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While inflation continues to be a challenge for many economies, there are positive signs in the UK and around the world. Read on to find out what may have affected stock markets and your investment portfolio in March 2024.

Remember, volatility is part of investing and most people should invest with a long-term outlook. If you have any questions about your investment strategy or performance, please contact us.

UK

In March, chancellor Jeremy Hunt delivered the 2024 Budget and set out the government’s spending and changes to taxation. One of the big announcements was a 2% cut to employee National Insurance, which follows a previous cut made in the 2023 Autumn Statement.

The Resolution Foundation, a thinktank, said pensioners were among the biggest losers in the Budget, as National Insurance is paid by workers but not people who are retired.

Investment bank Citigroup responded to the Budget by saying the Office for Budget Responsibility (OBR) was being too optimistic when it assumed productivity would grow by 0.9%. The organisation predicts a more modest 0.5% and said it means the UK could be “fiscally offside by around £50 – £60 billion”.

The OBR recognised that productivity has been poor since the 2008 financial crisis. In fact, growth has fallen from 2.5% a year to 0.5% – the economy would have been around 30% bigger today if the pre-2008 trend had continued.

David Miles, a member of the OBR, said the last 15 years have been so bad, that the next 5 to 10 years are likely to be a “bit better”. He particularly noted that AI could help boost productivity.

Inflation continued to fall in the 12 months to February 2024, with a rate of 3.4% – the lowest since September 2021.

Despite the positive news, the Bank of England (BoE) held its base interest rate at 5.25%. Huw Pill, chief economist at the BoE, said he believed more compelling evidence was needed before a cut would be made and it could be “some way off”.

The UK fell into a technical recession at the end of 2023, but the BoE said signs suggest it is already over.

Figures from the S&P Global Purchasing Managers’ Index (PMI) also support this. Private sector growth hit a nine-month high in February, indicating that the recession was shallow. However, the manufacturing sector continued to face challenges, with PMI data showing weak demand and supply chain disruption are contributing to a downturn.

Despite figures from the Insolvency Service indicating businesses are struggling, as insolvencies hit a 30-year high in 2023, there is some good news for investors.

The FTSE 100 – an index of the 100 largest companies listed on the London Stock Exchange – hit a 10-month high on 21 March when it increased by around 1.1%. Mining stocks were among the main risers amid expectations that the US Federal Reserve will cut its base interest rate soon.

Greggs also saw its stock rise during March. The bakery chain revealed like-for-like sales increased by 13.7% in 2023, while pre-tax profits jumped 27% to £188.3 million. The firm added it expected another year of good progress in 2024.

Europe

According to data from Eurostat, inflation across the eurozone continued to fall in February 2024, when it was 2.6% compared to 2.8% a month earlier.

While many countries in Europe are battling high inflation, Turkey’s rate of inflation has consistently been in double digits since the end of 2019. In February, it hit a 15-month high of 67%. In a bid to cool the soaring cost of living, Turkey’s central bank increased its interest rate to 50%; this compares to a rate of 8.5% just a year ago.

The pan-European Stoxx 600 index reached a record high on 13 March boosted by upbeat company results from the likes of energy supplier E.ON and retailer Zalando. Buoyant company forecasts indicate that businesses are feeling optimistic about the future.

US

Inflation in the US unexpectedly increased to 3.2% in the 12 months to February 2024. The news dampened hopes that an interest rate cut would be announced soon.

A consumer sentiment index from the University of Michigan suggests Americans have a gloomy outlook about economic conditions and prospects for the future. Pessimistic consumers might be more likely to curb their spending, which could harm businesses.

Data from the US Federal Reserve also indicates that businesses are taking a more cautious approach. Average hourly earnings increased by just 0.1% in February 2024, while unemployment reached 3.9% – the highest figure since January 2022.

Technology giant Apple saw its shares fall by around 2.5%, wiping around $70 billion (£55 billion) off the value of the company, on 4 March following an EU-issued fine. The EU fined the company €1.8 billion (£1.54 billion) after it was found to have broken competition laws by imposing curbs on app developers.

