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Do you consider yourself an optimist or a pessimist?

The “blue dot theory” could suggest that humans are hard-wired to be pessimists, after psychologists discovered that once our brains are primed to see something (such as a blue dot), we see it everywhere, even when it’s not really there.

Read on to learn more about how the blue dot theory could be affecting you and how you can stop it from negatively impacting your life.

The “blue dot” theory

In 2017, Harvard researchers asked participants to identify blue dots among thousands, ranging from very blue to very purple.

During the first 200 trials, the participants could accurately identify the roughly equal proportion of blue and purple dots. However, as the experiment progressed and fewer blue dots appeared, participants began to label more obviously purple dots as blue.

To confirm their findings, the researchers attempted another trial with the same concept where they replaced the blue and purple dots with photos of threatening and non-threatening expressions. Once again, as they reduced the number of threatening photos, participants still identified the same ratio of pictures as threatening.

They concluded that our brains are designed to look for threats and problems regardless of our environment or whether the issues exist.

In practice, this often affects social lives. If your brain is looking for problems, you are more likely to interpret other people’s expressions, comments, or silences as judgments against you.

The blue dot theory also means that when you solve the big problems in your life, instead of being pleased with your progress, the smaller annoyances become more significant to you to fill the space.

How to combat the blue dot effect

If your brain is hard-wired to be pessimistic, you might be thinking there’s nothing you can do to change it – but have a bit of optimism!

The more aware you are of how the blue dot theory impacts your day-to-day life, the easier it is for you to change your mindset and combat the negative effects it can have on your relationships.

1. Stop projecting assumptions

    The blue dot theory often leads us to leap to assumptions about other people based on our own thoughts, feelings, or intentions.

    For example, you might interpret your colleagues’ neutral behaviour as personal attacks on you based on insecurities. Next time you find yourself wondering if someone you know is displeased with you, stop and consider whether you have concrete evidence to prove this.

    Separating facts from assumptions can help you to quash the negative thoughts and remind you that most people are too focused on themselves to analyse your every move.

    2. Try to avoid snap judgments

    Our ability to make fast decisions is an evolutionary device that has kept humanity alive for centuries, but it can also lead to you making wrong judgments about your loved ones.

    For example, if your friend seems quiet, your first assumption might be that they are upset with you. However, this snap judgment is based on limited evidence and might not be true.

    Next time, you find yourself making a snap judgment about something important, pause and allow yourself to wonder what else could be the reasoning behind someone’s behaviour. For example, simply asking your friend what is wrong could help you to support them and deepen your friendship, rather than assuming the worst straight off the bat.

    3. Practise gratitude

    The blue dot effect can make your life seem a lot worse than reality by turning every inconvenience into a monumental problem and every social interaction into an anxiety-inducing spiral.

    Although we can’t prevent ourselves from finding problems and seeing the bad parts of life, it’s important to focus on the good things.

    Take five minutes out of your day to reflect on all the progress you have made in life and some good things that have happened to you recently. You can even record the things you are grateful for in a journal every morning for a positive start to your day, or every night to help you sleep peacefully.

    While it can seem difficult to find the positives at first, practising gratitude can help you weaponise the blue dot theory against your brain. If you prime yourself to focus on the good things in life, you are more likely to see them, helping you to have a more optimistic outlook on life.

    4. Be compassionate towards yourself

    We are often our own worst critics. When we’re quick to judge ourselves, blue dot theory means we are even faster at interpreting other people’s actions as judgments against us.

    Being kinder to yourself will mean you assume other people have good intentions and can help you put a positive spin on any problems you might face.

    To start practising self-compassion, try talking to yourself as you would someone you care about. Every time you catch yourself thinking negative thoughts, consider whether you would say those things to someone you love, and offer yourself the same kindness.

    Trade tariffs continued to affect investment markets in June 2025, though uncertainty did start to ease. However, rising tensions in the Middle East may have affected the performance of your investments. Read on to find out more.

    Remember, it’s often wise to take a long-term view of your investments when reviewing returns, rather than focusing on short-term market movements.

    In June, the Organisation for Economic Co-operation and Development (OECD) cut its global growth forecast to 2.9% in 2025 and 2026, down from 3.1% and 3% respectively, on the assumption that tariff rates in mid-May are sustained.

    The OECD said: “Substantial increases in barriers to trade, tighter financial conditions, weaker business and consumer confidence and heightened policy uncertainty will all have marked adverse effects on growth prospects if they persist.”

    Similarly, the World Bank lowered its growth forecasts for nearly 70% of all economies. It estimates that the 2020s are on course to be the weakest decade for the global economy since the 1960s.

    Trade tensions ease, but uncertainty in the Middle East leads to volatility

    On 2 June, a European market sell-off started in early trading as investors continued to react to the trade war. Stock indices, which track the largest companies listed on each stock exchange, were down, including Germany’s DAX (-0.25%), France’s CAC (-0.5%), and the UK’s FTSE 100 (-0.27%). Markets in the US also opened lower, including the S&P 500 dropping 0.3%.

