Category: News

Economies around the world continue to struggle with high inflation and weakening demand affecting GDP. Read on to discover some of the factors that may have affected your investment portfolio in September 2023. 

When reviewing short-term market movements, remember to focus on your long-term investment goals.

UK

Official data shows the UK economy contracted by 0.5% in July. The Office for National Statistics (ONS) attributed the poor performance to strike action and poor weather. 

However, there was some good GDP data. The ONS said the UK economy reached pre-pandemic levels earlier than thought in the final quarter of 2021. The revision is good news as economists previously believed the UK was lagging behind other countries. 

Inflation is falling but remains above the Bank of England’s (BoE) 2% target. In the 12 months to August 2023, it was 6.7%.

Despite high inflation, the BoE’s Monetary Policy Committee voted to hold its base interest rate of 5.25%. The Bank’s governor, Andrew Bailey, said he believes inflation will fall “quite markedly” by the end of the year. However, he added, it would be premature to cut interest rates now. 

Quarterly data from the central bank shows the public is dissatisfied with the strategy for controlling inflation. Public satisfaction was at its lowest since records began in 1999. 

While interest rates didn’t rise in September, households are struggling.

The Resolution Foundation warned average working household incomes are on course to be 4% lower in 2024/25 in real terms when compared to 2019/20 thanks to high interest rates, steep tax rises, and a stagnant economy. 

The number of mortgages in arrears also demonstrates the pressure some families are facing. According to the BoE, the number of mortgages in arrears hit the highest level in almost seven years. 

Businesses are feeling the strain from rising interest rates too. Think tank Cebr predicts that 7,000 businesses will fail every quarter in 2024.

Statistics from the Insolvency Service indicate some businesses are already struggling to balance costs.

Company insolvencies jumped by almost a fifth in England and Wales in August when compared to a year earlier. However, it’s important to note that insolvencies were at a historic low during the pandemic as businesses benefited from government support. 

Despite some negative statistics, the FTSE 100 recorded its best day of 2023 so far – the index gained 1.95% on 14 September. 

Europe

GDP data for the eurozone was revised downwards. Statistics show GDP expanded by only by 0.3% in the second quarter of 2023, which has led to concerns that the bloc could fall into a recession in the second half of the year. 

Inflation in the eurozone fell to 5.2% in the 12 months to August. However, there’s a big difference between economies across the bloc. Hungary had the highest rate of inflation at 14.2%, while Spain and Belgium saw prices increase by 2.4% when compared to a year earlier. 

In response, the European Central Bank raised its three key interest rates by 25 basis points. 

PMI data indicated that business output is still contracting as new orders fell and firms were forced to pay more for raw materials and other costs. Germany and Austria were among the worst-performing nations in the eurozone. 

As the largest economy in the eurozone, Germany is often used as a barometer for the economic area.

Unfortunately, signs suggest Germany’s economy could be faltering. The European Commission said it expects the country’s GDP to fall by 0.4% this year as energy price shocks due to the war in Ukraine hit the country hard.

Sentix’s index for the eurozone also suggests Germany’s performance is leading to pessimism among investors. 

While many countries are struggling to manage soaring inflation, Turkey’s is among the highest. In the 12 months to September 2023, inflation was 61.5% and its base interest rate was 25% in September.

US

Inflation in the US is lower than in some other developed economies. However, at 3.7% in the 12 months to August 2023, the figure is higher than it was a month earlier. 

Similar to countries in Europe, PMI data suggests business productivity flatlined in September. S&P Global said the service sector lost momentum in August, while manufacturers reported a drop in sales. 

Towards the end of the month, there was a risk that the US government could partially shut down. A group of Republican members of the House of Representatives refused to compromise with their own party’s leadership. 

Credit rating agency Moody’s warned a shutdown could threaten the US’s triple-A rating and cause market volatility. 

It would follow Fitch downgrading the US government’s credit rating in August due to a “deterioration of standards”. 

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.

