as income or tax calculators, before they made a withdrawal.

While retirement is an exciting milestone and you may feel confident handling your finances, it’s important to remember that the decisions you make now could affect your financial security for the rest of your life.

Seeking professional advice or guidance could help you make choices that are right for you, identify potential risks, and put your mind at ease as you enjoy the next chapter of your life.

Working with a financial planner may help you navigate Pension Freedoms

Pension Freedoms mean you have far more flexibility than previous generations, but they may also come with additional responsibility, such as ensuring you don’t run out of money. A retirement plan could help you manage your finances as you prepare for the milestone and once you give up work.

Please get in touch to speak to one of our team about your options for creating an income when you retire.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

Investment market update: April 2025

Wed, 30 Apr 2025 14:56:16 GMT

Investment market update: April 2025

Once again, US president Donald Trump’s trade tariffs have affected investment markets throughout April 2025 and could have far-reaching implications over the coming months.

Indeed, UN Trade and Development now predicts that global growth will slow to 2.3% in 2025, compared to 2.8% last year.

While experiencing volatility can be daunting as an investor, remember to take a long-term view. Historically, markets have recovered from periods of downturn. However, it’s important to note that investment returns cannot be guaranteed.

Trade tariffs and their effect on the market in April 2025

Since Trump took office in January, uncertainty around trade policies has affected global markets, and these announcements continued to have an effect in April.

On 2 April, markets prepared for key tariff announcements from the US, dubbed “Liberation Day” by the White House.

The speculation led to a European stock sell-off gathering pace, with pharmaceutical shares being particularly affected. The Stoxx 600 healthcare index, which is composed of European businesses in the healthcare sector, fell by around 2.5%.

On “Liberation Day”, Trump announced sweeping two-tier tariffs. A baseline 10% tariff was applied universally to imports from all countries (except Mexico and Canada) and then additional country-specific “reciprocal” tariffs were also applied.

As a result, on 3 April, markets around the world plummeted when they opened – from Tokyo’s Nikkei (-3.4%) to London’s FTSE 100 (-1.4%). In fact, Wall Street recorded its worst day since 2020 as the S&P 500, which tracks 500 leading companies in the US, closed 4.9% lower.

On 4 April, Beijing retaliated and announced 34% tariffs on the US.

As the market continued to fall, it didn’t stop there, with both the US and China increasing their tariffs several times. By 11 April, China’s tariff had reached 125% and the US’s was 145%.

Amid this tit-for-tat trade war, Trump announced a 90-day pause on reciprocal tariffs for most countries, which led to markets rallying.

Despite the uncertainty experienced throughout April, the market began to settle towards the end of the month. On 24 April, the FTSE 100 closed 0.65% higher than it opened and was back to the level it was on 3 April before the tariff volatility. It was a similarly positive day for the main indices in Germany and France.

Headline data was mixed for the UK in April.

Figures from the Office for National Statistics show the economy unexpectedly grew by 0.5% in February. While this will certainly be welcome news for chancellor Rachel Reeves, experts predict a downturn in March due to the tariffs.

Inflation also fell in line with expectations to 2.6% in the 12 months to March 2025, compared to 2.8% a month earlier. The Bank of England hinted it could cut the base interest rate at the next Monetary Policy Committee meeting in May.

However, readings from S&P Global’s Purchasing Managers Index (PMI), which provides an insight into the health of businesses, aren’t optimistic.

The PMI indicated manufacturing production fell at a faster pace in March as new orders declined at the sharpest rate in 19 months.

In addition, the private sector went into decline for the first time since October 2023 due to exports falling at the fastest pace in almost five years.

Europe

Eurostat data shows inflation was down across the eurozone to 2.2% in the 12 months to March. There was a significant variance between countries, from France (0.9%) to Romania (5.1%).

The figures paved the way for the European Central Bank to make its seventh cut to interest rates in the last 12 months. The main interest rate fell from 2.5% to 2.25%.

PMI data was more positive for the eurozone than the UK.

Factory output increased for the third consecutive month and crossed the threshold that indicates growth for the first time in two years. This boost is linked to orders rising as businesses tried to beat incoming tariffs.

Perhaps unsurprisingly given market volatility, a survey from the ZEW Economic Research Institute found German investor morale plunged to the lowest level since the start of the war in Ukraine. The president of the institute pointed to the “erratic change in US trade policy” as a reason.

There could be difficult months ahead for the US. The International Monetary Fund increased the probability of a US recession occurring in 2025 from 25% to 37%.

Tariffs affected more than the markets too. Uncertainty around trade policy led to factory production stalling, according to S&P Global’s PMI. However, at 50.2, the reading remained just above the 50 mark that indicates growth.

Similarly, the PMI showed US business activity fell to a 16-month low.

Some of the largest businesses in the US have suffered a setback due to the tariffs.

On 3 April, Apple shares were down by 9%, wiping $300 billion (£225 billion) from the company’s value. The business relies on imports from Asia and is likely to face higher costs as a result.

Tesla’s quarterly sales also indicated challenges as they slumped 13% in the first three months of the year. The fall was linked to strong competition from rivals and owner Elon Musk’s involvement with Trump’s presidential campaign.

Asia

Exports from China climbed by 12.4% year-on-year in March – a five-month high. The jump was caused by factories rushing to get shipments out before tariffs took effect.

There was a blow to China when Fitch downgraded its credit rating from A+ to A. The organisation said the decision was made before tariffs were considered and is due to China’s rising debt and deteriorating public finances.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

4 reasons to remain calm amid market volatility and uncertainty

Mon, 14 Apr 2025 08:50:09 GMT

4 reasons to remain calm amid market volatility and uncertainty

Geopolitical tensions have led to a bumpy start to 2025 for investors. If you’re worried about volatility and what it might mean for your long-term finances, there are reasons to remain calm despite the uncertainty.

The ongoing war in Ukraine has resulted in some anxiety in Europe, with the UK and other countries committing to increasing defence spending. In addition, the new Trump administration in the US has imposed several trade tariffs on partners and suggested more will follow.

As a result, many companies and sectors have seen share prices rise and fall more sharply than usual.

Indeed, according to the Guardian , the euro STOXX equity volatility index, which tracks market expectations of short- and long-term volatility, reached a seven-month high at the start of March 2025. The index has almost doubled since mid-December 2024, suggesting investors are feeling nervous.

As an investor, these external factors are likely to have affected the value of your investments over the last few months.

Investment markets don’t like uncertainty

Uncertainty is one of the key factors that contributes to volatility in investment markets.

Unknown policies or other events can make it difficult to understand how a company will perform financially over the long term. This uncertainty can affect the emotions of investors, who may be more likely to make knee-jerk decisions as a result.

Imagine you hold investments in an electronic goods company based in China. In the news, you read the US will impose a 10% tariff on all Chinese goods. As a major export market, this decision by the US could significantly affect the profitability of the company.

After hearing the news, you might worry about your finances and whether you should still invest in the company. If enough investors act on these concerns, it may result in the value of the shares in the company falling.

With so much global uncertainty at the moment, your investments and the wider market could experience more volatility than usual in the coming months.

Level-headed investors could improve investment outcomes over the long term

While it may be difficult, remaining level-headed during times of uncertainty could make financial sense. Here are four reasons to remain calm.

1. Periods of volatility have happened before

When markets are volatile, it may feel unusual or unexpected. However, market volatility is a normal part of investing.

While investment returns cannot be guaranteed, historically, markets have delivered returns over a long-term time frame. Even after downturns, markets have bounced back.

Remembering this could help put your mind at ease and allow you to focus on the bigger picture rather than short-term market movements.

2. Diversified investments could smooth out volatility

Newspaper headlines are designed to grab your attention, and they’re likely to focus on the parts of the market that are experiencing the greatest volatility. For example, you might read that “technology stocks have plunged 10%” or “markets in Japan are booming”.

While these headlines aren’t inaccurate, they don’t tell you the whole story.

In reality, a balanced investment portfolio will typically include investments across a range of assets, sectors and geographical locations.

So, while a fall in technology stocks might affect you, it may not have as large of an effect as you expect if you only read the headlines. Gains or stability in other areas of your investment portfolio could balance out the dip.

3. Market volatility may present an opportunity to buy low

If you’d previously planned to invest a lump sum or you invest regularly, market volatility may cause you to rethink. However, halting your investments might mean you miss an opportunity.

When markets fall, you might have a chance to invest when the price of stocks and shares is lower, allowing you to buy more units for your money. Over the long term, this could lead to better yields.

While investing during a low period could result in higher returns over the long term, you should ensure investments are appropriate. You may want to consider your financial risk profile and wider circumstances when deciding how to invest your money.

4. Trying to time the market can prove costly

Finally, if you’re focused on what the market is doing today, it can become tempting to try and time the market – to buy low and sell high.

However, with so many external factors affecting markets, it’s impossible to consistently time it right. Even professionals, who have a team and resources, don’t always get it right.

Rather than trying to time the market, remaining calm and sticking to your long-term investment strategy is often a better course of action.

Contact us to talk about your investments

If you have any questions about how your investments are performing or would like to review your investment strategy, please get in touch. We’re here to answer your questions and help you feel confident about your financial future.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Investment market update: March 2025

Wed, 02 Apr 2025 10:30:47 GMT

Investment market update: March 2025

Trade wars and fears that tariffs could spark recessions meant investment market volatility continued in March 2025. Read on to find out more about some of the factors that may have affected the value of your investments recently.

The Organisation for Economic Co-operation and Development slashed the growth forecast among advanced economies this year due to concerns about trade wars. The organisation now expects the global economy to grow by 3.1% in 2025 – down from the previous forecast of 3.3%.

As investors sought to move money into “safe” assets, the price of gold increased. On 14 March, it exceeded $3,000 (£2,324) per ounce for the first time.

While switching an asset that’s experiencing ups and downs to one that’s more stable may seem like a sensible move, remember volatility is part of investing. Historically, markets have delivered returns over long-term time frames, even after periods of downturn, and often sticking to your investment plan makes financial sense.

Chancellor Rachel Reeves delivered the Spring Statement at the end of March, setting out the government’s spending plans, against a challenging backdrop.

The UK economy contracted by 0.1% in January 2025 when compared to a month earlier following a decline in factory output. In addition, while the rate of inflation is declining, at 2.8% in the 12 months to February 2025, it’s still above the Bank of England’s (BoE) 2% target.

The news prompted the BoE to hold its base interest rate at 4.5%, which will have disappointed households and businesses that were hoping for a cut to ease the cost of borrowing.

Data from Purchasing Managers’ Indices (PMI) was pessimistic too.

According to S&P Global, the manufacturing sector continues to face tough conditions. The headline figure was 46.9 in February. It’s the fifth consecutive month that the reading has been below the 50 mark which indicates growth. There were declines in output, new orders, and employment.

The construction data was similar, with the headline figure falling to 46.6, the biggest downturn since 2009 aside from the 2020 pandemic. There were steep declines in housebuilding and civil engineering activity.

Despite speculation that Reeves would increase taxes and reduce tax thresholds or exemptions, the Spring Statement focused on cutting the welfare budget. Indeed, the announcements made in the 2024 Autumn Budget remain intact.

Investment markets were affected by US trade wars and the war in Ukraine.

On 3 March, European leaders met in London for a summit to draw up a Ukraine peace plan. The meeting led to the pound and European stock market soaring as investors hoped for a resolution. Perhaps unsurprisingly, defence stocks saw the biggest gains, including the UK’s BAE Systems, which jumped by more than 14%.

However, the boost was short-lived. On 4 March, trade wars between the US and Canada, Mexico, and China triggered a drop of 1.27% on the FTSE 100 – an index of the 100 biggest companies on the London Stock Exchange.

There was an uptick in optimism towards the end of the month.

On 24 March, investors hoped that President Donald Trump would show flexibility ahead of the unveiling of new global tariffs in April. The FTSE 100 opened 0.5% up, with mining stocks leading the rally – winners included Anglo American (3.9%), Antofagasta (3.3%), Glencore (3%), and Rio Tinto (2.5%).

Europe

Data from the European Central Bank (ECB) shows inflation is moving closer to the 2% target. It was 2.4% in the 12 months to February 2025 across the eurozone.

The news prompted the ECB to cut the base interest rate by a quarter of a percentage point to 2.25%.

Data suggests the wider European economy is facing similar challenges to the UK.

Indeed, S&P Global PMI figures show a factory downturn. In addition, the headline PMI figure fell from 45.5 in January to 42.7 in February. Worryingly, the two largest economies in the EU, Germany and France, experienced the sharpest downturns.

The Euro Stoxx Volatility index, which tracks investor uncertainty, found stock market volatility hit a seven-month high in February and has more than doubled since mid-December 2024 due to investors feeling nervous about the global outlook.

So, it’s not surprising that there have been ups and downs for investors.

The 3 March summit in London benefited wider European stock markets. Again, defence stocks saw the biggest gains – Germany’s Rheinmetall, France’s Thales, and Italy’s Leonardo all saw an increase of at least 14%.

Expectations that US tariffs will hit the automaker industry led to stocks in the sector falling on 4 March. Among the shares affected were tiremakers Continental, which saw a 9% drop, as well as Daimler Truck (-6.6%), BMW (-5.5%), and Mercedes-Benz (-4.5%).

US inflation is nearing the Federal Reserve’s 2% target after a rate of 2.8% was recorded in the 12 months to February 2025.

However, there was negative news from the labour market. According to the Bureau of Labor Statistics, the unemployment rate edged up to 4.1% in February.

PMI readings for the manufacturing sector also reflected this trend. New orders fell in February and companies continued to lay off staff, which may suggest they don’t feel confident in the future. Yet, the sector has grown for two consecutive months.

On 3 March, in contrast to Europe, Wall Street dipped slightly. The technology-focused Nasdaq index was down 0.8% and the broader market indices Dow Jones and S&P 500 both fell 0.3%.

The following day, Trump declared 25% tariffs on imports from Canada and Mexico and 10% tariffs on imports from China. The news led to the dollar weakening, and indices tumbling further – the Nasdaq fell 2.6% and S&P 500 was down 1.7% – and the declines continued into the next week.

Technology stocks in particular have been hit hard by the market volatility. AJ Bell warned since the start of 2025, $1.57 trillion (£1.21 trillion) had been wiped off the value of the Magnificent Seven – seven influential and high-performing US technology stocks – as of 4 March.

Carmaker Tesla is among the biggest losers. As of mid-March, its share price had halved since it benefited from a post-election rally at the end of 2024, which has partly been driven by sales in the EU falling by almost 50%.

Asia

As a country with a trade surplus and a large US market, tariffs are expected to hamper growth in China.

China’s GDP target is 5% for 2025, the same target it hit in 2024. However, economists believe replicating this in 2025 will be difficult. China succeeded in reaching the 2024 target thanks to an export boom at the end of the year – exports increased by 10.7%, as some businesses tried to beat the expected tariffs.

In contrast, between January and February 2025, Chinese imports fell by 8.4% year-on-year after economists had expected growth of 1%. The data might suggest that Chinese manufacturers are cutting back on buying raw materials and parts due to trade concerns.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

3 retirement financial shocks that could affect your finances

Thu, 20 Mar 2025 09:50:59 GMT

3 retirement financial shocks that could affect your finances

Those who have retired or are nearing the milestone are consistently overlooking the risk of financial shocks when compared to other generations, a survey published in PensionsAge in December 2024 suggests.

According to the report, 43% of over-50s had thought about financial shocks but not included the risks in their retirement plan. A further 32% haven’t considered risks at all.

Later in life, you might feel more financially secure than you did when you were younger, and if you no longer work, you don’t need to consider the risk of losing your job or being unable to carry out your role due to illness. So, it’s easy to see why weighing up financial shocks may become less of a priority in your later years.

However, financial shocks still have the potential to have a significant effect on your financial security and lifestyle. Read on to discover three shocks you may want to consider when you review your retirement plan.

1. An illness could affect your short- and long-term finances

During your working life, illness may have been a financial shock you incorporated into your financial plan as it could limit your ability to work. While an illness may not affect your income in retirement, it could still derail your finances.

For example, your outgoings could rise significantly. If you’re ill, you might need to factor in the cost of travelling to appointments and increased heating bills, or you might even choose to pay for private medical care. In some cases, a long-term diagnosis could lead to other large costs, such as needing to adapt your home or pay for a carer to provide support in your daily life.

If you haven’t budgeted for these outgoings or don’t have an emergency fund you can use, the cost of being ill could mean you deplete your pension and other assets quicker than you expect. This might leave you in a financially vulnerable position later in life.

Despite this, illness is something only 19% of over-50s considered when setting out their retirement plan. Similarly, just 17% had thought about the possibility of going into care.

2. A partner passing away may leave an income gap

The death of your partner can be difficult to think about. Indeed, it’s something only 18% of over-50s have fully planned for and almost a third have avoided the topic completely.

Yet, it may be an important part of creating long-term financial security for both you and your loved one. If one of you passed away, how would it affect the surviving partner’s finances in the short- and long-term?

For instance, if just one of you has an annuity that pays a regular income throughout retirement, this would stop when the person passes away, potentially leaving an income gap for the surviving partner. To mitigate this risk, you might select a joint annuity instead, which would continue to pay an income to the surviving partner for the rest of their life.

So, while these types of conversations can be emotional and challenging, having them and adjusting your retirement plan, if necessary, could offer peace of mind that you or your partner will be financially secure if the other passes away.

3. You might want to support other family members

If your child, grandchild, or other loved ones faced a financial emergency, would you want to offer them support?

Many people will answer “yes” to this question. Yet, only a small proportion of over-50s have considered how they’d lend a helping hand in retirement. As part of their retirement plan, 16% of parents have included a provision in case their children need urgent financial support and 7% have thought about how they may need to support their parents.

If you haven’t thought about how you’d lend support, it could mean you’re unsure how to respond if a loved one approaches you for help. It may lead to a decision that’s not right for you and could affect your long-term finances.

For instance, if you were to withdraw a lump sum from your pension to gift to your child, you could be faced with a larger tax bill than you expect, and it might have an impact on the long-term investment returns of your pension. Instead, depending on your circumstances, depleting other assets, like savings, could be more efficient.

Making this type of financial shock part of your retirement plan could mean you’re able to feel confident in the support you provide.

While you’re weighing up how to support your loved ones, you may want to review your wider estate plan, which includes setting out how you’d like your assets to be distributed. For some, this will involve writing a will that will state how assets are to be divided when you die. You may also consider gifting during your lifetime.

If you’d like support when reviewing your estate plan, please get in touch.

Considering financial shocks could boost your confidence in retirement

While weighing up the risk of financial shocks might seem like a daunting task, it may lead to you feeling more confident about your retirement. Knowing you’ve taken steps to improve your financial security, even if something unexpected happens, could allow you to focus on enjoying the next chapter of your life.

Get in touch with our team to talk about which steps may mitigate the effect of financial shocks during your retirement.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

The Financial Conduct Authority does not regulate tax planning or estate planning.

Investment market update: February 2025

Tue, 04 Mar 2025 15:13:55 GMT

Investment market update: February 2025

After reading headlines throughout February, you might be expecting a gloomy investment outlook. Yet, despite threats of trade wars and uncertainty around the world, there were market highs. Read on to find out more about some of the factors that influenced investment markets.

As investment markets are experiencing volatility, it’s perhaps unsurprising that some investors sought the “safe haven” of gold. On 10 February, the price of gold hit a record high of $2,900 (£2,288) an ounce.

While you might be tempted to follow suit and change your investment strategy, remember to focus on long-term performance. While returns cannot be guaranteed, volatility is part of investing and, historically, markets have delivered returns over long-term time frames.

The Bank of England (BoE) started the month by cutting the base interest rate from 4.75% to 4.5%, which may provide some relief to borrowers. However, higher than expected inflation could mean the Bank is less likely to make a further cut in March.

Office for National Statistics (ONS) data shows UK inflation was 3% in the 12 months to January 2025 – an increase of 0.5% when compared to a month earlier.

Additional data from the ONS was a mixed bag.

The chancellor will no doubt welcome news that the UK returned to growth in the final quarter of 2024 after the economy grew by 0.1% between October and December. However, GDP per head fell for the second quarter running and the manufacturing sector shrank for the fifth consecutive quarter.

The BoE also slashed its growth forecast. It halved its prediction made in November 2024, and now expects GDP to increase by just 0.75% in 2025.

In addition, a report from S&P suggests businesses are shedding jobs at the fastest pace in the last 15 years (excluding the pandemic). The trend was linked to higher payroll costs following increases to minimum wage and employer National Insurance contributions unveiled in the Autumn Budget.

Markets in the UK were rocky at the start of February. On 3 February, the FTSE 100 fell 1.25% when markets opened following talks of trade tariffs from the US and almost every share on the index was down.

Yet, just days later, on 6 February, the FTSE 100 hit a new closing high on the back of the BoE cutting interest rates. Then, on 10 February, the index hit another high, this time led by BP, which saw a 7% increase after activist investor Elliott Investment Management took a stake in the company.

Amid growing geopolitical tensions, on 25 February, prime minister Keir Starmer announced the government will increase defence spending to 2.5% of GDP by 2027. The news led to UK defence stocks rising, including BAE Systems, which lifted 4.2%.

Europe

Official figures from Eurostat show the eurozone narrowly avoided stagnation at the end of 2024 after posting growth of 0.1% in the final quarter. Growth varied across the bloc, both France and Germany contracted, while Spain grew 0.8%.

Figures from S&P Global’s Purchasing Managers’ Index (PMI) indicate the eurozone may have turned a corner. Indeed, the output index was above 50, which indicates growth, for the first time since August 2024. Spain was the main growth engine, but Germany, the largest economy in the bloc, posted its best monthly performance since May 2024.

Goldman Sachs warned the eurozone faced a “sizeable” hit from trade tensions.

Indeed, tariff threats are already affecting the business decisions of some companies. Beauty firm Estee Lauder announced plans to cut 7,000 jobs as it significantly expanded its restructuring programme to allow it to manage “external volatility, such as potential tariff increases globally”.

Similar to the UK, European markets opened in the red on 3 February. Germany’s Dax (-2%), France’s CAC 40 (-1.9%), Spain’s IBEX (-1.7%) and Italy’s FTSE MIB (-1.4%) were all affected by investor anxiety about the effect tariffs will have.

Again, the market didn’t experience a downturn for long.

European shares hit a record high on 12 February. The pan-European Stoxx 600 increased by 0.2% led by Amsterdam-based brewer Heineken, which saw a 12% jump after it revealed better than expected profits.

Following the US side-lining Ukraine during peace talks with Russia, investors anticipated a rise in military spending. On 17 February, more than €18 billion (£14.9 billion) was added to the value of European defensive stocks.

The headline figure for inflation was 3% in the 12 months to January 2025 after a slight increase when compared to a month earlier. The data may mean the Federal Reserve holds off cutting interest rates in the coming months.

Since taking office in January, President Donald Trump has implemented several trade tariffs and made threats to impose more. Trump has said tariffs will protect the US economy, but early signs might indicate it’s backfired.

The US trade deficit widened by around $19.5 billion (£15.3 billion) to $98.4 billion (£77.5 billion) as imports increased at the end of 2024. The jump may be driven by US companies trying to beat potential tariffs by shipping goods in larger quantities.

In contrast to initial speculation suggesting the Trump administration would boost US businesses, JP Morgan analysts said it was now leaning towards a “business unfriendly stance” due to tariffs.

Trump has also spoken about plans to cut immigration and deport those who are not authorised to live in the US. Global investment bank Goldman Sachs has warned these policies could harm economic growth. Indeed, the bank said in a baseline scenario, lowering immigration would result in losing 0.1% of GDP every quarter.

The report also noted that deportation could severely disrupt some industries. In the US, unauthorised immigrants account for around 4–5% of the workforce, but in some sectors, it is as high as 15–20%. The bank added losing these workers may lead to higher inflation.

The market volatility experienced in Europe on 3 February, affected the US too. Indeed, the Dow Jones – an index of 30 prominent companies listed on stock exchanges in the US – was down 1.26% at the start of trading. The broader S&P 500 index also fell by more than 1.6%.

After an initial post-election bounce, Elon Musk’s Tesla saw stocks tumble by 1.5% on 25 February after data showed European sales were plunging.

Asia

Markets in Asia started poorly in September as concerns about sweeping tariffs from the US weighed on exports across the region. Indeed, on 3 February, Japanese and South Korean automakers saw dips, including Honda, which fell by around 7%, and Toyota and Nissan, both of which slipped by more than 5%.

When China’s market reopened on 5 February following Lunar New Year celebrations, the CSI 300 index fell by 0.6% on opening.

The threat of tariffs is expected to affect economic performance too.

South Korean think tank Korea Development Institute now projects the country will grow by 1.6% in 2025 – 0.4 percentage points lower than it estimated in November 2024. The organisation said the lower pace of growth was due to a “deterioration of the trade environment”.

However, it wasn’t all negative.

In fact, Chinese technology stocks continued to perform well after receiving a boost in January following the launch of the AI app DeepSeek. The Hang Seng TECH index in Hong Kong was up 2.7% on 12 February and had increased by around 25% in the month to mid-February.

Among the companies that benefited from the boost was internet giant Alibaba and carmaker BYD, which boasted gains of 25% and 30% respectively for the month to mid-February.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

The cryptocurrency basics you need to know before you consider investing

Thu, 20 Feb 2025 12:56:47 GMT

The cryptocurrency basics you need to know before you consider investing

Even if you’ve never considered investing in cryptocurrency, also known as “cryptoassets”, the chances are, you’ve heard of the term. As more people invest in them, understanding what it means, and the risk associated with investing in these types of assets could be valuable.

According to the Financial Conduct Authority (FCA), as of August 2024, around 12% of UK adults, or 7 million people, own cryptoassets. Yet, almost everyone (93%) has heard of them.

In simple terms, cryptocurrency is a type of electronic cash. However, it offers an alternative way of storing value, with transfers and payments occurring through a peer-to-peer system. This means you can send and receive cryptocurrency without an intermediary, such as a bank.

The value of cryptocurrency changes, which means some people invest in it hoping that the value will rise. However, it’s often unpredictable.

According to the Bank of England (BoE), between 2015 and 2024, the value of the pound did not change by more than 10% in one day. In contrast, Bitcoin, one of the most popular types of cryptocurrency, experienced far more volatility. Indeed, it increased by 22% one day and fell by 26% on another during the same period.

Bitcoin wasn’t invented until more than 20 years after the first cryptocurrency was conceptualised

While Bitcoin might be one of the most commonly known cryptocurrencies and the largest by market capitalisation, it wasn’t the first.

In fact, the first cryptocurrency was proposed in 1983 by American David Chaum. He conceptualised a token currency called eCash that could be transferred between individuals privately.

Bitcoin, which was invented in 2008, built on Chaum’s and others’ ideas to become the first decentralised cryptocurrency. The ups and downs of Bitcoin’s value have made headlines, with early investors seeing the value of their assets soar.

As well as Bitcoin, there are thousands of different cryptocurrencies available today, including Ethereum, Tether, and Binance Coin. The cryptocurrency landscape is constantly evolving, and new coins are created every year.

Potential high returns are enticing investors, but they aren’t guaranteed

There are many reasons why investors might be enticed by cryptocurrency, including the potential returns.

In the past, cryptocurrency has made headlines when its value has soared, which may make it seem like an asset to invest in if you want to get the most out of your money. However, as with other asset classes, the greater the potential return, the more risk you’re likely to be exposed to.

Some investors could find they’re disappointed by the returns cryptocurrency delivers too.

An April 2023 report from the Financial Services Compensation Scheme (FSCS) found that around a third of cryptocurrency investors didn’t see returns in line with their expectations.

Worryingly, the FSCS report suggests some are investing in cryptocurrency due to a fear of missing out.

Indeed, 80% of people who have invested in cryptoassets said one of their motivations to invest was being “swayed by the hype”. Following the investment decisions of others could mean you make choices that aren’t right for your goals or circumstances, including taking too much investment risk.

Investing in cryptocurrency is typically high risk

As mentioned, cryptocurrency is typically a high-risk investment and not suitable for many investors as a result. In fact, the BoE warns the value of cryptocurrency could fall to zero, which would make the asset worthless.

In addition, there are other risks to weigh up before you decide to invest in cryptocurrency, including:

Cryptocurrency remains unregulated in the UK. So, if something goes wrong, it’s unlikely you will be protected and you could lose all of your money.
Similarly, cryptocurrency typically falls outside of existing consumer protections, which could mean there’s a lack of recourse should you face challenges and want to seek compensation.
While other assets can rise and fall in value, historical data suggests stocks, shares, and bonds deliver returns over a long-term time frame, though this cannot be guaranteed. As a relatively new asset, there is a lack of historical data on cryptocurrency, which can make it even more uncertain.
Some forms of cryptocurrency are difficult to sell and convert to cash without losing some of its value. This could present some challenges if you need to access the wealth tied up in cryptocurrency quickly.

While cryptocurrency may seem like an exciting investment opportunity, it’s important to weigh the potential returns against the risks and ensure it’s appropriate for you.

Get in touch to talk about your investments

If you’d like to discuss how investing in a range of assets may help you reach your financial goals, please get in touch. We could work with you to create an investment strategy that suits your needs and financial situation.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Crypto assets are not regulated financial products so please be aware that trading them carries a considerable amount of risk for your capital. Cryptocurrencies are also not covered by existing consumer protection laws.

Investment market update: January 2025

Mon, 03 Feb 2025 14:04:18 GMT

Investment market update: January 2025

Concerns around potential trade wars following President Trump’s inauguration weighed on investment markets in January 2025, but there was positive news too. Read on to discover some of the factors that may have affected the performance of your investments.

Keep in mind that short-term market movements are part of investing and taking a long-term view is an important investment strategy for many people.

Headline figures were positive for the UK.

UK inflation fell to 2.5% in the 12 months to December 2024, data from the Office for National Statistics (ONS) shows. According to the Guardian, there’s a 74% chance the Bank of England (BoE) will cut interest rates in February as a result.

The ONS also reported the UK economy returned to growth in November 2024, as GDP increased by 0.1%. While it’s only a small rise, it follows three months of stagnation.

What’s more, the International Monetary Fund expects the UK to grow by 1.6% in 2025 and be the third-strongest G7 economy in terms of growth.

In encouraging news for the chancellor, at the World Economic Forum, PwC revealed that the UK is the second-most attractive country for investment, only falling behind the US. It marks the highest rank for the UK in the 28 years PwC has carried out the survey.

Sharp rises in borrowing led to the UK bond market making headlines.

On 8 January, UK government debt hit its highest level since the 2008 financial crisis, just a day after 30-year bond yields were at the highest level since 1998. Bonds rising could lead to mortgage lenders increasing rates and could affect the value of pensions, particularly those who are nearing retirement and are more likely to hold bonds.

Markets calmed down the following day but continued to experience ups and downs throughout January.

After the turmoil in the bond market, the FTSE 100 – an index of the 100 largest companies listed on the London Stock Exchange – was down 0.9% on 10 January. The biggest faller was financial group Schroders, which saw a dip of 4.3%.

Yet, just weeks later, the FTSE 100 hit a record high and exceeded 8,500 points for the first time on 17 January. The boost of around 1% was linked to speculation that there would be several interest rate cuts this year thanks to falling inflation.

However, many businesses still aren’t confident.

According to the British Chambers of Commerce (BCC), confidence among British businesses fell to the lowest level since former prime minister Liz Truss’s mini-Budget in September 2022. The pessimism was linked to chancellor Rachel Reeves’s £40 billion tax increases, which have placed a large burden on businesses. The BCC survey suggests 55% of firms plan to raise prices as a result.

Similarly, a survey from the BoE suggests more than half of UK firms plan to cut jobs or raise prices in response to employer National Insurance contributions increasing in April 2025.

The effects of the chancellor's Budget were also evident in S&P Global’s Purchasing Managers’ Index (PMI).

The index fell to an 11-month low in December and into contraction territory. Rob Dobson, director at S&P Global Market Intelligence, noted there were also sharp staffing cuts as some companies acted now to “restructure operations in advance of rises in employer National Insurance and minimum wage levels”.

Europe

Data paints a gloomy picture for the eurozone.

As expected, following an interest rate cut by the European Central Bank to boost the flagging economy, inflation across the eurozone increased. In the 12 months to December 2024, inflation was 2.4%.

Germany – the largest economy in the bloc – reported GDP falling 0.2% in 2024 when compared to the previous year, and it follows a decline of 0.3% in 2023.

According to an index from sentix, the challenges Germany is facing are negatively affecting investor morale across the eurozone. Indeed, investor confidence fell to a one-year low at the start of 2025. Germany is set to hold a snap general election in February, which could ease some of the uncertainty investors are feeling.

PMI figures from the Hamburg Commercial Bank fail to offer investors optimism.

While the eurozone service sector improved, it was still in decline at the end of 2024. In addition, the construction sector continues to contract and new orders fell markedly, suggesting that a recovery isn’t on the horizon.

Dominating the headlines in the US in January was the inauguration of Donald Trump, which took place on 20 January. Trump will serve a second term as US president and promised a “golden age” for America in his inaugural address.

In the first days of his presidency, Trump continued to make similar trade threats to those he made during his campaign. He suggested a 10% tariff on Chinese-made goods arriving in the US could be implemented as early as 1 February 2025. Trump also hinted that he was considering levies on imports from the EU, as well as a potential 25% tariff on the US’s two largest trading partners, Mexico and Canada.

According to the US Bureau of Labor Statistics, inflation increased to 2.9% in the 12 months to December 2024, up from 2.7% a month earlier. The inflation data could mean the Federal Reserve is less likely to cut interest rates in the coming months.

Indeed, on 13 January, Wall Street fell when it opened as traders expect interest rates to remain where they are.

Technology-focused index Nasdaq fell 1.3% and the S&P 500, which tracks the 500 largest companies listed on stock exchanges in the US, lost 0.8%. Pharmaceutical firm Moderna experienced the largest slump when share prices fell 24% after the company cut its outlook due to shrinking demand for its Covid-19 vaccine.

Markets faced more turmoil on 27 January. The emergence of a low-cost Chinese AI model, DeepSeek, led to concerns about the sustainability of the US artificial intelligence boom.

According to Bloomberg, shares in US chipmaker Nvidia fell by 17% and erased $589 billion (£473 billion) from the company’s market capitalisation – the biggest in US stock market history.

Other US technology giants saw share prices fall too. Microsoft, Meta Platforms and Alphabet, which is the parent company of Google, saw losses between 2.2% and 3.6%. AI server makers saw even sharper drops, with Dell Technologies and Super Micro Computer sliding by 7.2% and 8.9% respectively.

PMI data from S&P Global indicates business could pick up at the start of 2024. In fact, the service sector posted its biggest growth in output and new orders in December 2024 since May 2022. The jump was linked to firms anticipating more business-friendly policies under the Trump administration.

Asia

Threats of trade tariffs from the US in 2025 meant Chinese manufacturers rushed to fill orders at the end of 2024. Indeed, exports increased by 10.7% in December 2024 when compared to a year earlier, according to official customs data. With exports outpacing imports, China’s trade surplus was just under $1 trillion (£0.8 trillion) in 2024.

China’s National Bureau of Statistics also reported the economy hit its official target of growing by 5% in 2024.

Chinese manufacturer BYD could be on track to overtake US technology giant Tesla this year. BYD revealed it sold 1.76 million battery electric cars in 2024 falling only behind Elon Musk’s company, which sold 1.97 million. In fact, when including hybrid vehicles, BYD surpassed Tesla.

However, the new year didn’t start positively in the Chinese stock market. On 2 January, weak manufacturing data contributed to a sell-off of Chinese stock. The Chinese Stock Exchange fell by 2.7%, and the Chinese yuan also fell to a 14-month low against the US dollar.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

How do you become an ISA millionaire? Investment returns could be key

Thu, 16 Jan 2025 09:12:35 GMT

How do you become an ISA millionaire? Investment returns could be key

The number of people with at least a million pounds in their ISAs is on the rise. If you want to join their ranks, consistency and investing could be key.

An ISA is a tax-efficient way to save or invest. The interest or investment returns added to your ISA won’t be liable for Income Tax or Capital Gains Tax. As a result, they could provide a useful way to cut your tax bill.

In 2024/25, you can add up to £20,000 to ISAs during the tax year but there is no cap on how much you can save during your lifetime. The ISA allowance resets at the start of each tax year, and you cannot carry forward unused allowance.

According to a report in MoneyWeek , the number of ISA millionaires has tripled in just three years. The latest figures show that in 2022/23, there were 3,180 ISA millionaires, compared to 1,030 three years earlier, and just 570 eight years before.

There are also around 7,000 people approaching ISA millionaire status with between £750,000 and £1 million saved or invested.

So, if you want to become an ISA millionaire, what can you do?

Make regular ISA deposits part of your financial plan

As you can’t carry forward unused ISA allowance, missing an opportunity to deposit the full £20,000 allowance could set back your plans to become an ISA millionaire.

Making ISA contributions part of your wider financial plan could help you set a goal and stick to it. You might decide to deposit a lump sum at the start of the tax year when the allowance resets, or spread your deposits across the year by making regular, monthly payments into your ISA.

Remember, the ISA allowance is for each individual. So, you might want to contribute to your partner’s ISA if you’re planning together, or even deposit money into your child’s ISA to lend them a helping hand.

Investing could help you become an ISA millionaire 20 years sooner

Regularly adding money to your ISA is essential if you’re to become an ISA millionaire. But you also need to think about how hard your money is working.

If you deposited the maximum £20,000 into an ISA each tax year, it’d take your contributions 50 years to turn into £1 million. The good news is your deposits could earn money too.

When opting for a Cash ISA, your savings would earn interest. The interest rate varies between providers and the most competitive deals often mean you’ll need to make regular deposits or lock your money away for a defined period.

While the money in your Cash ISA is “safe”, interest rates are typically lower when compared to potential investment returns. So, investing could help you become an ISA millionaire sooner and it’s an option many people choose.

Indeed, according to HMRC , around 12.4 million ISAs were subscribed to in 2022/23, and more than a third were Stocks and Shares ISAs.

The MoneyAge report suggests if someone had contributed the maximum to a Cash ISA every year since they launched in 1999, they’d have around £275,000 based on an average interest rate of just 1.21%.

In contrast, the average annual return of a Stocks and Shares ISA during the same period was 9.64% before fees were applied. If those averages continue, those investing the maximum amount could become an ISA millionaire by 2043 – it’d take cash savers an extra 20 years to reach the milestone.

Keep in mind that investment returns cannot be guaranteed. Market volatility could lead to the value of your investments falling as well as rising. So, it’s important to consider your attitude to risk and circumstances when weighing up your ISA options.

Whether you choose a Cash ISA or a Stocks and Shares ISA, you can benefit from the power of compounding. By leaving the interest or investment returns in your account, they could go on to generate interest or returns of their own. As a result, the pace at which your ISA grows could increase over time.

Consider if investing is right for your goals

While investing could help you become an ISA millionaire, that doesn’t mean it’s automatically right for you.

All investments have some risk, and it’s often advisable to invest with a minimum time frame of five years. As a result, if you’re saving for a short-term goal, a Cash ISA, or another type of savings account, might be better suited to your needs.

So, before you start depositing money into a Stocks and Shares ISA, consider what your goals are and what level of risk is appropriate for you. If you have any questions about investment risk, we’re here to help.

Get in touch to talk about your ISA

If you want to talk to us about how to make the most of your ISA allowance, please get in touch. We’re also here to show you how an ISA could fit into your wider financial plan and support your goals.

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Investment market update: December 2024

Thu, 02 Jan 2025 14:00:30 GMT

Investment market update: December 2024

Political instability in Europe and further afield affected investment markets in December. Read on to find out what other factors may have influenced your investment returns at the end of 2024.

Remember to focus on your long-term goals when assessing the performance of your investments. The value of your assets rising and falling is part of investing. What’s important is that the risk profile is appropriate for you and that your decisions align with your circumstances and aspirations.

Hopes that the Bank of England (BoE) would cut its base interest rate before the end of 2024 were dashed when data showed inflation had increased.

Figures from the Office for National Statistics show inflation was 2.6% in the 12 months to November 2024, which was up from the 2.3% recorded a month earlier.

This led to the BoE deciding to hold interest rates despite speculation that a cut was on the horizon. The central bank also said it expects GDP growth to be weaker at the end of 2024 than it had previously predicted.

Data paints a gloomy picture for the manufacturing sector.

According to S&P Global’s Purchasing Managers’ Index (PMI), UK manufacturing hit a nine-month low as output fell for the first time in seven months in November 2024. The decline was driven by new orders falling. Notably, manufacturers are struggling to export their goods, with new orders contracting for 31 consecutive months. Demand has fallen in key markets, including the US, China, the EU, and Middle East.

A survey from the Confederation of British Industry (CBI) indicates that manufacturers aren’t optimistic about the future either. The organisation said orders at UK factories “collapsed” in December to their lowest level since the height of the pandemic in 2020. The slump was linked to political instability in some European markets and uncertainty over US trade policy when Donald Trump becomes president.

Chancellor Rachel Reeves wants to reduce UK trade barriers with the US, stating she wanted to end the “fractious” post-Brexit accord as she went to meet eurozone finance ministers at the start of the month. Closer ties with the EU may benefit some firms that are struggling with exports.

Retailers are also experiencing challenges.

The festive period is often crucial for retailers. Yet, data from Rendle Intelligence and Insights are “bleak” with footfall in the first two weeks of December down 3.1% when compared to 2023. A slew of high street names entered administration in 2024, including Homebase, The Body Shop, and Ted Baker, and the research suggests more could follow suit in the year ahead.

December was a month of ups and downs for investors in the UK stock market.

The month started strong when stock markets increased across Europe on 3 December – dubbed a “Santa rally” in the media. The FTSE 100 – an index of the 100 largest firms on the London Stock Exchange – was up 0.7% despite worries about the economic outlook. EasyJet led the way with a 4% boost.

Yet, just mere weeks later, on 17 December, the FTSE 100 hit a three-week low and lost 0.7%. The biggest faller was Bunzl, a distribution and outsourcing company, which fell 4.6% when it warned persistent deflation would weigh on profits in 2024.

While it might have felt like a bumpy year as an investor, research shows the FTSE 100 has performed well. Indeed, according to AJ Bell, the index had its best year since 2021 and delivered a return of 11.4%. The top performers were NatWest and Rolls-Royce, while JD Sports and B&M were at the bottom of the pack.

Europe

Much like the UK, the manufacturing sector in the eurozone is struggling. Indeed, PMI data shows the sector continued to contract in November 2024 as new factory orders fell. Germany recorded the fastest drop in output and, as the bloc’s largest economy, could drag economic data down.

Dr Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, told the Guardian: “These numbers look terrible. It’s like the eurozone’s manufacturing recession is never going to end.”

Credit ratings firm Moody’s unexpectedly downgraded French government bonds, which are now rated Aa3 – the fourth highest rating – following the collapse of Michel Barnier’s government. MPs had refused to accept tax hikes and spending cuts in Barnier’s Budget.

Moody’s said: “Looking ahead, there is now very low probability that the next government will sustainably reduce the size of fiscal deficits beyond next year. As a result, we forecast that France’s public finances will be materially weaker over the next three years compared to our October 2024 baseline scenario.”

The news, unsurprisingly, led to French bonds weakening.

European markets also benefited from the so-called Santa rally on 3 December.

Germany’s DAX, a stock index of the 30 largest German companies on the Frankfurt Exchange, broke the 20,000-point barrier for the first time, despite a new election being called after the government collapsed. The recent boost means the DAX increased by around 3,000 points during 2024.

Similarly, Paris’s stock market index, the CAC, gained 0.6%. Luxury goods makers, like Hermes and LVMH, were among the biggest risers.

Unlike Europe, US manufacturing could give investors something to be optimistic about.

The PMI reading for November 2024 was 49.7, up from 48.5. While this means the sector is still below the 50-mark indicating growth, the signs suggest it’s stabilising and could move into more positive territory in the new year.

The service sector paints an even better picture. The PMI indicated the sector is growing at its fastest pace since the Covid-19 pandemic. Expectations of higher output linked to growing optimism about business conditions under the Trump administration led to a flash PMI reading of 56.6 for December, comfortably placing the sector in growth territory.

The job market also bounced back after disappointing figures in October. According to the US Bureau of Labor Statistics, 227,000 jobs were added to the economy in November, compared to just 36,000 a month earlier.

Yet, inflation continues to weigh on the US. In the 12 months to November 2024, inflation increased slightly to 2.7%.

While the Federal Reserve went ahead with an interest rate cut, taking the base rate to 4.25%, it also suggested it would make fewer cuts than expected in 2025 if inflation remains stubborn. The comments led to the S&P 500 index closing almost 3% down, while the tech-focused Nasdaq fell 3.6% on 19 December.

President-elect Trump is set to take office on 20 January 2025, but his plans are already influencing markets. Indeed, on 2 December, the dollar rallied after Trump warned countries in the BRICS bloc that he would impose 100% tariffs if they challenged the US dollar by creating a new rival currency.

The BRICS bloc was originally composed of Brazil, Russia, India, China, and South Africa, which led to the acronym. They have since been joined by Iran, Egypt, Ethiopia, Saudi Arabia and the United Arab Emirates.

Asia

In a move that shocked citizens, South Korea’s president declared martial law on 3 December, which led to political chaos. The uncertainty led to South Korea’s currency dropping to a two-year low and exchange-traded funds (ETFs), which track the country’s shares, fell sharply. Indeed, the MSCI South Korea EFT dropped by more than 5% in the immediate aftermath.

Outside of South Korea, stock market performances were more positive in Asia.

