budget

Economic Review – December 2024

Georgia Turner blog Blog, budget, economic growth, Economic review, economic update, economy, small business

Please find below our Economic Review for December 2024

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Headline inflation at eight-month high

Release of the latest inflation statistics showed consumer prices are now rising at their fastest rate since March 2024, while last month also saw Bank of England (BoE) policymakers become more divided over the need to cut interest rates.

Data published by the Office for National Statistics (ONS) showed the Consumer Prices Index (CPI) 12-month rate – which compares prices in the current

month with the same period a year earlier – rose from 2.3% in October to 2.6% in November. ONS said the rise was primarily driven by an increase in motor fuel and clothing prices, which was only partially offset by a drop in air fares.

November’s CPI rise was, though, in line with expectations expressed in a Reuters poll of economists. Additionally, there

was some relief in relation to underlying price pressures, with services inflation – a measure closely monitored by the BoE – remaining unchanged at 5.0%.

The latest decision of the BoE’s

interest-rate setting body was announced a day after the inflation release, with the nine-member Monetary Policy Committee (MPC) voting by a 6-3 majority to maintain Bank Rate at 4.75%. The three dissenting

voices each preferred an immediate 0.25 percentage point reduction in order to boost growth, but the six-strong majority, which included BoE Governor Andrew Bailey, expressed concern about wage growth and ‘inflation persistence.’

Commenting after announcing the Committee’s decision, Mr Bailey said he still believed the path for interest rates was “downwards.” However, he added, “We think a gradual approach to future interest rate cuts remains right, but with the heightened uncertainty in the economy we can’t commit to when or by how much we will cut rates in the coming year.”

The next MPC meeting is scheduled for early next month, with the outcome of the Committee’s deliberations due to be announced on 6 February.

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Economic Summary – November 2024

Georgia Turner blog Blog, budget, economic growth, Economic review, economic update, economy, small business

Please find below, our Economic review for November 2024

Download your Copy here:

SFFS Economic Review_Nov 24

Interest rates set to fall more gradually

Last month, the Bank of England (BoE) cut interest rates for only the second time since 2020 but also warned future reductions were likely to be more gradual due to the prospect of inflation creeping higher next year.

Following its latest meeting, which concluded on 6 November, the BoE’s nine-member Monetary Policy Committee (MPC) voted by an 8-1 majority to reduce rates by 0.25 percentage points. This took Bank Rate down to 4.75%.

Commenting after announcing the news, BoE Governor Andrew Bailey suggested rates were likely to “continue to fall gradually from here” although he did caution that they would not be reduced “too quickly or by too much.” Mr Bailey was also at pains to emphasise the word “gradual” and added that the reason for such an approach was that “there are a lot of risks out there in the world at large and also domestically.”

Alongside the rate announcement, the Governor unveiled the BoE’s latest economic forecast which takes account of the Chancellor’s Budget measures. The updated projections suggest the policies announced in the Budget are likely to boost the headline rate of inflation by almost half a percentage point at its peak in just over two years’ time and result in it taking a year longer for inflation to return to the Bank’s 2% target level.

The latest inflation data, which was published by the Office for National Statistics (ONS) two weeks after the MPC announcement, revealed that the annual headline rate jumped from 1.7% in September to 2.3% in October. While this sharp increase was largely driven by October’s energy price hike, the figure did come in slightly ahead of analysts’ expectations. This overshoot, combined with the Governor’s comments, has undoubtedly increased the prospect of interest rates remaining unchanged following the MPC’s final meeting of the year on 19 December.

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Spring Budget 2024

Jenny Procter blog Blog, budget, economic growth, economy, inflation, Interest Rates, investments, pensions, small business

Download your copy here

On 6 March, Chancellor of the Exchequer Jeremy Hunt delivered his Spring Budget to the House of Commons declaring it was “a Budget for long-term growth.” The fiscal update included a number of new policy measures, such as a widely-anticipated reduction in National Insurance, abolition of the non-dom tax status and new savings products designed to encourage more people to invest in UK assets. The Chancellor said his policies would help build a “high wage, high skill economy” and deliver “more investment, more jobs, better public services and lower taxes.”

OBR forecasts

During his speech, the Chancellor declared that the economy had “turned the corner on inflation” and “will soon turn the corner on growth” as he unveiled the latest economic projections produced by the Office for Budget Responsibility (OBR). He started by saying that they showed the rate of inflation falling below the Bank of England’s 2% target level in “a few months’ time.” He noted that this was nearly a year earlier than the OBR had forecast in the autumn and said this had not happened “by accident” but was due to “sound money” policies.

The Chancellor also noted that the OBR forecast shows the government is on track to meet both its self-imposed fiscal rules which state that underlying debt must be falling as a percentage of gross domestic product (GDP) by the fifth year of the forecast and that public sector borrowing must be below 3% of GDP over the same time period. Indeed, in relation to the second rule, Mr Hunt pointed out that borrowing looks set to fall below 3% of GDP by 2025/26 and that by the end of the forecast period it represents the lowest level of annual borrowing since 2001.

In terms of growth, Mr Hunt revealed that the updated OBR projections suggest the UK economy will expand by 0.8% this year, marginally higher than the fiscal watchdog’s autumn forecast. Next year’s growth rate was also revised upwards to 1.9% compared to the 1.4% figure previously predicted.

Cost-of-living measures

The Chancellor also announced a series of measures designed to help families deal with cost-of-living pressures. These included: an extension to the Household Support Fund at current levels for a further six months; maintaining the ‘temporary’ 5p cut on fuel duty and freezing it for another 12 months; an extension of the freeze in alcohol duty until February 2025; an extension in the repayment period for new budgeting advance loans from 12 months to 24 months, and abolition of the £90 charge for a debt relief order.

Personal taxation, savings and pensions

Following previous changes to National Insurance Contributions (NICs) from January 2024, the government announced further changes to take effect this April:

The main rate of employee NICs will be cut by 2p in the pound from 10% to 8%, which, when combined with the 2p cut that took effect in January, is estimated to save the average salaried worker around £900 a year
There will be a further 2p cut from the main rate of self-employed NICs on top of the 1p cut announced at the Autumn Statement
This means that from 6 April 2024 the main rate of Class 4 NICs for the self-employed will reduce from 9% to 6%. Combined with the abolition of the requirement to pay Class 2 NICs, this will save an average self-employed person around £650 a year.

To remove unfairness in the system, changes to Child Benefit were announced:

The Child Benefit system will be based on household rather than individual incomes by April 2026
From April 2024 the threshold for the High Income Child Benefit Charge will be raised to £60,000 from £50,000, taking 170,000 families out of paying this charge
The rate of the charge will also be halved, so that Child Benefit is not lost in full until an individual earns £80,000 per annum
The government estimates that nearly half a million families will gain an average of £1,260 in 2024/25 as a result.

The government announced two savings products to encourage UK savings – a new UK Individual Savings Account (ISA) and British Savings Bonds:

The new ISA will have a £5,000 annual allowance in addition to the existing ISA allowance and will be a new tax-free product for people to invest in UK-focused assets
British Savings Bonds will be delivered through National Savings & Investments (NS&I) in April 2024, offering a guaranteed interest rate, fixed for three years.

Expressing concern that, across the pensions industry, investment into UK equities is only around 6%, the Chancellor announced plans to bring forward requirements for Defined Contribution pension funds to publicly disclose the breakdown of their asset allocations, including UK equities, working closely with the Financial Conduct Authority (FCA) to achieve this.

The non-dom tax regime, available to some UK residents with permanent domicile overseas, is to be abolished. From April 2025, new arrivals to the UK will not have to pay tax on foreign income and gains for the first four years of their UK residency. After that, they will pay the same tax as other UK residents. Transition arrangements will be allowed for current non-doms.

In addition:

As previously announced in the Autumn Statement, the government is working to bring forward legislation by the end of the summer to allow people to invest in a diverse range of investment types through their ISAs
The existing ISA allowance remains at £20,000 and the JISA (Junior ISA) allowance and Child Trust Fund annual subscription limits remain at £9,000
The Dividend Allowance reduces to £500 from April 2024
The annual Capital Gains Tax (CGT) exemption reduces to £3,000 from April 2024
The standard nil rate Stamp Duty Land Tax threshold for England and Northern Ireland is £250,000 and £425,000 for first-time buyers, remaining in place until 31 March 2025
The Income Tax Personal Allowance and higher rate threshold remain at £12,570 and £50,270 respectively until April 2028 (rates and thresholds may differ for taxpayers in parts of the UK where Income Tax is devolved)
There will be a consultation on moving to a residence-based regime for Inheritance Tax (IHT). No changes to IHT will take effect before 6 April 2025 – £325,000 nil-rate band, £175,000 main residence nil-rate band, with taper starting at £2m estate value
From 1 April 2024, personal representatives of estates will no longer need to take out commercial loans to pay IHT before applying to obtain a grant on credit from HMRC
The State Pension, as previously announced, will go up by 8.5% in April, which means £221.20 a week for the full, new flat-rate State Pension (for those who reached State Pension age after April 2016) and £169.50 a week for the full, old basic State Pension (for those who reached State Pension age before April 2016)

The removal of the Lifetime Allowance (LTA) from pensions tax legislation from April

As previously announced, the National Living Wage for over-23s – paid by employers – will rise from £10.42 an hour to £11.44 an hour in April.

