economic growth

 

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

 

 

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

 

Your Finance Matters – Q1 Winter 2024

Your Finance Matters – Q1 Winter 2024

Preparing portfolios for resilience in 2024

Download your copy here

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:

 

  1. Phishing scams (37%)

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

 

  1. 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.

 

  1. 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:

 

  1. 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

 

  1. 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

 

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

 

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

 

  1. 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

Economic Review October 2023 – Inflation rate holds steady

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

 

Economic Review – August 2023

Economic Review – August 2023

Download your copy here

UK growth rate exceeds expectations

 

The latest gross domestic product (GDP) statistics revealed that the UK economy grew more strongly than expected in June, although more recent survey data does suggest a renewed contraction looks ‘inevitable.’

 

Official data released last month by the Office for National Statistics (ONS) showed the economy grew by 0.5% in June. This figure was higher than any forecast submitted to a Reuters poll of economists, with the consensus prediction suggesting the economy would expand by just 0.2% across the month.

 

ONS said that June’s growth partly stemmed from the increased number of working days with the economy bouncing back from May’s extra Bank Holiday for the King’s Coronation. In addition, the warm weather provided a notable boost to trade in pubs and restaurants as well as activity in the construction sector.

 

June’s stronger than anticipated figure also resulted in the economy expanding across the second quarter as a whole. The increase of 0.2% between April and June again beat economists’ expectations with the consensus forecast from the Reuters poll pointing to a flat reading.

 

Data from a closely watched survey released towards the end of last month, however, suggests a third-quarter downturn looks increasingly likely. The preliminary headline reading from the S&P Global/CIPS UK Purchasing Managers’ Index fell from 50.8 in July to 47.9 in August. This represents the weakest recorded figure for two and a half years and took the index below the 50 threshold that denotes a contraction in private sector output.

 

Commenting on the survey’s findings, S&P Global Market Intelligence’s Chief Business Economist Chris Williamson said, “The fight against inflation is carrying a heavy cost in terms of heightened recession risks. A renewed contraction of the economy already looks inevitable, as an increasingly severe manufacturing downturn is accompanied by a further faltering of the service sector’s spring revival.”

 

Interest rates rise again

  

Early last month, the Bank of England (BoE) announced a further hike in its benchmark interest rate and warned that rates were likely to remain high for some time.

 

Following its latest meeting which concluded on 2 August, the BoE’s nine-member Monetary Policy Committee (MPC) voted by a 6-3 majority to raise Bank Rate by 0.25 percentage points. This was the 14th consecutive increase sanctioned by the MPC and took rates to a 15-year high of 5.25%.

 

Two of the committee’s dissenting voices – Catherine Mann and Jonathan Haskel – voted for a more significant hike, preferring a 0.5 percentage point rise in order to “lean more actively against inflation persistence.” The other dissenting member – Swati Dhingra – again voted for no change, warning that the risks of overtightening “had continued to build.”

 

Although this difference in opinion shows that individual members of the committee are likely to hold differing views on the future path of interest rates, the minutes to the meeting did stress that further monetary tightening may be required. They concluded, ‘The MPC will ensure that Bank Rate is sufficiently restrictive for sufficiently long to return inflation to the 2% target sustainably in the medium term.’

 

On the day that he announced the decision, BoE Governor Andrew Bailey reiterated that message saying “we might need to raise interest rates again.” The Governor added that it was “far too soon” to speculate about the timing of any cuts and that rates would not fall until there was “solid evidence” that rapid price rises are slowing.

 

The next MPC meeting is due to conclude on 20 September with the rate announcement scheduled for the following day. A recent Reuters poll found economists now typically expect another quarter-point hike to be sanctioned at that meeting with rates then peaking at 5.5%.

  

Markets (Data compiled by TOMD)

 

At the end of August, major global stock markets closed the month in negative territory. European stock markets were mixed on the last trading day of the month, as key central bank policy meetings approached and investors processed regional inflation data.

 

In the UK, the FTSE 100 closed the month on 7,439.13, a loss of 3.38%. The mid cap focused FTSE 250 closed down 2.81% on 18,605.70, while the FTSE AIM closed August on 741.93, a loss during the month of 2.98%.

 

Across the pond, investors are awaiting the next batch of US employment data, which will provide a key indicator on the health of the economy and the impact of the Federal Reserve’s rate tightening measures. The Dow Jones Index closed the month down 2.36% on 34,721.91, while the tech-heavy NASDAQ closed the month down 2.17% on 14,034.97.

 

In Japan, the Nikkei 225 finished the month on 32,619.34, down 1.67%. On the continent, the Euro Stoxx 50 closed August on 4,297.11, a loss of 3.90%.

