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Economic Review – July 2024

Economic Review – July 2024

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UK growth stronger than expected

 

SFFS Economic Review_July 24

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Figures released last month by the Office for National Statistics (ONS) showed the UK economy grew faster in May than had been predicted, while survey evidence points to a more recent post-election pick-up in business activity.

The latest gross domestic product (GDP) statistics revealed that economic output rose by 0.4% in May, twice the level that had been forecast in a Reuters poll of economists. May’s figure also represented a strong rebound from the zero-growth rate recorded in April, with a broad-based increase in output as the services, manufacturing and construction sectors all posted positive rates of growth.

ONS also noted that growth was relatively strong in the three months to May, with GDP rising by 0.9% in comparison

to the previous three-month period. This represents the UK economy’s fastest rate of growth for more than two years.

Evidence from a closely watched economic survey also suggests private sector output picked up last month following a lull in the run-up to July’s General Election. The preliminary headline growth indicator from the latest S&P Global/CIPS UK Purchasing Managers’ Index (PMI) stood at 52.7 in July, slightly ahead of analysts’ expectations and up from a six-month low of 52.3 in June. Manufacturing output

 

was particularly strong, with this sector expanding at its fastest rate in almost two and a half years.

Commenting on the findings, S&P Global Market Intelligence’s Chief Busi- ness Economist Chris Williamson said, “The flash PMI survey data for July signal an encouraging start to the second half of the year, with output, order books and employment all growing at faster rates

amid rebounding business confidence. The first post-election business survey paints

a welcoming picture for the new government, with companies operating across manufacturing and services having gained optimism about the future and reporting a renewed surge in demand.”

 

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Economic Review – June 2024

Economic Review – June 2024

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Prospect of rate cut moves closer.

 

SFFS Economic Review_June 24

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While last month once again saw the
Bank of England (BoE) leave interest
rates unchanged at a 16-year high, the
minutes to the Bank’s Monetary Policy
Committee (MPC) meeting signalled a
notable change in tone and economists
now view a rate cut as the most likely
outcome when the MPC next convenes.

At its latest meeting, which concluded
on 19 June, the MPC voted by a 7–2 majority
to maintain Bank Rate at 5.25%. For the
second month running, the two dissenting
voices both called for an immediate
quarter-point reduction while, for the first
time, some other members described their
thinking as being “finely balanced.”
The minutes to the meeting also highlighted
this potentially significant shift in
stance, noting that the MPC will now be
looking at whether ‘the risks from inflation
persistence are receding.’ The minutes
concluded, ‘On that basis, the Committee
will keep under review for how long Bank
Rate should be maintained at its current
level.’

Last month’s inflation statistics published
by the Office for National Statistics
(ONS) prior to the MPC announcement,
revealed that the headline rate has now
returned to its 2% target level for the first
time in almost three years. In a statement
released alongside the MPC decision, BoE
Governor Andrew Bailey described that as
“good news.” He also said that policymakers
need to be sure inflation will remain low
and added, “that’s why we’ve decided to
hold rates for now.”

July’s release of economic data, particularly
in relation to wage growth and
services inflation, is likely to prove pivotal to
the next MPC decision which is due to be
announced on 1 August. A recent Reuters
survey, however, found that a large majority
of economists now expect an imminent
cut, with all but two of the 65 polled predicting
an August rate reduction.

 

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Spring Budget 2024

Spring Budget 2024

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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 – February 2024

Economic Review – February 2024

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Survey suggests recession already over

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Official statistics released last month showed the UK economy fell into recession during the second half of last year, although more recent survey data does suggest the recession could already be over.

 

The latest gross domestic product (GDP) figures published by the Office for National Statistics (ONS) showed the economy shrank by a larger than expected 0.3% during the final quarter of last year. This follows a 0.1% contraction between July and September, thereby pushing the UK into a technical recession – defined as two consecutive quarterly falls in GDP.

 

ONS data also revealed the economy experienced little growth across the whole of last year. In total, it grew by just 0.1% over the course of 2023 which, excluding the pandemic years, represents the weakest annual rate of growth since 2009.

 

The start of this year, however, has seen clear signs of a rebound in growth prompting suggestions that the recession may prove short-lived. Bank of England (BoE) Governor Andrew Bailey, for instance, recently told MPs on the Treasury Committee that the economy is showing “distinct signs of an upturn” and that the recession looks like being the weakest of modern times “by a long way.”

 

Data from the latest S&P Global/CIPS UK Purchasing Managers’ Index (PMI) also paints a more positive picture reporting strong service sector growth and business optimism at a two-year high. The preliminary headline growth indicator also rose, up from 52.9 in January to 53.3 in February, beating analysts’ expectations and pointing to an upturn in economic growth.

 

S&P Global Market Intelligence’s Chief Business Economist Chris Williamson said, “The survey data points to the economy growing at a quarterly rate of 0.2-0.3% in the first quarter of 2024, allaying fears that last year’s downturn will have spilled over into 2024 and suggesting that the UK’s ‘recession’ is already over.”

