Category: News

Lockdowns and restrictions have affected the financial security of millions of people. While the short-term impact has been the focus, it could have a long-term effect on your financial security too if it affected your pension savings.

Over the last 18 months, those who faced financial uncertainty in the pandemic may have cut back pension contributions, stopped paying into their pension altogether, or even dipped into their savings. These actions can have a long-lasting impact at any point in your working life. But it’s particularly worrying for those who are nearing retirement.

The over-50s have been among the most affected by the pandemic. According to a Scottish Widows study, this age group were the most likely to face job and income losses. Almost a quarter (23%) of people in their 50s lost their job or income due to the impact of Covid-19.

This age group also has more self-employed workers. Some 17% of people in their 50s are self-employed, compared to only 12% of 25–49-year-olds. With less job security and gaps in government support, self-employed workers have faced challenges. More than half of self-employed workers said their finances have suffered.

As a result, it’s not surprising that more than half of over-50s fear running out of money in retirement.

Did you reduce or stop your pension contributions?

When money is tight, the first step is often to review where you can cut back. As your retirement might be some time away, reducing or stopping pension contributions can seem harmless. But the impact might be bigger than you think.

Your pension doesn’t only miss out on the contributions you make. You could also lose tax relief and employer contributions. On top of this, your pension is usually invested and benefits from the effects of compounding over the long term. A relatively small break or reduction in pension contributions can have a much larger impact when you assess the forecast value.

So, how does this affect your retirement?

In some cases, you’ll still be able to meet your retirement goals even though you’ve changed your pension contributions. But it’s important to check. A quick review means you can still look forward to your retirement in confidence or highlight where there may be a shortfall.

A pension shortfall doesn’t mean you have to give up retirement dreams. The sooner you know, the better the position you’ll be in to make changes. A small increase in pension contributions once you’re more financially secure could mean you bridge the gap by the time you retire.

What’s important is that you understand the long-term implications changing your pension contributions could have. If you’d like to talk to a financial planner, please contact us.

2 things to keep in mind if you’ve dipped into your pension savings early

If you’re over the age of 55, you may have accessed your pension to tide you over during the pandemic. While useful, you also need to consider whether it could affect your retirement lifestyle.

According to Scottish Widows, the number of over-55s dipping into their pension savings has jumped 10%. In the first three months of 2021 alone, 383,000 people withdrew money from their pensions. While some may be ready to retire, the jump suggests that thousands of people are using their pensions to cover the financial impact of the pandemic.

If you dipped into your pension early, here are two questions to answer.

1. Will it affect your retirement?

As with changing your pension contributions, you should first assess the impact of making an early pension withdrawal. Your pension is designed to provide you with an income throughout retirement. Taking a lump sum early could mean that you’re no longer on track to achieve the lifestyle you want.

Do you still have enough to reach your retirement goals, or do you need to increase your contributions? It can be difficult to understand how a pension will translate into an income. If you need some help with this, please contact us.

2. Has it reduced your Annual Allowance?

If you’re not ready to retire yet, you may want to continue paying into your pension. Accessing your pension can trigger the Money Purchase Annual Allowance (MPAA), which reduces the amount you can tax-efficiently save through a pension.

Usually, you can save up to £40,000 or 100% of your annual earnings, whichever is lower, into your pension each tax year while still benefiting from tax relief. However, once the MPAA is triggered, this is reduced to just £4,000. It can have a huge impact on the amount you’re able to tax-efficiently save between now and retirement, and, therefore, towards your retirement income.

If your pension savings have been affected, you don’t need to panic. There are often steps you can take to ensure your retirement plans stay on track. Being proactive and assessing the impact now means you can bridge a gap if necessary. Get in touch if you need to assess your pension.

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

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.

Have you thought about how you’ll pass wealth on to those who are important to you? Traditionally, this has been done through inheritance, but it’s becoming more common to gift during your lifetime.

Our latest guide explains why more families are choosing to gift during their lifetime and the pros and cons of each option. Whichever option you decide is right for you, our guide will enable you to fully understand your situation and make sure your wishes are carried out, and will explain everything from writing a will to calculating the long-term impact of gifting.

It can be difficult to think about how you’ll pass on wealth to loved ones, but it’s important to set out a plan.

Download Leaving an inheritance vs gifting during your lifetime to discover the steps you should take.

If you have any questions about passing on wealth, please contact us. 