Business measures

Various business measures announced included the raising of the threshold at which small businesses must register to pay VAT from £85,000 to £90,000 from April 2024. In addition, the Recovery Loan Scheme for small businesses will be extended until March 2026.

Property taxation

The Chancellor also announced the government’s plans to make the property tax system fairer, by:

Abolishing the Furnished Holiday Lettings tax regime
Abolishing Stamp Duty Land Tax Multiple Dwellings Relief from 1 June 2024
Reducing the higher rate of CGT on residential properties from 28% to 24%.

Public services

“Good public services need a strong economy to pay for them, but a strong economy also needs good public services.” This is how the Chancellor introduced the government’s “landmark” Public Sector Productivity Plan which, it says, will restart public sector reform and change the Treasury’s traditional approach to public spending.

Our National Health Service is, said Mr Hunt, “rightly the biggest reason most of us are proud to be British.” He announced £3.4bn to modernise NHS IT systems, which is forecast to unlock £35bn of savings by 2030 and boost NHS productivity by almost 2% per year between 2025/26 and 2029/30.

This includes:

Modernising NHS IT systems
Improvements to the NHS app to allow patients to confirm and modify appointments
Piloting the use of AI to automate back-office functions
Moving all NHS Trusts to electronic patient records
Over 100 upgraded AI-fitted MRI scanners to speed up results for potentially 130,000 patients per year.

The Chancellor announced a £2.5bn funding boost for the NHS in 2024/25, allowing the service to continue its focus on reducing waiting times for patients.

Mr Hunt also announced £800m of additional investment to boost productivity across other public services, including:

£230m for drones and new technology to free up police officers’ time for frontline work
£75m to roll out the Violence Reduction Unit model across England and Wales
£170m for the justice system, including £55m for family courts, £100m for prisons and £15m to reduce administrative burdens in the courts
£165m to fund additional children’s social care placements
An initial commitment of £105m to build new special free schools.

Other key points

New duty on vaping products to be introduced from October 2026
Tobacco duty will be increased from October 2026
Air Passenger Duty adjustments to non-economy class rates from 2025/26
Energy Profits Levy one year extension from 1 April 2028 to 2029
Boosting local growth through a continuation of the Investment Zones programme
£1bn in additional tax relief over the next five years for creative industries
Housing investment including £124m at Barking Riverside and £118m to accelerate delivery of the Canary Wharf scheme (including up to 750 homes)
£120m for the Green Industries Growth Accelerator (GIGA)
£7.4m upskilling fund pilot to help SMEs develop AI skills of the future
Extension to Freeport tax reliefs to September 2031
Extension to and deepening of devolution in England, including the North East Trailblazer Devolution Deal
HMRC to establish an advisory panel to support the administration of the R&D tax reliefs.

Closing comments

Jeremy Hunt signed off his Budget saying he was delivering, “A plan to grow the economy, a plan for better public services, a plan to make work pay… Growth up, jobs up and taxes down. I commend this Statement to the House.”

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding of the Budget taxation and HMRC rules and can be subject to change in future. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK; please ask for details. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor.

All details are believed to be correct at the time of writing (6 March 2024)

Financial health is financial wealth.

If you want to be financially healthy, please book an initial meeting and let’s discover if we can help you

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Economic Review – January 2024

Jenny Procter blog Blog, budget, economic growth, Economic review, economic update, economy, inflation, Interest Rates, investments, small business

UK economy rebounds in November

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Official statistics show the economy returned to growth in November, although analysts believe it remains a close call as to whether or not the UK will once again manage to avoid a recession.

Figures released last month by the Office for National Statistics (ONS) showed the UK economy grew by 0.3% in November following a contraction of a similar magnitude during the previous month. ONS said the services sector led the rebound, with Black Friday providing a boost to retailers, warehousing and couriers, while car leasing and computer games firms also enjoyed a buoyant month.

Despite November’s bounce back, ONS noted that the longer-term picture remains one of little growth over the past year. Indeed, output actually shrank by 0.2% in the three months to the end of November, and the statistics agency said a contraction or even flat data in December could lead to a second successive quarter of falling output, and thereby tip the economy into a shallow technical recession.

Data from the latest S&P Global/CIPS UK Purchasing Managers’ Index (PMI) released towards the end of last month, however, paints a more positive picture with business confidence rising to its highest level since last May. The preliminary headline economic growth indicator also rose, up from 52.1 in December to 52.5 in January, beating analysts’ expectations and pointing to a stronger than expected start to 2024 for the UK economy.

Commenting on the findings, S&P Global Market Intelligence’s Chief Business Economist Chris Williamson said, “UK business activity growth accelerated for a third straight month in January, according to early PMI survey data, marking a promising start to the year. The survey data point to the economy growing at a quarterly rate of 0.2% after a flat fourth quarter, therefore skirting recession and showing signs of renewed momentum.”

Surprise uptick in inflation rate

Last month’s release of consumer price statistics revealed a small increase in the UK headline rate of inflation, bucking analysts’ expectations for a further easing in price pressures.

Data published by ONS showed the Consumer Prices Index (CPI) 12-month rate – which compares prices in the current month with the same period a year earlier – stood at 4.0% in December. This was up from November’s 3.9% figure and was also higher than the 3.8% consensus forecast from a Reuters poll of economists.

ONS said the increase, which represented the first inflation uptick in 10 months, was partly driven by a sharp rise in tobacco prices due to duty increases. There were also material upward contributions from the recreation, airfare and clothing sectors, although these were partially offset by a fall in food inflation with prices in this sector still rising but at a much lower rate than in the comparable period last year.

Analysts typically expect January’s inflation rate to rise as a result of base effects and there are a number of notable risks to the outlook particularly relating to disruption of shipping in the Red Sea. However, most economists are still predicting the downward trajectory will resume with potentially large declines forecast this spring.

Capital Economics, for instance, recently suggested CPI inflation could drop below 2% by April. The independent research firm also said this could result in the UK’s pace of price growth actually breaching the 2% mark before both the US and Eurozone.

While December’s inflation rise did dent market expectations of an early cut in interest rates, analysts do still typically expect the Bank of England to sanction a series of rate reductions this year. Indeed, a recent Reuters poll found that just over half of economists expect the first cut to be sanctioned before mid-2024.

Markets (Data compiled by TOMD)

Major global indices were mixed at the end of January. On the last trading day of the month the FTSE 100 lost ground ahead of imminent interest rate decisions in the UK and US.

In the UK, the FTSE 100 index closed the month on 7,630.57, a loss of 1.33%, while the mid cap orientated FTSE 250 closed January 1.68% lower on 19,357.95. The FTSE AIM closed on 754.75, a loss of 1.12% in the month.

On 31 January, the Federal Reserve decided to retain interest rates for another month, whilst making it clear that it needs to see more progress on inflation before reducing borrowing costs. The Dow closed the month up 1.22% on 38,150.30, while the tech-orientated NASDAQ closed January up just over 1% on 15,164.01. At month end the broader market came under pressure as technology stocks failed to live up to expectations.

Meanwhile, the Euro Stoxx 50 closed the month 2.80% higher, on 4,648.40. The Nikkei 225 ended January on 36,286.71, up 8.43%. During the month, Japan’s benchmark index broke past the 35,000 mark, for the first time since February 1990.

On the foreign exchanges, the euro closed the month at €1.17 against sterling. The US dollar closed at $1.27 against sterling and at $1.08 against the euro.

Gold closed the month trading around $2,053 a troy ounce, a monthly loss of 1.21%. Brent crude closed January trading at around $80 a barrel, a monthly gain of 4.87%. Oil posted its first monthly gain since September.

32Index Value (31/01/24) Movement since 29/12/23

FTSE 100 7,630.57 -1.33%

FTSE 250 19,357.95 -1.68%

FTSE AIM 754.75 -1.12%

Euro Stoxx 50 4,648.40 +2.80%

NASDAQ Composite 15,164.01 +1.02%

Dow Jones 38,150.30 +1.22%

Nikkei 225 36,286.71 +8.43%

Government borrowing lower than expected

The latest public sector finance statistics revealed a smaller-than-expected budget deficit providing the Chancellor with more room for manoeuvre as he prepares to deliver his Spring Statement in March.

ONS data showed government borrowing fell to £7.8bn in December, nearly half the level predicted in a Reuters poll of economists. This left the fiscal year-to-date total at £119bn, almost £5bn below the Office for Budget Responsibility’s November forecast produced for the Autumn Statement, principally as a result of lower than anticipated inflation reducing debt interest payments.