 

 

 

High interest rates ‘under review’

 

 

Last month, the Bank of England (BoE) once again kept interest rates at a 16-year high, although policymakers did signal they were open to the possibility of lowering rates for the first time since the pandemic. 

 

On 1 February, the BoE’s Monetary Policy Committee (MPC) announced it had voted to maintain Bank Rate at 5.25% following its latest deliberations. This decision, however, was not unanimous, with a three-way split emerging on the nine-member panel, two voting to raise rates by 0.25%, one preferring a similar-sized reduction and six opting to leave rates unchanged.

 

This meant the meeting was the first since 2020 when any policymaker had voted to reduce borrowing costs and the minutes also signalled a potential change of course – previous guidance stating that rates could rise again was withdrawn while a concluding sentence stated the MPC ‘will keep under review for how long Bank Rate should be maintained at its current level.’

 

Last month’s release of inflation data also raised hopes that the Bank may begin cutting rates soon. The headline annual CPI rate unexpectedly held firm at 4.0% in January, defying economists’ predictions that it would rise to 4.2%. Indeed, after release of the consumer prices data, investors put a 72% chance of a first interest rate reduction in June, with a 0.25% cut fully priced in for August.

 

While the past few weeks have seen several MPC members suggest there needs to be more evidence of weaker price pressures before rates can be cut, the BoE’s Governor did recently describe market expectations that the Bank would start reducing rates this year as “not unreasonable.” The latest poll conducted by Reuters suggests economists now expect the BoE to begin cutting rates in the third quarter, with a slim majority predicting the first cut will be delivered in August.

 

 

 

Markets (Data compiled by TOMD)

 

At the end of February, markets closed in mixed territory as investors processed a raft of data including US inflation, jobless claims and UK earnings. 

Across the pond, data released at month end showed US prices increased at the slowest rate in nearly three years, keeping a June interest rate cut from the Federal Reserve on the table, while jobless claims rose. The Dow closed February up 2.22% on 38,996.39, with the tech-orientated NASDAQ closing the month up 6.12% on 16,091.92.

 

On home shores, the blue chip FTSE 100 index closed February on 7,630.02, a small loss of 0.01%, meanwhile the FTSE 250 ended the month 1.57% lower on 19,054.87. The FTSE AIM closed on 736.50, a loss of 2.42% in the month.

On the continent, the Euro Stoxx 50 ended February on 4,877.77, 4.93% higher. In Japan, the Nikkei 225 continued its bull run, concluding the month on 39,166.19, a gain of 7.94%. The index ended lower on the last trading day of the month ahead of the release of key US inflation data.

 

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.

 

Brent crude ended the month trading at around $82 a barrel, a gain of 1.61%. The price per barrel has remained relatively stable within a narrow range over the last few weeks. Gold closed February trading around $2,048 a troy ounce, a small loss in the month of 0.25%. The price was supported by a softening in the US core price index at month end.

 

 

Index                                                  Value (29/02/24)                           Movement since 31/01/24

 

FTSE 100                                            7,630.02                                                           -0.01%                               

FTSE 250                                           19,054.87                                                         -1.57%                               

FTSE AIM                                          736.50                                                               -2.42%

Euro Stoxx 50                                  4,877.77                                                           +4.93%

NASDAQ Composite                      16,091.92                                                         +6.12%                

Dow Jones                                        38,996.39                                                         +2.22% 

Nikkei 225                                        39,166.19                                                         +7.94%

 

 

 

Wage growth slows again

 

Earnings statistics published last month showed that nominal pay is now rising at the weakest pace for more than a year with survey data suggesting this decline looks set to continue.

 

According to the latest ONS figures, average weekly earnings excluding bonuses rose at an annual rate of 6.2% across the final three months of 2023. Although this figure was slightly ahead of analysts’ expectations, it was notably lower than the 6.7% figure recorded in the three months to November 2023 and represents the slowest rate of increase since the August to October 2022 period.

 

Survey evidence also points to an expected further slowdown in levels of pay growth. Data recently released by XpertHR, for instance, showed that the median basic pay settlement fell to 5.1% in the three months to the end of January; this represents a significant drop from the 6.0% rate recorded during the previous three-month period.

 

In addition, research from the Chartered Institute of Personnel and Development (CIPD) suggests employers expect to raise basic pay by an average of 4% over the coming year. This is well below the 5% figure reported across 2023 and signals the first drop in this measure for nearly four years.

 

 

 

Retail sales rebound in January

 

The latest batch of retail sales statistics suggest consumers have recovered some of their appetite for spending, with much stronger than expected growth in sales volumes recorded at the start of the new year.

 

According to ONS figures published last month, total retail sales volumes rose by 3.4% in January compared to the previous month. ONS said this growth, which was significantly above the 1.5% consensus forecast predicted in a Reuters poll of economists, was driven by strong supermarket sales and shoppers taking advantage of new year bargains.

 

Commenting on the day the figures were released, British Retail Consortium Director of Insight Kris Hamer called the news “promising.” He also suggested the growth reflected “rising levels of consumer confidence, as well as a boost from the January sales.”