When you think about your future, how far ahead do you plan? Perhaps you’ve thought about what your life will look like in 10 years, but have you considered your later years?

While retirement planning is common, it’s often the early years of retirement that people focus on. However, your needs and lifestyle wishes can change drastically over a retirement that could last decades. It’s just as important to think about how you’ll spend your later years as those first years when you are still celebrating retirement.

You can download The guide to later-life planning and care to start thinking about your long-term plan. It’s here to help you understand why it’s important and what steps you can take. It covers:

• Reasons to make later-life planning part of your financial plan
• How to create long-term financial security
• Why care is something you should think about.

If you have any questions about your long-term plan or care, please contact us.

Search the internet and you’ll find a myriad of self-help sites aimed at helping you to improve your life and get the most out of it. Our latest guide explores some practical steps you can take to improve your overall wellbeing now and in the future.

Among the steps that can help create a better you are:

• Setting out your goals
• Making your mental wellbeing a priority
• Spending time on the things you enjoy
• Getting outdoors
• Creating a financial plan.

Download “10 simple but effective ways to create a better you” to discover some of the things you can do to improve your life in the short and long term.

The Bank of England interest rate has been below 1% for 12 years. If you’re a saver, you may think there’s little point in shopping around for the best deal or opening an ISA. But there are still valid reasons for making the most of your ISA allowance.

Each tax year, you can deposit up to £20,000 into an ISA. If you don’t use this allowance during the tax year, you lose it. In the past, ISAs offered an effective way to save with interest rates that helped your money grow. However, the low-interest rate environment means that savings have been earning little for more than a decade. But that doesn’t mean you should discount your ISA just yet, here are five reasons to use your allowance.

1. ISAs provide a tax-efficient way to save

Most people benefit from the Personal Savings Allowance, the amount you can earn in interest from your savings before Income Tax is due. Your Personal Savings Allowance depends on your Income Tax band:

• Basic-rate taxpayers: £1,000
• Higher-rate taxpayers: £500
• Additional-rate taxpayers: No allowance

If the interest earned in a tax year exceeds your allowance, or you don’t have an allowance, the interest earned will count as income and increase your tax bill. ISAs are a tax-efficient way to save, so you won’t have to pay any Income Tax on the interest you earn.

2. A fixed-rate ISA could give you access to higher interest rates

If you opened an ISA a couple of decades ago, you may have expected an interest rate of 5%, but now the rates on offer are much lower. However, by shopping around, you can find some accounts that are higher than the average. Often, these ISAs will mean you need to lock your money away for a certain period. If you’re saving for medium- or long-term goals, this type of savings account could suit you.

3. It provides a way to invest tax-efficiently

ISAs aren’t just an efficient way to save. You can use them to invest tax-efficiently too. The money you earn in returns is not subject to Capital Gains Tax. So, if investing is part of your financial plan, it makes sense to use your ISA allowance first.

A Stocks and Shares ISA offers you a way to invest your money, which can help you generate higher returns than a savings account. However, investing does come with some risks and the value of your investments may fall as well as rise. To smooth out the volatility of the investment markets, it’s advisable to invest with a long-term timeframe in mind.

4. A Lifetime ISA could boost your savings

If you’re eligible for a Lifetime ISA (LISA), it could provide a 25% boost to your savings. To open a LISA, you must be between 18 and 40. You can only deposit £4,000 each year into a LISA, but you’ll receive a 25% bonus from the government so it’s worth taking advantage of if you can.

One thing to keep in mind is when you’ll want to access your savings in a LISA. If you make a withdrawal before you turn 60 for a purpose other than buying your first home, you’ll lose the bonus and a portion of your own savings. Money in a LISA can either be held in a cash account or invested.

5. An ISA can make financial sense as part of your estate plan

If you’re married or in a civil partnership, an ISA can make sense as part of your estate plan. When you pass away, a surviving spouse will automatically receive a one-off additional ISA allowance. For instance, if your partner has £100,000 held in ISA when they pass away, you’d be able to deposit this amount in your own ISA, alongside using your usual £20,000 allowance.

This means your partner will be able to inherit your savings or investments and continue to hold them in a tax-efficient way. The additional prescription applies even if the money is intended for someone else. So, even if you want to leave your ISA savings to your children, your spouse will benefit from an increased ISA allowance.