Prior to release of the data, the Chancellor had hinted at potential pre-election tax cuts when he delivers his Spring Budget on 6 March. Speaking during a visit to the World Economic Forum in Davos, Mr Hunt said he wanted to move in the direction of cutting taxes and noted that countries with lower taxes “are more dynamic, more competitive and generate more money for public services.”

Analysis released late last month by the Institute for Fiscal Studies, however, suggests the next government is likely to face the toughest challenge since the 1950s to bring down the country’s high debt burden. The economic think tank also warned that tax cuts now could compound the problem.

Retail sales fall sharply

Data released last month by ONS revealed that the UK retail sector suffered its sharpest decline in sales volumes for almost three years.

Official retail sales statistics showed sales volumes fell by 3.2% in December; this figure was worse than all predictions in a Reuters poll of economists with the consensus forecast pointing to a 0.5% fall. The monthly decline was also the largest since January 2021 when the reintroduction of pandemic restrictions heavily impacted sales. While ONS did say people appeared to have shopped earlier this year in order to take advantage of Black Friday sales, they also noted evidence of consumers spending less on gifts while food sales also notably declined in the run-up to Christmas.

The latest CBI Distributive Trades Survey suggests the retail environment remains extremely challenging with year-on-year sales volumes in January falling at the fastest pace since the pandemic. The survey also found that retailers anticipate a similar rate of contraction in February.

CBI Principal Economist Martin Sartorius said, “Retailers reported a further deterioration in activity at the start of 2024. Looking ahead, demand conditions in the sector will remain challenging as higher interest rates continue to feed through to mortgage payments and household incomes.”

All details are correct at the time of writing (01 February 2024)

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. No part of this document may be reproduced in any manner without prior permission

Financial health is financial wealth.

If you want to be financially healthy, please book an initial meeting and let’s discover if we can help you

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Your Finance Matters – Q1 Winter 2024

Jenny Procter blog budget, economic growth, Economic review, economic update, economy, inflation, Interest Rates, investments, Markets, pensions

Preparing portfolios for resilience in 2024

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The past few years have been challenging for investors with a series of unforeseen events and rising geopolitical tensions weighing heavily on global markets and, as a new year dawns, many issues remain unresolved. However, while such times are disconcerting for investors, the best way to achieve financial empowerment is by sticking to a sound strategic plan that optimises investment decisions and thereby tackles any potential issues head on.

Geopolitical risk

Although it may sometimes feel we are living through unprecedented times, geopolitical risk is not a new phenomenon – it has always been a feature of the investment landscape. Russia’s invasion of Ukraine and, more recently, the Middle East conflict, however, are both clearly major events most people did not foresee. And, when such events do occur, even the most well-informed investors find it difficult to accurately predict their impact on markets and investment portfolios.

Economic prospects

The global economy is currently in a relatively precarious position with the long-term consequences of the pandemic, war in Ukraine and the Middle East, and increasing geoeconomic fragmentation hindering prospects. The International Monetary Fund’s assessment, for example, produced just before October’s Middle East conflict erupted, points to an easing of growth across advanced economies this year, while China looks set to experience its slowest growth rate for years.

Investment pragmatism

While geopolitical events need to be closely monitored, investors must also be disciplined with any changes to investment strategy based on hard facts rather than knee-jerk reactions to the latest news headlines. The key to successful investing is undoubtedly to focus on long-term objectives and mitigate any potential risks by maintaining a well-diversified portfolio spread across different asset classes, industries and geographical regions.

New year, new opportunities

While geopolitical tensions are expected to present ongoing challenges, as 2024 unfolds new investment opportunities will inevitably become available. We’ll be on hand throughout the year to help you make the most of any opportunities, by carefully repositioning your portfolio and ensuring it remains firmly aligned with your financial objectives.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

Global dividends – encouraging growth?

A new study¹ analysing global dividend trends has highlighted that, in the third quarter of last year, 89% of companies chose to maintain their dividend levels or raise them. Despite this, it was noted that during the quarter, global dividends reduced by 0.9% (on a headline basis) to total $421.9bn.

The underlying growth of dividends, paid by the world’s 1,200 largest firms measured by market capitalisation, was recorded at 0.3% in Q3 2023; this follows adjustments for the strengthening US dollar and for special dividends. Interestingly, the overall growth rate was ‘significantly impacted’ by a diminutive number of large dividend cuts; the report noted that this ‘masked encouraging growth across the wider market.’ If you exclude the two largest dividend reductions, for example, underlying growth was 5.3%.

From a year-on-year perspective, the 2023 headline forecast has been reduced from $1.64trn to $1.63trn, also reflective of reduced special dividends and a stronger US dollar, and ‘not a cause for concern,’ according to the report. Head of Global Equity Income at Janus Henderson, Ben Lofthouse, signalled that, “dividend growth from companies generally remains strong across a wide range of sectors and regions,” adding that the data highlights “a globally diversified income portfolio has natural stabilisers,” as sectors in ascendance are “able to counteract those with declining dividends,” before concluding, “Dividends are typically much less volatile than earnings over time, providing comfort in times of economic uncertainty.”

¹Janus Henderson, 2023

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

In the news

Who wants to be an (ISA) millionaire?

The number of ISA millionaires – i.e. people who have built up a tax-free pot of £1m or more by investing in stocks and shares ISAs – has almost quintupled since 2017, with the figure now standing at 2,760². With the first ISAs introduced in 1999 aimed at encouraging more people to save, the data certainly suggests the objective is being satisfied for an increasing number, with the most recent data suggesting around 11.8 million adults were subscribed to an ISA in 2021/22, making £66.9bn deposits in that tax year.

More people choose living inheritances

There has been an increase in the number of people who are choosing to gift significant sums of money to beneficiaries whilst they are still alive – otherwise known as a ‘living inheritance.’ One in 10 respondents to the Great British Retirement Survey 2023³ said they had given a living inheritance in the past three years. This increased to 15% amongst over-65s.

One million more over-65s still at work

There are now nearly a million more people over the age of 65 in the UK labour market compared with the number still at work in the year 2000⁴. This is according to the Centre for Ageing Better, which has calculated that 976,000 workers over the age of 65 and 3.1 million aged 50-64 have been added to the workforce since the Millennium. It is thought that the UK’s ageing population, in addition to changes in the State Pension age, are mostly responsible for the increasing numbers of older workers in the UK’s labour force over the past few decades.

²HMRC, 2023

³Interactive Investor, 2023

⁴Centre for Ageing Better, 2023

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. The Financial Conduct Authority (FCA) does not regulate Will writing, tax and trust advice and certain forms of estate planning.

The financial pitfalls that primarily affect women

Research⁵ has shone a spotlight on the financial challenges that prevent women from accumulating the same wealth as their male counterparts.

The report found that having children continues to have a disproportionately large impact on women’s finances, as do other life events such as the menopause.

The findings

Amongst the report’s findings were the following statistics:

A quarter of women continue paying into their pension at the same rate during parental leave, vs 70% of men

Caring responsibilities (outside of childcare) have financially impacted nearly half of women

One in 20 menopausal women have quit work due to their symptoms

Only 55% of women return to work full time after their first child, compared to 90% of men.

Of course, no two women are the same and each will face different challenges on her journey to financial wellbeing. However, these statistics show that there are common threads here. Women continue to take the lion’s share of caring responsibilities, taking them out of the workplace and reducing their financial security not only in the present, but as they approach retirement as well.

Let’s do something about it – together

Despite the financial challenges women face, they remain less likely than men to seek professional financial advice⁶. As we move into 2024, make a New Year’s resolution – let this be the year that you empower yourself to succeed and get your finances on track for a prosperous future.

⁵AJ Bell, 2023

⁶Canada Life, 2022

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

The sophisticated scammers targeting YOU

According to a study from NatWest⁷, seven in 10 people have been targeted by scams over the last 12 months. Vulnerabilities brought on by cost-of-living challenges have likely contributed to the high numbers.

Sadly, 13% of people have fallen prey to such scams, which are growing in both number and sophistication – targeting young and old – no one is immune.

Avoid, avoid, avoid

To avoid a scam, you’ve first got to know what you’re looking for. So, here’s a list of the most common scams used over the past year and the proportion of people who were targeted:

Phishing scams (37%)

Fake emails or calls from organisations purporting to be from legitimate companies, asking you to provide personal or private data.

Trusted organisation scams (21%)

Criminals contact their victims pretending to be trusted organisations such as HMRC, the police or their bank, saying there’s something wrong with their account, they need to pay a fine, or similar.

Refund scams (13%)

Similar to the above, but the criminals instead use a potential refund or rebate to tempt victims into sharing personal or banking information.

