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Lifetime cashflow forecasting is a core part of financial planning that could help you understand how your future may look. It could provide essential information that means you’re able to feel confident about what’s to come and the decisions you make. Read on to find out how it works and why it might be valuable for you.

Lifetime cashflow forecasting uses your financial information and plans to make an informed guess about how your wealth will change over time. It can then use this information to create graphs and more so you’re able to visualise how the value of your estate and individual assets might change based on the decisions you make.

To start, you’ll need to input details about your financial circumstances, like how much you have in a savings account or the value of your pension. You can then add how the actions you take now will affect your wealth. For example, you might include adding £300 to your investments each month or contributing 8% of your income to your pension.

As other factors outside of your control will also affect your wealth during your lifetime, cashflow forecasting will make certain assumptions, such as:

The rate of inflation
Growth of your investments
Assets rising in value, like your property.

It’s important to ensure accurate information when using cashflow forecasting, and it’s often wise to err on the side of caution and be realistic when making assumptions – you might want to achieve annual investment returns of 8%, but is that likely when you consider your risk profile?

So, while the results of cashflow forecasting cannot be guaranteed, it could provide you with a valuable snapshot of how your wealth might change during your lifetime. But how does that help boost your confidence?

1. It could help you understand when you’ll be financially independent

One of the challenges of managing your finances is that you often need to consider your lifestyle and needs for decades in the future, particularly when you’re thinking about retirement.

It can be difficult to know when you have “enough” saved in your pension to be financially independent. Lifetime cashflow forecasting could show you when you may be able to retire and take a sustainable income that suits your needs. As well as your pension it could incorporate other assets that might fund retirement too, such as savings or property.

If you find the date is further away than you’d like, cashflow forecasting could help you visualise how changing your finances now may allow you to retire sooner. For example, boosting pension contributions by 2% could bridge the gap so you’ll be financially independent earlier.

2. It may give you the confidence to spend more

When you ask people about their long-term financial concerns, one of the biggest is that they’ll run out of money in retirement. Indeed, a survey published in IFA Magazine found that almost half of people are concerned about this.

Yet, the opposite can also happen – you have built up enough wealth to enjoy your later years, but due to worries about running out, you’re more frugal than you have to be. It could mean that you miss out on amazing experiences you’ve been looking forward to even though you have the means to pay for them.

So, while it might seem illogical at first, cashflow forecasting could encourage you to spend more. Remember, financial planning isn’t about maximising your wealth, it’s about understanding how to use your assets to create the life you want, including spending more if you’re in a position to do so.

3. It might ease worries you have about unexpected events

Even the best-laid plans may be derailed by unexpected events that are outside of your control. Cashflow forecasting could let you model the shocks you’re worried about so you understand the effect they could have and what steps you might take to ensure your long-term security.

For instance, you may know you can afford to comfortably retire when you turn 65. But what if ill health means you need to retire five years earlier than expected? Cashflow forecasting could demonstrate how you might maintain your financial security by adjusting your income needs, adding more to your pension now, or using other assets.

If you have “what if?” questions that are preventing you from feeling confident about the future, cashflow forecasting could be a valuable tool that helps to put your mind at ease.

4. It could help you understand how you could support the next generation

For many people, providing support to loved ones and leaving a lasting legacy is important.

Lifetime cashflow forecasting could be useful if you want to pass on assets during your lifetime – it could help you understand the long-term implications and whether it might affect your financial security in the future.

You might also use it to calculate the expected value of your estate when you pass away, which could inform your decisions about how you’d like assets to be distributed or whether you need to consider Inheritance Tax.

Understanding what the value of your estate could be when you pass away might also help your beneficiaries plan more effectively. In some cases, you may want to involve your loved ones in your financial plan to discover how you may lend support.

Get in touch to talk about your goals and financial future

If you have questions about your financial future or would like to update your financial plan, please get in touch to arrange a meeting with our team.

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 cashflow forecasting, tax planning, or estate planning.

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.

You might think of your financial plan as being a way to help you reach your life goals. But it could benefit more than just you.

As a financial plan focuses on your goals, you might choose to include ways to create a legacy for your loved ones. It could mean your wealth provides long-term financial security to your children, grandchildren, and others who are important to you.

So, how could a financial plan help you create a legacy? There are two main options to consider.

You may set out how you’d like your assets to be distributed when you pass away

An inheritance has the potential to be life-changing. In fact, a Canada Life report found that almost 1 in 5 Brits are delaying major life plans until they receive an inheritance.

As a result, the assets you leave behind might help loved ones achieve important milestones, such as buying a property, or mean they feel financially secure enough to invest for their future.

Considering your estate and how it’ll change during your lifetime could mean you’re able to take steps that will make a material difference in the lives of your loved ones. You might choose to simply pass on assets according to the wishes you set out in a will, or weigh up other options, like using a trust to provide for vulnerable or younger family members, or to state how you’d like the assets to be used in the future.