Asia

Japan’s main index, the Nikkei, hit 40,000 points for the first time on 4 March after it increased by 0.5%, partly thanks to a weak Japanese Yen helping exporting businesses. The milestone follows a strong start to the year – the Nikkei has gained almost 20% since the start of 2024 thanks to booming technology firms.

The Bank of Japan also made its first interest rate hike in 17 years and ended eight years of negative interest rates, which sought to encourage lending. The bank’s base rate increased from -0.1% to 0.1% after board members said they expected to achieve 2% inflation in the coming year after decades of deflation and stagflation.

China continues to face a property crisis, which is affecting consumer spending and lending, as well as economic growth.

The Chinese government previously cracked down on property speculation that sent prices soaring. However, the property market peaked in 2020 and has faced a downturn ever since.

According to the country’s National Bureau of Statistics, house prices continued to fall in major cities in February. The organisation said it expects real estate to remain the main drag on economic growth in 2024.

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.

In the March 2024 Budget, Jeremy Hunt announced a second cut to National Insurance (NI), which could reduce your tax liability. Yet, as the chancellor didn’t unfreeze other allowances, many workers will see their overall tax bill rise in real terms due to fiscal drag.

Fiscal drag refers to a phenomenon where the government increases revenue by freezing thresholds rather than increasing them in line with inflation. So, even though tax rates don’t increase – and in some cases fall – your tax liability may still rise. During periods of high inflation, which the UK has experienced over the last few years, the effect of fiscal drag can be magnified.

So, while you might welcome the news of National Insurance cuts, it may not have as much impact on your finances as you first believe.

29 million workers will pay less National Insurance in 2024/25

Rishi Sunak’s government first made cuts to NI in the 2023 Autumn Statement and then made a further announcement in the March 2024 Budget.

According to the government, reducing employee and self-employed NI is “the best way to target working people, supporting growth and making the tax system fairer”.

It’s estimated that 29 million workers will benefit from the reduced NI rate. The second cut is collectively worth more than £10 billion a year for workers across the UK, according to the Budget document.

The rate of NI employees will pay in 2024/25 fell from 10% to 8% on 6 April 2024, following a cut from 12% to 10% that came into force on 6 January 2024. It’s calculated that the two cuts combined will save the average worker earning £35,400 more than £900 a year.

Self-employed workers may also benefit from a reduction to the main rate of Class 4 NI contributions, which has fallen from 9% to 6%. In addition, Class 2 NI contributions were abolished. The combination of these measures is expected to save the average self-employed person earning £28,000 around £650 a year.

So, on the face of it, the NI cuts suggest that workers will be better off in 2024/25.

Frozen Income Tax thresholds could increase your tax burden

The amount you can earn before being liable for Income Tax, known as the “Personal Allowance”, and thresholds for paying the higher and additional rate have been frozen until April 2028. Previously, they have usually increased each tax year in line with inflation.

As average wages rise, more people will start paying Income Tax or move into a higher tax bracket. So, while you might see your NI bill fall, overall your tax liability could rise in real terms.

Indeed, according to the BBC, by 2027, the average earner would only be £140 better off – and only people earning between £32,000 and £55,000 a year would be better off despite the NI cuts.

As a result of fiscal drag, a report in FTAdviser suggests that 3.8 million people will be brought into a higher tax bracket over the coming years and face a shock tax bill as a result.

It’s not just your Income Tax liability you might need to be mindful of. Moving into a higher tax bracket could affect other allowances.

For example, if you become a higher-rate taxpayer, your Personal Savings Allowance (PSA) – the amount you can earn in interest on savings before they could become liable for Income Tax – would halve to just £500 a year. If you moved into the additional rate bracket, your PSA would be £0.

Moving into a higher tax bracket could also affect the rate of Capital Gains Tax you pay, as well as other areas of your financial plan.

There could be ways to potentially reduce your Income Tax bill

If you could be dragged into a higher tax bracket, one way to potentially reduce your tax bill is by increasing your pension contributions.

As tax is calculated after pension contributions are made, increasing how much you’re saving for retirement could be a useful way to avoid being pulled into a higher tax bracket.

Remember, pensions are not usually accessible until you’re 55 (rising to 57 in 2028). So, it may be important to weigh up the pros and cons of increasing your pension contributions with your short- and medium-term finances in mind before you proceed.