              

On the foreign exchanges, the euro closed the month at €1.16 against sterling. The US dollar closed at $1.26 against sterling and at $1.08 against the euro.

 

Tightening physical supplies are supporting oil prices. Brent crude closed August trading at around $86, a gain over the month of 1.04%. Gold closed the month trading at around $1,942 a troy ounce, a monthly loss of around 1.44%.

 

 

 

 

Index                                        Value (31/08/23)                           Movement since 31/07/23

 

FTSE 100                                   7,439.13                                                           -3.38%

FTSE 250                                   18,605.70                                                         -2.81%

FTSE AIM                                  741.93                                                               -2.98%

Euro Stoxx 50                            4,297.11                                                           -3.90%

NASDAQ Composite                14,034.97                                                         -2.17%

Dow Jones                                  34,721.91                                                         -2.36%

Nikkei 225                                  32,619.34                                                         -1.67%

 

 

 

Headline inflation rate declines

 

 

Official consumer price statistics have revealed a further fall in the UK headline rate of inflation, although the latest data also showed fresh signs of stickiness in terms of core inflation.

 

Figures released last month by ONS showed that the Consumer Prices Index (CPI) 12-month rate – which compares prices in the current month with the same period a year earlier – stood at 6.8% in July. While this was sharply lower than the previous month’s figure of 7.9%, the drop was exactly in line with forecasts.

 

ONS noted that falling gas and electricity prices had largely driven the decline as a change to the energy price cap came into force. Price rises for some staple food items including milk, butter, bread, eggs, cereal and fish also eased, although these dips were partially offset by a further rise in the cost of eating out, as well as a jump in flight, alcohol and tobacco prices.

 

Core CPI inflation, which excludes volatile elements such as energy, food, alcohol and tobacco, however, failed to fall. July’s figure of 6.9% was unchanged from the previous month and slightly higher than the consensus prediction from the Reuters poll.

 

 

 

Wage growth hits record high

 

 

Earnings statistics published last month showed that nominal wage growth rose at a record rate in the three months to June, although more recent survey data does suggest pay deals may have started to cool.

 

According to the latest ONS figures, average weekly earnings excluding bonuses rose at an annual rate of 7.8% in the April to June period. This represents the strongest growth rate since comparable records began in 2001 and was significantly higher than the 7.4% rise predicted in a poll of economists.

 

Commenting on the data, ONS Director of Economic Statistics Darren Morgan noted that wage growth is still not outstripping the pace of price rises. However, Mr Morgan did say that the latest figures show that real pay levels are now “recovering.”

 

The BoE has been closely monitoring wage growth for inflationary signs and the latest figures will undoubtedly have caused concern. Survey evidence, however, does point to a more recent slowdown – data from Adzuna, for example, shows average advertised salaries fell by 0.15% between June and July, while XpertHR figures show the median basic pay settlement in the three months to July dropped to 5.7% following six consecutive quarters at a record 6%.

 

 

 

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 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 information only. We cannot assume legal liability for any errors or omissions it might contain. No part of this document may be reproduced in any manner without prior permission

 

All details are correct at the time of writing (1 September 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

 

UK inflation rate declines

UK inflation rate declines

 

Download your copy here

Data released by the Office for National Statistics (ONS) showed the UK inflation rate fell by more than expected in June, leading analysts to predict that interest rates are now likely to rise less sharply than previously feared.

 

The latest inflation statistics revealed that the Consumer Prices Index (CPI) 12-month rate – which compares prices in the current month with the same period a year earlier – stood at 7.9% in June. This was significantly below the previous month’s figure of 8.7% and also lower than the 8.2% consensus forecast from a Reuters poll of economists.

 

Core CPI inflation, which excludes volatile elements such as energy, food, alcohol and tobacco and is used by the Bank of England (BoE) to gauge underlying price pressures, also dropped by more than expected. Economists had predicted the core measure of price growth would remain at May’s three-decade high of 7.1%, but instead it dropped to 6.9%.

 

ONS noted that the largest downward pressure on June’s CPI rate came from petrol and diesel prices which declined by 23% compared to year earlier levels. The price of some other goods and services, however, continued to rise sharply with sugar up by 54% and transport insurance costs up by 48%.

 

Although the CPI inflation rate does now stand at its lowest level in over a year, the figure is still almost four times higher than the BoE’s 2% target. Economists therefore continue to expect the Bank to sanction further monetary tightening in the months ahead.

 

The peak in the current interest rate cycle, though, is now likely to be lower than forecasts had suggested prior to release of June’s inflation data. According to a recent Reuters poll, economists now typically expect Bank Rate to reach a high point of 5.75% during the final quarter of this year.