If you’d like to talk about trusts and other ways to pass on wealth, please contact us.

You could gift with confidence during your lifetime

While leaving assets in a will is the traditional way to pass on wealth and create a legacy, you may choose to gift assets during your lifetime as well.

Indeed, according to a report in IFA Magazine, gifting is becoming an increasingly popular way to support loved ones. Data obtained from HMRC revealed a 48% rise in the number of families choosing to distribute some of their wealth before passing away when compared to 10 years ago.

A well-timed financial gift could have a positive effect on your family’s life and mean they’re more secure over the long term.

For instance, you might offer to provide a deposit that will help them get on the property ladder. It may help them buy sooner or cut the cost of a mortgage if they’re able to access a better interest rate as a result of your gift. Or covering one-off large payments so they don’t need to take out a loan could result in them saving thousands of pounds in interest.

Concern about how a gift would affect your financial security might hold you back from lending support when you want to. A financial plan may demonstrate the long-term effect gifting could have, so you can decide if it’s the right choice for you and proceed with confidence.

A financial plan could help you create a tax-efficient legacy

As well as setting out what you want to achieve with your financial legacy, a financial plan could also help you pass on assets in a way that’s tax-efficient for both you and your loved ones.

When you think about tax and your legacy, Inheritance Tax (IHT) might come to mind first. If the entire value of your estate exceeds the nil-rate band, which is £325,000 in 2024/25, your estate could be liable for IHT.

With a standard tax rate of 40%, IHT could reduce how much you pass on to loved ones. According to government figures, IHT receipts for April to September 2024 reached £4.3 billion – £0.4 billion higher than the same period last year.

There are often steps you can take to reduce a potential IHT bill if you’re proactive. If you’d like to learn what steps you may take, please get in touch.

When passing on assets during your lifetime, you might want to consider what’s tax-efficient for your loved one.

If you want to potentially give your family a long-term financial boost, you could deposit money into their Stocks and Shares ISA. In 2024/25, individuals can add up to £20,000 to tax-efficient ISAs. Investments held in an ISA aren’t liable for Capital Gains Tax, so it could help your gift go further than if they invested your gift outside of an ISA.

Speaking to your loved one could help you understand their goals and identify ways you may offer tax-efficient support that suits both you and them.

Get in touch to arrange a meeting to discuss your legacy

If leaving a legacy for your loved ones or lending financial support during your lifetime is important to you, making it part of your wider financial plan could be useful. Please contact us if you’d like to talk about your legacy with one of our team.

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, tax planning, trusts, or will writing.

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

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

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

Chancellor Rachel Reeves delivered the new Labour government’s first Budget on 30 October 2024. Amid the announcements were key changes to Capital Gains Tax (CGT) and Inheritance Tax (IHT) that could affect your financial plan.

Ahead of the Budget, prime minister Keir Starmer said it would be “painful” as there was a £22 billion black hole in the public finances. Indeed, Reeves went on to announce measures that would raise annual tax revenues by £40 billion by 2030.

Some of these taxes will be paid by businesses, but others could affect your personal finances. Here are two changes you might want to consider when reviewing your financial plan.

1. The main rates of Capital Gains Tax have increased

There was a lot of speculation that Reeves would announce changes to CGT. In the Budget, she revealed the rates would indeed rise. It could mean you pay more tax than you expect when selling assets.

CGT is a type of tax you pay if you make a profit when you dispose of assets such as:

Investments that are not held in a tax-efficient wrapper, like an ISA
Personal possessions worth more than £6,000 (excluding your car)
Property that is not your main home
Business assets.

In 2024/25, you can make profits of up to £3,000 before CGT is due. This is known as the “Annual Exempt Amount”. If profits exceed this threshold, you may be liable for CGT.

The changes Reeves announced to CGT rates came into effect immediately on 30 October 2024. The rate of CGT you pay depends on your other taxable income. If you’re a:

Higher- or additional-rate taxpayer, your CGT rate has increased from 20% to 24%
Basic-rate taxpayer, you may benefit from a lower CGT rate of 18%, which has increased from 10%, if the taxable amount falls within the basic-rate Income Tax band.

So, it might be more important than ever to consider how to reduce your CGT liability as part of your financial plan. For example, you may:

Spread disposing of assets over several tax years
Focus on increasing investments held in a tax-efficient wrapper
Pass on assets to your spouse or civil partner to make use of their Annual Exempt Amount.

We could work with you to understand if you may be liable for CGT and the steps you might take to mitigate a large or unexpected tax bill.

2. Your pension may form part of your estate for Inheritance Tax purposes

Currently, your pension isn’t usually included in your estate for IHT purposes. As a result, you may have planned to use other assets to fund your later years so you could pass on wealth tax-efficiently through your pension.

However, Reeves announced she would close this “loophole” that gives pensions preferable IHT treatment.