    However, there was some good news in the UK. Following the announcement of a new defence review, stocks in the sector jumped, with Babcock, one of the largest Ministry of Defence contractors, leading the way with a rise of 3.8%.  

    Germany’s sluggish economy received a boost on 4 June when a tax relief package worth €46 billion between 2025 and 2029 was unveiled. It led to the DAX rising 0.9%.

    After weeks of tit-for-tat tariffs between the US and China, a trade deal was struck on 11 June. The US said a 55% tariff, inclusive of pre-existing levies, would be placed on China. The deal led to Chinese stocks rising. Indeed, the CSI 300 index, which tracks the largest stocks on the Shanghai and Shenzhen markets, was up around 0.8%.

    Despite poor economic data from the UK, the FTSE 100 closed at a record high on 12 June. Among the top risers were health and safety device maker Halma (2.8%) and Tesco (1.8%).

    In contrast, European markets dipped, with the DAX (-1.35%) and CAC (-1%) both falling.

    The Iran-Israel crisis led to stock markets falling when they opened on 13 June. In London, the FTSE 100 was down 0.56% and almost every blue-chip share was in the red. It was a similar picture in Europe and the US, with indices dipping.

    On 24 June, Donald Trump, president of the US, declared there was a ceasefire between Iran and Israel. It led to geopolitical fears easing and markets rallying around the world. However, some fears remain.

    UK

    UK economic data released in June was weak.

    Data from the Office for National Statistics (ONS) shows the UK economy shrank by 0.3% in April. This was partly linked to trade tariffs as exports of UK goods to the US fell by around £2 billion.

    In addition, the ONS revealed the rate of inflation remained above the 2% target at 3.4% in the 12 months to May. The news led to the Bank of England’s Monetary Policy Committee voting to hold interest rates.

    However, think tank the Institute for Public Policy Committee said the central bank was harming households by not cutting the base interest rate. It also added that GDP was lower than expected because interest rates have been kept too high for too long.

    A Purchasing Managers’ Index (PMI) involves surveying companies to create an economic indicator. A reading above 50 suggests a sector is growing.

    In June, PMI readings for May show the manufacturing and construction sectors were contracting, but they had improved when compared to a month earlier, leading to hopes that a corner has been turned. In addition, the composite PMI, which combines service and manufacturing surveys, moved back into growth.

    Europe

    Eurostat figures show the rate of inflation across the eurozone fell to 1.9% in May, down from 2.2% in April, taking it below the European Central Bank’s (ECB) 2% target for the first time since September 2024.

    In response, the ECB lowered its three key interest rates for the eighth time in the last 12 months.

    There was also positive news from PMI data. The eurozone continues to hover just above the 50 mark that indicates growth, and German business activity returned to growth in June. As the largest economy in the eurozone, German activity is important to the bloc, and factory orders were also higher than expected.

    Ireland is leading the EU in terms of growth. The country had expected its GDP to grow by 3.2% in the first quarter of 2025, but exceeded this with an impressive 9.7% boost. The jump was linked to strong exports in pharmaceuticals and other key sectors as companies tried to get ahead of tariffs.

    US

    In the 12 months to May 2025, the rate of inflation in the US increased slightly to 2.4% and remains above the Federal Reserve’s target of 2%.

    A PMI conducted by the Institute of Supply Management shows the US manufacturing sector is slipping due to tariff uncertainty. Indeed, 57% of the sector’s GDP contracted in May, up from 41% in April.

    The data from the service sector was also negative, with figures showing it contracted in May for the first time in June 2024, and new orders fell at the fastest rate since December 2022.

    However, separate data suggests that businesses are feeling more optimistic about the future.

    The National Federation of Independent Business’s Small Business Optimism Index increased three points in May. It was the first rise since Trump took office at the start of the year thanks to trade talks taking place between the US and China throughout June.

    The US economy also added 139,000 jobs in May. The number was slightly higher than forecast and could suggest that businesses feel confident enough to expand their workforce. 

    Asia

    Data from China showed it wasn’t immune to the effects of the trade war.

    China’s National Bureau of Statistics data shows inflation was -0.1% in May as prices dropped. Deflation affecting the country highlighted the importance of the US and China reaching a trade deal.

    In addition, manufacturing activity in May shrank at the fastest pace in two and a half years. Firms were hit by falls in new orders and weaker export demand. The PMI reading was 48.5, down from 50.4 in April.

    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.

    A career break could be fantastic for your life plans. It may allow you to take time away from work to raise children, pursue education, travel the world, or follow other dreams. Yet, it could also harm your security in retirement, so a long-term plan might be important.

    A May 2025 article published by Protection Reporter suggests career breaks could become more popular. In fact, around 29% of 18- to 24-year-olds plan to take extended leave at some point in their career. In contrast, just 9% of 45- to 54-year-olds plan to do the same.

    While career breaks might not be the norm for older generations, there could be benefits to taking one. However, there are downsides to consider, including the effect it might have on your retirement.

    A May 2025 report in PensionsAge noted that if everyone took an unpaid two-year career break, it would collectively lead to a £230.69 billion shortfall in pensions nationwide. 

