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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.
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.
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.
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
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.
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.’
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.