From 6 April 2027, your unspent pension pot will be included in your estate when calculating an IHT liability. The change could mean the number of estates that pay IHT doubles.

Under the existing rules, around 4% of estates are liable for IHT and it raises about £7 billion a year for the government. However, the Budget states that bringing pensions into the scope of IHT will affect around 8% of estates each year. Reeves added the changes would boost IHT receipts by £2 billion a year by the end of the forecast period (2029/30).

So, if you haven’t previously considered IHT as part of your estate plan, you may need to now.

The threshold for paying IHT is known as the nil-rate band and is £325,000 in 2024/25. In most cases, you can also use the residence nil-rate band if you pass on your main home to a direct descendant. In 2024/25, the residence nil-rate band is £175,000.

In addition, you can pass on unused allowances to your spouse or civil partner. In effect, that means, as a couple, you could leave behind up to £1 million before IHT may be due.

It’s important to note that both the nil-rate band and residence nil-rate band are frozen until 6 April 2030 and will not rise in line with inflation.

As a result, you might need to consider how the value of your assets will change and whether growth could affect what you’ll leave behind for loved ones.

Previously, you may have increased pension contributions to build up a tax-efficient nest egg that you could leave to your family when you pass away. A financial review could help you assess if it’s still the right option for you in light of the changes.

Get in touch to talk about the impact the Budget could have on your plans

If you’d like to discuss how the Autumn Budget could affect your finances and how you might keep your plans on track, please get in touch. We can work with you to create a tailored plan that reflects the changes and aligns with your aspirations.

Please note:

This blog is for general information only and does not constitute advice. 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 estate planning or tax planning.

Almost four months after Labour won the general election, chancellor Rachel Reeves has delivered her 2024 Autumn Budget, outlining the government’s plans for this tax year and beyond.

Arguing that the July general election had given Labour a “mandate to restore stability and start a decade of renewal”, Reeves described it as “a Budget to fix the foundations and deliver change”.

Against a backdrop of a manifesto pledge not to increase Income Tax, employee National Insurance, or VAT, Reeves also announced that her Budget would raise taxes by £40 billion, stating that any other chancellor would “face the same reality”.

Read on for a summary of some of the key measures and announcements from this year’s Autumn Budget – the first ever delivered by a woman – and what they might mean for you.

Extra investment in infrastructure

The chancellor argued that “the only way to drive economic growth is to invest, invest, invest.”

In the run-up to the Budget, Reeves announced she was making a technical change to the way debt is measured, which will allow the government to fund extra investment. This wider debt measure will allow for more borrowing to invest in big building projects such as roads, railways, and hospitals.

It’s important to note that this additional room for manoeuvre for spending on investment projects will not be used to support day-to-day spending, as the chancellor has committed to fund that with tax receipts.

A rise in employer National Insurance contributions

As many analysts had predicted, Reeves increased employer National Insurance (NI) rates by 1.2% from 13.8% to 15%, effective 6 April 2025.

Currently, employers pay NI only above a threshold of £9,100 a year. The chancellor reduced this threshold to £5,000 a year, effective 6 April 2025. The threshold will remain at £5,000 until 6 April 2028 and then increase in line with the Consumer Prices Index (CPI) thereafter.

These reforms will raise £25 billion a year by the end of the forecast period (2029/30).

At the same time, the government is increasing the Employment Allowance.

The current Employment Allowance gives employers with NI bills of £100,000 or less a discount of £5,000 on their employer NI bill.

From 2025, the Employment Allowance will rise to £10,500. Moreover, the government will expand the Employment Allowance by removing the £100,000 eligibility threshold so that all eligible employers now benefit.

Taken together, the government says that 865,000 businesses will pay no NI contributions at all, and more than half of employers with NI liabilities will either see no change or will gain overall next year.

An end to the freeze on Income Tax thresholds from 2028

Back in 2021, the then-chancellor, Rishi Sunak, raised both the Personal Allowance and the threshold at which higher-rate Income Tax is due by £70 and £270 respectively.

Importantly, however, he also fixed these thresholds until 2026. Then, in the 2022 Autumn Statement, Jeremy Hunt extended this freeze until 2028.

Unexpectedly, Reeves decided against extending the freeze beyond 2028. From 2028/29, personal tax thresholds will be uprated in line with inflation once again.

Capital Gains Tax reforms

The chancellor announced several changes to the Capital Gains Tax (CGT) regime.

Firstly, as of 30 October, the main rates of CGT have increased. The basic rate has risen from 10% to 18% and the higher rate has increased from 20% to 24%.

The government will maintain the lifetime limit for Business Asset Disposal Relief (BADR) – formerly Entrepreneurs’ Relief – at £1 million. Meanwhile, the lifetime limit for Investors’ Relief (IR) will be reduced from £10 million to £1 million.

The BADR and IR rate of CGT will continue to be charged at 10%, before rising to 14% on 6 April 2025 and 18% on 6 April 2026.

These measures will raise £2.5 billion a year by the end of the forecast period.