    On an individual level, having less in your pension might limit your options when you’re ready to retire. It could mean you need to delay giving up work, or your income is lower than expected throughout retirement.

    However, that doesn’t automatically mean you have to put plans for a career break on hold if you’ve been thinking about it. There may be effective ways to keep your retirement on track, such as these seven practical steps.

    1. Set out what a career break means for you

      Understanding the full effect of taking a career break often starts with setting out a clear plan – how long do you intend to take off work?

      A six-month career break to explore South America would have a very different effect on your pension than taking five years out of work to look after young children. While your plans might change in the future, deciding exactly what your career break will look like is usually an essential first step to keeping your retirement on track.

      You might also want to consider if your career break would lead to work and financial changes in the future. For example, could you face challenges re-entering the workplace at your current level if you took an extended period off? Or do you hope your career break will lead to a new path entirely?

      2. Forecast how the value of your pension will change

      While retirement might seem like a long way off, forecasting the value of your pension and the income it might provide could be useful.

      Working with a financial adviser could help you understand how the decisions you make about your career now may affect your long-term financial security. You might find you’d still be in a position to retire comfortably even if you halt pension contributions, but you could also discover a shortfall.

      By projecting the effect of a career break now, you can make an informed decision about what to do and potentially bridge gaps. 

      3. Assess how you’ll use other assets

      When you’re taking a career break, consider how you’ll fund your expenses. In many cases, people will use assets, like savings and investments, to create an income. So, it may be important to consider how depleting these assets could affect your retirement and financial security.

      4. Continue to make pension contributions

      If your pension could face a shortfall due to a career break and you’re in a position to do so, you may want to continue making pension contributions.

      While you might not receive employer contributions, your contributions might still benefit from tax relief and be invested with the aim of delivering long-term growth.

      One thing to note is that if you’re no longer earning an income, the amount you can place into a pension while retaining tax relief could be significantly lower. In 2025/26, if you’re a non-taxpayer, up to £3,600 may be added to your pension without incurring a charge if you’re part of a relief at source pension scheme.

      5. Increase your pension contributions when you return to work

      Alternatively, when facing a potential pension shortfall, you might plan to make higher contributions when you return to work.

      A financial plan could help you understand how much you might need to increase contributions by and whether they would fit into your day-to-day budget.

      6. Check your State Pension forecast

      If taking a career break means you won’t be making National Insurance (NI) contributions, it’s worth checking if it could affect your State Pension entitlement.

      While the State Pension alone often isn’t enough to retire on, it provides a reliable income throughout your later years. Usually, you’ll need 35 years on your NI record to receive the full State Pension. You can use the State Pension forecast tool to check how many years you already have and calculate if a career break might mean you fall short.

      If you could face a shortfall, you can normally pay voluntary contributions for the past six years to fill in the gaps.

      In addition, you might be able to claim NI credits. For instance, you can do so if you’re taking a career break to care for a child and are registered for Child Benefit.

      7. Keep your financial plan up to date

      During your career break, your plans or financial circumstances might change. So, keeping your financial plan up to date to reflect your current situation could be essential. It might allow you to spot potential risks or opportunities.

      If you’d like to understand if you could take a career break and keep your retirement on track, please get in touch. 

      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.

      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.

      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. 

      Passing on your wealth to loved ones could transform their lives and mean they have more opportunities in the future. However, to get the most out of the “great wealth transfer”, younger generations need to be prepared to manage their inheritance.

      According to September 2024 data from Vanguard, it’s estimated $18.3 trillion (£13.45 trillion) in wealth will be transferred globally by 2030. It’s expected to be the largest intergenerational transfer of assets in history, leading to it being dubbed the great wealth transfer.

      In the UK alone, it’s estimated that £7 trillion will pass between generations by 2050.

      Receiving an inheritance provides your loved ones with a chance to improve their financial security and reach lifestyle goals, from home ownership to travelling. However, with previous US research suggesting that up to 70% of affluent families lose their wealth by the next generation, you might want to think beyond assets. 

      Ensuring your wealth is passed on in line with your wishes

      When you’re creating an estate plan, taking steps to ensure your assets are passed on in line with your wishes is essential.

      If you want to leave assets to loved ones after you pass away, writing a will is often a priority. A will lets you state what you’d like to happen to your assets when you die. Without a will, assets will usually be distributed according to intestacy rules, which could be very different from your wishes and mean some intended beneficiaries are disinherited.

      There are other alternative options to consider as part of your estate plan, including:

      • Gifting wealth during your lifetime. This has the benefit of allowing you to see the positive effect your wealth has, and a chance to offer guidance. In some circumstances, gifting could also make sense from an Inheritance Tax perspective.
      • Use a trust to pass on assets. If you place assets in a trust, you can set out how and when they can be used, and name a trustee to manage the assets on behalf of your beneficiaries. It could allow you to retain greater control and preserve wealth. Trusts can be complex, and you may benefit from seeking legal advice if you want to set one up.

      With an estate plan setting out how you want to pass on wealth to your family, you can start to think about how to ensure your beneficiaries are equipped to manage it.