On 9 December, Hong Kong’s Hang Seng was up by 2% after China said it would implement a more proactive fiscal policy and planned to loosen monetary policy in 2025. The market was also aided by consumer inflation in China falling to a five-month low in November to 0.2%.

On the same day, Japan revised its economic growth upwards, leading to a 0.3% boost to the Nikkei 225 index.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Research: The perils of chasing stock market “winners”

Wed, 11 Dec 2024 08:43:59 GMT

Research: The perils of chasing stock market “winners”

Following the stocks and shares that have experienced impressive returns can seem like fun and a way to make the most out of your investments.

Yet, a study indicates that following the crowd and investing in companies that are being hyped in the press or among investors could mean you miss out on growth opportunities from other sources.

Top stocks rarely perform well for two consecutive years

Research carried out by Schroders looked at the top 10 performing stocks on the US stock market each year.

Interestingly, in 12 of the past 18 years, not a single stock that was in the top 10 also made it into the top 10 in the following year. Of the other six years, in five of them, only a single company managed to maintain its strong position.

Even staying in the top 100 is rare – an average of 15 companies each year managed to be in the top 100 for two consecutive years. The odds of making it back onto the list in a couple of years are similarly low.

You might be surprised to learn that companies that performed well are more likely to be among the worst-performing stocks a year later.

The research noted that a similar trend can be seen in other markets. In the UK, 11 out of 18 years saw the average top 10 performers move to the bottom half of the performance distribution the next year.

So, if you’ve been hearing about how well a particular stock has been performing, automatically investing in it might not be the right thing to do. It could expose you to more investment volatility than is appropriate for you.

There’s also a risk that companies that are hyped might be overvalued.

The Magnificent Seven is a group of influential technology companies – Apple, Microsoft, Nvidia, Alphabet, Amazon, Meta Platforms, and Tesla – on the US stock market that has made impressive gains over the last year. However, Schroders found collectively they are twice as expensive as the rest of the market in terms of a multiple of the next 12 months of earnings.

Some companies will deliver these expectations, but others won’t, and identifying which ones will meet targets can be difficult.

3 investing lessons you can learn from the volatility of the top stocks

1. Don’t fall for hype

It can be tempting to invest in a company that’s experienced impressive growth recently. But the Schroders study highlights how these companies can experience a fall just as much as others, and perhaps more severely.

Chasing the “hot” stocks could result in higher costs and lower returns than if you opted for investments that were consistently delivering average returns.

That’s not to say you should avoid investing in popular stocks. Indeed, many investment funds will hold investments in the Magnificent Seven. What’s important is assessing if it’s the right option for you and focusing on long-term gains, rather than short-term rises.

2. Accept the investment market can be volatile

As the research highlights, volatility is part of investing.

As an investor, accepting this can be difficult – you understandably don’t want to see the value of your investments fall. Yet, for most investors, sticking to their long-term plan, even when markets dip, makes financial sense if you take a long-term view.

Historically, markets have delivered growth when you look at performance over a longer time frame, including after sharp drops like those experienced during the pandemic in 2020.

While returns cannot be guaranteed and past performance is not a reliable indicator of future performance, history suggests holding investments and waiting out volatility may be the right course of action for you.

Volatility is why it’s often recommended that you invest with a minimum time frame of five years. This provides time for the ups and downs of the market to smooth out and, hopefully, deliver investment returns.

3. Ensure your investments are diversified

If you invested in just one company that was in the top 10 performing stocks, the research suggests the value could fall within the next year. However, if you spread your investment across multiple stocks, you could reduce the risk of this happening.

Diversifying your investments means investing in a range of assets, sectors, and geographical locations. When one area of your investments experiences a drop, a rise in another could offset this.

This is how investment funds work. A fund would pool your money with that of other investors and then invest in a wide range of assets in line with the fund’s risk profile. So, if you want to diversify your investments, a fund could be a good solution for you.

Invest in a way that reflects your goals and circumstances

If you have any questions about how to invest in a way that’s appropriate for your goals and circumstances, we’re here to help. We can offer ongoing support to ensure your investments continue to reflect your needs. Please contact us to speak to one of our team.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Investment market update: November 2024

Wed, 27 Nov 2024 13:36:36 GMT

Investment market update: November 2024

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Investment market update: October 2024

Mon, 18 Nov 2024 08:51:46 GMT

Investment market update: October 2024

While inflation is stabilising in many major economies, markets continue to experience some volatility, which may have affected your investment portfolio.

According to the latest International Monetary Fund’s Global Financial Stability Report, markets could be underestimating the risks of conflicts and upcoming elections.

Indeed, the rising price of gold suggests some investors are seeking a safe haven amid news of interest rate cuts, the upcoming US election, and escalating tensions in the Middle East. On 18 October, the price of gold hit $2,700 (£2,083) an ounce for the first time.

Read on to discover what else may have affected your investments in October 2024.

The headline news in the UK in October 2024 was chancellor Rachel Reeves’ delivery of the Autumn Budget – the first from the Labour Party in 14 years.

She announced a raft of reforms, including £40 billion in tax rises to address the “black hole” in the public finances. Among the announcements were changes to Capital Gains Tax, Inheritance Tax, Stamp Duty, and employer National Insurance contributions.

Following the Budget on 31 October, the FTSE 100 – an index of the 100 largest companies on the London Stock Exchange – slumped to its lowest level in almost three months as investors reacted to the updates.

The latest GDP figures released by the Office for National Statistics (ONS) offered some welcome news. After the economy flatlined in June and July, it returned to growth in August and was up 0.2%.

Inflation figures were also positive. The ONS data shows that inflation was 1.7% in the 12 months to September 2024 – the first time it’s been below the Bank of England’s (BoE) 2% target in three and a half years.

The news led to the FTSE 100 rising by 0.65% on 16 October.

Inflation falling paves the way for the BoE to make further interest rate cuts, which would be welcomed by borrowers. Indeed, the BoE hinted that it could be more aggressive with rate cuts in the coming months.

Lower interest rates could boost the property market, and homebuilders benefited from the BoE’s outlook as a result. On 3 October, Persimmon was the top riser on the FTSE 100 after a 3.1% increase. Vistry and Barratt also gained.

Yet, it wasn’t all good news for the housebuilding sector. Just days later, Vistry issued a profit warning and said this year’s pre-tax profits would be around £80 million lower than expected. The announcement led to shares in the company plunging by almost a third.

Data suggests the manufacturing sector is struggling. According to S&P Global’s Purchasing Managers’ Index (PMI), the sector suffered its biggest drop since March 2020 in September. The fall was linked to the Autumn Budget with businesses reportedly taking a “wait and see” approach before making decisions.

Overall, business outlook could be gloomy. Trade credit insurance firm Allianz Trade predicts UK business insolvencies will rise by 5% this year when compared to 2023 to more than 29,000. That figure would be a 12-year high and around 30% above pre-pandemic levels.

However, some businesses are bucking the trend. At a time when many other retailers are struggling, fast-fashion giant Shein’s UK arm reported sales surpassed £1.5 billion for the first time in 2023, up from £1.12 billion in the previous year.

Europe

The eurozone’s key data is similar to the UK.

In the 12 months to September 2024, inflation in the eurozone fell below the 2% target to 1.7%. The news led to the European Central Bank (ECB) cutting interest rates for the third time this year – all key rates were trimmed by 25 basis points.

However, the ECB warned that inflation was expected to rise in the coming months.

PMI data indicates the eurozone economy is stuck in a rut. In October the PMI reading was 49.7 after a slight rise from 49.6 in September – only a figure above 50 indicates the economy is growing.

The manufacturing sector in particular is struggling, with a PMI reading of 45.0, indicating contraction. The bloc’s two largest members are dragging the figure down. Germany recorded its worst decline in factory conditions in 12 months, and France’s manufacturing sector is also contracting.

The UK wasn’t the only country to review taxation in October. According to Bloomberg, Italy’s finance minister said it plans to raise taxes on companies that have benefited the most from the economic turbulence of recent years to bring down the country’s deficit.

In response, Italy’s MIB share index, which tracks the 40 leading companies listed on the Borsa Italiana, fell 1.35% on 3 October.

Official figures show inflation in the US continues to near its 2% target when it fell to 2.4% in September 2024.

After recent concerns that the US economy could fall into a recession, job data indicates the economy isn’t weakening and businesses are feeling confident. According to the Bureau of Labor Statistics, the number of jobs increased by 254,000 in September.

The data led to the dollar rising and Wall Street rallying on 4 October. On the back of the news, the Dow Jones Industrial Average was up 0.55%, while the S&P 500 gained 0.75%, and the Nasdaq jumped 1.2%.

Asia

China and the EU continued their trade tit-for-tat, which had a knock-on effect on French spirit makers.

At the start of the month, the EU voted to increase tariffs on Chinese-made electric vehicles from 10% to up to 45% for the next five years. Beijing labelled the tariffs as “protectionist” and, just days later, announced temporary anti-dumping measures on imports of brandy from the EU. France’s trade ministry said the measures were “incomprehensible” and violated free trade.

Among the French companies affected were spirit makers Remy Cointreau and Pernod Ricard, which saw shares fall by 8% and 4% respectively on 8 October.

A Chinese press briefing also affected markets when investors were disappointed that officials didn’t announce any major stimulus measures. On 9 October, the Shenzhen Composite Index tumbled by 8.2% – its biggest fall since 1997 – while the Shanghai Stock Exchange lost 6.6% and the benchmark CSI 300 fell by 7.1%.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

2 key Budget announcements that may affect your financial plan

0063639678 (Paul Loberidge) — Fri, 01 Nov 2024 14:17:39 GMT

2 key Budget announcements that may affect your financial plan

Chancellor Rachel Reeves delivered the new Labour government’s first Budget on 30 October 2024. Amid the announcements were key changes to Capital Gains Tax (CGT) and Inheritance Tax (IHT) that could affect your financial plan.

Ahead of the Budget, prime minister Keir Starmer said it would be “painful” as there was a £22 billion black hole in the public finances. Indeed, Reeves went on to announce measures that would raise annual tax revenues by £40 billion by 2030.

Some of these taxes will be paid by businesses, but others could affect your personal finances. Here are two changes you might want to consider when reviewing your financial plan.

1. The main rates of Capital Gains Tax have increased

There was a lot of speculation that Reeves would announce changes to CGT. In the Budget, she revealed the rates would indeed rise. It could mean you pay more tax than you expect when selling assets.

CGT is a type of tax you pay if you make a profit when you dispose of assets such as:

Investments that are not held in a tax-efficient wrapper, like an ISA
Personal possessions worth more than £6,000 (excluding your car)
Property that is not your main home
Business assets.

In 2024/25, you can make profits of up to £3,000 before CGT is due. This is known as the “Annual Exempt Amount”. If profits exceed this threshold, you may be liable for CGT.

The changes Reeves announced to CGT rates came into effect immediately on 30 October 2024. The rate of CGT you pay depends on your other taxable income. If you’re a:

Higher- or additional-rate taxpayer, your CGT rate has increased from 20% to 24%
Basic-rate taxpayer, you may benefit from a lower CGT rate of 18%, which has increased from 10%, if the taxable amount falls within the basic-rate Income Tax band.

So, it might be more important than ever to consider how to reduce your CGT liability as part of your financial plan. For example, you may:

Spread disposing of assets over several tax years
Focus on increasing investments held in a tax-efficient wrapper
Pass on assets to your spouse or civil partner to make use of their Annual Exempt Amount.

We could work with you to understand if you may be liable for CGT and the steps you might take to mitigate a large or unexpected tax bill.

2. Your pension may form part of your estate for Inheritance Tax purposes

Currently, your pension isn’t usually included in your estate for IHT purposes. As a result, you may have planned to use other assets to fund your later years so you could pass on wealth tax-efficiently through your pension.

However, Reeves announced she would close this “loophole” that gives pensions preferable IHT treatment.

From 6 April 2027, your unspent pension pot will be included in your estate when calculating an IHT liability. The change could mean the number of estates that pay IHT doubles.

Under the existing rules, around 4% of estates are liable for IHT and it raises about £7 billion a year for the government. However, the Budget states that bringing pensions into the scope of IHT will affect around 8% of estates each year. Reeves added the changes would boost IHT receipts by £2 billion a year by the end of the forecast period (2029/30).

So, if you haven’t previously considered IHT as part of your estate plan, you may need to now.

The threshold for paying IHT is known as the nil-rate band and is £325,000 in 2024/25. In most cases, you can also use the residence nil-rate band if you pass on your main home to a direct descendant. In 2024/25, the residence nil-rate band is £175,000.

In addition, you can pass on unused allowances to your spouse or civil partner. In effect, that means, as a couple, you could leave behind up to £1 million before IHT may be due.

It’s important to note that both the nil-rate band and residence nil-rate band are frozen until 6 April 2030 and will not rise in line with inflation.

As a result, you might need to consider how the value of your assets will change and whether growth could affect what you’ll leave behind for loved ones.

Previously, you may have increased pension contributions to build up a tax-efficient nest egg that you could leave to your family when you pass away. A financial review could help you assess if it’s still the right option for you in light of the changes.

Get in touch to talk about the impact the Budget could have on your plans

If you’d like to discuss how the Autumn Budget could affect your finances and how you might keep your plans on track, please get in touch. We can work with you to create a tailored plan that reflects the changes and aligns with your aspirations.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate estate planning or tax planning.

How would soaring property prices affect a 2024 Monopoly board?

Tue, 15 Oct 2024 07:00:00 GMT

How would soaring property prices affect a 2024 Monopoly board?

Classic board game Monopoly hit shelves in 1935 and has been causing family arguments ever since. As the real estate game was loosely based on property values at the time it was launched it provides some interesting insights into how the market has changed over the last nine decades.

The original Monopoly game was based on Atlantic City, US, but it didn’t take long for the game to be adapted to new locations. Indeed, a London version of the game was available within months.

Since its launch, the game has sold more than 275 million copies worldwide and there are hundreds of different editions to choose from. So, if the game was updated to reflect 2024 prices, how would it be different?

Mayfair would continue to hold the top spot but prices have soared

Unsurprisingly, if you updated the property prices to reflect today’s figures, they would be much higher than they were in 1935, and some locations have fared better than others.

According to a report in IFA Magazine, using today’s prices, the top locations on the Monopoly board would be:

You might notice that the top properties don’t appear in the same order as they do on the board as some areas have seen prices rise far more rapidly than others.

In fact, the iconic dark blue set – the most expensive on the board – has changed. Mayfair continues to hold the top spot, with a value that’s significantly higher than other locations. However, Park Lane, once the second most expensive property, has fallen six places.

Even the cheapest properties on the board have seen huge increases in value.

Indeed, the first property on the board, Old Kent Road, was priced at an affordable £60. At today’s prices, a home on the same street would set you back around £342,000.

While property prices in London remain the highest in the UK, the trend is reflected across the country.

Land Registry data doesn’t go back to 1935, but the average property price in the UK was £3,595 in April 1968. By July 2024, the average price has increased to £289,723 – an increase of almost 8,000%.

Property prices have increased at a quicker pace than inflation

In the classic rules of Monopoly, you start with £1,500 and receive £200 every time you pass “GO”. According to the Bank of England, inflation would mean these figures rise to £89,644 and £11,952 respectively in August 2024.

Yet, they wouldn’t have the same spending power as rising property prices have outstripped average inflation over the last 90 years.

With your initial £1,500, you’d be able to buy several properties on the Monopoly board, even if you’re lucky enough to land on the more expensive tiles. Yet, with 2024 prices, you would still be some way short of being able to afford even the cheapest property – Old Kent Road at £342,000 – with your starting sum after it’s been adjusted for inflation.

Relying on the money you receive when passing GO would mean you’d need to go around the board more than 1,260 times to build up enough cash to buy Old Kent Road, which would be sure to lead to a long and tedious game.

The gap between rent and mortgage repayments is much closer

In Monopoly you make money and try to bankrupt others by charging players rent when they land on a tile you own.

Before you start adding houses and hotels to your tiles, the rent is usually half the purchase price. So, when you buy Old Kent Road for £60, you charge £30 rent. In reality, the cost of rent and mortgage repayments are far closer.

Indeed, according to Zoopla, between 2011 and 2022, renting a home was more expensive than paying a mortgage. Even with rising interest rates leading to mortgages becoming more expensive for the first time in 13 years, rent is only around 9.5% lower.

If you need a mortgage to buy your new home, whether the location is on the Monopoly board or not, we could help you find a lender that’s right for you and may be able to save you money. Please get in touch to talk about your needs.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

Investment market update: September 2024

0063639678 (Paul Loberidge) — Tue, 01 Oct 2024 15:26:55 GMT

Investment market update: September 2024

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How to join the pension treasure hunt and discover “lost” savings

Thu, 12 Sep 2024 09:00:01 GMT

How to join the pension treasure hunt and discover “lost” savings

You could uncover “lost” pension savings and boost your retirement by tracking down old pots you might have forgotten about. Read on to find out why you might have lost pensions and how to rediscover them.

29 October 2024 marks National Pension Tracing Day and the campaign urges you to join the pension treasure hunt.

It’s estimated there are 2.8 million “lost” pensions with a combined value of £26.6 billion. That means around 1 in 20 people could boost their pension by an average of £9,500 simply by tracking down savings they’ve lost touch with.

So, paying attention to your pensions this autumn could offer you greater flexibility when you retire.

A busy life could mean you overlook and lose a pension

It can be easier than you think to lose a pension.

According to Zippia , the average person will hold around 12 jobs in their lifetime – that could leave you with a lot of pensions to juggle and keep track of. A relatively small pension can easily slip your mind when calculating how much you’re saving for your retirement.

Moving home could also mean you lose touch with a pension if you forget to update your contact details. Without a regular statement, you might be overlooking thousands of pounds you’ve put away for retirement.

Keeping your personal details, including your address, up to date can make it easier to manage your pensions.

In addition, for some workers, pension consolidation might make keeping track of pensions easier as you’d have fewer pots to manage.

While consolidating pensions might seem like a simple solution, it isn’t always the right option. For example, if your pension offers benefits, such as being able to access your pension earlier than the usual pension age, you’d typically lose these when you transfer the money.

You might also want to weigh up fees and investment performance when deciding if you should move your retirement savings.

If you have questions about pension consolidation or would like to understand if it’s right for you, please contact us.

How to track down your pensions in 5 simple steps

1. List your previous employers

When searching for lost pensions, a good place to start is often your career history. Writing down your previous employers could make it easier to identify gaps in your retirement savings.

2. Link your pensions to your jobs

With a list of jobs, you can start to assess if you have a pension for each employer. This may mean going through your paperwork to find pension statements and linking them to an employer.

A gap doesn’t automatically mean you’ve lost a pension – you might have opted out or previously consolidated your savings. However, it can highlight where you could benefit from some further investigation.

So, you might want to check old employment contracts, payslips, or employee handbooks if you have the documents to hand. This will help you to see if you should have a pension and if you made contributions.

3. Contact the pension provider about your missing savings

If you realise there’s a gap in your pension savings and you know who the pension provider is, you can get in touch with them. They’ll be able to advise if you do have a pension with them and how to update your details.

4. Find the provider’s contact details using the pension tracing service

If you believe you have a lost pension but aren’t sure who to contact, getting in touch with your old workplace might be useful. They could provide the details of the pension provider they use and information about whether it’s changed. From here, you can contact the provider directly to find out if they hold a pension in your name.

You can also use the government’s pension tracing service to find the contact details you need using the name of the employer or pension provider.

5. Make your rediscovered pension part of your retirement plan

Once you’ve identified a lost pension, there may be some important steps to take to ensure it fits into your retirement plan.

One of the first things to do is update the contact details to minimise the risk of losing the pension in the future.

You might also want to look at the expected retirement age. Your retirement date may affect the projected value of your pension at retirement and how the provider will invest the money on your behalf. In addition, you can usually choose the risk profile of your pension to suit your needs, so it may be worthwhile checking how your pension is currently invested.

Updating your retirement plan to include the savings you’ve uncovered can help ensure it continues to reflect your circumstances. The financial boost might mean you’re able to retire sooner or could afford to spend on a big-ticket expense to mark the milestone.

A retirement plan could help you manage your pensions and future

Whether you’ve found lost pension savings or not, a retirement plan could help you feel confident about your future finances.

From managing your pension now to creating an income when you’re ready to give up work, a tailored retirement plan may offer you a blueprint to follow that supports your goals. As well as creating a plan, we can help you regularly review it and make adjustments when your goals or circumstances change. Please contact us to talk about your retirement.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

Investment market update: August 2024

Thu, 29 Aug 2024 09:36:15 GMT

Investment market update: August 2024

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Why taking your pension as a lump sum could leave you with a huge tax bill

Mon, 29 Jul 2024 08:41:27 GMT

Why taking your pension as a lump sum could leave you with a huge tax bill

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Investment market update: July 2024

0063639678 (Paul Loberidge) — Mon, 29 Jul 2024 08:30:24 GMT

Investment market update: July 2024

In July, the markets were affected by general elections taking place in the UK and France, and the ongoing presidential campaign in the US. Read on to find out what else affected investment markets in July 2024.

Uncertainty and numerous other factors may affect the value of your investment portfolio. However, for most investors, long-term trends are a better indicator of their strategy’s performance than short-term movements. Returns cannot be guaranteed, but, historically, markets have risen in value over longer time frames.

The UK public took to the polls on the 4 July. The results of the general election ended 14 years of Conservative rule when the Labour Party secured a majority.

The following day saw the FTSE 100 – an index of the 100 largest companies listed on the London Stock Exchange – rise by 0.3% when trading opened.

Housebuilders saw some of the biggest gains as Labour made building 1.5 million new homes over the next five years a key manifesto pledge. According to the Guardian, Persimmon, Vistry Group, Taylor Wimpey and Barratt Developments all saw rises between 1.7% and 2.5%.

Mid-cap index FTSE 250 also benefited from a post-election bounce when its value increased by 1.8% and reached a two-year high.

New prime minister Keir Starmer stepped into the top job and received welcome news when official statistics were released.

Data from the Office for National Statistics shows that after no growth in April, GDP increased by 0.4% in May. The figure suggests the UK economic recovery is gaining momentum after a technical recession at the end of 2023.

Inflation remained stable during July, as prices increased by 2%, which is the Bank of England’s (BoE) target. The data could give the BoE’s Monetary Policy Committee the confidence to start cutting interest rates over the coming months.

According to S&P Global’s Purchasing Manager’s Index (PMI), the momentum in the service sector in May started to slow in June. However, the slowed pace was linked to the general election as some individuals and businesses opted to see the outcome before they placed orders. So, the sector could see an uptick in July.

Despite the positive signs, many businesses are still struggling. According to business recovery firm Begbies Traynor, the number of firms in “significant” financial distress jumped by 10% in the second quarter of 2024 compared to the first three months of the year.

The numbers are even more stark when you compare them to the same period in 2023 – with a 36.9% rise. Of the 22 sectors monitored, 20 saw an increase in the number of firms in difficulty.

Europe

Inflation across the eurozone fell slightly to 2.5% in the 12 months to June 2024, according to Eurostat. The figures show inflation varied significantly across the bloc. Finland recorded the lowest rate of inflation at 0.5%, while Belgium had the highest rate at 5.4%.

With the headline inflation figure still above the 2% target, the European Central Bank opted to hold interest rates.

PMI figures suggest the manufacturing sector is struggling in the eurozone. It was partly pulled down by Germany’s enormous manufacturing sector, which has been contracting for the last two years, according to the PMI. A PMI reading above 50 indicates growth, so Germany’s reading of 43.5 in June suggests the country has some way to go before it starts to grow again.

The parliamentary election in France and its unexpected twists led to market volatility. On 1 July, the CAC 40 index, which includes 40 of the most significant stocks on the Euronext Paris stock exchange, was up 1.5% as it became less likely a far-right party would secure a majority.

The final shock results saw the formation of a left-wing coalition. The uncertainty around whether the left could work with Emmanuel Macron’s centrist party led to the CAC 40 falling by 0.5% on 8 July when trading opened. Yet, it returned to positive territory later in the day.

The EU is reportedly planning to impose an import duty on cheap goods amid concerns from retailers in a move that could affect foreign businesses, such as Temu and Shein. The current limit for import duty is €150 (£126.13), which allows some retailers to ship products from overseas while avoiding a levy.

The US presidential election doesn’t take place until 5 November, but candidates have already been campaigning for months.

Following an assassination attempt on Republican candidate Donald Trump, Wall Street rose on the 15 July. Expectations of a victory for Trump led to the S&P 500 index rising 0.42%. The share price of Trump’s media company far outstripped the market when it rose by 70% at the opening and briefly led to the business being valued at $10 billion (£7.76 billion).

With Joe Biden stepping out of the presidential race, the results of the election are far from certain and it’s likely to continue affecting markets.

Inflation in the US continued to fall in the 12 months to June. However, at 3%, it’s still above the Federal Reserve’s 2% target.

Official statistics also show that the US trade deficit widened slightly as exports fell by 0.7% month-on-month in May while imports fell by 0.3%. The deficit now stands at around $75.1 billion (£58.3 billion) and could be a drag on growth in the second quarter of 2024.

American cybersecurity company Crowdstrike saw its share price plunge by more than 13% when a software bug crashed an estimated 8.5 million computers around the world on 19 July. The error led to services grinding to a halt as it affected banks, airlines, railways, GP surgeries, and many other businesses globally.

Meta, owner of Facebook and Instagram, also saw its share price fall after the EU ruled it breached a new digital law. Meta’s advertising model that charges users for ad-free versions of its social media platforms that don’t use personal data for advertising purposes was found to breach consumer protection rules. Meta could now face fines of up to 10% of its global revenue.

Asia

A growing interest in artificial intelligence led to Japan’s Nikkei 225 index reaching a record high on 9 July, when it increased by 0.6%.

Over the last few months, statistics have suggested that China could face some challenges if it’s to maintain its pace of growth. However, data shows exports grew at their fastest rate in 15 months in June 2024 thanks to a boost in the sales of cars, household electronics, and semiconductors.

Year-on-year, Chinese exports grew by 8.6% to $307.8 billion (£258.8 billion). Over the first half of 2024, exports totalled a staggering $1.7 trillion (£1.43 trillion) – a 3.6% increase when compared to a year earlier. Coupled with weaker imports, it led to a record $99 billion (£83.25 billion) trade surplus.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

How to effectively protect your identity and your finances from criminals

Wed, 17 Jul 2024 07:00:00 GMT

How to effectively protect your identity and your finances from criminals

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Investment market update: June 2024

0063639678 (Paul Loberidge) — Wed, 03 Jul 2024 09:47:55 GMT

Investment market update: June 2024

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What 70 years of BBC news bulletins could teach you about investment markets

0063639678 (Paul Loberidge) — Tue, 18 Jun 2024 08:00:00 GMT

What 70 years of BBC news bulletins could teach you about investment markets

70 years ago, the BBC broadcast its first daily television news programme. Since then, round-the-clock news has become available, and you can get the latest headlines with a few taps on your smartphone. While being connected can be positive, for investors, it can make periods of volatility and choosing an investment even more difficult. Read on to find out why.

On 5 July 1954, Richard Baker delivered the latest news, which started with an update on truce talks being held near Hanoi, Vietnam, and an item on French troop movements in Tunisia. It wasn’t met with universal approval. Indeed, the BBC received feedback stating it was “absolutely ghastly” and “as visually impressive as the fat stock prices”.

Sir Ian Jacob, who was BBC director at the time, noted that there were challenges because many main news items are “not easily made visual”. However, he added that he believed it was the start of something “extremely significant for the future”.

But how does this relate to investing? 70 years ago, you may have read about investment performance or the latest tip in the newspaper or heard a segment on the radio. Now, you can find out about stock market movements in seconds, and it could lead to knee-jerk decisions.

Too much “noise” could lead to poor investment decisions

Imagine you hear about stock market volatility affecting your portfolio now. You may hear in the news how stocks are “plummeting” or that it’s the worst day for a particular index in a year. How do you feel? You might worry about what it means for your financial future. As a result, it could lead to you making rash decisions that aren’t right for you.

Yet, 70 years ago before there were daily TV news programmes on the BBC, you might not hear about the volatility right away. The market and your portfolio could even have recovered before you knew.

Being in the loop when it comes to stock market movements can work the other way too. You might see a segment about how technology businesses are doing well, and it tempts you to invest without considering how it might affect your overall portfolio or risk profile.

So, being exposed to too much “noise” may lead to investors making decisions based on short-term movements. However, if you look at some of the big events, and their impact on stock markets over the last 70 years, it indicates that investors who stuck to their investment strategy could have benefited.

The last 70 years demonstrate why a long-term view often makes sense for investors

When Richard Baker sat down to deliver the BBC bulletin, the stock market was doing well. After decades of uncertainty due to the world wars, by the late 1950s, it was booming. Indeed, work began on the new Stock Exchange Tower in 1967, which became a London City landmark at 26 storeys.

The markets didn’t remain stable though. The early 1990s brought a recession that led to unemployment of more than 12% in the UK. Then, the dot-com bubble saw technology stocks soaring at the end of the decade as investors were excited by the widespread adoption of the internet and innovative start-ups before the bubble burst in 2000.

Countless historical events have affected the markets. In the last decade, the 2016 Brexit vote and the pandemic in 2020 led to markets falling.

Despite the turbulence and the attention-grabbing headlines of the last seven decades, the overall trend in investment markets is an upward one. Once you look at the bigger picture, it suggests investing with a long-term view is savvy for most investors.

Indeed, take a look at the FTSE 100 – an index of the 100 largest companies on the London Stock Exchange. It launched in 1984 and started with a benchmark of 1,000 points. On 3 May 2024, it hit a record high at 8,248 points.

Of course, you cannot guarantee investment returns. It’s important you consider your goals and remember that all investments carry some risk. You may want to consider your risk profile and wider financial circumstances when creating an investment strategy.

Get in touch to talk about your investment strategy

If you’d like to understand how to create an investment strategy that reflects your goals, or would like to review your current portfolio, please contact us. We’ll help you build an investment strategy that reflects your goals and circumstances.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Investment market update: May 2024

Wed, 29 May 2024 10:13:22 GMT

Investment market update: May 2024

On the back of data showing some countries have exited recessions at the end of the first quarter of 2024 and inflation falling, several market indexes reached record highs in May. Read on to find out what else may have affected the markets and your investment portfolio.

Dominating headlines towards the end of May was prime minister Rishi Sunak calling a general election. Sunak made the seemingly snap decision following positive inflation news despite polls suggesting the Conservative government is trailing the Labour Party.

The general election will take place on Thursday 4 July. The uncertainty over the next few weeks could lead to markets being bumpy as they react to the latest information and assumptions. Remember, ups and downs are a part of investing and it’s important to focus on your long-term goals during periods of volatility.

The latest figures from the Office for National Statistics (ONS) show the UK is nearing the Bank of England’s (BoE) 2% inflation target. In the 12 months to April 2024, inflation was 2.3%.

Sunak said the data was proof the Conservative’s plan was working and “brighter days are ahead”. In response, the Labour Party accused the government of celebrating a “tone-deaf victory lap”.

The BoE voted to hold its base interest rate at 5.25%. Borrowers keen for rates to start falling could receive some good news this year though. BoE governor Andrew Bailey said a cut will likely come in the coming quarters if inflation continues to fall, and he hinted the Bank could make cuts faster than the market expects.

Data on the economy was positive too. After the UK fell into a technical recession – defined as two consecutive quarters of negative growth – at the end of 2023, ONS figures confirm the UK economy grew in the first quarter of 2024. GDP increased by 0.4% in March 2024, following growth of 0.3% and 0.2% in January and February respectively.

Yet, the Organisation for Economic Co-operation and Development warned the UK would have the weakest growth across G7 countries in 2025. The organisation predicts GDP will rise by just 1% next year.

The latest readings from the S&P Global’s Purchasing Managers’ Index (PMI) support the ONS GDP data. PMI data provides an indicator of business conditions, such as output and new orders.

In April 2024, the service sector posted its fastest business activity growth in almost a year. The sector makes up around three-quarters of the UK economy, so strong growth will have helped pull the UK out of the recession quickly.

There was good news in the construction sector as well, with the PMI information showing growth reached a 14-month high. However, the data indicates the manufacturing sector contracted in April. One of the challenges facing manufacturing firms was purchasing costs rising for four consecutive months.

May was an excellent month for the FTSE 100 – an index of the 100 largest companies on the London Stock Exchange. It reached record highs several times throughout the month as markets reacted to speculation that interest rates would fall.

On 15 May, the index jumped by around 0.5% to reach 8,474 points. The top riser was credit data firm Experian after it reported growth at the top end of their expectations for the last financial year, which led to shares rising by more than 8%.

Europe

The wider continent fared similarly to the UK.

Eurostat confirmed that the eurozone is out of a recession. The economy shrank by 0.1% in the last two quarters of 2023 but posted growth of 0.3% in the first quarter of 2024. Major economies, including Germany, France, Spain, and Italy, grew in the first three months of the year.

However, the European Commission warned external factors could place economic growth at risk. These risks include ongoing Ukraine-Russia and Israel-Gaza conflicts.

In the eurozone, inflation was stable at 2.4% in the year to April 2024. While the European Central Bank has also yet to cut interest rates, it’s expected that it may do so as early as June if inflation falls.

European markets were also influenced by expectations that an interest rate cut could be imminent. Sliding oil prices led to modest gains on 8 May when France’s CAC was up 0.6% and Germany’s DAX increased by 0.1%.

Figures from the US show inflation fell to 3.4% in the year to April 2024. It led to Wall Street reaching a record high on 15 May as both the S&P 500 and the tech-focused Nasdaq index rose.

Data could suggest that US business confidence is falling after fewer jobs were added to the US economy than expected in April. Businesses added around 175,000 jobs compared to the 243,000 economists had predicted. Unemployment also increased slightly from 3.8% to 3.9%, which had a knock-on effect on the power of the dollar.

The Dow Jones index, which contains 30 major US companies, hit a milestone this month. The index reached 40,000 points for the first time on 16 May. The biggest riser was retailer Walmart, which was up 6%.

Entertainment giant Disney also hit a landmark in May – its streaming platform Disney+ turned a profit for the first time since it launched four years ago. Despite the news, Disney’s shares dropped by more than 5% in pre-market trading on 7 May as results have still fallen short of expectations.

Asia

On 9 May, encouraging trade data from China, which showed both exports and imports have returned to growth, boosted markets around the world.

However, China could face headwinds. After speculation over the last few months that the US would introduce trade tariffs, US president Joe Biden announced new tariffs would come into force on 1 August 2024.

There will be a 100% tariff on Chinese-made electric vehicles. Tariffs will also increase for other items, including lithium batteries, critical minerals, solar cells, and semiconductors.

The US said the tariff would help stop subsidised Chinese goods in the US market from stifling the growth of the American green technology sector. China responded by saying the move undermined fair trade and it’s US consumers who would bear the brunt of the additional costs.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Investment market update: April 2024

Tue, 30 Apr 2024 10:53:18 GMT

Investment market update: April 2024

Interest rates and inflation continued to affect markets around the world in April 2024. Read on to find out what else may have affected investment markets and your portfolio in April.

Expectations of interest rate cuts were good news for gold. Investors who feared falling interest rates would lead to lower returns on cash and government bonds purchased more gold. It led to the asset hitting a record high on 8 April at $2,535 (£3,171) an ounce.

Yet, while many experts are predicting that interest rates will fall, Kristalina Georgieva, the managing director of the International Monetary Fund, warned that central banks must resist pressure to cut them too soon.

The UK ended 2023 in a technical recession – defined as two consecutive quarters of economic contraction. The latest figures suggest the UK is already out of the recession. According to the Office for National Statistics, GDP grew slightly by 0.1% in February 2024, following 0.3% growth in January.

UK inflation data was also positive. Inflation in the 12 months to March 2024 was 3.2%. While there’s still some way to go before reaching the Bank of England’s (BoE) 2% target, it’s the lowest figure recorded since September 2021.

Clare Lombardelli, the newly appointed BoE deputy governor, tempered the news by adding that inflation is likely to be “bumpy” as pricing behaviour isn’t smooth. However, she added that the overall experience for people should be lower and more predictable inflation.

On the back of good news and with a general election looming this year, chancellor Jeremy Hunt told the Financial Times that he’d like to cut taxes in the autumn fiscal statement “if we can”.

While inflation overall is falling, business group British Chamber of Commerce has warned that new Brexit fees and checks could lead to higher food prices in the UK. Importers of animal products from the EU will face an additional charge from 30 April 2024 and new checks will be applied from October.

Data from S&P Global’s Purchasing Managers’ Index (PMI) also indicates that growth will continue. The service sector continued to expand in March and the construction industry returned to growth thanks to increased work in infrastructure projects.

Official data shows average wages, excluding bonuses, increased by around 6% between December 2023 and February 2024. Once inflation is factored in, average wages increased by 2.1% in real terms.

Yet, other information suggests many households will continue to financially struggle. A BoE report suggests it expects the number of households and small businesses to default on debt to rise this summer.

A report from consultancy firm KPMG also found that half of consumers are cutting back on non-essential spending. In fact, just 3% of consumers said they had been able to spend more in the first quarter of 2024. Eating out is the most likely expense to be cut from budgets, which could negatively affect the hospitality sector.

In April, the FTSE 100 proved why investors need to be prepared to weather market volatility.

On 12 April, the index of the 100 largest companies on the London Stock Exchange closed at the highest level for over a year. News that the UK is likely to have exited a recession led to the index rising by 0.9%.

However, just days later, on 16 April, the index tumbled by 1.35% and almost every stock on the index was in the red, with mining companies and banks suffering the largest falls. The downturn was linked to a market adjustment after the US Federal Reserve said it may not cut interest rates as soon as it hoped.

Then there was another turn as the FTSE 100 hit a record high of 8,068 points on 23 April due to expectations that the BoE will start cutting interest rates this year and fears about escalating tensions in the Middle East eased.

The ups and downs serve as useful reminders to focus on the long-term performance of investments rather than short-term market movements.

Europe

Inflation across the eurozone fell by more than expected to 2.4% in the 12 months to March 2024. Despite optimism that interest rates would be cut, the European Central Bank opted to hold rates. Yet, the bank did signal that, if inflation continues to fall, it could cut them in the summer.

PMI data indicates that the eurozone economy returned to growth for the first time since May 2023. The positive figures were driven by stronger than expected output from the service sector, with Spain and Italy providing the strongest boost. However, the two largest economies in the bloc, Germany and France, contracted.

Some EU countries, including Italy and France, could be put under an infringement order procedure for operating budgets with deficits that breach the EU’s rules. Usually, governments have to keep budget deficits below 3% of GDP. The cap was set aside during the Covid-19 pandemic but could be implemented again, which might place pressure on public spending plans.

Similar to the UK, European indexes suffered on 16 April when the Federal Reserve indicated it wouldn’t cut interest rates soon. France’s CAC index fell 1.8% and Spain’s IBEX was down 1.2%.

The US private sector added 40,000 more jobs than expected in March 2024, with businesses hiring an additional 184,000 employees. Job growth is one of the measures the Federal Reserve will consider when deciding whether to cut interest rates, so the data led to speculation that rates would fall soon.

Yet, when the rate of inflation was released, it dampened the optimism. In the 12 months to March 2024, inflation was 3.5%, an increase when compared to the 3.2% recorded a month earlier.

Investment markets did benefit when fears that Iran’s attack on Israel would lead to an escalation in the Middle East didn’t materialise. On 15 April, the Dow Jones saw a rise of 0.9%, while the S&P 500 increased by 0.7%, and tech-focused index Nasdaq was up 0.6%.

Asia

China beat its GDP forecast when it posted growth of 5.3% for January to March 2024 when compared to a year earlier. However, China’s National Bureau of Statistics recognised that growth could be hampered. The organisation said the external environment was becoming more “complex, severe, and uncertain”.

Indeed, the country faced several headwinds in April.

First, credit rating agency Fitch has cut the outlook of China’s debt from “stable” to “negative”, as it said the country was facing uncertain economic prospects.

Then, US treasury secretary Janet Yellen voiced concerns that China’s excess manufacturing capital could cause global fallout. She said China was too big to rely on exports for rapid growth and excess capacity was putting pressure on other economies.

While Yellen didn’t make any announcements about trade tariffs on Chinese goods, she said she would not rule out taking more action to protect the US economy from Chinese imports.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

4 compelling reasons you might want to consolidate your pension

Tue, 30 Apr 2024 10:44:54 GMT

4 compelling reasons you might want to consolidate your pension

It’s been more than a decade since auto-enrolment was introduced, and now most workers automatically become members of their employer’s pension scheme. While more people saving for retirement is excellent news, it could mean you end up juggling multiple pots.

One option is to transfer one pension to another, known as “consolidation”. It’s usually simple to do and there are many reasons why you might want to transfer a pension. However, there are also some potential drawbacks that you may wish to weigh up first.

Here are four compelling reasons you might want to transfer one pension to another.

1.It could make it easier to keep track of your savings during your working life

With each job potentially providing you with a pension, the number of pots you might need to manage could become overwhelming during your working life. Indeed, according to Zippia , the average person has 12 different jobs in their lifetime.

Keeping track of several pensions can be difficult. Not only could it make calculating if you’re on track for retirement challenging, but it may be easier to “lose” some of your savings too. According to Aviva , there could be as many as 2.8 million lost pensions in the UK, with a combined value of £26.6 billion.

Consolidating your pension could make handling your retirement plans easier during your working life.

2. Fewer pensions could make creating a retirement income simpler

Similarly, managing multiple pensions in retirement could also be complicated. If you’re juggling several pots, you might need to consider how to spread withdrawals across them and regularly review how the value of each one has changed to ensure withdrawals are sustainable.

Transferring your pensions could make the decisions you make once you retire simpler and your finances easier to manage throughout the next stage of your life.

3. Pension consolidation could reduce the fees you pay overall

Usually, you’ll pay a fee to your pension provider for running your pension scheme and investing on your behalf. This may be a set amount or a percentage of your total pension pot.

Fees vary between providers, so it may be worth reviewing how much you’re paying each pension scheme and considering if transferring could reduce the overall cost. Lower fees mean more of your contributions will be invested for your retirement, which could help your savings grow at a faster pace.

4. You could transfer your retirement savings to a scheme that is performing well

Typically, your pension is invested with the aim of delivering long-term growth. So, transferring your money to a scheme that has investment options that suit your needs or perform well could deliver a boost to the value of your pension over the long term.

When you’re reviewing the performance of your pension, remember to focus on the long term. Short-term market movements may affect the value of your pension, but over a longer time frame markets have, historically, delivered returns.

3 essential reasons you might choose not to transfer your pension

While there might be a good case for transferring your pension, there are reasons not to do so too. Here are three reasons you may decide to leave your retirement savings with your current pension scheme.

1. You have a defined benefit (DB) pension

A DB pension, also known as a “final salary pension”, would provide you with a guaranteed income from your retirement date for the rest of your life to create long-term security. They are often generous, and it usually doesn’t make financial sense to transfer out of a DB pension.

You will normally need to receive specialist financial advice to transfer out of a DB pension to ensure you understand the benefits you’d be losing.

Transferring out of a DB scheme is unlikely to be in the best interests of or be suitable for most people.

2. Your pension provides additional benefits

When you transfer out of a pension, you’d lose any additional benefits that come with it. So, it might be worth reviewing what your pension offers and whether benefits could be valuable to you.

For example, your pension could allow you to access your savings earlier, which might be useful if you want to retire sooner, or provide a guaranteed annuity rate when you start to take an income from it.

3. Withdrawing from small pension pots could be useful

Having several smaller pension pots might be useful if you want to access some of your savings and continue to contribute. “Small pots” are usually defined as a pension with a value of less than £10,000.

In some cases, you might be able to withdraw money from a small pot without triggering the Money Purchase Annual Allowance, which would reduce the amount you can tax-efficiently contribute to a pension in 2024/25 to just £10,000, compared to the usual £60,000.

Considering your retirement plans and reviewing each pension before you decide to transfer it to another scheme could help you decide if consolidation is right for you.

You should also note that transferring your pension may come with a fee. Make sure you understand the potential cost before you proceed.

If you’re thinking about consolidating your pensions and would like to understand if it’s the right decision for you, please get in touch. We can provide tailored advice about your retirement plan and how you could turn goals into a reality.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

Investment market update: March 2024

Mon, 22 Apr 2024 10:42:31 GMT

Investment market update: March 2024

While inflation continues to be a challenge for many economies, there are positive signs in the UK and around the world. Read on to find out what may have affected stock markets and your investment portfolio in March 2024.

Remember, volatility is part of investing and most people should invest with a long-term outlook. If you have any questions about your investment strategy or performance, please contact us.

In March, chancellor Jeremy Hunt delivered the 2024 Budget and set out the government’s spending and changes to taxation. One of the big announcements was a 2% cut to employee National Insurance, which follows a previous cut made in the 2023 Autumn Statement.

The Resolution Foundation, a thinktank, said pensioners were among the biggest losers in the Budget, as National Insurance is paid by workers but not people who are retired.

Investment bank Citigroup responded to the Budget by saying the Office for Budget Responsibility (OBR) was being too optimistic when it assumed productivity would grow by 0.9%. The organisation predicts a more modest 0.5% and said it means the UK could be “fiscally offside by around £50 – £60 billion”.

The OBR recognised that productivity has been poor since the 2008 financial crisis. In fact, growth has fallen from 2.5% a year to 0.5% – the economy would have been around 30% bigger today if the pre-2008 trend had continued.

