Chris Thorpe, Author at Agile IFA

Heading to university is an exciting time for new students. As a parent, you may feel proud of your child’s achievements, but it’s normal to feel apprehensive as they potentially move out and embrace independence for the first time. You might also worry about the financial burden of student loans. Read on to discover what you need to know.

The average student will graduate with £42,900 of student debt

Data from the House of Commons library suggests those starting university in 2023/24 will graduate with £42,900 of student debt on average. However, if your child is living away from home, their total student debt could be higher.

That might seem like a huge burden to start your working life with. However, the way student loans work mean repayments are manageable for most graduates and many won’t repay the full amount.

For 2023/24, universities can charge up to £9,250 for a year of tuition. As most courses last three years, students can expect to pay £27,750 in tuition fees. If your child is using a student loan to pay for their tuition, the money is usually paid directly to the university.

The remainder of student debt is made up of maintenance loans, which can be used to cover costs like accommodation, course books, and day-to-day expenses. Maintenance loans are paid into your child’s bank account in three instalments each year.

The maximum your child could receive through maintenance loans will depend on if they are living at home or moving out, and whether they’re studying in London.

Students starting university in 2023 will take out a new “plan 5” loan

The government has made changes to how student loans are repaid, and students going to university in autumn 2023 are among the first to be part of the new “plan 5” loans.

So, even if you’re aware of how student loans work, it may be worth reviewing the changes. Here are the key things you need to know.

Graduates will only repay student loans when they earn more than £25,000 a year

One of the key things to remember if you’re worried about student debt is that your child wouldn’t need to make repayments if they struggle to find a job or earn a low income.

Plan 5 graduates won’t need to make repayments until they earn more than £25,000 a year. This threshold is frozen until 2027, after which it’s expected to increase in line with inflation.

Once your child’s income exceeds £25,000, they’d repay 9% of everything earned above the threshold. So, if their income was £35,000 a year, they’d need to make student loan repayments of £900 a year.

As a result, repayments are typically manageable and wouldn’t need to be made if your child lost their job or took time away from work.

The loan is automatically wiped after 40 years

One of the biggest changes for plan 5 graduates is how long they could be making student loan repayments.

Older plans wiped out the debt after 30 years, but it’s now been extended to 40 years. More plan 5 graduates are expected to repay their loans in full or repay a larger proportion of the debt.

This could mean some graduates will be paying student loans when they retire if their income exceeds the repayment threshold.

The interest rate on student loans is linked to inflation

A positive change for plan 5 graduates is that the interest rate added to outstanding debt will be set at the Retail Prices Index (RPI), which measures inflation. For some older plans, the interest rate added was RPI plus 3%.

Student debt doesn’t go on their credit report

If you’re worried about how student loans could affect your child’s financial prospects, the good news is that they aren’t included on credit reports.

However, they may affect borrowing options if a lender assesses take-home pay, which could be lower due to repayments.

63% of students say they’re struggling with rent

While student loans may help cover university tuition and some living costs, many students are still struggling to make ends meet.

According to the 2023 National Student Accommodation Survey, 63% of students said they struggled to pay their rent. Worryingly, 2 in 5 students have considered dropping out of university due to rent or bills.

If you’re in a position to offer financial support, doing so could alleviate stress and help your child focus on their studies.

Whether your child is off to university this year or it’s something they may do in the future, making further education part of your financial plan could mean you feel more confident lending support.

If your child is already at university, you could make regular transfers to help with living costs part of your budget. Or if university is still a few years away, setting up a nest egg for your child could provide them with more financial security.

If you’d like to update your financial plan to consider university costs or other ways you’d like to support your family, please contact us.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A Lasting Power of Attorney (LPA) could provide you with protection when you’re most vulnerable by giving someone you trust the ability to make decisions on your behalf. Yet, a survey in the Independent, found that less than half of married couples have an LPA.

If it’s something you don’t have in place, here are seven reasons to make it a priority.