 

The latest CBI Distributive Trades Survey also painted a more positive picture of the retail sector, with its headline measure of sales volumes in the year to February rising to -7% from -50% in January. This marked the slowest rate of decline in year-on-year sales for ten months. Looking further ahead, however, the survey did strike a note of caution with retailers expecting sales to contract at a slightly faster pace in March.

 

 

 

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

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Your Finance Matters – Q1 Winter 2024

Your Finance Matters – Q1 Winter 2024

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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:

 

  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

 

Love your independent financial adviser

Love your independent financial adviser

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This Valentine’s day you may not be automatically thinking of your finances. Hopefully you have something more interesting to do on 14th February than plan your pension! But mid-February is a great time to build a relationship with an independent financial adviser. In fact we think there are 5 perfect reasons to make a date with the Sheldon Flanders team this month.

We will help you plan for your future

You may receive your state pension later than you think and it might be considerably less than you expect. So if you work with us, the first conversations we have will be about your goals and your plans. When do you want to retire and what do you want to do when you get there? Fewer and fewer of our clients are planning to go from full time work to complete retirement. The majority have some kind of plan to transition between the 2. Maybe that’s reducing from full time to part time hours. Or selling the business but staying on in a non-executive capacity for a year. All of those steps have a financial implication, and we can help you plan those out.

We will help you retire this year

Ok we may not be able to guarantee this, but if you are in your mid 50s and have been saving into a pension for some years, this may be an option. Why not have a conversation and find out if this could be a reality for you?

We’ll save you the work of researching the market

The advantage of working with an independent adviser is that we have an overview of the market. We keep up to date with the vast range of products on offer and we do the research so you don’t have to. We also keep up to date with the ever changing landscape of tax allowances, the regulations around pension contributions and inheritance tax thresholds. So you can be assured that we will find the best solution for you, whatever your circumstances.

We’ll ensure that you can make a positive impact with your money

We know that increasingly our clients are asking intelligent questions about where their money is invested. They want to know if it is making a difference in the world. Social responsibility is more important than ever to many people. For every new client when we research suitable investments for them, we recommend sustainable investments. We will explain these funds clearly to you when we present our recommendations, and are always happy to explain any aspect of the fund and their features. We can focus on investments in, for example, sustainable technology or we can ensure particular industries or countries are excluded from your portfolio.

We care about your small business and your family

We are an independent Midlands based business, and helping other independent business owners plan their wealth and ensure they can pass that wealth on to their family is what we do best.

 

So book a date with us, it may not be the most romantic, but we promise that you will definitely love the results!

 

 

 

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 Winter 2023

Your Finance Matters Winter 2023

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You can download this update here

Investment focus for the new year

By any comparison, the past 12 months have been tough for investors with a series of shocks impacting markets and, as 2023 dawns, uncertainties remain. One constant on the investment horizon, though, is the requirement to be strategic with your portfolio. A sound strategy based on careful planning; making purposeful decisions, based on thorough research and reliable processes, will stand you in good stead.

Last year saw markets struggle with bouts of volatility as a combination of high inflation, rising interest rates and the war in Ukraine brought about challenging headwinds and markets sought a stable footing. As a result, fund inflows slowed while cash as a percentage of investors’ portfolios rose, prompting warnings that investors need to be aware of limitations to the Financial Services Compensation Scheme (FSCS) for cash balances.

Identifying opportunities

With large amounts of money on the sidelines, using our knowledge, we aim to identify opportunities and position portfolios to benefit from recession-resistant companies in which we have conviction. Those who still have the capacity to invest should consider adding back to their portfolios in order to take advantage of any potential low valuations.

Battling inflation

Investors also need to be aware of the erosive impact of inflation on cash-based savings. In the current economic climate, anyone holding a significant proportion of their assets in cash, even with savings rates improving, will inevitably see the value of their wealth decline in real terms. In essence, equities offer a better potential defence in the battle with inflation.

Trust in our process

Experienced investor or not, staying calm during periods of market turmoil is never easy but adapting your mindset and focusing on investment strategy rather than market sentiment is vital. Investing in the stock market does clearly involve a level of risk but the adoption of a carefully considered strategy based on sound financial planning principles undoubtedly offers investors the best chance of success.

Tax year end reminder

As the end of the tax year approaches, a prime consideration should be how external factors such as reduced or frozen allowances, together with high inflation, could impact your finances and what action you need to take before 5 April 2023.

If you are affected by the impending changes to Dividend Tax or Capital Gains Tax (CGT) announced in the Autumn Statement, have you considered investing up to £20,000 this tax year in a stocks and shares Individual Savings Account (ISA)? From April 2023, the Dividend Allowance will be cut from £2,000 to £1,000 and then fall further to £500 from April 2024.

In addition, the annual CGT exemption will fall from £12,300 to £6,000 next tax year and then to £3,000 the following tax year. Dividends received on shares within an ISA are tax free and won’t impact your Dividend Allowance. Also, any profit you make when selling investments in your stocks and shares ISA is free of CGT.

And don’t forget your pension

Both the Annual Allowance and Lifetime Allowance are frozen, at £40,000 and £1,073,100 respectively. As these allowances haven’t increased with inflation, it effectively means those saving to the maximum extent possible with tax concessions can save less in real terms each year.