High inflation over the last year has collectively cost savers billions of pounds in real terms, according to an Independent report. Have you considered the effect the rising cost of living could have on your wealth?

While inflation may not reduce how much you have in your savings account, in real terms, the value may fall. 

As the cost of goods and services rises, what you could purchase with your savings falls. Usually, this happens at a gradual pace. However, as inflation has been higher than the Bank of England’s (BoE) 2% target for two years, the effect has been more noticeable. 

If the interest rate your savings earn doesn’t keep pace with inflation, the value of your money decreases.

Inflation could reduce the value of your savings in real terms, but cash may still be useful

The BoE calculations suggest £10,000 in 2021 would have to have grown to £11,774 in August 2023 just to have the same spending power. So, your savings would need to have earned £1,774 in interest during that time.

Even though interest rates have started to rise as the BoE has increased its base rate to tackle high inflation, it’s unlikely your savings have grown at the same pace. 

The analysis published in the Independent suggests up to £113 billion has been wiped off the value of savings in the last year in real terms. 

While the value of your money may fall in real terms in a savings or current account, there are still times when they might be the right option for you, including these three:

• Handling your day-to-day finances: If you’re using money held in your account to pay for utility bills or other regular expenses, inflation will have little effect. 
• Saving for short-term goals: Investing could make sense when you’re saving for a long-term goal. However, if you’ll be saving over a shorter period, volatility might mean investing isn’t the right option. So, when you’re saving for a holiday next year or home improvements for example, a cash account could be right for you. 
• Creating an emergency fund: While you may not want to access your emergency fund now, you want to be able to easily make a withdrawal if the unexpected happens. As a result, a cash savings account could make sense. 

So, it’s important to set out what you want to use your money for. It can help you select an appropriate place for your wealth that aligns with your goals. 

Inflation is starting to fall, which could ease the burden for some savers. However, the value of the money held in a savings account could still fall in real terms. Meanwhile, investing might provide a way to grow your wealth. 

Investment returns may outstrip inflation 

It’s impossible to guarantee investment returns. Yet, investing does present an opportunity to potentially grow your wealth in real terms. 

Historically, markets have delivered returns over long time frames. If you’re saving for a goal that’s more than five years away, from buying a property to retiring, investing might be an option you want to consider. 

Market volatility is a normal part of investing. The value of your investments will rise and fall at different points. So, it’s often not appropriate if you’re investing with a short-term time frame, as a dip in the market could mean you lose money.

If you want to invest, considering risk is important.

All investments carry some risk. However, investment risk varies significantly and you can choose options that are appropriate for you.

There are many factors you may want to weigh up when deciding how much investment risk to take, including the reason you’re investing and the other assets you hold. We can help you create a risk profile and an investment portfolio that reflects your wider financial plan. 

Get in touch to talk about how to make the most of your money

Getting the most out of your money is about understanding your goals and how to use your assets to reach them. If you’d like to talk about your tailored financial plan, including whether investing is right for you, 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.

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.

People often think of their financial plan as a way to grow their wealth and provide financial security. You might consider areas like your pension or financial protection to be core parts of your financial plan. Yet, while they’re important, your happiness is essential too. 

Financial planning is about helping you reach your financial goals, but it goes further than that.

It’s about making your money work in a way that aligns with your lifestyle aspirations and understanding how it could improve your wellbeing. 

After all, you might want the money in your pension to grow, but your money will often be linked to other aspirations you may have. For example, you might want investments to perform well so you can travel more in retirement, or to allow you to retire early so you can spend more time with grandchildren while they’re young. 

As a result, recognising what makes you happy now or could improve your life in the future should be at the centre of your financial plan.

Here are three steps you can take to make your happiness the focus of your financial plan.

1. Set out what makes you happy

Think about your day-to-day life. What gives you purpose and makes you happy? Setting out what is important to you can help you make conscious money decisions that reflect your wellbeing.