Other scams include messages purporting to be from friends/family asking for money (12%), get rich quick scams (12%) and purchase scams (9%).

Keep yourself (and your money) safe

Staying vigilant and keeping your guard up around unsolicited calls and messages is key to protecting yourself from scams. Remember:

If something seems too good to be true, it probably is

Your bank will never ask you to disclose your full PIN or password

Don’t respond to unsolicited calls, emails or texts, or open links if you feel suspicious

We’re always here to help if you’re ever unsure about something.

Always be alert to the risk of fraud – double check any details to ensure people or organisations are who you think they are. Stay vigilant, protect yourself – knowledge is power.

⁷NatWest, 2023

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. The Financial Conduct Authority (FCA) does not regulate Will writing, tax and trust advice and certain forms of estate planning.

Are you due a midlife MOT?

Just to be clear, we’re not talking about your physical health here (that’s the doctor’s remit). We’re talking about a check-up to assess your financial wellbeing.

And we’re asking because nearly one in six people aged between 45 and 54 are now making significant financial sacrifices to ensure their pension pots are up to scratch for retirement⁸. At the same time, they are still juggling a multitude of other financial responsibilities, including childcare and mortgages, at a time when cost of living pressures persist.

Just like you’d go to the doctor for a check-up if you were feeling a bit run down, a financial MOT could be just what you need at this crucial time in your life to ensure your finances are working for you.

Here are some key aspects to think about:

Retirement planning – as you approach retirement, now is the time to take stock of your pension savings to ensure you’re on track for your goals

Protection – your health needs can change as you get older, so a review of your protection cover could be a good idea to ensure you and your family are properly protected

Debt management – a review can help you assess your current debts and work out how to best pay them off

Investments – are your investments working for you? Can your portfolio be rebalanced to better align with your risk profile and long-term financial objectives?

Estate planning – now is also an excellent time to review your long-term plans for passing your wealth onto the next generation and to make a Will and Lasting Power of Attorney (LPA).

Here to help

If a midlife MOT sounds like it might benefit you, then please do give us a call – we’re on hand to help you review each aspect of your finances and develop a comprehensive financial plan.

⁸Phoenix Group, 2023

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. The Financial Conduct Authority (FCA) does not regulate Will writing, tax and trust advice and certain forms of estate planning.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

Planning for a secure financial future

Over the past 12 months, the cost-of-living crisis has put significant pressure on household budgets and knocked many people’s confidence in their future financial prospects. Research, however, shows that planning is a key driver of positivity about our financial futures; so, as a new year dawns, now seems the perfect time to take stock of your finances and formulate a plan to help you achieve your retirement goals.

Plan, plan, plan

Although decisions around retirement are arguably the most critical people have to make during their whole lives, research⁹ suggests only half of over-50s with pension entitlements other than the State Pension have actually formulated a detailed plan. Perhaps unsurprisingly, it also found that those with a plan were much more confident about securing a comfortable retirement than those who do not have one.

Gender gap

The research found clear evidence of a gender gap with men generally more confident about their prospects for a comfortable retirement than their female counterparts. It also found that the

cost-of-living crisis has been a key driver of low confidence, with half of the sample stating that it has either slightly or significantly worsened their chances of a comfortable retirement.

Triple default trap

People without a plan are also more likely to get stuck with their default pension settings. Recent years are thought to have seen a sharp rise in the number of triple defaulters who ‘set and forget’ their pension choices, with millions of auto-enrolled 32-40 year olds failing to update their contributions, investment choices or target retirement age. Even relatively small tweaks to one or more of these default choices could potentially boost a pension pot by thousands of pounds.

Here to support you

The evidence clearly shows that formulating a plan is the key to boosting confidence in your financial future. So, let’s kick off 2024 on a positive footing ‒ get in touch and we’ll help you develop a plan capable of securing the rewarding retirement you deserve.

⁹Nucleus Financial Platforms, 2023

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

Prospects of stronger economic growth

As we enter a new year, the global economy sits in a relatively precarious position, with the long-term consequences of the pandemic, as well as ongoing conflicts and geopolitical tensions all hindering growth prospects. While such times can appear daunting for investors, the key to successful investing actually remains the same: focus on long-term goals and mitigate potential risks by maintaining a well-diversified portfolio.

Global recovery remains slow

In its latest assessment of economic prospects, produced just before the Middle East conflict began, the International Monetary Fund (IMF) dampened its baseline global growth forecast for the coming year. The international soothsayer is now predicting growth will slow from 3.5% in 2022 to 3.0% in 2023 and 2.9% in 2024; all three figures are below the long-term average global growth rate of 3.8%.

Challenges ahead but growth prospects

The IMF noted that the current weak growth outlook allied with heightened uncertainty, still-elevated global inflation and limited fiscal space, do pose a series of challenges for policymakers. However, the report also highlighted some more upbeat aspects including disinflation, rebuilt buffers to help manage future shocks and the prospect of stronger, more balanced growth.

Diversification is key

In the current economic climate, strong research capabilities are clearly vital and that is our strength. It enables us to formulate and develop an effective investment plan tailored specifically to your needs, and helps us ensure you continue to hold a well-diversified, balanced portfolio firmly aligned to your long-term financial objectives.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

It is important to take professional advice before making any decision relating to your personal finances. Information within this newsletter is based on our current understanding of taxation and can be subject to change in future. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK; please ask for details. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases

of, and reliefs from taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. Changes in the rates of exchange may have an adverse effect on the value or price of an investment in sterling terms if it is denominated in a foreign currency. Taxation depends on individual circumstances as well as tax law and HMRC practice which can change.

The information contained within this newsletter is for information only purposes and does not constitute financial advice. The purpose of this newsletter is to provide technical and general guidance and should not be interpreted as a personal recommendation or advice.

The Financial Conduct Authority does not regulate advice on deposit accounts and some forms of tax advice.

All details are correct at time of writing – December 2023.

Financial health is financial wealth.

If you want to be financially healthy, please book an initial meeting and let’s discover if we can help you

Call us on 01332913006

Economic Review October 2023 – Inflation rate holds steady

Jenny Procter blog Blog, budget, economic growth, Economic review, economic update, inflation, Interest Rates, investments

Download your copy here

The Bank of England (BoE) Governor has described the latest batch of inflation statistics as “quite encouraging,” adding that he expects a “noticeable drop” in the headline rate when the next set of data is released later this month.

Figures recently published by the Office for National Statistics (ONS) revealed that the Consumer Prices Index (CPI) 12-month rate – which compares prices in the current month with the same period a year earlier – held steady at 6.7% in September. This ended a run of three consecutive monthly declines and came in slightly ahead of analysts expectations’ of a further 0.1% fall.

ONS pointed out that the figures did include the first monthly decline in food price levels for two years. However, a sharp rise in fuel costs between August and September was the main factor that prevented the CPI annual rate from declining again. Despite remaining unchanged, though, September’s update does leave CPI below the level forecast by the BoE in early August.

The latest release did also report a fall in core inflation, which excludes volatile elements such as energy, food, alcohol and tobacco, although this decrease was again less than economists had predicted. This measure of inflation, which is typically viewed as a better guide to longer-term price trends, fell to 6.1% in September from 6.2% in August.

Commenting on the consumer prices data release in an interview with the Belfast Telegraph, BoE Governor Andrew Bailey said, “It was not far off what we were expecting. Core inflation fell slightly from what we were expecting and that’s quite encouraging.” The Governor also stressed that he expects to see a “noticeable drop” in the CPI rate when the next set of figures are published in mid-November as last year’s sharp hike in energy prices drops out of the annual comparison.

Economy stages partial rebound

Growth statistics released last month by ONS showed the UK economy returned to growth in August following a sharp decline in July, although forward-looking indicators continue to suggest the outlook remains uncertain.

According to the latest gross domestic product (GDP) figures, the UK economy grew by 0.2% in August following a downwardly revised fall of 0.6% in July. ONS said August’s modest bounce back was partly driven by the education sector, which recovered from two days of industrial action the previous month, along with a boost from computer programmers and engineers.

While analysts typically described the latest GDP data as ‘lacklustre,’ August’s figures are thought to have reduced the possibility of a recession beginning as early as the July to September period. Indeed, ONS noted that the economy would only need to have grown by 0.2% during September to avoid it contracting across the third quarter as a whole.

Data from the latest S&P Global/CIPS UK Purchasing Managers’ Index released towards the end of last month, however, does suggest that business activity across the private sector continues to weaken. The preliminary composite headline Index stood at 48.6 in October, a marginal increase from September’s figure of 48.5, but below the 50 threshold that denotes a contraction in private sector output for the third month running.

Commenting on the survey’s findings, S&P Global Market Intelligence’s Chief Business Economist Chris Williamson said, “The UK economy continued to skirt with recession in October, as the increased cost of living, higher interest rates and falling exports were widely blamed on a third month of falling output. The overall pace of decline remains only modest, but gloom about the outlook has intensified in the uncertain economic climate, boding ill for output in the coming months. A recession, albeit only mild at present, cannot be ruled out.”

