September 2025 - Agile IFA

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

Hopes of a peace deal between Russia and Ukraine boost markets

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

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

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

There was good news for investors in the UK market on 6 August. The FTSE 100 reached a new closing high after it increased by 0.24%. Among the biggest risers were insurer Hiscox (9.4%), precious metal producer Fresnillo (8.9%), and drinks company Diageo (4.2%).

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

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

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

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

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

UK

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

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

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

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

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

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

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

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

Europe

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

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

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

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

US

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

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

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

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

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

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

Asia

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

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

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

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

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

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

In recent years, sustainability as a concept has taken root. Now, most organisations have strict policies in terms of the environmental impact of their supply chain, introducing more eco-friendly packaging, and setting goals for reducing carbon emissions and other negative impacts on the planet.

Companies have also seen tighter restrictions introduced over how data is collected and used, with General Data Protection Regulations (GDPR) providing a strict framework for compliance.

Meanwhile, another area which has seen huge recent acceleration is AI, or “artificial intelligence”. It’s gathered traction in most areas of life and work, such as medical applications, search functions, and improving workplace efficiencies.

These areas could see some potential crossover for certain groups of investors, namely those in the ESG (environmental, social, and governance) arena. For companies to be included in ESG funds, they are carefully scrutinised on their stance around areas such as climate change, health and safety, and integrity and transparency for shareholders, all coming under the spotlight.

In some cases, AI will support and strengthen each of the three ESG pillars, but in other areas, there could be conflict. Read on to discover the pros and cons of AI from an ESG investment perspective.

AI is already a key feature of our day-to-day lives, in social media, biometrics, and virtual assistants

AI has developed in remarkable leaps and bounds recently. While for some it can conjure up futuristic images of “robots taking over the world”, the reality is that most of us are using it in our everyday lives already.

You’re using AI when you use Siri or other types of virtual assistant, unlock your devices using facial recognition biometrics, or notice your social media feed and product recommendations change to reflect recent purchases and searches.

But its functions now extend well beyond the everyday and are integrating into all three pillars of ESG.

AI is changing the way we tackle climate change, from predicting weather patterns to facilitating ocean clean-ups

Tackling climate change is a hugely important global mission. And AI has potentially transformative powers in this arena.

Citing data from February 2024, the World Economic Forum states that around 4 billion people already live in areas vulnerable to climate change. This is likely to lead to an extra 250,000 deaths a year between 2030 and 2050, from undernutrition, diarrhoea, malaria, and heat stress.

In terms of environmental mapping, AI can:

Measure the accelerating pace of meltwater released into the ocean by icebergs
Help to chart the impact of deforestation on climate change
Predict weather patterns, to help with contingency planning and impact mitigation
Detect objects in the ocean to enable clean-up mapping
Track emissions from machinery and processes to support organisations with their carbon reduction programmes.

AI can also be used in an agricultural context, processing data from sensors placed on crops to assess environmental impact.

And as AI technologies develop, these applications will become even more innovative and accurate.

Clinical and medical use of AI is improving diagnostics, while in the workplace, it is strengthening health and safety programmes

AI is helping make huge strides in clinical diagnostics, with pattern recognition of CT, MRI, and ultrasound scans. It can also be used for data analysis across a wide range of applications, including clinical data, health records, and family histories.

Delivering services at large scale can also be facilitated by AI, using a standard programme which is then tailored by AI to deliver a personalised model. Sleepio is highlighted by NICE as an example of this. The self-help sleep improvement programme is based on cognitive behavioural therapy (CBT) and uses an AI algorithm to offer tailored digital support.

Workplace health and safety can also be enhanced using AI. For example, it can monitor hazards, control equipment, and introduce more sophisticated surveillance methods for crime detection and prevention.

AI can help to ensure compliance with regulations and legislation, and offer a fast solution to large-scale data dissemination

Regulatory change is commonplace across most industries. AI can support the pace of change, with tools reviewing audit documents to assess compliance, or disseminating complex information into simple summaries for easier understanding of new regulatory expectations.

This can help law-abiding organisations swerve needless fines or loss of reputation, which could simply have been down to a misunderstanding or lack of attention to a small detail.