      Communication could be key to preparing your beneficiaries

      While wealth can be something of a taboo subject, talking about money and other assets could be hugely beneficial for your loved ones.

      Talk to your beneficiaries about your wishes

      Many people in the UK don’t discuss what they want to happen to their assets after they pass away. According to an October 2024 report from The National Will Register, 53% of adults haven’t done so.

      As a result, it’s likely many beneficiaries are unsure about what they’ll inherit and how assets will be passed on. This could lead to them feeling overwhelmed when they receive the inheritance and potentially make poor financial decisions. Speaking to your loved ones about your wishes could allow them to make long-term plans.

      However, it’s important to note that inheritances cannot be guaranteed. Changes to your circumstances could mean the inheritance is less than expected, so they should consider this.

      Share your financial experiences and goals

      Sharing your money experiences, both the positives and the negatives, can be powerful. It can be a way to pass on the knowledge you’ve amassed and encourage good financial habits.

      It’s also an excellent opportunity to talk about the legacy you want to leave. If you have a clear idea about how you’d like your loved ones to use the wealth you’re leaving them, talking about the reasons why could mean they’re more likely to uphold your values and make decisions that align with your wishes.

      As well as talking about your goals, take the time to understand theirs too. Listening to the challenges they face and their aspirations could help identify ways you might be able to offer support.

      Create an intergenerational financial plan

      If you currently manage your finances completely separate from your beneficiaries, you might want to consider creating an intergenerational financial plan that involves them.

      An intergenerational plan may establish ways to improve tax efficiency and support the long-term goals of each person. It’s also an excellent way to introduce your loved one to financial planning and working with a professional if they don’t already, which may mean they’re better prepared for the great wealth transfer.

      An intergenerational financial plan doesn’t mean you have to involve your beneficiaries in all your financial decisions or share the details of every asset; you can tailor the approach with your financial planner to suit you.

      Contact us to talk about your estate plan and prepare the next generation

      If you’d like to review your existing estate plan or discuss how we could work with you to financially prepare the next generation, please contact us.

      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 Financial Conduct Authority does not regulate wills, trusts, Inheritance Tax planning, or estate planning.

      Opting for a “boring” investment strategy could be the route to returns that allow you to make exciting lifestyle decisions in the future. If you’re looking for excitement in your investments, read on to find out why that approach could lead to disappointments.

      The media can make investing seem exciting

      When you’re reading financial headlines, they might say things like “stock market soars in best day ever” or “the best companies to invest in right now”. In other media, investing is often dramatic too. For example, in The Wolf of Wall Street, the main character, Jordan Belfort, is shown making a huge fortune through investing and fraud.

      Yet, despite the perceived excitement of investing, acting on emotions, even ones that feel positive, could harm your decisions. The excitement of finding a tip that declares a company will be the “next Apple” could lead to you skipping further research, like assessing the risk profile of the firm and whether it fits into your existing portfolio.

      Investors might even feel excited about the risks they’re taking – the anticipation of waiting to see if they were “right” can be addictive. So, some investors may take more risk than is appropriate because it adds to the excitement.

      As a result, viewing investing as something that should be exciting has the potential to affect the long-term performance and could mean you’re at greater risk of losing your money.

      So, what’s the solution? For many, it’s taking a boring approach to investing. 

      Why boring investments work

      First, what does a “boring” approach to investing mean?

      Focusing on your long-term goals and building an investment strategy around this and other factors, such as what an appropriate level of risk is and other assets you might hold. You’d try to remove emotions from your investment decisions and, instead, use logic.

      If you’ve heard the mantra “buy low, sell high”, this approach might seem like it wouldn’t work. Yet, historically, investing with a long-term outlook, rather than responding to short-term market movements, is a strategy that’s worked for many investors.

      March 2023 data from Schroders highlights the challenges of trying to time the market.

      If you’d invested £1,000 at the start of 1988 in an index of the largest 100 UK companies and left the investment alone, it would have been worth £15,104 in June 2022 – an annual return of 8.31% on average.

      However, if you tried to time the market and missed just the 10 best days, your average annual return would fall to 6.1% and you’d have £7,503 in June 2022, less than half of the amount had you remained invested.

      While trying to buy low and sell high might be exciting, even just a few mistakes could mean you miss out on long-term returns.

      Of course, it’s important to note that investment returns cannot be guaranteed, and past performance isn’t a reliable indicator of future performance. Yet, it can provide a useful insight into why taking a long-term view when making investment decisions could be beneficial.

      Boring investing could lead to exciting lifestyle opportunities

      A boring approach to investing doesn’t have to mean the outcomes are dull. In fact, taking a long-term approach could mean you have more opportunities to create the lifestyle you want. 

      A long-term investment strategy might allow you to tick items off your bucket list like:

      • Retiring earlier to travel the world
      • Sampling dishes at award-winning restaurants
      • Creating a disposable income to attend gigs or the theatre
      • Purchasing a holiday home to spend time with your family.

      Rather than looking for excitement when investing, finding it in your long-term plans and what investment returns may allow you to do could be far more rewarding. 