Without a clear focus, it can be easy to make decisions that aren’t necessarily right for you. For example, you might spend money on impulsive purchases that give you a brief serotonin boost, but you then have to compromise on something that would bring you longer-lasting happiness. 

It’s also worth thinking about the one-off experiences you’ve had that brought you joy. Which memories do you look back on fondly with a smile? You might want to make other similar experiences part of your long-term plan. 

2. Create clear objectives

Often, your happiness goals will be linked to finances in some way. So, setting out financial objectives with your wellbeing at the centre is useful.

These could be both short- and long-term objectives. Perhaps you have a hobby that brightens up your day, so you want to make the associated costs part of your regular budget. Or maybe you’re really looking forward to the freedom that retirement will bring, so you have a pension goal you want to achieve that would allow you to give up work sooner. 

Consider what money or assets you’d need to make your life happier. You can then turn your attention to how to reach these objectives with your circumstances in mind. 

3. Form a financial plan around your objectives

With your objectives set out, you can start to think about how to achieve them through your financial plan.

For example, if you want to retire early so you can indulge your passions, what is a tax-efficient way of saving the money you need? Or what steps can you take to create long-term financial security once you give up work?

By starting with what makes you happy you can make conscious financial decisions that support your wellbeing now and over the long term. 

A financial planner can help identify how to use your money to reach the goals you’ve set out. Having a plan that’s tailored to you may also improve how confident you feel about your finances, so you may focus on enjoying other parts of your life.

Contact us to create a financial plan that focuses on your happiness 

As a financial planner, we may help you get more out of your money with your lifestyle goals in mind. We’ll work with you to not only understand how you could grow your wealth, if that’s your goal and appropriate for you, but also understand how to use your assets to enhance your life.

Please contact us to arrange a meeting to discuss your life goals and how we could offer support in creating a financial plan for you. 

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 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 latest release from HMRC shows it collected a record £16.7 billion in 2021/22 through Capital Gains Tax (CGT) – a 15% increase on the previous tax year. Cuts to a tax exemption could mean CGT receipts might climb even further.

CGT is a type of tax you pay when you sell or dispose of certain assets. It may include property that isn’t your main home, some investments that are held outside of an ISA, or personal possessions that are worth more than £6,000. 

Previously, the annual exempt amount – the threshold up to which you can generate profits before CGT is due – was £12,300. However, the exemption fell to £6,000 in 2023/24 and will be just £3,000 in 2024/25.  

So, while the value of your assets may rise, the amount of profit you can make before CGT is due is falling. It could mean more individuals face a CGT bill or that your liability may be higher than you expect. 

Yet, some steps might help you manage your CGT bill. 

5 useful options that could reduce your Capital Gains Tax bill 

1. Use your annual exempt amount

Keeping your annual exempt amount in mind when planning how to dispose of assets could be useful. 

For example, if you plan to sell two assets and the profits would exceed the CGT threshold, delaying the sale of one until a new tax year when your annual exempt amount resets could reduce your bill.

If you’re married or in a civil partnership, you can also transfer assets to your partner without being liable for CGT. As a result, transferring assets to your partner could allow you to use both of your annual exempt amounts. 

2. Consider tax-efficient wrappers and allowances 

There are ways to hold assets tax-efficiently, which could mean you avoid CGT or potentially reduce your bill.

If you’re investing, an ISA could be one such option. Investments held in an ISA aren’t liable for CGT when you sell them or Income Tax when you withdraw your money.  

A pension may be another option if you’re investing for the long term. A pension is a tax-efficient way to invest. However, you may need to pay Income Tax when you withdraw money from your pension if your total income exceeds the Personal Allowance. 

There may be other allowances and tax-efficient wrappers that are suitable for you too. 

3. Manage your taxable income

The CGT rate depends on your other taxable income. If you’re not sure what rate of CGT you could pay please contact us. In 2023/24:

• The standard CGT rate is 10% (18% on property that isn’t your main residence)
• The higher CGT rate is 20% (28% on property that isn’t your main residence).