Furthermore, CGT on carried interest – paid by private equity managers – will rise from 18% (basic rate) and 28% (higher rate) to 32% from 6 April 2025. There will be further reforms from April 2026 to bring carried interest within the Income Tax framework, under bespoke rules.

Changes to some Inheritance Tax reliefs

As expected, the chancellor made key announcements that could affect estate planning.

Nil-rate bands

The freeze on Inheritance Tax (IHT) thresholds will be extended by an additional two years, to 2030. The nil-rate band and residence nil-rate band will remain at £325,000 and £175,000 respectively.

Pensions

Reeves announced she was closing the “loophole” that gives pensions preferable IHT treatment. She will bring unused pension funds and death benefits payable from a pension into a person’s estate for IHT purposes from 6 April 2027.

The government estimates this measure will affect around 8% of estates each year.

Agricultural Property Relief

Currently, individuals can claim up to 100% relief on agricultural property (land or pasture that is used to grow crops or rear animals).

From 6 April 2026, the first £1 million of combined business and agricultural assets will continue to attract no IHT at all. However, for assets above this threshold, IHT will apply with 50% relief.

Business Property Relief

From 6 April 2026, the government will also reduce the rate of Business Property Relief from 100% to 50% in all circumstances for shares designated as “not listed” on the markets of a recognised stock exchange, such as the AIM.

ISA subscription limits frozen until 2030

Prior to the Budget, there was speculation that the chancellor may make changes to simplify the ISA regime.

While these did not materialise, the Budget did confirm that annual subscription limits will remain at £20,000 for ISAs, £4,000 for Lifetime ISAs and £9,000 for Junior ISAs and Child Trust Funds until 5 April 2030.

Additionally, the starting rate for savings will be retained at £5,000 for 2025/26, allowing individuals with less than £17,570 in employment or pension income to receive up to £5,000 of savings income tax-free.

A change to business rates relief

The current business rates relief system is set to run until April 2025. It effectively serves as a reduction on business rate bills for eligible businesses, with retail and hospitality firms having been key beneficiaries.

The chancellor announced that, from 2026/27, permanently lower tax rates will be introduced for retail, hospitality and leisure properties.

Additionally, for 2025/26, some retail, hospitality, and leisure properties will receive 40% relief on their bills, up to a cash cap of £110,000 per business.

Corporation Tax capped at 25%

The government plans to support businesses to invest by publishing a Corporate Tax Roadmap. This confirms that the government will cap Corporation Tax at 25% for the duration of the parliament.

A rise in the national living wage

Reeves announced a 6.7% rise in the national living wage for workers aged 21 and over, from £11.44 to £12.21 an hour, effective April 2025. For a full-time employee earning the national minimum wage, this means a £1,400 annual pay boost and is expected to benefit more than 3 million workers.

In addition, the national minimum wage for people aged 18 to 20 will rise from £8.60 to £10 an hour. Apprentices will receive the biggest pay increase, with hourly pay rising from £6.40 to £7.55 an hour.

The announcement could significantly increase outgoings for businesses, particularly when coupled with reforms to employers’ NI.

A freeze in fuel duty

Fuel duty has been frozen since 2011, and the 5p cut brought in by the Conservatives in 2022 has been extended at every subsequent Budget.

Despite speculation that Reeves might increase fuel duty, she confirmed the freeze for another year and extended the 5p cut. This will save the average motorist £59 in 2025/26.

Second home Stamp Duty surcharge increasing

With effect from 31 October 2024, the Stamp Duty surcharge on the purchases of second homes, buy-to-let residential properties, and companies purchasing residential property in England and Northern Ireland will increase from 3% to 5%.

This surcharge is also paid by non-UK residents purchasing additional property.

Reforms to the non-dom regime

Currently, for UK residents whose main residence – or “domicile” – is elsewhere in the world, income and gains are taxed differently, depending on factors such as how long individuals are resident in the UK.

The chancellor confirmed that the tax regime for non-domiciled individuals (non-doms) will be abolished from April 2025, claiming that the rules will ensure that those who “make the UK their home will pay their taxes here”.

Moving forward, there will be a residence-based scheme with “internationally competitive arrangements” for those who come to the UK on a temporary basis.

Over the next five years, Office for Budget Responsibility (OBR) figures estimate that these reforms will raise £12.7 billion.

VAT on private school fees from January 2025

As they had promised in their election manifesto, Labour announced that, from 1 January 2025, VAT will apply to all education, training, and boarding services provided by private schools.

Additionally, the chancellor announced that she was removing business rates relief from private schools from April 2025.

An end to the £2 bus fare cap

The £2 cap on bus fares introduced by the previous Conservative administration is due to end on 31 December 2024.

Labour has announced that it will extend the cap for a further 12 months but that the cap will rise from £2 to £3.