1. The unexpected happens

No one wants to think about losing the mental capacity to make decisions themselves. Yet, it’s something that many people experience during their life.

According to the Alzheimer’s Society, someone in the UK develops dementia every three minutes. It may not be something you can change, but you can be in control of how prepared you are.

LPAs don’t have to be permanent either. If you suffered an accident or illness, you could use an LPA to allow someone to temporarily manage your affairs while you focus on recovering.

2. You can name someone you trust as your LPA

By naming an attorney through an LPA, you can choose someone you trust to act on your behalf. It means you have control over who may make decisions for you.

Without an LPA, your family could apply to the Court of Protection. However, the judge will decide who is most suitable to make decisions for you, and it might not be the person you would choose.

3. It ensures someone who cares about you can make health decisions

There are two types of LPA. The first is an LPA that covers health and welfare decisions. It would allow your attorney to make decisions about your daily routine, medical care, and moving into a care home.

Without a health and welfare LPA, it could be difficult for your loved ones to ensure you receive care or treatment if it’s needed.

4. It allows a trusted person to manage your financial affairs

The second type of LPA covers your financial affairs. If you’re unable to make decisions, it may not take long for your affairs to fall into disarray. For example, bills could go unpaid or you may not be able to collect your pension or other sources of income.

An LPA giving someone you trust the power to make decisions about your financial affairs could help with this. They may also be able to make larger decisions, such as selling your home.

5. It may provide an opportunity to set out your wishes

When you name your attorney in an LPA, you have an opportunity to prepare an advance statement of wishes and care preferences.

The document isn’t legally binding, but it could be useful for your attorney to refer to. You could provide information about the care home you’d prefer, views on life-sustaining treatment, or possessions you’d like to pass on to a loved one.

6. It could help protect you from fraud in the future

A report from UK Finance found in 2022 £1 billion was lost to fraud – that’s the equivalent of around £2,300 stolen every minute. While criminals use a variety of tactics, targeting vulnerable people is a common one.

Having a property and financial affairs LPA in place means someone you trust can manage your bank accounts, savings, and more. It may mean fraud is spotted sooner or even prevented.

7. An LPA may form part of your wider estate plan

As part of your estate plan, you may be thinking about how you’d like to manage and pass on assets. Having an LPA in place may ensure your wishes are followed even if you can’t make decisions yourself.

Get in touch to discuss the steps you could take to improve your security

Putting an LPA in place could provide you with security if you lose the ability to make decisions yourself. As part of your financial plan, there might be other steps you may take to prepare for the unexpected too.

Please contact us to talk about your concerns and priorities. We’ll work with you to create an estate plan that suits your needs.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate estate planning.

Reports suggest that the Conservative party will make scrapping Inheritance Tax (IHT) part of its manifesto pledge in a bid to secure the general election. Frozen tax thresholds meant HMRC raked in a record amount of IHT in the last tax year. Read on to find out more about the reports.

While there have been reports that IHT would be abolished next year, according to the Guardian, it’s something prime minister Rishi Sunak is considering as a manifesto pledge.

The controversial tax could help boost election votes, as more estates are paying IHT due to frozen thresholds.

In 2023/24, the nil-rate band is £325,000. If the total value of your estate is below this threshold, no IHT is due. In addition, if you leave your main home to direct descendants, you may also be able to use the residence nil-rate band, which is £175,000 in 2023/24.

The government has frozen both the nil-rate band and the residence nil-rate band until April 2028.

HMRC data shows the government collected a record amount through IHT in 2022/23. In total, families paid £7.1 billion in IHT last tax year. HMRC said the rise was likely due to a combination of “recent rises in asset values and the government’s decision to maintain the IHT nil-rate band thresholds”.

The graph below shows how IHT receipts have climbed over the last 20 years:

Source: HMRC

Scrapping IHT may seem contradictory following reports that Sunak’s priority is reducing high inflation over tax cuts.