 

 

IMF upgrades economic growth forecast

 

The International Monetary Fund (IMF) has raised its 2023 global growth forecast, but warned challenges remain and that the balance of risks continue to be ‘tilted to the downside’.

 

In its latest assessment of world economic prospects, the IMF said inflation was coming down and acute stress in the banking sector had receded. The international soothsayer predicts an overall global growth rate of 3.0% for 2023, lower than the 2022 figure of 3.5%, but 0.2 percentage points higher than its previous estimate produced in April.

 

The latest projections also included a significant UK upgrade, with the IMF now forecasting growth of 0.4% across 2023, a 0.7 percentage point increase from April’s figure. While this does mean the IMF is now predicting some growth, the UK is expected to be the second most sluggish of the G7 economies this year, with only Germany forecast a lower rate.

 

Meanwhile, the latest monthly growth figures released by ONS showed the UK economy shrank by 0.1% in May, partly because of the extra bank holiday for the King’s Coronation reducing the number of working days in the month. The figure, however, was ahead of analysts’ expectations, while ONS noted that anything better than a 0.1% decline in June would result in the economy avoiding a contraction for the second quarter as a whole.

 

Survey data released towards the end of last month, though, does still point to a relatively weak outlook, with the preliminary reading from the S&P Global/CIPS Composite Purchasing Managers’ Index dropping to a six-month low of 50.7 in July. While the figure does remain just above the 50 threshold that denotes growth in private sector output, S&P Global Market Intelligence’s Chief Business Economist Chris Williamson noted that forward-looking indicators “all point to growth weakening further in the months ahead”.  

 

 

Markets (Data compiled by TOMD)

 

At the end of July, stock indices across Europe finished the day in green following positive inflation readings in the bloc. London stocks ended firmer at close on Monday after news of higher-than-expected mortgage approval rates in the UK.

 

The FTSE 100 closed the month on 7,699.41, a gain of 2.23%, while the mid cap FTSE 250 closed up 3.95% on 19,143.76 and the FTSE AIM closed July on 764.72, a monthly gain of 1.49%.

 

In the US, earnings remain a key driver of markets. Wall Street’s main market gauges ended the day slightly higher to cap off a fifth consecutive month of gains. The Dow Jones Index closed the month up 3.35% on 35,559.53, while the NASDAQ closed the month up 4.05% on 14,346.02.

 

On the continent, the Euro Stoxx 50 closed July on 4,471.31, a gain of 1.64%. In Japan, the Nikkei 225 closed the month down 0.05% on 33,172.22.

              

On the foreign exchanges, the euro closed the month at €1.16 against sterling. The US dollar closed at $1.28 against sterling and at $1.10 against the euro.

 

Gold closed the month trading at $1,970.65 a troy ounce. Brent crude closed the month trading at around $85, a three-month high and its steepest monthly gain since January 2022, supported by signs of tightening global supply and rising demand through the rest of this year.

 

 

 

 

Index                                                  Value (31/07/23)                           Movement since 30/06/23

 

FTSE 100                                            7,699.41                                                           2.23%                                 

FTSE 250                                           19,143.76                                                         3.95%                                 

FTSE AIM                                          764.72                                                               1.49%

Euro Stoxx 50                                  4,471.31                                                           1.64%

NASDAQ Composite                      14,346.02                                                         4.05%                                 

Dow Jones                                        35,559.53                                                         3.35%   

Nikkei 225                                        33,172.22                                                         -0.05%

 

 Budget deficit declines in June

 

Chancellor Jeremy Hunt has again ruled out a rush to cut taxes despite the latest public sector finance statistics showing government borrowing for the first three months of the fiscal year was lower than expected.

 

ONS data released last month showed government borrowing in June totalled £18.5bn. While this represents the third-highest June ever recorded, it was £400m below the same month last year and lower than analysts’ expectations. It also left the fiscal year-to-date deficit £7.5bn below the most recent forecast from the Office for Budget Responsibility (OBR), with this downside surprise reflecting stronger than predicted tax receipts.

 

Analysts, however, still typically believe there remains little scope for potential tax cuts before next year’s general election. Reacting to the figures on the day the data was released, the Chancellor appeared to concur, saying, “Now more than ever we need to maintain discipline with the public finances.”

 

A separate report on fiscal risks published last month by the OBR also warned that the country’s public finances are currently in a ‘vulnerable position’. The report also stressed that, in the coming decades, government finances will come under growing pressure as an ageing society inevitably increases costs and reduces tax receipts.

 

Hot weather sparks retail sales rise

 

The latest official set of retail sales statistics revealed stronger than expected growth in sales volumes as the hottest June on record provided a boost to the retail sector.