David Miles, a member of the OBR, said the last 15 years have been so bad, that the next 5 to 10 years are likely to be a “bit better”. He particularly noted that AI could help boost productivity.

Inflation continued to fall in the 12 months to February 2024, with a rate of 3.4% – the lowest since September 2021.

Despite the positive news, the Bank of England (BoE) held its base interest rate at 5.25%. Huw Pill, chief economist at the BoE, said he believed more compelling evidence was needed before a cut would be made and it could be “some way off”.

The UK fell into a technical recession at the end of 2023, but the BoE said signs suggest it is already over.

Figures from the S&P Global Purchasing Managers’ Index (PMI) also support this. Private sector growth hit a nine-month high in February, indicating that the recession was shallow. However, the manufacturing sector continued to face challenges, with PMI data showing weak demand and supply chain disruption are contributing to a downturn.

Despite figures from the Insolvency Service indicating businesses are struggling, as insolvencies hit a 30-year high in 2023, there is some good news for investors.

The FTSE 100 – an index of the 100 largest companies listed on the London Stock Exchange – hit a 10-month high on 21 March when it increased by around 1.1%. Mining stocks were among the main risers amid expectations that the US Federal Reserve will cut its base interest rate soon.

Greggs also saw its stock rise during March. The bakery chain revealed like-for-like sales increased by 13.7% in 2023, while pre-tax profits jumped 27% to £188.3 million. The firm added it expected another year of good progress in 2024.

Europe

According to data from Eurostat, inflation across the eurozone continued to fall in February 2024, when it was 2.6% compared to 2.8% a month earlier.

While many countries in Europe are battling high inflation, Turkey’s rate of inflation has consistently been in double digits since the end of 2019. In February, it hit a 15-month high of 67%. In a bid to cool the soaring cost of living, Turkey’s central bank increased its interest rate to 50%; this compares to a rate of 8.5% just a year ago.

The pan-European Stoxx 600 index reached a record high on 13 March boosted by upbeat company results from the likes of energy supplier E.ON and retailer Zalando. Buoyant company forecasts indicate that businesses are feeling optimistic about the future.

Inflation in the US unexpectedly increased to 3.2% in the 12 months to February 2024. The news dampened hopes that an interest rate cut would be announced soon.

A consumer sentiment index from the University of Michigan suggests Americans have a gloomy outlook about economic conditions and prospects for the future. Pessimistic consumers might be more likely to curb their spending, which could harm businesses.

Data from the US Federal Reserve also indicates that businesses are taking a more cautious approach. Average hourly earnings increased by just 0.1% in February 2024, while unemployment reached 3.9% – the highest figure since January 2022.

Technology giant Apple saw its shares fall by around 2.5%, wiping around $70 billion (£55 billion) off the value of the company, on 4 March following an EU-issued fine. The EU fined the company €1.8 billion (£1.54 billion) after it was found to have broken competition laws by imposing curbs on app developers.

Asia

Japan’s main index, the Nikkei, hit 40,000 points for the first time on 4 March after it increased by 0.5%, partly thanks to a weak Japanese Yen helping exporting businesses. The milestone follows a strong start to the year – the Nikkei has gained almost 20% since the start of 2024 thanks to booming technology firms.

The Bank of Japan also made its first interest rate hike in 17 years and ended eight years of negative interest rates, which sought to encourage lending. The bank’s base rate increased from -0.1% to 0.1% after board members said they expected to achieve 2% inflation in the coming year after decades of deflation and stagflation.

China continues to face a property crisis, which is affecting consumer spending and lending, as well as economic growth.

The Chinese government previously cracked down on property speculation that sent prices soaring. However, the property market peaked in 2020 and has faced a downturn ever since.

According to the country’s National Bureau of Statistics, house prices continued to fall in major cities in February. The organisation said it expects real estate to remain the main drag on economic growth in 2024.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested.

Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Everything you need to know about lifetime mortgages

Mon, 22 Apr 2024 10:37:56 GMT

Everything you need to know about lifetime mortgages

A lifetime mortgage could provide a useful way to unlock property wealth. The money you access could be used to fund your later years or help you overcome financial challenges. Yet, there are important drawbacks you might need to consider first.

A lifetime mortgage is a type of equity release. It’s a loan that’s secured against the value of your home. However, it’s different to traditional loans as you usually don’t need to make repayments during your lifetime. Instead, the loan is repaid after you sell your home, pass away or move into long-term care.

You can still live in the property after taking out a lifetime mortgage. You can choose to access the equity available through a lump sum or withdraw several smaller amounts, known as “drawdown”.

As your home could be one of the largest assets you own, being able to access some of the equity could be valuable.

Usually, you’ll need to be aged 55 or older to use equity release. The value of your home will affect how much you can access. If you have a mortgage, you might still be able to take out a lifetime mortgage, but you’ll usually need to pay off the outstanding amount with the equity you’ve accessed.

According to the Equity Release Council , homeowners used equity release to access £2.6 billion in 2023.

1 in 13 people who divorce after 50 are turning to equity release

Research from Legal & General indicates more people are turning to lifetime mortgages following a relationship breakdown.

According to the survey, 1 in 13 couples who divorce after the age of 50 will turn to equity release to settle their finances. Splitting up with your partner can have a huge effect on your finances, and if you’ve already retired you might have fewer options. So, equity release could seem like an attractive solution.

In the UK, over-55s hold more than £3.5 trillion in housing wealth. In many cases, ex-couples who are dividing assets will sell the home and split the equity, or one partner will buy the other out. However, where one partner wants to stay in the home but doesn’t have the savings to buy the other out, a lifetime mortgage is becoming a popular option.

Equity release may be useful in other circumstances where you might face financial challenges too.

For instance, if you’re ready to retire but still have a mortgage that would make giving up work difficult, a lifetime mortgage might be valuable. It may allow you to pay off your existing mortgage debt to reduce your outgoings in retirement.

4 potential disadvantages to using a lifetime mortgage

1.The amount you owe can rise rapidly

As you often don’t make repayments, the amount you owe through a lifetime mortgage can increase quickly.

The amount you owe when you die or move into long-term care could be far higher than the initial equity you accessed.

An example from Unbiased shows the effect rolling up interest can have. If you borrowed £50,000 with an interest rate fixed at 5%, after 10 years, the amount owed would be more than £81,000. If you lived for 20 years after taking out a lifetime mortgage with a 5% interest rate, the amount due when you passed away would be more than £132,000.

Many providers will allow you to pay the accrued interest. If you’re income allows you to do so, making regular payments may help you manage the debt.

2. It may affect the inheritance you leave behind

As mentioned above, the amount you owe through a lifetime mortgage can rise significantly during your lifetime. As a result, it can affect how much you leave behind for your loved ones.

In some cases, you may be able to ring-fence a portion of your property wealth to pass on to your family. However, this will usually mean the equity you can access is lower.

If you decide to use a lifetime mortgage, you might want to speak to your family and other beneficiaries about how it could affect their inheritance.

3. It might reduce your options if you want to move in the future

Asking yourself if your current home is where you plan to stay and whether it’ll meet your needs in your later years could be important. In some cases, you can move after taking out a lifetime mortgage, but it’ll often limit your options and your new home may need to meet certain criteria.

4. It could affect means-tested benefits

If you’re eligible for means-tested benefits or could be in the future, including financial support if you need care, it’s worth considering the impact receiving a lump sum could have. In some cases, you may no longer be eligible for benefits if you’re wealth exceeds thresholds.

If you’re thinking about using a lifetime mortgage to unlock some of your property wealth, we could help you understand if it’s the right decision for you, as well as explain alternative options. Please contact us to arrange a meeting.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Equity release will reduce the value of your estate and can affect your eligibility for means-tested benefits.

A lifetime mortgage is a loan secured against your home. To understand the features and risks, ask for a personalised illustration.

How to calculate the level of income protection that would provide you with financial security

Wed, 20 Mar 2024 12:19:22 GMT

How to calculate the level of income protection that would provide you with financial security

Income protection could provide you with an essential safety net if you’re unable to work due to an accident or illness. Yet, research suggests it’s a valuable step that some people might be overlooking.

If you’re too ill to work, income protection could provide you with a regular replacement income. Usually, income protection would pay out a proportion of your usual salary, such as 60%. It may allow you to continue meeting essential outgoings and focus on your recovery.

It can be easy to think that you wouldn’t need to rely on income protection. But statistics paint a different picture. According to the Office for National Statistics , the number of people reporting they are long-term sick reached a historic high at the end of 2023 – around 2.8 million people aren’t working for health reasons.

Poor health or an accident could affect you at any age, so considering how you’d cope financially may be useful.

Without financial protection, you may be reliant on Statutory Sick Pay (SSP). However, a survey from The Exeter found that almost 1 in 3 UK workers overestimate SSP, so it might not provide the financial security you expect. In 2023/24, SSP is £109.40 a week for up to 28 weeks.

Yet, the same report found that just 11% of women and 16% of men have taken out income protection.

Figures from the Association of British Insurers highlight how useful income protection could be. In 2022, more than 15,900 people claimed income protection and collectively received £231 million – a 22% increase when compared to the previous year.

So, income protection could create a safety net when you need it most. Read on to find out what you may want to consider when deciding what level of income protection could provide you with financial security.

What are your regular essential outgoings?

When you’re assessing what level of financial protection is right for you, you may want to start by looking at your outgoings. This could help you identify the potential shortfall you’d face if your income unexpectedly stopped.

As income protection typically pays a percentage of your usual income, understanding how much of your regular expenses are essential could be useful. These outgoings might include mortgage repayments, utility bills, and grocery shopping.

You may also want to include non-essential outgoings that you wouldn’t want to cut back if possible, such as private school fees for your children or club memberships.

With a clear picture of your monthly spending, you can start to see what payout you’d need from income protection to create financial security.

2 potential income sources you may want to factor into your calculations

When weighing up the level of cover you’d want income protection to provide, you might want to factor in other steps or income sources as well, including these two.

1. Emergency fund

Having an emergency fund can provide financial peace of mind. It’s often recommended that you have three to six months of essential outgoings held in an easy access savings account to cover emergencies.

As well as being useful when your boiler or car needs repairing, you could use an emergency fund to cover expenses in the short term if you’re unable to work. However, an emergency fund might not create long-term financial security alone – what would happen if you couldn’t return to work for a year?

Yet, it can supplement income protection. For example, you might be able to choose a lower level of cover if you’d also access your savings.

When you take out income protection, you’ll usually select a deferred period – this is the waiting time between the first day you’re unable to work and when you’re eligible to receive income protection payments. Typically, the longer the deferred period, the lower the cost of maintaining the financial protection will be.

So, if you know you have enough in your emergency fund to cover three months of expenses, you may opt to choose a deferred period of 12 weeks to reflect this.

2. Sick pay from your employer

When you’re assessing how you’d cope financially if you couldn’t work, reviewing your employer’s sick pay policy may be useful. If your employer would continue to pay you a regular salary, it could put your mind at ease.

However, research by The Exeter found that 19% of UK workers are not entitled to any employer sick pay. What’s more, almost half would receive support for no longer than three months.

Income protection could help you fill this potential gap. Again, your employer’s sick pay policy might affect the level of income you’d need income protection to provide and the deferred period.

Calculating if income protection is appropriate for you

If you may struggle to maintain regular expenses without your salary, income protection could provide peace of mind and an essential safety net if you’re unable to work due to an accident or illness.

Assessing the other steps you’ve taken to improve your financial resilience, such as building an emergency fund, may help you identify the gap income protection could fill and choose the right option for you.

Taking out appropriate income protection is just one way you could create long-term financial security. We can work with you to create a comprehensive financial plan that aims to offer you peace of mind, even when the unexpected happens.

Please contact us to arrange a meeting to talk about how you could improve your financial resilience.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Note that financial protection plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.

Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.

Investment market update: February 2024

Wed, 20 Mar 2024 12:13:31 GMT

Investment market update: February 2024

While many economies are still struggling with high inflation there are signs that the pace is starting to slow, which could pave the way for interest rate cuts later this year.

To reflect this, the OECD has lifted its 2024 global growth forecast by 0.3%, when compared to the end of 2023, to 2.9%. However, the international organisation warned that central banks should ensure underlying price pressures were “fully contained” before they cut interest rates.

Market rallies around the world on 22 February highlighted how interconnected markets are and how difficult it can be to predict movements.

US chipmaker Nvidia beat expectations and reported sales of $22.1 billion (£17.4 billion) in the final quarter of 2023 – a 22% increase when compared to the previous quarter and a huge 265% higher than in the final quarter of 2022. In fact, the company has gone from a market cap of $1 trillion to $2 trillion in a record eight months – less than half the time it took technology giants Apple and Microsoft.

It led to widespread optimism that the AI boom would continue. Tech-heavy US index Nasdaq jumped more than 2%, as Nvidia’s share price soared by 12%. The news led to Japan’s main index, the Nikkei, hitting a record high, Europe’s Stoxx 600 index increasing by 1%, and the FTSE 100 benefiting from a boost to its technology stocks.

Read on to find out what else affected markets in February 2024.

The headline news is that the UK is in a technical recession, defined as two consecutive quarters of economic contraction.

The Office for National Statistics (ONS) figures show GDP fell by 0.3% in the final quarter of 2023, following a drop of 0.1% in the previous quarter. The ONS said the biggest drags on growth were manufacturing, construction, and wholesale.

The news places pressure on prime minister Rishi Sunak, who is expected to call a general election in the coming months.

ONS data also showed that UK inflation was unchanged in January at 4%. While positive news, as economists predicted a rise, it’s still double the Bank of England’s (BoE) 2% target.

The BoE’s governor, Andrew Bailey, said the bank needed more confidence that inflation would fall and stay low before it made cuts to interest rates. As a result, the BoE base rate remains at 5.25%. However, Bailey noted that inflation didn’t need to reach 2% before cuts would be considered, signalling that it could happen soon.

Tension in the Red Sea is continuing to affect supply chains around the world. The S&P Purchasing Managers’ Index (PMI) shows the manufacturing sector continued to contract in January, with the need for shipping firms to reroute vessels away from the Suez Canal contributing to challenges and rising costs.

In contrast, the PMI for the service sector showed three consecutive months of growth with the highest reading in eight months. The pace of new orders also increased, which led to firms hiring more staff.

After a pre-Christmas slump, retailers have benefited from sales bouncing back, according to the ONS. In January, retail sales volumes increased by 3.4% – the fastest growth recorded since April 2021.

However, the high street still faces significant challenges as consumers watch their spending during the cost of living crisis. The latest high-street casualty is well-known cosmetic brand The Body Shop, which filed for administration in February.

Europe

The eurozone is moving closer to reaching its inflation target of 2%. In the 12 months to January 2024, inflation was 2.8%. Steep falls of 6.8% in energy prices played a role in bringing down the headline figure.

The eurozone avoided falling into a recession, but the GDP data was far from positive. In the final quarter of 2023, eurozone GDP remained the same as the previous quarter as economies stagnated.

In response, the European Commission (EC) has cut its growth forecasts. The EC now expects the eurozone to grow by just 0.8% in 2024, while the wider EU is anticipated to grow by 0.9%.

There were warnings that Europe’s largest economy, Germany, could slip into a recession.

ING data suggest that German industrial production fell by 1.6% month-on-month in December, and was 3% lower than a year ago. What’s more, Destatis said German exports fell by 4.6% in December when compared to a month earlier as demand continued to affect business operations.

In the US, inflation fell to 3.1% in the 12 months to January and moved closer to the Federal Reserve’s 2% target.

Similar to other economies, the base interest rate was maintained in the US. However, speculation that rates would fall later this year led to the S&P 500 index reaching a new high on 7 February. This was driven by energy, consumer discretionary, and material stocks.

With a presidential election due to take place in the US in November, current president Joe Biden took the opportunity to state that the latest job figures show America’s economy is “the strongest in the world”.

Economists predicted that the US would add 180,000 new jobs in January. This forecast was far surpassed when figures showed 353,000 new jobs were created. In addition, average hourly earnings increased by 4.5% when compared to a year earlier and reached $35.55 (£28.10).

Both of these figures indicate that businesses are feeling confident about their prospects.

Asia

Over the last few decades, China has consistently been one of the fastest-growing major economies in the world. However, the International Monetary Fund (IMF) has warned that an economic slowdown is likely.

The IMF predicts China’s GDP will grow by 4.6% in 2024 although this growth will fall to 3.5% by 2028 due to weak productivity and an ageing population. While the figures may seem high compared to other countries, it follows growth of 5.2% in 2023 and is significantly below the medium-term average.

China’s markets have been experiencing volatility. As stock exchanges in Shanghai and Shenzhen fell to their lowest level since 2019 early in February, the government decided to remove the boss of the stock market regulator in a bid to calm the turbulence.

Official statistics from Japan show the country fell into a recession at the end of 2023. In the final quarter of the year, GDP fell by 0.1%, while the figure from the third quarter of 2023 was revised downwards to a fall of 0.8%.

The contraction means Japan is no longer the world’s third-biggest economy as it slipped into the fourth spot. Japan’s GDP fell to $4.2 trillion (£3.31 trillion) and is now lower than Germany’s GDP of $4.5 trillion (£3.55 trillion).

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

The ups and downs of the FTSE 100 40-year history demonstrates time in the market matters

Thu, 15 Feb 2024 09:46:47 GMT

The ups and downs of the FTSE 100 40-year history demonstrates time in the market matters

This year the FTSE 100 index turns 40. Over the last four decades, it’s become a way to measure the health of the UK stock market. During that time there have been highs that investors no doubt celebrated, and lows that serve as a reminder that there’s some truth in the saying: it’s time in the market, not timing the market.

In 1984, Margaret Thatcher was serving as prime minister and, similar to today, interest rates were increasing in a bid to reduce inflation – the base interest rate exceeded 12.8% in July 1984. The country was also grappling with miners' strikes and high levels of unemployment. Yet, it was also a time of technological advancement and scientific discoveries.

Against this backdrop, the FTSE 100 index launched.

The FTSE 100 is made up of the biggest 100 companies that are listed on the London Stock Exchange. The market capitalisation of each company is reviewed every quarter, and the index is adjusted accordingly.

More than 20 companies that were listed when the FTSE 100 launched are still on it today, including NatWest, Unilever, and Shell.

While you might think 100 companies were selected for being a round number, it was chosen because it was the maximum number of stock symbols that could be displayed on a single page of the electronic information terminals at the time. The technology’s improved, but the 100 figure has stuck.

As an investor, you might hold individual stocks in some of the companies included in the FTSE 100. You might also be invested in FTSE 100 firms through a fund, which would pool your money with that of other investors to invest in a range of companies.

The FTSE 100 has experienced volatility in the last 40 years

One of the first substantial falls the FTSE 100 recorded was in 1987 during the “Black Monday crash”.

The global stock market crash was unexpected and severe. Some analysts have suggested it was due to significantly overvalued stocks, rising interest rates, or persistent trade and budget deficits in the US.

On 19 October 1987, the FTSE 100 fell by 10.8% and then a further 12.2% the following day. While it took several years, the index recovered and was reaching new highs in the 1990s.

More recently, the FTSE 100 experienced a fall following the 2008 financial crisis, the Brexit referendum, and the Covid-19 pandemic. There have been many smaller dips and corrections too.

Yet, historically, the FTSE 100 has recovered from downturns.

The FTSE 100 hit 8,000 points in February 2023

On the first day, the FTSE 100 launched at 1,000 points. Over four decades, the overall trend has been an upward one, despite periods of volatility.

Indeed, on 16 February 2023, the index hit an all-time high when it exceeded 8,000 points even though the UK economy was expected to fall into a recession at the time. According to the Guardian, the boost was partly attributed to energy firms making significant gains in light of the war in Ukraine.

Over 40 years, the annualised rate of returns from the FTSE 100 is just above 8%. That’s far above the average rate of inflation of around 3% over the same period.

So, if investors had been spooked during the 1987 crash and withdrew their money from the stock market, they could have missed out on future gains. The ups and downs of the FTSE 100 highlight why a long-term view is often important when you’re investing.

Short-term volatility is part of investing and is impossible to consistently predict. So, rather than trying to time the market, holding assets over a long time frame makes sense for many investors.

Get in touch to talk about your investments

The FTSE 100 has become a useful tool for investors over the last 40 years and it’s often used to provide a snapshot of the investing market. However, there are other opportunities to weigh up too.

We could help you build an investment portfolio that suits you and aligns with your risk profile. Please get in touch to arrange a meeting.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Investment market update: January 2024

Thu, 01 Feb 2024 15:18:34 GMT

Investment market update: January 2024

While a new year started, many of the key factors affecting economies and markets in January were the same as those in 2023, namely high levels of inflation and recession fears.

The World Bank warned the global economy is set to slow for a third successive year in 2024 and is on course for the weakest half-decade of growth since the early 1990s. It added there was a risk that the 2020s would be a “wasted” decade following a series of setbacks, including the pandemic.

Tensions in the Red Sea are also affecting businesses and economies around the world. The German Economic Institute said global trade fell by 1.3% in December as a result of attacks on merchant ships. The volume of container transport in the Red Sea fell by more than half at the end of 2023 and could have implications for many businesses relying on goods.

Read on to find out what else affected markets at the start of 2024.

There was positive news when the Office for National Statistics (ONS) released the latest GDP figures at the start of the year. November posted growth of 0.3%, after a contraction in October. However, experts warned the UK was still at risk of a technical recession – defined as two consecutive quarters of negative growth.

Yet, EY Item Club said it expects UK economic growth to rebound in late 2024 as both inflation and interest rates are predicted to fall.

Data indicates that inflation in the UK is stabilising, but it’s still above the Bank of England’s (BoE) 2% target. In the 12 months to December, inflation was 4%, a slight increase on the 3.9% recorded in the previous month.

Higher interest rates to tackle inflation have been placing pressure on both households and businesses, but they’ve also presented an opportunity for investors with government bonds becoming more attractive. The sale of £2.25 billion of 20-year bonds attracted bids for 3.62 times the volume on offer.

Chancellor Jeremy Hunt is preparing to deliver the Budget on 6 March 2024. According to reports, government borrowing halved year-on-year in December, which has reportedly given Hunt the scope to make around £20 billion worth of tax cuts if he chooses. With a general election looming, it could be an opportunity to ease the tax burden.

Businesses as well as households may look to the budget to ease some of the pressure they’re facing.

Insolvency experts at Begbies Traynor warned that more than 47,000 UK businesses are on the “brink of collapse” as the number of firms in “critical” financial distress increased by 25% in the final three months of 2023 when compared to the previous quarter.

Some other businesses plan to make cuts in the coming months too. One such firm is Tata Steel, which announced plans to cut up to 2,800 jobs by the end of the year. The news was met with strong words from union Unite, which pledged to use “everything in its armoury” to defend steel workers.

Some businesses are posting positive news though. Retailer Next saw a 10% jump in sales in the two weeks before Christmas, which led to its shares hitting an all-time high of more than £85.30 at the start of January.

Europe

As the European Central Bank (ECB) predicted, inflation across the eurozone increased in January. In the 12 months to December 2023, the rate of inflation was 2.9%, official statistics show. The ECB said it expects inflation to remain between 2.5% and 3% throughout 2024.

ECB vice president Luis de Guindos went on to warn that the eurozone may have already fallen into a technical recession and prospects remain weak.

Data from Germany’s national statistics office, Destatis, paints a pessimistic outlook. The country is on track for its first two-year recession since the early 2000s as the economy shrank by 0.3% in 2023. The decline was linked to higher energy costs and weaker industrial demand.

Low demand looks set to plague the eurozone’s largest economy into 2024 too. In November, industrial output was weaker than expected and fell by 0.7% month-on-month.

While many economies have battled double-digit inflation over the last couple of years, in many cases, they’ve now started to fall. One outlier is Turkey, which saw an inflation rate of almost 65% in the year to December 2023.

The huge rise is partly attributed to an almost 50% increase in the nation’s minimum wage. Demand from tourists is also having an effect. For example, hotel prices jumped 93% year-on-year.

US inflation also increased in the 12 months to December 2023 to 3.4%, compared to 3.1% recorded a month earlier. The rise was linked to higher housing and energy costs.

Similar to economies in Europe, some sectors in the US are struggling due to weak demand. The Institute for Supply Management found that US factories contracted in December for the 14th consecutive month. Yet, job data indicates that businesses are feeling optimistic, as they added 216,000 new jobs at the end of 2023.

On 22 January, the US stock market reached a record high. The S&P 500 index, which tracks the 500 largest companies listed on stock exchanges in the US, increased by 0.5% as technology stocks rallied.

US company Microsoft also started the year strong when it overtook Apple to become the world’s most valuable company on 11 January. The firm’s share price increased by 1.5% to boost its market valuation to $2,888 trillion (£2,272 trillion).

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested.

Past performance is not a reliable indicator of future performance.

Inflation is falling. Here’s what it could mean for your finances

Tue, 02 Jan 2024 16:11:09 GMT

Inflation is falling. Here’s what it could mean for your finances

High inflation has dominated headlines over the last two years. With the rate now slowly nearing the Bank of England’s (BoE) target, taking stock of what it means for your finances could be useful.

The BoE is responsible for managing inflation and aims to keep it at 2%. The central bank explains keeping inflation stable helps everyone plan for the future.

Several factors combined in 2021 that led to the rate of inflation soaring. It reached a peak of 11.1% in October 2022 – a 41-year high. In the 12 months to November 2023, it’s still above the BoE target but has fallen to 3.9%, according to Office for National Statistics data.

The BoE’s Monetary Policy Committee (MPC) said it expects inflation to continue falling towards the 2% target in 2024. However, it doesn’t expect to reach the target until the end of 2025.

Declining inflation doesn’t mean the cost of goods and services will fall

While slowing inflation could be a good thing for your long-term finances, it’s unlikely to deliver a boost to your everyday budget.

Falling inflation doesn’t mean the prices of goods and services fall, it simply means the pace at which the costs are rising is slowing down. So, it might be a good idea to review your day-to-day expenses. If your income hasn’t increased at the same rate as inflation, you could find your disposable income has fallen in real terms.

For example, let’s say your income was £3,000 a month in 2020. According to the BoE’s inflation calculator, your income would need to have increased by more than £630 a month just to maintain the same lifestyle in November 2023.

Falling interest rates could be beneficial if you’re a borrower

While the rate of inflation might not reduce the price you pay for goods and services, it could affect the cost of borrowing.

One of the main ways the BoE has sought to tackle inflation is by increasing its base interest rate. Higher interest rates can lower spending in the economy as both consumers and businesses tighten their belts.

As of December 2023, the BoE’s base interest rate is 5.25%, which compares to a rate of just 0.1% in November 2021. The MPC expects to maintain this rate through the first half of 2024 before gradually reducing it to reach 4.25% in 2026.

So, if you have a mortgage, credit card, personal loan or other form of borrowing, you might start to benefit financially from lower interest rates in 2024. For some, this could have a positive effect on their budget.

Making inflation part of your long-term goals could help keep you on track

The period of high inflation over the last two years has highlighted why it’s important to consider the rising cost of living when you’re making long-term plans.

Even when inflation meets the BoE’s target, the gradual rise of goods and services can add up.

Between 2010 and 2020, inflation averaged 2% a year. That might not seem like a lot, but over a decade it could gradually reduce your spending power if your income is static.

If you retired in 2010 and planned to take a monthly income of £2,000 from your pension for the rest of your life, you’ll start to notice your money doesn’t stretch as far relatively quickly.

Indeed, the BoE’s inflation calculator suggests your income would need to have increased to more than £2,400 by 2020 to maintain the same standard of living.

Now, imagine the effect stable inflation could have on your income needs over a retirement that might span several decades. During that time, you may also experience periods of high inflation, which could reduce your spending power even further.

It’s not just retirement planning that could be affected by inflation, but any of your long-term goals. Whether you’re setting aside money to support your children through university or to buy property in the future, inflation may affect your target and the steps you need to take.

Do you want to make inflation part of your financial plan?

Considering how outside factors, like inflation, might affect your goals could help your financial plan stay on track. Please contact us to talk about creating a long-term financial plan that could give you confidence, even when inflation is high.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Investment market update: December 2023

Tue, 02 Jan 2024 16:08:19 GMT

Investment market update: December 2023

Many markets rallied during December based on the expectation that interest rates will start to fall in 2024. Read on to discover what else may have affected your investment portfolio in the final month of 2023.

On 27 December, the MSCI World Stock Index, which comprises stock from nearly 3,000 companies to track global equity-market performance, was up 4.5% when compared to the start of the month. It was driven by expectations that interest rates will start to fall in early 2024.

The price of gold has also been affected by hopes that interest rates have peaked. In December, the price of gold reached a record high of $2,111.30 (£1,650.08) an ounce.

So, what else affected markets as 2023 drew to a close?

Official figures from the UK paint a gloomy picture for the economy.

According to the Office for National Statistics (ONS), the economy unexpectedly shrank by 0.3% in October as both households and businesses faced pressure amid the cost of living crisis.

Chancellor Jeremy Hunt said it was “inevitable” that GDP would be subdued while interest rates are high to bring down inflation. He added that announcements made in the Autumn Statement in November mean the economy is now “well-placed to start growing again”.

However, revised figures for the third quarter of 2023 provided a further blow. Previously, the ONS said the UK posted no growth between July and September 2023, but an update reveals the economy shrank by 0.1%. Despite this, Hunt said the medium-term outlook is “far more optimistic” than GDP data suggests.

There was some positive news when it came to inflation. In the 12 months to November 2023, inflation was 3.9%, down from 4.6% in October.

Yet, the Bank of England’s (BoE) Monetary Policy Committee voted to hold interest rates at 5.25% rather than cut them. BoE governor Andrew Bailey said he was willing to do “what it takes” to bring inflation down to 2%.

While interest rates haven’t fallen yet, there are signs they could in the coming months.

The yield, or interest rate, on 2-, 10-, and 30-year UK bonds fell mid-month. Yields often fall when bond prices rise, which indicates that markets expect the BoE to start cutting borrowing costs in 2024.

Falling interest rates could provide some much-needed relief for both businesses and households that have been affected by the rising cost of borrowing. The government has also been affected.

According to the Treasury, public sector borrowing was higher than expected in November at £14.3 billion and the interest payable on central government debt hit £7.7 billion. While slightly lower than October’s figure of £8.1 billion, it’s the highest since records began in 1997 for a November.

Data indicated that businesses continue to face headwinds. The CBI reported that retail sales fell at a fast pace in the year to December, which is expected to continue into January, as consumers watched their spending.

Purchasing Managers’ Index (PMI) figures also found both the construction and manufacturing sectors are contracting. Dr John Glen, chief economist at the Chartered Institute of Procurement & Supply said the UK continued along a “fragile path” following news that manufacturing export orders fell for the 22nd consecutive month.

The FTSE 100 started the month with a 0.9% rise to 2520 points on 1 December. Mining stocks were leading risers, and homebuilders also benefited from a boost on the news that house prices could start rising again in 2024.

However, there’s no clear consensus about property prices. Indeed, Halifax predicts property prices could fall by up to 4% next year.

Europe

Data indicates that many European countries are in a similar position to the UK.

In the 12 months to November 2023, inflation across the eurozone fell to 2.4% – in the 12 months to November 2022, it was 10.1%.

However, the European Central Bank (ECB) opted to hold interest rates. The ECB’s Governing Council said: “While inflation has dropped in recent months, it is likely to pick up again temporarily in the near term.”

Nonetheless, anticipation of an interest rate cut in early 2024 led to stock markets in France and Germany rallying. France’s CAC-40 climbed as much as 0.4% to set a new record on 12 December, while Germany’s Dax also reached a new high.

PMI data for the eurozone show business activity fell sharply in December. Output fell at the fastest pace in 11 years if the early 2020 pandemic months are excluded.

As Europe’s largest economy, Germany is often used as an indicator for the area. The Ifo Institute measure of German business morale worsened in December – companies were less happy about current economic conditions and pessimistic about the future. Energy-intensive industries were found to be particularly gloomy.

US inflation fell to 3.1% in the 12 months to November 2023. Treasury secretary Janet Yellen said inflation is coming down “meaningfully” and she believes the current path will lead to inflation gradually declining to the Federal Reserve’s 2% target.

Employment figures suggest businesses are optimistic about the future. Federal Reserve data shows 199,000 jobs were added in November to indicate a strong labour market.

However, other figures paint a different picture. According to the Census Bureau, US factory orders fell by 3.6% month-on-month in October. In addition, a PMI reading suggests that the manufacturing sector is contracting.

Asia

Credit ratings agency Moody’s cut China’s credit outlook from “stable” to “negative”. The agency said it was due to concerns about rising debt and economic growth slowing. While the country’s credit rating remained the same at A1, the fifth highest rating, lowering the outlook suggests Moody’s could cut it in the future.

While many other developed countries are battling inflation, China has the opposite problem. Its inflation index fell 0.5% in November, showing prices are declining. Deflation could indicate that demand is low and may negatively affect businesses.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investment market update: October 2023

Wed, 08 Nov 2023 15:58:36 GMT

Investment market update: October 2023

As inflation remains stubborn, and interest rates may have to remain higher for longer, recessionary concerns have grown around the world.

Read on to discover some of the factors that may have affected your investment portfolio in October 2023.

When reviewing short-term market movements, remember to focus on your long-term investment goals.

After a slump in July, official data shows the UK economy grew by 0.2% in August with the Office for National Statistics (ONS) reporting that the service sector mostly drove this growth.

Despite this positive news, concerns remain that the UK is heading into recession. Official figures indicated that the unemployment rate rose to 4.2% between June and August, up from 4% in the March to May quarter.

In addition, UK business activity shrank for the third consecutive month in October. The S&P Global/Cips Flash UK composite purchasing managers’ output index marginally increased to 48.6 in October from 48.5 the previous month.

However, the reading remained below the 50 mark, indicating that a majority of businesses continued to report a contraction in their output.

Inflation remains stubborn, as the headline rate was unchanged at 6.7% in the year to September. Rising fuel costs offset the first monthly fall in food prices for two years to maintain pressure on households.

This means that interest rates may have to remain higher for longer, especially considering that Swati Dhingra, one of the Bank of England’s nine-strong Monetary Policy Committee, said that they felt most of the impact of 14 interest rate rises was yet to be felt.

While the FTSE All-Share Index rose by 1.9% in the third quarter of 2023, the market remains uncertain, and it had given up all of these gains by mid-October.

Europe

Fears of a recession also persist in the eurozone.

S&P Global said that eurozone business activity declined for the fifth consecutive month and, excluding the months affected by pandemic lockdowns, it was the heaviest fall for a decade.

Falling exports, a sharp drop in new business orders, and a surge in fuel prices all contributed to this decline.

In more positive news, annual inflation in the eurozone fell to 4.3% in the year to September – its lowest level since October 2021. This comes after the European Central Bank decided to increase interest rates to a record level in September, pegging its key rate at 4%.

This data masks sharp differences in inflation between nations. Spain and Italy both saw the inflation rate rise in September – to 3.2% and 5.7% respectively – while Croatia’s inflation rate of 7.3% was the eurozone’s highest.

Contrast this with inflation in the Netherlands, which fell into the negative zone at -0.3%, meaning prices were lower than they were a year previously.

Overall, the MSCI Europe ex-UK index – an index covering 344 constituents in 14 developed markets across Europe – rose by 10% in the first nine months of 2023.

Over the last two decades, the US economy has grown at roughly double the pace of Europe and the UK. This looks set to continue in 2024.

The IMF has predicted that the US economy will power ahead in 2024, forecasting an expansion of 1.5% next year. This compares with IMF forecasts of 1.2% for the eurozone and 0.6% for the UK.

While this is partly due to soaring costs of energy in Europe after Russia’s invasion of Ukraine, more structural reasons – like the US’s booming technology sector – have also helped to maintain growth.

The percentage of US adults in their prime working years participating in the labour force is now at its highest level in 20 years and, interestingly, labour force participation by Americans with a disability has soared.

As in the UK, US inflation remained steady over the 12 months to September, at 3.7%.

Overall, the S&P 500 index rose by around 4% in the six months to 24 October, while the Dow fell by around 1% over the same period.

Asia

Diversifying your portfolio means investing in a range of different funds, companies, and geographical locations. Gains in one particular sector or world market can help to offset losses elsewhere.

Q3 of 2023 illustrates this well.

In the three months to the end of September, leading indices in the US, Europe, and “emerging markets” all fell in value. So, if you’d invested in just the US or Europe, you’d likely have seen a slight reduction in the overall value of your portfolio.

During the same period, the Japan TOPIX index rose by 2.5%. In the first nine months of 2023, the TOPIX index rose by 25.7%.

Diversifying your assets across regions means you can benefit from strong growth in certain parts of the world, even if other markets are uncertain.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

2 key reasons why you may want to update your plan during a financial review

Wed, 08 Nov 2023 15:54:35 GMT

2 key reasons why you may want to update your plan during a financial review

Regular financial reviews may help keep you on track to meet your goals and give you confidence in the steps you’re taking. As well as reviewing your assets, you might also want to make changes to your plan.

Last month, you read about why you shouldn’t skip your financial reviews and how they could help you reach your goals. Now, read on to discover two reasons why you might want to make changes to your financial plan during a review.

Updating your plan in response to short-term movements could harm your goals

While there are times when it’s appropriate to update your financial plan, you should be aware of the risks of responding to short-term movements or bias.

Stock market volatility can be nerve-wracking. If you’ve read about the value of shares falling, it can be tempting to withdraw money from the market to preserve your wealth. However, it could have a negative effect on your progress towards your long-term goals.

Historically, markets have delivered returns over the long term, and investors who weather the ups and downs have benefited in the long run. By taking money out of investments during a downturn, you turn paper losses into actual ones.

Of course, investment returns cannot be guaranteed and do carry risks. Understanding which investments align with your circumstances and objectives may help you take an appropriate level of risk.

Similarly, after speaking to a friend about how they’re investing in a certain asset that’s going to deliver “great returns”, you might want to follow suit. Behavioural biases, like following the crowd, could lead to you making unnecessary changes to your plan, which could harm the projected outcomes.

Remember, your goals and circumstances should be at the centre of your financial plan. If changes are tempting, taking a step back to calculate what’s driving the decisions could be useful.

So, following a financial review, why might you make changes? There are several reasons why it may be appropriate, including these two.

1. Your goals or circumstances have changed

Your financial plan should be built around your goals and circumstances. Over time, these may change, and altering your plan may ensure it continues to reflect your lifestyle.

Perhaps you want to bring forward your retirement date, so you increase pension contributions as a result to provide you with financial security? Or becoming a parent might mean taking out life insurance would provide peace of mind, or you’d like to build a nest egg for your child.

A financial review is a chance to let your financial planner know about changes in your life.

It means they can offer advice that’s suitable for you and your aspirations. In some cases, it could mean altering your plan so that it continues to align with your life.

2. Government changes will affect your plans

Sometimes government announcements will affect what’s suitable for you. Changes to allowances, tax hikes, and more could mean adjusting your financial plan would help you get more out of your assets.

The recent announcement that the government will abolish the pension Lifetime Allowance is a good example.

From 2024, there’s expected to be no limit on how much you can save into your pension over your lifetime. It might mean it’s appropriate to increase your pension contributions or it could alter your retirement date.

Keeping on top of the latest news and then understanding what it means for you can be difficult.

Your financial reviews provide an opportunity for your financial planner to explain what announcements mean for you. Tailored advice can help you identify potential risks or opportunities that may lead to changes in your long-term plan.

If you have any questions about your financial plan or would like to understand how we could support you, please get in touch.

Next month, read our blog to find out why financial reviews may help you reduce impulsive financial decisions and focus on your long-term aims.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

How to access wealth that’s locked away in your home

Wed, 04 Oct 2023 11:01:16 GMT

How to access wealth that’s locked away in your home

Are you considering how to access the wealth that’s locked away in your home? There’s more than one way you could release property wealth later in life.

There are lots of reasons why you may want to access the money that’s tied up in your home. Perhaps you want to use the money to fund retirement or help grandchildren get on the property ladder?

Your home may be one of your largest assets, so it could play an important role in your long-term finances. In fact, according to the Halifax House Price Index , the average home was worth almost £280,000 in August 2023.

If you want to unlock property wealth as you near retirement you usually have two main options – downsizing and using equity release. Both choices have pros and cons that you might want to weigh up.

2 useful advantages of downsizing

You can unlock property wealth without taking on debt

If you sell your current property and purchase a cheaper one, you could gain access to a lump sum without having to take on debt. If you have an outstanding mortgage, you’ll need to factor paying it off into your calculations.

You may be ready to search for a new home

As your needs change, you might be looking forward to moving to a new home. Perhaps a property with fewer bedrooms makes sense once children have moved out?

A smaller property could also be more manageable later in life or better suit your needs.

2 drawbacks of downsizing you may want to consider

You may not want to move out of your home and away from your community

For some, moving home can be a difficult prospect. You might have an emotional attachment and fond memories associated with your home. You may also be reluctant to start again in a different community or move further away from your family and friends.

You may need to pay costs associated with moving

There are often associated costs with buying a new property.

You might need to pay Stamp Duty, conveyancing fees, and general moving costs. Factoring these expenses in when weighing up whether downsizing is the right option for you could be useful.

Equity release could allow you to unlock property wealth while remaining in your home

If downsizing isn’t right for you, equity release may be an option you want to consider. However, it could affect your finances for the rest of your life, so it’s important to understand how it works.

The most common type of equity release is known as a “lifetime mortgage”. It’s essentially a loan that’s secured against your home.

Unlike traditional loans, you don’t have to make repayments. Instead, the money you access, along with the accrued interest, is usually paid when you pass away or move into a care home.

So, equity release could give you access to a lump sum while allowing you to remain in your home without increasing your day-to-day costs.

Figures from the Equity Release Council show the total lending through equity release in the second quarter of 2023 was £664 million. The average customer accessed almost £60,000 when using equity release for the first time.

How much you can access through equity release will be dependent on the value of your home. The minimum age for using equity release is usually 55.

You don’t have to own your home outright. However, you’ll need to pay off your mortgage, along with any early repayment charges, with the money you release.

Of course, there are potential disadvantages to using equity release you need to balance against the pros, including these:

The amount you owe can increase significantly

As you don’t have to make repayments when using equity release, the amount you owe when you pass away could be much higher than the amount you borrowed.

If you don’t make interest repayments, the interest is added to the original loan. The following month or year, depending on your plan, the interest will be calculated based on the amount you borrowed, plus the interest already accrued.

This compounding effect means the amount of interest added can rise even if the interest rate remains the same.

Some equity release providers allow you to make repayments or pay off the interest, which may help you manage the debt.

Equity release could affect the inheritance you leave loved ones

Using equity release will reduce the value of your estate and may affect the inheritance you intend to leave behind for loved ones. So, considering who you’d like to benefit from your estate and whether you want to pass on your home is important.

Often, equity release providers offer a “no negative equity guarantee”. This means the amount you owe cannot exceed the value of your home and other assets are preserved to pass on.

It may limit your options in the future

You cannot secure other loans against your home after using equity release. As a result, it may limit your options in the future.

In addition, it could make moving home more complicated. It might be worth thinking about your long-term plans before you proceed with equity release.

It can affect means-tested benefits

If you currently receive means-tested benefits, or could in the future, equity release could affect your eligibility.

Get in touch to discuss if equity release could be right for you

If you’re interested in accessing property wealth and would like to know more about how equity release works and whether it may be an option for you, please get in touch.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A lifetime mortgage is a loan secured against your home. To understand the features and risks, ask for a personalised illustration. Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits. Your home may be repossessed if you do not keep up repayments on your mortgage.

40 years of critical illness cover: Could it improve your financial security?

Wed, 04 Oct 2023 10:50:12 GMT

40 years of critical illness cover: Could it improve your financial security?

Critical illness cover has been used to form people’s financial safety nets since 1983. Four decades on, it could improve your financial resilience and provide a cash injection when you need it most.

Critical illness cover is a type of financial protection that would pay out a lump sum if you were diagnosed with a covered illness, such as cancer, or if you suffered a heart attack, for example.

It’s a form of financial protection that might provide your finances with a boost at a time when your income may fall or stop.

According to a survey from Macmillan Cancer Support , a third of people battling cancer stop work either permanently or temporarily, and 8% are forced to reduce their working hours.

As well as a potentially lower income, the research also found that 85% of cancer patients faced increased costs as a direct result of their diagnosis. These costs include things like travel to hospital appointments and higher energy bills due to feeling the cold more.

Almost 4 in 10 people with cancer have used savings, sold assets, or borrowed money to cover the costs or loss of income.

This could place pressure on patients who should be focusing on their recovery. It may also affect their long-term finances. For instance, those diagnosed with a critical illness may halt their pension contributions or use savings that were earmarked for another purpose.

Taking out appropriate financial protection may allow you to focus on your recovery and give you the financial freedom to take time off work if you need to.

The average critical illness claim paid out more than £66,000 in 2022

Figures from the Association of British Insurers (ABI) suggest almost 20,000 people received a lump sum through a critical illness claim in 2022. The average amount received was £66,296.

The money from a critical illness payout may have helped patients pay off their mortgage, cover day-to-day costs, or provide peace of mind during a difficult time in their life.

It’s a common misconception that financial protection won’t pay out when you make a claim. Indeed, the ABI figures show that more than 91% of critical illness claims were upheld in 2022.

If you were diagnosed with a critical illness, how would your finances fare? Considering how you’d cope if you were unable to work or reduced your hours might identify a gap in your financial resilience. For some families, critical illness cover could provide a crucial safety net.

3 useful questions to consider if you want to take out critical illness cover

1. What other steps have you taken to improve your financial resilience?

Often, critical illness cover is just one part of your financial plan that could improve your security if you fall ill.