Massive energy consumption makes AI a difficult sustainability proposition

Conversely, AI can also have negative implications for each ESG pillar, which could be a direct conflict for investors.

The energy-intensive nature of AI is almost impossible to ignore. In June 2025, the Guardian reported that Google’s carbon emissions had risen by 51% since 2019, derailing its efforts to “go green”.

This is, for the most part, due to the tech company’s increased requirement for data centre capacity to power its AI models, such as Gemini. The Guardian also cites calculations by research firm SemiAnalysis that AI will result in datacentres using 4.5% of global energy generation by 2030.

AI is automating tasks and potentially risking jobs, significantly changing the employment landscape

As more organisations are adopting AI, fears about job displacement are proving to be well-founded.

According to the World Economic Forum in April 2025, AI could replace more than 50% of the tasks performed by market research analysts and sales representatives, and 40% of employers expect to reduce their workforce where tasks could be automated using AI instead.

Data breaches and privacy issues are key threats to compliant governance

AI brings specific challenges in terms of data privacy, in particular relating to GDPR compliance. Personal data is a key driver of AI technology, for example in producing predictive algorithms.

However, much of this data is collected covertly, without users’ consent, which can lead to privacy breaches and personal details being shared without appropriate transparency. In turn, this can result in unwanted advertising or profiling, and in serious cases, identity theft.

Get in touch

It’s clear that in terms of ESG, AI can be something of a conundrum, presenting a balance of opportunities and challenges across the three pillars. If you’re seeking ESG investments, it’s important to weigh up the balance of pros and cons to establish if the investment will match your criteria.

Equally important to consider is that even if the investment is a good fit for your ESG requirements, you still need to take into account whether the risk profile fits your approach, and if the investment will help you create a balanced, diversified portfolio.

If you’d like to find out more about ESG investments, or any other type of investment for your portfolio, please get in touch and we’ll be happy to help.

Please note:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

3 ways you could pass on wealth and reduce Inheritance Tax

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

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

1. Gift assets to loved ones during your lifetime

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

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

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

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

Gifts that are immediately considered outside of your estate include:

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

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

2. Place assets in a trust

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

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

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

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

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

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

Get in touch to talk about your estate plan

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

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

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

Your midlife can be an exciting time; you may have ticked off some goals or bucket list items and are looking forward to what the future holds. Yet, it might also present some new challenges. Arranging a financial midlife MOT could help you overcome obstacles and feel confident as you prepare for the next chapter.

While you might have a better understanding of what you want to get out of life than when you were younger, finances can often become more complex, making it difficult to understand what’s possible. A financial midlife MOT gives you a chance to examine your finances now and calculate if you’re on track to reach your aspirations.

Here are five common challenges a financial MOT could help you navigate.

1. Merging your finances with a partner

As you start to consider retirement and your future, you may opt to merge finances with your partner if you don’t already.

Bringing together your finances can be challenging at any time, but particularly when you’re older, as you may both already hold assets, such as pensions or property. Working with a financial planner could help you take stock of your assets and start to understand how they might form part of your financial plan as a couple.

As well as juggling two sets of assets, you might have different views on financial priorities and long-term goals.

As your financial plan places your aspirations at the centre, a midlife MOT could help you clarify your priorities and balance them with your partner’s.

2. Planning for your retirement

66% of people aged between 45 and 49 feel unprepared for retirement, according to research from LV published in June 2025.

Retirement might feel years away, but it’s a milestone that benefits from early preparation. The decisions you make now could affect your income in your later years, so weighing up your options is essential.

A financial midlife MOT can include reviewing your pensions and other assets you intend to use in retirement to calculate if you have “enough” to live the retirement lifestyle you’re looking forward to.

You could find you’re already on track and enjoy peace of mind as a result. If you discover there’s a potential shortfall, knowing this sooner puts you in a stronger position to bridge the gap, and a financial plan highlights the steps you might take.

3. Balancing care responsibilities

While you might no longer have young children to care for, you could find that you still have care responsibilities during your midlife.

In fact, according to December 2024 research from Legal & General, 1 in 6 middle-aged people support other adults financially, such as grown-up children or elderly parents.