In the news

Women hold their nerve

Recent research1 reveals women are more likely to hold their nerve and avoid crystallising a loss when the market dips. Almost half of men (48%) have sold investments at a loss when they’ve dropped in value, in an attempt to stem their losses, while just 38% of women have done the same. Such impatience could prove to be costly. The research estimates (based on £10,000 invested in 1992, adding 10% of average salary and reinvesting dividends until 2022) that the real cost of ‘impatient’ investing over 30 years could amount to nearly £200,000!

Where is the best place to retire?

Retiring abroad is a much-desired goal for many, particularly for an improved lifestyle. Croatia currently tops the list of the best countries to retire in, due to a better cost of living when compared with the UK – rent costs and the price of day-to-day living is nearly half that versus the UK2.

Croatia also scores highly due to the ease of getting there from the UK, with relatively cheap average flight costs meaning that friends and family can visit and flying back to the UK is also convenient. (Relocation to some countries may mean forgoing future annual increases to State Pension.)

1Alliance Trust, 2022

2Penfold, 2022

Global economic growth in 2023

The International Monetary Fund (IMF)3 has predicted a challenging 2023, reducing growth expectations and forecasting economic contraction in a third of the world, in its latest World Economic Outlook entitled ‘Countering the Cost-of-Living Crisis.’

With the cost-of-living crisis ‘tightening financial conditions in most regions’, the outlook suggests that in order to restore price stability, monetary policy should stay the course and fiscal policy should aim to alleviate pressures ‘while maintaining a sufficiently tight stance.’

The global growth rate for 2023 has been revised down from previous expectations to 2.7%. This reflects ‘significant slowdowns’ for the largest economies as America’s gross domestic product (GDP) contracted in the first half of 2022, followed by the Euro area’s contraction in the second half of last year, and prolonged COVID-19 outbreaks and lockdowns in China. Closer to home, the IMF predict growth of 3.6% in 2022 and 0.3% in 2023 for the UK.

3IMF, 2022

Dividend update

According to the latest Dividend Monitor4, driven by sterling weakness, 2022 headline payouts are expected to rise to £97.4bn, up 11.0% on an adjusted basis, with underlying dividends expected to rise 13.4% to £87.2bn. The provisional forecast for UK dividends in 2023 anticipates a slight drop in headline dividends but modest underlying growth.

Looking ahead, Ian Stokes, Managing Director of Corporate Markets UK and Europe at Link Group commented, “For 2023, we expect a further reduction in mining dividends and likely lower one-off special dividends but outside the mining sector there is still room for payouts to rise, even with a weakening economy. Our provisional 2023 forecast suggests a slight drop in headline dividends to £96bn and a slight increase in the underlying total to £89bn. This implies no change in our expectation that UK payouts will only regain their pre-pandemic highs some time in 2025.”

4Link Group, 2022

Giving your children a helping hand

With the current generation of graduates typically leaving university with a mountain of debt, it is perhaps unsurprising that so many parents are now looking to ease the burden by investing on their children’s behalf.

University challenge

Government statistics show the average debt accumulated by a university student is currently around £45,000. Thankfully, graduates only start repayments when their earnings hit a certain threshold and, at the moment, loans are written off after 30 years however much debt remains. As a result, some students will never pay back their loans in full.

Increasing debt burden

Many students, though, do repay a significant amount of their debt, and recent reforms to the loans system means many more will do so in the future – government forecasts suggest that, from next year, over half of students will repay their loans in full. This inevitably places an even greater burden on future graduates’ shoulders, both as they enter the world of work and, potentially, throughout their entire careers.

Saving for their future

Most parents are keen to help their children fund university and many do so by investing on their behalf through a stocks and shares Junior ISA (JISA). While there are risks with stock market investments, historically they have performed better than cash-based savings and consistently delivered above-inflation returns. The annual JISA allowance is currently £9,000 per child which, for anyone who starts saving early, can grow to a sizeable tax-free lump sum. Smaller amounts can mount up too, particularly when combined with contributions from other family members.

Peace of mind

Investing on a child’s behalf can make a huge difference to their future, whether they decide to go to university or put the money towards something else. It also provides parents with the comfort of knowing they are giving their children the best possible start to adult life.

Take control now to beat the tax chill

Following his controversial ‘stealth tax’ Statement in November, the Chancellor made a raft of key personal taxation and pension announcements.

The government pledged its commitment to the pensions Triple Lock, 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.

Then came some ‘stealth’ announcements set to pull people into paying higher rates of tax, more people paying IHT, a cut to tax-free earnings from dividends and a reduction in CGT allowances.

In addition to the Dividend Allowance and CGT allowance reductions (as per ‘Tax year end reminder’ article) and IHT freeze (see page 4), other key personal tax announcements from the Scottish

Budget included:

  • 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. This move is set to push 250,000 more people into this band
  • 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).

With an increasing number of people likely to be impacted by these changes, we can’t stress enough the importance of tax year end planning. Although some of these changes don’t come in with immediate effect, it is vital to ensure you are in the best place possible to take advantage of any allowances, exemptions and reliefs available this year and to prepare for the changes that come in over the next few years. With plenty to consider and factor into your financial plan, valuable financial advice remains central to achieving your goals and aspirations.