Changes to duties for alcohol, tobacco, and vaping

The chancellor confirmed a reduction in the duty for draught alcohol, cutting duty on an average strength pint by a penny. Rates for non-draught products will increase in line with the Retail Prices Index (RPI) from 1 February 2025.

Furthermore, a new vaping duty will be introduced from 1 October 2026, standing at £2.20 per 10 ml of liquid. Meanwhile, there will be a one-off tobacco duty rise designed to maintain the incentive to choose refillable vaping over smoking.

Confirmation of the 4.1% increase to the State Pension under the triple lock

The basic and new State Pension will increase by 4.1% in 2025/26, in line with earnings growth, meaning over 12 million pensioners will receive up to £470 a year more.

Please note

All information is from the Autumn Budget documents on this page.

The content of this Autumn Budget summary is intended for general information purposes only. The content should not be relied upon in its entirety and shall not be deemed to be or constitute advice.

While we believe this interpretation to be correct, it cannot be guaranteed and we cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained within this summary. Please obtain professional advice before entering into or altering any new arrangement.

High inflation has been a hot topic over the last couple of years, and as its pace stabilises, you might think it no longer needs to be part of your financial plan. Yet, skipping inflation when calculating your long-term finances could leave you with a shortfall.

The government sets the Bank of England (BoE) a target of keeping inflation at 2%.

The BoE explains that inflation that is too high or moves around a lot makes it hard for businesses to set the right prices and for people to plan their spending. However, inflation that is too low, or even negative, may put people off spending because they expect prices to fall. This hesitation to spend could lead to companies failing and people losing their jobs.

As a result, stable inflation is important for the economy.

A combination of the Covid-19 pandemic and the war in Ukraine, as well as other factors, led to the UK and many other countries experiencing a period of high inflation. Indeed, according to the Office for National Statistics (ONS), inflation reached a peak of 11.1% in October 2022 – the highest rate recorded in more than 40 years.

The good news is that the rate of inflation has since fallen and started to stabilise. In the 12 months to August 2024, the ONS reported inflation was slightly above the BoE’s target at 2.2%.

While the immediate pressure of prices rising sharply has eased, that doesn’t mean you can forget about inflation when you’re reviewing your long-term finances.

Even when inflation is stable, prices are often rising

While inflation meeting the BoE’s target won’t often make headlines, it still means that the cost of goods and services is rising. You might think 2% inflation won’t affect your finances too much. Yet, when you look at the long-term impact, the effect could be harmful if it’s something you’ve overlooked.

According to the BoE, inflation averaged 2% a year between 2010 and 2020. So, if you had £20,000 in 2010, you’d need almost £24,320 in 2020 just to maintain the spending power you had a decade ago.

That could have a substantial effect on some parts of your financial plan. For instance, if you’ve set a retirement income without considering how it may need to grow to support your lifestyle, you could find you face a shortfall. During a retirement that could span decades, the effects of even 2% inflation might really add up.

Inflation has only hit the target rate 30% of the time since 1997

What’s more, while the BoE has an inflation target, there are factors outside of its control that may cause it to rise or fall, as the last few years have demonstrated.

Indeed, according to a report in FTAdviser, since 1997, the BoE has missed its target around 70% of the time, and it’s more likely to be above the target than below it.

As a result, even if you’ve factored a 2% rise in inflation into your long-term plan, you could still experience outgoings rising at a quicker pace than your income. Considering the effects of a high inflation environment may help you secure your finances and keep goals on track even when factors outside of your control lead to expenses increasing.

Making inflation part of your financial plan

It’s impossible to know what the rate of inflation will be next year, and when you’re creating a long-term financial plan, you might want to weigh up the effect of inflation over decades. While you can’t predict what will happen, there are often steps you can take to incorporate it into your finances and provide security.

As part of your financial plan, you might consider how to:

Create a financial buffer in case inflation is higher than you expect
Use other assets to support your income during periods of high inflation
Grow your wealth at a pace that could match or beat the rate of inflation
Regularly review your short- and long-term finances to ensure they continue to reflect your current circumstances.

An effective financial plan could help you prepare for the unknown, including the inflation rate.

Contact us to discuss how to incorporate inflation into your financial plan

If you’d like to review your financial plan and understand how inflation might affect your outgoings, we could help. Please contact us to arrange a meeting with our team.

Please note:

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

What’s stopping you from retiring sooner? For many, it’s not just finances that are holding them back but their mindset too. If the excitement of retiring is also mixed with nerves, a financial plan could give you the confidence boost you need to take a step back from work.

Finances may play a role in the hesitancy to retire for some people. Yet, others are in a financial position to retire but are still worried about taking that next step. It’s easy to see why you might not want to plunge straight into retirement – it could represent a huge lifestyle change.

So, how could financial planning help you retire sooner? It may provide the confidence boost you need to start the next chapter of your life.

A retirement plan starts with setting out your goals

If you had more free time, how would you spend your days? Retirement is a great opportunity to think about what makes you happy and build a lifestyle around those activities.