So, if you’re able to reduce your income from other sources, you could potentially halve the rate of CGT you pay. 

Whether this is an option will depend on your income and circumstances. For example, if you’re a retiree drawing a flexible income from your pension, you may choose to pause or lower your withdrawals to avoid exceeding thresholds. Or, if you’re an employee, you may increase your pension contributions to reduce your taxable income. 

If you want to understand the possible effects of reducing your taxable income, please get in touch. 

4. Offset losses against gains

No one wants to make a loss when selling assets, but it could reduce your tax liability. In some cases, it is possible to offset losses against gains to reduce CGT.

For instance, if you sold investments at a loss, you could use this to your benefit from a tax perspective as CGT is charged on your net capital gains during a tax year. 

You may also be able to carry forward losses to future tax years. Keeping good records may mean you’re able to use losses against gains in the future. 

5. Make Capital Gains Tax part of your long-term strategy

You may want to consider CGT when setting out and reviewing your long-term plan. Understanding when you plan to dispose of certain assets could help you identify ways to reduce the amount of tax you pay.

Contact us if you have questions about Capital Gains Tax

If you’d like to better understand how much CGT you could be liable for or want to make it part of your long-term strategy, 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.

HM Revenue and Customs’ practice and the law relating to taxation are complex and subject to individual circumstances and changes, which cannot be foreseen.

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.

205 years after it was published, the novel Frankenstein has inspired countless horror books, films, and more. The approach the scientist takes in the story to create a sapient creature might have more in common with effective financial planning than you think.

English author Mary Shelley published Frankenstein in 1818 after being inspired by historical tales of alchemists and the occult while travelling through Europe. 

The novel tells the story of young scientist Victor Frankenstein and his ambitions to create life. He assembles old body parts, strange chemicals and electricity from a lightning storm to bring his Creature to life. 

Frankenstein is considered, by some, to be the first true science-fiction story. It also has a couple of important lessons when creating a financial plan. 

Lesson 1: A bespoke approach could help you reach your goals 

Frankenstein’s experiment might not end well, but he does achieve his aim – creating an articulate life. 

He can’t simply use an existing body to create his Creature. So, Frankenstein must gather different parts that suit his needs. Taking a similar approach when you’re building a long-term financial plan could work too. 

There’s no one-size-fits-all financial plan. Your goals and finances will affect what’s right for you. The financial plans of two seemingly similar people may be very different.  

So, like Frankenstein, understanding which “parts” you need to create a financial plan could help you get more out of your assets and may mean you’re more likely to reach your goal.

Often, a financial plan involves bringing together lots of different areas that need to complement each other. If you aim to create long-term financial security, you might consider areas like:

• Adding to a savings account to create a safety net
• Contributing to a pension to create a retirement income
• Investing outside of a pension to provide flexibility
• Paying off your mortgage so your expenses fall later in life
• Taking out financial protection that could prevent shocks from derailing your plans.

Creating a plan that’s tailored to you may seem complex, as you’ll need to balance multiple factors. Yet, a “Frankenstein” approach could help you take steps that are right for you and discard those that aren’t appropriate. 

As a financial planner, we can work with you to create a bespoke financial plan that’s tailored to your needs. We’ll help you understand how different aspects of your plan can work together to support your goals, like the electricity that brings Frankenstein’s creation to life. 

Lesson 2: Keep track of your “creation”

When Frankenstein is selecting the features for the Creature, he purposely chooses beautiful ones. Yet, when the Creature is animated the result is “hideous”, and so, repulsed by his own work, the scientist flees. 

When Frankenstein returns, the Creature is gone, and it leads to a series of events that cause grief and guilt. 

Fortunately, you don’t need to worry about an eight-foot monster if you leave your financial plan unattended. But things could go awry if you don’t manage it.

Regular financial reviews could help ensure your plan continues to reflect your goals and that you remain on track.

Over time your wishes or circumstances may change. In some cases, making alterations to your financial plan could make sense. Factors outside of your control, such as a period of high inflation or government changes to tax allowances, might also affect how suitable your financial plan is. 