It pays to think about estate planning

Inheritance Tax (IHT) is once again in the spotlight following the Chancellor’s decision to freeze IHT thresholds for a further two years until April 2028. Extending the frozen thresholds, together with rising house prices and soaring inflation mean that more estates are likely to be affected.

IHT receipts on an upwards trend

The latest IHT figures released in October make interesting reading. Total HM Revenue and Customs (HMRC) receipts for April 2022 to September 2022 were £3.5bn, £0.4bn higher than in the same period last year.

Not just a tax on the very wealthy

IHT is a tax payable on all your assets when you die and potentially on some gifts you make during your lifetime. If the estate is liable for IHT, it is usually payable at 40%. These days, you don’t have to be hugely wealthy to be affected by IHT – the hated tax can cost your estate thousands of pounds when you die.

A reminder of the thresholds

An individual’s current threshold, or nil-rate band, is £325,000. A couple (married or civil partners) has £650,000. Any unused nil-rate band can be passed to the surviving spouse or civil partner on death.

In 2017 the government introduced an additional nil-rate band when a residence is passed on death to a direct descendant. The main residence nil-rate band is £175,000 and when added to the existing threshold of £325,000 could potentially give an overall allowance for individuals of £500,000.

To reduce the amount of IHT payable, many families consider giving assets away during their lifetime. Some gifts will be automatically free from IHT; for example, £3,000 each financial year, certain wedding gifts and gifts to charities.

Getting the right balance between gifting money during your lifetime and ensuring you have enough for your future years requires careful planning. Expert planning can legitimately mitigate IHT, meaning you can pass on assets to your family as you’d intended.

Time for a retirement reboot?

Nowadays there are more choices open to you than ever before. This means there are more things you need to consider and have a plan for, like how to manage your finances to provide the income you’ll need to live on, how you’ll transition into full retirement and what lifestyle you want to enjoy in your later years.

We’re all leading busy lives and with cost-of-living financial pressures intensifying, it’s understandable if retirement plans have been placed on the back burner. If you are keen to revisit your plans and get them back on track so you can relax and fully enjoy your retirement years, the new year is the perfect time to act, so please do get in touch.

 

If you would like advice or information on any of the areas highlighted in this newsletter, please get in touch, we’d be delighted to help you consider your personal financial circumstances.

 

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 (FCA) does not regulate Will writing, tax and trust advice and certain forms of estate planning.

All details are correct at time of writing – December 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
Call us on 01332913006

 

Your financial resolutions for 2023

Your financial resolutions for 2023

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Have you resolved that 2023 is the year you get your financial situation organised? You may have been thinking about reviewing your pension? Or checking if you are making the most from your investments? Maybe 2023 is the year you will retire and make a start on all those big adventures you have been looking forward to.

Whatever your financial resolutions for this new year, we can help you achieve them.

Reviewing your pension

If you are running a successful business, your pension contributions should form part of your financial planning for the business. But maybe you have made changes to your business recently and you need to reassess your pension arrangements. Or perhaps your business is relatively new and you haven’t thought about your pension since leaving your corporate role. The sooner you start, the more you can save before you retire.

If you have a personal pension that you haven’t looked at for a while, it would almost certainly benefit from an independent review and potentially making changes to the investment funds.

Planning your retirement

If 2023 is your planned retirement year (lucky you!) we can help you decide what to do with your pension pot. Since pension freedoms, which give you the flexibility to withdraw income in a way you choose, the need for advice is paramount.  We can help you decide on the most appropriate course of action and draw income in the most tax efficient way.

Maybe you want to phase out of running your business and into retirement and you want some help to plan that handover successfully. We have worked with very many retiring entrepreneurs to help them take those steps into a prosperous retirement while ensuring that their business continues to run successfully.

 

I want to invest for the future

Maybe 2022 was the year you became a parent, or a grandparent and want to start a fund to help them in the future. Maybe you have inherited a significant amount and are wondering how best to invest it. Perhaps you are just looking at your bank account and wondering how to make your money work a little harder. There is a staggering array of savings and investment products on the market, and we can help tailor investments to your own needs.

Can I do good with my money?

In 2022 we made the decision as a business to focus on values led investments. With every new client when we research suitable investments for them, our focus is on sustainable investments (find out more here). We will explain these funds clearly to you when we present our recommendations, and are always happy to explain any aspect of the fund and their features. If you would like your investments to make a wider impact, we’d be delighted to explore this with you.

Whatever your financial goal we are best placed to give you totally independent advice which focusses on you and your needs. Take a look at the comments of our clients and let us see if we can help you.

Get in touch

We can help you keep your 2023 financial resolutions. Book an appointment by calling us on 01332 913006

 

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 window on wealth Autumn 2022

Your window on wealth Autumn 2022

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Welcome to our quarterly newsletter Your Window on Wealth. If you would like to discuss any of the items in this edition, please call us for an appointment on 01332 913006.