If this isn’t something you’ve considered as part of your financial plan, it could make it harder to budget now and may affect your financial security in the future.

It’s not just your finances that care duties may affect. 1 in 7 midlifers said they provide unpaid care, with hours equivalent to a part-time job. Around half said they feel overwhelmed by their weekly commitments. This can take a toll on your overall wellbeing.

A financial plan that’s focused on what’s important to you could help you balance new responsibilities with your personal goals. For example, you might pay for a carer a few times a week so you’re still able to attend social clubs that you enjoy.

4. Improving your financial resilience

While you might have ticked off some financial commitments, such as paying your mortgage or children’s school fees, it’s still important to ensure you could withstand a financial shock. Your income stopping or facing an unexpected bill often has the potential to derail your plans.

A midlife review gives you the opportunity to evaluate your financial security and assess how you’d cope with an unexpected event.

You might check if you hold enough cash in your emergency fund or review your financial protection to see if you have an adequate safety net. While you hope never to need it, a financial safety net can provide reassurance and protection if the unexpected happens.

5. Setting out your legacy

It’s easy to think that you don’t need to consider how you’ll pass on assets to your loved ones yet. However, it’s impossible to know what’s around the corner, and there may be benefits to passing on wealth during your lifetime rather than waiting to leave an inheritance.

Putting together an estate plan can be difficult. Not only are you bringing together all your assets and considering how circumstances may change in the coming decades, it’s also an emotional topic. So, if it’s something you’ve been putting off, you’re not alone.

It may be daunting at first, but your estate plan allows you to take control of your legacy. As your financial planner, we can help you create an estate plan that gives you long-term security while supporting the people who are important to you.

Contact us to arrange a financial midlife MOT

Get the most out of your life by feeling confident about your finances. Please contact us to talk to one of our team members and arrange a financial review.

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

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

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

Note that life insurance and financial protection plans typically have no cash in value at any time, and cover will cease at the end of the term. If premiums stop, then cover will lapse.

Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.

The Financial Conduct Authority does not regulate estate planning.

Financial biases are often linked to investing. However, subconscious tendencies can affect many aspects of your finances, including your estate plan.

An estate plan sets out how your assets will be managed during your lifetime and distributed after your death. It might include writing a will or creating a trust to provide for young children.

As estate planning can be emotional, it’s not surprising that behavioural biases could affect how you approach the task. So, here are three ways biases might affect your estate plan.

1. Putting off your estate plan due to emotions or overconfidence

Trying to avoid confronting difficult emotions means some people put off estate planning altogether.

A February 2025 survey carried out by JMW Solicitors found that 77% of people believe having a will is important. Yet, 58% don’t have a valid will, and avoiding the sometimes difficult conversations that might form part of estate planning could be a reason why.

Overconfidence may also be a reason for not creating an estate plan. For example, you might believe you’re “too young” to worry about writing a will or that you’re healthy now, so you can leave the task for the future. However, life is unpredictable and it’s impossible to know what’s around the corner.

Putting off estate planning because it’s difficult or you assume you don’t need one yet could leave your family in a vulnerable position should the unexpected happen.

While estate planning can be daunting at first, view it as a step that allows you to take control of your legacy. Once the task is complete, you may find it reassuring to know you’ve set out your wishes.

2. Under or overvaluing assets could have implications for your estate plan

A common financial bias that affects investors is tying the value of certain assets to a particular piece of information. For example, you might view shares as being worth £100 because that’s what you initially paid for them, even if the value has changed.

Under or overvaluing your assets could have implications for your estate plan.

You might want to split your estate evenly between your children while giving them specific assets. However, if you don’t have accurate information when doing this, they could end up with very different proportions of your wealth, which might lead to disputes.

Alternatively, if you undervalue assets, you might not realise your estate could be subject to Inheritance Tax (IHT). For instance, if you’ve “anchored” the value of your home to the price you paid for it 20 years ago, your estate could unexpectedly be liable for IHT due to rising property prices.

Regular financial reviews with your financial planner can help you track the value of your assets, and how they could rise or fall in the future.

3. Loss aversion could mean you are reluctant to pass on assets

Loss aversion suggests that you feel the pain of a loss twice as strongly as the pleasure of an equivalent gain. This bias can lead to people avoiding taking action, even when it would make sense.