Don’t forget about Junior ISAs

As well as an effective way to save and invest for yourself, a Junior ISA (JISA) offers a way to build a nest egg on behalf of a child. Each tax year, a child can have up to £9,000 deposited on their behalf into a JISA. Like adult ISAs, they offer a tax-efficient way to save and invest. However, keep in mind, the money will be locked away until the child turns 18.

If you’d like to discuss how ISAs can help you reach your goals, 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.

Investing has been around for centuries and the basics haven’t changed as much as you might think. Technology has changed how we invest, but some of the investment lessons from the past are just as relevant today as they were in the 1600s.

Our latest guide looks at the foundations of modern investing, and what you can learn from the past, including:

• How the first stock markets came to be
• Why you should focus on the long term
• Why it’s important to diversify
• Why it’s impossible to consistently predict market movements
• How following the crowd can mean you don’t choose investments that are right for you.

Download “The history of investing and what you can learn from the past” to learn more about how investing began and why some of the lessons still apply today.

As countries around the world began to tentatively reopen businesses and lift Covid-19 restrictions, there are strong signs of growth and recovery. However, this has been tempered with concerns around inflation and long-term growth prospects.

UK

In May, the Bank of England Governor Andrew Bailey increased the UK’s growth forecast to 7.25% for this year. While good news, he still noted that it means the UK has lost two years of output growth due to the pandemic. The Bank of England has also lowered its unemployment forecast. Thanks to the furlough scheme, it now expects unemployment to peak at below 5.5% in the third quarter of this year. This compares to its earlier forecast of 7.75%.

Economic thinktank NIESR has also increased GDP expectations, but warned of the long-term impact of Covid-19 on the economy. According to the organisation, the combined effects of Covid-19 and Brexit mean the UK will lose £700 billion in output over the next five years. Despite positive signs, it predicts GDP will be almost 4% lower in 2025 than it would have been without the pandemic.

The latest data suggests sectors across the UK are beginning to recover:

• Markit’s PMI (Purchasing Manager’s Index) for manufacturing data increased to 60.9 in April, up from 58.9 in March. Any reading over 50 indicates growth and the latest figures show activity is accelerating. It’s the highest reading since 1994, but the rise is partly due to longer delivery times as factories struggle to get hold of raw materials and parts.
• Within the construction sector, output reached a six-and-a-half-year peak, leading to the biggest boost in job creation since 2015.
• The service sector also saw its growth reach its fastest pace since 2013, with a PMI reading of 51 in April.

As retail reopened in April following months of closures, retail sales jumped by 9.2%, according to the Office for National Statistics (ONS). Retail sales were higher than pre-Covid levels, delivering a much-needed boost to the sector. 

Another sector reopening and expecting a boost is hospitality. However, hotel technology provider Avvio has warned that last-minute cancellations could affect hotels and place further pressure on businesses. The firm said holidaymakers are hoarding bookings to ensure they can have a break, even if travel abroad is restricted again. Cancellation rates are running at about 4%, far below the usual 30%.

The property market continued to receive a boost from the Stamp Duty holiday. Data from the Bank of England shows mortgage lending has reached a record high. Net mortgage borrowing was £11.8 billion in March, the strongest reading since the series began in 1993.

ONS figures suggest UK-EU trade is beginning to recover. But the statistics office also cautioned that the Brexit transition period has caused higher levels of volatility than usual in the last two years. In March, exports and imports with the EU (excluding precious metals) increased by £1 billion (8.6%) and £800 million (4.5%), respectively. However, figures also show the UK’s total trade with the EU has fallen below trade with the rest of the world. Between January and March 2021, total trade in goods with the UK fell by 23% when compared to the same period in 2018. Over the same period, trade with non-EU countries declined by just 0.8%.

Europe

Last month, the eurozone entered a technical recession. However, growth forecasts suggest economies are recovering as lockdown restrictions ease. Eurozone companies grew at their fastest pace since last July and this could help to pull the bloc into growth territory.

The EU Commission has also raised growth forecasts following the ongoing progress of the vaccination programme across the continent. The EU is now expected to grow 4.2% this year and 4.4% next year.

One of the challenges now facing many businesses is issues within supply chains after some sectors were forced to close for months. The German DAX Stock Index has recently highlighted this. The index was affected by chipmaker Infineon saying that ongoing shortages and other supply chain problems were hitting car production.

US

There have also been positive signs in the US. Companies across the country created 742,000 new jobs in April. While slightly less than forecast, it’s still an indication that businesses are confident and investing. On top of this, the US service sector PMI surged from 60.4 to 64.7. The latest reading is the highest since the survey began in 2009.