However, while £7.1 billion in IHT may seem substantial, it accounts for just 0.28% of GDP. So, the government may view scrapping IHT as a way to boost election-day votes without having a significant effect on its coffers.

For some people, abolishing IHT could affect their estate plan. For instance, if you’ve decided to gift assets during your lifetime to reduce a potential IHT bill, you may want to review this decision if the plans went ahead.

There are calls for an Inheritance Tax overhaul rather than abolishing it

While some have welcomed reports that the government could scrap IHT, others are urging for an overhaul to make the tax “fairer”. There are several ways Sunak could change IHT.

Reduce the Inheritance Tax rate

The portion of your estate that exceeds the IHT thresholds is currently taxed at a standard rate of 40%. One option that might still deliver an election boost is to slash the tax rate to reduce the bills estates are paying.

Increase the Inheritance Tax thresholds in line with inflation

As mentioned above, the nil-rate band and residence nil-rate band have both remained the same for several years and are frozen until 2028. Reversing this decision and increasing the thresholds in line with inflation would mean fewer families will need to consider how to manage IHT.

Changes to gifting rules and other allowances

Alternatively, Sunak could change gifting allowances and other rules that estates may use to mitigate a potential tax bill when estate planning.

According to the Guardian, Paul Johnson, the director of the Institute for Fiscal Studies, said current IHT rules were “genuinely unfair”.

He added a report shows the “effective rate of IHT on estates of more than £10 million was only half the effective rate on estates of £2 million” as the tax is more difficult to avoid if a large portion of your wealth is your family home.

Don’t adjust your estate plan until changes are confirmed

While it can be tempting to try and get ahead of the curve by responding to the reports now, the potential changes aren’t set in stone. The government could alter its plans for IHT or decide to make no changes at all.

For most people, sticking to your existing estate plan and carrying out regular reviews makes sense. If the government announces changes, give yourself time to understand them and what they could mean for you and your beneficiaries before you react.

As financial planners, we can work with you to create an estate plan and ensure it continues to reflect current regulations. Please contact us to arrange a meeting to talk about your estate and wishes.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

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

While the State Pension may not be your main source of income in retirement, it’s often an important one. If you’re not on track to receive the full amount, there might be things you could do to boost it.

For 2023/24, the full new State Pension is £203.85 a week, adding up to around £10,600 a year. However, your National Insurance (NI) record will affect the amount you receive.

To claim the full new State Pension, you’ll usually need 35 qualifying years on your NI record. If you have between 10 and 35 years, you’ll normally receive a proportion of the State Pension.

There are many reasons why you may have gaps in your NI record, such as taking time away from work to raise children. If you don’t have the 35 years needed to claim the full amount, reviewing how to boost your State Pension entitlement could be worthwhile.

You can use the government’s State Pension forecast tool to see how much you could receive.

The State Pension may be valuable in retirement for two key reasons.

It provides a guaranteed income. In retirement, your other sources of income may not be reliable, so having a guaranteed base income that will cover essentials could improve your financial resilience. Knowing that you’ll receive the State Pension every four weeks could provide peace of mind.

It increases each tax year. Under the triple lock, the State Pension rises each tax year by at least 2.5%. This can help preserve your spending power throughout retirement, as the cost of goods and services may rise. In 2023/24, pensioners benefited from a record 10.1% increase in the State Pension due to high inflation.

To increase your State Pension, you often need to add more qualifying years to your NI record. Here are two options that could boost your retirement income by thousands of pounds.

1. Claim NI credits if you’re caring for grandchildren

Working parents struggling to balance childcare costs and careers often turn to grandparents or other family members for support. But did you know if you’re under the State Pension Age and provide care for a child under the age of 12 regularly, you could apply for NI credits?

According to Royal London, almost 6 in 10 over-50s aren’t aware NI credits can be claimed as a carer or grandparent.