 

According to ONS data published last month, total retail sales volumes rose by 0.7% in June. This growth in the quantity of goods bought by consumers was higher than May’s downwardly revised 0.1% monthly increase and also stronger than the 0.2% consensus forecast predicted in a Reuters poll of economists.

 

ONS said supermarkets were a key driver of June’s rise, with food sales benefitting from rising temperatures and a rebound after the coronation had disrupted spending patterns in May. The hotter weather also encouraged more people on to the high street, leading to both department stores and furniture shops enjoying a strong month.

 

Responding to the figures, British Retail Consortium Chief Executive Helen Dickinson said, “June’s sunshine gave retail sales growth a boost as customers readied themselves for the summer season. Nonetheless, consumer confidence remains fragile, and with households feeling the pinch from high inflation and rising interest rates they held back on making big ticket purchases. Retailers are hopeful that consumer confidence will improve over the coming months as inflation eases.”

 

All details are correct at the time of writing (01 August 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.

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 information only. We cannot assume legal liability for any errors or omissions it might contain. 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

 

Signs of optimism in global economy

Signs of optimism in global economy

Download your copy here

Although the global economy continues to face significant headwinds, statistics released during the first few months of this year have revealed unexpected signs of resilience. This has led economists to begin upgrading growth forecasts, while the World Economic Forum’s latest Chief Economists Outlook reported signs of ‘nascent optimism.’

 

Growth stronger than expected

Uncertainty undoubtedly continues to be a key feature of the world economy with pressure being exerted from a number of issues. First quarter data, though, has shown that the global economy performed better than most economists had previously feared, with growth recorded across all regions amid signs of the green shoots of recovery.

 

Inflationary pressures set to fall

Persistent inflationary pressures and tighter financial conditions, however, do remain key challenges for policymakers around the globe. Inflation has so far stayed stubbornly high and, while economists do expect it to continue falling over the rest of the year, this decline is predicted to be at a slower pace than previously thought.

 

Resilient economic growth

A key theme at the World Economic Forum’s recent Growth Summit was ‘enabling resilient economic growth’ with discussions focusing on inclusive and sustainable growth, and equitable globalisation. The organisation’s updated forecast showed a notable strengthening in growth expectations, although it also highlighted sharp variations by region. The most buoyant activity is predicted to be in Asia, with China’s reopening expected to drive a significant rebound, while growth prospects are thought to be noticeably weaker in Europe.

 

Diversification is key

An improving outlook should clearly create opportunities for shrewd investors. However, the relatively uncertain backdrop, along with divergent regional dynamics, inevitably means diversification will remain a vital component in any investor’s armoury. Spreading money in a globally diversified portfolio across a range of sectors and different size businesses should, as ever, prove an effective way to mitigate risk in the quest to build wealth.

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.

 

 Striking a balance

 

While recent financial challenges have taken their toll on everyone’s pockets, it comes as no surprise that parents are putting concerns about their children’s finances above their own, as highlighted in a recent survey of advisers1.

Over half (55%) of the advisers surveyed noted that adult children were taking priority in clients’ wealth planning at present, with many taking action to assist with their children’s financial struggles amid the cost-of-living crisis.

 

The main requests by parents wanting to lend a financial hand include releasing funds (25%) for their adult children, while over half (55%) of the advisers have clients choosing to access their pension savings in order to enhance their disposable income to support family members, with 18% of those clients taking an additional lump sum specifically to help their offspring. Reportedly 53% of advisers have clients keen to adjust their finances, with 40% requesting advice on ensuring investments stayed ahead of inflation.

 

Although people are understandably concerned about their children’s financial circumstances and are keen to help, it’s important to be mindful about striking the right balance and not to lose focus on your financial objectives for your own future. For help in striking that balance, get in touch.

 

1Royal London, 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.

 

IHT goes mainstream

 

Inheritance Tax (IHT) receipts have been consistently rising, with new data from HM Revenue & Customs (HMRC) showing takings for the 2022-23 tax year totalled £7.1bn, up a massive £1bn from the previous tax year (£6.1bn 2021-22). According to HMRC, this huge uplift can be attributed in part to ‘a combination of the recent rises in asset values and the government’s decision to maintain the IHT nil rate band thresholds at their 2020 to 2021 levels up to and including 2025 to 2026.’

 

Reported estimates from the Spring Budget detail that over the next five years, IHT is expected to bring in £38bn for the Treasury, meaning annual receipts will exceed £8bn by 2027-28, with 6.7% of deaths expected to trigger an IHT charge. This compares with 3.76% of UK deaths in 2019-20.

 

Record receipts have prompted suggestions that the tax has now become mainstream. Previously dubbed a tax on the wealthy, this is certainly no longer the case, as frozen thresholds and elevated house prices impact.