Markets (Data compiled by TOMD)

As October drew to a close, investors focused on major central bank meetings with the Bank of England and Federal Reserve due to meet in early November.

In the UK, the FTSE 100 closed October on 7,321.72, a loss of 3.76%. At month end losses in some mining and energy stocks weighed, impacted by declines in commodity prices following weaker-than-expected factory activity data in China. The domestically-focused FTSE 250 closed down 6.54% on 17,083.05, while the FTSE AIM closed the month on 679.85, a loss of 6.38%. On the continent, the Euro Stoxx 50 ended October on 4,061.12, a loss of 2.72%.

At month end, Asian equities struggled as disappointing activity data from China reignited some concerns over the resilience of the world’s second largest economy. In Japan the Nikkei 225 closed the month on 30,858.85, down 3.14%.

A raft of new data has highlighted resilience in the US economy. Comments from Federal Reserve Chairman Jerome Powell will be closely watched as an indicator of how long interest rates are likely to remain elevated. The Dow Jones Index closed the month down 1.36% on 33,052.87, while the NASDAQ closed the month down 2.78% on 12,851.24.

On the foreign exchanges, the euro closed the month at €1.14 against sterling. The US dollar closed at $1.21 against sterling and at $1.05 against the euro.

Safe haven demand as a result of the Middle Eastern conflict saw gold prices trading higher in the month. Gold closed October trading at around $1,996 a troy ounce, a monthly gain of around 6.76%. With traders wary of any new developments in the conflict and concerns over slowing fuel demand in China weighing, Brent crude closed the month trading at around $85, a loss over the month of 7.41%.

Index Value (31/10/23) Movement since 29/09/23

FTSE 100 7,321.72 -3.76%

FTSE 250 17,083.05 -6.54%

FTSE AIM 679.85 -6.38%

Euro Stoxx 50 4,061.12 -2.72%

NASDAQ Composite 12,851.24 -2.78%

Dow Jones 33,052.87 -1.36%

Nikkei 225 30,858.85 -3.14%

Jobs market continues to cool

Last month’s release of labour market statistics suggests there has been a further softening in the UK jobs market, although earnings data did reveal average pay is now rising above inflation for the first time in almost two years.

The latest figures released by ONS were dubbed ‘experimental estimates’ produced under a new calculation that attempts to account for low response rates to the labour force survey. The new data showed that, although the unemployment rate stayed unchanged at 4.2% during the June to August period, the overall level of employment fell and the rate of economic inactivity rose.

In addition, the estimated total number of job vacancies dropped by 43,000 during the three months to September, the 15th consecutive reported decline. This reduced the number of vacancies to a two-year low of 988,000, although this figure is still significantly above pre-pandemic vacancy levels recorded in early 2020.

The latest earnings figures also revealed that regular pay rose at an annual rate of 7.8% in the June to August period, higher than the average inflation rate over the same three months. Furthermore, data revisions meant that wage growth actually outpaced inflation in the three months to July for the first time since October 2021.

Retail sales in autumnal fall

Official retail sales statistics reported a sharper than expected decline in sales volumes during September, while more recent survey evidence suggests the current trading environment remains extremely challenging.

Data published last month by ONS revealed that total retail sales volumes fell by 0.9% in September, a much larger decline than the 0.2% fall predicted in a Reuters poll of economists. ONS said it had been ‘a poor month for clothing stores’ with the unseasonable warm autumnal conditions reducing sales of colder weather gear, while the quick pace of price rises had deterred shoppers from buying ‘non-essential goods.’

The latest CBI Distributive Trades Survey suggests sales remained weak last month, with retailers reporting the joint-worst level of sales volumes for October since records began in 1983. The survey also found that retailers do not anticipate a turnaround in fortunes this month, with cost-of-living concerns and higher interest rates expected to continue weighing on consumer spending.

Commenting on the findings, CBI Principal Economist Martin Sartorius said, “As the festive period approaches, the retail sector remains in a perilous position. While slowing inflation should help to bolster households’ income in the coming months, retailers will continue to face headwinds from higher energy and borrowing costs.”

All details are correct at the time of writing (01 November 2023 )

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. No part of this document may be reproduced in any manner without prior permission.

Financial health is financial wealth.

If you want to be financially healthy, please book an initial meeting and let’s discover if we can help you

Call us on 01332913006

Your top 5 things to do at the end of the financial year

Jenny Procter blog budget, End of the Financial Year, ISA, Pension, Year End

With just a few days to the end of the financial year on 5^th April, we wanted to remind you of the top 5 things we think you should do to keep in great financial health.

Top up your ISA

The end of the tax year is when your tax free ISA (Individual Savings Account) allowance runs out. Currently the allowance is £20,000. So you still have time to transfer more into your ISA if you haven’t reached that amount. Don’t forget that everything you put in to your ISA is, and stays, tax-free for as long as it is there.

The ISA allowance is not changing in the new financial year. The Junior Individual Savings Account allowance and Child Trust Fund annual subscription limits also remain at £9,000.

Top up your pension

You also have an Annual Allowance for your pension, which is the total amount that you, your employer and any third party can pay in across all your pension plans in a tax year. The standard Annual Allowance is currently £40,000. This is changing in the new financial year, as the Chancellor has increased it to £60,000 from April 2023.

This, and several of the other pension changes in the Budget, will have the impact of allowing people to pay more into their plan. People with higher salaries or bigger pension pots, who can really afford to make the most of these new allowances, are more likely to benefit from the changes.

Just like with an ISA, this limit resets on the 6th April and you have access to your entire allowance again for the new financial year.

There are very many tax benefits from putting money into your pension. If you are the director of a private limited company paying into a pension can help reduce what you pay to HMRC. If you get a work bonus, you might have the option to put some or all of it into your pension plan which could save on tax and National Insurance deductions. We regularly advise clients about how to make the most of their pension as part of their overall tax planning strategy.

Check your state pension

All the information about your state pension is here https://www.gov.uk/check-state-pension – you can check when you are able to claim it and how much it is going to be. In the new financial year, the basic State Pension will increase from £141.85 per week to £156.20 per week. It’s a 10 per cent increase but we would guess it’s probably not enough to give you the comfortable retirement that you are planning – and that you deserve.

Check any personal or occupational pension pots that you have

Your pension provider will send you an annual statement. It will include the value of your pension pot at the start and end of the statement year, contributions paid to your pot and an estimate of the income you could get at your selected retirement date.

If you have several pensions from previous jobs, it will be worthwhile to access all that information and get an overall picture of your pension assets.

Book an appointment to talk to us

Every client we speak to has a unique set of circumstances which mean that we can only give very broad pointers in a blog post. We specialize in advising company directors and high earners on the best way to save into their pensions and eventually to draw money out of their pension. If you are planning on retiring in the next couple of years, now is the perfect time to ensure you are doing everything you can to increase your pension pot and ensure you can take your money out in the right way to support your retirement.

There’s still time to talk to us before the end of the financial year, so book an appointment and we’d be delighted to help you.

Because financial health is financial wealth

Financial health is financial wealth.

If you want to be financially healthy, please book an initial meeting and let’s discover if we can help you

Call us on 01332913006

Spring Budget 2023: A budget for growth

Jenny Procter blog budget, economic update

You can download this update here

Chancellor of the Exchequer, Jeremy Hunt, delivered his first Spring Budget on 15 March declaring it was “A Budget for Growth.” The fiscal update included a range of new measures, some of which had been widely trailed prior to Budget day, in order to achieve growth “by removing obstacles that stop businesses investing; by tackling labour shortages that stop them recruiting; by breaking down barriers that stop people working; and by harnessing British ingenuity to make us a science and technology superpower.”

OBR forecasts

The Chancellor began his statement by unveiling the latest economic projections produced by the Office for Budget Responsibility (OBR) which he said showed the UK would meet the Prime Minister’s priorities to “halve inflation, reduce debt and get the economy growing.” In relation to the first priority, Mr Hunt said the latest OBR figures suggest inflation will fall from an average rate of 10.7% in the final quarter of last year to 2.9% by the end of 2023. This sharp decline is partly due to some of the Chancellor’s Budget measures, including the three-month extension to the household Energy Price Guarantee (EPG), which the government had confirmed earlier in the day.

Mr Hunt also said the OBR forecast suggests the UK economy will now avoid a technical recession this year (defined as two consecutive quarters of economic decline) and then expand in each of the remaining years of the five-year forecast period. According to the updated figures, the economy is expected to shrink by 0.2% this year, a significant upgrade from last autumn’s forecast of a 1.4% contraction, with growth then predicted to hit 1.8% in 2024 and 2.5% in 2025, before easing back towards its medium-term potential growth rate of 1.75% by 2028.