If you would prefer to download this, you can do so here

 

The growing need for intergenerational planning

With the next 30 years set to witness the largest ever intergenerational passing of wealth, the need for inheritance advice has never been greater. Intergenerational planning, however, can also help with more immediate financial needs, particularly when generations work collaboratively to find solutions that support the whole family both now and in the future.

Inflation concerns

Currently, financial pressures are proving a key challenge across all generations, especially the impact of soaring energy bills as we move towards the winter period. The cost-of-living squeeze, though, is not only impacting people’s current spending power but also their future decision-making capabilities with regard to key issues such as housing, private education or university.

Balancing current and future needs

This has resulted in families increasingly adopting integrated strategies, especially in relation to gifting, in order to address imminent financial challenges. While reducing future Inheritance Tax liabilities inevitably remains at the heart of intergenerational planning decisions, the growing necessity to balance today’s and tomorrow’s needs is resulting in the focus shifting to support for children and grandchildren now.

Involving the generations

Intergenerational planning tends to be most effective when the process is not just focused on those who currently hold wealth. While funding a comfortable retirement and quality of care for the ‘caretaker’ generations remain fundamental elements of intergenerational planning, delivery of support for the coming generations and ensuring wealth passes efficiently to the right individuals at the right time have become increasingly important dimensions.

More families share an adviser

Greater involvement across multiple generations has also seen sharing a financial adviser become increasingly commonplace. This trend offers significant benefits, particularly when it comes to joining up a whole family’s needs with inheritance and gifting strategies, while treating all family members fairly.

Encouraging conversations

If your family needs help with any aspect of intergenerational planning, then please get in touch. We’ll be happy to assist by encouraging more open financial conversations across the generations.

 

Retirement – where’s your “happy place”?

If you’re in Wiltshire and about to retire, you’re doing it in the right place

This is according to an online search engine that helps retirees and their families find the best retirement communities and care homes. The research found that Google searches for ‘retirement homes in Wiltshire’ have soared by 150% in the last year alone – and for good reason! With its beautiful countryside, historic towns and City of Salisbury, and great investment potential, Wiltshire is an ideal location to live out one’s later years. In close second and third places are Buckinghamshire and Dorset, scoring high on both investment potential and wellbeing.

Reaching your financial happy place

No matter where you’re located, though, the truth remains that you’ll struggle to achieve a happy and fulfilled life in retirement without an adequate level of income. So, how much money do today’s retirees need to live their best life after quitting work? According to a recent survey, the average retired couple spends £2,333 a month (around £28,000 per year) to be ‘comfortable’ – i.e. having enough to cover their basic expenditure requirements in addition to some luxuries such as holidays, hobbies and dining out.

 

Challenging waters ahead

Even experienced investors are likely to find the current investment environment a challenge, particularly when one considers the array of uncertainties in the post-COVID economy which are so fundamentally different to those faced during the last two years. Opportunities, however, are still available to investors who can steer a safe course through choppy waters.

Uncertainty abounds

One look at the latest economic forecasts released by the International Monetary Fund (IMF) gives a strong hint of the challenges that lie ahead. The international soothsayer described the current outlook as ‘gloomy and more uncertain’ as it reduced its global growth forecast to 3.2% this year and 2.9% in 2023, downgrades of 0.4 and 0.7 percentage points from April’s predictions.

Risks skewed downwards

The IMF noted several shocks that have hit a world economy already weakened by the pandemic. These include higher-than-expected inflation worldwide which is triggering tighter financial conditions; a worse-than-anticipated slowdown in China, and further fallout from the war in Ukraine. It also stressed that risks are ‘overwhelmingly tilted to the downside.’

But opportunities remain

This economic sea-change clearly presents a serious challenge to investors. However, while managing portfolios in a high-inflation environment may require some change in course, there are still opportunities out there.

Help at hand

And of course, we’re always here to help. So, if you want to take stock of your investments, get in touch and we’ll be happy to help steer you through any troubled waters.

 

In the news

Healthy dividends

UK listed companies paid out £37bn in shareholder dividends between April and June, up 38.6% from the same period last year, making Q2 the second largest UK dividend payout on record.

Large one-off special payments were a key driver, but underlying dividends, which exclude these volatile specials, jumped by 27.0% to £32.0bn, boosted by weaker sterling.

The Growth Plan 2022

On 23 September, Chancellor Kwasi Kwarteng outlined a series of tax cuts and measures. Key personal tax announcements included:

  • A reversal of the National Insurance contribution rise, which came into force in April. The 1.25 percentage point increase will be reversed from 6 November. The planned Health and Social Care Levy which was due to replace the National Insurance rise as a new standalone tax from April 2023 has also been cancelled
  • A reduction in Stamp Duty Land Tax (SDLT) in England and Northern Ireland, raising the residential nil-rate threshold from £125,000 to £250,000, with immediate effect, and First Time Buyers Relief from £300,000 to £425,000. The maximum amount that an individual can pay for a home while remaining eligible for First Time Buyers’ Relief, was increased from £500,000 to £625,000. As SDLT is devolved in Scotland and Wales, the Scottish and Welsh Governments will receive funding through an agreed fiscal framework to allocate as they see fit
  • The basic rate of Income Tax will be cut to 19% in April 2023 – one year earlier than previously planned. At present, people in England, Wales and Northern Ireland pay 20% on annual earnings between £12,571 and £50,270, different rates apply in Scotland
  • The government is reversing the 1.25 percentage point increase in Dividend Tax rates applying UK-wide from 6 April 2023, so the ordinary and upper rates of Dividend Tax will revert to 7.5% and 32.5% respectively.