 

The good news is that through expert planning you can legitimately mitigate this tax, so you can pass on assets to your family as you’d intended. There are various different strategies depending on your unique circumstances, including making gifts during your lifetime, considering placing assets into trust, making use of exemptions, and thinking about leaving something to charity, to name but a few.

 

Don’t go it alone

IHT is a complex tax, with reliefs and exemptions on gifts to consider and the interaction with other taxes. These days, with many more estates likely to be subject to IHT, taking expert advice could save your beneficiaries substantial amounts of tax. Get in touch.

 

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.

 

 

In the news

 

HNWIs cutting pension contributions

Research has highlighted that in an effort to alleviate daily financial pressures, including rising mortgage rates, one third of high-net-worth individuals (HNWIs) have reduced their pension contributions or intend to do so in the next six months2. Those with assets of £250,000 plus are more likely to have reduced their pension contributions in the last six months (14%), versus 9% across the UK population as a whole.

 

Those HNWIs who have already taken steps to reduce their pension payments have done so by an average of £1,246 a month, nearly £15,000 over the course of a year. Over eighty percent (84%) of HNWIs are already experiencing or expecting an increase in their mortgage rates to put a strain on their cashflow, prompting many to reduce their pension contributions.

 

Interestingly, the research has also shown that the majority of HNWIs are underestimating the requirements for a comfortable retirement, believing on average that a pension pot around £580,000 will do the job, but in reality a pot of nearly £700,000 plus the full State Pension will suffice, according to the research.

 

2Saltus, 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.

 

 

Achieving real financial empowerment

 

Traditionally, people might have assessed their financial health by simply checking the balance on their bank account or totalling their amassed level of wealth. In recent years, however, a different measure has emerged which seeks to balance financial stability with emotional wellbeing.

 

Financial empowerment

This new concept places greater emphasis on goals and developing a financial plan to achieve life’s aspirations; in other words, it’s about people gaining control over their finances rather than their finances controlling them. Achieving genuine financial empowerment does not therefore focus simply on someone’s level of wealth, but on handling that money so it has a truly positive impact on their wellbeing.

 

A state of mind

In many ways, financial empowerment is about understanding the emotional relationship with money by focusing on an individual’s mindset as well as their finances. Taking time to strategise, by aligning spending and savings commitments with long-term goals while being prepared for life’s unexpected financial challenges, can provide a logical, ordered approach that brings satisfaction and pride to our financial lives. In effect, it creates control that affords a sense of financial freedom and thereby puts us on track to a fulfilling, well-lived life and retirement.

Empowerment versus income

Analysis3, which compares people’s emotional experiences with their level of empowerment and earnings, offers further valuable insight. It found that financially empowered people had mostly positive experiences, even those in lower income brackets, while those who felt disempowered were generally less happy with their finances than their peers. This suggests that a sense of personal power rather than someone’s income level is the key to achieving emotional wellbeing in their financial lives.

 

It’s all in the planning

Financial empowerment effectively derives from equipping ourselves with the right tools. With the clear, transparent advice and professional support our firm provides, we can construct a well thought-out, long-term but flexible plan that will allow you to live the life you want and thereby achieve true financial empowerment.

 

3Morningstar, 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.

 

 

Pensions – what’s changing?

 

During the Spring Budget the Chancellor announced several changes to pensions including increasing the Annual Allowance and the Money Purchase Annual Allowance. The changes, the most significant since pensions freedoms in 2015, have largely been met with positivity, bringing greater flexibility and opportunity.

 

Some higher-paid workers faced additional tax bills as a result of building sizeable pension pots or significant final salary benefits. The overhaul makes it easier for people to accumulate a larger pension pot and not be penalised by taxes, also enabling them to build larger capital sums needed to

produce sufficient retirement income. Let’s take a look in closer detail at some of the main changes, many of which took effect from 6 April 2023:

 

  • The Lifetime Allowance (LTA) charge was removed, with the LTA (currently £1,073,100) itself expected to be formally abolished (likely to be April 2024), allowing people to save more into their pension over their lifetime without facing tax charges for exceeding it

 

  • The standard Annual Allowance (AA) increased from £40,000 to £60,000 (max 100% of earnings), allowing many individuals to pay more into their pension each tax year and receive tax relief on it. Individuals are still able to carry forward any unutilised allowance from the previous three tax years. Increasing the AA will particularly benefit workers approaching retirement who may have neglected pension saving in the past, who will be able to pay more into their pension each year and receive tax relief

 

  • The ‘adjusted income’ threshold for Annual Allowance tapering increased from £240,000 to £260,000 and the minimum tapered Annual Allowance increased from £4,000 to £10,000 (meaning that individuals with annual adjusted income of £360,000 or more will have an Annual Allowance of £10,000). The tapered Annual Allowance is the reduced pension Annual Allowance that is applied to those who now have an ‘adjusted income’ over £260,000, for every £2 earned above the £260,000 threshold the normal Annual Allowance is reduced by £1

 

  • The Money Purchase Annual Allowance (MPAA) increased from £4,000 per tax year to £10,000, to encourage those drawing a pension to continue working. This is the amount you can pay into your pension after you have accessed pension benefits, and still enjoy tax relief. The additional MPAA means anyone already using their pension but continuing to work, or looking to return to work, will be incentivised to do so as they can increase the size of their pension pot and receive tax relief.