Setting out how you’d like to spend your days in retirement could make the lifestyle shift seem less daunting.

For some, that might mean enjoying a slower pace of life now you don’t have to adhere to a work schedule. For others, days packed with plans could be far more appealing, so think about what works for you.

You might look forward to being able to spend more time with grandchildren during the school holidays. Or maybe you’ve got plans to transform your garden.

As well as the day-to-day lifestyle, you might want to consider one-off experiences you’d love to make part of your retirement plan too. Perhaps you’ve always wanted to go on a cruise to Alaska, take a university course, or train for a marathon – now could be the perfect time to think about the things you’ve wanted to try and simply put off or haven’t had the time to do.

While setting out your retirement lifestyle could be the nudge you need to give up work, the financial side of retirement might still be a cause of worry for some people. Fortunately, with your goals laid out, you can start to calculate how much you’d need to secure the retirement you want, and assess if you have “enough”.

Most people retire between the age of 55 and 65

According to a report from the Institute for Fiscal Studies, most people retire between the ages of 55 and 65. At age 55, 81% of men are in paid work, and this figure falls to 44% by age 65. For women, the employment rates fall from 74% to 34% over the same ages.

That means many people are retiring before the State Pension Age, which is currently 66 and gradually rising to 68. So, if you aim to retire sooner, you might need to consider how to use your assets to fund all your outgoings initially.

Even when you reach the State Pension Age, the income you receive from the State Pension often isn’t enough to meet all your expenses. In 2024/25, those entitled to the full new State Pension receive around £11,500 a year.

As a result, your retirement plan is likely to need to consider how to supplement the State Pension during retirement.

Understanding how to create a sustainable income in retirement can be challenging, and there are lots of factors you might need to consider, such as longevity and the effect of inflation on your income needs.

A financial plan that’s tailored to you and the lifestyle you want in retirement could help you assess how to create an income and how your wealth will change during your lifetime. Having a financial plan you can have confidence in could give you the freedom to really enjoy your retirement.

Contact us to talk to us about your aspirations for retirement

If you’re thinking about retirement and could benefit from a confidence boost, we’re here to help. We’ll work with you to create a financial plan that brings together your retirement aspirations and financial circumstances. Please get in touch to arrange a meeting to talk to our team.

Please note:

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

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.

Economic data suggesting some developed countries, including the US, could fall into a recession continued to affect investment markets in September 2024. Read on to discover other factors that may have affected the performance of your investments.

UK

Data from the Office for National Statistics (ONS) shows inflation remained stable at 2.2% in the 12 months to August. The figure is slightly above the Bank of England’s (BoE) 2% target.

Despite speculation that inflation data would lead to the BoE cutting interest rates, the Bank opted to maintain its base rate at 5%. While good news for savers, it means borrowers, including mortgage holders, are still likely to face higher outgoings when compared to 2021.

Many economists expect the BoE will make an interest rate cut before the end of the year. Indeed, investment bank Goldman Sachs predicts the interest rate will fall to 3% over the next 12 months.

GDP data showed the UK economy returned to growth in July after a plateau in June. However, the figures were disappointing, with just 0.5% growth in the three months to July 2024.

There could be more positive news in the coming months though. Investment bank Peel Hunt optimistically said the UK economy is heading for “above-average growth” as inflation stabilises and consumer demand picks up.

A report from the Office for Budget Responsibility (OBR) provided a less cheerful outlook for the UK. The latest risk and sustainability report warned the UK, and other countries in the world, face long-term pressures, such as an ageing population, climate change, and rising geopolitical tensions.

In addition, the OBR said, based on current policy, public debt is projected to almost triple to more than 270% of GDP over the next 50 years. The comments highlight the challenging backdrop chancellor Rachel Reeves will need to consider as she prepares to deliver her first Budget on 30 October.

There was positive data released from the manufacturing sector. S&P Global’s Purchasing Managers’ Index (PMI) recorded the strongest month in two years. Both output and new orders continued to recover.

Yet, many businesses continue to face significant headwinds. Among those is UK shipbuilder Harland & Wolff, which owns the Belfast shipyard that once built the Titanic. The company entered administration in September.

Research also suggests that trade difficulties following Brexit could worsen. Aston Business School analysed the effect of the Trade and Cooperation Agreement on UK-EU trade relations, and found that trade is down by almost a quarter.

The FTSE 100 experienced ups and downs, including falling 0.6% to a three-week low on 4 September. Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “Fresh worries about the health of the global economy have gripped markets, with the FTSE 100 far from immune.”

Europe

Eurozone inflation fell to 2.2% in the 12 months to August 2024. The news gave the European Central Bank the confidence to cut interest rates for the second time this year.

The Paris Olympics provided a short-term boost to the eurozone economy. A PMI output index increased for the first time since May in August 2024 to reach a three-month high of 51.0 – a reading above 50 indicates growth.