Financial reviews may highlight potential risks and opportunities. So, they may be an important part of getting the most out of your money over the long term. 

We can help you create a tailored financial plan

As financial planners, we can help you create a bespoke financial plan that suits your circumstances and goals. We’ll bring together different aspects of financial planning to create a holistic plan that’s tailored to you. 

If you’d like to talk to one of our team, please get in touch. 

Please note:

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

Creating a financial plan is just the first step to reaching your goals. While you may have carefully set out what you need to do, financial reviews are still essential.  

Often, it’s advised that you review your financial plan once a year or following major life events. Over the next few months, you can read about why reviews are a part of your financial plan and the times when you might want to make changes. 

Here are three reasons why you shouldn’t skip reviews.  

1. You can use your review to check you’re on track to meet your goals

Even the best-laid plans can go awry. 

A whole host of outside factors could affect the outcome of your financial plan, from interest rates to financial shocks. Financial reviews can provide a snapshot of your finances and help you understand if everything is still on track.

A review is a chance to look at things like how your investments have performed and what the projected long-term returns mean for your future. 

Financial reviews mean you could identify potential obstacles in your plan sooner than you might if you didn’t carry one out. It may give you a chance to respond to possible risks and limit the effect they’ll have. 

Going through your plan regularly may also help you feel more in control and boost your wellbeing overall. Knowing that a professional is handling your finances with your aspirations in mind could help you focus on other areas of your life. 

2. You can update your financial planner about changes in your life

Your circumstances and goals should be a central part of your financial plan. What you want to achieve with your money may affect which decisions are right for you.

While you’ll often set out long-term goals when you first make a financial plan, things can change. 

As part of your financial review, we’ll not only discuss how your assets have performed but whether your plan is still suitable. So, talking about your aspirations is essential.

Perhaps since your last review you’ve decided you want to: 

• Receive a higher income in retirement because your lifestyle or financial commitments have changed 
• Take time away from work to raise children or care for a relative 
• Retire earlier 
• Gift a lump sum to your child to help them reach their goals
• Start your own business. 

New goals might also affect your long-term finances.

For instance, if you want to take time away from work, you may pause pension contributions, which could affect your retirement income. By making these decisions part of your financial plan, you can understand both the short- and long-term effects and how you could keep other goals on track. 

3. Reviews provide a great opportunity to ask questions or address concerns 

Your financial reviews are the perfect time to ask any questions or bring concerns you might have to your financial planner. 

Perhaps a period of investment volatility means you’re worried about how market ups and downs could affect your income in the future? Or maybe a news story about retirees running out of money has made you worried? 

Feeling anxious about your finances could cause unnecessary stress or even lead to you making decisions that aren’t right for you. So, using your review to talk to your financial planner about what’s on your mind could help you stay on track and feel comfortable when handling your finances. 

Of course, if you have any questions or concerns, you don’t need to wait until your review to bring them up. You can contact us to speak to one of our team when you need to. 

Do you have questions about your financial plan or review?

Whether you’d like our support in creating a financial plan that suits you, or you have questions about your review, you can contact us.

Our goal is to help you have confidence in your finances and make the most of your money in a way that aligns with your aspirations. 

Next month, read our blog to discover two key reasons why you might want to make changes to your financial plan following a review. 

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.

Globally, signs suggest the pace of inflation is slowing. However, businesses in some sectors are struggling and weighing on economies. Read on to discover some of the factors that affected investment markets in August 2023. 

According to a Purchasing Managers’ Index (PMI) from JP Morgan, reports indicated that manufacturing in Asia, Europe and the US is contracting. New orders declined for the 13th consecutive month, which could have medium-term consequences for investment markets. 

When reviewing your investments, remember to take a long-term view. Volatility is part of investing and, usually, sticking to your long-term strategy makes sense, rather than reacting to short-term movements.

If you have any questions about your investments or the current climate, please contact us. 