 

Good for you

The changes only really impact the highest earners, those with generous company pensions and those wanting to aggressively fund their pensions later in life. The government is hoping the changes will incentivise those in certain high demand, high earning professions such as GPs and NHS consultants to postpone retirement.

 

Professional pension advice is essential to ensure you make the most suitable decisions with your pension and to maximise your pension provision without encountering tax issues.

 

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.

 

Summer retirement round-up – developing a coherent strategy

The last few years have created an increasingly complex backdrop for retirement planning. Not only has the post-pandemic era seen attitudes to work alter significantly, but macro-economic headwinds from Russia’s invasion of Ukraine and the cost-of-living crisis have created significant unhelpful market volatility. In combination, this has inevitably heightened the need for everyone to engage in retirement conversations at the earliest opportunity. Some recent research sets the backdrop for your summer retirement round-up, spotlighting key trends.

 

Changing face of retirement

A recent study4 of UK employees has shown how people are re-evaluating plans for work and later life, with evidence that partial retirement may become the new norm. In total, over half of all workers said they like the idea of continuing to work through retirement. The research also highlighted a strong sense of semi-retirement positivity, with nine out of ten saying they were ‘much happier’ after reducing their working hours.

 

Low levels of confidence

Another study5, however, has highlighted a distinct lack of confidence among 55 to 75-year-olds when it comes to financing retirement. Indeed, nearly a third said they were either not at all confident or not very confident they would enjoy a comfortable lifestyle in retirement, compared to less than one in five who felt very or extremely confident.

 

Mind the gap

The research also highlighted a sense of unpreparedness, with a notable divergence in anticipated levels of retirement income and expenditure. For instance, while average expected spending five years into retirement was predicted to be 92% of pre-retirement levels, average income was only expected to hit 78%; other evidence suggests this latter figure is an aspiration few pensioners are likely to achieve.

 

Planning is essential

These findings suggest many from the next generation of retirees will need support if their finances are to see them through retirement, and this vividly highlights the need to develop a sound strategy tailored to an individual’s unique circumstances long before retirement looms. Planning ahead can address potential income requirements and offer solutions that build resilience to ensure you enjoy the retirement you deserve.

 

4Aviva, 2023

5The Wisdom Council, 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.

 

A defining moment – FTSE 350 female board representation

Three years ahead of schedule, FTSE 350 companies have met the target of achieving 40% female board representation, according to the latest FTSE Women Leaders Review6.

 

The report highlights ‘steady progress’ in getting women leaders to the ‘top table of business in the UK,’ with Nimesh Patel and Penny James, co-chairs of the Review describing the achievement as “a defining moment and testament to the power of the voluntary approach and the collective efforts of many businesses and individuals over the last decade.”

 

6FTSE Women Leaders, 2023

 

Making purposeful financial decisions to combat inflation

 

The upsurge in inflation over the last year or so has again vividly highlighted the devastating impact sharply rising price levels can wreak on people’s finances. Carefully reviewing your financial choices now, though, can ensure you continue making appropriate decisions that will help to stop inflation leaving a lasting impression on your financial future.

A lack of understanding

Official statistics show the headline rate of inflation peaked at a 41-year high of 11.1% last October but, although economists expect it to continue falling for the rest of this year, the rate has so far remained stubbornly high. Research7, however, suggests the impact inflation has on our finances is not widely understood, with over half of UK adults failing to grasp how rising prices eat into the buying power of their savings.

 

Limiting the damage

Inheritance is another area where high inflation can have a profound effect. When combined with the continuing nil-rate threshold freeze, soaring prices inevitably mean more estates are likely to be dragged into the Inheritance Tax net. Careful planning now, though, can limit any future liability and preserve people’s ability to pass on assets to their heirs.

 

Pension pressures

Retirement provision is also a concern, with growing evidence that cost-of-living pressures are leading some to cut back contributions as a way to make ends meet, without realising the lasting damage such decisions can make. For instance, analysis8 based on various assumptions (about such factors as salary, pension contribution rates and investment growth) shows that if someone opts out of pension contributions for five years in their 20s it could reduce their final retirement pot at age 66 by £114,000.