However, as the temporary boost of the Olympics fades, additional PMI data isn’t as positive. Indeed, HCOB’s flash PMI suggests the eurozone economy shrank for the first time in seven months in September.

The manufacturing sector in particular is struggling, with a PMI reading of 45.8 in August 2024. Dr Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, said: “Things are going downhill, and fast. The manufacturing sector has been stuck in a rut.”

As the largest economy in the EU, the conditions in Germany can affect the bloc, and statistics suggest there are risks ahead.

Indeed, the Kiel Institute for the World Economy predicts Germany’s GDP will shrink by 0.1% this year and has halved its growth forecast for 2025 to 0.5%.

Statistics body Destatis reports industrial production in Germany fell by 2.4% in July – far more severe than the 0.3% fall economists had predicted. The automotive sector suffered the largest fall (8.1%) followed by electrical equipment (7%).

German carmaker Volkswagen has spoken about the challenges it faces. The company warned that it has a “year, maybe two” to adapt to lower demand. The economic environment has led to Volkswagen considering making unprecedented closures in its home market for the first time in its history as it tries to cut costs.

US

Inflation in the US fell to its lowest level since February 2021 in August 2024 to 2.5%. In response, the Federal Reserve cut its base interest rate from 5% to 4.75%.

The inflation and interest rate announcements led to the S&P 500 – an index of the 500 largest public companies in the US – jumping 1.5% on 19 September.

Similar to Europe, data indicates the manufacturing sector in the US is struggling. Indeed, the Institute of Supply Management reported it contracted for the fifth consecutive month in August. The news led to a dip in the markets around the world at the start of the month.

Figures from the Bureau of Economic Analysis also indicate a business threat as the trade deficit increased by $5.6 billion (£4.19 billion) in July to $103.1 billion (£77.13 billion).

American company OpenAI, the firm behind ChatGPT, announced it was in talks to raise $6.5 billion (£4.86 billion) from investors at a valuation of $150 billion (£112.21 billion) – making it one of the most valuable start-ups in the world.

Asia

Investment market volatility in Asia highlighted how factors around the world can affect markets. On 4 September, Japan’s Nikkei lost 4.2% and South Korea’s Kospi fell 3.4% after investors were spooked by fears that the US could experience a downturn when poor manufacturing data was posted.

A survey of China’s manufacturers from Caixin suggests export orders were subdued in August and fell for the first time this year as it faced external challenges.

However, China announced stimulus measures aimed at boosting the economy and stock market, as well as supporting the property sector on 24 September.

The news led to stock markets across Asia-Pacific rising – China’s CSI 300 index was up more than 4%. In fact, the announcement led to world stocks hitting a record high when the MSCI World Stocks index increased by 0.3%.

Please note:

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

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

When you read that investment markets have fallen you might feel nervous or scared about the effect it could have on your future. Emotions like these sometimes lead to impulsive decisions that aren’t always in your best interest when you consider the long term. So, read on to discover some insightful pieces of data that could help you remain calm.

Volatility is part of investing – a huge range of factors might influence whether a stock market rises or falls. However, history shows that, over the long term, markets typically go on to deliver returns.

Recently, markets experienced volatility amid fears that the US was on track for a recession. Indeed, on 2 August 2024, US technology-focused index Nasdaq fell 10% from its peak. Just a few days later, the market rallied, and it was technology firms that led the way.

Concerns about the US economy weren’t confined to the US indices either. Markets fell in Europe and Asia too. In fact, Japan’s Nikkei index suffered its worst day since 1987 following the news. Again, it didn’t take long for the markets to bounce back.

Returns cannot be guaranteed and recoveries may be over longer periods. Yet, the above example highlights how making a knee-jerk decision due to volatility could harm your long-term wealth. If you’d responded by selling your investments when you saw markets were falling, you’d have missed out on the recovery.

So, if volatility is part of your experience when investing, how can you remain calm? These pieces of data could help you hold your nerve.

1. Investment risk falls over a longer time frame

It’s important to note that all investments carry some risk. There is a chance that you could receive less than the original amount you invested. However, the level of risk varies between investments, so you could invest in a way that reflects your risk profile and financial circumstances.

Usually, it’s a good idea to invest with a five-year minimum time frame. By investing for longer, you’re giving your investments a chance to recover if they fall due to short-term volatility.

Research supports this too. Using almost 100 years of data on the US stock market, Schroders found that if you invested for a month, you would have lost 40% of the time. Interestingly, when you invest for longer, your odds of losing money start to fall.

When invested for five years, the odds of losing money fall to 22%, and at 10 years it falls to 13%. The research shows there have been no 20-year periods during the time analysed where stocks lost money overall.

You can’t rule out risk entirely, but by investing for a long-term goal, you could minimise the chance of losing money.

2. Sharp drops in the market occur more often than you think

One of the reasons investors react to market movements is that sharp falls may feel like they’re unprecedented and that you should act as a result. Yet, the Schroders research suggests that sharp falls are more common than you might think.