Considering the other steps you’ve taken may help you choose financial protection that complements them. For instance, if you have an emergency fund, you may choose a lower potential payout when selecting financial protection.

It’s also worth reviewing the benefits your workplace provides. Some employers will continue to pay you a salary for a defined period if you’re unable to work due to an illness.

2. How comprehensive do you want your critical illness cover to be?

Not every illness will be included when you take out critical illness cover.

Usually, only long-term and very serious conditions will be covered, and it’s important you understand in what circumstances it would pay out.

Typically, the more comprehensive critical illness cover is, the higher your premiums will be. Other factors will also affect the premiums, including your age and health. The cost of cover can vary significantly between providers, so it might be worth shopping around before you make a decision.

When you’re comparing options, make sure you understand what each provider would cover. Paying a higher premium could make sense if the cover would be more comprehensive than alternatives.

3. How much would you need to receive to provide financial security?

You can choose how much you’d receive if you needed to make a claim for a critical illness.

Spending some time calculating how much you’d need to be financially secure if you were diagnosed with a serious illness could help you select an appropriate figure. You may want to consider what your regular expenses are and one-off payments you may want to make, such as paying off your mortgage.

Usually, the higher the potential payout for critical illness, the higher the premiums to maintain the cover will be.

While you hope you won’t have to make a critical illness claim, knowing that you’ve taken steps to improve your financial resilience if you fall seriously ill could provide comfort.

If you’d like to talk about critical illness cover, as well as other steps that you may want to take to improve your financial security, please contact us.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Note that protection plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse. Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.

5 common mistakes when writing a will that a solicitor could help you avoid

Wed, 04 Oct 2023 10:36:35 GMT

5 common mistakes when writing a will that a solicitor could help you avoid

A will provides a way to state who you’d like to receive your assets when you pass away. While you don’t need to work with a solicitor when writing a will, doing so could help you avoid mistakes.

Will Aid is taking place in November and may be the perfect time to write your will while supporting good causes.

Every year, participating solicitors volunteer to waive their usual fee for writing a basic will. Instead, they invite clients to make a voluntary donation to Will Aid. The donations support a variety of charities, including Age UK, the British Red Cross, and Save the Children.

Choosing to work with a solicitor when you’re writing your will could help you avoid mistakes that may mean your estate isn’t distributed how you want or could lead to probate taking longer.

Here are five mistakes that affect some wills.

1. Your wishes aren’t clear enough

Using ambiguous language in a will can make distributing your estate much more difficult. Vague or contradictory wishes may lead to confusion about your intentions. In some cases, it may mean your wishes aren’t carried out.

You should ensure your will clearly specifies the assets you’re referring to and sets out your wishes in a way that’s easy to understand.

You may also want to consider what would happen if an asset changes. For example, if you intended to leave a property to one beneficiary but have since sold it, should they receive the cash equivalent?

As a will may cover a lot of assets and beneficiaries, it can be difficult to write a will that’s precise if you’re not a professional, especially if your wishes are complex.

2. You don’t consider all your assets

Estates can be complex and it’s easy to overlook some of your assets. Many people will include their main assets, like property or a savings account, but other items may go unnoticed when writing your will. Perhaps you have some Premium Bonds or artwork you’ve forgotten about.

Carrying out a financial review before you write your will may help you better understand the assets that make up your estate.

Financial planning could also forecast how the value of assets may change during your lifetime, which might affect how you want to distribute assets to loved ones.

3. You don’t account for beneficiaries passing away

One of the challenges of writing a will is that you need to consider what may happen in the future. If a beneficiary passes away before your estate is settled, who would you want to inherit your assets?

Usually, if a beneficiary passes away, the assets they were due to inherit will be kept within your estate and distributed to surviving beneficiaries, which may not align with your wishes.

4. You don’t appoint an executor

An executor is the person who will deal with the administration of your estate when you pass away. Their duties will include carrying out your wishes in accordance with your will.

It’s an important role, but some people overlook naming an executor. Your will would still be valid in this case, but someone will need to apply to become the administrator or a court may ask someone to take on the role. It could delay the probate process.

You can choose someone you know personally to be the executor. It’s often a good idea to speak to the person first to ensure they’re happy to take on the responsibility and understand what’s involved. You may also choose a professional executor, such as your solicitor.

5. Your will isn’t signed or witnessed correctly

A common error when writing a will without support is that it isn’t signed or witnessed correctly. It may mean your will is invalid and, rather than being distributed according to your wishes, intestacy rules would apply.

Your two witnesses must be over the age of 18 and shouldn’t be family members. They and their spouse also shouldn’t benefit from your will in any way. You must sign your will in the presence of your witnesses, who should also sign it, as well as write their full names, addresses, and occupations. Finally, you should date your will.

Regular reviews of your will may be just as important as writing one

Once you’ve written your will, don’t simply put it to one side and forget about it.

During your life, your wishes and circumstances may change, which might mean you need to update your will. Whether you want to make provisions for a new grandchild, or the value of your assets has increased, regular reviews may help ensure your will continues to reflect your wishes.

It’s often a good idea to review your will after major life events or every five years.

If you need to make changes, there are two options:

A codicil is added to your existing will. It must be signed and witnessed. While there are no limits to how many codicils you can add or what they can cover, significant changes or several small alterations can make your will complicated. Codicils may mean your will is more likely to contain contradictions, so they are often best used for straightforward changes.
If a codicil isn’t appropriate, you can write a new will. This is usually a good option if you would like to make major changes. Your new will should state it revokes all previous wills and codicils, which should be destroyed.

You can add a codicil or write a new will without professional support, but, again, a solicitor could help you avoid mistakes.

An estate plan could help you distribute your assets effectively

Writing your will is an essential step to take to ensure your assets are distributed how you wish. Before you put a will in place, understanding your assets and how their value could change over time may help you set out wishes that reflect your goals.

In addition, estate planning might highlight if you want to consider things like Inheritance Tax, how to pass on your pension, or gifting during your lifetime.

Please contact us to talk about your estate plan and how you may want to pass on assets through your will.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate estate planning, tax planning, or legal services.

3 essential factors to consider if you plan to gift wealth to avoid Inheritance Tax

Wed, 04 Oct 2023 10:26:48 GMT

3 essential factors to consider if you plan to gift wealth to avoid Inheritance Tax

Figures suggest more families are gifting to avoid Inheritance Tax (IHT). While passing on assets to loved ones may seem like a clear solution, it isn’t always so simple.

More estates are becoming liable for IHT as thresholds for paying the tax are frozen. The Office for Budget Responsibility predicts HMRC will collect £8.4 billion from IHT receipts in 2027/28, compared to £7 billion in 2022/23.

The portion of your estate that exceeds IHT thresholds could be taxed at a standard rate of 40%. So, it’s not surprising that families are looking for ways to mitigate a potential bill.

According to a Telegraph report, the number of people who have gifted assets that would become exempt from IHT if they survived a further seven years increased by 48% between 2009/10 and 2019/20.

If the value of your estate exceeds the nil-rate band, which is £325,000 in 2023/24, your estate may be liable for IHT. You might also be able to use the residence nil-rate band, which is £175,000 in 2023/24, if you leave your main home to direct descendants.

You can pass on unused allowances to your spouse or civil partner.

Both the nil-rate band and residence nil-rate band are frozen until April 2028. So, if the value of your estate is nearing the threshold, you may find your estate could become liable for IHT as the value of your assets could rise.

Gifting assets to your beneficiaries now can be advantageous. It may allow you to help loved ones reach life milestones.

However, if you’re gifting for IHT purposes, there are some things you may want to keep in mind.

1. Gifting may affect your financial security later in life

Before you hand over a gift, assessing the effect it could have on your later life may provide peace of mind. Could gifting leave you financially vulnerable in your later years? Could it affect your ability to overcome a financial shock?

Making gifts part of your wider financial plan means you can understand how your decision may affect your wealth over the short and long term.

Understanding the potential implications before you make a gift might help you to feel more confident about your finances.

2. Not all gifts are considered immediately outside of your estate for Inheritance Tax purposes

When you’re gifting to minimise an IHT bill, considering longevity may be important.

Gifts might be considered “potentially exempt transfers” (PETs) and included as part of your estate when calculating IHT for up to seven years after they were given.

As a result, if the entire value of your estate exceeds IHT thresholds, your estate could be liable for IHT on assets you’ve already passed on.

Once seven years have passed, gifts will not be included when calculating IHT liability.

3. There are gifting allowances you may want to make use of

If you want to gift assets to reduce an IHT bill, there are some allowances you could make use of.

These gifts would be considered immediately outside of your estate for IHT purposes:

The annual exemption, which is £3,000 in 2023/24
£1,000 to someone getting married, rising to £5,000 for your children and £2,500 for grandchildren
Unlimited gifts of up to £250 to any individual who has not received a gift using another allowance.

Regular gifts that are made from your income may also be exempt from IHT. These gifts must be made regularly. For instance, you may pay the rent on your child’s home or your grandchild’s school fees.

Making use of these allowances and exemptions could provide a tax-efficient way to pass on wealth during your lifetime.

There are others steps you could take to reduce a potential Inheritance Tax bill

Gifting isn’t the only option if you want to reduce a potential IHT bill. Other solutions might include:

Leaving 10% or more of your estate to charity, which would reduce the IHT rate from 40% to 36%
Passing on wealth through your pension, which is usually considered outside of your estate
Using a trust to pass on assets tax-efficiently.

It’s important to weigh up the pros and cons of these options. It may also be useful to take both financial and legal advice in some cases, as estate planning can be complex.

You might also want to consider taking out a whole of life insurance policy. This wouldn’t reduce the amount of IHT your estate is liable for, but loved ones could use the money it pays out to settle the bill.

It’s essential that life insurance is written in trust. Otherwise, the payout could be considered part of your estate and result in a higher IHT bill.

An estate plan can help you set your affairs in order and minimise Inheritance Tax

An estate plan can help you set out what you’d like to happen in your later years and how you’d like to pass on assets when you die. Setting your affairs in order can be emotional, but it’s an important task.

We can help you create an estate plan that reflects your wishes and considers concerns you may have, such as whether IHT will affect the assets you leave behind. Please contact us to arrange a meeting.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate estate or tax planning.

Taper relief does not reduce the value transferred; it reduces the tax payable as a consequence of that transfer.

3 valuable reasons your financial reviews are important

Tue, 03 Oct 2023 15:24:21 GMT

3 valuable reasons your financial reviews are important

Creating a financial plan is just the first step to reaching your goals. While you may have carefully set out what you need to do, financial reviews are still essential.

Often, it’s advised that you review your financial plan once a year or following major life events. Over the next few months, you can read about why reviews are a part of your financial plan and the times when you might want to make changes.

Here are three reasons why you shouldn’t skip reviews.

1. You can use your review to check you’re on track to meet your goals

Even the best-laid plans can go awry.

A whole host of outside factors could affect the outcome of your financial plan, from interest rates to financial shocks. Financial reviews can provide a snapshot of your finances and help you understand if everything is still on track.

A review is a chance to look at things like how your investments have performed and what the projected long-term returns mean for your future.

Financial reviews mean you could identify potential obstacles in your plan sooner than you might if you didn’t carry one out. It may give you a chance to respond to possible risks and limit the effect they’ll have.

Going through your plan regularly may also help you feel more in control and boost your wellbeing overall. Knowing that a professional is handling your finances with your aspirations in mind could help you focus on other areas of your life.

2. You can update your financial planner about changes in your life

Your circumstances and goals should be a central part of your financial plan. What you want to achieve with your money may affect which decisions are right for you.

While you’ll often set out long-term goals when you first make a financial plan, things can change.

As part of your financial review, we’ll not only discuss how your assets have performed but whether your plan is still suitable. So, talking about your aspirations is essential.

Perhaps since your last review you’ve decided you want to:

Receive a higher income in retirement because your lifestyle or financial commitments have changed
Take time away from work to raise children or care for a relative
Retire earlier
Gift a lump sum to your child to help them reach their goals
Start your own business.

New goals might also affect your long-term finances.

For instance, if you want to take time away from work, you may pause pension contributions, which could affect your retirement income. By making these decisions part of your financial plan, you can understand both the short- and long-term effects and how you could keep other goals on track.

3. Reviews provide a great opportunity to ask questions or address concerns

Your financial reviews are the perfect time to ask any questions or bring concerns you might have to your financial planner.

Perhaps a period of investment volatility means you’re worried about how market ups and downs could affect your income in the future? Or maybe a news story about retirees running out of money has made you worried?

Feeling anxious about your finances could cause unnecessary stress or even lead to you making decisions that aren’t right for you. So, using your review to talk to your financial planner about what’s on your mind could help you stay on track and feel comfortable when handling your finances.

Of course, if you have any questions or concerns, you don’t need to wait until your review to bring them up. You can contact us to speak to one of our team when you need to.

Do you have questions about your financial plan or review?

Whether you’d like our support in creating a financial plan that suits you, or you have questions about your review, you can contact us.

Our goal is to help you have confidence in your finances and make the most of your money in a way that aligns with your aspirations.

Next month, read our blog to discover two key reasons why you might want to make changes to your financial plan following a review.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investment market update: September 2023

Tue, 03 Oct 2023 15:14:56 GMT

Investment market update: September 2023

Economies around the world continue to struggle with high inflation and weakening demand affecting GDP. Read on to discover some of the factors that may have affected your investment portfolio in September 2023.

When reviewing short-term market movements, remember to focus on your long-term investment goals.

Official data shows the UK economy contracted by 0.5% in July. The Office for National Statistics (ONS) attributed the poor performance to strike action and poor weather.

However, there was some good GDP data. The ONS said the UK economy reached pre-pandemic levels earlier than thought in the final quarter of 2021. The revision is good news as economists previously believed the UK was lagging behind other countries.

Inflation is falling but remains above the Bank of England’s (BoE) 2% target. In the 12 months to August 2023, it was 6.7%.

Despite high inflation, the BoE’s Monetary Policy Committee voted to hold its base interest rate of 5.25%. The Bank’s governor, Andrew Bailey, said he believes inflation will fall “quite markedly” by the end of the year. However, he added, it would be premature to cut interest rates now.

Quarterly data from the central bank shows the public is dissatisfied with the strategy for controlling inflation. Public satisfaction was at its lowest since records began in 1999.

While interest rates didn’t rise in September, households are struggling.

The Resolution Foundation warned average working household incomes are on course to be 4% lower in 2024/25 in real terms when compared to 2019/20 thanks to high interest rates, steep tax rises, and a stagnant economy.

The number of mortgages in arrears also demonstrates the pressure some families are facing. According to the BoE, the number of mortgages in arrears hit the highest level in almost seven years.

Businesses are feeling the strain from rising interest rates too. Think tank Cebr predicts that 7,000 businesses will fail every quarter in 2024.

Statistics from the Insolvency Service indicate some businesses are already struggling to balance costs.

Company insolvencies jumped by almost a fifth in England and Wales in August when compared to a year earlier. However, it’s important to note that insolvencies were at a historic low during the pandemic as businesses benefited from government support.

Despite some negative statistics, the FTSE 100 recorded its best day of 2023 so far – the index gained 1.95% on 14 September.

Europe

GDP data for the eurozone was revised downwards. Statistics show GDP expanded by only by 0.3% in the second quarter of 2023, which has led to concerns that the bloc could fall into a recession in the second half of the year.

Inflation in the eurozone fell to 5.2% in the 12 months to August. However, there’s a big difference between economies across the bloc. Hungary had the highest rate of inflation at 14.2%, while Spain and Belgium saw prices increase by 2.4% when compared to a year earlier.

In response, the European Central Bank raised its three key interest rates by 25 basis points.

PMI data indicated that business output is still contracting as new orders fell and firms were forced to pay more for raw materials and other costs. Germany and Austria were among the worst-performing nations in the eurozone.

As the largest economy in the eurozone, Germany is often used as a barometer for the economic area.

Unfortunately, signs suggest Germany’s economy could be faltering. The European Commission said it expects the country’s GDP to fall by 0.4% this year as energy price shocks due to the war in Ukraine hit the country hard.

Sentix’s index for the eurozone also suggests Germany’s performance is leading to pessimism among investors.

While many countries are struggling to manage soaring inflation, Turkey’s is among the highest. In the 12 months to September 2023, inflation was 61.5% and its base interest rate was 25% in September.

Inflation in the US is lower than in some other developed economies. However, at 3.7% in the 12 months to August 2023, the figure is higher than it was a month earlier.

Similar to countries in Europe, PMI data suggests business productivity flatlined in September. S&P Global said the service sector lost momentum in August, while manufacturers reported a drop in sales.

Towards the end of the month, there was a risk that the US government could partially shut down. A group of Republican members of the House of Representatives refused to compromise with their own party’s leadership.

Credit rating agency Moody’s warned a shutdown could threaten the US’s triple-A rating and cause market volatility.

It would follow Fitch downgrading the US government’s credit rating in August due to a “deterioration of standards”.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Intergenerational wealth planning: Your options when passing on wealth to the next generation

Tue, 25 Jul 2023 12:43:21 GMT

Intergenerational wealth planning: Your options when passing on wealth to the next generation

Ensuring your family is financially secure for the long term is a common goal. If it’s one of your priorities, intergenerational wealth planning could help you create a plan that suits you and your loved ones.

There’s more than one way to pass on wealth to your family. Each option has advantages and drawbacks that you need to weigh up to understand what’s right for you and your beneficiaries. This useful guide covers three main options:

1.Gifting assets during your lifetime

2. Using a trust to pass on wealth

3. Leaving an inheritance

The guide also explains some of the key things you need to consider before you pass on wealth. For instance, if you gifted assets now, could you face financial insecurity later in life? Or could your estate be liable for Inheritance Tax when you pass away?

You can also read about the benefits of involving your family in the financial planning process. From facilitating money conversations to helping you identify tax allowances you could use, it may help your wealth go further.

Download your copy of ‘ Intergenerational wealth planning: Your options when passing on wealth to the next generation ’ now to read more about creating a plan that suits your family.

It’s never too soon to start thinking about how you want to pass on wealth or who you want to benefit from your assets.

If you have any questions about intergenerational wealth planning, please contact us.

The 3 types of tax you need to understand before investing in buy-to-let

Wed, 05 Jul 2023 14:53:01 GMT

The 3 types of tax you need to understand before investing in buy-to-let

Investing in property is often seen as a savvy way to boost your long-term wealth. But, if you’re thinking about becoming a landlord, there are three taxes you need to factor into your plans to avoid an unforeseen bill.

Property prices have steadily increased in recent decades, so it’s not surprising that people are considering property investments. Even after short-term downturns in the market, such as the one that followed the 2008 financial crisis, property prices have recovered.

The average UK house price at the start of 2013 was almost £168,000, according to Land Registry data. A decade later, it had increased to more than £288,000. So, historically, property investors have had the opportunity to generate a sizeable return.

Of course, as well as the property increasing in value, landlords hope to receive a regular income from tenants too.

High inflation and stock market volatility mean more people are thinking about how they could use property to improve their long-term financial wellbeing. A report in FTAdviser suggests a quarter of savers plan to invest in property to support their retirement goals.

Before you move ahead with plans to purchase a buy-to-let property, there are lots of pros and cons you should weigh up first. Among the areas to consider are the taxes associated with buying a second property and being a landlord, including these three.

1. Stamp Duty

When buying a second property, the first tax charge you’re likely to need to pay is Stamp Duty.

This is a tax you pay when purchasing property or land. There is usually a 3% Stamp Duty surcharge when buying a second property, including a property you intend to use as a buy-to-let.

For 2023/24, the Stamp Duty tax rates for a second property in England and Northern Ireland are:

The government’s Stamp Duty calculator can help you understand what charge you may need to pay.

You should note, Scotland and Wales have similar taxes when purchasing property. However, the thresholds and rates are different.

Normally, you’ll need to pay any Stamp Duty due within 30 days from the completion of the purchase. As a result, it’s essential that you’ve calculated the bill and included it in your budget for buying a buy-to-let property.

2. Income Tax

If you’re renting out a property, you’ll usually pay Income Tax on the profit.

The profit you make will be added to any other income you receive, such as your salary. So, the rate of Income Tax you pay as a landlord will depend on which tax bracket you’re in. You should be mindful of property income pushing you unexpectedly into a higher tax bracket.

There are potentially ways to reduce your Income Tax bill as a landlord. However, allowances are not as generous as they were in the past, so it’s important to calculate your expected bill when deciding if investing in property is right for you.

You can deduct “allowable expenses” from your rental income when calculating profit. These expenses must be wholly and exclusively for the purpose of renting out the property.

You could, for example, deduct general maintenance work, like repairing a leaking roof, treating damp, or replacing existing fixtures and fittings. However, you cannot deduct improvements, such as switching laminate kitchen countertops for high-end granite ones.

It’s also no longer possible to deduct mortgage expenses from your rental income to reduce your tax bill, although you may receive a tax credit on 20% of your mortgage interest payments.

So, while there may be ways you can reduce Income Tax on the rental yield, you could still face a significant bill that you need to weigh against the profit.

3. Capital Gains Tax

When you’re thinking about investing in property, you may not have considered when you’ll sell it or the tax charge you could face when you do. However, it’s a crucial part of understanding if buy-to-let makes financial sense for you.

You pay Capital Gains Tax (CGT) when you make a profit when you sell certain assets, including property that isn’t your main home. The CGT rate depends on the rate of Income Tax you pay and the size of your gain. For residential property, it can be as much as 28%.

The CGT annual exempt amount could provide you with a way to reduce the bill when you sell buy-to-let property. In 2023/24, you can make a profit of up to £6,000 before CGT is due. In 2024/25, the CGT exempt amount will halve to £3,000.

Keep in mind that the CGT exempt amount covers gains made when you sell some other assets too. So, if you’ve sold shares for a profit during the same tax year, you’ll need to consider how this would affect your CGT exempt amount and your overall bill.

Calculating CGT can be complex, and seeking tailored financial advice can be useful.

Do you have questions about buy-to-let mortgages?

There are some key differences between traditional and buy-to-let mortgages. If you’re considering buying a buy-to-let property and have questions, from how much you could borrow to how much the repayments could be, please contact us.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Buy-to-let (pure) and commercial mortgages are not regulated by the Financial Conduct Authority.

Your property may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

8 in 10 first-time buyers risk inaccurate information as they turn to social media for tips

Wed, 05 Jul 2023 14:48:30 GMT

8 in 10 first-time buyers risk inaccurate information as they turn to social media for tips

Buying your first home can be overwhelming and with lots of decisions to make, seeking advice can be invaluable. Yet, a survey suggests that many first-time buyers could be accessing information that isn’t right for them as they turn to social media.

According to a MoneyAge report, 84% of first-time buyers used social media for guidance, advice, and hacks on homeownership in the last year. TikTok was the most popular platform, followed by Facebook and Instagram. Among the questions aspiring homeowners are searching for are:

How long does it take to purchase a home?
How to search for a property?
How much does it cost to buy a property?
How to make an offer?
How do you hire a solicitor or conveyancer?

With social media being part of everyday life and easily accessible with just a few taps on your phone, it may seem like the obvious place to find answers to these questions. However, the information may not be correct or appropriate and could lead to some buyers making decisions that aren’t right for them.

That’s not to say social media can’t be a valuable tool. It’s a great way to learn about the experiences of other first-time buyers and to discover tips. But you need to be cautious about acting on advice given on social media platforms – the decisions you make when buying your first home could have a huge effect on your finances.

Here are four reasons why you shouldn’t rely on information from social media as a first-time buyer.

1. It can be difficult to verify the person offering advice

One of the key challenges of seeking advice on social media is that it is often not verified. Does the person offering guidance have any qualifications, or are they regulated?

While someone on social media may sound professional, it can be difficult to know if they have the expertise, experience, and authority to be offering advice on the topic.

If you’re seeking advice about mortgages, for example, a regulated mortgage broker would be registered with the Financial Conduct Authority. Regulated brokers are required to ensure their knowledge of the industry is up to date, that they carry out a thorough analysis of your financial situation, and that the quality of advice they give is to a high standard.

Take some time to research who you’re taking advice from before you act on it.

2. You may not get a full view of all the options

Whether you want to better understand the different types of mortgages or find a conveyancer, there are often several options you need to consider.

Recommendations or information online may not provide you with a full overview, and it could mean you miss looking into an option that’s right for you.

As social media often utilises passing on information quickly, it may simply provide a snapshot of a handful of the choices. Could a 30-second video or short status update provide you with all the information you need?

A social media influencer may only recommend options that they have used themselves or those that come from a provider that they are affiliated with.

3. Your circumstances will affect what’s right for you

While the person offering social media advice may have the best intentions, what’s right for one first-time buyer, isn’t right for them all. This is why tailored guidance is useful when you’re buying a home and taking out a mortgage.

When you engage the services of a professional, such as a mortgage broker or solicitor, they’ll take the time to understand your circumstances and what your goals or concerns are. It means they’re in a position to offer advice that’s relevant to you and your situation.

4. The property industry can change quickly

Accessing up-to-date advice is crucial when you’re buying a home. Things like tax allowances, interest rates and processes can change.

If you act on information that’s out of date, it could harm your home-buying plans or cost you money.

For instance, a social media profile may claim a certain mortgage lender currently offers the “best” interest rate or deal for first-time buyers. Not only may this not be accurate for all first-time buyers from the start, but lenders frequently update the deals they offer. So, there could be other options that are more suitable for you.

If you have questions about mortgages, we can offer you support throughout the process. The mortgage you choose could affect your outgoings and it’s important to understand which option is right for you. We can explain your choices and help you apply for a mortgage when the time is right.

Please contact us to speak to one of our team.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

Business owners: Is your firm protected against the loss of a key person?

Wed, 05 Jul 2023 14:45:09 GMT

Business owners: Is your firm protected against the loss of a key person?

As a business owner, have you considered how your firm would cope if it lost a key member of the team unexpectedly? Key person cover could provide a vital cash injection when you need it most, but it’s something many businesses are overlooking.

Losing a key person may have a devastating effect on businesses.

According to a report from Legal & General, more than a quarter of small businesses in the UK would have to close immediately if a key person died or became critically ill. A further quarter of small firms would cease trading within a year.

In fact, 15% of businesses that had already suffered an event have shut their doors. Firms that have lost a key person also said it affected:

Profits
Customer confidence

So, even if your business continues to trade after the loss of a key person, it may not meet targets and could face new challenges.

Given the effect of losing a key person could have on business operations, it’s not surprising that it ranked as the number one concern in small companies.

Yet, the report also found that 70% of businesses had never considered or did not understand the need for business protection.

Key person protection could help your business cover profit loss

Key person protection is a type of insurance that could support businesses if they lose a key person by providing capital.

Usually, key person protection will pay out a lump sum to the business if a covered person passes away or is diagnosed with a terminal illness. For more comprehensive cover, you could also choose to insure against a key person being diagnosed with a specified critical illness.

You can choose the level of cover that’s needed for your business. Often, this is linked to the key person’s salary. For example, the cover may pay out five times their annual salary.

You could use the payout to:

Replace lost profits
Manage cash flow
Recruit and train a new employee.

In essence, key person protection may give your business the capital it needs to continue operating while you recover from the loss of a vital team member. It could mean the difference between your business surviving a loss and having to close its doors.

If you’re considering key person protection, it’s essential you choose the right level of cover for your business. You should consider how much additional capital your business would need to maintain operations and in what circumstances it would be necessary.

Generally, the more comprehensive the protection and the larger the potential payout, the more the premiums will be. However, it’s worth comparing options and you should make sure you understand exactly what is covered.

Who is a key person in your business?

The Legal & General report found that 63% of businesses say they have more than one key person. So, who should your policy cover?

As a business owner, a good place to start is you. If your business would struggle to operate without you, protection could help preserve your legacy or mean it’s able to continue operating during your recovery if you suffer a serious illness.

A key person could also be an employee that:

Is part of your senior management team
Has technical knowledge that’s important for keeping your business running
Is vital for sales and increasing the profits of your business
Works closely with customers or manages important relationships.

Take some time to consider the contributions of your team and the role they play in the business’s success.

Who is essential for the smooth running of your business?
Who plays an important role in the business growing and meeting targets?
Do any employees have skills or experience that would be difficult to replace?

With this information, you can start assessing what level of cover is right for your business to provide security and peace of mind.

Protecting against the loss of a key person isn’t the only step you can take to improve the security of your firm. For some businesses, shareholder protection, loan protection, or another type of cover could also add value.

While you’re reviewing your business’s security, it may also be worthwhile to assess your own protection. Key person protection would pay out a lump sum to your business, but how would your family cope if you passed away or were too ill to work? Critical illness cover or life insurance may be appropriate and could improve the financial security of your loved ones.

If you’d like to talk about the steps you can take to protect your business and family, please contact us.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Note that insurance plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.

Savers celebrate rising interest rates, but it could mean an unexpected tax charge

Wed, 05 Jul 2023 14:24:10 GMT

Savers celebrate rising interest rates, but it could mean an unexpected tax charge

After more than a decade of low interest rates, many people will be pleased to see the amount their savings are earning is starting to rise. Yet, it could mean you need to pay a tax charge.

Interest from saving accounts may be liable for Income Tax. When the average interest rate was below 1%, you usually had to have a substantial amount held in cash accounts to face a tax charge. However, as interest rates rise, you could unexpectedly cross the tax threshold.

So, read on to find out when you need to pay tax on interest and how you could avoid a bill.

Do you benefit from the Personal Savings Allowance?

The Personal Savings Allowance (PSA) lets you earn interest on savings without paying tax. Not everyone benefits from the PSA, and the amount varies depending on your Income Tax bracket.

For 2023/24, the PSA is:

£1,000 a year if you’re a basic-rate taxpayer
£500 a year if you’re a higher-rate taxpayer
£0 if you’re an additional-rate taxpayer.

The PSA covers any interest you earn from savings accounts, as well as corporate bonds, government bonds, and gilts. It could also include interest earned on other currencies you hold in a UK-based savings account.

If the interest you earn exceeds the PSA, or you don’t benefit from it, it’s added to your other income when calculating tax liability. So, if you’re an additional-rate taxpayer, you could pay 45% tax on the interest your savings earn.

Usually, HMRC will make changes to your tax code to cover the tax charge on the interest you earn. For example, you may get a lower Personal Allowance if you exceeded the PSA in the previous tax year.

You don’t normally need to act to pay the tax, but you should let HMRC know if the interest you earn is no longer above the PSA so they can adjust your tax code accordingly.

Using your ISA allowance could reduce your tax bill

If you’re not using your ISA allowance, doing so could reduce your tax bill.

In 2023/24, your annual ISA allowance is £20,000. The interest cash savings generate when they’re held in a Cash ISA are free from Income Tax. So, if you could exceed the PSA, it’s worth reviewing if you’re using your full ISA allowance and the interest rates available on Cash ISAs.

To access the most competitive interest rates from an ISA, there may be additional requirements. For instance, some may require you to deposit a set amount each month or won’t allow you to make withdrawals for several years. Make sure you assess the terms and conditions of an account and that it suits your needs first.

A savings account may not be the most appropriate place for your money

While interest rates are increasing, if you benefit from the PSA, you’ll typically need to have a substantial amount held in your savings account before a tax charge is due.

According to MoneySavingExpert , as of May 2023, a top easy access account pays an interest rate of 3.71% (AER). With this interest rate:

A basic-rate taxpayer could place £26,954 into the account before exceeding the PSA
A higher-rate taxpayer could deposit £13,477 into the account before facing a tax charge.

Savings accounts play an important role in many financial plans. As well as being useful for your day-to-day spending, they often make sense for your emergency fund, which you want easy access to. However, you should be mindful of keeping large sums in cash accounts, as the value may fall in real terms.

While an interest rate of 3.71% may seem good when you compare it to recent years, it’s still much lower than the rate of inflation. When the cost of goods and services rises at a faster pace than your savings are growing, the value of savings in real terms decreases.

If you could face a tax charge because you’re holding large sums in cash, it may be worth looking at alternatives. One option, depending on your circumstances, could be to invest, which may potentially deliver returns that keep pace with inflation. However, there are still tax considerations if you decide to invest.

Creating a tailored plan could help you get the most out of your money and manage your tax liability.

Factors outside of your control affect your financial plan, from rising interest rates to inflation. As a result, it’s important to review your plan with these circumstances in mind to ensure it’s still appropriate for reaching your long-term goals.

If you have any questions about how rising interest rates or other factors may affect you, please get in touch.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

7 common but potentially harmful Inheritance Tax myths debunked

Wed, 05 Jul 2023 14:17:23 GMT

7 common but potentially harmful Inheritance Tax myths debunked

Inheritance Tax (IHT) is often controversial – you may have heard of it referred to as “the most hated tax in Britain”. Yet, despite the coverage it receives, it’s often misunderstood. Common myths about IHT could mean you’re needlessly worrying about a potential bill or failing to take steps that could allow you to pass on more wealth to your family.

Read on to discover seven common myths about IHT and better understand if it’s something you need to consider as part of your estate plan.

1. “Inheritance Tax makes up a large portion of HMRC receipts”

It’s not surprising that people often believe IHT makes up a large portion of the money the government raises through taxes. After all, it’s a tax you may hear more about than Capital Gains Tax or Corporation Tax.

Yet, a relatively small part of the government’s income comes from IHT.

In fact, government statistics show that in April 2023, it collected £0.6 billion through IHT. That may sound significant but it compares to:

£40.4 billion through Income Tax and National Insurance contributions
£17.9 billion from VAT
£1.2 billion from Stamp Duty Land Tax and Annual Tax Enveloped Dwellings.

So, while a standard 40% IHT rate can lead to hefty bills for individuals, it may not be boosting the government coffers by as much as you think.

2. “Only the super-rich will need to pay Inheritance Tax”

While it’s true that the majority of estates won’t be liable for IHT, it doesn’t just affect the very wealthy. Once you add up the value of all your assets, you may be closer to the IHT threshold than you believe.

For 2023/24, the nil-rate band is £325,000. If the value of your estate is below this, it won’t be liable for IHT. Many individuals leaving their main home to direct descendants can also make use of the residence nil-rate band, which is up to £175,000 in the 2023/24 tax year.

So, many people can pass on up to £500,000 before they need to consider IHT. According to a report in the FTAdviser , around 1 in 25 estates result in an IHT charge.

The £500,000 threshold may seem like a lot, but once you consider assets like your home, it can be easier than you expect to exceed it.

In addition, both the nil-rate band and residence nil-rate band are frozen until 2028.

So, over the next five years, a greater proportion of estates are likely to pay an IHT bill – the Office for Budget Responsibility estimates the freeze will increase IHT receipts by £35 million by the end of 2027/28.

3. “You can pass on £1 million before Inheritance Tax is due”

It’s easy to see where this myth comes from – it is possible to pass on up to £1 million without being liable for IHT. However, this doesn’t apply to all estates.

As explained above, the nil-rate band and residence nil-rate band add up to £500,000. If you’re married or in a civil partnership, it is possible to pass on unused allowances to your partner when you pass away.

As a result, when planning as a couple, you may be able to leave up to £1 million before IHT is due. However, it’s dependent on your and your partner’s circumstances and who you want to leave assets to.

4. “You don’t need to consider Inheritance Tax if you leave everything to your partner”

While you can leave assets to a spouse or civil partner without being liable for IHT, this isn’t a reason to skip estate planning.

Don’t assume your partner will automatically inherit all your assets unless it’s stated in your will.

If you pass away without a will, your assets will be distributed under intestacy rules. Under these rules, a spouse or civil partner will inherit everything if the value of your estate is less than £270,000. If it exceeds this amount, some of your assets could go to your children or other direct descendants.

While your plan may be to leave all your assets to your partner, what would happen if they passed away first? Or could their estate be liable for IHT after they’ve received your assets? Having an estate plan that covers different scenarios is valuable.

5. “Gifted assets aren’t liable for Inheritance Tax”

Giving away assets to bring the value of your estate under the IHT threshold may seem like a simple solution, but it isn’t as straightforward as that.

Some gifts are considered immediately outside of your estate for IHT purposes. This includes up to £3,000 (in the 2023/24 tax year) known as your “annual exemption”, up to £250 to individuals that have not received your annual exemption, and regular gifts made from your income.

However, many other gifts are “potentially exempt transfers”. This means they could be considered part of your estate when calculating IHT for up to seven years.

The rules around gifting and IHT can be complex. If it’s something you’re thinking about, we can explain your options.

6. " You can leave your home to children without paying Inheritance Tax”

This misunderstanding comes from the residence nil-rate band. While this allowance could increase how much you can leave behind before IHT is due, it may not be enough to cover the value of your entire property.

It's also important to note that the residence nil-rate band does taper for larger estates.

In 2023/24, for every £2 your estate exceeds the £2 million Taper Threshold, your residence nil-rate band is reduced by £1. So, estates that are worth £2.35 million or more may not benefit from the residence nil-rate band at all.

7. “Assets held abroad will not be liable for UK Inheritance Tax”

If you’re a UK-domiciled individual, your worldwide assets are usually included when calculating the value of your estate and potential IHT bill. However, where assets could be liable for tax in other countries, you may receive credit so your estate isn’t charged twice.

IHT on assets abroad is complex. Seeking tailored advice can help you understand the potential bill your loved ones may face.

If your estate may be liable for IHT, there are often steps you could take to reduce the bill or provide loved ones with a way to pay it. You can contact us with questions you may have about IHT and to discuss your options.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate estate or tax planning.

Remortgaging: The essential steps you should take when your mortgage ends

Tue, 27 Jun 2023 10:45:22 GMT

Remortgaging: The essential steps you should take when your mortgage ends

If your mortgage deal is coming to an end or it’s already expired, you should consider remortgaging. This guide reveals the essential things you need to know.

The government previously estimated 57% of fixed-rate mortgages ending in 2023 had an interest rate below 2%. When these mortgage deals end, it’s very likely that households will now need to pay a much higher interest rate.

While remortgaging could still mean outgoings rise, it could help secure a more competitive interest rate and save you money over the full mortgage term.

As remortgaging is something that you’ll probably do several times, it’s important to understand how it works and the steps you can take to make the process smoother.

The guide explains:

Why homeowners remortgage
How remortgaging could save you money
Practical steps you can take when you’re ready to remortgage
How a mortgage broker can be valuable during the remortgaging process.

Download your copy of ‘ Remortgaging: The essential steps you should take when your mortgage ends ’ now to understand why remortgaging is important and to potentially save money.

If you have any questions about mortgages and the remortgaging process, please contact us.

Guide: How to manage the harmful effects of inflation on your wealth

Tue, 20 Jun 2023 13:30:03 GMT

Guide: How to manage the harmful effects of inflation on your wealth

For the last year, inflation has been high. If you’re worried about the effects of the rising cost of living, this guide could help you.

Figures from the Office for National Statistics show, in the 12 months to April 2023, the rate of inflation was 8.7%. This is far above the Bank of England’s target of 2%, and for much of the last year, the rate has been in double digits.

The guide explains why needing to spend more to maintain your lifestyle could affect your long-term plans and how inflation could reduce the value of your assets in real terms.

You can also discover some of the steps you could take to “beat” inflation, including:

Making the most of suitable allowances
Shopping around for the best interest rate
Considering if investing is right for you
Reviewing your budget
Focusing on your long-term plan.

Download your copy of ‘ How to manage the harmful effects of inflation on your wealth ’ now to learn more about the effects of inflation and what steps you can take to “beat” it.

Financial planning as a couple could boost your finances, but almost 2 in 5 admit to “financial infidelity”

Mon, 12 Jun 2023 14:20:27 GMT

Financial planning as a couple could boost your finances, but almost 2 in 5 admit to “financial infidelity”

Research has found that many couples keep financial secrets. While you may want to keep your finances separate for a whole host of reasons, working together could mean your money goes further and you’re more likely to reach your goals.

According to an Aviva survey, 38% of people in a relationship admit to having a secret account or money stashed away that their partner doesn’t know about. The average amount hidden in a savings account is £1,600, and half of over-55s have more than £2,000 squirrelled away.

There are lots of motives for keeping some money to yourself. 33% of people said it was because they wanted to maintain control of their finances. A quarter said it was so they could treat themselves without their partner knowing, while a similar proportion are doing so to create a nest egg for their child.

As well as savings accounts, it’s not uncommon for couples to keep other financial secrets.

Perhaps you haven’t told your partner how much you have saved in your pension, or how well your investments have performed?

Whatever your reasons for keeping some of your finances to yourself, it’s worth considering if creating a financial plan together could be useful.

3 fantastic reasons to plan as a couple

Creating a financial plan with your partner can be incredibly useful and mean you both have more confidence about the future. If you’re not already planning with your partner, here are three fantastic reasons you should think about it.

1. It provides an opportunity to talk about your attitude to money

Money can be a difficult subject to discuss. If you have different views about money from your partner, it can lead to arguments.

The Aviva survey found that 26% of people said they bicker about money at least once a week. Unsurprisingly, the cost of living crisis is putting more pressure on couples, and 34% said they are arguing about money more.

A financial plan can facilitate an open conversation about your attitude to money and how you use it. It’s a process that can help you better understand your partner’s point of view and ease tensions.

2. Benefit from a clear goal that you’re both working towards

Financial planning isn’t just about maximising your wealth – in fact, far from it. The key benefit of financial planning is that it creates a plan that’s designed to help you reach your goals.

So, planning as a couple can mean you’re both working towards the same future. Whether you hope to retire early or are keen to give your children a financial head start when they reach adulthood, a financial plan will be tailored to suit your goals.

Setting this out as a couple can mean you’re both on the same page and motivated to take the steps necessary to secure the future you want.

3. Make the most of tax allowances

As a couple, there may be tax allowances you can take advantage of by planning as a couple.

For example, the Marriage Allowance could lower your combined Income Tax bill if one of you doesn’t earn more than the Personal Allowance, which is £12,570 for the 2023/24 tax year.

Splitting assets between you could also mean you can make the most of tax breaks. Each individual can add up to £20,000 each tax year to an ISA to save or invest tax-efficiently. So, spreading cash between both of your ISAs could reduce your overall tax bill.

Similarly, for the 2023/24 tax year, you can make up to £6,000 profit when disposing of some assets, including investments that aren’t held in a tax-efficient wrapper, before Capital Gains Tax (CGT) is due. As you can pass on assets to your spouse or civil partner without having to pay CGT, doing so could mean you could make profits of up to £12,000 before becoming liable for tax.

Working together towards common goals doesn’t have to mean merging all of your assets. You may choose to keep some, or even all, assets separate. There’s no one-size-fits-all solution when creating a financial plan – it’s about what works for you and your partner.

Please contact us to arrange a meeting to discuss your finances and aspirations for the future. We can help you implement a plan that you feel comfortable with.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

Guide: 10 really fab things the Beatles can teach you about successful financial planning

Mon, 15 May 2023 11:31:16 GMT

Guide: 10 really fab things the Beatles can teach you about successful financial planning

60 years ago, the Beatles celebrated their first UK number one single – ‘From Me to You’. The Fab Four went on to spend an incredible seven years in the UK top 40.

The band has influenced musicians for decades, but what you might have overlooked are some of the financial planning lessons in their lyrics.

From a young man thinking about and planning his later years in ‘When I’m Sixty-Four’ to ‘Taxman’, which protests the high rates of progressive tax the band paid in the mid-60s, there are essential money lessons hidden in the Beatles’ albums.

Download your copy of ‘ 10 really fab things the Beatles can teach you about successful financial planning ’ now to discover what you could learn from the Fab Four’s lyrics.

More people are turning to equity release to boost their income. Find out why here

Fri, 05 May 2023 10:22:06 GMT

More people are turning to equity release to boost their income

The amount of wealth that’s accessible through equity release is on the rise. It’s something more people are using to boost their income later in life for a variety of reasons. Read on to find out what equity release is and why people are using it.

You could use equity release to unlock property wealth

Equity release is a type of long-term loan that allows you to take out cash from the value of your home.

The most common way of doing this is through a lifetime mortgage. With this option, you don’t have to make loan repayments. Instead, the money you borrow, along with any interest accrued, is paid when you pass away or if you move into long-term care.

The money received from equity release is tax-free and can be used however you like. You can choose to take a lump sum or regular smaller payments. As a result, it can be an attractive option if you want to boost your income later in life.

However, there are drawbacks to consider too. As the interest payments are typically rolled up, the amount owed can quickly rise and affect what you leave behind for loved ones. It can also limit your options in the future, such as if you want to move home.

To be eligible for equity release, you will usually need to be at least 55 years old. You don’t have to own your home, but if you still have a mortgage, you will typically need to pay it off with the money you receive. Each provider will have its own criteria that you will need to meet.

More than 200 people use equity release each day

Equity release has become more popular in recent years. According to the Equity Release Council , more than 200 customers a day use equity release. In the second quarter of 2022, homeowners accessed more than £1.6 billion of property wealth.

There are many reasons why the amount accessed through equity release is on the rise, including increasing property prices meaning homes are often among the most valuable assets people have.

Analysis from Canada Life estimates that around £811 billion is available to release across England, Scotland and Wales by over-55s.

So, why are people turning to property wealth later in life? The cash injection can help create long-term financial security and mean you can live the life you want. Additional research from Canada Life revealed the top reasons why people are using equity release.

The top 5 reasons why people are turning to equity release

1. To pay off mortgage debt

Half of the people that use equity release use some or all the cash to pay off an existing mortgage.

If you’re nearing retirement with a mortgage, you may worry about how you’ll meet financial commitments. It could also mean you need to delay retirement or change your lifestyle goals. For some, equity release can provide a solution.