In fact, it’s estimated that grandmothers could be missing out on more than £6,300 worth of State Pension payments for every year of NI contributions they don’t claim.

There’s no minimum number of hours you need to look after the child.

However, the child’s parent must register for Child Benefit, even if they earn too much to receive it. Child Benefit entitles the parent to an NI credit if they aren’t working or earn a low income. If they aren’t claiming the NI credit, they can transfer it to those providing childcare, such as grandparents.

If you’ve cared for a child under 12 in the past, you may be able to backdate your claim to 2011 and boost your State Pension.

2. Purchase additional qualifying years

The government has extended the deadline for a scheme that allows you to fill in gaps in your NI record until April 2025.

Currently, you can fill in gaps going back to 2006. After the April 2025 deadline, you’ll only be able to fill in gaps from the last six tax years. So, it could be worth reviewing your NI record to identify potential gaps now.

The cost of a full NI year will vary depending on which tax year you’re filling in. However, for some people, purchasing an NI year could pay for itself within a few years of reaching the State Pension Age.

Don’t immediately fill in gaps you find – take some time to work out if it could boost your State Pension first. If you’re still several years away from retiring, will you reach the necessary 35 qualifying years without filling in the gaps?

If you decide to fill in gaps in your NI record, you’ll need to contact HMRC by phone and send the money either through bank transfer or cheque.

Do you have questions about your State Pension and other income in retirement?

We can help you create a retirement plan that combines the State Pension with other sources of income you may have. Please contact us to talk about how you could use your assets to fund your retirement.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Over the last few months, you’ve read about the potential benefits of investing, what to consider when creating a risk profile, and how you could improve tax efficiency.

Now, read on to discover why reviewing your investment portfolio is a crucial part of managing your assets over the long term.

Reviewing your investments too frequently could encourage short-term thinking

Reviewing your investments provides an opportunity to ensure your portfolio still suits your needs and understand whether you’re on track to meet your goals. So, how frequently should you be reviewing your portfolio?

With daily headlines about company stocks that have risen or fallen, it can seem like you should be checking your portfolio every day or week. Yet, this could encourage a short-term mindset when managing your investments.

Looking at your investments too frequently can make it tempting to try and time the market. While selling high and buying low is something every investor wants, many factors affect the markets and it’s impossible to consistently time it right. It could mean you miss out on long-term growth opportunities.

Instead, reviewing your portfolio once or twice a year is often enough for many long-term investors. This frequency may help you strike a balance between understanding how your portfolio is performing and focusing on the long term.

4 key questions to answer during the review process

1. Have your long-term investing goals changed?

The reasons you’re investing may affect which options are right for you. As well as looking at figures, taking some time to review your investment goals may be important.

If your goals have changed, it could affect the investment time frame and how much risk is appropriate. As a result, you might adjust your portfolio to ensure it continues to reflect the outcomes you want.

2. Are your financial circumstances the same?

As well as your goals, you may want to consider if your financial circumstances have changed since your last review.

Again, your financial security and other assets you hold often influence your risk profile when investing. So, significant changes to your situation could mean adjustments to your portfolio make sense.

For example, if you’re approaching retirement, you may decide to reduce the amount of risk you’re taking to preserve your wealth. Or, if you’ve received a wealth boost, you might want to increase the size of your portfolio and allocate a proportion of it to higher-risk investments.

3. How has your portfolio performed?

While it’s often a good idea not to review your portfolio’s performance too frequently, the returns are a crucial part of the review process.

If your portfolio hasn’t performed as well as you’d hoped, be cautious of making knee-jerk decisions in response. The key thing is to focus on long-term trends rather than short-term movements.

Volatility is part of investing, and it’s normal to see the value of your portfolio rise and fall. Yet, when you look at the performance over the years, the peaks and troughs often smooth out.

Even after market shocks, such as when the markets fell sharply during the Covid-19 pandemic, historically, they have recovered and gone on to deliver returns when you look at the bigger picture.