      Contact us to talk about your investments

      If you’d like to talk about your current investments, or you have a sum you’d like to invest, please get in touch. We’ll work with you to create a long-term investment strategy that’s aligned with your goals and financial circumstances.

      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.

      A recent article published by an influential think tank, the Institute for Fiscal Studies (IFS), has suggested that the Labour government should consider increasing the basic rate of Income Tax in order to boost revenue and curb the amount of money it has to borrow.

      Doing this would break a so-called “taboo” as no chancellor has increased the basic rate of Income Tax for 50 years. Indeed, for much of that time, the aim of most chancellors has been to cut the basic rate as a symbol of their commitment to low personal taxation.

      In this article, you can discover why the IFS is suggesting the government make this move, and how it could affect your finances.  

      The basic rate of Income Tax has been gradually reduced over the last 50 years

      The last chancellor to increase the basic rate of Income Tax was Dennis Healey in 1975, who raised it from 33% to 35%. At the time, the UK government was facing the combined financial threats of economic weakness at home, together with global uncertainty driven by the oil crisis. 

      Since that time, the basic rate has only ever been reduced, with the final reduction to its existing rate of 20% made by the former chancellor, Gordon Brown, in 2007.

      In reality, however, the freeze in tax thresholds and the Personal Allowance since 2021 has actually resulted in many individuals paying more Income Tax. The Personal Allowance stands at £12,570 and is set to be frozen at this level until 2028, meaning that the more a person earns, the higher their Income Tax is likely to be. This is commonly known as a “stealth tax”.

      Previous governments have sought alternatives to Income Tax to raise revenue

      Instead of increasing the basic rate, successive governments have used other methods to raise revenue, such as implementing higher taxes on businesses and capital gains.

      The rate of VAT has also increased markedly in the last 50 years, from 8% in 1975 to 20% in 2025/26, as chancellors have seen taxing consumption more politically acceptable to the electorate than taxing income.

      Previous governments have also put up the rate at which individuals pay National Insurance contributions (NICs) on their income. While having the same effect as an increase in Income Tax, this does seem to be somewhat less emotive. This could be down to the fact that NICs receipts are hypothecated and used to fund the State Pension and other benefits such as Maternity Allowance, so earners understand where their contributions are going.

      Election promises have restricted the government’s revenue raising options

      During the 2024 general election campaign, the Labour Party manifesto pledged no increases in:

      • The standard rate of VAT
      • Employee NICs
      • Income Tax.

      Labour made it clear that the government intends to fund increased public spending through the proceeds of economic growth rather than higher taxes. It has also committed to only increase borrowing to fund growth.

      To this end, this government has announced a series of measures, including a massive house-building programme, along with big infrastructure projects such as airport expansion and the Oxford-Cambridge corridor.

      However, all those measures will take time to come to fruition and deliver growth. In the meantime, public services, such as the NHS, schools, and local government, remain in need of financial support.

      External events have blown government plans off course

      As well as internal challenges, the government’s financial position has been made even more precarious by two external events:

      1. The reduction in the US financial and military commitment to Ukraine, which has forced other nations, including the UK, to boost defence spending.
      2. The imposition by President Trump of a 10% tariff on all UK exports to the US.

      While increased military expenditure could ultimately be an effective growth driver, it poses an immediate funding problem for the treasury.

      Tariffs on UK goods and services entering the US provide a more immediate challenge. A paper issued by the Department for Business and Trade confirmed that these have led to a reduction in business confidence, and a report in the Guardian suggesting that this would hinder the very growth the government is hoping for.

      The effect of an Income Tax rise on your income

      Clearly, there is no danger of Income Tax rates reverting to the level they were at in 1975.

      However, according to the government, just a 1% increase in the basic rate would raise £6.55 billion in 2025/26 and £7.9 billion the following year. Additionally, if the government were to announce an increase of 1% on all Income Tax rates, this would raise £8.1 billion next year.

      So, how would an increase in Income Tax affect your take-home pay?

      According to Forbes, the UK national average salary is £37,430, as of April 2025.

      Assuming you are entitled to the full Personal Allowance of £12,570, the table shows the comparative amounts of Income Tax you would pay.

      Annual income £37,430Income Tax payable
      Basic rate of 20%£4,970.30
      Basic rate of 21%£5,220.60
      Annual increase in Income Tax£250.30

      Source: Government website

      While any potential increase in Income Tax is likely to be relatively small, it’s clear that this would be controversial, especially given the manifesto commitment the Labour Party made not to take such a step.

      However, the government could justifiably argue that it could not have foreseen the issues around defence spending and US tariffs.

      As a result, it may be tempted to earmark any Income Tax rise for defence spending, which may well help to increase the public’s acceptance of it.

      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.

      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 tax planning.

      Uncertainty continued to lead to market volatility in May 2025. However, there was some good news for investors as some markets recovered the losses they experienced in April 2025. Read on to find out more and what factors may have influenced your portfolio’s performance recently.

      While market movements may be worrisome, remember, it’s a normal part of investing. Keep your long-term goals and strategy in mind when you review how the value of your investments has changed.