American company Pfizer, which co-developed a Covid-19 vaccine with Germany’s BioNTech, has raised its sales forecast following successful vaccine programmes around the world. The company now expects vaccine sales of $26 billion in 2021. That’s a sharp increase from its previous forecast of $15 billion.

Despite figures pointing towards stability and growth, US consumer confidence has fallen. According to the University of Michigan’s Index of Consumer Sentiment, confidence fell from 88.3 in April to 82.8 in May. The fall has been linked to expectations that long-term inflation will reach 3.1%, well above the Federal Reserve’s target of 2%.

Asia

China was one of the first economies to post signs of recovery following the impact of the pandemic. However, there have been concerns that inflation will rise. The latest Producers Price Index (PPI), which measures the cost of goods sold by manufacturers, suggests inflation is increasing. Year-on-year, prices have increased by 6.8%.

Reports from Malaysia could also have an impact on global businesses. The country’s disgraced state investment fund 1MDB is reportedly suing Deutsche Bank, Coutts and JP Morgan in a bid to recover some of the billions lost in a huge corruption scandal.

Please note: 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.

Cinemas are now starting to reopen after months of closure. If you’re a film fan, many cinemas are showing classic films to enjoy but new blockbusters are coming to the big screen too. Some of the most anticipated releases of 2020 and early 2021 are now scheduled for release in the coming months. Which of these 10 films are on your need-to-watch list?

1. Black Widow

The latest instalment of the huge Marvel franchise, Black Widow, is expected to be released in July. This time the story focuses on former KGB assassin Natasha Romanoff as she deals with her history and confronts a conspiracy. As you’d expect from a Marvel film, there’s plenty of action, a fast-paced story, and a few laughs along the way. For superhero fans, Marvel has a further three films coming out in 2021: Shang-Chi and the Legend of the Ten Rings, Eternals, and Spider-Man: No Way Home.

2. No Time to Die

James Bond fans have had to wait through repeated delays for this film to hit the cinema, but the 25th instalment of the James Bond series will be worth waiting for. Daniel Craig reprises his role as the suave MI6 agent for what is thought to be the last time, with the plot seeing him search for a missing scientist and confront a villain, played by Rami Malek. Expect the usual Bond close calls, cool gadgets, and explosive scenes.

3. A Quiet Place Part II

Fans of the horror genre should add A Quiet Place Part II to their watch list. Picking up where part one left off, we once again follow a family that is trying to survive in a post-apocalyptic world filled with blind monsters with a keen sense of hearing. This time, the family departs their home in search of human communities and pick up radio signals from a nearby island – will the family make it there safely?

4. Dune

The rights to produce a Dune film based on the popular novel have been held since the 1970s and fans of Frank Herbert’s science-fiction story will now get to enjoy an update film version with the latest technology, bringing it to life for a new generation of fans. Dune is set in the distant future where noble houses control planetary fiefs with politics, religion, and technology all playing an important role in the story of young Paul Atreides, who accepts the stewardship of the planet Arrakis. There’s already a planned sequel and spin-off series.

5. Jungle Cruise

The Jungle Cruise is a great option for a family-friendly trip to the cinema. It’s based on a ride at the Disney World theme park. Set in the early 20th century, a riverboat captain, played by Dwayne Johnson, takes a scientist on a mission into a jungle to find the tree of life. Along the way, they must battle dangerous animals and try to get to their destination before a rival expedition.

6. The Green Knight

Based on Arthurian legend, The Green Knight is an epic fantasy. It tells the story of reckless Sir Gawain as he embarks on a quest to confront a green-skinned creature. The journey sees the knight contend with an array of mythical creatures and thieves as he’s tested by the Green Knight to prove his worth by facing the ultimate challenge.

7. West Side Story

If you love a musical, the classic West Side Story has had a remake and will be released just in time for the festive period later this year. It follows the Broadway script as teenagers Tony and Marie fall in love in the 1950s in New York City despite being part of rival street gangs. You’ll be able to sing along to all your favourite songs from the stage version, including ‘Somewhere’, ‘Something’s Coming’, and, of course, ‘America’.

8. Top Gun: Maverick

Tom Cruise and Val Kilmer return to reprise their roles in the sequel to the 1986 film Top Gun. Pete “Maverick” Mitchell is still one of the Navy’s top aviators after years of service but will need to confront his past while training a new squad for a dangerous mission. After more than 30 years since the original movie was released, the latest edition offers a bit of nostalgia for fans with high-intensity thrills and drama.