Rather than reviewing just the last 6 to 12 months of data, consider how your portfolio has performed since you set it up. You may also want to consider long-term projections too, although keep in mind these cannot be guaranteed.

As well as looking at your portfolio’s performance, reviewing the wider market may be useful. If your portfolio has suffered a dip, has the rest of the market fared similarly?

4. What investment fees have you paid?

The fees you pay when investing will reduce your overall returns. As a result, it’s also worth considering what fees you’re paying, how they relate to your portfolio, and how they compare to alternative options.

We can help create and manage your investment portfolio

Whether you’re just starting to invest or want support managing your portfolio on an ongoing basis, we could offer professional advice.

An investment strategy that’s tailored to you could reflect your aspirations, financial circumstances, and tax-efficient opportunities. We can also incorporate your investments into a wider financial plan that’s focused on your goals.

Please contact us if you have any questions about investing or would like to arrange a meeting.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment 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.

Data from economies around the world indicate business output and confidence could be slowing. Read on to find out what influenced the investment market in July 2023.

Despite some data suggesting there could be a downturn in some areas, the International Monetary Fund (IMF) has lifted its global growth forecast for 2023. The organisation now expects the global economy to grow by 3%, up from its previous prediction of 2.8%.

Globally, both households and businesses could face pressure as energy prices may rise in the colder months. The International Energy Agency warned that, if China’s economy rebounds this year, energy prices may spike in winter.

UK

The pace of inflation in the UK is slowing. Yet, it remains stubbornly high and above many other economies at 7.9% in the 12 months to June 2023. The latest inflation figures prompted the Bank of England (BoE) to hike its base interest rate again – as of July 2023, it stands at 5%.

The IMF predicts the BoE will need to keep interest rates high for longer than expected due to economic challenges.

Further rises could cause market volatility – the FTSE 100 hit its lowest closing level of 2023 ahead of the July BoE announcement at the start of the month.

The interest rate increases have led to mortgage rates soaring. In July, the average five-year fixed-rate mortgage deal exceeded 6% for the first time since 2008. In fact, by the end of 2026, the BoE predicts that 1 million households will see their monthly mortgage repayments increase by £500.

While many borrowers have been affected by interest rates increasing almost immediately, saving rates have been lagging. The Financial Conduct Authority set out expectations for “fair and competitive savings” during the month, and savers may have started to see the earnings on their savings rise as a result.

The latest release from the Office for National Statistics shows that between February and April 2023, the average wage increased by 7.2%. While growth is good news, the figure is below inflation and so wages are falling in real terms.

As well as soaring mortgage costs, food inflation has significantly affected household budgets. So, it may be of little surprise that a survey for i newspaper found 67% of consumers would back the idea of a price cap on essential goods.

Data suggests many businesses are struggling too.

According to a Purchasing Managers’ Index (PMI) UK factories shrank at their fastest pace in six months in June. Output, new orders, and employment levels all fell and could signal the challenges will continue into the medium term.

As businesses struggle with rising costs, insolvencies are expected to rise. Figures released by the Insolvency Service show business bankruptcies were 27% higher in June when compared to the same period in 2022.

Begbies Traynor, a business recovery and financial consultancy, believes insolvencies will rise over the next 18 months due to interest rate hikes. The firm added that “zombie” businesses have been able to continue operating due to cheap borrowing costs but will now struggle to service debts.

While there have been ups and downs in the market throughout July, the pound hit a 15-month high after all major UK banks passed BoE stress tests.

Europe

Inflation in the Eurozone fell to 5.5% in the 12 months to June 2023. While still above the long-term average, it’s lower than the 8.6% recorded in June 2022.

In response, the European Central Bank increased interest rates to its highest level in more than 20 years. The deposit rate is 3.75% as of July 2023.