      Tariff announcements continued to affect markets towards the end of May 2025

      The month got off to a good start for investors – the FTSE 100, an index of the largest 100 companies listed on the London Stock Exchange, recorded its longest-ever winning streak. On 3 May, the index had made gains for 15 consecutive days and almost recovered all the losses that followed tariff announcements in April.

      The European markets experienced some volatility at the start of the month as Friedrich Merz lost the vote to become Germany’s chancellor. It led to some calling for a fresh election, and also uncertainty – on 6 May, the German index DAX fell 1.9%.

      After a tit-for-tat trade war sparked investor fear in April, many were optimistic when trade discussions between the US and China began on 7 May. Combined with the People’s Bank of China cutting interest rates by half a percentage point, this led to Asian stocks lifting. Indeed, the Shanghai Composite rose by almost 0.5%. 

      This was followed by Donald Trump, president of the US, announcing a “full and comprehensive” trade deal with the UK. When markets opened on 8 May, Wall Street was up 0.6%.

      Hope that other countries will also reach agreements with the US lifted European markets. The DAX in Germany increased by 0.6% to reach a record high, while France’s CAC was up 0.5% on 9 May.

      Wall Street surged on 12 May when it was revealed the US and China had agreed to a 90-day pause on tariffs. The Dow Jones Industrial Average (2.3%), S&P 500 (2.6%), and Nasdaq (3.6%) all rallied.

      Similarly, when markets opened in Asia, Chinese indices jumped, particularly technology and financial stocks.

      However, the positive news didn’t last throughout the month.

      On 19 May, credit ratings firm Moody’s downgraded the US’s rating from triple-A to Aa1. The decision was linked to the growing US national debt, which is around $36 trillion (£26.6 trillion) and rising interest costs. The announcement led to global volatility.

      What’s more, on 23 May, Trump threatened further tariffs, which led to markets falling.

      In a bid to encourage technology giant Apple to make its iPhone in the US, Trump suggested the company could face a 25% tariff. Apple’s shares fell by around 3% before markets opened after the comments were made.

      Trump also said EU imports would face a 50% tariff from the start of June. He added he wasn’t looking to make a deal with the bloc, but instead wanted EU businesses to build plants in the US. The news led to falls across European markets, including the DAX (-1.9%), FTSE 100 (-1.1%) and Italy’s FTSE MIB (-2%).

      However, just a few days later, on 28 May, Trump agreed to delay EU tariffs and suggested meetings would be arranged to discuss a trade deal.

      UK

      The Bank of England (BoE) decided to cut its base interest rate by a quarter of a percentage point to 4.25% – the lowest rate in two years – at the start of the month.

      However, inflation data may raise concerns for the BoE. While inflation was expected to rise, it was higher than predicted. In the 12 months to April 2025, inflation was 3.5%, with increasing energy costs playing a key role in the rise.

      GDP data was positive. The UK grew by 0.7% in the first quarter of 2025, making it the fastest-growing G7 economy. Yet, the think tank Resolution Foundation warned a rebound is unlikely, and it expected April data to be weaker.

      The UK unveiled a trade deal with India, covering a range of products from cosmetics to food. The agreement represents the biggest trade deal since Brexit in 2020 and is expected to increase bilateral trade by more than £25 billion over the long term.

      While many businesses are worried about the potential effects of trade tariffs, aerospace and defence firm Rolls-Royce said it could offset the impact. CEO Tufan Erginbilgic said the company expected to deliver an underlying operating profit of between £2.7 billion and £2.9 billion in 2025 on 1 May, which led to share prices increasing by 2.7%.

      The firm benefited from a further boost of 4% on 8 May when the UK-US trade deal was announced.

      However, other firms aren’t expected to fare as well.

      Drinks company Diageo, which produces around 40% of all Scotch whisky, predicts it will lose around £150 million due to tariffs.

      Europe

      Inflation in the eurozone continued to hover above the 2% target at 2.2% for the 12 months to April 2025.

      Eurostat lowered its estimate for economic growth in the eurozone in the first three months of the year to 0.3%. In the first quarter of 2025, Ireland boasts the fastest-rising GDP (3.2%), while contractions were measured in Slovenia, Portugal, and Hungary.

      Unsurprisingly, the European Commission also cut its growth forecast for the eurozone in 2025 from 1.3% to 0.9%. It said this was “largely due to the increased tariffs and the heightened uncertainty caused by recent abrupt changes in US trade policy”.

      HCOB’s PMI output index for the eurozone fell from 50.9 to 50.4 in April – a reading above 50 indicates growth. While still growing overall, it’s notable that France’s private sector contracted for the eighth consecutive month and Germany’s output barely rose. However, there was a strong increase in Ireland, and Spain and Italy also expanded.

      There is potentially good news on the horizon. Germany’s factory orders jumped by 3.6% in March as companies tried to get ahead of tariffs.

      US

      Trump’s tariffs, which aim to reduce the trade deficit, have initially, at least, had the opposite effect.