While you’d still have debt after using equity release, you won’t need to make repayments. This can help your income stretch further. However, keep in mind that interest can increase significantly and affect the value of your estate.

2. To make home improvements

More than a third of people plan to use some of the money to make home improvements to create a more comfortable environment.

As equity release can make it more difficult to move home, you should consider whether the improvements will ensure that your property is suitable for the long term.

3. Support day-to-day living costs

As the cost of living rises, it’s not surprising that some people are using equity release to boost their income for day-to-day costs. A fifth of people will use some of the money they’ve withdrawn from their home to pay for bills.

While equity release can provide a lump sum or smaller withdrawals, keep in mind you won’t be able to take out another loan against your home. As a result, if you faced a financial shortfall in the future, you may have limited options.

You should consider how you’ll create a sustainable income over the long term if you’re facing challenges due to the rising cost of living.

4. Provide gifts to family and friends

According to Aviva research, more than half of those over 55 want to provide gifts to their families during their lifetimes rather than leaving an inheritance.

This is reflected in the fact that 15% of people who have used equity release plan to use some of the wealth to provide gifts to family and friends.

If this is one of the reasons you’re thinking about using equity release, you should carefully consider if it could affect your long-term security, and the potential tax implications.

5. Make substantial one-off purchases

Finally, a significant proportion of people are using equity release to make a substantial one-off purchase. These include a holiday (14%), buying a new property (12%), and buying a new car (10%).

Equity release can be a valuable way to make purchases that could help reach lifestyle goals, but it’s important to consider the alternatives and whether they could be more appropriate.

Is equity release right for you?

Equity release can be useful, but it’s not the right option for everyone.

Before you apply for equity release you should ensure you explore other options too. From using savings to pay for one-off purchases to paying a mortgage in retirement, it’s vital you fully understand what all your options are, and how they’d affect your short- and long-term financial security.

By going through your complete financial plan and the implications of using equity release first, you can have confidence in the decision you make.

If you have questions about equity release and how it could help you reach your goals, please contact us.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Equity Release will reduce the value of your estate and can affect your eligibility for means-tested benefits.

Why it could pay to use your 2023/24 tax year allowances right now

Wed, 05 Apr 2023 14:14:03 GMT

Why it could pay to use your 2023/24 tax year allowances right now

The new tax year has only just started. Yet, making the most of your allowances now, rather than waiting until March 2024, could make sense. Read on to find out why.

When a new tax year starts on 6 April, many allowances reset, such as the:

ISA allowance
Pension Annual Allowance
Capital Gains Tax annual exempt amount
Dividend Allowance

Using allowances could reduce your tax liability and improve your long-term financial security. So, they should be part of your financial plan.

In the past, you may have waited until the end of the tax year to calculate how much of your allowances you’ve used and then potentially made the most of remaining allowances. However, taking some time to assess how you’ll use appropriate allowances now could be useful – here are four reasons why.

1. Avoid making last-minute decisions

If you wait until the end of the tax year, you may find you need to make decisions quickly. It could mean you overlook potential opportunities or choose an option that isn’t right for you. By going through your allowances now, you can give yourself plenty of time to understand how your decisions could affect your short- and long-term finances.

Making use of allowances now also means you don’t have to worry about delays and a looming deadline.

2. Benefit from an extra 12 months of returns or interest

Do you want to boost your savings or investments over 2023/24? Thinking about how allowances could help you reach your goal now could mean you benefit from an extra 12 months of interest or returns.

The ISA allowance, for instance, allows you to save or invest up to £20,000 tax-efficiently in the 2023/24 tax year. You don’t need to pay Income Tax on interest or Capital Gains Tax (CGT) on returns if your assets are held in an ISA. As a result, they could form an essential part of your financial plan.

Analysis from Hargreaves Lansdown has highlighted that when you deposit money in a Stocks and Shares ISA could affect the value.

If you invested £5,000 each tax year in the UK stock market between 1999 and 2022, you’d be more than £10,000 better off if you invested at the start of each tax year, rather than waiting until the end. So, if you have a lump sum to invest, you may want to consider using your allowance now.

Source: Hargreaves Lansdown

Of course, investment returns cannot be guaranteed, and you should remember that markets experience volatility. As a result, investing with a long-term time frame and choosing investments that suit your risk profile is essential.

Similarly, if you use your ISA allowance to boost savings, doing so sooner means you’ll likely benefit from more interest. As interest rates have increased over the last year, it’s worth checking if your Cash ISA rate is still competitive. Transferring your ISA to a provider with a higher interest rate could boost your savings even more.

3. You can spread out contributions over the tax year

If you don’t have a lump sum available to use your allowances now, a plan at the start of the year can still be valuable. It means you could spread out contributions and make it part of your budget.

Let’s say you want to add an extra £5,000 to your pension from your take-home pay this tax year. Rather than depositing a lump sum, setting a direct debit of around £420 each month can ensure you stay on track as it will become part of your regular outgoings.

As your pension is usually invested, spreading out contributions throughout the year means you’ll be investing at different points of the market cycle. This can help balance market volatility, as investing when the market is high could be offset by a contribution that’s made when it’s low.

The same principle also applies if you’re investing in other ways too, such as through a Stocks and Shares ISA.

4. Ensure your decisions reflect your goals throughout the year

Setting out how you want to use tax breaks this year can help ensure your financial decisions reflect wider goals. Reviewing your finances now is an opportunity to see what steps you can take to move closer to aspirations like retiring early, purchasing property, or lending financial support to loved ones.

If you want to discuss how you could make use of 2023/24 tax allowances now or throughout the year, please contact us. We can help you understand which allowances could support your long-term goals.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts.

This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

6 helpful ways to keep yourself active during retirement

Tue, 04 Apr 2023 15:23:55 GMT

6 helpful ways to keep yourself active during retirement

A strong financial plan will help you to stay on course to meet your long-term goals, as you navigate your way through life towards your eventual retirement. The aim is that when that day arrives, you’ll be in a position to live the kind of lifestyle you desire.

It can be easy to focus on the financial aspects of your retirement and lose track of what that life will actually entail. After possibly spending decades of your life working on your career, you might find yourself a little lost when your days are suddenly filled with free time.

One of the many lessons we can learn from the world’s “blue zones” – the regions in which people have the longest life expectancies and tend to live healthy, active lives throughout their 80s and 90s – is the concept of “purpose”.

This notion takes many forms. In two of the blue zones, they have words that conceptualise this idea. In Nicoya they call it “plan de vida” and in Okinawa “ikigai”, both roughly translating as “why I wake up in the morning”.

Having a positive mindset and things to do with your days can benefit your emotional wellbeing during retirement.

Read on to discover six ways you can keep yourself active in both mind and body, and ensure you get the most out of your retirement years.

1. Consider embracing your creative side and taking up an artistic hobby

According to AgeUK, one of the many unexpected outcomes of retirement is the sudden loss of identity. You might find yourself feeling emotionally drained, isolated, and unsure of how to fill your time.

Picking up a creative hobby could be a potential solution. It might not have been something you considered in the past, but it could benefit your mental health. You could try:

Painting
Writing poetry
Photography
Learning an instrument
Acting

The Mental Health Foundation champions arts as a way for people, especially those later in life, to overcome isolation and rebuild social connections.

You don’t have to discover your inner Van Gogh or Brando. Simply taking the time to switch off and pursue something creative can help your mind stay active and healthy.

2. Unleash your “green fingers” and adopt gardening as part of your daily routine

The blue zones teach us many lessons about how to go about later life. In all five of these regions, exercise is built into daily routines, rather than as a dedicated goal.

People in these zones typically don’t play physical sports or hit the gym on a daily basis. Instead, they allow physical activity to naturally feature throughout their days.

One of the ways they do this is by tending to their land. Gardening not only keeps your body active as you shovel, water, plant, and oversee your grounds, but can also benefit your diet and your mind.

Fresh vegetables, fruit and herbs can do wonders for your health, so why not consider growing them yourself in your garden?

It’s also great for your mental health and could help you unwind.

3. Become a leader in your local community

Taking an active role in your local community can do wonders for your health and emotional wellbeing.

You can not only leave your mark on other people’s lives and build upon your legacy, but also foster new connections and friendships that might open up all sorts of new avenues of interest for you to pursue during your retirement.

Community engagement can take many forms. You might decide to help with programmes for young people, coach a sports team, help with a charity, or support efforts to revitalise your local area.

4. Take the time to exercise your mind and body

As part of continuing globalisation, Asian exercise and mindfulness concepts have slowly filtered over to the West.

You will probably be familiar with yoga, meditation, and perhaps even t’ai chi. Once seen as hobbies of the free-spirited fringes of society, they have become increasingly mainstream.

The benefits of these activities aren’t just physical, but also mental.

Stress is well-known to be one of the leading contributors to heart disease and other life-threatening ailments. Staying active in a way that not only keeps your body healthy but also your mind could mean you get the most out of retirement.

5. Reflect on your life and write down your story

The idea of writing your memoirs might be daunting, but it can be an excellent way to acknowledge your achievements and reflect on your favourite memories.

The exercise helps keep your mind active. It is also an opportunity for you to share your story with your loved ones and descendants.

You don’t need to write your magnum opus and seek out a publishing deal. You can simply use it as a means for your children, grandchildren, or great-grandchildren to get to know you better.

6. Stay productive with a part-time job

It might seem counterproductive to take on a job when you’ve only just retired. But part-time work can be very beneficial for maintaining a structure in your daily life.

It can also help with giving you purpose and a challenge that will keep you active and feeling productive.

This can take many forms; you might opt to take up consultancy for your old profession or look into a teaching position. Otherwise, you might want to turn a long-gestating idea into reality and start up a new business.

Self-employed? Read these 6 useful tips before applying for a mortgage

Tue, 04 Apr 2023 15:17:02 GMT

Self-employed? Read these 6 useful tips before applying for a mortgage

Self-employed workers have always faced additional challenges when trying to get on the property ladder. But stringent affordability tests mean it’s becoming even more difficult to secure a mortgage.

Government statistics show in 2021 around 13% of the UK’s labour force was self-employed. So, the barriers for self-employed workers are something thousands of aspiring homeowners need to overcome every year.

According to the Telegraph , it’s “never been harder” to get a mortgage if you’re self-employed.

If you don’t have a predictable income, lenders are likely to ask you more questions. However, lenders are reportedly asking self-employed workers questions that weren’t common in the past, such as which energy supplier they are with or if they can supply a reference from their accountant about the strength of their business.

As lenders are being more cautious, it’s estimated they rated only 65% of self-employed mortgage applications as “affordable” at the end of 2022.

So, if you’re self-employed and seeking a mortgage, what can you do?

1. Check your credit report

Anyone seeking a mortgage should check their credit report. It’s one of the tools lenders will use to assess how much of a risk you pose. Going through your report before you apply gives you a chance to uncover potential red flags first.

Things like payday loans or large credit card debt could lead to your application being rejected, even if you’re confident you could meet the repayments.

There may be things you can do to improve your credit report, such as registering on the electoral roll or paying off an overdraft.

2. Prepare evidence of your income

You will need to prove your income when applying for a mortgage. As a self-employed worker, this is usually done by providing your self-assessment tax returns.

You will typically need a minimum of 12 months of accounts to be eligible for a mortgage. However, some lenders may require evidence of your income for two years or more.

Getting your paperwork in order before you apply for a mortgage could help you identify potential gaps and ensure you have everything to hand.

3. Be mindful of how steps to reduce tax liability could affect your mortgage application

When taking an income from your work, you may take steps to minimise your tax liability. While this can help your money to go further, you should be mindful that it could affect your mortgage application.

For example, not every lender will consider “retained profits” as part of your income as a self-employed borrower.

Your income is used to calculate how much you can borrow – a typical amount is 4.5 times your annual income – but this varies between lenders and will depend on your circumstances. So, managing your tax bill could have a knock-on effect on the amount you could borrow or even mean a lender rejects your application.

4. Keep track of your contracts

If you have a pipeline of work or long-term projects, having your contracts to show lenders could be useful. It can demonstrate that you’ll have an income in the future, and boost their confidence that you’ll meet repayments.

Borrowers that pose a lower risk could benefit from a more competitive interest rate and lower repayments as a result.

5. Save a larger deposit

You could access a mortgage with a 5% deposit. However, if you want to improve your chances of success, a larger deposit could tip the scales in your favour – the larger the deposit, the less risk you pose to a lender.

Taking some time to save more for your deposit might be frustrating, but it could make all the difference.

6. Look beyond high street banks

There are lots of mortgage lenders to choose from. While your first thought may be to approach a familiar high street bank, alternatives may be more likely to approve your application, allow you to borrow more, or offer a lower interest rate. So, searching the market could help you reach your home ownership goals.

Searching the market and understanding which lenders could be right for you can be difficult. Working with a mortgage broker could be valuable here and improve your chances of success.

We can make your mortgage application process smoother

As mortgage brokers, we can lend support throughout the mortgage application process. From identifying the lenders that are most likely to approve your application to going through your paperwork, we’ll be there every step of the way. Contact us to talk about your mortgage needs.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

If your mortgage repayments have increased, you should review your financial protection

Tue, 04 Apr 2023 15:08:45 GMT

If your mortgage repayments have increased, you should review your financial protection

Over the last year, interest rates have steadily increased. If you have a mortgage, it may have affected your repayments, or could in the future. So, does your financial protection still provide the cover you need?

The Bank of England has increased its base interest rate to tackle high inflation, which has led to a rise in the cost of borrowing. If you have a loan with a variable interest rate, your repayments may have already increased.

As your mortgage is often the largest loan you take out, even a seemingly small change to the interest rate could mean your expenses are much higher. If you have a repayment mortgage of £240,000 over 25 years:

An interest rate of 3% would lead to a monthly repayment of £1,138
In comparison, repayments would rise to £1,404 if the interest rate increased to 5%.

So, it can have a significant effect on your budget and your ability to overcome financial shocks.

As a result, if you already have financial protection in place, it may no longer provide the security you want.

Income protection could provide financial support when you need it most

If your income stopped due to an illness or accident, what financial commitments would you need to meet? Regularly reviewing your outgoings could help you identify these and fill a gap if it’s needed.

Income protection could provide an income if you’re unable to work due to an accident or illness. It will typically provide you with a proportion of your usual salary, normally around 60%, until you return to work, retire, or the policy term ends. This could help you cover regular expenses and means you don’t need to worry about short-term finances.

According to the Association of British Insurers , the average income protection payout in 2021 was £23,380.

Just 12 months ago, your income protection may have been enough to maintain your lifestyle, but would that still be the case now?

Your mortgage repayments could be significantly higher than they were previously. Inflation has led to other costs soaring too, particularly energy and groceries.

While you may be confident about your ability to weather a financial shock, rising outgoings could mean you’re unprepared and face a shortfall if you ever need to rely on financial protection.

So, you should check your financial protection would still provide the income you need to be financially secure.

If you don’t have financial protection already in place, reviewing how you’d cope if you suffered a financial shock can be valuable.

Financial protection can give you peace of mind that, should something happen, you’ll have money to fall back on. While you would need to make paying premiums part of your budget, they may not be as high as you think.

2 more things to check to create a financial safety net you can rely on

1. Your emergency fund

An emergency fund can provide you with a safety net to cover short-term outgoings.

The amount you should have in your emergency fund will depend on your goals. Having enough to cover thre months of expenses is a common target.

Again, as inflation could mean your outgoings are higher, you may want to increase your cash reserves.

2. Your employer’s sick pay policy

It’s worth looking at your employer’s sick pay policy too. In some cases, they will pay your full income or a proportion of it for a defined period. This way, you wouldn’t need to rely on Statutory Sick Pay, which is unlikely to cover your essential expenses.

If your employer does provide sick pay, you could opt for financial protection that has a longer deferment period, which could lower your premiums.

Having a financial safety net that reflects your regular outgoings is essential and can give you confidence about the future. If you have any questions about the steps you could take to improve your financial security, please contact us.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

Financial wellbeing: 4 steps to creating a financial wellbeing plan

Tue, 04 Apr 2023 14:41:51 GMT

Financial wellbeing: 4 steps to creating a financial wellbeing plan

While growing wealth is often an important part of a financial plan, understanding how you can use your money to reach goals and improve your wellbeing is crucial. It could help you get the most out of your wealth and lead to a more fulfilling life.

This guide offers practical steps that could help you improve your relationship with money by understanding how it’s related to happiness. It covers four essential steps to creating a financial wellbeing plan that’s tailored to you:

Understanding the sources of happiness that are true for everyone
Understanding what makes you happy
Creating a clear path to your objectives
Travelling along that path in the most effective and efficient way possible.

Download your copy of ‘ Financial wellbeing: 4 steps to creating a financial wellbeing plan ’ now to find out what you could do to boost your long-term wellbeing.

4 valuable ways a financial planner can help you tackle “overwhelming” pension information

Tue, 04 Apr 2023 14:02:44 GMT

4 valuable ways a financial planner can help you tackle “overwhelming” pension information

Do you find pension information confusing? You’re not alone; 50% of people in the UK describe the information they receive about their pension as “overwhelming”, according to a Standard Life study.

Fortunately, there are places where you can seek guidance or advice. The survey found 83% of people think financial advisers offer useful support.

If you’re not sure if your pension is on the right track, a financial planner could help put your mind at ease. Here are four reasons why.

1. A financial planner can cut through jargon

Pension information can be filled with jargon that makes it difficult to understand exactly what it is saying.

From “annuities” to the “Tapered Annual Allowance”, a financial planner could help you cut through confusing terms and take the time to explain what they mean and, more importantly, whether they’re relevant to you.

Having someone you can turn to for answers that you know you can rely on is invaluable.

2. A financial planner can help you make sense of pension statements

Your pension provider will provide a statement each year; this may come in the post or be online.

It will cover pension contributions, including your own, those made by your employer, and tax relief. These figures can help you understand how much is going into your pension.

As your pension will usually be invested, the statement is likely to include investment performance too. As investments can be volatile, it can be difficult to know whether your investments are performing well or not, and it’s also essential to ensure they match your risk profile and goals. As financial planners, we can help you get to grips with pension investments.

In addition, your pension statement will include a forecast. This is a projection based on assumptions that the provider makes, including your retirement date and investment performance, so it’s not a guarantee.

The pension forecast can be incredibly useful when thinking about how your savings will add up to deliver a retirement income. But understanding if it’s “enough” is another challenge.

3. A financial planner can help you calculate if you’re saving “enough”

Calculating how much you should be saving into your pension can be complex. There’s no one-size-fits-all figure, so you’ll need to consider your circumstances and goals to understand what is “enough”.

Not only will you need to calculate potential investment returns, but also the income you need to create the retirement lifestyle you want. As a result, setting a pension target often means pulling together different pieces of information, from life expectancy to other assets you’ll use to create an income, like savings.

A financial plan can help you understand what is “enough” for you to retire on, and, importantly, the steps you can take to reach the goal. With a clear blueprint, you’re more likely to retire with enough savings to live the lifestyle you want.

4. A financial planner can create a plan that means you can enjoy retirement

A financial plan can help you get the most out of your money, and allow you to really enjoy your retirement.

There’s strong evidence that taking control of your finances could boost your wellbeing. In fact, 93% of people that planned for retirement with an income of less than £20,000 say they are enjoying life after giving up work. However, only 66% of people that didn’t plan could say the same.

Despite this, 7 in 10 people are doing very little, if anything, to plan for their retirement.

So, arranging a meeting now to create a plan for when you give up work means you’re more likely to enjoy the next stage of your life. It’s never too soon to start retirement planning, and doing so earlier could grant you more freedom in the future.

If you want to talk about your pension and start thinking about what it means for your retirement, please contact us. We’ll work with you so you can have confidence in your retirement savings and look forward to the milestone.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts.

Business owners: The essential basics about salary sacrifice pensions

Wed, 29 Mar 2023 10:13:22 GMT

Business owners: The essential basics about salary sacrifice pensions

Salary sacrifice schemes could offer employees a tax-efficient way to boost their retirement savings. It could benefit your business too, so they are well worth considering.

If you’ve been thinking about salary sacrifice pensions or want to explore how you could expand your workplace benefits, read on to discover what they could mean for your business.

What is a “salary sacrifice” pension?

In simple terms, salary sacrifice means that an employee gives up some of their salary in exchange for a benefit. In this case, that benefit would involve you, as their employer, making higher contributions to their pension.

From the employee’s perspective, a salary sacrifice has two key benefits:

It increases their pension savings. As you will contribute more to their pension each month, their pension pot will grow faster.
It could reduce tax liability. As their income will be lower, Income Tax and National Insurance could deductions fall. In some cases, the income difference is negligible due to the savings.

As a result, employees choosing a salary sacrifice pension are often financially better off in the long term, while giving up relatively little now.

For employers, offering this option can deliver both financial and non-financial benefits.

The financial benefits of providing a salary sacrifice pension

From an employee’s perspective, the additional pension benefits could outweigh the salary sacrifice they’re making. In some cases, they may be better off financially day-to-day too, as their Income Tax and National Insurance contributions will fall.

The extra pension contributions benefit from tax relief, boosting retirement savings further. As the money will usually be invested, it has the potential to deliver long-term returns too.

So, it’s easy to see why, for an employee, a salary sacrifice pension can make sense financially. But how does it financially benefit employers?

While you’ll be contributing more to your employee’s pension, your employer NICs will fall, which could deliver a saving overall.

Salary sacrifice could boost employee satisfaction

As well as tangible financial benefits, salary sacrifice options could boost employee satisfaction.

Having more options to choose what’s important to them and an opportunity to save more efficiently for retirement can improve employee wellbeing. A salary sacrifice pension could help your team to feel more confident about their retirement and long-term financial security.

This step could also make your business more attractive to talent in a competitive job market.

To make the most of this benefit, it’s important that you effectively communicate what salary sacrifice means to your employees and how they could benefit from it. Including the details in documents like an employee handbook, regularly mentioning it during team meetings, and including it in job adverts can help.

Working with a finance professional to engage with employees can also increase how many people make use of salary sacrifice options. For instance, we could speak to your employees to help them calculate exactly how salary sacrifice would affect their income now and what it would mean for their retirement.

If you’d like to work with us to improve financial education and wellbeing in your business, please contact us.

What steps do you need to take to set up a salary sacrifice scheme?

As an employer, it’s likely you already have a pension scheme in place for your employees under auto-enrolment. So, setting up a salary sacrifice scheme could be easier than you think and it’s something we could help with.

If an employee agrees to take a salary sacrifice, you will need to update their contract. You can usually do this by adding a clause that explains the details of the scheme. You will also need to update your payroll process to include the new figures for gross salary and tax.

Tax savings you make through a salary sacrifice scheme are instant – you don’t need to claim them back.

Do you want to learn more about salary sacrifice and employee financial education?

Whether you want to discuss the pros and cons of salary sacrifice with an expert or arrange for a financial adviser to talk to your team, we can help. Please contact us to discuss your business needs and how we can work together.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The value of your investments (and any income from them) can go down as well as up, which would have an impact on the level of pension benefits available.

Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances. Levels, bases of and reliefs from taxation may change in subsequent Finance Acts.

All the winners and losers from the 2023 spring Budget

Wed, 15 Mar 2023 18:13:06 GMT

All the winners and losers from the 2023 spring Budget

Just six months ago, Kwasi Kwarteng stood up in the House of Commons and delivered his controversial “mini-Budget”.

The announcements ultimately brought down the short-lived Truss administration, with current chancellor, Jeremy Hunt, announcing a series of policy measures in November 2022 aimed at calming the markets.

Having taken “difficult decisions to deliver stability and sound money”, the chancellor has delivered the next part of his plan: “a Budget for growth”.

Read on to find out who were the winners and losers from the 2023 spring Budget.

Winners

Over-50s returning to work

In his speech, the chancellor said that “older people are the most skilled and experienced people we have”. So, he announced steps to make it easier for those over 50 to work for longer.

Firstly, the government announced an enhancement to the “midlife MOT” strategy – offering reviews to help individuals take stock of their finances and wellbeing to prepare for a more secure retirement.

Hunt also introduced a new kind of apprenticeship – called a “returnership” – aimed at over-50s who want to return to work.

The chancellor also announced some significant pension reforms aimed at encouraging more over-50s to remain in work, or to return to work. This brings us to…

Pension savers

The Lifetime Allowance (LTA) restricts the amount of tax-efficient pension savings an individual can accrue in their lifetime.

Having reached a peak in 2012, the LTA has been frozen at £1,073,100 since 2020.

To encourage people to remain in work, rather than retiring to avoid punitive tax charges for exceeding the lifetime limit, Hunt made the unexpected decision to abolish the LTA. The government will remove the LTA tax charge from April 2023, and completely abolish it in a future Finance Bill.

In addition, the Annual Allowance that restricts the amount that you can save tax-efficiently in any one year will also rise, from £40,000 to £60,000 in April 2023. You will also continue to be able to carry forward unused Annual Allowances from the three previous tax years.

Finally, many high earners are also affected by the Tapered Annual Allowance. The chancellor announced that the minimum Tapered Annual Allowance will increase from £4,000 to £10,000 from 6 April 2023.

In addition, the adjusted income threshold for the Tapered Annual Allowance will also be increased from £240,000 to £260,000 from the same date.

These are major steps that will allow pension savers to accumulate significantly more tax-efficient pension savings over their lifetime, and reduce some tax disincentives to work.

In addition, once an individual flexibly accesses their defined contribution pension savings, the total tax-relieved pension savings they can make each year is restricted to the level of the Money Purchase Annual Allowance (MPAA).

To support those who have left the labour market to return and supplement their income, or build up their retirement savings, the government will also increase the MPAA to £10,000 from April 2023.

Parents with young children

In what is likely to be a key battleground ahead of the next election, the chancellor announced an expansion of free childcare.

In an attempt to boost growth and get more people into work, working families will have access to 30 hours of free childcare each week for children aged between nine months and four years.

This is alongside boosts to subsidised childcare for parents on Universal Credit including upfront support.

Support will be phased in until every single eligible working parent of an under-five gets this support by September 2025.

Households with high energy bills

Back in November, Hunt announced that the government’s Energy Price Guarantee – an initiative of the Truss administration – would continue in its present guise until April 2023.

Under the guarantee, for six months from 1 October 2022, the average household has been paying energy bills equivalent to around £2,500 a year.

In April 2023, the guarantee was set to rise to £3,000, however the chancellor announced that the Energy Price Guarantee would be extended by a further three months.

This is designed to keep bills at £2,500 on average and the Treasury says this will save the average family £160 on top of the energy support measures already announced.

Drivers

With inflation remaining high, the chancellor argued that now is not the right time to uprate fuel duty with inflation, or increase the duty.

So, he announced a one-year extension of the 5p cut in fuel duty, saving the average driver £100 on top of the £100 saved so far since last year’s cut.

In addition, the chancellor announced an increase of £200 million to the “potholes fund”, taking the annual amount allocated to £700 million. The increase is expected to fix the equivalent of up to 4 million additional potholes across the country.

Swimmers

Hunt talked about the risk to swimming pools and other community facilities of rising costs.

In response, he announced a £63 million fund to keep public leisure centres and pools afloat.

Pubgoers

In a populist measure, Hunt announced his “Brexit pubs guarantee”.

While duty rates of all alcoholic products produced in, or imported into, the UK will increase in line with inflation, from 1 August, draught relief in pubs will be up to 11p lower than the relief for supermarkets. This is in addition to changes already due to come into effect in August.

As Hunt said: “British ale is warm but the duty on a pint is frozen.”

Losers

Businesses with larger profits

Back in 2021, when he was chancellor of the Exchequer, Rishi Sunak announced that Corporation Tax would rise in April 2023 for businesses making more than £250,000 in profits.

The Budget confirmed that this increase will proceed in April as planned – with around 10% of companies paying the top rate.

Companies with profits of less than £50,000 will continue to pay Corporation Tax at 19%.

However, businesses will be able to offset 100% of their UK investment in IT equipment, plant, and machinery against profits to reduce their tax bills. This is an effective cut to Corporation Tax of £9 billion a year, and the government aim to make the scheme permanent when it is responsible to do so.

Taxpayers

In his November statement, the chancellor reduced the Income Tax additional rate threshold from £150,000 to £125,140, increasing taxes for those on high incomes.

He also announced that Income tax, National Insurance, and Inheritance Tax (IHT) thresholds would be maintained at their current levels for a further two years, to April 2028.

Over the next five years, this is likely to see many people pay more Income Tax, as rising earnings push them into a higher tax bracket.

In addition, as house prices and asset values rise, it is likely that more and more estates will face an IHT bill over the next five years.

Savers

While it may now be possible to contribute more to your pension tax-efficiently, the subscription limits for tax-efficient ISAs were frozen at:

£20,000 for an adult ISA
£9,000 for a Junior ISA.

Smokers

In the Budget document, the Treasury confirmed that duty rates on all tobacco products will increase by RPI plus 2% from 6 pm on Budget day.

The rate on hand-rolling tobacco will increase by RPI plus 6% and the minimum excise tax will increase by RPI plus 3% this year.

Get in touch

If you have any questions about whether you are a winner or a loser from the spring Budget, and how it will affect you and your finances, please get in touch.

All information is from the spring Budget document and the government’s spring Budget bulletin.

The content of this spring Budget summary is intended for general information purposes only. The content should not be relied upon in its entirety and shall not be deemed to be or constitute advice.

While we believe this interpretation to be correct, it cannot be guaranteed and we cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained within this summary. Please obtain professional advice before entering into or altering any new arrangement.

Your spring Budget update – the key news from the chancellor’s statement

Wed, 15 Mar 2023 18:07:54 GMT

Your spring Budget update – the key news from the chancellor’s statement

On Wednesday 15 March 2023, chancellor Jeremy Hunt presented his spring Budget.

Focusing on the government's aims to halve inflation, reduce public debt, and boost economic growth, Hunt delivered his first official Budget alongside the latest economic and fiscal outlook from the Office for Budget Responsibility (OBR).

“Despite continuing global instability, the OBR report today that inflation in the UK will fall from 10.7% in the final quarter of last year to 2.9% by the end of 2023.”

Hunt opened his speech by admitting that, in the autumn, the government “took difficult decisions to deliver stability and sound money”.

Today, he promised “a budget for growth”.

“Not just growth from emerging out of a downturn. But long-term, sustainable, healthy growth that pays for our NHS and schools, finds good jobs for young people, provides a safety net for older people […] all whilst making our country one of the most prosperous in the world.”

Here are the key points of the spring Budget, and what they might mean for you.

Encouraging early retirees back into work

Jeremy Hunt’s primary focus with his spring Budget is to encourage Britain back to work. Around 7 million working aged adults are classed as “economically inactive”. Of these, more than a million people have taken early retirement.

To address this issue and to stop pension limits “from acting as a barrier to remaining in work”, the chancellor announced increases to pension allowances and abolished the Lifetime Allowance.

Pensions Lifetime Allowance abolished

Following conversations with senior doctors in the NHS and other experienced professionals, the pensions Lifetime Allowance (LTA) has been abolished.

The LTA is the maximum amount of tax-efficient pension savings you can accrue in your lifetime and includes the total value of your pensions, including your contributions, your employer’s contributions from your workplace pension, tax relief, and investment returns.

From April 2023, there will be no limit on the amount of total tax-efficient pension savings you can accrue.

Pensions Annual Allowance increased

The chancellor announced that the Annual Allowance will increase from £40,000 to £60,000 from 6 April 2023.

The Annual Allowance is the amount that you can save into your pension each tax year (6 April to 5 April) while still being able to benefit from tax relief. In the 2023/24 tax year, this will now be £60,000.

Money Purchase Annual Allowance to increase

Another useful incentive to encourage experienced people to return to work, the chancellor announced an increase to the Money Purchase Annual Allowance (MPAA).

The MPAA limits the amount of money you can save tax-efficiently into your pension after you have started drawing flexibly from your defined contribution pension savings.

The MPAA will increase from £4,000 to £10,000 from April 2023.

Tapered Annual Allowance to increase

From April 2023, the minimum Tapered Annual Allowance will increase from £4,000 to £10,000. The adjusted income threshold for the Tapered Annual Allowance will also be increased from £240,000 to £260,000 from 6 April 2023.

These announcements have increased the amount people can put aside for their pensions

In abolishing the LTA and increasing the Annual Allowance, MPAA, and Tapered Annual Allowance the government has increased the amount people can put aside for their pensions each year and save over their lifetime, all while minimising tax. The hope is that this will also dissuade people from retiring early.

Savers and investors see key subscription limits frozen

The annual subscription limit for adult ISAs will remain at £20,000.

Junior Individual Savings Accounts (JISA) and Child Trust Fund accounts will also remain static at £9,000.

No changes to planned Corporation Tax rises, but a new incentive to invest

From April 2023, Corporation Tax will increase from 19% to 25%. In acknowledgement of this move and to limit the impact of the increase, Hunt will allow businesses to offset 100% of investments in infrastructure and factory and machinery assets against profits for tax purposes.

The full force of this tax rise will hit those businesses with profits exceeding £250,000. Meanwhile, companies with profits of between £50,000 and £250,000 will get marginal relief.

For those with profits of less than £50,000 there is no change. They will continue to pay Corporation Tax at 19%.

Plan for business growth

As part of the Treasury's plan to stimulate the UK's sluggish economic growth and to spur regional activity outside London, up to 12 successful investment zones will receive funding of £80 million each over five years. This money can be directed towards tax relief for businesses, training, and infrastructure.

Eight places in England have been shortlisted to host investment zones. These are:

East Midlands
Greater Manchester
Liverpool
North East
South Yorkshire
Tees Valley
West Midlands
West Yorkshire

A further four zones will sit across Scotland, Wales and Northern Ireland.

Energy price guarantee extended

The energy price guarantee (EPG) that limits the typical annual bill to £2,500 has been extended.

The EPG had been due to change in April, with the ceiling increasing to £3,000 a year, but now the present level will remain for a further three months, until the end of June 2023. Hunt said: “This temporary change will bridge the gap and ease the pressure on families, while also helping to lower inflation too.”

The chancellor added, “This measure will save the average family a further £160 on top of the energy support measures already announced.”

Fuel duty

As petrol and diesel prices continue to be volatile, the chancellor announced continuing support for households and businesses by extending the temporary 5p fuel duty for a further 12 months.

“That saves the average driver £100 next year and around £200 since the 5p cut was introduced,” Jeremy Hunt said.

This one-year extension will cost £6 billion.

Draught Relief

In good news for beer drinkers, Hunt announced that he would “significantly increase the generosity of Draught Relief”. From 1 August, the duty on draught products in pubs will be up to 11p lower than the duty in supermarkets.

As the chancellor said, “British ale may be warm, but the duty on a pint is frozen.”

Get in touch

If you have any questions about how the spring Budget will affect you and your finances, please get in touch.

All information is from the spring Budget document and the government’s spring Budget bulletin.

The content of this spring Budget summary is intended for general information purposes only. The content should not be relied upon in its entirety and shall not be deemed to be or constitute advice.

Your guide to pension consolidation: The pros and cons you need to know

Mon, 06 Mar 2023 13:54:01 GMT

Your guide to pension consolidation: The pros and cons you need to know

Do you have multiple pensions? It could make it difficult to manage your pension savings during your working life and when you retire. In some cases, consolidating them could be beneficial.

This guide explains what you need to know about transferring your pension savings, so you have fewer pots to manage. It could help you feel more in control of your retirement and, in some cases, reduce the amount you’re paying in fees.

However, there are reasons why consolidating your pension may not be right for you:

You have a defined benefit pension
Your pension has additional benefits
You may need to pay an exit fee
You could benefit from using “small pot” privileges.

Download “ Your guide to pension consolidation: The pros and cons you need to know ” now to read more about pension consolidation and understand if it could be the right decision for you.

If you have any questions about your pension or retirement, please get in touch.

Are you ready for the changes in the new tax-year this April?

Wed, 22 Feb 2023 21:54:37 GMT

Are you ready for the changes in the new tax year this April?

We are fast approaching the end of this tax-year in April and while the financial landscape has begun to settle, questions which we would not have considered as key issues just 12 months ago are coming to the surface all due to the seismic events in 2022.

We are pleased to provide a quick summary of some of the key changes that will occur in the new tax-year, but first let's go back to the Autumn Budget where these changes were first announced.

Signs of spring are on the way, but personal tax-allowances remain frozen

In October 2022, the Autumn budget set out a number of tax freezes which may have gone unnoticed to many due to the chaos that preceded it. However, the policy of ‘fiscal drag’ meaning to freeze personal allowances for a number of years, is expected to be even more painful for many individuals due to higher than expected inflation and wage-growth. We expect these changes to hit all parts of society, from working age to pensioners through to the golden-ages.

The impact of these policies are becoming evident as just yesterday the UK public sector budget update posted a surplus in January of £5.4bn instead of the £7.8bn deficit which had been predicted. The UK government have been quick to announce that despite public borrowing for the financial year to January now being £30.6bn less than forecast at the time of the budget, there are no plans to radically change their short-term plans for personal tax affairs.

A quick summary of the key changes coming our way in April 2023. This list is not exhaustive and you should take full financial advice to understand how the changes may apply to your personal financial circumstances.

Tax-free Personal Allowance (the amount of money you’re allowed to earn each tax-year before you start paying tax) is frozen again at £12,570.00 and not expected to change until April 2028
Higher-rate allowance (the amount of money you’re allowed to earn each tax year at zero or basic rate of income tax of 20%) is frozen again at £50,270.00 and not expected to change until April 2028. It is estimated that up to four million more people could become higher-rate tax payers over this period
Threshold for Additional rate taxpayers (reduced from £150,000.00 to £125,140.00)
Personal Savings Allowance (frozen at £1,000.00 for basic-rate taxpayers and £500.00 for higher-rate taxpayers, £0.00 for additional rate taxpayers)
Inheritance tax thresholds before your estate is assessed for inheritance tax (The nil-rate band of £325,000.00 and Residence nil-rate band of £175,000.00 are both frozen and not expected to change again until April 2028) The amount paid in IHT receipts to the UK Government is up 15% in the last 12 months
Pension Lifetime Allowance (The maximum amount your pension pots can increase to without incurring a potential lifetime allowance tax charge) Frozen at the current limit of £1,073,100.00
Dividend Allowance (the amount you can earn tax-free from dividend payments) cut from £2,000.00 to £1,000.00
Capital Gains Tax Annual Exempt Amount (the amount paid on gains from the sale of shares, property that is not your main residence etc) Reducing from £12,300.00 to £6,000.00 in April 2023, and again to £3,000.00 in April 2024) The amount paid to the UK Government is already up 24% in 12 months prior to these changes coming into effect
High Income Child Benefit Tax Charge (1% paid back for each £100.00 in excess of £50,000.00 adjusted net income)

There are two caveats to this, first with the Spring Budget on the horizon in March 2023, it is unlikely these changes will not go ahead but the ‘freezes’ may not go on for as long as currently legislated. Second, the next general election in the UK must be held no later than 24 ^th January 2025, which may have an impact on personal tax rates with an Autumn Budget focus on luring in potential voters.

What can be done to mitigate these changes?

Much depends on your personal financial circumstances for instance:

Pension contributions can be used to reduce the impact of high income child benefit tax charges as it is calculated on adjusted net income which takes into account pension contributions in the tax-year
Salary exchange options with employers may allow you to reduce your gross taxable income falling into higher tax-brackets while maintaining the same amount of net-pay
Deferring income across two tax-years for large one-off expenditures or sale of shares that may be subject to capital gains tax
Use of suitable trust arrangements and gifting allowances to reduce a future potential Inheritance tax liability
Using tax-efficient wrappers such as ISA’s and pensions

All of the above should be reviewed alongside full financial advice as they have benefits and drawbacks.

Interest rates – What goes up must come down?

The general expectation is that the Bank of England will continue to see a sustained downward shift in inflation rates, which is signalling that there may be only a small number of rate increases left before they may begin to use interest rates as a tool to stimulate demand in an economy teetering on the edge of a recession.

As of yesterday, Santander became one of just 12 lenders offering a sub 4.00% 5-year fixed mortgage product. We’d hesitate to bring out the champagne given the previously low mortgage rates on offer, however the general trend is downward having peaked at more than 6.50% in September 2022. This does raise questions around the benefits and drawbacks or regularly overpaying a mortgage liability now that interest rates are expected to remain higher over the medium to long term. The last 12 months have taught us that nothing can be taken for granted however.

There is greater concern for savers however, which is around the Personal Savings Allowance, introduced in 2016, to reduce the amount of individuals who were required to file self-assessed tax-returns for interest received on investments such as cash savings. As above, alongside many other tax thresholds, these are currently frozen. Back in 2016, getting £1,000.00 in interest from an instant access savings account would have required savings of around £200,000.00 in a year. However due to rising rates, savings of around £25,000.00 could provide you with over £1,000.00 in interest. Interest income in excess of this amount for basic-rate taxpayers may result in paying income tax at your marginal rate. For higher-rate taxpayers, the allowance is only £500.00 until you begin to pay income tax at your marginal rate.

The above demonstrates the government’s fiscal drag policy in real-terms, but also the changing landscape we find ourselves in with a higher interest-rates becoming the norm.

So, what can be done about it? Fortunately, although once again the limit is yes, you guessed it, frozen, you can contribute a generous £20,000.00 into an Individual Savings Account (ISA) in each tax-year. Whether it be cash savings or investments held outside of an ISA-wrapper, now is an excellent opportunity to review these as we approach the new tax-year. A single individual has the ability to put £40,000.00 in an ISA wrapper over the next 43 days, a couple has the ability to put £80,000.00 in an ISA wrapper over the same time period by utilising both tax-years. Furthermore, any unused allowances cannot be brought forward for ISA’s. One thing that has not changed however, is loyalty when it comes to your cash savings provider still does not pay, so shop-around.

If you would like to discuss the above, please feel free to get in touch. Our local, friendly team of Independent Financial Advisers will be happy to provide advice and suitable recommendations tailored specifically for you.

Give us a call on 01788 571122 and we will be more than happy to help.

The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. It does not constitute advice. All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority.

5 useful tips for building a nest egg for children during a cost of living crisis

Sun, 12 Feb 2023 15:23:20 GMT

5 useful tips for building a nest egg for children when costs are rising

As a parent or grandparent, creating a nest egg for children may be one of your goals. However, the increase in the cost of living may mean you’re worried about whether you can still put enough aside to build a savings account for them.

Creating a nest egg for children is a common goal. According to a report in FT Adviser , more than 6 in 10 new parents start saving or investing for their new born.

Putting money aside throughout their childhood could mean they can reach milestones easier. Your child could use it to support their education, purchase a first home or pay for driving lessons.

As you review your expenses in light of rising inflation, you should look at the steps you’re taking to build up a nest egg too. Here are five tips that could help you stay on track.

1. Make nest egg contributions part of your budget

If contributing to a savings account on behalf of your child is important to you, make it part of your budget.

Putting the savings as an outgoing alongside paying your mortgage or utility bills can help you prioritise it.

Another simple step is to arrange a standing order. This means you don’t have to remember to transfer the money each month. A standing order will automatically transfer the sum on a specified date. It means you don’t risk forgetting about the contribution and spending the money on something else.

2. Stick to regular contributions

Even if you need to reduce how much you’re putting away, make regular contributions. Small but frequent contributions can add up to more than you expect.

When you’re building up a nest egg, consistency is key.

While the FT Adviser research found that many new parents have intentions of creating a nest egg for their children, by the time the child reaches secondary school, only 54% are still making contributions.

Adding £10 a week to your child’s savings account for 18 years adds up to more than £9,000 – a sum that can really give them a helping hand as they become more independent.

Another option to consider is using a “round-up” feature, which many banks now offer. When you make a purchase, your bank rounds up the cost to the nearest pound and transfers the difference to a savings account. So, if you purchased a £2.70 coffee, 30p would be added to your nest egg. The individual figures are small but combined they can give savings a boost.

3. Make your savings efficient

Considering tax efficiency can help you get the most out of the savings you’re putting aside.

If you’re saving on behalf of your child, one option to consider is a Junior ISA (JISA), which provides a tax-efficient way to save or invest. For the 2022/23 tax year, you can add up to £9,000 to a JISA.

One thing to keep in mind with a JISA is that the money will not be accessible until the child is 18. As a result, it’s not the right option if you may want to access the savings sooner.

The child will also be able to access the money how they wish once they turn 18. So, it may be a good idea to discuss how they could use the money to reach their goals.

4. Shop around for the best interest rate

While rising prices may put pressure on your budget, it is good news for savers.

To tackle rising inflation, the Bank of England (BoE) has increased its base interest rate several times last year.

After more than a decade of very low interest on savings, there are now better options available.

Shopping around for an account that’s right for you and provides a competitive interest rate can make your savings work harder. Over the years that you could be contributing to a nest egg, even a small difference in the interest rate can have an effect.

The BoE is expected to make further increases to its base interest rate. Regularly reviewing the interest your savings are earning and what your other options are can make sure you’re getting the most out of your money.

5. Consider investing

While money held in a savings account earns interest, the rate of inflation is likely higher. In real terms, this means that the value of the savings is falling, as it’ll be able to buy less and less as costs rise.

Over the long term, inflation can have a serious effect on the value of your savings.

£10,000 in a savings account in 2011 would need to have grown to £11,941 to deliver the same value in 2021, according to the BoE’s inflation calculator. It’s very unlikely that interest would have delivered the returns needed to maintain the value of your savings.

If you will be saving over the long term, investing the money could provide a solution. While investments can experience volatility and fall in value, over the long term, they have historically delivered returns above inflation, so the value of your nest egg could grow.