The Chancellor’s growth strategy focuses on the four pillars ‘Everywhere, Enterprise, Employment and Education,’ as previously outlined in his Bloomberg speech in January.

Everywhere

Mr Hunt spoke about the government’s plans for ‘Levelling Up,’ including the launch of 12 new Investment Zones. Across these “12 potential Canary Wharfs,” £80m of support per zone will be available for skills, infrastructure and tax reliefs. Mr Hunt also mentioned specific projects selected for local investment, including:

£200m for local regeneration projects and £400m for new Levelling Up Partnerships across England
£8.8bn over the next five-year funding period for the City Region Sustainable Transport Settlements
Up to £8.6m for the Edinburgh Festivals, as well as £1.5m for the repair of Cloddach Bridge, near Elgin, and £20m for the restoration of the Holyhead Breakwater in Anglesey
Up to £3m to extend the Tackling Paramilitarism Programme in Northern Ireland.

Enterprise

To provide the right conditions for businesses to succeed:

A ‘full expensing’ policy will apply from 1 April 2023 until 31 March 2026 to allow investment in IT, plant or machinery to be deducted in full and immediately from taxable profits
An increased rate of relief for loss-making R&D-intensive small and medium size enterprises (SMEs) – eligible companies will receive a £27 credit from HMRC for every £100 of R&D investment
An extension of higher reliefs for theatres, orchestras, museums and galleries for two further years

The Medicines and Healthcare products Regulatory Agency (MHRA) will receive £10m extra funding over two years
All of the recommendations from Sir Patrick Vallance’s review of pro-innovation regulation of digital technologies are accepted
£900m of funding for AI Research Resource and an exascale computer as well as a commitment to £2.5bn ten-year quantum research and innovation programme through the government’s new Quantum Strategy

Innovation Accelerators programme – £100m funding for 26 transformative R&D projects
AI Challenge Prize – £1 million prize every year for the next ten years to researchers that drive progress in critical areas of AI.

Employment

The Chancellor turned next to Employment, with a suite of new measures to “remove the barriers that stop people who want to from working.” To achieve this, he announced:

Mature workers

The expansion of the DWP’s ‘midlife’ MOT scheme, aiming to reach up to 40,000 individuals per year (up from the current 8,000)
New ‘Returnerships’ scheme to make existing skills programmes more accessible to older workers and help them upskill and retrain
A pension tax relief overhaul; see details in Personal Taxation and Pensions section.

People with long-term illnesses and disabilities

A white paper on disability benefits reform
The abolition of the Work Capability Assessment for disability benefits claimants
A new voluntary employment scheme for people with disabilities
£406m to increase support for working adults with mental health, musculoskeletal and cardiovascular problems.

Welfare recipients

An increase to the Administrative Earnings Threshold
A stronger sanctions regime for Universal Credit claimants.

Care leavers

A 50% increase in funding for the Staying Close programme
An increase in the Qualifying Care Relief threshold to £18,140 per year plus £375 to £450 per person cared for per week for 2023/24 and these thresholds will then be index-linked, representing a tax cut worth approximately £450 per year on average.

Education

Mr Hunt then turned to Education, stating that he wants to reform the childcare system, currently “one of the most expensive systems in the world.”

His new proposal will offer 30 free hours of childcare each week to pre-school-age children aged nine months or above in English households where both parents work. It will be phased in on the following timeline:

April 2024 – eligible two-year-olds will receive 15 hours of free childcare per week
September 2024 – qualifying children aged nine months to two years will receive 15 hours
September 2025 – eligible children aged nine months to three years will receive 30 hours.

Also, schools and local authorities will be funded to increase availability of wraparound care, to enable parents of school-age children to drop them off between 8am and 6pm.

To tackle the problem of unaffordable upfront costs, Mr Hunt also announced support for the 700,000 families on Universal Credit. Another major change involves each staff member in England being able to look after five two-year-olds instead of four, as is already the case in Scotland.

Personal Taxation and Pensions

To encourage over-50s to extend their working lives, the government is increasing tax relief limits on pension contributions and pots – the Annual Allowance will be raised from £40,000 to £60,000 from April 2023; the Lifetime Allowance (LTA) charge will be removed from April 2023, and the LTA will be abolished from April 2024. The maximum amount that can be accessed tax free (Pension Commencement Lump Sum) will be frozen at its current level of £268,275 (25% of current LTA). From April, the minimum Tapered Annual Allowance (TAA) and the Money Purchase Annual Allowance (MPAA) will increase from £4,000 to £10,000 and the adjusted income threshold for the TAA will also rise, from £240,000 to £260,000.

As a reminder, the following changes were previously announced in the Autumn Statement 2022:

The Income Tax additional rate threshold (ART) at which 45p becomes payable is lowered from £150,000 to £125,140 from April 2023. The ART for non-savings and non-dividend income will apply to taxpayers in England, Wales and Northern Ireland
The Dividend Allowance reduces from £2,000 to £1,000 from April 2023 and to £500 from April 2024
The annual Capital Gains Tax exemption reduces from £12,300 to £6,000 from April 2023 and to £3,000 from April 2024
The Stamp Duty Land Tax nil-rate threshold for England and Northern Ireland is £250,000 for all purchasers and £425,000 for first-time buyers, remaining in place until 31 March 2025.

In addition:

The Income Tax Personal Allowance and higher rate threshold remain at £12,570 and £50,270 respectively until April 2028 (rates and thresholds may differ for taxpayers in parts of the UK where Income Tax is devolved)
The basic State Pension will increase in April 2023 from £141.85 per week to £156.20 per week, while the full new State Pension will rise from £185.15 to £203.85 per week. The standard minimum income guarantee in Pension Credit will also increase in line with inflation from April 2023 (rather than in line with average earnings growth)
Inheritance Tax (IHT) nil-rate bands remain at £325,000 nil-rate band, £175,000 residence nil-rate band, with taper starting at £2m – fixed at these levels until April 2028
National Insurance contributions (NICs) Upper Earnings Limit (UEL) and Upper Profits Limit (UPL) are frozen until April 2028
The ISA (Individual Savings Account) allowance remains at £20,000 and the JISA (Junior Individual Savings Account) allowance and Child Trust Fund annual subscription limits remain at £9,000.

Other key points

Potholes Fund – an extra £200m for local road maintenance in England in 2023/24
Alcohol Duty – rates frozen until August 2023 then uprated by RPI, Draught Relief increased to 9.2% for beer and cider and 23% for wine from 1 August 2023
Fuel duty rates – maintaining the rates of fuel duty at the current levels for an additional 12 months
Defence spending – an extra £4.95bn for defence over 2023/24 and 2024/25
Support for veterans – an additional £33m over the next three years
Swimming Pool Support Fund – over £60m for public swimming pools across England
Support for charities and community organisations – £100m (England)
Plastic Packaging Tax rate – uprated in line with CPI from 1 April 2023
Launching ‘Great British Nuclear’ – supporting new nuclear builds, £20bn available for Carbon Capture, Utilisation and Storage (CCUS), and extending the Climate Change Agreement scheme for a further two years
Devolved administrations – receiving an additional £630m through the Barnett formula over 2023/24 and 2024/25 (Scottish Government £320m, Welsh Government £180m and Northern Ireland Executive £130m).

Closing comments

Jeremy Hunt signed off his announcement saying, “Today we build for the future with inflation down, debt falling and growth up. The declinists are wrong and the optimists are right. We stick to the plan because the plan is working.”

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding of the Budget and taxation and can be subject to change in future. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK; please ask for details. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on individual circumstances.

All details are believed to be correct at the time of writing (15 March 2023)

Financial health is financial wealth.

If you want to be financially healthy, please book an initial meeting and let’s discover if we can help you

Call us on 01332913006

Autumn Statement 2022

Jenny Procter blog budget, economic update, small business

You can download this update here

“We will face into the storm”

On 17 November, Chancellor of the Exchequer Jeremy Hunt delivered his fiscal plan to “tackle the cost-of-living crisis and rebuild our economy” stating that the government’s three priorities are “stability, growth and public services.” The Chancellor struck a defiant tone during the key fiscal event, saying he was “taking difficult decisions” that would deliver a “balanced path to stability” before outlining a package of measures equating to a consolidated total of around £55bn in spending cuts and tax rises.

Economic forecasts

Mr Hunt began his statement by stressing that the country is facing “unprecedented global headwinds” before unveiling updated economic projections from the Office for Budget Responsibility (OBR) which confirm the UK is now officially in recession. The Chancellor did, however, point out that the independent public finance analyst believes the downturn will be relatively shallow, if comparatively long. The revised GDP figures suggest the UK economy will grow by 4.2% this year, but then shrink by 1.4% next year before returning to growth in 2024.

The Chancellor also announced revised OBR forecasts which suggest inflation will peak in the current quarter and then drop sharply over the course of next year. The OBR’s updated forecast though does suggest the eroding impact of inflation will reduce living standards by 7% in total over the two financial years to 2023-24, wiping out the previous eight years’ growth, while unemployment is expected to rise from 3.6% today to 4.9% by 2024.