      As businesses tried to stock up before new tariffs were imposed on goods from abroad, the US trade deficit reached a record high in April. The deficit increased by $17.3 billion (£12.8 billion) to $140.5 billion (£104 billion).

      GDP data also suggests Trump’s policies are having a negative effect on the economy. In the first three months of 2025, GDP fell by 0.3%; this is in stark contrast to the 2.4% rate of growth recorded in the final quarter of 2024. It marks the first time the US economy has shrunk in three years.

      The University of Michigan’s index of consumer sentiment indicates households are worried about their finances. Americans are concerned about potentially weakening incomes, with the index falling 26% year-on-year.

      Tariffs are expected to affect a range of businesses, including the car manufacturing sector.

      The three big US car manufacturers – General Motors, Ford, and Stellantis – all have some manufacturing facilities in Mexico or Canada that serve the US market and are likely to be affected by trade tariffs.

      General Motors expects tariffs to cost the company as much as $5 billion (£3.7 billion) this year. Similarly, Ford has said tariffs will cost around $1.5 billion (£1.1 billion) in profits this financial year and has suspended its guidance while it seeks to understand the full impact of consumer reaction and competitive response. 

      Asia

      At the start of the month, the Bank of Japan cut its economic growth forecast for the fiscal year ending March 2026 from 1.1% to 0.5%. The bank cited trade policies as the reason for the fall.

      Indeed, GDP for the first quarter shows Japan’s economy contracted by 0.7% due to a decline in exports and private consumption as households cut back their spending.

      Trade between China and the US fell sharply in April. Shipments to the US fell 21% year-on-year, and imports declined by 14%. However, the data suggests that Chinese manufacturers have found alternative markets. Overall exports jumped by 8.1% compared to the forecast rise of 1.9%.

      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.

      If you’ve been keeping up with the news recently, you’ll likely know that global economic growth is under increasing pressure.

      In February 2025, the Bank of England halved its forecast for UK growth this year from 1.5% to just 0.75%, the BBC reports.

      Meanwhile, the Guardian reveals that US Gross Domestic Product (GDP) shrank by 0.3% in the first quarter of 2025, partly due to uncertainty surrounding Donald Trump’s questionable economic policy.

      GDP – which reflects a nation’s total economic output – remains a key measure of financial health. It indicates how much a country produces and whether its economy is growing or contracting.

      Two consecutive quarters of negative GDP growth usually signal the start of a recession, a time when incomes tend to fall, the job market is weaker, and – crucially, if you’re planning to retire soon – potential market turbulence occurs.

      Several financial organisations seem to take this risk seriously, too.

      Indeed, the International Monetary Fund (IMF) recently increased the probability of a global recession from 17% to 30%, while JP Morgan has placed chances even higher at 60%.

      Whether a recession actually occurs or not, this could be a sensible moment to consider how prepared you are.

      If you’re approaching retirement, the next few years might seem especially uncertain, but you can take several proactive steps to recession-proof your plans. Continue reading to discover four ways of doing so.

      1. Assess your current finances

        Now could be the ideal time to assess your overall financial health. Even if you already have a retirement plan in place, it’s important to remember that it should evolve as your circumstances change and new challenges, such as the threat of a recession, emerge.

        You could start by reviewing your monthly spending, and in doing so, you may identify non-essential costs you could cut back.

        Even small reductions can add up, freeing up extra wealth to act as a helpful buffer during times of economic uncertainty.

        It might also be prudent to address any outstanding unsecured debt. High-interest debt – such as that from credit cards and overdrafts – can quickly snowball and drain your financial and mental wellbeing.

        Clearing these, where possible, could free up funds to act as a financial cushion during any potential global recession.

        2. Review the investments in your pension

        As markets tend to respond to economic uncertainty, you may find that the value of any investments held within your pension fluctuates more than usual.

        While this volatility can be unsettling, it’s vital to remain calm and maintain a long-term view.

        Still, it could be wise to review your pension investments now, as doing so could help you feel more confident.

        One area to assess is your diversification. If your pension portfolio is spread across various asset classes, sectors, and geographical areas, it might be more likely to withstand periods of downturn in specific areas.

        You essentially reduce the risk of being overexposed to any given part of the market, which is especially valuable during a recession.

        It’s also worth taking a look at your current risk profile. As retirement draws closer, you may want to think about reducing your exposure to higher-risk investments. Or, you could ensure that your investments still reflect your appetite for risk and your time frame for drawing an income.

        3. Maintain a financial safety net in retirement

        A financial safety net in the form of an emergency fund is helpful at the best of times, and could be even more so during a recession.

        Generally, it’s worth setting aside between three and six months’ worth of essential household expenses in an easy access savings account.

        This could protect you from unexpected costs without having to access funds ringfenced for other purposes.

        If you’re already retired, it might be prudent to save more, potentially between one and two years of expenses.

        Doing so could mean that you don’t have to sell investments at a time when their value is temporarily lower due to recession.

        You won’t have to deplete your savings as quick, either, and you will be less likely to be subject to “sequence risk”, when the timing of retirement withdrawals negatively affects your overall returns.