PMI data indicates businesses in the Eurozone are facing similar challenges to the UK. Overall business activity fell and moved into negative territory. Factory output was also weak in June, particularly in Austria, Germany and Italy, and employment fell for the first time since January 2021.

US

Steps taken by the Federal Reserve have successfully slowed inflation in the US. In the 12 months to June, it was 3% – a two-year low.

According to PMI data, the US factory sector took a “sharp turn for the worse” in June. The results mirror the situation in Europe, with new orders falling. It’s increased concerns that the country could slip into a recession in the second half of the year.

While there may be worries about the US economy, official data indicates businesses are still confident about their future. American companies added half a million jobs to the economy in June and US wages increased by 4.4%.

In company news, Twitter’s rebrand to X is estimated to have wiped billions off the company’s value.

Since Tesla owner Elon Musk took over the social media platform in October 2022, he’s made a raft of changes. In July, Musk revealed a new name and logo for the platform, which have drawn criticism. According to Fortune, changing the name has wiped out between $4 billion and $20 billion in brand value.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment 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.

It can be difficult not to let your emotions influence the decisions you make. When investing, emotional decision-making could be harming your portfolio’s performance and your ability to reach your goals.

While you try to make investment decisions based on logic and facts, it can be easy for emotions, from fear to excitement, to play a role at times. And a survey of financial advisers reveals it could be costing you more than you think.

According to a report in FTAdviser, financial advisers believe emotional decision-making costs investors at least 2% each year in foregone returns. They believe two of the biggest mistakes investors make are:

Being too influenced by the news (47%)
Taking too little risk (44%).

If you’ve been guilty of these mistakes in the past, you’re certainly not alone. The good news is that there are things you can do to reduce the effect emotions have on your investments. Read on to find out how you could tackle these two mistakes.

1. Tuning out the news to focus on your long-term plan

Market volatility is part of investing. Unfortunately, sensational headlines about markets “soaring” or “plunging” sell. However, they often don’t show the bigger picture – that even after volatility, markets have, historically, smoothed out over the long term and delivered returns.

On top of providing a snapshot, rather than an in-depth look at markets, remember that the news isn’t tailored to you. An investment opportunity that is perfect for one person, may not be right for another.

If you read about markets falling sharply or the latest “must invest” tip in the newspaper, it’s natural to think about what it means for your investment portfolio. Perhaps you’re scared that volatility could mean the value of your assets will fall and you won’t be able to retire when you intend? Or maybe you feel a thrill at the thought of investing in the next big technology firm?

Tuning out the noise can be difficult, but it may reduce the chance of emotions affecting your decisions.

Working with a financial planner may help you reduce the effect the news has on your mindset. It means you have someone to turn to if you have concerns or would like to pursue an opportunity. Speaking to a professional about your options could prevent knee-jerk decisions you might regret later.

Creating an investment strategy that’s tailored to your goals and circumstances with a financial planner may also give you the confidence to dismiss the news.

At times, your portfolio may dip but understanding why investments have been selected and how it fits into your overall plan could put your mind at ease.

2. Balancing how much investment risk you should take

It’s common to hear that investors are worried about taking too much risk. After all, too much risk could mean you’re more likely to lose your money, and it could affect your progress towards your life goals. Yet, nervous investors can take too little risk.

While you may feel comfortable taking less risk as your money is “safer”, you could miss out on potential growth. Taking too little risk for your circumstances may mean falling short of your goals, even though you had an opportunity to achieve them.

Setting out a risk profile is an essential part of understanding which investments are right for you.

It can be difficult to understand how much risk is appropriate. A financial planner could help you here. By considering a range of areas, from what assets you hold to your investment goals, we can create a risk profile that suits you.

By understanding risk and what’s appropriate for your circumstances, you could reduce the effect emotions like fear have on your decisions. You may feel confident enough to take greater investment risk if it’s right for you and find yourself in a better position to reach your goals.

Want to review your investments? Contact us

Tailored investment advice may help you reduce the effect emotions have on your decisions so you can focus on what’s right for your circumstances.