Analysing the MSCI World Index, which captures large and mid-cap representations across 23 developed countries, the study found that 10% falls happen in more years than they don’t. Indeed, in the 52 calendar years to 2024, investors experienced a 10% fall in 30 of them.

Even significant falls of 20% may occur more than you expect – roughly every six years.

Despite these dips, markets have delivered returns over the 50 years analysed. So, holding your nerve during these sharp falls often makes sense when you take a long-term view.

3. Periods of “heightened fear” could be more lucrative

The Vix Index measures expected volatility in the US market– it’s often referred to as the market’s “fear gauge”. It can highlight when investors perceive there is a greater risk of losing money. For example, it last reached a significant peak in May 2022 in the aftermath of the invasion of Ukraine.

Schroders has assessed how your investments would fare if you sold assets during periods of “heightened fear” to hold your wealth in cash, and then shifted back to investments when the fear receded. Taking this approach when invested in the S&P 500 – an index of the 500 largest public companies in the US – would have yielded average returns of 7.4% a year between 1990 and 2024.

However, if you didn’t let fear affect your investment decisions and remained invested, you may have benefited from average annual returns of 9.9%.

So, even when it seems like investing isn’t a good idea because of the economic environment or geopolitical tensions, it could be worthwhile taking a step back to consider what’s driving your decision.

Contact us to talk about your investments

If you have questions about investing and how it could support your financial goals, 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.

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

Anchoring bias is a common cognitive phenomenon that could affect your day-to-day and long-term financial decisions. The good news is that there are ways you could minimise the effect of bias, including anchoring.

First, what is a financial bias? The term refers to mental shortcuts and errors you might make when processing financial information that may lead to “irrational” decisions that don’t align with your long-term plans. There are many different types of financial bias, so read on to find out more about anchoring bias and how to minimise the effect.

Anchoring bias occurs when you focus or rely too heavily on a single piece of information when making financial decisions. It’s a bias that could lead to you dismissing other relevant data or it could skew your perceptions when you’re assessing a financial opportunity.

By “anchoring” your views to certain data, you could make decisions that aren’t right for you.

Anchoring bias could affect your short- and long-term finances

Anchoring bias could affect your financial decisions in several ways.

When it comes to your day-to-day spending, it might affect how you view the price of items. Let’s say you’re searching for a new TV and you find one you want priced at £1,000. You don’t make the purchase right away, and a few weeks later you see the same TV is now £800.

If you anchored the value of the TV to the first price you’d seen, the new, lower price might seem like an excellent deal. Yet, if you did some further research, you might find it was overpriced at £1,000 and it’s cheaper elsewhere. So, if you acted impulsively and purchased the TV when you saw it was £800 it might not be the bargain you first think it is.

Similarly, anchoring bias could affect long-term financial decisions too.

For instance, investors might purchase stock because they believe it’s a “good” price as they’ve anchored their view of it to a particular piece of information that suggests it should be higher. Alternatively, investors might hold on to assets that are no longer right for them because they believe the value will rise despite market conditions suggesting otherwise.

In short, anchoring bias could mean your investment decisions are based on an attachment to a certain piece of information, which might not reflect reality. It could lead to missed opportunities and poor decisions.

5 practical steps that could help you reduce the effect of anchoring

1. Be aware of the effect of anchoring bias

Often, the first step to reducing the effect of anchoring bias is simply to be aware of the effect it could have. Recognising that you may judge financial opportunities based on a single piece of information could give you pause enough to reconsider your initial thoughts before you act.

2. Assess the credibility of sources

There’s so much information available that it can be overwhelming. So, taking some time to assess how credible a source is could help judge whether it’s information you want to use when making financial decisions.

It’s not just the credibility of the source you may want to weigh up either. For example, reviewing when the information was released could be just as important – basing an investment decision on the price of a stock a year ago could mean you’re overlooking more valuable, recent figures.

3. Carry out further research

In addition to reviewing key pieces of information you already have access to, carrying out further research is often useful.

Let’s say you’re making a large purchase for your home, you’ll often shop around to see which retailer is offering the best deal. Taking the same approach for other financial decisions could also help you make better decisions for you.

4. Focus on your long-term plans

Focusing on your long-term plans or budget could reduce the chance of you acting on impulse because you’ve seen what seems like an excellent opportunity at first glance.

Whether a retailer has cut the price of that TV when compared to your anchor or the latest technology company’s shares are falling, take a step back and ask if it fits into your plans – is this potential opportunity right for you and how would it affect your finances?

5. Work with a financial planner

Sometimes an outside perspective could help you see where financial bias, including anchoring bias, could be clouding your judgement. As a financial planner, we’re here to work with you to create a long-term plan that considers your aspirations. Having a plan that’s been tailored to you could help you reduce the influence of bias and make better financial decisions for you.

Please contact us to talk to one of our team or 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.

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