        Protection might also be practical, especially critical illness cover. This form of cover pays a tax-free lump sum if you’re diagnosed with a serious condition covered by your provider.

        This might allow you to fund your recovery without prematurely exhausting your retirement fund, all while offering some peace of mind at an already challenging financial time.

        4. Book a meeting to review your retirement plan

        It’s entirely understandable to feel anxious when the media is constantly discussing reports of economic slowdown and market uncertainty. Even the word “recession” might be enough to spark fear.

        Yet, staying calm and focused on your long-term plan is essential, and this is where working with a professional can help.

        A review with your financial planner could provide the ideal opportunity to step back and assess how your retirement plans hold up to various scenarios.

        Your planner could walk you through some of the potential risks, and help you identify whether any adjustments are needed. This might involve rebalancing your investments, assessing your budget, or even ensuring that your financial safety net is adequate.

        With a clearer picture of your finances, you could move forward with greater clarity and confidence, even if a global recession does materialise.

        Please get in touch with us today if you’d like some support.

        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.

        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. 

        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.

        Note that 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.

        Achieving “financial freedom” is an aspiration many people have. Yet, it can mean different things to each person and is influenced by other lifestyle goals, so defining how to measure it for you could help you turn it into a reality.

        Securing financial freedom so you can retire with confidence is a common goal.

        A January 2025 Legal & General survey asked people what their perfect retirement would look like. The top answer was “living stress-free without financial worries”. Correspondingly, the biggest barrier to retirement was financial concerns, which ranked higher than potential health issues and fear of boredom.

        Some modern money trends have arisen from the desire to achieve financial freedom too.

        For example, FIRE, which stands for “financial independence, retire early”, involves workers devoting large portions of their income to savings and investments. Followers of the movement aim to retire from traditional work as soon as possible and live off the passive income their assets generate.

        The common theme among people working towards financial freedom is to live the lifestyle they want, including giving up work if they choose, while maintaining their financial security. However, how much you need to do this can vary enormously.

        So, setting out what financial freedom would look like to you could be useful. Answering these two questions may provide a useful starting point.

        1. What do you want the freedom to do?
        2. What do you want to be free from?

        Read on to find out what you might consider when reflecting on these questions and how financial planning could help you create an effective road map to financial freedom.

        Setting out the lifestyle you want to enjoy

        To calculate how much you need to secure financial freedom, you need to understand how much your desired lifestyle will cost. This is where you think about what you want the freedom to do.

        Some people would prefer to live more frugally if it meant they could step back from work sooner, while others might be looking forward to a more luxurious lifestyle. From how often you’d like to eat out to what holidays you’d like to take, setting out lifestyle expectations is an essential step.

        So, answering questions like those below may help you define what financial freedom means for you.

        • What would your day-to-day lifestyle and spending look like?
        • How could your income needs change during your life?
        • Are there one-off costs you need to consider?

        It may be useful to break down your income needs into essential and non-essential spending. This way, you could understand how adjusting your lifestyle might mean you’re able to reach financial freedom sooner – would you choose a lifestyle that involves spending less if you could retire earlier than expected? 

        Understanding your worries is important for financial freedom

        To fully enjoy the lifestyle you want, you often need to have confidence in your finances. So, when you’re thinking about what you want to be free from, concerns and worries are common.

        For example, to make the most of financial freedom, you might benefit from being free from worrying about:

        • The potential long-term effects of inflation
        • How you’d cope if you faced a financial shock
        • How periods of investment volatility could affect your income
        • If your partner would be financially secure if you passed away first.

        Addressing these concerns when you’re setting out what financial freedom means to you could help you take steps to protect your long-term financial security and ease your mind.

        Modelling your finances could demonstrate how you could achieve financial freedom

        Armed with your answers to the above questions, your financial planner can work with you to create a financial plan that focuses on securing financial freedom.

        As you’ll typically need to consider the long-term effects of saving, investing, spending, and more, a cashflow model may be a valuable tool. Cashflow modelling could help you visualise how the value of your assets might change over time.

        For example, you could see how the value of your investment portfolio might rise over the next decade as you divert more of your income to it. Once you give up work, you might draw an income from your investments. A cashflow model could show how the value would change depending on the withdrawal rate, investment returns, and how long it’ll be used to create an income.

        As a result, cashflow modelling could help you calculate how much you need to be financially secure.

        You can also model different scenarios on a cashflow model, which may be useful for addressing the concerns you want to be free from. For instance, you might adjust expected investment returns to understand how a period of volatility could affect your long-term finances.

        Being aware of the potential risks often gives you an opportunity to create a financial buffer or take other steps to mitigate the effects. So, cashflow modelling could mean you’re able to enjoy your financial freedom, rather than worrying about what’s around the corner.

        It’s important to note that the outcomes of a cashflow model cannot be guaranteed, but the information can provide valuable insights and help you make more informed financial decisions.

        Get in touch to talk about what financial freedom means for you

        If you’d like to talk to one of our team about your financial plan or how we could help you reach your goals, please get in touch.

        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.

        The Financial Conduct Authority does not regulate cashflow modelling.