Despite this, a report in the Independent , found that 83% of parents who are saving for children do so exclusively in cash.

If you’re thinking about investing, it’s vital you consider what level of risk is appropriate for your goals. This is something we can help with.

Do you have questions about building a nest egg for children?

Making a nest egg for children or grandchildren part of your financial plan can help you reach your goal. We’re here to help you understand what steps you can take to provide your loved ones with financial support and answer any questions you have. Please contact us to arrange a meeting.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Do you think financial protection claims aren’t upheld? 98% were paid in 2021

Tue, 10 Jan 2023 15:23:19 GMT

Do you think financial protection claims aren’t upheld? 98% were paid in 2021

If you think that insurers don’t pay out when people make claims, you’re far from alone.

According to Scottish Widows , just 7% of people think that life cover claims pay out between 91% and 100% of the time.

For critical illness claims, this figure falls dramatically to just 2%.

Together, these figures show the lack of confidence many people have in insurers to pay out when claims are made.

In reality, however, this perception is far from accurate. So, find out the true figures behind financial protection claims, and why keeping your cover in place is important, especially as the cost of living soars in the UK.

98% of claims made in 2021 were upheld

Data from the Association of British Insurers (ABI) shows that 98% of claims made in 2021 were upheld, with insurers paying out a record £6.8 billion in individual and group life insurance, income protection, and critical illness claims.

This translates to £18.6 million paid out every single day, £1.6 million more than in 2020 when the previous record was set.

The table below shows a breakdown of these figures for six of the largest insurers in the UK:

As you can see, the number of paid claims is typically in the 90s, and doesn’t drop below 80% in any of these examples. That means the perception that insurers don’t pay out isn’t accurate at all.

What protection do these types of cover offer?

Now you know that insurers will pay out in the majority of claims, it’s also useful to understand what you receive from these three types of cover.

Find out more about life insurance, critical illness cover, and income protection below.

Life insurance

Life insurance pays out a lump sum to your chosen beneficiaries if you die while the cover is in place.

There are different types of life insurance, two of the most common being:

Term life insurance, in which your cover lasts for a set number of years and then expires if not renewed
Whole life insurance, a type of cover that does not expire.

Your chosen beneficiaries of your lump sum are then free to use the money as they wish, including paying household bills and mortgage repayments.

According to the ABI, the average value of a life insurance payout was £80,485 in 2021.

Critical illness cover

Critical illness cover provides you with a lump sum payout in the event that you’re diagnosed with a critical illness or have major surgery that’s covered on the policy.

Illnesses and surgeries covered by critical illness cover can include:

Heart attack
Stroke
Many types of cancer
Kidney and liver failure
Open-heart surgery.

In this event, you’ll receive a lump sum payout and your cover will end. This lump sum can be instrumental in helping you to provide for your family at a difficult time, especially if your condition is particularly serious or even terminal.

The ABI recorded the average value of claims paid to be £67,951 in 2021.

Income protection

Income protection offers you a regular income if you’re unable to work due to sickness or disability. The cover will continue until the term of the policy ends, you’re able to return to work or you retire.

Typically, you’ll receive around two-thirds of your current income from your cover. This income is tax-free, meaning it should be almost akin to your take-home pay.

This can be a significant lifeline if you’re suddenly unable to work, ensuring that you can continue to provide for your family.

The average value of claims paid was £23,380 in 2021, according to the ABI.

Financial protection is even more important in the current climate

With the cost of living on the rise and the need to tighten your belt seemingly a high priority, cancelling financial protection you have may seem like a sensible way to reduce your expenses.

However, this may actually be a mistake, especially during periods of uncertainty like this.

You never know what’s going to happen next, and so having protection in place offers you and your family financial security.

If you would like to learn more about this subject or require Independent Financial Advice from our local, experienced and friendly team, please feel free to contact us on 01788 57 11 22.

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority.

10 New Years Resolutions That Could Boost Your Financial Wellbeing

Sat, 31 Dec 2022 11:20:06 GMT

10 new year resolutions that could boost your financial wellbeing

At the start of a new year, it’s common to reflect on what you want to achieve over the next 12 months,

and to set out some goals. According to a YouGov poll, around 1 in 6 Brits make a new year resolution. While improving fitness and doing more exercise in the year ahead is the top goal, improving finances is also common. Across Britons that were setting a new year resolution at the start of 2022:

• 39% said they wanted to save more money

• 19% hoped to pursue a career ambition, which could increase income and financial security.

Improving financial wellbeing could support other goals too, such as taking up a new hobby (15%), decorating or renovating part of their home (14%), or raising money for charity (5%). So, if you want to take positive steps to improve your financial wellbeing, here are 10 new year resolutions that could help.

While putting more money into your savings account is often a good idea, knowing what you want to achieve can mean you make decisions that are right for you and provide the motivation you need. It’s normal to think about what you want to achieve in the next 12 months at new year but setting larger financial goals can make sense too. The financial decisions you make now could affect your wellbeing for decades to come.

Starting with your goals means you can understand which choices are right for you. For instance, knowing what you’re saving for can help you choose the right type of account – does it need to be easily accessible or could it be locked away for two years to access a higher interest rate?

As well as setting out your financial goals, think about the lifestyle you want. Would putting a bit of money away each month mean you can plan a holiday to a dream destination? Or will adding to your pension mean you can retire early and enjoy the next chapter of your life? Focusing on how the financial steps you’re taking will improve your life can help you stay on track.

1. Set out what you want to achieve this year and beyond December 2022

While reviewing your budget can be a tedious task, it’s a worthwhile one. It can help you understand your expenses, disposable income, and where you could make better decisions that would help you to achieve your goals. As inflation has been high this year, your outgoings may have changed significantly

since you last reviewed your budget. Writing down your regular expenses could highlight where you could make savings. From cutting out services that you no longer use to reducing your spending in some areas, it can help your money to go further. Getting into the habit of tracking your spending can be useful too. It means you’re less likely to overspend or forget to move money to your savings account.

2. Go through your budget and keep track during the year

If you have debt, regularly reviewing it is important. It can make borrowing more affordable and will keep you on track to pay it off. Your first step should be to take stock of your existing debt, from credit cards to personal loans. Take some time to look at what interest rate you’re paying, and if you currently benefit from an introductory offer, make a note of when it will end. To combat high inflation, the Bank of England (BoE) has increased its base interest rate. As a result, borrowing is becoming less affordable, and it’s more important that you search for a competitive deal that makes sense for you. In some cases, transferring to another provider could save you money. For example, if you have a credit card, are there any lenders offering a 0% balance transfer that you could take advantage of? As you won’t be paying interest it means you could reduce the debt quicker, but you should carefully note when the deal ends and the interest rate you’d be paying after this period.

3. Create a plan for paying off debt

As well as looking at the interest rate you’re paying, set out how you’ll reduce the amount of debt you have overall. It could improve your long-term financial security. Breaking down your goal into smaller, realistic targets can be useful. For instance, how much do you want to reduce debt by each month? What’s your target by the end of 2023? Making just the minimum repayments will mean it takes you longer to clear the debt and will often cost you more in interest overall. So, if you can, overpaying is often sensible. If you’re thinking about applying for credit or transferring existing borrowing, make sure you understand the lender’s criteria before applying. An application will usually involve a hard credit check, which will show up on your credit report. Several checks close together could harm your credit score and act as a red flag for other lenders.

4. Review your current mortgage deal

A mortgage is often the largest loan you’ll take out, so it’s worth dedicating particular attention to, even if you’re reviewing other forms of borrowing. Once your existing mortgage deal ends, you will often be moved on to your lender’s standard variable rate (SVR). While this can provide you with the flexibility to make overpayments, the interest rate usually isn’t competitive. So, knowing when your deal will end and what your other options are is important. Again, rising interest rates will affect how much your mortgage costs. If you have a tracker- or variable-rate mortgage, the interest rate you pay, and so your repayments, may change during the term. If you have a fixed rate mortgage, it will remain the same for a

defined period. Even a small difference in the interest rate you pay can add up.

Like other forms of borrowing, making mortgage overpayments can reduce the total cost of borrowing. Keep in mind that some mortgages may restrict how much you can overpay before fees are applied. So, check the terms and conditions of your mortgage.

5. Give your emergency fund a boost

How much do you have saved for a rainy day? An emergency fund can provide you with a valuable safety net when you need it. From allowing you to repair a leaky roof to covering an unexpected energy bill, it can provide you with financial security. It’s often advisable to have between three and six months of expenses in an easily accessible account so it’s there when you need it. Research from HSBC found that having an emergency fund is a priority for many people. 6 in 10 adults said that saving for a rainy day is important to them.

The average emergency fund balance is around £7,606. However, 1 in 5 people have less than £1,000 in their savings account, indicating they could benefit from making boosting their emergency fund a new year resolution to improve financial resilience.

Should you consider financial protection too?

Your emergency fund can provide a vital lifeline when you face short- or medium-term shocks. But how well would you cope if you faced a long-term shock, such as losing your income?

Financial protection can fill the gap when you need it most. Choosing appropriate financial protection could mean you and your loved ones are financially secure. There are three main types to consider:

• Income protection, which would provide a regular income if you were unable to work

due to an accident or illness.

• Critical illness cover, which would pay out a lump sum if you were diagnosed with a critical illness named within the policy.

• Life insurance, which would pay out a lump sum to your beneficiaries, such as your partner or children, if you passed away.

Financial protection is often more affordable than people think, and it could provide peace of mind.

6. Make the most out of your savings

Getting the most out of your savings can help you reach your goals. So, seeing how much interest your savings accounts are paying is a good place to start. Interest rates have started to rise in the last year as the BoE takes steps to tackle high levels of inflation. As a result, it’s worth shopping around to find an account that’s right for you and offers a competitive rate. Depending on your goals, it could make sense to choose a savings account that locks your money away. While you won’t be able to make a withdrawal for a set period, you will often be rewarded with a higher interest rate. If you want to increase your savings, setting up a standing order can help you meet your target and simplify the process.

Managing your savings can help you reach goals, but as interest rates are unlikely to match inflation rates, the value of your savings could be falling in real terms. Depending on your circumstances, investing could provide a solution.

Saving for children? If you have children, you may want to set a saving goal to build a nest egg for them. It could help them reach milestones later in life, from paying for driving lessons to buying their first home. The good news is that children’s savings accounts typically offer higher interest rates, so your money will go further. You can choose from a variety of accounts, from an easy access account to a Junior ISA (JISA), where the money is locked away until they’re 18. You can add up to £9,000 to a JISA in the 2022/23 tax year.

7. Make regular investing part of your plan

One way to combat the effect of inflation on your savings is to invest. The BoE’s inflation calculator highlights how the rising cost of living can affect savings. If you had £10,000 in a savings account in 2000, it would need to have increased by almost £5,000 over two decades simply to maintain its value in real terms. Even with interest rates rising, it’s unlikely the interest your savings earn will keep up with inflation. Historically, markets have delivered returns in real terms over the long term. As a result, investing could provide a way for you to grow your wealth. If you want to build up your investment

portfolio, setting up a regular contribution can help you take steady steps to reach your goal. It’ll also mean you buy stocks and shares at different points of the market cycle, which could help to balance risk and volatility. You should keep in mind that all investments carry some risk, and it’s important you choose investments that are appropriate for you. Volatility is part of investing, and the value of your investment may fall.

When is the right time to invest? Investing could grow your wealth but isn’t always the right option. If you’re thinking about investing, you should:

• Have a long-term goal in mind as investments may experience volatility

• Have an emergency fund to provide a safety net for short-term shocks

• Understand your risk profile and which investments are appropriate for you.

If you’d like to discuss if investing could be right for you, please get in touch.

8. Secure your retirement by increasing your pension contributions

It’s never too soon to start thinking about your retirement. Whether the milestone is just around the corner or years away, increasing your pension contributions now could help you secure the lifestyle

you want in the future. Start by reviewing how much you currently have in your pension and what contributions, including those made on your behalf, are regularly being made. Look at your budget and see how much you can realistically increase your contributions. Not only will you be adding more to your pension, but your contributions will normally also benefit from tax relief to give your pension an extra boost. Your pension is usually invested, so it’s also worth reviewing how it’s invested to ensure it aligns with your goals and risk profile – it could help your contributions go further. If you’re not sure if you’re on track to deliver the income you want in retirement, a review with a financial planner can help.

9. Get your estate plan in order

If you’ve been putting off getting your affairs in order, resolve to take control of your estate in 2023. While it can be difficult to think about, organising your affairs can give you peace of mind and ensure your wishes are followed. Here are four steps you could take to help put your estate in order in 2023:

1. Write or review your will

A will is the only way to ensure your estate is passed on according to your wishes, so it’s an important document. You can use a will to name your beneficiaries and what you’d like them to receive from your estate. It’s a good idea to review your will after major life events and at least every five years, so even if you have a will in place, you may want to review it.

2. Name a Lasting Power of Attorney

A Lasting Power of Attorney (LPA) gives someone you trust the ability to make decisions on your behalf if you’re unable to, including if you lose mental capacity. There are two types of LPA, covering finance and health, and it is normally beneficial to have both in place.

3. Complete an expression of wishes

An expression of wishes is used to say who you’d like to receive your pension benefits if you pass away. It is not legally binding but provides guidance. You will need to complete an expression of wishes for each of your pensions.

4. Calculate if your estate could be liable for Inheritance Tax

If the value of your estate exceeds the nil-rate band, which is £325,000 for the 2022/23 tax year, it could be liable for Inheritance Tax (IHT). The standard rate of IHT is 40% so it could significantly reduce what you leave behind for loved ones. However, by being aware of a potential IHT bill you can take advantage of allowances and take other steps to potentially reduce it. One example might be to take advantage of the “residence nil-rate band” by leaving your home to a child or grandchild. We can help you create an estate plan that ensures your wishes are carried out and that you’re financially secure later in life.

10. Schedule a financial review

A financial review can help balance your goals for 2023 with long-term aspirations. It can give you

confidence in the decisions you make. Regular reviews with a financial planner can help ensure you

remain on track and that your plan continues to reflect your needs.

Please note: This guide is for general information only and does not constitute advice. The

information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount

you invested. Past performance is not a reliable indicator of future performance.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans

secured on it.

Note that life insurance plans typically have no cash in value at any time and cover will cease at the

end of the term. If premiums stop, then cover will lapse.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund

value may fluctuate and can go down, which would have an impact on the level of pension benefits

available. Past performance is not a reliable indicator of future results.

The tax implications of pension withdrawals will be based on your individual circumstances.

Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts.

The Financial Conduct Authority does not regulate will writing, tax planning, or estate planning.

PJL Financial Services Ltd is authorised and regulated by the Financial Conduct Authority. FCA Number: 813547.

Have you used your pension Annual Allowance? Here’s why you should review it before the tax year ends

Fri, 23 Dec 2022 10:38:14 GMT

Have you used your pension Annual Allowance? Here’s why you should review it before the tax year ends

When a new tax year starts, your pension Annual Allowance resets. Maximising your allowance could help you reach retirement goals and it can be a tax-efficient way to invest for the long term.

The Annual Allowance limits how much can be added to your pension each tax year while retaining tax relief benefits. It covers all pension contributions, including those made by your employer and other third parties.

For most pension savers, their Annual Allowance is 100% of their annual income up to £40,000. If you haven’t made the most of your allowance and are looking for a way to make your money go further, boosting your pension could make sense.

However, there are two reasons why your Annual Allowance could be lower:

If you’re a high earner, you could be affected by the Tapered Annual Allowance. If your adjusted income is more than £240,000, your Annual Allowance will be reduced by £1 for every £2 your income exceeds this threshold. It can be reduced by a maximum of £36,000. So, some high earners will have an Annual Allowance of just £4,000.
If you’ve already flexibly accessed your pension to create an income, you may be affected by the Money Purchase Annual Allowance (MPAA). This reduces how much you can tax-efficiently save into your pension to £4,000.

Exceeding the Annual Allowance could result in an unexpected tax bill. So, if you’re thinking about boosting your pension before the end of the tax year, you should review the contributions you’ve already made and your allowance.

You can carry your Annual Allowance forward for up to three years provided you maximise your contributions in the current tax year. So, you have until 5 April 2023 to use your allowance from the 2019/20 tax year.

If you’re not sure if adding to your pension is right for you, here are three reasons to consider it.

3 excellent reasons to consider maximising your pension contributions

1. It could help you secure the retirement you want

While it can seem like you have years before you need to start thinking about retirement when you’re working, it’s never too soon to start planning.

Boosting your pension could mean the difference between being able to retire early and having to work for longer than expected. Or it could mean you’re able to live far more comfortably once you stop working.

Using your Annual Allowance now can mean you have more flexibility and security later in life.

2. Your pension savings are often invested

Usually, your pension will be invested. As you’ll often be saving over several decades, it can help you build wealth. Historically, investments have typically delivered returns and outpaced inflation.

So, adding to your pension could be a way to increase your long-term wealth and make the most of your assets.

You should keep in mind that investment returns cannot be guaranteed. The value of your investments can fall and it’s important you choose funds or shares that match your risk profile. If you have any questions about investing, including through your pension, please contact us.

3. Pension contributions typically benefit from tax relief

Tax relief when contributing to a pension makes it a tax-efficient way to save.

When you add to your pension, tax relief means some of the money you have paid in tax is added to your retirement savings. This is paid at the highest rate of Income Tax you pay. So, if you’re a basic-rate taxpayer, every £1 you contribute will increase your pension by £1.25. If you’re a higher- or additional-rate taxpayer, your pension will be boosted even more.

Usually, your pension scheme will claim tax relief at the basic rate on your behalf. However, if you’re a higher- or additional-rate taxpayer, you’ll need to fill in a self-assessment tax return to claim your full entitlement.

PensionBee previously estimated that high earners failed to claim £810 million in tax relief in the 2018/19 financial year.

Do you need to be mindful of the Lifetime Allowance?

As well as the Annual Allowance, the Lifetime Allowance limits how much you can save into a pension over your lifetime while still benefiting from tax relief.

For the 2022/23 tax year, the Lifetime Allowance is £1,073,100. If you exceed this allowance, you may face an unexpected tax bill. This allowance covers the total value of your pension, so you need to consider how investment performance could affect the value as well as contributions and tax relief.

Do you have questions about your pension contributions? Contact us

If you have any questions about your pension contributions, from whether you should boost your deposits before the end of the tax year to what your Annual Allowance is, please contact us.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Does “lifestyling” pensions still make sense for modern workers?

Fri, 23 Dec 2022 10:26:49 GMT

Does “lifestyling” pensions still make sense for modern workers?

“Lifestyling” is a common way to protect your pension wealth as you near retirement. Yet, as retirement becomes far more flexible, is it something that’s still appropriate for modern workers? Read on to find out what it means and if it’s something you should consider.

Lifestyling aims to protect the pension savings you’ve built up as you near retirement age. Usually, it means changing your investment strategy to take less risk as you near the end of your working life. It can mean you’re exposed to less volatility so there’s less risk that the value of your savings will fall before you retire.

Your pension provider may automatically change which fund your savings are invested in as you approach retirement age.

In the past, retirees would use their pension savings to purchase an annuity, which would then provide a guaranteed income for life. So, reducing risk as retirees neared the milestone helped to preserve their savings.

However, Pension Freedoms legislation means that many retirees are choosing to leave their pension invested throughout retirement. So, does lifestyling still make sense?

More than £59 billion has been flexibly withdrawn from pensions since 2015

The government introduced Pension Freedoms in 2015. It means that retirees now have greater control over how they access their pensions, and taking a flexible income to suit your needs has become popular.

According to government statistics, between the introduction of Pension Freedoms and the second quarter of 2022, retirees flexibly withdrew more than £59 billion.

If you choose to flexibly take an income from your pension, your savings will usually remain invested. This provides an opportunity for them to grow throughout retirement. This could be useful for ensuring your spending power is maintained as the costs of goods and services rise. However, you should keep in mind that investment returns cannot be guaranteed.

With a flexible income, you are responsible for ensuring the income you withdraw is sustainable and your savings will last for the rest of your life. As your pension could remain invested for several more decades after you reach retirement age, understanding potential investment growth and risk is important.

For some retirees that want their pension to remain invested, automatically reducing the amount of investment risk they take may not be right for them.

While you may not be ready to access your pension yet, thinking about how you’ll create an income in retirement makes sense. It can help you understand how your risk profile should change as you near the milestone with your plans in mind.

There’s no one-size-fits-all approach for managing your pension risk profile

So, does lifestyling still make sense for modern workers? There’s no single answer; it will depend on your goals, circumstances and how you’ll access your pension.

What’s important is that you make decisions that are right for you. To help you understand what your retirement plan should include ahead of time, consider the following questions:

1. When do you want to retire?

Your retirement date is important for a variety of reasons. It can help you understand if you’re saving enough and how long your savings will need to last. If you should adjust your risk profile, a timeline is also important. Make sure your pension provider has the correct retirement date if it’ll adjust your investment automatically.

2. How will you access your pension?

It’s worth thinking about how you want to access your pension when you retire. There are pros and cons whether you choose an annuity, a flexible income, or take a lump sum, so you should weigh them up and understand which is right for your retirement lifestyle. You can also choose to mix the options, such as using some of your savings to purchase an annuity while accessing the rest flexibly when you need to.

3. What is your risk profile now and how will it change?

A risk profile can help you understand how much investment risk is appropriate for you. When you’re planning for retirement, it’s important to understand what your risk profile is now and how that may change depending on when you’ll retire and how you’ll access your income. Your risk profile should consider things like other sources of income, investment time frame, and your attitude to risk. If you’re not sure what’s right for you, we can help.

If you have any questions about how to get the most out of your pension or your options for retirement, please contact us. We’ll carry out a pension review with your goals in mind. With a bespoke retirement plan in place, you can understand what decisions make sense for you. Please get in touch to arrange a meeting.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts.

Our Festive Opening Hours

Mon, 19 Dec 2022 10:43:46 GMT

Our Festive Opening Hours

As 2022 comes to an end, we wanted provide you with our Christmas opening hours over the Festive period. Our advisers will remain contactable throughout this period by contacting their mobile phone numbers should you need to speak with them.

Friday 23rd December - 8.30am to 5.00pm

Monday 26th December - Closed (Bank Holiday)

Tuesday 27th December - Closed (Bank Holiday)

Wednesday 28th December - Closed

Thursday 29th December - Closed

Friday 30th December - Closed

Monday 2nd January - Closed (Bank Holiday)

Normal Opening Hours Resume

Tuesday 3rd January - 8.30am to 5.00pm

Wednesday 4th January - 8.30am to 5.00pm

Thursday 5th January - 8.30am to 5.00pm

Friday 6th January - 8.30am to 5.00pm

Finally, we wanted to take the opportunity to thank all of our clients for continuing to trust us with supporting them with their personal financial goals and we look forward to what 2023 brings. In the meantime, we hope you have a wonderful Festive Break and a Happy and prosperous New Year!.

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority.

Why saving your pension could reduce a potential Inheritance Tax bill

Mon, 05 Dec 2022 15:23:18 GMT

Why saving your pension could reduce a potential Inheritance Tax bill

When you start thinking about how you’ll create an income in retirement, it’s probably your pension that comes to mind. Yet, if your estate could be liable for Inheritance Tax (IHT), it could make sense to use other assets first.

IHT is paid after you pass away if the value of all your assets exceeds certain thresholds. It can significantly reduce how much you leave behind for loved ones. However, there are often steps you can take to reduce a potential IHT bill, including assessing how you’ll use assets in retirement.

Inheritance Tax receipts reached a record high in June 2022

According to HMRC , IHT receipts between April 2022 and June 2022 were £1.8 billion. The sum is £0.3 billion higher than the same period last year and IHT receipts reached a record high in June 2022 due to high-value payments.

HMRC expects IHT payments to continue rising thanks to inflation and a freeze on thresholds.

The value of some of your assets, such as property or an investment portfolio, may be rising. Yet, the thresholds for paying IHT are frozen until 2026. As a result, more families are expected to pay IHT if they don’t take steps to reduce their tax liability.

There are two key allowances to consider if you’re reviewing if your estate could be liable for IHT:

Nil-rate band: For the 2022/23 tax year, the nil-rate band is £325,000. If the value of all your assets is below this threshold, IHT will not be due.
Residence nil-rate band: If you leave certain properties, including your main home, to your children or grandchildren, you can also take advantage of the residence nil-rate band. For the 2022/23 tax year, it is up to £175,000.

If you maximise both allowances, you can pass on up to £500,000 before IHT is due.

IHT is not due when you’re leaving assets to your spouse or civil partner, and you can also pass on unused allowances. So, if you’re planning as a couple, you may be able to leave up to £1 million without paying IHT.

The standard IHT rate is 40%. If it’s something your estate could be liable for, it’s important to be proactive to ensure you pass on as much as possible to your loved ones.

While you may consider gifting assets during your lifetime or making charitable donations, one potential option you may have overlooked is leaving your pension untouched.

For Inheritance Tax purposes, your pension is outside of your estate

Your pension is likely to be one of the largest assets you have. In fact, according to a report from the Office for National Statistics , private pension wealth represents a greater share of household wealth than property.

Crucially, the money held in your pension is usually considered outside of your estate for IHT purposes.

So, while your first instinct may be to access your pension to create an income in retirement, it could make financial sense to deplete other assets first and leave your pension for your loved ones.

The beneficiary of the pension may need to pay Income Tax at their nominal rate when they access the savings. The rate will depend on the age you pass away and how they access it, but it could be lower than the IHT rate.

If you’re concerned about IHT and leaving your pension to loved ones is something you’re considering, it’s important to review your long-term financial plan. You should understand how you’ll create an income in retirement that allows you to meet your goals, and what other steps to reduce IHT may be appropriate.

You will need to complete an expression of wishes to pass on your pension

Your pension isn’t covered by your will. The pension scheme administrator has the final say over who receives your pension when you pass away.

You can use an expression of wishes to tell the administrator who you would like your beneficiaries to be. It’s important you complete this. If you don’t, your pension may not be inherited by the person you want.

You will need to complete an expression of wishes for each pension you hold.

Creating a long-term financial plan that suits you

When you plan your retirement or pass on wealth, it’s normal to have lots of questions. We’re here to help you answer them and provide advice.

Whether you’d like to understand how you can mitigate IHT or how to use your assets to create financial security in retirement, please contact us to discuss your needs.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate will writing, tax planning or estate planning.

4 vital things you should discuss when naming a Lasting Power of Attorney

Thu, 01 Dec 2022 09:42:40 GMT

4 vital things you should discuss when naming a Lasting Power of Attorney

A Lasting Power of Attorney (LPA) gives someone you trust the ability to make decisions on your behalf if you cannot.

This can ensure there’s someone taking care of your affairs and advocating on your behalf if you’re ill or lose mental capacity. Naming an LPA is an important step, and it’s one you should discuss with the prospective person first.

In simple terms, an LPA is a document that gives someone the power to make decisions around health or money on your behalf.

In many cases, an LPA is used when someone loses mental capacity, but it can also be useful in other situations and may be temporary. For example, if you’re receiving treatment in a hospital, you may want someone to manage your bills so you can focus on your recovery.

Without an LPA, it can be difficult, costly, and time-consuming for loved ones to gain the power to make decisions for you. They would need to apply to the Court of Protection, which would appoint a deputy to make decisions. The deputy appointed may not be the person you’d choose, so naming an LPA now can help ensure your wishes are carried out.

Even if you’re married or in a civil partnership, you should consider an LPA – your partner does not have an automatic right to manage your affairs.

Choosing your Lasting Power of Attorney

Anyone over the age of 18 can be named an LPA, but you should think carefully about who you choose.

The right person should be someone you trust. You should also consider their age and health. For instance, while your partner may be your first choice, they may have their own health issues to manage.

As well as someone you know, you may also choose a professional LPA, such as a solicitor.

You can choose more than one person to act on your behalf. You can decide if they can make decisions independently or must make them together. Having more than one LPA can be useful, but you should consider whether they may disagree on what to do.

Whoever you choose as your LPA, having an honest conversation is important. It can help ensure you’re both on the same page and mean you feel more confident that they’d make the right decisions if they need to.

Here are four topics you should cover.

1. The responsibilities of an LPA

Becoming an LPA is a big responsibility. If you plan to name a loved one as an LPA, it’s important they understand what is involved and they’re comfortable with the role.

2. Your preferences for health and care

There are two types of LPA. When naming someone to make health and welfare decisions on your behalf, they will have the power to choose things like whether you move into a care home and the medical treatment you receive.

It can be difficult to think about needing care or serious treatment, but it’s important to discuss these issues. It can help ensure that your loved one makes decisions that are in line with your wishes. So, covering key issues like the type of care you’d prefer and life-sustaining treatment is important.

3. How you’d like them to manage your finances

The second type of LPA covers property and finances. Your LPA may collect your pension, pay bills, and manage your bank accounts and investments on your behalf. They may also make decisions like selling your home or giving gifts to your family.

If you have a financial and estate plan in place, sharing the details with your LPA can be useful. Again, it can help them understand your preferences and act according to your wishes.

4. Set out specific instructions

An LPA must act in your best interests, but if you have specific instructions you want your LPA to follow, be clear about what they are.

You may, for instance, specify that you’d like them to consult your financial planner before they make any investments above a certain amount.

As well as a conversation, you can use your LPA document to provide extra instructions or record your preferences.

How to name a Lasting Power of Attorney

If you’re ready to name an LPA, you can fill in or print the necessary forms from the government’s website: gov.uk/power-of-attorney

The forms will need to be witnessed and signed by a “certificate provider”, who is there to ensure you’re acting of your own free will.

You can choose to fill in the forms yourself or seek legal advice, which could help you avoid mistakes.

You must register your LPA with the Office of Public Guardian for it to be valid. Registering each LPA will cost £82 unless you are eligible for an exemption or a remission.

If you’d like to discuss naming an LPA, including how we could work with someone you trust, please contact us.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate estate planning.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Do you have a gap in your National Insurance record? Checking now could boost your State Pension

Thu, 01 Dec 2022 09:38:09 GMT

Do you have a gap in your National Insurance record? Checking now could boost your State Pension

The rules around filling in a gap in your National Insurance (NI) record are changing. From 5 April 2023, you will only be able to make voluntary contributions for the past six years. If you have gaps in your record, filling them in now could boost your retirement income.

There are many reasons why you may have gaps in your NI record, from taking time away from work to care for children to moving abroad. Even if you were working, you may have a gap in your record if you were on a low income or self-employed.

Under the current rules, if you’re eligible, you can make voluntary contributions to fill in gaps between April 2006 and April 2016. However, when the 2023/24 tax year starts, you will only be able to make voluntary contributions for the last six tax years.

As a result, you may have just months left to fill in some of the gaps in your NI record. But why should you?

Your National Insurance record affects how much State Pension you will receive

The number of years you have paid National Insurance contributions (NICs) can directly affect your income in retirement.

To receive the full State Pension, you will usually need 35 years on your NI record. If you have fewer than 35, you will typically receive a portion of the full amount.

For the 2022/23 tax year, the full new State Pension is £185.15 a week, adding up to £9,627.80 a year. So, while it may not be your only source of income in retirement, it’s often an important part.

The State Pension also rises each tax year under the triple lock. This makes it a valuable way to maintain your spending power in retirement. As the rise is calculated as a percentage, pensioners that aren’t entitled to the full State Pension won’t benefit as much.

Under the current rules, you can make additional voluntary NI payments to fill in the gaps if you have any. It will cost around £800 to purchase an additional year, but it could boost your State Pension income by £275 a year. As a result, you’d need to claim the State Pension for just three years to make it worth your while financially.

The current State Pension Age is 66. According to the Office for National Statistics , the average man aged 66 can expect to live for another 19 years. An extra £275 a year over 19 years adds up to £5,225. For women aged 66, the average life expectancy is two years higher.

So, while it may seem counterproductive to make voluntary contributions as you near retirement, it could mean you receive thousands of pounds more from the State Pension.

How to check your National Insurance record

Before you buy additional NI years, you should make sure it’s the right decision for you. In some cases, buying extra years wouldn’t boost your income in retirement.

You can use the government’s State Pension forecast tool to check when you’ll reach State Pension Age and your NICs record.

Even if you have gaps in your record, don’t jump straight into making voluntary contributions – you should consider your retirement plan first. If you have 30 years on your record but plan to work for another 10 years, you still have an opportunity to add the extra five years you need to receive the full State Pension.

What’s important is that you understand whether you’re on track to receive the full State Pension ahead of the April 2023 deadline. If you have gaps in your NICs record, you can then take steps to fill them if necessary.

If you’ve taken time off work, you may be able to claim NICs, which will mean you don’t have gaps in your record.

For example, you’ll be credited with NICs when you claim Child Benefit until the child is 12. This can help ensure parents don’t face a significant gap in their NI record. Carers claiming the Carer’s Allowance can also receive credits to their NI record.

Understanding what you’re entitled to is important for your financial security in retirement.

If you have any questions about whether you should make voluntary NICs and how your State Pension fits into your plans, please contact us.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

1 in 3 savers worry they’ve “lost” a pension. Here’s how to track them down

Mon, 21 Nov 2022 15:23:17 GMT

1 in 3 savers worry they’ve “lost” a pension. Here’s how to track them down

It can be easier than you think to lose your retirement savings. In fact, estimates suggest thousands of savers have forgotten about pensions that could support their retirement goals.

31 October marks National Pension Tracing Day, so it’s the perfect time to review your savings and see if you could reclaim lost money.

As you could be paying into a pension for decades before you can access it, it’s easy to lose touch with some of your savings. Perhaps you’ve changed your job or moved home and didn’t update your details.

Even small sums in a pension can support your retirement goals, so it’s worth spending some time tracking down lost savings.

1 in 3 savers worry that they’ve “lost” a pension

It’s becoming more common to switch jobs frequently during your working life. As a result, many employees will build up multiple pensions during their careers, and it is hard to keep track of the different pots.

Research published in FT Adviser found that 1 in 3 people worry they’ve lost or forgotten about a pension when they’ve switched jobs.

It’s estimated that 5.5 million workers have three or more pensions. So, it’s not surprising that a quarter of savers say it’s difficult to keep track of what they’ve put away for their retirement.

You could have more than you think in lost pensions.

According to figures from Gretel , there are 1.6 million unclaimed pensions with an average value of £23,125. Finding old pensions could mean the difference between reaching your retirement goals and having to make unwanted compromises in your lifestyle in later life.

4 simple steps that could help you find a “lost” pension

Search your old paperwork and emails. While it can be a tedious task, your old paperwork and emails are an excellent place to start if you’re looking for savings that you’ve forgotten about. Keep an eye out for pension statements so you can identify gaps.
Go through your career path. Spend some time listing your old jobs. If you have paperwork for these positions, such as old payslips, you may notice pension contributions that you’ve previously overlooked.
Get in touch with old employers. If you spot a gap in your pension history, try reaching out to your previous employer’s HR department. They may be able to pass on details about the scheme.
Use the Pension Tracing Service. If you find a lost pension but aren’t sure who to get in touch with to find out more, the Pension Tracing Service is useful. This can provide contact details, including if a pension provider has been taken over by another company.

While you’re going through the process of finding lost pensions, don’t forget to review the details of the pensions you know about.

Make sure the contact details each provider holds are correct to avoid losing touch with these pots.

What should you do when you track down a “lost” pension?

If you find a pension you’ve forgotten about, the first step is to make sure you keep the paperwork in a safe place to ensure you don’t lose it again.

You will then need to decide what you want to do with the pension.

You may want to keep the savings separate from your other pensions. If the pension provider offers benefits, such as being able to access your pension earlier than usual, this can be valuable.

Alternatively, you could consolidate your pensions, so you don’t need to keep track of as many pots.

Consolidating can make it easier to manage your pensions and can make sense financially when you’re investing. It can also make understanding your retirement income easier.

However, consolidating is not always the right option. If you’d like to discuss whether you should consolidate pensions, please contact us.

If the value of your pensions is larger than you thought after discovering a “lost” pension, it’s a good idea to review your retirement plan. You may want to move your retirement date forward or change other parts of your plan if a reclaimed pension boosts your savings.

It’s not just pensions that are “lost”

While you’re reviewing your pensions, it’s worth assessing what other assets you may have “lost” too.

The data from Gretel suggests that more than 10 million people have bank and building society accounts they’ve forgotten to close, with £4.5 billion sitting in these accounts. It’s estimated that almost £10 million is sitting idly in investment and shares accounts, life insurance policies, and child trust funds.

Going through your old paperwork could give you a financial boost.

If you have questions about your pensions and what it means for your retirement, please contact us.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Announcement: Mark Neal - Exam Success

Fri, 11 Nov 2022 09:51:08 GMT

Announcement: Mark Neal - Exam Success

We are pleased to announce that Mark Neal, one of our long-standing Independent Financial Advisers successfully passed his Mortgage Qualifications this week. The team at PJL Financial Services are extremely proud of his achievements which involves significant study time while continuing to serve his clients to the best of his ability.

Mark Neal told us ' I am extremely pleased that my hard work has paid-off. Many of my existing clients have mortgage requirements which we have always been able to support in-house, however by successfully completing my CeMAP Qualifications, this ensures that my clients continue to receive the best service and will enable me to support them personally with their mortgage requirements moving forward. Over the last few months following the increases in the Bank of England base rate, we have experienced a significant increase in clients becoming concerned about their future mortgage repayments and being armed with the knowledge and expertise to support individuals through this process is something I am very much looking forward to'

If you would like to learn more about how Mark can support you with your upcoming mortgage requirements or require Independent Financial Advice from our local, experienced and friendly team, please feel free to contact us on 01788 57 11 22.

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority.

7 compelling reasons you should seek financial advice at retirement

Mon, 07 Nov 2022 15:23:15 GMT

7 compelling reasons you should seek financial advice at retirement

Some of the decisions you make as you retire could affect your income and lifestyle for the rest of your life. Yet, data suggests that many retirees aren’t taking financial advice and it could mean they face hardship in the future.

According to the Great British Retirement Survey , only 27% of retirees in 2021 sought the services of a professional financial adviser.

Separate research shows that many people prefer a DIY approach when managing their finances. A Scottish Widows report found that almost half of households have never accessed professional financial advice.

While financial advice that’s tailored to you can be valuable throughout your life, it can make a huge difference when you make milestone financial decisions.

If you’re nearing retirement and haven’t sought the support of an expert, here are seven compelling reasons to do so.

1. Understand your different pension options

One of the big decisions you’ll need to make when you retire is how and when to access your pension.

If you have a defined contribution (DC) pension, you are responsible for ensuring it will provide an income for the rest of your life.

There are several options you will need to weigh up. These include purchasing an annuity to create a guaranteed income or taking a flexible income.

Even if you have a defined benefit (DB) pension, which provides a regular income for the rest of your life, you may still need to make important decisions. For example, you may have the option to take a lump sum out of your pension if you accept a lower income.

These decisions can have a lifelong effect and may be overwhelming. A financial planner can explain the options to you and demonstrate what they would mean for your retirement.

2. Consider how you could use other assets to create an income

While your pension plays a crucial role in creating a retirement income, you may want to use other assets too.

Pulling together these different sources, from property to investments, can be complex. You will need to consider which sources to access first, the tax implications of doing so, and ensure you don’t deplete the assets too quickly.

A financial planner can help you bring together all these different elements to provide security in retirement.

3. Have confidence that your assets will last a lifetime

Retirement can last several decades, and it can make managing your finances challenging.

Running out of money in retirement is a common fear. According to abrdn , almost half of retirees are concerned that they will face a shortfall. A financial plan can help you see how the decisions you make at the start of retirement will affect the long term.

A professional can also help you consider how your income needs may change during retirement. This may be because of your lifestyle goals or outside factors, such as rising inflation.

Inflation is high– it was 10.1% in the 12 months to July 2022. Retirees that didn’t consider how they’d cope if the cost of living increased may find they’re struggling or are depleting assets faster than expected.

4. Check you’re making the most of tax-efficient allowances

Tax efficiency can help you get the most out of your income and assets when you retire.

Do you know how to spread pension withdrawals to minimise the Income Tax you will be liable for? Or what tax you could be liable for if you dispose of some assets? A financial planner can help you understand the taxes that affect you and the allowances you could make use of.

If your estate could be liable for Inheritance Tax, being proactive could ensure you leave more for your family.

5. Consider your long-term security

Even when you carefully create a retirement plan, some things can go awry.

A financial planner will help you identify what could happen and put things in place to provide you with security if they do. This could be steps like ensuring you have an emergency fund.

It may also cover life changes, for instance, what would happen if an accident or illness meant you couldn’t make decisions on your own? A robust financial plan may include naming a Lasting Power of Attorney (LPA) to make decisions on your behalf if you’re unable to.

While it’s hoped you won’t need to use an LPA, having it in place could provide you with long-term security if something happens. Despite this, a survey from Canada Life revealed that 77% of over-55s have not registered an LPA.

6. Create a retirement plan that considers other goals

When you retire, creating a stable income to achieve the lifestyle you want will usually be a priority. However, you may have other goals that are important to you too.

Perhaps you want to help grandchildren get on the property ladder or ensure you leave behind a legacy for your children. Whatever your goals are, a financial planner can help you understand how to reach them. By making them part of your retirement plan, you’re far more likely to achieve these goals.

7. An effective plan can provide peace of mind

Finally, creating your retirement plan with the support of a professional can provide you with peace of mind.

Regular reviews can also mean you feel confident that your plans will remain on track. Knowing that you have someone to ask questions when things change means you can focus on enjoying your retirement.

Are you ready to start planning your retirement?

Give us a call on 01788 571122 and we will be more than happy to help.

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority.

Interest rates are finally rising for savers, but inflation can still reduce value in real terms

Mon, 07 Nov 2022 10:39:16 GMT

Interest rates are finally rising for savers, but inflation can still reduce value in real terms

As interest rates start to rise for the first time in more than a decade, a report suggests that savers are pulling their money out of investments in favour of cash accounts. But while the interest rate may be higher now, inflation can still reduce the value of your savings in real terms. Find out why here.

In response to high inflation, the Bank of England (BoE) has increased its base interest rate several times this year. In November 2022, it increased to 3%.

For savers, that can seem like good news. For the first time since the 2008 financial crisis, the interest you can earn on your savings is rising from historic lows.

Yet, inflation is also much higher. In the 12 months to October 2022, the rate of inflation was 11.1%.

As the cost of living rises, the goods and services that you can buy with your savings will gradually fall. So, while the figure in your savings account will grow thanks to interest, in real terms, it’s likely to be falling in value.

Just to maintain the value of your savings, the interest rate would need to match inflation. Unfortunately, despite interest rates rising, there’s still a significant gap.

In fact, the high inflation rate could mean your savings are falling in value faster in real terms than they were previously.

Investors pulled £115 million out of UK equities during a single week in September

Even though inflation could reduce the value of your savings in real terms, figures suggest that some savers are withdrawing money from investments to place in savings accounts.

According to a report in iNews , investors pulled £115 million out of UK equities between 23 and 28 September 2022. They also withdrew £453 million from US stocks and £6.5 million from US, UK and EU bonds.

After recent market volatility due to economic uncertainty, a cash account may seem like the “safe” option. However, if you want to maintain or grow your wealth, investing could make sense.

While all investments are exposed to risk and could fall in value, historically, markets have delivered returns that outpace inflation over the long term. By withdrawing money from investments, you could be missing out on potential growth.

While investing could help you to make the most of your money, it isn’t the right option in every situation. You should consider your goals and financial resilience first.

3 signs that investing could be the right choice for you

1. You have an emergency fund

Investing should involve a long-term strategy, so you should ensure your finances are in good order before you start. This includes having a financial safety net to fall back on if you need it.

Ideally, you should have between three to six months of expenses in an easily accessible cash account. This can provide you with security if you need to pay unexpected costs or your income stops. Having this safety net in place means you won’t need to withdraw investments to cover short-term costs.

2. You’re saving for the long term

Volatility is part of investing and it’s likely the value of your investments will fall at times. However, when you view returns across a long-term time frame, the peaks and troughs have historically smoothed out.

This is why a long-term goal is important when investing – it’s often recommended that you remain invested for at least five years.

So, if you’re saving for goals like retirement, helping children eventually buy their own home, or to leave a legacy, investing could help your money go further.

3. You understand investment risk and your risk profile

All investments have some risk, and it’s important you understand what an appropriate level for you is.

Understanding your risk profile can help you build a portfolio that reflects your goals, circumstances, and general attitude to risk. Taking too much or too little risk could harm your financial security or mean you don’t reach your goals. If you have any questions about risk and what investment opportunities are appropriate for you, please contact us.

Do you have questions about investing?

If you already have an investment portfolio and have questions about whether it’s still suitable for your goals, please contact us. We can work with you to create a long-term investment strategy that reflects your aspirations.

We can also provide support if you think investing could be right for you but aren’t sure where to start. We can help you understand the different options and how to get the most out of your money. Please get in touch to arrange a meeting.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

The UK could face a “retirement savings crisis” as workers aren’t putting enough away

Mon, 07 Nov 2022 10:23:26 GMT

The UK could face a “retirement savings crisis” as workers aren’t putting enough away

Figures suggest that many households aren’t saving enough to be financially secure in retirement. Calculating what income you’d need to reach retirement goals before the milestone could mean you’re in a better position to reach them.

According to a report in PensionAge , only 43% of baby boomer households below the age of 65 are on track to secure a “moderate” income. The Pensions and Lifetime Savings Association define this as £20,800 for a single retiree and £30,600 for a couple.

On top of this, the rising cost of living is likely to mean more people will struggle to meet retirement goals. If retirees hadn’t considered inflation, including periods of high inflation, when calculating their income needs, they could find they have an income gap.