Whether you want to start investing or would like a portfolio review, please contact us. We can work with you to create an investment strategy that you have confidence in and provide ongoing support so you have someone to turn to if you have any questions or concerns.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment 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.

Since the government introduced pension auto-enrolment in 2012, millions more workers have started saving for their retirement. Now, the government has confirmed plans to extend auto-enrolment to encourage a savings boost. The changes could have implications for both employees and business owners.

In a publication, the government has revealed key announcements following a review of auto-enrolment that started in 2017. The reforms are forecast to increase pension contributions by £2 billion a year.

3 key auto-enrolment changes to be aware of

1. The minimum age of auto-enrolment will fall from 22 to 18

Young workers could start saving into a pension much sooner. The government intends to lower the minimum auto-enrolment age from 22 to 18.

For employees, this could be a positive step. Saving for retirement from the outset of their careers could help establish positive money habits among workers. In addition, compound growth means early contributions have the potential to grow significantly.

For business owners, it could mean their outgoings will increase as they’ll also need to make pension contributions on behalf of eligible workers.

2. The lower earnings limit will be removed

At the moment, workers must earn at least £6,240 to be eligible for auto-enrolment. The government plans to remove this lower earnings limit, so workers will receive contributions from the first pound they earn.

This will boost pension contributions among those that are already paying into a pension. It will also mean low-income workers that haven’t previously benefited from a pension, such as those who work part-time while caring for children or older relatives, will automatically start paying into a pension and receive employer contributions too.

While more people saving for retirement is a positive step, there are concerns it could lead to an increase in the number of employees opting out.

Speaking to FTAdviser, Tom Selby, head of retirement policy at AJ Bell, said: “Ratcheting up contributions during a cost of living crisis could be the straw that breaks the camel’s back for some savers, who might decide they simply cannot afford to put money to one side for retirement.”

From an employer’s perspective, this change could, again, increase the amount they are contributing to employees’ pensions.

3. There could be a maximum limit on pension pots

As most employees are entitled to a pension through their employer, frequent job hopping could lead to individuals holding numerous small pensions. This may make it difficult to manage pensions effectively and understand if you’re on track to reach your retirement goals.

In its report, the government sets out initial plans to help savers manage multiple pots. Among the proposals is a maximum limit on the number of pensions a person can have. The report also suggests a central clearing house to make it simpler to consolidate pensions.

3 omissions from the auto-enrolment expansion

1. There is no timescale for the proposed changes

While reports suggest the government plans to implement the changes by the mid-2020s, the official document doesn’t set out a timescale. So, while young and low-income workers are set to benefit from auto-enrolment, it could be several years before they start contributing to pensions.

2. The minimum pension contribution will not be increased

Research suggests that minimum contribution levels are not enough to afford a comfortable lifestyle in retirement. A recent Scottish Widows report indicates a third of Brits could struggle in retirement because they’re not putting enough away during their working life.

Under the current rules, the minimum contribution is 8% of qualifying earnings, made up of 5% from employees and 3% from employers.

There have been calls for the government to increase the minimum pension contribution level to help close the gap.

3. Auto-enrolment won’t be extended to cover self-employed workers

Some organisations have called on the government to extend auto-enrolment to encourage self-employed workers to save for their retirement. However, support for the self-employed has been overlooked in the latest report.

Research from the Institute for Fiscal Studies suggests the number of self-employed workers paying into a pension has fallen over the last decade.

It also found self-employed workers that pay into a pension rarely change the amount they contribute. The analysis suggested a form of auto-escalation, such as a direct debit that increases in line with inflation, could help self-employed workers save more for their retirement.

Take control of your pension and retirement

While the change to auto-enrolment could mean more people are on track for a financially secure retirement, there are still challenges. If you want to reach your retirement goals, engaging with your pension sooner, rather than later, could allow you to identify the steps you need to take.