UK

The UK economy beat forecasts to post growth of 0.2% between April and June 2023 to avoid stagnation. 

Yet, some institutions, including consulting firm RSM UK, warn the UK could still slip into a recession next year. This concern is compounded by PMI data showing contraction in the manufacturing sector. 

While slowing, the rate of inflation remains stubbornly high. It was 6.8% in the 12 months to July 2023.

Bank of England (BoE) governor Andrew Bailey said he expects inflation to fall to 5% in October. However, he added that high interest rates are likely to remain for at least two years. 

The inflation figures led to the BoE increasing its base interest rate again. As of August 2023, it is 5.25% – a 15-year high. 

The decision was met with criticism. Think tank IPPR warned the central bank was “tightening the screws too much, given the UK economy is weakening, the labour market is slow, and productivity is falling”. 

The rising interest rates are placing particular pressure on mortgage holders. 

At the start of the month, the interest rate of an average two-year fixed mortgage deal exceeded 6.5%, although rates started to fall by the end of August. 

Unsurprisingly, rising interest rates have led to house prices falling. According to Nationwide, property prices fell by 3.8% in July 2023 when compared to a year earlier. 

UK Finance also reported 7% more homeowners are now behind on their mortgage repayments when compared to the first quarter of 2023. The figures suggest landlords are struggling the most – the number of buy-to-let mortgages in arrears jumped by 28%. 

As a result, house prices could fall further. Estate agent Knight Frank predicts prices will fall by 5% this year. 

Demonstrating the difficulties businesses are facing too, beloved high street store Wilko fell into administration after rescue talks failed. It places more than 12,000 jobs at risk across the UK. 

Europe

The eurozone is facing similar challenges to the UK.

PMI data shows manufacturing firms have cut prices at the quickest pace since 2009. In addition, new orders, employment, and production all fell in July at a faster pace than the previous month. 

As the largest economy in Europe, Germany is often viewed as the stalwart of the eurozone economy. Yet research group Sentix warned the country is “becoming the sick man of Europe and is weighing heavily on the region”. 

Findings from the Ifo Institute support this warning. A report suggests the number of German construction firms in financial difficulty doubled in July when compared to a month earlier. In addition, 19% of companies reported cancelled orders, against a long-run average of 3.1%, which could signal medium-term challenges. 

There was some positive news for the eurozone economy – in June it boasted a large trade surplus.

According to Eurostat, sharply falling imports from Russia and China led to a trade surplus of €23 billion (£19.7 billion) in June. Just a year earlier the economic region recorded a trade deficit of €27.1 billion (£18 billion).

Early in August, the decision to impose a windfall tax on banks in Italy led to stocks tumbling before the government watered down the announcement.

Facing accusations that banks were reaping billions of euros in extra profits thanks to rising interest rates, the Italian government approved a 40% windfall tax on the profits of banks. 

Analysts estimated the tax could mean banks would collectively have handed over more than €9 billion (£7.7 billion). The news sent bank shares tumbling – Intesa Sanpaolo, which is the largest bank in Italy, saw shares fall by 8.7%. 

As stock values fell, the government backtracked and said lenders would pay no more than 0.1% of their assets in tax, which analysts estimate will be just a fifth of the sum initially forecast. 

US

In an unexpected decision, credit rating agency Fitch downgraded US debt due to “erosion of governance”.

It led to all major US stock markets opening in the red after the announcement. The Nasdaq recorded the largest fall and was down by 1.86%.

The downgrade also had a knock-on effect on European shares. The FTSE 100 fell by 1.7%, and markets in Germany, Italy and France were similarly affected. 

While lower than other economies, inflation accelerated in the 12 months to July to 3.2%. To stabilise prices, the US central bank hiked interest rates to 5.5% – the highest level in 22 years. 

Data could indicate that business optimism is waning. Figures from the Bureau of Labor Statistics show firms added 187,000 jobs to the economy, which fell short of expectations. In 2022, the average monthly gain was 400,000. 

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.

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.