 

Children’s pensions: Saving for their future

It may be an old adage, but definitely one that remains true – it really never is too early to start a pension. So, if you’re looking to help secure the long-term financial future of your child, or grandchild, saving into a pension on their behalf may be a suitable option worth considering, in addition to provision for earlier decades.

Tax incentives and compound returns

In some ways, saving for a child’s pension when they are so far from retirement can seem odd but it can actually make sound financial sense. Junior pensions can be set up as soon as a child is born and contributions up to £2,880 per annum attract tax relief of 20% from the government. Another benefit of saving at a young age is the power of compounding returns which provide growth on growth across the years.

Small amounts add up

These two factors mean you don’t have to save huge sums to make a big difference; saving little and often really can add up in the long term. Current rules allow savings of up to £2,880 per annum into a child’s pension.

Fulfilling and rewarding

Providing financial security for children, or grandchildren, is a key goal for many and saving on their behalf can therefore be fulfilling for you and rewarding for them. If you’d like to give your loved ones a financial head start, then get in touch.

 

An “epidemic of fraud” impacting young and old

The latest annual fraud report published by UK Finance stresses the need for an urgent response to ‘the epidemic of fraud’ that the UK is currently facing.

The report reveals that £1.3bn was stolen by criminals through authorised and unauthorised fraud in 2021. In total, 56% of UK adults4 have received a suspicious communication or known someone who has in the last year, which equates to an estimated 29.6 million UK adults being affected by scams last year.

Preying on the elderly

Reportedly, scam victims aged over 70 lost about £977m5 in total between April 2019 and 2022. Official figures fail to capture the true extent of such fraud because these crimes remain under-reported, especially among elderly people who live alone.

Cost of living

During the pandemic, criminals exploited victims’ fears over coronavirus. Now, the cost-of-living crisis has become a new line of attack. The UK Finance report showed that authorised push payment (APP) fraud, where victims are tricked into transferring money into scammers’ accounts, leapt by 40% last year. Such techniques are now being used to prey on people’s financial preoccupations.

Tech effect

Everyone, young or old, can be a victim of fraud. Indeed, under-25s are more likely to be defrauded on the phone than older generations. One study found the youngest cohort 75% more likely to have been scammed this way than those over fifty-five.

Scammers are also seeing a growing opportunity in cryptocurrencies, which are not regulated by the UK’s Financial Conduct Authority. In the year to May 2022, crypto frauds soared 58% to £226m, new research has found.

Don’t suffer in silence

Anyone can be a victim of fraud. We can help you protect your finances.

 

All eyes on COP27

As the world continues to emerge from the pandemic, although other headwinds exist, governments, businesses and the financial world are refocusing on what the Principles for Responsible Investment (PRI) describe as ‘the greatest threat to the wellbeing of humanity and to the ecosystems on which we depend’ – climate change.

According to the PRI, a United Nations-supported initiative, many are now recognising ‘the enormous opportunity for economic growth and investment returns presented by the transition to net-zero emissions.’ The PRI reflect a firm belief that ‘the financial sector and the investment community will play a central role in the global response to climate change and supporting the transition to a net-zero economy.’

COP27

A year after the United Nations 26th Conference of the Parties, on British shores, the upcoming COP27 climate conference is taking place in Sharm El-Sheikh, Egypt this November. Last year, delegates from almost 200 countries agreed upon the Glasgow Climate Pact at COP26, which builds upon targets set out in the Paris Agreement, an international legally binding treaty intended to limit global warming to 1.5 degrees Celsius. Key pledges made by governments last year included commitments to end deforestation, cut global methane emissions and to transition to zero-emission vehicles. Countries were asked to return to this year’s conference with a plan to strengthen their 2030 commitments.

“A decisive decade for climate action”

Mahmoud Mohieldin, the UN climate change high-level champion for Egypt, hopes the 2022 conference will be an important milestone in what he calls “a decisive decade for climate action.” In his view, COP27 should undertake an “urgent, ambitious, impactful, and transformative agenda, guided by a holistic approach to sustainable development,” based upon the principle of equity and informed by science.

“In light of the goals and objectives… we will promote a stronger focus on implementation, transforming commitments into actions and translating the pledges of the summits into solutions in the field,” he continued, “While acknowledging the complexities of the different political, economic and developmental challenges, it is incumbent on us all to raise the threshold of action at COP27.”

Climate change for investors

COP27 will undoubtedly be of interest to investors engaged with climate change, with key announcements potentially impacting their portfolios. Investment decisions have a role to play, and the investment industry continues to play a pivotal role in the global climate transition. One investor initiative – The Net Zero Asset Managers Initiative – has now grown to over 270 investor signatories with over $60trn assets under management – all committed to supporting the goal to reach net zero and investments aligned with net zero emissions.