It’s often stated that baby boomers are in a better position financially for retirement. During their careers, defined benefit (DB) pensions, which provide a guaranteed income and are often generous, were more common.

However, this isn’t the case for all baby boomers, who missed out on the introduction of auto-enrolment, which led to a rise in the number of defined contribution (DC) pensions. As a result, many are relying on the State Pension and their savings.

These financial challenges are further compounded for retirees that didn’t get on the property ladder or are still paying a mortgage.

The retirement income gap could widen, even though more people than ever are saving through a pension.

Research from the People’s Pension suggests that 63% of individuals aren’t saving enough to meet their target. This rises to 68% of Generation X workers, who were born between 1965 and 1980, and 76% of millennials, who were born between 1981 and 1996.

The findings suggest that retirement could fall short of expectations for more than half of workers.

Phil Brown, director of policy at B&CE, the People’s Pension’s provider, said: “Once Generation X starts to retire in large numbers, the UK could face a retirement savings crisis, with people unable to carry on with anything like their current standard of living.”

Are you saving enough for your retirement?

Even if retirement is years away, calculating if you’re on track is a worthwhile task. It can help give you confidence and, if you identify a gap, you’re in a better position to close it.

To understand if you’re on the right track for retirement, you need to bring together how much income you’ll need and how much you are saving now.

What income will you need in retirement?

A vital first step is understanding how much income you will need to reach your goals.

Many retirees find that their day-to-day expenses fall – you may have paid off your mortgage or no longer need to spend money commuting. However, discretionary spending may increase, whether you want to indulge in hobbies or hope to visit some bucket list destinations.

While things can change, setting out a retirement budget now can provide a useful guideline when you’re trying to understand if you’re saving enough.

The current levels of high inflation have highlighted why it’s important to think about how your income needs may change over the years.

Usually, the cost of living gradually rises. So, an income that afforded a comfortable lifestyle at the start of retirement may not stretch as far in 20 years. It’s important to think about how inflation will affect your income.

As well as the cost of living, you should consider how unexpected events could affect income needs too.

How will your pension contributions create an income?

It can be difficult to understand how the pension contributions you’re making regularly will translate into a retirement income.

If you have a DB pension, it will provide a guaranteed income in retirement. The income is usually based on your salary and how many years you’ve been a member of the scheme. Your pension scheme can provide the details that will help you calculate your income in retirement.

If you have a DC pension, it can be a little more complicated. Your pension contributions, along with tax relief and employer contributions, are added to a pot and usually invested. As a result, investment performance is likely to affect your retirement savings. When you retire, you will be responsible for using your pension to create a sustainable income.

Often complicating calculations is that you’re likely to have multiple pensions and other assets, such as savings or property, that you intend to use for retirement.

Bringing together your different assets now to understand how they could deliver an income could help you identify potential gaps.

Assessing your retirement savings is an important step to reaching your goals. If you’d like to work with us to understand how your pension contributions and other assets will provide an income later in life, please contact us.

We can provide some reassurance that you’re on track or create a long-term plan if you are not saving enough.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.

12 of the best Christmas markets to enjoy in the UK and Europe in 2022

Wed, 02 Nov 2022 15:25:17 GMT

12 of the best Christmas markets to enjoy in the UK and Europe in 2022

You may have only just recycled the pumpkins, however at PJL Financial Services Limited we are already beginning the countdown to the Festive Season. Nothing beats a Christmas market to help get into the festive spirit and we hope this guide on 12 best Christmas markets to visit in the UK and Europe will get you into the spirit too.

What's more, two of the markets which are recommended are on our door-step making it a perfect excuse to visit one day with the family or colleagues.

If you want some festive cheer, a Christmas market is perfect. From stalls filled with seasonal treats to entertainment like carol singers, they can really put you in the mood for the holidays. Whether you want to visit an event locally or combine it with a weekend away in Europe, there are hundreds of Christmas markets to choose from. These magical Christmas markets are ideal if you’re making festive plans this year.

Download your copy of “12 of the Best Christmas markets to visit in the UK and Europe” here to learn more.

Our Guide to Financial Wellbeing: 6 ways to help you make better financial decisions

Wed, 19 Oct 2022 10:01:03 GMT

Guide: Financial wellbeing: 6 ways to help you make better financial decisions

Humans are hard-wired to make poor financial decisions. It’s just in our DNA.

Financial wellbeing is a broad topic, covering all aspects of the relationship between money and our long-term happiness. It covers a wide variety of subjects, including how to manage money better, and how to use money to generate wellbeing.

In some ways, financial wellbeing is about getting out of the bad habits we have acquired by linking money with success.

If you want to improve how you make financial decisions, this guide covers six steps to take:

Understanding why you are bad with money
Understand the sources of wellbeing
Identify your objectives
Don’t be a financial wellbeing junkie
Connect with your future self
How to give.

Download your copy of “ Financial wellbeing: 6 ways to help you make better financial decisions ” to learn more.

If you have any questions about your financial plan and how to improve your wellbeing, please contact us.

Your complete guide to buy-to-let

Mon, 10 Oct 2022 10:52:03 GMT

Guide: Your complete guide to buy-to-let

Buy-to-let properties can provide an additional income stream and help you to support your goals. As a result, becoming a landlord is something you may have thought about.

For example, you may want to purchase a buy-to-let property to diversify your assets or provide children with an inheritance. One of the most common reasons is to fund retirement.

However, it’s also common to have concerns about buy-to-let. You may worry about understanding the regulations and tax requirements if you become a landlord.

If you’re thinking about investing in a property, there are some important things to consider first. This guide explains some of the essential things you need to know, including:

How a buy-to-let mortgage works
What taxes you may need to consider as a landlord
How to reduce tax liability
What to consider when you’re choosing a buy-to-let property
And more…

Download your copy of ‘ Your complete guide to buy-to-let ’ to learn more.

If you have any questions about the contents of the guide or would like to discuss your buy-to-let plans, please contact us.

Are you making full-use of the Tax-Free Childcare Allowance for children under the age 11?

Mon, 03 Oct 2022 12:05:58 GMT

Are you making full use of the Tax-Free Childcare Allowance for children under the age 11

We accept the news headlines currently make for grim reading. Inflation at levels unseen for 40 years, mortgage rates increasing significantly from their historic lows over the last 14 years, meanwhile your pension and investment savings may feel a little worse for wear following recent poor market returns. It is more important than ever to ensure that your personal finances are in good shape.

Those with families may be feeling the pinch even more so and we speak to many clients who were either unaware or unsure how to go about obtaining tax relief on childcare costs. Take a few minutes to read the below to understand if you could be eligible to claim the tax-free childcare allowance.

What you could receive?

You can get up to £500 every 3 months (up to £2,000 a year) for each of your children to help with the costs of childcare. This goes up to £1,000 every 3 months if a child is disabled (up to £4,000 a year)
If you get Tax-Free Childcare, you’ll set up an online childcare account for your child. For every £8 you pay into this account, the government will pay in £2 to use to pay your provider.
You can get Tax-Free Childcare at the same time as 30 hours free childcare if you’re eligible for both which can be used to pay for approved childcare including childminders/nurseries alongside after school clubs and play schemes until your child reaches age 11.

Eligibility

Your eligibility depends on a number of factors such as:

If you are working (either employed or self-employed), including if you are in work, on sick leave or annual leave or on shared parental, maternity, paternity or adoption leave
Your income (and your partner’s income, if you have one)
Your child’s age and circumstances
Your immigration status

Your income

You’ll need to expect to earn a certain amount over the next 3 months which is typically equivalent to working 16 hours per week on minimum wage. If you have a partner, they’ll need to expect to earn at least this much too.

If you’re self-employed and do not expect to make enough profit in the next 3 months, you can use an average of how much you expect to make over the current tax year. This earnings limit does not apply if you’re self-employed and started your business less than 12 months ago.

If you or your partner have an expected ‘adjusted net income’ over £100,000 in the current tax year you will not be eligible. This includes any bonuses you expect to get. The calculation of your ‘adjusted net income’ can be complicated as it does not include earnings from dividends, income from property or pension payments. Furthermore it can be reduced by making payments into a registered pension scheme or Gift Aid donations. If you near the threshold, it’s worthwhile understanding what does and doesn’t count in more detail.

If you’re not currently working

You may still be eligible if your partner is working, and you get Incapacity Benefit, Severe Disablement Allowance, Carer’s Allowance or contribution-based Employment and Support Allowance. You can apply if you’re starting or re-starting work within the next 31 days.

Your child

Your child must be 11 or under and usually live with you. They stop being eligible on 1 September after their 11th birthday.
Adopted children are eligible, but foster children are not.
If your child is disabled you may get up to £4,000 a year until they’re 17 subject to being in receipt of certain state benefits

If you get tax credits, Universal Credit, a childcare bursary or grant, or childcare vouchers

You cannot get Tax-Free Childcare at the same time as claiming Working Tax Credit, Child Tax Credit, Universal Credit or childcare vouchers. Which scheme you’re better off with depends on your situation.

Tax Credits, if you successfully apply for Tax-Free Childcare, your Working Tax Credit or Child Tax Credit will stop straight away. You cannot apply for them again.
Childcare vouchers, you must tell your employer within 90 days of applying for Tax-Free Childcare to stop your childcare vouchers if applicable and they’ll then stop the vouchers or directly contracted childcare
Universal Credit, wait until you get a decision on your Tax-Free Childcare application before cancelling your Universal Credit claim

How to apply

See the link attached to learn more about how to Apply online for Tax-Free Childcare .

If you apply for Tax-Free Childcare and someone else already gets 30 hours free childcare for that child, their 30 hours will stop at the end of the next term

Give us a call on 01788 571122 and we will be more than happy to help.

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority.

How much has the value of your home changed? Here’s why it could reduce your mortgage repayments

Wed, 28 Sep 2022 14:23:22 GMT

How much has the value of your home changed? Here’s why it could reduce your mortgage repayments

It’s no secret that property prices have been rising quickly. If it’s been some time since you checked your property’s value, doing so is a worthwhile step. If the value has increased, your mortgage repayments could be reduced.

According to figures from Zoopla , the value of all homes in the UK surpassed the £10 trillion mark for the first time in April 2022.

This has largely been driven by soaring property prices. The average price of a UK home has increased by £48 a day since 2020. A lucky third of homeowners – the equivalent of 9.4 million families – have seen the value of their home increase by more than £50,000.

Homes in affordable regions saw the biggest gains. While the value of the average home in Wales increased by 22%, London saw a more moderate increase of 7%.

Over the longer term, the value of your home is likely to have changed significantly.

If you purchased a house in June 2011, the average price was £167,753, according to Land Registry data. Over 10 years, the value of the average home has increased by more than £115,000.

While it’s always good news when an asset has appreciated, the value of your home may not seem to have a material effect on your wealth. After all, to access the cash locked in the property, you’d usually need to downsize, which may not align with your plans.

However, if you’re paying a mortgage, it could mean your repayments fall. This is more important than ever given the recent changes in the mortgage market as obtaining a lower loan to value mortgage product may help reduce the interest rate you pay.

How rising property prices could cut your monthly mortgage repayments

When you buy your first home, it’s common to put down a 10% deposit, so the equity you hold in your property is 10%. Over time, as you repay the loan, the amount of equity you own increases.

As you build up more equity over time, your loan-to-value (LTV) ratio falls. Typically, a mortgage holder with a lower LTV will be able to secure a deal with a lower interest rate as lenders will view them as less of a risk.

In turn, this means your repayments could fall and you can save money over the full term of your mortgage.

While keeping up with mortgage repayments can lower your LTV, it’s not the only way.

If the value of your home has increased, you’ll hold more equity in your home. As a result, it could help you access a better interest rate on your mortgage.

When you compare the interest rates offered for different LTV bands, it can seem minimal, but it does add up.

If you have mortgage debt of £250,000 with a 25-year term with an interest rate of 2.5%, your repayments would be £1,122. This rises to £1,462 if the interest rate is 5%.

As the Bank of England has increased the base interest rate several times in 2022 in response to inflation, it’s more important than ever to understand how and why the rate you pay could change.

So, if your current mortgage deal has ended or will end soon, checking the value of your home could be beneficial.

Valuing your property before you remortgage

If your previous mortgage deal has ended, it’s worth looking for a new deal.

When a deal ends, you’ll usually be moved on to your lender’s standard variable rate (SVR). Often, this will mean you’re paying a higher rate of interest than you need to, but it could be beneficial if, for example, you have plans to move or make overpayments.

Whether your deal has already ended or not, it’s worth valuing your property before applying for a new one.

As part of a remortgage application, a lender will instruct their own valuation. How lenders carry out these valuations varies from a full valuation completed by a surveyor to an automated one.

Having a realistic valuation before you apply can be useful. It means you can approach the right lenders for your circumstances and understand what your repayments could be.

Online valuation tools and looking at current asking prices of properties in your local area are good places to start if you want to carry out your own research. You can also contact estate agents to visit the property and ask their opinion. Keep in mind that there will be variances and many things can influence the value of a property.

If you’re looking at remortgaging your home, we’re here to help you find the right deal for you and answer any questions you have, including how interest rates could affect your repayments. Please contact us to arrange a meeting.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority.

Your home may be at risk if you do not keep up repayments or other loans secured against it.

How does the Mini-Budget impact you?

Fri, 23 Sep 2022 09:16:49 GMT

How does the Mini-Budget Impact You?

The newly formed UK Government led by our new Prime Minister, Liz Truss have wasted no time in setting our their plans to support the UK Economy, and this morning the Chancellor, Kwasi Kwarteng updated the House of Commons on their plans to boost growth.

Here is a summary of the key changes following the recent announcement and how they impact you:

We will continue to keep this page updated as the plans are released in more detail

Income Tax

The basic rate of income tax will be reduced from 20p in the pound to 19p in the pound for basic-rate taxpayers. This will come into effect in the new tax-year (i.e. From 6th April 2023)
The additional rate of income tax is currently 45%, this will be removed as part of the UK Governments plans to simplify the UK tax system. Additional rate taxpayers will no longer pay the additional rate of income tax and will remain in the higher tax bracket of 40%

National Insurance Contributions

Reversal of the recent rises in National Insurance which will be reversed on the 6th November 2022. The National insurance threshold was previously raised to £12,570.00 in line with the personal allowance for income tax
This does not have any benefit to pensioners as they do not pay National Insurance Contributions

Energy Costs

Previous support was outlined by the UK Government to cap household energy costs over the Winter through the Energy Bill Relief Scheme
This has recently been extended to UK businesses with targeted support for energy intensive companies

Stamp Duty Land Tax (SDLT)

Effective from today, the threshold for previous homeowners or home-movers where Stamp-Duty becomes payable has increased from £125,000.00 to £250,000.00
The rate in which first-time buyers currently pay no Stamp Duty Land Tax is being increased from £300,000.00 to £425,000.00
There are still no announcements on further support for first-time buyers with the Help to Buy Equity Loan scheme due to close in March 2023

Corporation Tax

The planned increase for larger UK companies corporation tax rates has been scrapped. This was due to increase to 25% but will now remain at the current level of 19%

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority.

The passing of Her Majesty The Queen

Fri, 09 Sep 2022 11:06:11 GMT

The passing of Her Majesty the Queen

We are saddened by the passing of Her Majesty The Queen.

The Queen was inspirational in the way she lived a life of remarkable, dedicated public service. Our thoughts are with the Royal Family at this difficult time.

As we enter a period of national mourning, we will reflect on how our activities in the coming days may need to change so that we can show our respect to our Royal patron, who has set the standard for future monarchs to follow.

5 crucial things you need to consider when reviewing your estate plan

Wed, 07 Sep 2022 10:24:39 GMT

5 crucial things you need to consider when reviewing your estate plan

If you have an estate plan, you shouldn’t simply forget about it. Instead, regular reviews can help ensure it continues to reflect your wishes and circumstances.

Sometimes you may have a specific reason to review your estate plan.

Life milestones can often cause you to reflect on the steps you’ve previously taken. Experiences like getting married or divorced, or welcoming children or grandchildren into your family may mean you need to make changes to your estate plan.

However, it’s advisable that you schedule regular reviews, not just after major life events like these.

Over time, your wishes or circumstances can gradually change; a plan that met your needs five years ago, may not be suitable now.

So, if you’re ready to review your estate plan, these five questions can help you assess if it needs updating.

1. Have your assets or the value of your estate changed?

A good place to start is taking stock of what your estate consists of.

Your estate refers to all your assets. It could include cash savings, investment, property, and other items. Since you made an estate plan, you may have acquired new assets or disposed of others.

As well as taking stock of your assets, you should review the estate’s value – you may be surprised by how it’s changed.

According to the Land Registry , between May 2017 and May 2022, the value of the average property in the UK increased by more than £60,000. In contrast, you may have depleted other assets to fund your lifestyle.

This step is important for several reasons. Understanding your estate is necessary for effectively distributing it, and if your estate has changed, you may want to update your wishes.

The value of your estate will also affect your Inheritance Tax (IHT) liability.

2. Do you need to consider Inheritance Tax?

If the total value of your estate exceeds certain thresholds, your estate could be liable for IHT. With a standard rate of 40%, it can significantly reduce what you leave behind for loved ones.

For the 2022/23 tax year, you can pass on up to £325,000 without IHT being due. This is known as the “nil-rate band”.

If you leave some types of property, including your main home, to children or grandchildren, you can also take advantage of the residence nil-rate band. This is £175,000 for the 2022/23 tax year.

So, you can often leave up to £500,000 without needing to consider IHT.

If you’re married or in a civil partnership, you can pass on unused allowances. So, as a couple, you may be able to pass on up to £1 million without a IHT liability.

If the value of your estate exceeds these thresholds, there are often steps you can take to reduce an IHT bill, but you need to be proactive. If you think your estate could be liable for IHT, please contact us.

3. Does your will still reflect your wishes?

A will is the only way to ensure that your wishes are carried out when you pass away. As a result, a regular review of your will is vital.

If you decide your will needs updating, you have two options.

The first is to write a new will. This should clearly state that it revokes all previous wills and you should destroy all copies of your old will.

The second is through a codicil, which makes an official alteration to an existing will. A codicil can be useful if you want to make minor changes to your will, such as changing the executor or adding a grandchild as a beneficiary.

4. Do you have a plan for your later years?

While estate planning often focuses on what you’ll leave behind for loved ones, ensuring your long-term security is just as important.

If you don’t already have a Lasting Power of Attorney (LPA) in place, it’s a step you should consider.

An LPA gives someone you trust the ability to make decisions on your behalf if you can’t. An LPA can either cover health or financial decisions. While losing mental capacity isn’t something anyone wants to think about, naming an LPA can ensure a loved one can provide support if it does happen.

You should also consider potential care costs. If you needed care later in life, do you have a fund to pay for it? And how would care costs affect other parts of your estate plan?

Setting out a plan now means you can think about what your wishes would be, and set aside provisions accordingly.

5. Have allowances or reliefs changed since you made your estate plan?

The government may make changes to allowances and even introduce or remove reliefs.

Ensuring your estate plan reflects the current rules means you can pass on as much wealth as possible to your loved ones. If you overlook this step, you could miss out on opportunities.

It can be difficult to keep up to date with tax changes and understand which ones make sense for you. Working with an estate planner means you can have confidence in the steps you take and know that your plan will accurately reflect the current rules.

Please contact us to review your estate plan

If you’d like an expert to review your estate plan, please contact us. We’ll work with you to craft a plan that matches your needs, goals, and estate.

Please note : This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate estate planning, tax planning, or will writing.

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority.

5 important things to check this Pension Awareness Day

Tue, 30 Aug 2022 10:15:42 GMT

5 important things to check this Pension Awareness Day

If you’re guilty of ignoring your pension, a review ahead of Pension Awareness Day on 15 September can help make sure you’re on track for the retirement you want.

Here are five important things to check.

1. How is your pension invested?

The money held in your pension is usually invested.

This provides an opportunity for your savings to grow over your working life. Over the decades you’ll be saving, investing your pension contributions can really add up. It means you could look forward to a more comfortable retirement.

So, understanding how your pension is invested and how well it’s performing is important.

If you haven’t selected how your pension is invested, it will usually be through your provider’s default fund.

Many providers offer a selection of funds for you to choose from. The funds will have different risk profiles and criteria. Going through the different options with your goals in mind is useful, and we’re here to answer any questions you may have.

When reviewing investment performance, keep in mind that you should focus on the long-term outcomes, rather than short-term fluctuations.

2. Are you claiming all the tax relief you’re entitled to?

When you contribute to a pension, you can often claim tax relief. This means some of the tax you would have paid is added to your retirement savings. It can deliver a valuable boost to your pension.

Assuming your contributions are below the Annual Allowance, you can claim tax relief at the highest rate of Income Tax you pay.

Your pension provider will often collect tax relief at the basic rate of 20% automatically. However, you should check this is being added to your contributions.

If you’re a higher- or additional-rate taxpayer, you will usually need to complete a self-assessment tax form to claim the full amount of tax relief you’re entitled to.

3. When is your retirement date?

Often, pension providers will change how your savings are invested as you near your retirement date. This will usually mean taking less risk to reduce the chance of volatility affecting your retirement plans.

As a result, you should check when your retirement date is set for. This is often linked to the State Pension Age, however, you may plan to retire sooner or later than this.

In addition, changing your investment strategy may not be right for you as you near retirement. For example, if you plan to use other assets to fund your lifestyle initially, you may want to maintain your current risk profile for longer.

4. What income is your pension projected to deliver in retirement?

While you may know how much is going into your pension each month, it can be difficult to understand what this will mean for your retirement income. This is particularly true if the money is invested.

If you have a defined benefit (DB) pension, you will know what income it will deliver and when. This is normally dependent on how long you’ve been a member of the scheme and your salary.

However, if you have a defined contribution (DC) pension, you will need to factor in how the value of your pension could change during your working life. Your pension provider will give a projected value, but keep in mind this isn’t guaranteed.

You will also need to consider how you’ll use your pension to create an income for the rest of your life, assessing things like life expectancy and one-off costs.

Calculating the projected income of your pension now means you can make adjustments if you could face a shortfall. If you’re not sure where to start or have questions about your retirement income, we’re here to help.

5. Are you maximising contributions from your employer?

If you’re employed, your employer will usually be contributing to your pension on your behalf.

Under auto-enrolment rules, they must contribute a minimum of 3% of your pensionable earnings. However, some employers may contribute more as a perk, so it’s worth checking if you’re maximising what’s on offer.

Your employer may increase their contributions in line with yours, for instance. While this would mean you need to contribute more to your pension, it also boosts how much “free money” is being added to your retirement savings too. As these additional contributions are typically invested, they can deliver a significant boost to your pension over the long term.

Checking your employee handbook or speaking to your employer can highlight how you could maximise employer pension contributions.

Getting to grips with your pension is essential for reaching retirement goals. If you have questions about your pension or how it could create an income in retirement, we can answer them and carry out a review that you can have confidence in.

Please note : This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority.

Long Term Care Requirements

Tue, 09 Aug 2022 21:24:12 GMT

Long Term Care Requirements: The often overlooked but increasingly important aspect of growing older

What is social Care?

Social care supports people who can’t manage by themselves. It can help people with everyday tasks they can’t do on their own and makes sure they can take an active part in life. For example, people may need help to:

Continue living in their own home
Get washed and dressed
Going out and about and maintaining social contact

You may need social care because you are older or because you have an illness or disability which makes it more difficult to do certain things and look after yourself. You may be looked after by a family member or a close friend, or maybe by someone who is paid to look after you. You may also need somewhere safe to live.

People who need social care also often need healthcare, but healthcare is paid for in a different way. Healthcare is given to you free by the NHS.

What is ‘A Means Test’?

A means test is a way of deciding who should pay for the cost of people’s care, based on how much money they have. The means test is £23,250 at the moment. If you have more money than that, you will need to pay for any care you need. This is currently under review by the Commission on Funding of Care and Support and many changes have been recommended which will keep abreast and update our clients further.

Long-Term Care Needs

With greater life expectancies and greater morbidity rates, people are living longer, therefore reaching a point in their lives when they become unable to look after themselves properly or their own homes properly. People can have a diverse range of care needs, ranging from needing help with a few hours cleaning each week to chronic illness that requires ongoing treatment and constant care. With people living longer, the potential of larger long-term care costs is becoming increasing common.

The rising need for long-term care provision results from:

Longer working lives
Changes in the way people live
Changes in working patterns

Economic conditions mean that people now need to work longer to maintain their standard of living, particularly in view of the decline in final salary pensions, the raising of the pension age and reduction in state support. In the past, different generations of the same family would tend to live either together or close by and if an elderly relative needed care in the home, a family member might often provide this care. Today, working people tend to be more geographically mobile than in the past and may move far away from their families as they seek to develop careers. There has been a fundamental change in working patterns and in relationships it is now common for both partners to go out to work. Modern working patterns mean that, even if the younger members of the family do not move away from their relations, there may be no one available in the home for a large part of the working week.

All in all, people need to start thinking about funding for later life and long-term care. The rules regarding these are likely to change as time goes by. For more information and advice on this, please don’t hesitate to get in touch.

If you would like to learn more about this subject or require Independent Financial Advice from our local, experienced and friendly team, please feel free to contact us on 01788 57 11 22.

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority.

Interest Rates Rising

Thu, 14 Jul 2022 15:16:55 GMT

With interest rates on the rise, should I get a Fixed interest rate mortgage?

It’s a common question that we often get asked and while the correct answer depends upon your circumstances, here are some of the key considerations that you need to consider when you are deciding whether to get a fixed rate.

History

Interest rates have been at an all-time low for years. This is usually the reason why people want a fixed-rate – fix whilst the rates are low. However, on 16 ^th December 2021 the Bank of England began to increase the base rate from 0.10% to where it currently stands today at 1.25%. These are the first increases since August 2018 and will likely increase the interest rates on fixed-rate products offered by lenders who obtain their capital from inter-bank rates which are directly related to the Bank of England base rate.

Personal Circumstances

Having a fixed interest rate protects you from any rises in variable rates for the duration of the fixed term whilst giving you consistency in your mortgage repayments which could be a key priority for you as mortgage repayments are often the largest monthly expenditure for a household. Your short-term plans and goals should be considered and there should be some deliberation on which mortgage product would be suitable for your plans. For example, if you were looking to move house in two years and you had a five-year fixed rate mortgage – you may be subject to early repayment charges if your mortgage is not portable.

Portability and Early Repayment Charges

If the mortgage is not portable and you were to sell your home within the initial fixed term, you would incur early repayment charges when you repay the mortgage following the sale of your house. These charges are usually between 1% and 5% of the outstanding mortgage debt and usually decrease each year of the fixed term duration. For example, if you were to repay a £200,000.00 mortgage during the second year of a five-year fixed term then you may have to pay a 4.00% early repayment charge which could be £8,000.00 as well as the other mandatory fees associated with moving house.

Most mortgage products offer portability which provides the option of being able to transfer your existing mortgage to a new property subject to the lender’s current underwriting criteria. This may result in not having to pay any early repayment charges when you move home, however you are restricted to your existing lenders’ products and underwriting criteria at that time which may not be the most competitive or even mean being able to borrow less than with an alternative lender with different affordability metrics.

Product Fees

The majority of fixed-rate mortgages have an arrangement/product fee as the fixed rate offered can be lower than the lenders’ variable interest rates. Although a fee may be payable this can still have a lower total cost compared with adding the fee to the loan. By way of example, a £250,000.00 mortgage with a fixed interest rate of 2.40% would have £28,480.45 interest payable over 5 years. However, if you were to add a £999.00 product fee to the loan to get a lower interest rate of 2.15% you would pay less interest over the 5-year term (£24,806.86) interest over 5 years. In this example, you can see that even with the fee added to the loan, the interest paid is £3,673.59 less due to the lower interest rate obtained. You can often add these product fees onto your overall mortgage however it is important to remember that you will be charged interest on this amount through the mortgage term.

To summarise, there are many different aspects to consider when deciding whether to get a fixed-rate mortgage, at PJL Financial Services Limited, we can support you in understanding the most suitable option based on your own individual personal circumstances. If you would like to learn more about this subject or require Independent Financial Advice from our local, experienced and friendly team, please feel free to contact us on 01788 57 11 22.

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority.

Your home may be at risk if you do not keep up repayments or other loans secured against it.

Cawston Summer Sizzler

Tue, 05 Jul 2022 20:39:32 GMT

Proud to have Sponsored the Cawston Grange Primary School Summer Sizzler

We had the absolute pleasure of sponsoring the Cawston Grange Primary School Summer Sizzler on Saturday the 2nd July.

Despite the changeable weather, we were blown away by the support of the local community who came in force to ensure that the event was a complete success.

As Gold Sponsors of the event, we were excited to run the Bottle Tombola for the entire afternoon which proved to be one of the most popular stalls of the day.

We are also pleased to announce the winner of the Champagne Magnum was local resident - Hayley Tucker. The prize was personally hand-delivered by our mortgage and protection adviser - Mark Harris this afternoon. We hope you enjoy your prize Hayley!

All of the funds raised go directly towards the Cawston Grange PTA who work tirelessly all year round to provide the students with unforgettable events such as these .

Cawston Summer Sizzler

Wed, 15 Jun 2022 21:01:38 GMT

Proud to Sponsor the Cawston Grange Primary School Summer Sizzler

We are pleased to confirm that we are sponsoring the Cawston Grange Primary School Summer Sizzler Event this year. We are excited to be able to support the event following a two-year hiatus due to Covid-19. This event has always been extremely well received and brings many of the local community together for what is always a fun and eventful afternoon for all ages.

We hope as many of you can join us as possible on the day and in the meantime we are praying for the glorious weather we are currently experiencing to continue on Saturday 2nd July 2022.

Expect great food and drink alongside many activities for the kids such as a Mobile Caving Experience and four inflatables alongside various stalls from many local businesses in the area. We are pleased to be running the drink tombola throughout the afternoon and hope to see many happy faces, winning some excellent prizes which were kindly donated by the parents of Cawston Grange Primary School.

All funds go directly towards the Cawston Grange PTA who work tirelessly all year round to provide the students with unforgettable events such as these .

We hope to see you there!

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority.

Your home may be at risk if you do not keep up repayments or other loans secured against it.

Family Income Benefit

Sat, 11 Jun 2022 08:25:40 GMT

What is Family Income Benefit?

Most of us have heard of life insurance, which will pay out a tax free cash lump sum on death which can be used by our loved ones to meet any financial needs such as repaying outstanding mortgages or looking after our children. However, many people are unaware of another option for death cover.

Family Income Benefit is a type of protection which also covers you should you pass away or suffer a specified terminal illness, but instead of a tax free cash lump sum, this type of plan will pay out a tax free regular income for a specified term. This type of plan can also be useful for your loved ones to meet their financial needs upon your death and can be particularly beneficial for those with dependent children.

The income received from Family Income Benefit could be used by your family to ease the burden of bills and everyday expenditure or to cover any ongoing childcare fees. Knowing these outgoings are covered can ease the burden of of financial worries and can allow your family to focus on supporting each other during an already difficult time.

The amount of monthly income to be paid out after your passing can be either fixed (the income will remain level throughout the term of the plan) or it can be set to increase or decrease as time goes on to factor in rising costs (i.e. inflation). This decision will be largely dictated by your individual circumstances and requirements and our advisers can guide your through this decision to ensure that your Family Income Benefit plan is appropriate for you.

Family Income Benefit could also be of use to single parents. Most parents have plans in place regarding whom will take care of their children should they pass away, however a Family Income Benefit plan could be used to pay out a regular income to your child's new guardian to cover some of the day to day expenses associated with raising a child.

As with regular life insurance, critical illness cover can also be added to Family Income Benefit plans which allows for the regular income to begin to be paid upon the diagnosis of a specified critical illness (the specific diagnoses which will result in a successful claim will vary depending on the provider chosen). There would be additional costs associated with this which our advisers would explain to you in detail to ensure you are able to make the correct decision for you and your family.

Why choose a Family Income Benefit plan rather than a typical life cover plan?

Family Income Benefit plans are typically lower cost than traditional life cover. This is due to the fact that the longer you live, the less monthly payments will be received which is more beneficial to the insurer. The affordability of such plans can be highly beneficial and cost less than a typical life cover plan. but it can also compliment any existing life cover that you may have which may be used to clear your outstanding mortgage liability.

Also, as the benefit is paid out as a regular monthly income rather than a larger lump sum, your loved ones would not need to manage/invest a large lump sum, they would simply receive their regular payments to use towards the cost of living until the end of the plan.

If you would like to learn more about this subject or require Independent Financial Advice from our local, experienced and friendly team, please feel free to contact us on 01788 57 11 22.

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority.

Your home may be at risk if you do not keep up repayments or other loans secured against it.

What Do Rising Mortgage Interest Rates Mean For You

Wed, 11 May 2022 13:12:49 GMT

With interest rates on the rise, what should you consider when looking at a fixed-rate mortgage product?

Interest rates have been at an all-time low for years. Many home-owners cannot recall mortgage interest rates that were prevalent in the 1970's and 1980's and many do not understand the impact that rising interest rates can have on their future mortgage repayments.

In recent time, many households have sought to fix their mortgage rates on the premise of fixing whilst the rates are low. However, on 16th December 2021 the Bank of England increased the base rate from 0.1% to 0.25% and this was followed by an increase to 0.50% on 2nd February 2022, a further increase to 0.75% on 17th March 2022 and then an increase to 1% on the 5th May 2022. These are the first increases since August 2018 and will likely increase the interest rates on fixed-rate products offered by lenders.

Personal Circumstances

Portability and Early Repayment Charges

Product Fees

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority.

Your home may be at risk if you do not keep up repayments or other loans secured against it.

Withdrawing from your pension? Have you considered the Money Purchase Annual Allowance

Fri, 06 May 2022 08:37:38 GMT

Withdrawing from your pension? Have you considered the Money Purchase Annual Allowance (MPAA)

We regularly meet clients who wish to access their pension at the current minimum age of 55, this may be in the form of accessing their tax-free cash or closing and withdrawing all of the capital from some of their smaller pension plans they may have accumulated throughout their working life.

While many of us would like to fully retire at this relatively young age, in reality many clients will expect to continue working and contributing to their pension for the foreseeable future. Without specialist financial advice, there is a little known issue called the Money Purchase Annual Allowance (MPAA) that may restrict you from contributing into your pension in the future and have serious consequences for your overall retirement income planning strategy.

What is the Money Purchase Annual Allowance (MPAA)

The Money Purchase Annual Allowance (MPAA) was introduced on 6th April 2015 in line with other pension flexibilities under the ‘Pensions Scheme Act 2015’ which also paved the way to the variety of income options available today such as ‘Flexi-Access Drawdown’. It was seen as a complete overhaul the pensions industry and as such, it’s relatively new laws have led to some uncertainty and unintended consequences.

When the Money Purchase Annual Allowance rules are triggered, the individual will have reduced annual allowance for future money purchase pension contributions restricted to £4,000.00 per annum (£3,200.00 per annum or just £266.67 per month), subject to your earnings, the annual allowance prior to triggering the Money Purchase Annual Allowance is £40,000.00 per annum.

Triggering the Money Purchase Annual Allowance rules could have serious consequences for you in the future, firstly, you may be expecting to save a higher percentage of your income in your final years of employment as a result of lower expenditure as your children may no longer be dependent, you may be mortgage-free or your earnings are relatively higher than what they were many years ago due to career progression. With the restriction over what you can save into your pension limited to £4,000.00 per annum, you could lose the valuable tax-relief from saving into a pension and many providers will not accept pension contributions where tax-relief is not available.

Another potential issue with unintentionally triggering the Money Purchase Annual Allowance rules is limited the ability to maximise your pension contributions to mitigate potential Inheritance Tax liabilities. If correctly set-up, under current rules, a registered pension currently sits outside of an individuals’ estate for inheritance tax purposes and with the effective use of carry-forward of your annual allowance subject to your earnings, you could contribute up to £160,000.00 in a single tax year into a pension, potentially saving £64,000.00 in inheritance tax. However, if you have triggered the Money Purchase Annual Allowance, this option is lost or at least the benefits are significantly restricted due to the cap on your future pension contributions.

What can trigger the Money Purchase Annual Allowance Rules (MPAA)

Certain events trigger MPAA, once triggered, it applies from the following day and continues to apply in all subsequent years. See below the common methods of income in retirement and whether they may constitute as triggering these rules. This list is not exhaustive and you should take financial advice before accessing your pensions to ensure you are not triggering the Money Purchase Annual Allowance (MPAA) rules unintentionally.

MPAA Triggers

• First funds drawn from Flexi-access drawdown arrangement

• Takes an Uncrystallised Funds Pension Lump-sum (i.e. part tax-free, part taxable payment)

• Notifies scheme administrator of intent to convert an old capped drawdown plan to Flexi-access drawdown, then takes withdrawal

• Takes more than permitted from an old capped drawdown plan

• Receives payment from flexible annuity contract or short-term annuity contract

• Payment of the above from overseas pension scheme which benefits from tax relief

Not MPAA triggers

• Receives tax-free lump-sum (AKA Pension commencement lump-sum)

• Receives trivial commutation lump-sum or small-pots lump sum

• In receipt of conventional lifetime annuity

• Remains within permitted withdrawal limits for capped drawdown arrangement

It is important to note that rules for individuals who have a final salary/defined benefit arrangement are subject to different rules.

At PJL Financial Services Limited, we appreciate that the number of options available to you in accessing your pension can become confusing and we are here to support you and discuss with you all of your options to ensure you are able to achieve your retirement goals. Unfortunately, we have dealt with clients who have unintentionally triggered these rules which has impacted their future retirement income planning and would always recommend speaking to a professional before accessing your pensions to ensure it is completed in a way that best suits your personal financial circumstances.
If you would like to learn more about this subject or require Independent Financial Advice from our local, experienced and friendly team, please feel free to contact us on 01788 57 11 22.

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority.

Your home may be at risk if you do not keep up repayments or other loans secured against it.

Pensions: What is the Lifetime Allowance

Wed, 20 Apr 2022 10:02:22 GMT

Pensions: What is the Lifetime Allowance?

What is the Lifetime Allowance?

The lifetime allowance is the total amount you can build up in all your pension savings without incurring a tax charge.

Although there’s no limit on the amount an individual can accumulate into their registered pension schemes, there is a limit on the level of tax-privileged benefits. So, effectively, your lifetime allowance determines the amount of benefit you can receive before you have to pay additional tax on either pension income or lump sums over and above this limit.

The current standard lifetime allowance is £1,073,100, and will remain so until at least 2025/26, therefore we expect more individuals to become impacted by this limit.

If you’ve built up more than the value of the lifetime allowance when a calculation is carried out, you might have to pay a tax charge. A lifetime allowance test is typically carried out:

· When you start drawing a defined benefit pension

· When you take an income or lump sum from a defined contribution pension

· If you transfer a pension overseas before age 75

· If you reach your 75th birthday and have pension in drawdown or that you haven’t touched

· If you die before age 75 and have pensions you haven’t touched.

After age 75, there are generally no further checks against the lifetime allowance.

How is the Lifetime Allowance Calculated?

For a Defined Contribution Pension (where the underlying value of your pension is made up of the amount you have contributed and the performance of your investments), it is just a case of calculating the percentage of the total fund value. So if the total fund value was £156,284.79, it would be divided by the LTA and multiplied by 100.

i.e. £156,284.79 divided by £1,073,100 multiplied by 100 = 14.56% of your Lifetime Allowance has been used.

When working out the Lifetime Allowance calculation for a Defined Benefit (DB) Pension, you multply the annual benefit by 20 plus any separate tax-free cash lump-sum. (If a Defined benefit pension is transferred to a personal pension, the Lifetime Allowance is calculated on the Cash Equivalent Transfer Value (CETV).

i.e. A defined benefit pension will provide an annual benefit is £9,645.32 and a tax-free lump sum of £35,000.00. The calculation is performed by multiplying the annual benefit by 20 = £192,906.40 plus the tax-free lump sum of £35,000.00. Totalling £227,906.40, so it would use 21.24% of your LTA.

What if you exceed the Lifetime Allowance?

Lump Sums - If you take the excess as a lump sum, you are subject to income tax at 55% on the amount in excess of your lifetime allowance.

Income - If you keep the money in the pension and withdraw the income from it at a later date, you would incur an immediate 25% tax charge. This is on top of any income tax you pay on the income you receive in the future.

If you would like to learn more about this subject or require Independent Financial Advice from our local, experienced and friendly team, please feel free to contact us on 01788 57 11 22.

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority.

Your home may be at risk if you do not keep up repayments or other loans secured against it.

The Mortgage Process: What to expect when buying a new home

Thu, 31 Mar 2022 21:32:09 GMT

The Mortgage Process: What to expect when buying a home

It’s a common question that we often get asked and here are some of the key considerations that you need to take into account when considering the mortgage process. You may be first-time buyers or haven’t purchased a new home for some time. As experienced mortgage advisers, we are here to support you throughout what can be quite a stressful process at times.

The beginning

The journey begins with house viewings and finding a property. Since 2020, it has become common practice for estate agents to require a mortgage decision in principle before allowing any viewings. Once the ideal property is found and an offer is made; it is down to the vendor/seller to choose which offer to accept (usually the highest offer but not always, you may be first-time buyers which tend to be preferred over buyers who may need to sell their home in order to complete the purchase, thus creating a ‘chain’). Even after an offer is accepted – it is not binding as another offer can be accepted prior to exchange. This highlights the importance of being prepared once you have your offer accepted to avoid the risk of the vendor/seller considering their other options or becoming concerned that you are not in a position to buy.

The lender

When an offer has been accepted, the formal mortgage application is sent. The lender will require a valuation of the property to ensure the property has adequate value as security for the loan applied for. At this point a lender will decide to lend based on their valuation. For example, if buying a property for £200,000.00 with a £20,000.00 deposit (i.e. a 90% loan to value mortgage) and the subsequent valuation was confirmed at £180,000.00, this would mean the lender would only lend £162,000.00 against the property and thus leaving a £18,000 shortfall which would need to be funded by yourself as in the lender’s opinion you are overpaying for the property. The buyer could choose to have their own independent valuation or building survey which can sometimes depend on the age of the property, we always discuss and recommend undertaking a more detailed valuation.

On completion of the lenders valuation and due diligence procedures, the lender will produce a mortgage offer which is binding for 3-6months to allow time for the property purchase to go through.

The Conveyancing Process

Following the building survey/lender valuation it’s time to instruct the solicitors to commence the searches on the property. It’s now time for both the buyer and the vendor’s solicitors to set a date for the completion and exchange of contracts. It is imperative that buildings insurance has been taken out at the point of exchange by the buyer as they are now liable for the property. The buyer’s solicitor will now then receive the title deeds and transfer deeds ready to be signed to complete the purchase. Your solicitor will deal directly with the lender to ensure that the mortgage monies are ready for completion.

To summarise, there are many different aspects to consider when purchasing a residential property, at PJL Financial Services Limited, we can support you in understanding the most suitable option based on your own individual personal circumstances and guide you through the process. If you would like to learn more about this subject or require Independent Financial Advice from our local, experienced and friendly team, please feel free to contact us on 01788 57 11 22.

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority.

Your home may be at risk if you do not keep up repayments or other loans secured against it.

Income in Retirement Series: Part 6

Wed, 23 Mar 2022 12:51:55 GMT

Income in Retirement Series

Part 6: Pension Annuities

Welcome to the final part of our Income in Retirement Series. Our final post provides details of another method of taking income in retirement. Although this method has reduced in popularity since the introduction of Pension Flexibility Rules in 2015, they still remain a popular option for individuals to receive income in retirement.

What is a Pension Annuity?

A pension annuity involves exchanging your pension pot for a 25% tax free lump sum followed by a guaranteed income for the rest of your life. The income can be set up as a fixed income for life, or the income can be set to increase or decrease over time. This can be useful as an annuity which increases over time can protect your income against inflation. Annuities can also be set up on a single or joint life basis. A single life annuity will cease upon death whereas a joint life annuity taken out between spouses will pay out until the surviving partner passes.

It is also possible to purchase an impaired or enhanced annuity. These annuities have a higher rate than other annuities due to a shorter life expectancy due to lifestyle factors (such as being a smoker) or serious medical conditions and will pay a higher annual income.

Whilst a guaranteed income may sound appealing, there are a number of advantages and disadvantages that should be considered before making any decision.

As an annuity cannot be changed once set up, it is imperative that all factors are considered before making your final decision. Our expert financial advisers can assist you and give specific recommendations based on your own personal circumstances and objectives and ensure that you make the choice best suited to you and your family.

Advantages

· 25% tax free lump sum is payable at the start of the annuity

· A regular set income for the rest of your life

· If an increasing annuity is chosen, your income will keep pace with inflation

· A joint life annuity can provide a set income for both of your lives

Disadvantages

· Once an annuity has been set up it cannot be changed

· All income from an annuity is taxable at your marginal rate (after the 25% tax free cash)

· The tax free lump sum must be taken in full at the start of the plan

· The pension funds will be depleted entirely and cannot be left to your loved ones after your death

If you wish to explore your options in retirement, please feel free to get in touch. Our local, friendly team of Independent Financial Advisers will be happy to provide advice and suitable recommendations tailored specifically for you.

Give us a call on 01788 571122 and we will be more than happy to help

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority.

Your home may be at risk if you do not keep up repayments or other loans secured against it.