9. The King’s Man

The King’s Man was originally scheduled for release at the end of 2019 but has suffered numerous delays. It serves as a prequel to the 2015 film Kingsman, this time set during World War I and following Conrad, a top-secret operative tasked with protecting the British Empire against some of history’s worst tyrants and masterminds, with Ralph Fiennes taking on the mentor role as the Duke of Oxford. 

10. Nomadland

Nomadland is already out in cinemas and has received positive reviews. It follows a woman in her 60s who loses everything during the Great Recession, forcing her to live the life of a nomad as she embarks on a journey across the American West. It’s a slow-paced film but one that’s beautiful and a reminder of the forgotten and downtrodden that were left in the wake of the Great Recession.

Does FOMO – the fear of missing out – affect your investment decisions? It can lead to you making investment decisions that aren’t right for you and potentially mean you take more risk than is appropriate.

At times, it can seem like everyone is investing in a particular company or sector. Perhaps you’ve seen a company feature on the news after share prices have skyrocketed. Or you’ve heard friends and family talking about how everyone is investing in a certain industry with the expectation that prices will rise quickly. If you’re not following these trends, it can seem like you’ll miss out on significant returns.

FOMO isn’t a new phenomenon, but it’s become easier than ever to share information. From social media posts to the investment segments of media, you can get an insight into how others are investing and it can shape how you view your own investments. It’s also easier than ever to act on these impulses. In the past, FOMO may have made you tempted to invest but it’s not something you could do straight away, providing you with some time to think. Now, you can transfer your money and invest in a matter of minutes.

If you’ve ever made an investment decision after hearing about a trend, FOMO could have influenced you. 

Why does it happen?

No one wants to be the investor that missed out on an incredible opportunity. How would you feel if colleagues invested in a start-up that delivered huge returns within a year, but you hadn’t followed the crowd? You’d no doubt be frustrated. Thinking about “what if” scenarios like this can encourage you to invest in companies that you may have otherwise avoided.

While investments decisions should be logical and based on fact, your emotions and experiences do have an impact. It means that financial bias can influence how you invest and feel about opportunities. In the case of FOMO, the “bandwagon effect” can have an impact.

We’ve all heard the phrase “jumping on the bandwagon” meaning that someone is supporting a cause only because it’s popular to do so. In investment terms, the meaning is similar – that investment decisions are made simply because others are doing the same. If you’ve invested based on “hot tips” or suggestions that stocks will soar alone, you may have experienced the bandwagon effect.

Following a trend can provide reassurance that you’re making the “right” decision. It’s a bias that can also lead to you deciding to sell an investment because others believe the value of these stocks will fall. FOMO can mean you make investment mistakes because the decisions are driven by worries, not by what is right for you.

How to avoid investing FOMO

1. Remember why you’re investing

You should invest with a goal in mind and tailor your portfolio to reflect this. Remember, your reason for investing may be very different from that of friends or people speaking in the media. What is right for one investor may not be right for you. Keeping your goal in mind can help you focus on why you’re making certain investment decisions.

2. Try to screen out the day-to-day noise

Often, investment trends are short-lived. While a company may be “hot” now, will it still be in a year? For the majority of investors, decisions should be made with a long-term outlook. Jumping from trend to trend can mean you’re exposed to more risk and that you miss out on long-term growth. While it can be difficult to do, try to screen out the day-to-day market news and instead focus on the bigger picture.

3. Keep investment risk in mind

Usually, investments with the potential to deliver high returns are also high risk. Don’t just focus on the potential gains but the risk that you could lose your money; would you still want to invest in a start-up that everyone is talking about if there’s a high level of risk? Always consider the risk of the investments you make. Overlooking risk could mean some of your investments don’t align with your risk profile and wider investment portfolio.

4. Be patient

Finally, investing isn’t a way to get rich quick. While stories of investors seeing their net worth soar may feature in the media, they are few and far between in real life. For most, investing is a marathon, not a sprint. Be patient with your investments and focus on your long-term goal.

It can be difficult to remove financial bias from the investment process. However, working with a financial planner means you have another view on your investments, helping you to highlight where FOMO may be driving your decisions. Working with us can help you build a balanced portfolio that reflects your circumstances. Please get in touch with us to discuss your investment portfolio.

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.