As part of your financial plan, you might want to gift assets to your beneficiaries now instead of leaving them an inheritance. It’s an option that could provide much-needed financial support to your loved ones, such as covering university fees or helping them renovate their home.

Gifting during your lifetime can be rewarding, but loss aversion might also mean you’re reluctant to part with assets.

A reason for this is that you might worry about an unexpected event creating a financial shortfall in the future. So, you choose to hold on to the assets.

A financial plan could help you see the effect of gifting during your lifetime, including whether you could still overcome a financial shock. Discussing your gifting plans could give you the confidence to pass on assets and ease your worries.

Contact us to talk about your estate plan

Working with a professional who understands your circumstances and goals can make estate planning easier. We’ll be on hand to offer support and guidance from the outset.

Please contact us to arrange a meeting to discuss your estate plan.

The Financial Conduct Authority does not regulate estate planning, will writing, or trusts.

This guest blog was written by Chris Budd, who wrote the original Financial Wellbeing Book as well as The Four Cornerstones of Financial Wellbeing. He founded the Institute for Financial Wellbeing and has written more than 100 episodes of the Financial Wellbeing Podcast.

There is a dilemma at the heart of financial planning that explains why we so often fail to take the steps now which will benefit ourselves in the future. Connecting with our future selves is one of the keys to successful planning.

How your brain works

While studying the brain, neuroscientists discovered that we use one part of the brain when thinking about ourselves, and a different part when we think about other people¹. They wired up the brain and observed that different parts of the brain light up when we think of someone else now to when we think about ourselves now.

They then found something remarkable. When we think of ourselves in the future, the part of the brain that lights up is the part that thinks of other people. When we think about our future self, we treat them as if they were a stranger to us.

This is one reason why so many of us find it hard to save and to plan for the future; to put money, into a pension fund, for example, feels like we are giving our money away to someone else.

3 ways to connect

To envisage our future selves, we need to be able to make a connection. This must happen on three levels:

Physical
Emotional
A clear path

Only when we make a real connection with our future are we likely to treat our future self less like a stranger. This can then have an impact on whether we take action now.

Physical connection

In order to make a connection at a physical level, we need to be able to see our future selves. There are several ways of achieving this. One could be the use of an ageing app. If you see a picture of yourself at the age at which you are planning for, perhaps by using an aged picture of yourself on the front of a financial plan, this is going to create a physical connection. However, this might not work for everyone – not all of us are comfortable seeing ourselves aged.

Maybe your future objectives involve something physical. For example, moving to live by the sea. Using images of the future can help create a firm connection. Put a picture of the seaside on your fridge, for instance.

This tip does need a caveat: it’s not always good to create inflexible plans. Things change, and one should try to choose images that create a general direction, rather than a fixed destination. In the example given, it might be a modest and generic place by the sea, rather than an expensive house in a favourite location.

We are trying to create a connection to a desirable and achievable future, not dream of big things to inspire us to work harder.

Emotional connection

We are more likely to feel connected to our future self when that self is based upon our own assumptions and desires. One piece of research found that people who strongly identify with their future selves are six times more likely to contribute significant amounts to their pensions. They also enjoy their work more and find it more meaningful².

One strong motivator is having meaning and purpose. What will make you feel proud in the future? Take some time to envisage what a day in the future might look like. From waking up and making breakfast to heading out for the day. What do these look like? Where are you? Who are you with?

A clear path

One of the five key pillars of financial wellbeing for the Institute for Financial Wellbeing (IFW) is having a clear path to identifiable objectives.

If we were to insert “your future self” in place of identifiable objectives, then we can see that the next important part of the process is to create a series of steps to go in that general direction. This will help test whether that future self is realistic. Your financial plan can test different scenarios to see which might be possible and which are perhaps a little unrealistic.

Conclusion

Our inability to picture our future selves has been an unconscious inhibitor for financial planning over the years. Now that we know the challenge in front of us, we can create a better image of our future and create a clear path towards it.

¹Your Future Self by Hal Hershfield

²From Aegon’s Centre for Behavioural Research, as recounted in Your Path to Prosperity by Thomas Mathar