Public finances

During his speech, Mr Hunt announced he was introducing two new fiscal rules and that the plan he was announcing met both of them. His first rule states that underlying debt must fall as a percentage of GDP by the fifth year of a rolling five-year period, while the second states that annual public sector borrowing, over the same time period, must be below 3% of GDP.

The Chancellor went on to reveal updated public finance forecasts, which predict government borrowing in the current fiscal year will rise to £177bn before falling back to £69bn (2.4% of GDP) in 2027-28. This means the medium-term fiscal outlook has materially worsened since the previous OBR forecast produced in March, which had predicted borrowing of £32bn by 2026-27. The OBR said this deterioration in the public finances was due to a weaker economy, higher interest rates and higher inflation.

Personal taxation, wages and pensions

The Chancellor went on to make a raft of key personal taxation, wages and pension announcements.

The government will increase the National Living Wage for individuals aged 23 and over by 9.7% from £9.50 to £10.42 an hour, effective from 1 April 2023.

The commitment to the pensions Triple Lock remains, which will increase the State Pension in line with September’s Consumer Prices Index (CPI) rate of 10.1%. This means that the value of the basic State Pension will increase in April 2023 from £141.85 per week to £156.20 per week, while the full new State Pension will rise from £185.15 to £203.85 per week. The standard minimum income guarantee in Pension Credit will also increase in line with inflation from April 2023 (rather than in line with average earnings growth).

The Income Tax additional rate threshold (ART) at which 45p becomes payable will be lowered from £150,000 to £125,140 from 6 April 2023. The ART for non-savings and non-dividend income will apply to taxpayers in England, Wales and Northern Ireland. The ART for savings and dividend income will apply UK-wide.

The Dividend Allowance will be reduced from £2,000 to £1,000 from April 2023, and to £500 from April 2024.

The annual Capital Gains Tax exemption will be reduced from £12,300 to £6,000 from April 2023 and then to £3,000 from April 2024.

The change to Stamp Duty Land Tax threshold for England and Northern Ireland, which was announced on 23 September 2022, remains in place until 31 March 2025. The nil rate threshold is £250,000 for all purchasers and £425,000 for first-time buyers.

In addition:

The Income Tax Personal Allowance and higher rate threshold are to remain at current levels – £12,570 and £50,270 respectively – until April 2028 (rates and thresholds may differ for taxpayers in parts of the UK where Income Tax is devolved)
Inheritance Tax nil-rate bands remain at £325,000 nil-rate band, £175,000 residence nil-rate band, with taper starting at £2m – fixed at these levels for a further two years until April 2028
National Insurance contributions (NICs) Upper Earnings Limit (UEL) and Upper Profits Limit (UPL) frozen for a further two years until April 2028
The 2022-23 tax year ISA (Individual Savings Account) allowance remains at £20,000 and the JISA (Junior Individual Savings Account) allowance and Child Trust Fund annual subscription limits remain at £9,000
The Lifetime Allowance for pensions remains at its current level of £1,073,100 until April 2026.

Business measures

The National Insurance Secondary Threshold is frozen at £9,100 until April 2028
The VAT registration threshold is fixed at £85,000 for two years from April 2024
R&D tax credits to be reformed to ensure public money is spent effectively and best supports innovation
Businesses making extraordinary profits due to external factors are required to contribute more, including those in the oil and gas sector – the Energy Profits Levy is now extended to the end of March 2028, and the rate is increased by 10 percentage points to 35% from 1 January 2023
A new temporary 45% levy will be introduced for electricity generators from 1 January 2023
A package of targeted support to help with business rates costs worth £13.6bn over the next five years
The Annual Investment Allowance (AIA) is to be set at its highest ever permanent level of £1m from 1 April 2023.

Cost-of-living support

The Energy Price Guarantee (EPG) per unit will be maintained through the winter, in effect limiting typical energy bills to £2,500 per year. From April 2023 the EPG will rise to £3,000 per year, ending March 2024. The government will double to £200 the level of support for households that use alternative fuels, such as heating oil, liquefied petroleum gas, coal or biomass.

The Chancellor announced that there will be targeted cost-of-living support measures for those on low incomes, disability benefits and pensions. In 2023-24 an additional Cost of Living Payment of £900 will be provided to households on means-tested benefits, £300 to pensioner households and £150 to individuals on disability benefits. Rent increases in the social housing sector will be capped at 7% in the next financial year.

Education, health and social care

To promote education and boost the UK’s health and social care system, Mr Hunt announced:

An additional £3.3bn per year for the NHS in the 2023-24 and 2024-25 tax years
Up to £2.8bn in 2023-24 and £4.7bn in 2024-25 for the social care sector
An additional £2.3bn per year for England’s core schools budget in 2023-24 and 2024-25
An extra £1.5bn, £1.2bn and £650m have been pledged for hospitals and schools in Scotland, Wales and Northern Ireland, respectively.

Priorities for growth

Next, the Chancellor moved on to outline his three priorities for economic growth: energy, infrastructure and innovation. Key announcements included:

A new Sizewell C nuclear power plant in Suffolk
New funding of £6bn from 2025 to meet the government’s objective to reduce energy consumption from buildings and industry by 15% by 2030
Northern Powerhouse Rail and HS2 to go ahead as planned
A commitment to proceed with round two of the levelling up fund, at least matching the £1.7bn value of round one
The removal of import tariffs on over 100 goods used by UK businesses
An increase in public funding for R&D to £20bn by 2024-25.

Other key points

Vehicle Excise Duty chargeable on electric cars, vans and motorcycles from April 2025
Local authorities in England given additional Council Tax flexibility by modifying the referendum limit for increases
Review of the Energy Bill Relief Scheme, findings to be published by 31 December 2022
The Secretary of State for Work and Pensions will publish the government’s Review of the State Pension Age in early 2023
Defence spending to be at least 2% of national income
Overseas aid spending to be kept at 0.5% for next five years.

Closing comments

Jeremy Hunt signed off his announcement saying, “There is a global energy crisis, a global inflation crisis and a global economic crisis, but the British people are tough, inventive and resourceful. We have risen to bigger challenges before. We aren’t immune to these headwinds but with this plan for stability, growth and public services, we will face into the storm… I commend this statement to the House.”

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding of taxation and can be subject to change in future. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK; please ask for details. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor.

All details are believed to be correct at the time of writing (17 November 2022)

Financial health is financial wealth.

If you want to be financially healthy, please book an initial meeting and let’s discover if we can help you

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Economic Review October

Jenny Procter blog budget, economic update

You can read a pdf version of this update here

Chancellor’s fiscal statement delayed

The government has pushed back the date of its much-anticipated Medium-Term Fiscal Plan in order to ensure it is based on the “most accurate” economic forecasts available.

Chancellor Jeremy Hunt had been due to deliver his first fiscal statement detailing how the government plans to repair the country’s public finances on 31 October, but following Rishi Sunak’s appointment as Prime Minister, it was decided to move the announcement back by two-and-a-half weeks.

The fiscal event, which will now be delivered on 17 November, has also been upgraded to a full Autumn Statement, paving the way for wider taxation policies to be announced. The Chancellor’s tax and spending plans will also be accompanied by updated economic growth and borrowing forecasts produced by the independent Office for Budget Responsibility (OBR).

When announcing the postponement, Mr Hunt said, “Our number one priority is economic stability and restoring confidence that the United Kingdom is a country that pays its way. I’m willing to make choices that are politically embarrassing if they’re the right thing to do for the country, if they’re in the national interest.”

Financial markets were relatively calm after the news broke with analysts describing the delay as understandable, and both sterling and government bond prices were little changed by the announcement. The International Monetary Fund, which had criticised the previous Chancellor’s unfunded tax cuts, offered support to the incoming Prime Minister, with the organisation’s Chief Kristalina Georgieva suggesting Rishi Sunak will bring “fiscal discipline” to the UK.

The Chancellor has been keen to demonstrate his fiscal credentials, reiterating his commitment to “debt falling over the medium term.” This suggests the government will have some tough tax and spending decisions to make in order to fill the budget black hole, with Treasury officials warning people “should not underestimate the scale of this challenge.”

Inflation back at 40-year high

Soaring food prices have pushed the UK inflation rate back to a four-decade high, fuelling expectations of a sharp interest rate hike at the next Bank of England (BoE) Monetary Policy Committee (MPC) meeting in early November.

Data released last month by the Office for National Statistics (ONS) showed that the headline rate of inflation rose to 10.1% in September after dipping to 9.9% in August. This was slightly above analysts’ expectations and took consumer price inflation back to a 40-year high previously hit in July.