 

Stay on plan

At times like these, it is often worth revisiting what initially inspired you to set your financial goals. Reconnecting with those original motivations can encourage you to stick to your plans and thereby help maintain control over your financial destiny.

 

Here for you

As ever, we’re here to help; so please get in touch if you need to review your finances and, together, we’ll plan to mitigate inflation’s impact on your future financial wellbeing.

 

7Aviva, 2022

8Standard Life, 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.

 

 

In other news

 

National Insurance (NI) gap

If you want to boost your State Pension and plug a gap in your NI record, the government has just extended the deadline for doing so from 31 July 2023 to 5 April 2025. The government has been allowing eligible people to retrospectively build up their April 2006 to April 2016 NI record through voluntary contributions, as part of transitional arrangements introduced alongside the new State Pension. You can check your NI record here www.gov.uk/check-national-insurance-record.

 

Locked Child Trust Funds

Around 80,000 young people who lack the capacity to make financial decisions have been unable to access money in their Child Trust Fund9. Instead of being able to withdraw the money when they turned 18, families are having to pay to go through the Court of Protection, a long-winded and costly process. Ministry of Justice figures show only 15 accounts were accessed through this process in 2021.

 

Using property wealth to support grandchildren

Research10 has found that 79% of grandparents are providing financial support for their grandchildren, with one in 12 (8%) using their property wealth to do this. Grandparents aged 50 to 64 are twice as likely to use property wealth to gift to grandchildren compared with 65 to 74-year-olds, indicating that the next generation of grandparents are likely to use equity in their property for financial planning.

 

9Renaissance Legal, 2023

10L&G, 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. Think carefully before securing other debts against your home. Equity released from your home will be secured against it.

 

 

The benefits of being a new tax year front runner

 

The longer days of summer are the ideal time to think about what you want for yourself and your family in the future, to set specific financial goals and to benefit from getting plans organised early in the tax year.

Setting your goals

Considering your individual financial goals and developing a financial plan that aligns with those goals can help you to identify what is important to you, to stay disciplined and focused on your long-term objectives, avoiding short-term market fluctuations or investment fads.

 

The early bird

Investing early in the tax year can offer several benefits:

 

  • It gives your investments more time to grow tax-free or tax-deferred, benefiting from compounded returns
  • It can help you avoid a last-minute rush to make contributions before the end of the tax year, which can lead to mistakes or missed opportunities
  • There is time to spread your contributions over the year, making budgeting easier.

 

Work with us

We can work with you to identify your financial goals and set up plans so that you can get ahead early in the tax year, giving you powerful strategies for building wealth and achieving financial security.

 

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.

 

 

Investment myths debunked

 

To many, the world of investing is shrouded in mystery; the realm of financial whizz-kids and the super-rich. In reality, however, this is not the case and, once myth is separated from reality, it should be clear that investing is actually accessible to all.

Can’t invest, won’t invest!

Research11 has highlighted several reasons why people are sometimes reluctant to invest. The main one, cited by 45% of respondents, is because they don’t have sufficient money, while 23% feel they are not knowledgeable enough about investing and 21% are worried about losing money.

 

Only for the rich?

These findings mirror a number of common misconceptions surrounding investing, one of which is that only wealthy people invest. However, while this may have been the case in the past, it is certainly not true nowadays, with investment options available for people with relatively small sums to invest.

 

Expertise and devotion required?

Other common investment myths include the idea that you have to be a stock market genius and monitor your investments on a daily basis. Both of these are untrue: advice is readily available to guide novice investors throughout their investment journey, while taking a long-term approach is always advisable.

 

Too risky by far?

While it is true that all investing involves risk, not all investments are similarly risky. So, anyone who is worried about losing money can take a more cautious approach by holding a greater proportion of less-risky assets in their portfolio.

 

Help at hand

If you’re new to investing then get in touch and we can help get you started. We’ll show you that investing is not just for the very wealthy but it does give everyone a chance to potentially secure a higher return on their hard-earned cash.

 

11HSBC, 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.

 

 

Pensions round-up

 

How up to date are you with your pension? Here are a few things to consider.

How much is in your pension pot?

According to research12, three quarters of UK adults don’t know how much is in their pension pot. This figure rises to 79% of 55 to 64-year-olds who say they can’t put a figure on the value of their pension – especially worrying as this is a crucial stage for retirement planning. The research highlighted that women (81%) are more likely than men (68%) not to know how much they have accumulated in pensions saving.