COP provides an opportunity for institutional investors to consider how they can innovate in developing solutions to solve climate issues and in financing sector transition. PRI deduce that, ‘Investors increasingly recognise the threat posed by climate change to the global economy, and therefore to their ability to meet the needs of their beneficiaries over the decades to come… They understand the imperative to engage with the companies in which they invest, and the policymakers who write the laws, to ensure that both groups respond appropriately to the threats and opportunities involved.’

 

Good to know – IHT share loss relief

In challenging market conditions, it’s likely that some bereft individuals will inherit investments that have fallen in value.

Through IHT share loss relief, people inheriting can be entitled to claim a tax rebate when they sell certain qualifying investments at a loss. Strict rules, criteria and exemptions apply however. For example, to be eligible for the relief, the sale of the qualifying investment (shares listed on a recognised stock exchange excluding AIM, government bonds and/or holdings in investment funds) has to be within 12 months of the date of death. Interestingly, according to recent data, few people reclaim the overpaid tax, with just 1,640 taxpayers a year on average (between 2014 and 2019) applying for refunds.

 

IF YOU WOULD LIKE ADVICE OR INFORMATION ON ANY OF THE AREAS HIGHLIGHTED IN THIS NEWSLETTER, PLEASE GET IN TOUCH.

 

All details are correct at time of writing – September 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
Call us on 01332913006

 

Why female entrepreneurs need to think about pensions

Why female entrepreneurs need to think about pensions

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In Pensions Awareness Week our MD Karen Sheldon reflects on why she is so determined to ensure women entrepreneurs are thinking about their financial futures.

Like so many women I started my career in a corporate environment. I was good at what I did, I earnt the bonuses and went on the conferences and sales trips. It’s easy to take many things for granted when you work for a big organisation. Your salary drops into your bank account at the end of the month, there’s always someone to ask if you have IT problems, and you are part of a pension scheme.

Like many women when they become parents, I came to the point when working for someone else wasn’t working for me or my family and I decided to set up my own business. Not only did I learn quickly how to sort out any IT problems, I made sure to set up my own pension fund and prioritise making payments over the years of growing the business. As a pensions adviser, this was second nature to me. But I realised that for many women in the same position as me, starting their own business after a long corporate career, this wasn’t a priority.

This is why, in Pensions Awareness Week, I’m so determined to ensure that other female entrepreneurs are building pension planning into their business finances. Here’s why you – as a female entrepreneur – need to think about your pension:

Your state pension may be later and less than you think

If you were hoping that the state pension will step in and support you in your retirement, let me give you a reality check. You won’t be able to claim a state pension until well into your 60s – use the government tool here to check exactly when https://www.gov.uk/state-pension-age And it may not be as much as you think. The current state pension is £185.15 a week, assuming you have made adequate NI contributions. Whilst a good staple building block, for many it just won’t be enough to enjoy your retirement, so you will need to think about other sources of income.

Women have less in their pension funds

According to research by Legal and General earlier this year, women have significantly less in their pension pot regardless of which sector they are in.

This is particularly worrying because women are likely to live longer than men, so really should have larger pensions at the point of retirement.

Add to this, research in 2019 by Scottish Widows showed that more than a third (35%) of female entrepreneurs are saving nothing for their retirement. That’s almost 600,000 women who will have no savings to fall back on in later life. It revealed that less than half of self-employed women save the minimum recommended level for retirement.

There are many reasons for this. If we are starting a new business in our mid career, we will prioritise other financial matters before our pensions. We may find it harder to access finance, so we are more likely to self-fund our businesses. We may also be working fewer hours, to allow for caring responsibilities, so our turnover is reduced.

If we are in a relationship, our incomes may be less than our partners, and seen as less important, or simply an income for extras, such as holidays. We are more likely to prioritise putting funds into savings for our children.

All of these factors play a significant part in the funds we have available to invest in pensions.

Women think differently about money

Aside from demographic issues, attitudes towards money may also be important. The Fidelity Global Women and Money report 2021 suggests that while women’s incomes globally increased to $24 trillion in 2020, up from $20 trillion in 2018, we do not think of ourselves as investors.

Legal and General’s research showed that “women are less likely than men to feel confident managing their investments (22% of women versus 41% of men), and their savings (56% of women versus 67% of men).”

Simply put, we don’t see ourselves as investors, so we don’t invest.

We are still impacted by the pandemic and cost of living

Add to all these ongoing factors, nearly one in five women (18%) has reduced the amount of money she is saving into a pension as a direct result of the pandemic. As we face a cost of living crisis in the UK, women entrepreneurs may be tempted to reduce or completely stop their pension payments in favour of other more pressing concerns.

What is the solution?

There is a lot of work to do to ensure that women entrepreneurs have the financial future they deserve. You can’t just rely on the state pension and anything that you may have saved from their corporate career. You can start a personal pension with a relatively small amount, and there may be significant tax implications from investing, depending on the structure of your business. The key is to start, and to save regularly.

Whatever your concerns about investing in a pension, I would be really happy to talk to you about it. Please book a free initial conversation by calling the office. 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

 

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