The food and non-alcoholic drinks sector was the biggest upward contributor to September’s rise, with prices in this category recording their biggest jump since April 1980. ONS said the price of most key items in an average household’s food basket rose, including fish, sugar, fruit and rice, as the war in Ukraine and recent weakness in the pound made both food products and ingredients more expensive.

This further jump in inflation has placed additional pressure on the BoE to raise interest rates when its next MPC meeting concludes on 3 November. Speaking at a G30 event in Washington in mid-October, Bank Governor Andrew Bailey acknowledged rates may need to rise by more than the BoE had previously envisaged. The Governor said, “We will not hesitate to raise interest rates to meet the inflation target. And, as things stand today, my best guess is that inflationary pressures will require a stronger response than we perhaps thought in August.”

While the Chancellor’s decision to delay his fiscal statement until after the Bank’s November meeting will make policymakers’ deliberations more difficult, analysts still expect them to take decisive action. Indeed, over half of respondents in a recent Reuters poll of economists expect rates to rise by 0.75% in November, with most of the others predicting a 1% increase.

Markets (Data compiled by TOMD)

As October drew to a close, UK stock markets benefited from a Halloween rebound. The blue-chip FTSE 100 index closed the month at a five-week high, up 2.91% to 7,094.53, buoyed by gains across Britain’s high street banks, amid expectations of an imminent Bank Rate rise. The FTSE 250 registered a gain of 4.20%, while the FTSE AIM ended October with a small loss of 0.03%.

On the continent, the Euro Stoxx 50 closed the month up 9.02%. Eurozone annual inflation reached a record high of 10.7% in October, ahead of analyst expectations of 10.3%. In Japan, the Nikkei 225 closed October on 27,587.46, up 6.36%. The Bank of Japan has chosen to maintain ultra-low interest rates, bucking the tightening trend among global central banks.

Across the pond, earnings season is in full swing and US markets are awaiting the highly anticipated Federal Reserve rates meeting in early November. Following a challenging September, markets made a comeback in October, with the Dow closing the month up 13.95% on 32,732.95, its best monthly advance since January 1976. Meanwhile the tech-orientated Nasdaq closed October on 10,988.15, up 3.90%.

On the foreign exchanges, the euro closed at €1.16 against sterling. The US dollar closed the month at $1.14 against sterling and at $0.98 against the euro.

Gold is currently trading at around $1,639 a troy ounce, a loss of 1.96% on the month. Pressure from anticipated rate hikes, rising yields and the relative strength of the dollar are weighing on the precious metal. Brent Crude closed the month trading at around $91 a barrel, a gain of 7.05%, following a decision by the Organization of the Petroleum Exporting Countries (OPEC+) alliance to make sizable cuts to output from November.

Index Value (31/10/22) Movement since 30/09/22

FTSE 100 7,094.53 +2.91%

FTSE 250 17,889.93 +4.20%

FTSE AIM 806.13 -0.03%

Euro Stoxx 50 3,617.54 +9.02%

NASDAQ Composite 10,988.15 +3.90%

Dow Jones 32,732.95 +13.95%

Nikkei 225 27,587.46 +6.36%

UK economy unexpectedly shrinks

Growth statistics released by ONS show the economy unexpectedly contracted in August while forward-looking indicators point to further deterioration following the country’s recent political and market turmoil.

According to the latest gross domestic product (GDP) figures the UK economy shrank by 0.3% in August with output in both the production and services sectors falling back. ONS noted that a number of customer-facing businesses, including retail, hairdressers and hotels, had all fared ‘relatively poorly’ during the month.

August’s figure was significantly weaker than analysts’ expectations, with the consensus from a Reuters poll of economists pointing to zero growth. July’s GDP figure was also revised down to 0.1% from a previous estimate of 0.2%; as a result, output across the three months to August as a whole fell by 0.3%.

Analysts have warned that September could see an even sharper decline, partly due to the extra Bank Holiday to mark the Queen’s funeral and reduction in business opening hours during the period of mourning. Recent survey evidence also suggests the downturn is set to intensify, with October’s preliminary headline reading of S&P Global’s Purchasing Managers’ Index showing the pace of economic decline ‘gathered momentum after the recent political and financial market upheavals.’

Unemployment rate falls again

The latest labour market statistics showed that the rate of unemployment in the UK declined to its lowest level in nearly 50 years, driven by an increase in the number of people leaving the workforce.

ONS figures showed the unemployment rate fell to 3.5% in the three months to August, its lowest level since December to February 1974. This decline, however, was due to an increase in the number of working-age adults who are neither working nor looking for work.

The economic inactivity rate, which measures the proportion of 16 to 64-year-olds who are not in the labour force, rose to 21.7% in the June to August period, an increase of 0.6 percentage points from the previous quarter. This rise was partly driven by an increase in student numbers, as well as a rise in the number of people suffering with a long-term illness, which rose to a record high.

This resulted in the ratio of unemployed people to job vacancies dropping to a record low, despite the latest data revealing a decline in the total number of vacancies. ONS noted that the fall in vacancies was due to a number of employers reducing recruitment ‘due to a variety of economic pressures.’

All details are correct at the time of writing (01 Nov 2022).

Contact us to talk about how this announcement affects your investments

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. No part of this document may be reproduced in any manner without prior permission.

Financial health is financial wealth.

If you want to be financially healthy, please book an initial meeting and let’s discover if we can help you

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Sean Kinsella

Oakes Insurance

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Trembirth Design

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Andy Peat Design

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Sean Kinsella

Oakes Insurance

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Linkedin Expert

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ON DEMAND SUPPORT

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budget

Financial health is financial wealth.

If you want to be financially healthy, please book an initial meeting and let’s discover if we can help you

Call us on 01332913006

Financial health is financial wealth.

If you want to be financially healthy, please book an initial meeting and let’s discover if we can help you

Call us on 01332913006

OBR forecasts

Cost-of-living measures

Personal taxation, savings and pensions

Business measures

Property taxation

Public services

Other key points

Closing comments

All details are believed to be correct at the time of writing (6 March 2024)

Financial health is financial wealth.

If you want to be financially healthy, please book an initial meeting and let’s discover if we can help you

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UK economy rebounds in November

Official statistics show the economy returned to growth in November, although analysts believe it remains a close call as to whether or not the UK will once again manage to avoid a recession.

Surprise uptick in inflation rate

Last month’s release of consumer price statistics revealed a small increase in the UK headline rate of inflation, bucking analysts’ expectations for a further easing in price pressures.

Markets (Data compiled by TOMD)

Major global indices were mixed at the end of January. On the last trading day of the month the FTSE 100 lost ground ahead of imminent interest rate decisions in the UK and US.

Government borrowing lower than expected

The latest public sector finance statistics revealed a smaller-than-expected budget deficit providing the Chancellor with more room for manoeuvre as he prepares to deliver his Spring Statement in March.

Retail sales fall sharply

Data released last month by ONS revealed that the UK retail sector suffered its sharpest decline in sales volumes for almost three years.

All details are correct at the time of writing (01 February 2024)

Financial health is financial wealth.

If you want to be financially healthy, please book an initial meeting and let’s discover if we can help you

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Preparing portfolios for resilience in 2024

Geopolitical risk

Economic prospects

Investment pragmatism

New year, new opportunities

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

Global dividends – encouraging growth?

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

In the news

Who wants to be an (ISA) millionaire?

More people choose living inheritances

One million more over-65s still at work

The financial pitfalls that primarily affect women

Research5 has shone a spotlight on the financial challenges that prevent women from accumulating the same wealth as their male counterparts.

The findings

Let’s do something about it – together

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

The sophisticated scammers targeting YOU

According to a study from NatWest7, seven in 10 people have been targeted by scams over the last 12 months. Vulnerabilities brought on by cost-of-living challenges have likely contributed to the high numbers.

Avoid, avoid, avoid

Phishing scams (37%)

Trusted organisation scams (21%)

Refund scams (13%)

Keep yourself (and your money) safe

Are you due a midlife MOT?

Just to be clear, we’re not talking about your physical health here (that’s the doctor’s remit). We’re talking about a check-up to assess your financial wellbeing.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

Planning for a secure financial future

Plan, plan, plan

Gender gap

Triple default trap

Here to support you

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

Prospects of stronger economic growth

Global recovery remains slow

Challenges ahead but growth prospects

Diversification is key

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

Financial health is financial wealth.

If you want to be financially healthy, please book an initial meeting and let’s discover if we can help you

Call us on 01332913006

Economy stages partial rebound

Markets (Data compiled by TOMD)

Jobs market continues to cool

Retail sales in autumnal fall

All details are correct at the time of writing (01 November 2023 )

Financial health is financial wealth.

Research⁵ has shone a spotlight on the financial challenges that prevent women from accumulating the same wealth as their male counterparts.

According to a study from NatWest⁷, seven in 10 people have been targeted by scams over the last 12 months. Vulnerabilities brought on by cost-of-living challenges have likely contributed to the high numbers.