 

Consider the gender gap

Research13 has again found a widening of the gender pension gap from the age of 35. The gap between women’s and men’s contributions for 35 to 39-year-olds is 21%, up from 18% in the previous year. Other research14 has highlighted how pension inequality is exacerbated for minority women, with over half (54%) of Black women saying they don’t have any retirement savings, compared to 40% of South Asian women and 35% of White women.

 

State Pension passes £10,000, but watch the tax

There was a welcome boost to pensioners’ incomes in April. The single-tier State Pension is now £203.85 a week or £10,600.20 a year. Those in receipt of the basic State Pension now get £156.20 a week, which may be topped up further by the Additional State Pension.

 

However, the freezing of the Income Tax personal allowance since 2021-22 means that the State Pension takes up 84% of the allowance, meaning pensioners will only need to earn £1,969.80 before they start paying Income Tax.

12Standard Life

13Aviva

14Scottish Widows 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.

 

 

How does age affect your life insurance?

 

Age is a key factor in determining cost when you take out life insurance. Generally, the younger you are when you purchase a policy, the less expensive your regular premiums will be, because younger people are statistically less likely to die than older people, so the risk to the insurer is lower.

 

Assessing the risks

Insurers consider how likely it is that they will have to pay out a claim if you were to die during the term of the policy. As you age, the cost of new life insurance cover generally increases because the likelihood of death increases. This is especially true for people who have developed health issues or who engage in risky behaviours such as extreme sports or smoking.

 

For example, a 25-year-old non-smoker in good health is likely to pay significantly less for the same level and duration of cover than a 65-year-old smoker with a history of health problems. Insurers will also consider your age when determining the length of the policy term, with longer terms generally being available to younger people. Many insurance companies offer a maximum term of around 40 years, but maximum age limits can vary.

 

It’s not all about age

Your age is just one factor that will affect the cost. The insurance company will also consider your overall health, lifestyle, occupation, family medical history and the length of policy you require.

 

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.

 

 

Your retirement – don’t do it a disservice

 

The Institute for Fiscal Studies (IFS) has warned that 90% of those currently in their 30s and 40s are saving less than they need to if they want to have a decent standard of living in retirement. Whilst the IFS researchers found that the current generation of pensioners is doing better than any before it, they also concluded that future generations are unlikely to fare as well.

 

Saving enough

IFS found that many employees are saving very little for retirement; 60% of middle-earning private sector employees who contribute to a pension are saving less than 8% of their earnings. Fewer than one-in-five self-employed workers save into a pension at all.

 

Paul Johnson, IFS Director, commented, “Despite the number of self-employed people growing considerably, many fewer of them are saving in a pension. Most private sector workers are left having to manage considerable risks – not least over how long their retirement will be – which for many will be incredibly difficult to balance well.”

 

When can I retire?

Although current rules let you take money from your pension at age 55 (57 from 2028), you may not have enough in your pension pot to make this a viable option. Discussing your options with us can give you the bigger picture and help you to be realistic with your plans – even small contributions, made regularly, can help boost your pension pot and you’ll get tax relief too.

 

So, whatever your circumstances, we can help you to plan for an enjoyable and fulfilling retirement.

 

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 importance and value of financial advice today

 

There are clearly a variety of reasons why people utilise the services of a financial adviser, but among the key motivating factors is undoubtedly the peace of mind professional advice affords to clients. And, in challenging times like these, it is clearly not difficult to understand why that particular benefit is deemed so important.

Peace of mind

A recent survey15 sought to ascertain the main reasons why investors seek the expertise of a financial adviser and it found that more than half of those that use one did so for peace of mind. In contrast, just a third said they used an adviser due to their own lack of financial expertise, while less than a fifth did so because of time constraints.

 

Soft factors are important

The research also asked investors which aspects of advice they place most value on, with two-thirds saying investment returns were critical and just over four in ten attributing value to tax management efficiency. Interestingly, however, the study also found that a number of soft factors were equally, if not more, important to investors. For instance, half of respondents said they valued the ability to plan how they will attain their financial goals.

 

Support key in difficult times

The value of support provided by an adviser tends to be accentuated during challenging economic times when clients typically need greater reassurance and the confidence required to maintain a long-term outlook. During such periods, for example, advisers perform a vital role by ensuring clients

do not fall into the trap of ‘selling low’ or ‘buying high.’

 

Avoiding expensive mistakes

This latter point perhaps highlights the true value gained from using a financial adviser, which is that it helps clients avoid making costly mistakes. In essence, value therefore seems to stem less from picking the best investments and more from constantly making smart decisions across a range of issues, whether that be: tax, cost or income management, asset allocation, portfolio rebalancing, or withdrawal strategies.

 

15Hymans Robertson, 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.

 

 

 

 

 

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 – June 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
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