Income in Retirement Series: Part 5

Fri, 11 Mar 2022 14:55:02 GMT

Income in Retirement Series

Part 5: Alternative ways to generate income in retirement

Aside from typical Flexi-Access Drawdown which was covered in more depth in our last blog post, there are a number of other options that may be available from your pension plans. The specific features available to you will be dictated by the type of plan your pension funds are currently held within therefore a full pensions review with one of our experienced Independent Financial Advisers is necessary in order to advise you on what options are available to you and which would be the most suitable for your own personal goals and objectives.

Some of the options available to you may be:

Capped Drawdown

These are older arrangements that are no longer available for new policies, however if you already have a capped drawdown plan you are able to continue with it. Withdrawals from capped drawdown plans were “capped” at a level equivalent to 150% of a comparable annuity. This figure is set by the Government Actuary’s Department. Provided your income level remains below the “cap” your Money Purchase Annual Allowance will not be triggered by the withdrawals however should you make withdrawals in excess of this cap, the plan will automatically convert to a Flexi-Access Drawdown where there are no restrictions on withdrawals and your Money Purchase Annual Allowance will be triggered.

Uncrystallised Funds Pension Lump Sum (UFPLS)

Although not technically classified as a drawdown, UFPLS involves withdrawals whereby 25% of the payment is tax free and the remaining 75% is taxed at you marginal rate of income tax. These withdrawals can be made in smaller transactions or the entire fund value can be taken at once. This can provide a tax efficient way to take income as only 75% of the income will be subject to income tax. This method of withdrawal can be useful for those wanted to utilise their personal allowance (the amount that can be earned each year without any tax liability) as they are able to make higher withdrawals when utilising the 25% tax free element without incurring further tax liabilities. Your adviser will be able to do these calculations for you and explain the most tax efficient route to achieving your income goals.

Small Pots

For pension pots valued at £10,000 or less, the entire pot can withdrawn without impacting the Money Purchase Annual Allowance (MPAA). 25% of the fund value will be paid tax free, with remainder being taxed at your marginal rate of income tax.

Income from other investments

Many of us also have additional savings such as ISAs, Investment Bonds etc therefore your pensions review will also take into account any additional savings you have amassed as there may be other tax efficient income streams available to you. (For example, income from ISAs is entirely tax free therefore ISA income may be preferable over taxable pension income).

If you wish to discuss your plans for retirement please feel free to get in touch. Our local, friendly team of Independent Financial Advisers will be happy to provide advice and suitable recommendations tailored specifically for you.

Give us a call on 01788 571122 and we will be more than happy to help.

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority.

Your home may be at risk if you do not keep up repayments or other loans secured against it.

Income in Retirement Series: Part 4

Wed, 16 Feb 2022 22:02:41 GMT

Income in Retirement Series

Part 4: Flexi-access Drawdown

For those who may be approaching retirement, a quick internet search may have thrown out the idea of “Flexi-Access Drawdown”. You may have heard this term used in relation to your pension provisions and you may be wondering how it works and if it is right for you.

What is Flexi-Access Drawdown?

From April 2015, rules on how you can take your pension benefits were changed to allow everyone more flexibility over how and when you take your income in retirement.

For most modern day Defined Contribution plans, Flexi-Access Drawdown means there are no limits on the amount of withdrawals that can be taken from your pension. Although, older plans and many workplace schemes still have a more limited choice of options at retirement available therefore a full pension review with one of our dedicated Independent Financial Advisers will be necessary to give further clarity over which options are available to you within your specific pension plans.

Tax Free Cash (Pension Commencement Lump Sum)

From age 55 (57 from 2028) you are entitled to withdraw up to 25% of your fund value with no tax to pay regardless of your current marginal rate of tax. This can be highly advantageous for tax payers as it provides tax free income which can be used however is needed. The tax free cash can be paid alone, or you can have 25% of each income payment tax free which is a variation on flexi-access drawdown. The topic of Tax Free Cash was discussed in detail in last week’s article.

Taxable Income

Income in excess of the 25% PCLS will be taxed at your marginal rate of income tax. As mentioned above, there is no limit to the amount of withdrawals that can be made from your Flexi-Access Drawdown although it is imperative to remember that if more income is taken than the amount of growth received on the funds there will be a greater risk of depleting the funds entirely and running out of income.

Money Purchase Annual Allowance

Once income in excess of the 25% PCLS (tax free cash) is taken, the Money Purchase Annual Allowance (MPAA) will be triggered. This means that the maximum you can save into a pension and receive tax relief will be reduced from £40,000 per year for most individuals to £4,000 per year. This must be considered before any ‘taxable’ withdrawals are made. Our advisers would be able to explain this in detail at your pension review meeting.

Our advisers are able to put together an overall income strategy for your retirement in order to ensure that you receive the correct level income in the most tax efficient manner whilst preserving the value of your pension funds wherever possible. We are also able to provide you with a cash flow report that can show you, in monetary terms, the effect of your income withdrawals on your overall pension funds which many of our client’s have found useful.

If you wish to explore your options in retirement please feel free to get in touch. Our local, friendly team of Independent Financial Advisers will be happy to provide advice and suitable recommendations tailored specifically for you.

Give us a call on 01788 571122 and we will be more than happy to help.

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority.

Your home may be at risk if you do not keep up repayments or other loans secured against it.

Income in Retirement Series: Part 3

Thu, 10 Feb 2022 09:20:45 GMT

Income in Retirement Series

Part 3: Tax-free cash from your pension

What is Tax Free Cash?

The Pension Commencement Lump Sum (or PCLS) is colloquially know as “Tax Free Cash” and PCLS is exactly that; an amount of tax free money withdrawn from your pension. For most Defined Contribution Pensions, from age 55 (increasing to age 57 from 2028), you are entitled to withdraw up to 25% of your total fund value with no tax to pay. This can be taken as a one off lump sum, or as smaller regular or adhoc payments.

As this capital is paid to you tax free, this can be highly advantageous. This is especially true for higher or additional rate tax payers as it can provide highly tax efficient income to use for a variety of purposes.

The remaining pension funds can be left invested with the aim of increasing the value of your retirement pot to use later in life (although the value can fall as will as rise) or your remaining funds can be used to purchase an annuity to provide a guaranteed income in retirement. Any further income in excess of the 25% PCLS will be taxed as income at your marginal rate of income tax.

There are a number of specialised pensions, generally from many years ago, which have built in features such as protected tax free cash or tax free cash which exceeds the 25% limit and for Defined Benefit schemes the rules are different again. Therefore it is important to seek financial advice if you are considering consolidating your pensions or considering beginning to withdraw income from your pensions.

A full pensions review with our one of our Independent Financial Advisers would be needed in order to assess each of your plans individually to gain a clearer picture of your PCLS entitlement applicable to each individual policy and any other benefits associated with them and also to provide a income in retirement plan that suits your individual personal circumstances.

Due to the complex nature of pension rules, it is important to fully understand what is offered from each of your plans to ensure that you make the best decisions with your pension provisions.

If you would like to learn more about this subject or require Independent Financial Advice from our local, experienced and friendly team, please feel free to contact us on 01788 57 11 22.

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority.

Your home may be at risk if you do not keep up repayments or other loans secured against it.

Income in Retirement Series: Part 2

Wed, 26 Jan 2022 18:32:08 GMT

Income in Retirement Series

Part 2: The State Pension

What is the State Pension?
The state pension is a weekly income paid by the government from state pension age. (You can check your state pension age here: https://www.gov.uk/state-pension-ag e). The new state pension (applicable for those reaching state pension age from the 6th April 2016) will provide a maximum weekly payment of £175.20, however this is dependent on your national insurance contributions. For those with less than 30 years of NI contributions, this figure will be lower. In order to confirm your entitlement to state benefits in retirement, a BR19 form can be submitted. Our advisers can assist you with completion of this document along with advice and guidance on the information received.

Will I pay tax on my State Pension?

The simple answer to this is yes. The state pension is subject to income tax at your marginal rate. Of course, if your earnings still fall below the personal allowance (including the income from your State Pension) then no tax will be payable.

Why is my State Pension not enough to live on?

In recent times, the government have been attempting to make people aware that we will need to provide our own funds to supplement our income in retirement. The impact of rising welfare costs and people generally living longer has resulted in an ever increasing savings gap (the shortfall of pension funds).

As a full state pension will still only provide income of £9,110.40 per annum, for the large majority this alone will not be enough to manage financially in retirement. Due to this, we must all consider alternative ways to provide income in retirement. Our experienced advisers can assist you with bespoke retirement planning through a variety of savings vehicles tailored to your own circumstances.

Do I have to take my state pension?

Many of us have enough additional income in retirement to not necessarily need our state pension and many wonder if there would be a benefit to deferring the state pension until later in life. The new state pension can be deferred, however the annual pension only increases by 5.8% for every year deferred. Due to this you would need to live significantly longer to benefit from this. It is generally understood that the only people who will benefit from deferment is those who are still working as the state pension is taxable and therefore it may be more beneficial to wait until retirement as you may pay less tax depending of your annual income at this point.

All of our advisers are well versed in the rules regarding taxation and can provide detailed advice on the best course of action based on your current and expected future circumstances.

If you would like to learn more about this subject or require Independent Financial Advice from our local, experienced and friendly team, please feel free to contact us on 01788 57 11 22.

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority.

Your home may be at risk if you do not keep up repayments or other loans secured against it.

Income in Retirement Series Part 1

Fri, 14 Jan 2022 12:15:10 GMT

Part 1: An Introduction to income in retirement

Are you approaching retirement and thinking about your options to provide income after finishing work?

Welcome to our seven part series on income in retirement. In the coming weeks we will be providing an overview of your options.

Retirement planning is a complex area of finance which requires advice and guidance from an experienced financial adviser, however in the coming weeks we aim to demystify some of the most common options/products available and hopefully these topics could provide food for thought and can be used as a talking point for your initial consultation with your adviser.

What is a pension?

Pensions are essentially long term savings plans used to accumulate a sum of money during your working life to support you financially in retirement.

When can I retire?

The normal minimum pension age is currently set at age 55. Before this, pension funds cannot be accessed other than in exceptional circumstances such as end of life. This age will be increasing to 58 by 2028. From then on the minimum pension age will remain as ten years before state pension age.

How much income will I have in retirement?

At retirement your level of income will be dependent on a variety of factors including the size of your pension pots, the types of pensions that you hold and how you choose to take income from these plans to achieve your goals whilst maximising the tax efficiency of any income received.

In the coming weeks we will cover the following options:

The State Pension: When will I receive this and how much will I be entitled to?
Tax Free Cash: What is it, when can I take it and how much can I take?
Flexi Access Drawdown: What options can this provide?
Other ways to take generate income in retirement
Annuities: What is an annuity and when could they be beneficial?
Defined Benefit Pensions: What is a Defined Benefit Pension and what are the benefits associated with them?

Over the years, our clients have often accumulated a variety of different pensions from past employers or personal schemes. When there are several pension pots to deal with the administration of these schemes can become confusing and overwhelming for many of us and we may not fully understand what we actually have. Our goal is to help you understand what types of pensions you currently hold, if they are still suitable and how they can be utilised to achieve your goals.

If you would like to discuss your plans for retirement please feel free to get in touch. Our local, friendly team of Independent Financial Advisers will be happy to provide advice and suitable recommendations tailored specifically for you.

Give us a call on 01788 571122 and we will be more than happy to help.

The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority.

Your home may be at risk if you do not keep up repayments or other loans secured against it.

What is a Trust?

Tue, 07 Dec 2021 14:55:24 GMT

What is a Trust?

Trusts come in a variety of different forms and each have their own specific uses. Typically, these can initially cause our client's confusion however in simple terms a trust is designed to protect and manage a persons assets, and they give you the peace of mind that your estate can be passed on securely and intact to your spouse, your children and their bloodline, or other named beneficiaries, either before or after your death. There are many types of trusts, all of which provide solutions for different circumstances, these include;

• Bare Trust

• Interest in Possession Trust

• Discretionary Trust

• Mixed Trust

• Trust for vulnerable people

• Non-resident Trust

They are made up from different people these involve:

• The ‘settlor’ - the person who puts assets into a trust

• The ‘trustee’ - the person who manages the trust

• The ‘beneficiary’ - the person who benefits from the trust

You can place different types of assets into a trust including Cash, Property, Shares and land. Trusts are set up for a number of reasons, including:

• To control and protect family assets

• When someone’s too young to handle their affairs

• When someone cannot handle their affairs because they are incapacitated

• To pass on assets while you are still alive

• To pass on assets when you die (a ‘will trust’)

A trust bypasses the time-consuming process of probate and assets can be managed without the need to wait for the ‘Grant of Probate’ from the Court. If the settlor wishes, the trustees do not have to wait for the settlor to die to provide assistance to the beneficiaries. They can see their beneficiaries benefit during their lifetime. You can place your assets in a trust to make sure your beneficiaries receive them at a time that’s right for you and for them. You have complete control and you decide on the trustees and what they can and cannot do.

This is beneficial if at some point in the future you are unable to manage your financial and legal affairs due to incapacity such as dementia. A Trust can also protect your share of assets for your children in the event that your partner should marry or co-habit after you have gone.

If you would like to learn more about this subject or require Independent Financial Advice from our local, experienced and friendly team, please feel free to contact us on 01788 57 11 22.

The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority.

Your home may be at risk if you do not keep up repayments or other loans secured against it.

Announcement : Exam Success

Fri, 19 Nov 2021 22:05:44 GMT

Announcement: Exam Success

We are extremely pleased to announce that one of our IFA Administrators, Jodie Allen, received the results from her final exam with the London Institute of Banking and Finance and is now a fully-qualified Paraplanner, having successfully completed the 'Diploma for Financial Advisers (DipFA).

Jodie joined us six years ago as an office administrator and quickly moved on to support our team of IFA's by preparing valuations, annual review documentation and completing research along with a number of other tasks and has become an integral part of the team. She has grasped this opportunity and driven herself to pass this course with flying colours. At PJL Financial Services Limited, we are always keen to support our team in achieving their goals and encourage them to complete relevant examinations that they wish to undertake as we believe this makes us better at being able to support our existing and new clients.

For our clients who already know Jodie and receive regular correspondence from her, you will be pleased to know that there will be no changes as she will continue to support Chris Wood (one of our Independent Financial Adviser's) in her new capacity.

We are extremely proud of Jodie for all of her hard-work over the last year and wish her all the best in her new role.

The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority.

Your home may be at risk if you do not keep up repayments or other loans secured against it.

Announcement: New Mortgage Adviser

Mon, 01 Nov 2021 12:03:06 GMT

Announcement: New Mortgage Adviser

As a result of our continued growth and increased demand for our Independent Mortgage Advice, we are pleased to welcome our newest member of our team, Mark Harris.

Mark is a fully Qualified Mortgage and Protection Adviser having passed his CeMAP Qualifications in June this year. As a result, he can support you across a range of different areas such as residential purchases, re-mortgaging and further advances and buy-to-let mortgages with access to the whole-of-market to ensure you obtain the most suitable mortgage for your own personal financial circumstances.

The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority.

Your home may be at risk if you do not keep up repayments or other loans secured against it.

Effect of Inflation on your cash

Fri, 08 Oct 2021 15:18:25 GMT

Real Returns: The effect of inflation on your cash accounts

As we progress through life saving on a regular basis, we all get that “feel good factor” as we see our bank balances increasing. However inflation is constantly reducing the purchasing power of our hard earned money behind the scenes, often without us even realising.

What is inflation?

Inflation is the decrease in the purchasing power of money and is reflected as an increase in the price of everyday goods. As a result of inflation, £1 in today’s money could buy us a single loaf of bread, however back in the 1970’s the same amount could have bought us 10 loaves of bread.

Is the interest paid on your cash account a “real return”?

Let’s say that your current easy access savings account has a balance of £1000 and is currently paying an interest rate of 1%. This means that in a years’ time, your account should be worth £1010 and will have grown by 1%.

However, let’s now also consider inflation which is generally around 2%. This means that although your capital has grown, the same items which would have cost you £1000, will now cost you £1020 therefore the amount you can buy with your money has decreased - your capital has now lost purchasing power despite the monetary value increasing.

What is a “real return”?

A real return is growth over and above inflation, meaning that in the future your capital will be able to buy more than it could have done in the past.

How do I achieve a real return on my savings?

The ideal and most risk-free option would be to save into a cash savings account which pays an interest rate over and above inflation, however accounts paying this level of interest are scarce and very hard to come by nowadays.

The other option is to invest your capital into the markets with the aim of achieving a potentially higher return than the current rate of inflation. Investment returns are likely to be significantly higher than interest received on cash accounts, however they do come with varying levels of risk. Investments should be viewed as long term savings as the value of your investments will fluctuate daily and ultimately there is no guarantee that your portfolio will outperform inflation.

The risk level will depend entirely on the underlying investments within your portfolio, (for example, government bonds are typically very low risk however returns will likely be lower than their higher risk counterparts such as shares). Risk can be reduced by holding a diverse portfolio with a variety of investments across multiple sectors and geographic locations, however risk can never be eliminated entirely.

The risk level and contents of your portfolio can be tailored to you with the help of one of expert advisers and will be based on your personal financial goals and your individual attitude towards investment risk.

Your investments will be held within specific “wrappers” (such as ISA’s, pensions and investment bonds) which our experts can select with you based on your own goals to ensure that any investment is as tax efficient as possible.

If you would like to learn more about this subject or require Independent Financial Advice from our local, experienced and friendly team, please feel free to contact us on 01788 57 11 22.

The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority.

Your home may be at risk if you do not keep up repayments or other loans secured against it.

Bricks & Mortar vs. Investments

Tue, 28 Sep 2021 08:31:56 GMT

Bricks & Mortar vs. Stocks and Shares ISA

Different people have different reasons for investing. This is then defined even more depending on the individual's attitude towards risk. There are pros and cons for the different types of investing, and again this depends on your ultimate goal. Is it a long term savings plan, or is it to provide an income? Moving even further down the decision process, what are your personal financial circumstances? This will have an impact on how tax efficient the type investment is. So let’s take a look at the pros & cons of investing into property, or a stocks & shares ISA.

Bricks & Mortar

Benefits

You would like to think over time the property can increase in value along with providing you with a regular income. It’s mainly more stable than investing in shares (but not bulletproof). Any rental income can be offset against the mortgage. If it’s a short-term holiday let, you and family can benefit yourselves and these can bring in a greater income than long-term residential lets. Properties can also be placed in a trust or a Limited Company to improve the tax efficiency of your investment.

Drawbacks

Property letting is not suitable for short term investors and the property market can fall as well as rise. Landlords are also subject to tenant-risks i.e. Non-payers or those who cause damage to the property. A void property can also hit hard with no tenant and no income, as you may still have mortgage repayments running alongside. When purchasing you are potentially liable for the stamp duty land tax surcharge which increases your purchase costs. Your investment will be more illiquid than shares. The property may incur professional lettings fees and will require regular test certificates and maintenance which will reduce your net profits. Furthermore, your net income will be taxable at your marginal rate of income tax. Finally, if sold or gifted, the profit made on the sale of the property maybe liable to capital gains tax.

Stocks & Shares ISA

Benefits

The investment can provide a potential greater return over the medium to long term. The investment is liquid i.e. readily accessible (usually 5-10 working days). They are very tax efficient i.e. free from capital gains and dividend tax and can also provide a regular tax free income, no matter what your marginal rate is! You can pay monthly premiums into the investment if you want to save on a regular basis. You can have a number of different funds to spread the risk that can be switched to match clients attitude towards risk or if individual funds are under performing. You receive protection from the Financial Services Compensation Scheme should the ISA provider collapse (up to the value of £85,000.00).

Drawbacks

This type of investment is not suitable for a short term investor. Investment returns or capital growth is not guaranteed and are best managed with support of professional advisers to monitor the performance of your investments on an ongoing basis, which will incur fees. ISA’s cannot be written into trust and form part of your estate for Inheritance Tax purposes unless invested in shares which qualify for Business Relief such as AIM shares however these are not suitable for all investors due to the additional risks associated with this type of investment . You are also only able to invest £20,000.00 a year into an ISA (this however can run alongside a General Investment if you have surplus capital that you wish to invest and then transfer £20,000.00 each tax-year so to maximise the tax-efficiency of your investments.

If you would like to learn more about this subject or require Independent Financial Advice from our local, experienced, and friendly team, please feel free to contact us on 01788 57 11 22.

The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority.

Your home may be at risk if you do not keep up repayments or other loans secured against it.

Long Term Care

Thu, 16 Sep 2021 20:06:26 GMT

Long Term Care Planning

With a person’s increasing ability to improve their long-term survival prospects, there comes a new set of challenges – how to plan your finances long into retirement.

A little over 100 years ago, life expectancy of an average male was only 48.5 years, and a female was 52.5 years. Medical advancements have virtually wiped out many fatal diseases such as TB, Diphtheria, and Polio. Improved conditions in the workplace and better housing have also improved longevity, meaning that a 50-year-old male today would have an average life expectancy of 84 years and a female of the same age would expect to live to age 87 years.

Living longer increases the risk of disablement so we must ensure we have sufficient financial provisions to cover long term care. The best time to plan for your old age is normally from the age of 45 to 60. This is the time when perhaps the children have left home, and income is potentially at its highest.

After taking care of basic priorities, such as life cover, income replacement on ill health and pension planning, it is now wise to turn our attentions to long term health care.

Costs of Care:

Under current legislation, anyone who has savings or property worth over £23,250.00 is unable to obtain government help to pay for fees in a nursing or residential home. At today’s prices you could expect to spend over £33,500.00 per year to stay in a residential home and over £42,500.00 per year in a nursing home. Care in your own home can also prove to be very expensive.

New Social Care Plan Legislation Announced 7th September 2021:

The government confirmed that from April 2022 the maximum that any person in England would be expected to pay for social care costs would be capped at £86,000.00 over their lifetime. Although welcome news, on the face of it, there are potentially other underlying costs which will require further clarification. The £86,000.00 cap is based on care costs; however, it is unclear whether this includes the cost of accommodation and food. If these are excluded from the cap the true cost of long-term care may well be significantly higher than first thought.

Potential Solution:

Historically insurance was used to protect a person’s estate from the cost of long-term care, however in recent times these have been largely withdrawn from the marketplace, meaning that a person’s only choice has been to spend their life savings until the point that the government provides help.

The positive news is that there is a general expectation that over the coming months a number of Insurance policies will be developed to help towards mitigating these costs, therefore enabling advanced planning to become a possibility once again.

If you would like to learn more about this subject or require Independent Financial Advice from our local, experienced, and friendly team, please feel free to contact us on 01788 57 11 22.

The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority.

Your home may be at risk if you do not keep up repayments or other loans secured against it.

Planned increases to dividend tax and how this may impact you

Fri, 10 Sep 2021 14:54:11 GMT

Will you be impacted by the planned increase to dividend tax?

It’s been an eventful week, while many of our children returned to school, as did our own Members of Parliament, and the Government wasted no time by setting out their plans to tackle the issues in the provision of social care and most importantly how this planned overhaul will be funded.

The government announced two measures which were voted through Parliament this week and take effect from the 6th April 2022:

Increase in dividend rate tax by 1.25% across all income tax bands
Increase in National insurance contributions

Today, we are reviewing the changes to dividend rate tax in more detail and discuss who the changes are most likely to impact and most importantly, what steps you may be able to take this tax-year to minimise any negative impact.

Dividend rate tax increase

Dividend tax is paid on shares and income that you receive from funds that invest in shares such as pooled investments and the amount you pay will depend on your marginal rate of income tax as below:

Income tax band Current Dividend tax-rate New Dividend tax-rate from 6th April 2022

Basic Rate 7.50% 8.75%

Higher Rate 32.50% 33.75%

Additional Rate 38.10% 39.35%

Many directors of UK businesses opt to pay themselves through dividends due to its relative tax-efficiency against taking an employed salary due to the lower rates of income-tax and to reduce the amount of national insurance contributions paid. For these individuals, it would be prudent to assess your own remuneration package and to ensure it remains suitable after the 6th April 2022.

Remember, regardless of your marginal rate of tax, you have a £2,000.00 dividend allowance where dividend income received up to this level remains tax-free.

Furthermore, dividend income that is received inside either an ISA-wrapper or pension-wrapper remain tax-free. For investors, this is extremely important, by maximizing your £20,000.00 ISA allowance for this tax-year and contributing into a UK registered pension scheme can both help reduce the amount of dividend tax payable by transferring your capital into these tax-sheltered investments.

As a result of this announcement, it may a worthwhile time to review your investment portfolios to ensure they remain suitable for your own personal financial circumstances and continue to be as tax-efficient as possible. If you would like to learn more about this subject or require Independent Financial Advice from our local, experienced and friendly team, please feel free to contact us on 01788 57 11 22.

Coming Soon

Our review on the impact of National Insurance Contributions increase for employees and employers and the planned changes to funding social care and how this may change your approach towards planning for long-term care in the future.

The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority.

Your home may be at risk if you do not keep up repayments or other loans secured against it.

10 year Anniversary

Wed, 01 Sep 2021 08:48:33 GMT

Celebrating 10 years of success

We are celebrating our ten year anniversary today and we would like to take this opportunity to thank all of our clients who have supported us along the way.

The business was founded by Paul Loveridge (Managing Director) in September 2011 and since then has grown into a thriving team of eight individuals including four Financial Advisers who collectively have over 45 years experience in the industry and four administrative staff who ensure our business runs effectively and remains fully compliant in an ever changing world.

As Independent Financial Advisers, we have continued to build upon our excellent local reputation and recommendations from our existing clients to become one of the largest directly authorised IFA firms locally offering a number of services including Pensions and Retirement Planning, Wealth Planning, Savings and Investment Advice, Protection, Mortgage advice and Equity Release.

We look forward to another ten years.

Benefits of saving into an ISA

Fri, 20 Aug 2021 08:06:34 GMT

Why invest into an ISA?

ISA’s are tax efficient savings vehicles which are free of income tax and capital gains tax (CGT). This means that all growth within an ISA and any income taken from one will be completely tax free. This can be beneficial for building up a pot of savings for use in the future, at which point income can be taken from the ISA completely tax free regardless of your income.

There are two main types of ISA:

Cash ISA

Cash ISA’s are offered by most banks and building societies and offer an excellent low risk option for those who may need access to their funds at short notice. Whilst Cash ISA’s protect your capital from the day to day ups and down of the market, in the long run they are unlikely to produce a “real return” above inflation.

Stocks and Shares ISA (S&S)

Stocks and Shares ISA’s offer the same attractive tax free advantages as a cash ISA, however your capital will be invested in a range of investment funds rather than remaining in cash. Investment into a Stocks and Shares ISA should be viewed as a long term investment, usually for at least five years. This allows for the day to day fluctuations of the markets. Whilst the potential for real returns will be higher than that available via a cash ISA over the long term, there will always be risk to your original investment and the value of your ISA will go up and down.

The portfolio in which your ISA funds will be invested in can be tailored to suit your own attitude to investment risk and also gives you the flexibility to change your investments as your needs and circumstances change.

ISA Contribution Limits

All UK residents over the age of 18 have an annual ISA allowance of £20,000.00 each tax year. Any unused ISA allowance cannot be carried forward.

You have the option of investing the full £20,000 into a cash ISA, a stocks and shares ISA or a combination of the two. However you can only invest in one of each type of ISA per tax year. (For those aged 16 or 17, you may only invest in a cash ISA.)

ISA Withdrawals

Withdrawals from an ISA can be made at any time, however once withdrawn, the capital will lose its tax free status and can only be paid back into an ISA provided there is unused ISA allowance available. (Flexible ISA’s allow money to be replaced within the same tax year without affecting the ISA allowance.)

Transfers between ISA’s retain their tax free status throughout. This means that you can transfer money between ISA’s (either cash or stocks and shares) without impacting your annual ISA allowance.

If you would like to learn more about this subject or require Independent Financial Advice from our local, experienced and friendly team, please feel free to contact us on 01788 57 11 22.

The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority.

Your home may be at risk if you do not keep up repayments or other loans secured against it.

How would you manage financially if you couldn’t work due to illness?

Mon, 16 Aug 2021 08:26:02 GMT

How would you manage financially if you couldn't work due to illness?

Accidents and illness can and do affect people when we are least prepared for them and can have life changing implications.

If you are employed and you are off sick then generally you will receive sick pay from your employer for a limited amount of time then it will revert to statutory sick pay which currently is £96.35 per week for up to 28 weeks. If you have a family and a mortgage how would you manage on this small amount each week?

If you are self-employed and you are off sick then you don’t get the luxury of receiving sick pay from your employer and therefore the burden on yourself is huge. If you’re a painter a decorator and fall off a ladder breaking an arm how long would you be off work for? If you’re a builder and injur your back then it is going to take time for you to recover and return to work.

It is vitally important to have an emergency fund of approximately 3-6 months worth of outgoings to help manage short term peroids of financial loss however what if your illness prevents you from working long term? What would you have to change in your lifestyle in order to manage financially?

The good news is that you can do something to protect your income in case of long term illness or injury which prevents you form doing your own job. This is called Income Protection which generally will pay out up to 65% of your pre tax earnings until you are able to return back to work or to when the plan ends which could be your state pension age. A self-employed person may want a plan that will pay out after the first four weeks of incapacity whereas an employed individual may require a plan that pays out when their sick pay at work ends. This period is known as the deferred period and as such the longer the deferred period the lower the cost. This takes me back to the importance of an adequate emergency fund to help in the short term.

If cost is an issue then there are plans which will pay out for a limited period, i.e. 12 months or 2 years.

It is important to consider this type of protection alongside your whole financial circumstances.

If you wish to have a chat about this or anything else to do with your finances then get in touch now, don’t leave it until it’s too late. We are here to help you and your family. We are a local, friendly team of Independent Financial Advisers with many years of experience.

Give us a call on 01788 57 11 22 and we will be more than happy to help.

The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority.

Your home may be at risk if you do not keep up repayments or other loans secured against it.

Reasons to use a Mortgage Adviser

Mon, 02 Aug 2021 20:31:00 GMT

Reasons To Use a Mortgage Adviser

We all know how stressful the house-buying process can be right from the beginning. From finding and securing your ideal home and obtaining a new mortgage. Then comes the property valuation, conveyancing, exchange of contracts, buildings insurance and then finally you get the keys to your new home. Even for an existing homeowner, this process is complicated at times while for a first-time buyer this process can seem very daunting.

Mortgage products themselves can be complicated with a variety of different options such as interest-rates, deposit size, product flexibility, deal length and mortgage product set-up fees. It’s useful to have an Independent Mortgage Adviser to guide you through this process to support you in obtaining a mortgage that suits your own personal circumstances.

Here are some of the main reasons why it may benefit you to obtain Independent mortgage advice next time you are thinking about purchasing your new home or re-mortgaging your existing home:

Cost isn’t everything, but it’s certainly important. An Independent Mortgage Adviser can support you in finding the most competitive deal available in the market taking into account your personal circumstances. Just small changes in your initial mortgage rate can save thousands of pounds over the term of a mortgage. For example, take a £200,000.00 mortgage payable over 30 years, if you secured a five year fixed rate of 1.80%, you would pay £17,374.67 of interest costs in the first five years. For the same mortgage but at a lower five year fixed rate of 1.70%, you would pay £16.367.42 (a saving of £1,007.25 or £201.45 a year)
An Independent Mortgage Adviser has access to the whole market and a range of different products and lenders, some of which are only available through intermediary channels which you would be unable to obtain directly.
An Independent Mortgage Adviser will take the time to discuss your mortgage requirements in detail and consider which lender may be most suitable. For instance, one high-street lender will currently only use 40% of any regular overtime payments whilst another will use 100%, this can make a substantial difference to the maximum mortgage the lender may calculate that you are able to afford.
Minimising the risk of a declined mortgage application, this can prove very costly, as this may leave a mark on your personal credit file and furthermore you may have already paid some legal and valuation fees beforehand which may be non-refundable. We can help you prepare for your application to boost your chances of success.
An Independent Mortgage Adviser will research the market, complete your mortgage application and be a useful sounding board throughout the mortgage process, this can save you significant time and provide assurance at certain stages of the mortgage process

At PJL Financial Services Limited, we do not charge you any application fees or completion fees throughout the mortgage process, instead we receive a procurement fee from the lender, meaning all the benefits above can be achieved with no cost to you.

If you would like to learn more about this subject or require Independent Financial Advice from our local, experienced and friendly team, please feel free to contact us on 01788 57 11 22.

The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority.

Your home may be at risk if you do not keep up repayments or other loans secured against it.

Using carry-forward to boost your pension contributions

Fri, 23 Jul 2021 09:52:59 GMT

Using carry-forward to boost your pension contributions

Contributing regularly into a pension has many benefits however many individuals put off their retirement planning until later in life due to other financial commitments at that time such as obtaining a deposit for a home, raising a family or education costs. Generally, the earlier you begin saving into a registered pension scheme, the greater the opportunity your investment has to grow to ultimately provide a larger pot to use in your retirement.

You may be at the point in life where you are considering making a lump-sum payment into your personal pension or employers pension to ensure you are on track with your retirement planning, and this is generally advisable particularly if you are forecast to have a lower pension than you desire. What makes it even more attractive is the tax-relief that you may receive on contributions into your pension.

However, since the Pensions Act 2006, you have an annual limit which runs each tax year for which you can make pension contributions and still recieve the tax relief. It is called the ‘Annual Allowance’. Assuming you are under 55 years of age or yet to access any of your existing pensions flexibly, this is limited to £40,000.00 which is the maximum gross contribution each tax-year you can make or the total of your relevant income for the tax year, whichever is lower.

For a basic-rate tax payer, that equates to a personal contribution of £32,000.00 or for a higher-rate taxpayer just £24,000.00 and while this is generally sufficient for most individuals, you may be seeking to make a larger lump-sum contribution. The goods news is that you may be eligible to use ‘Carry Forward’:

Carry-forward allows you to use your previous tax-years unused annual allowance of £40,000.00 to increase your contributions in the current tax-year
You can carry-forward up to three tax-years prior, therefore you could make a gross contribution of up to £160,000.00 in a single tax-year by utilising this method subject to having sufficient ‘relevant income’ this tax-year

Importantly, HMRC state exactly what is deemed to be ‘relevant income’ where items such as employment income or self-employed income are included within this definition however, dividends which many Directors may choose to pay themselves as their main renumeration package due to the potential income tax and National Insurance savings are not deemed to be relevant income and do not count towards your carry-forward calculation.

We believe it is important to regularly review your retirement plans to ensure they remain on-track and carry-forward is one method that may be available to you in order to get your pension planning back on track.

If you would like to learn more about this subject or require Independent Financial Advice from our local, experienced and friendly team, please feel free to contact us on 01788 57 11 22.

The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority.

Your home may be at risk if you do not keep up repayments or other loans secured against it.

What are Distribution Bonds?

Fri, 16 Jul 2021 15:15:44 GMT

What are Distribution Bonds?

Interest only accounts such as building society accounts are a useful way to manage your cash over the short term, for buying household goods or saving for next year’s holiday. Furthermore, your original investment is usually guaranteed. However, the money earned on interest only deposits can be undermined by the effects of inflation.

The concept of the distribution bond is to allow investors to take advantage of stock market growth, whilst at the same time enjoying the benefits of a relatively cautious investment. The aim is to provide distributions that over the medium to long term would exceed the rate of inflation and the interest rate of building society deposits and produce some capital growth.

A distribution bond allows the smaller investor access to the top investment professionals, their expert analysis and proven experience. The strategy behind the distribution bond is to not only select the right types of investments but to ensure the right investment mix is achieved in order to maximise the potential for income and capital growth whilst minimising risk. Instead of concentrating exclusively on one investment area and hoping it performs well, the bond’s investments are split in such a way that whatever the investment conditions are at least part of the fund’s assets should be producing a positive return. The concept of risk spreading is a valuable safeguard against falls in the stock market, although there are no guarantees.

As well as aiming for capital appreciation you can use the distribution bond as a way of receiving income which is normally distributed twice a year. The income received from your bond is not the same as interest you would receive from a building society account. The income you receive is generated from the investment holdings in the bond, such as fixed interest investments, dividends and interest from money held on deposit. Any income you receive is considered to be a withdrawal of capital and if you start taking income too early, what you receive maybe made up from your original investment. Any tax you may have to pay on this income would depend on the size of the withdrawals and income you receive from other sources.

The distribution bond is an investment vehicle that allows the cautious investor exposure to stock market investments that have historically outpaced inflation. It is a medium to long term investment and you should consult an independent financial adviser who can determine the best type of investment to suit your needs and the best company to arrange this investment with.

If you would like to learn more about this subject or require Independent Financial Advice from our local, experienced and friendly team, please feel free to contact us on 01788 57 11 22.

The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority.

Your home may be at risk if you do not keep up repayments or other loans secured against it.

The Importance of Protection

Fri, 09 Jul 2021 15:22:32 GMT

The Importance of Protection

How would your loved ones manage if you should die or suffer a serious illness?

We all know of someone who has been affected by the death of a loved one, or suffered with cancer, stroke, multiple sclerosis or heart attack to name but a few conditions and the effect it has, not only on the individual but also their close family. We all think that it will never happen to us, and I do hope that it won’t, but you never know what is around the corner. No one is immune.

Take a minute of your time and think about it for a short while.

You have car insurance, why? Because it’s the law.

You have house insurance, why? Because who can afford to pay the rebuild costs of a house should anything happen to it.

You have travel insurance, why? Just in case something happens to you when you go on holiday.

You have pet insurance, why? Because you care about your pet and don’t want to be lumbered with large vets bills.

Who pays for the above? Well that’s you! You go to work to earn the money to pay for all of the above. Think of a cash machine in the corner of your living room. Every month you go to it and take out money to pay for the household bills, the lovely car, the food on your table, the nice clothes and the beautiful holidays. What would happen if that cash machine broke down? Wouldn’t you protect it? Of course you would. Then why don’t you protect yourselves?

In 2018, 141.4 million working days were lost through sickness absence or injury in the UK according to the Office for National Statistics 2019.

There are many types of protection that can cover you for different things. It is a minefield but with the correct advice and guidance you can choose the best product from the whole of the market that matches your needs.

If you have some protection in place, then that’s great. I guess it was probably taken out years ago? Can you remember what it covers? Does it still match your needs? What is it that you’re paying for each month?

If you wish to have a chat about your protection needs then get in touch now, don’t leave it until it’s too late. We are here to help you and your family. We are a local, friendly team of Independent Financial Advisers with many years of experience.

Give us a call on 01788 57 11 22 and we will be more than happy to help.

The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority.

Your home may be at risk if you do not keep up repayments or other loans secured against it.

Inheritance Tax: What is the Nil-rate Band

Thu, 01 Jul 2021 21:56:07 GMT

Inheritance Tax: What is the Nil-Rate Band?

When it comes to passing on assets and estates to loved ones, it’s always a subject that isn’t talked about. I mean, who wants to talk about a loved one passing away! The trouble is, if you have a sizable estate, and plans are not put in place, you heirs could face a tax bill of up to 40% of your estate. Your estate amounts to your property(s), savings and any other assets you hold. One of the tax reliefs in place to help negate the potential IHT to be paid is called the Nil Rate Band. This is currently set at £325,000 (2021-2022) and this allow your heirs to inherit £325,000 before any IHT has to be paid.

If you are married or in a civil partnership, your partner will always inherit from your estate tax free. On the death of the first partner, the Nil Rate Band can be pooled, thus giving the surviving partner a Nil Rate Band of £650,000.

If your estate includes a property, you may also benefit from an additional allowance called the Residential Nil Rate Band. As from 2020, this has now reached £175,000, and this allowance can also be pooled on the death of the first partner. This however can only be used on a property that you have lived in, so Buy-to-let properties will not benefit from the Residential Nil Rate Band allowance. The other criteria is that to qualify for the Residential Nil Rate Band, the property has to be left to what the government describe as direct descendants.

This means, that as a couple, you could potentially pass on £1,000,000 before any Inheritance Tax is due. However, some people whose partner died before 21 March 1972 will be caught by a loophole which means they don't get a 'double allowance'.

There are a number of other ways to avoid or reduce IHT even further, these are;

• Gift allowances.

• Utilising Trusts.

• Gifts to Charity or political parties.

• Lifetime Mortgage.

• Insurance Policies.

Any gifts that are gifted over and above the annual gift allowance are then classed as a Potentially Exempt Transfer (PET). This then falls into a seven year period, and if the person gifting survives seven year from when the gift was originally made, it becomes exempt from IHT. In that seven year period, any IHT due on the gift is then tapered and will reduce after three years from the 40%, by 8% each year, until after the seventh year, when it then becomes fully exempt.

If you would like to learn more about this subject or require Independent Financial Advice from our local, experienced and friendly team, please feel free to contact us on 01788 57 11 22.

The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority.

Your home may be at risk if you do not keep up repayments or other loans secured against it.

Should you purchase a Buy-to-let property personally or through a Limited Company?

Thu, 24 Jun 2021 20:59:24 GMT

Should you purchase a Buy-to-let property personally or through a Limited Company?

It’s a common question that we often get asked and while the correct answer depends upon your own personal circumstances, here are some of the key considerations that you need to take into account whether you purchase a residential investment property in a Limited Company or personally either as a sole-trader or a Partnership.

Purchase Costs

If you are an existing property owner, you can expect to pay a higher rate of Stamp-duty land tax which is charged on completion. You can expect to pay a 3.00% premium above the standard SDLT thresholds which are currently reduced due to HMRC’s own decision to reduce this tax as a way to stimulate the housing market since the Covid-19 pandemic. Assuming the limited company is set-up solely as a property investment vehicle, the amount of SDLT you will pay will likely be the same.

Mortgages

If you are seeking a mortgage to support your purchase is important to consider the mortgage rates that you will pay, currently limited company buy-to-let mortgages are generally more expensive however lenders may be more flexible with their internal stress rates and interest-cover margins which may allow you to obtain a higher mortgage amount than a purchase as a sole-trader or Partnership.

Tax on Income

Mortgage rate relief is an important consideration for purchasing as a sole trader or partnership as the amount you can deduct for finance costs (i.e. mortgage interest) is now restricted to basic-rate tax deduction only. You will pay tax at your marginal rate of income tax for the profits generated from a rental property which could be as high as 45% if you are an additional rate tax-payer.

For a Limited company, profits are subject to Corporation tax which could be lower however you still need to consider how you take your profits. All UK residents have an annual dividend allowance of £2,000.00 which is tax-free and could be used as a highly tax-efficient way to extract profits, however this is only applicable if you are not currently in receipt of dividend income elsewhere (income received from pensions or stocks and shares ISA are not relevant to this calculation).

Tax on disposal

A sale of the property or even gift to a family member will trigger a capital gain at the current market value. If this disposal results in a profit once deducting for certain allowable fees. For an individual/partnership, you are able to use your Annual Exempt amount of £12,300.00 for the tax-year for the disposal occurred, however gains in excess of this are taxed at either 18% or 28% depending on whether you are a basic rate tax-payer or higher rate tax-payer. Meanwhile Limited company disposals are subject to corporation tax only.

Conclusion

To summarise, there are many different aspects to consider when purchasing a residential property as an investment, at PJL Financial Services, we can support you in understanding the most suitable option based on your own individual personal circumstances. If you would like to learn more about this subject or require Independent Financial Advice from our local, experienced and friendly team, please feel free to contact us on 01788 57 11 22.

The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority.

Your home may be at risk if you do not keep up repayments or other loans secured against it.

The Need for a Financial Review

Sun, 20 Jun 2021 21:20:11 GMT

The Need for a Financial Review

Recent years have seen a great improvement in the health of the nation, through diet and exercise. Although there is a long way to go yet, people are more aware of the advantages of taking a little more care of themselves and are set to live longer and happier.

The same has been true in personal finance, with many people now taking an active interest in their monetary affairs. But as with fitness, there are still far too many “couch potatoes” and a bigger danger still is that once they have decided to set aside a few hours to organise pensions, investments, and protection policies, they think the task is over and there is no need to worry for a long time to come.

In fact, looking after your finances is an ongoing task and it is vital for you to have a regular “check-up” to make sure things are going smoothly. All too often, a few bits and pieces are put in place and then forgotten about, and it can be a long time before they are looked at again. If you look back over the past few years, there have probably been many changes to your lifestyle, and it is these changes that could mean the financial plans you have drawn up now need fine tuning.

So, how often should you have these check-ups? We would suggest that anything over a year could potentially cost you money. Whether it be changing rates of interest in building society accounts, managing your investment portfolio, or the level of your pension contributions, they all need looking after to get the most from your cash.

If there has been a major change in your circumstances, sometimes the need for a review seems quite obvious. For example, if you start a family then cost-effective protection becomes a main priority. Similarly, if you change jobs, the amount of life cover you have could suddenly alter and may need immediate attention. Furthermore, it wont just be your own circumstances that change over a period of time. Over the recent past we have seen an increase in state pension ages in men and women and changes to drawdown pensions that can lead to far greater flexibility in retirement planning.

In fact, there are very few people who do not need to examine their finances from one year to the next, and it is well worth while setting aside just an hour or two a year to talk things over and make sure your cash is working hard. Most people need a little assistance in planning their finances, to realise exactly what options they have, and many turn to an independent financial adviser for help. One important factor for these people is the ongoing nature of the service which can last for many years and will enable them to keep their finances on course. PJL Financial Services Ltd can help keep you up to date with any new changes that could affect you.

If you would like to learn more about this subject or require Independent Financial Advice from our local, experienced and friendly team, please feel free to contact us on 01788 57 11 22.

The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority.

Your home may be at risk if you do not keep up repayments or other loans secured against it.

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