Please contact us to discuss your retirement aspirations and how we could help you create a tailored financial plan.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

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Visiting the supermarket to pick up a few items or do your weekly shopping is so common it can be difficult to imagine life without this convenience. Yet, it wasn’t too long ago that the first supermarket was opening its doors in the UK. And looking back offers an interesting insight into how money and shopping habits have changed.

The London Co-operative Society opened its doors for the first time in 1948.

It offered a very different service to other shops of the time. Shoppers were used to chatting with the shopkeeper while an assistant picked the items for them. In fact, shoppers wouldn’t have handled the goods at all until they paid.

So, walking into a “self-service” supermarket – where customers picked up their items themselves and took them to a till – was a very different experience. On top of that, there were all kinds of goods under one roof and competitive prices. It’s easy to see why supermarkets became popular.

Today, there are thousands of supermarkets across the UK, from the “big six” to independent stores. And “self-service” has gone one step further with many shops installing checkouts customers can use themselves.

In the 75 years since the first supermarket opened, how we use money, the value of it, and shopping habits have changed enormously. Looking at inflation and how it’s calculated offers a glimpse into this transition.

£1,000 in 1946 has the same value as almost £34,500 today

The UK first started tracking retail prices a year after the first supermarket opened. It shows how prices have changed over seven decades.

Data from the Office for National Statistics (ONS) demonstrates how inflation influenced prices between 1947 and 2023. While there have been times retail prices have dipped, overall, it’s been an upwards trend.

Source: Office for National Statistics

In fact, according to the Bank of England’s inflation calculator, £1,000 in 1946 would be equivalent to almost £34,500 today.

The ONS measures inflation by tracking a “basket of goods”. This basket is filled with common goods and services to understand how the cost of frequent purchases changes. Currently, there are around 700 representative consumer goods and services in the basket. As well as groceries from the supermarket, it also includes items like clothing and electronics.

The items are regularly reviewed. So, not only does it track prices, but trends and spending habits.

When the first supermarket opened, rationing was still in place. In the post-war era, the ONS included items like condensed milk, which was often used to make rations stretch further. Condensed milk remained in the basket until 1987 when fresh, pasteurised milk became more widely available.

Fast forward to 2023, and new additions to the basket include frozen berries and free-from products.

3 interesting comparisons that show the power of inflation

1. The average salary was 126 shillings, 9 pence

Before the government introduced decimalisation in 1971, there were 20 shillings to a pound and 12 pence to a shilling. According to the House of Commons library, the average worker earned 126 shillings, 9 pence a week in November 1946.

Inflation means the average earnings in April 2023 are significantly more. Data from ONS shows the average weekly salary is £603, excluding bonuses.

2. A weekly grocery shop was just 45p

According to the Northumberland Gazette, the average person needed just 45p to pick up a week’s worth of groceries in the 1940s. In today’s money that would be less than £20.

However, food inflation and changing habits mean the average adult spends around £44 a week on food in 2023.

3. A property “boom” led to prices quadrupling in some areas

Soaring property prices are often discussed in newspapers today, and it’s not a new phenomenon.

A 1947 article in the Guardian states there was a “boom in house property prices”. In 1939, houses went for around £500. Just eight years later, aspiring homeowners could expect to pay up to £1,500, or even up to £4,000 in select residential districts.

Over the next seven decades, house prices outstripped inflation. The Halifax House Price Index suggests the price of an average house in June 2023 was more than £285,000.

Have you considered how inflation could affect your finances?

Since the first supermarket opened its doors, inflation has affected the value of money. This is something you may need to consider when managing your finances.

For example, if you’re planning for retirement in 20 years, how will the income you need to maintain your lifestyle change? How can you grow your assets to keep up with the pace of inflation?

A financial plan that incorporates inflation could help you understand how it may affect your wealth and the steps you might take to protect it. Please contact us to arrange a meeting to discuss your financial plan.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.