There might be other steps you could take to reduce your tax liability too, such as making charitable donations from your income or using a salary sacrifice scheme. Please contact us to talk about your options.

Get in touch to discuss how to make tax efficiency part of your financial plan

Managing your tax liability could help you get more out of your money and turn long-term aspirations into a reality. Please contact us to arrange a meeting to talk about your tax bill and the steps you may be able to take to reduce it.

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.

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.

If you’re concerned about running out of money during retirement, you’re not alone. In fact, it’s one of the top financial concerns in the UK. Being proactive and working with a financial planner to create a retirement plan could offer you peace of mind. Read on to find out why.

In an Aegon survey, 7 in 10 financial advisers said their clients’ number one concern was outliving their savings. The good news is that by seeking the support of a finance professional, you can understand what income is sustainable for you and the lifestyle it might afford.

High inflation is playing a role in fears of running out of money

When you retire, you may have a pension pot that you could use to create an income. However, as you may be responsible for managing withdrawals, you might worry about taking too much too soon.

It can be difficult to know what a sustainable income is. After all, you don’t know exactly how long your pension will need to provide an income for, or what unexpected expenses you could face.

Recent economic circumstances have also highlighted how factors outside of your control could affect the income you need to maintain your lifestyle.

The effects of the Covid-19 pandemic and the war in Ukraine led to prices rising. Many countries have experienced a period of high inflation as a result. In the UK, inflation peaked at 11.1% in October 2022 – the highest rate recorded in 40 years.

Inflation has since fallen, but is still above the Bank of England’s target of 2%. According to the Office for National Statistics, in the 12 months to February 2024, inflation was 3.4%.

As the cost of goods and services increased, some retirees may have taken a higher income from their pension to meet their outgoings. Some could be on track to deplete their assets quicker than expected as a result, which may fuel concerns about running out of money.

Given the circumstances, it’s not surprising that the Aegon survey found that 64% of financial advisers also said inflation was a major concern for their clients.

With so many different factors to consider when deciding how to create a sustainable income from your pension, it can feel overwhelming. Financial planning that’s tailored to you could offer you the reassurance you need to feel confident about your finances and the decisions you make.

A tailored financial plan could address your fears

As you might expect, creating a bespoke financial plan involves assessing your assets, but also includes understanding your goals and fears to give you confidence about the future.

Cashflow modelling could be a valuable financial planning tool if you’re worried about running out of money in retirement.

Based on data like the value of your assets and outgoings, it can create a visual representation of your wealth and how it could change during your lifetime. It will also include some assumptions, like the returns your investments are expected to generate and the rising cost of living.

After inputting the data, you can change information to model how your decisions might affect your financial security. For example, you could create a visualisation of how your assets may change if you took an annual income of £35,000 from your pension, and then see how your financial security would change if you increased it to £40,000.

Cashflow modelling may also be used to answer questions that you’re worried about, such as:

Would a period of high inflation mean I’d run out of money during my lifetime?
Could my pension provide a reliable income if I lived to 100?
Would I have enough to cover the cost of care if it’s needed later in life?
Could I sustainably increase my income each year to reflect the rising cost of living?

Cashflow modelling isn’t just useful for understanding what level of income is sustainable either. It can factor in one-off outgoings so you can review their impact on your financial resilience.

For instance, the Aegon survey suggests travelling or living overseas is an aspiration for many. So, you might want to model what would happen if you withdrew a lump sum to fund a bucket list trip, or whether you could afford to buy a holiday home.

Similarly, many people want to lend financial support to the next generation. As a result, you may want to incorporate gifting assets during your lifetime to help your family reach milestones, like getting on the property ladder or pursuing further education.

We could help you create a long-term retirement plan

A retirement plan could help you enjoy the next stage of your life and feel confident about your finances. Please get in touch to arrange a meeting to talk about how you might create a sustainable income using your pension and other assets.

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 planning.

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.

Effective retirement planning often involves weaving together lots of different threads. As you think about your retirement, you might be unsure how to bring everything together, but a bespoke financial plan could put your mind at ease.

Over the last few months, you’ve read about the importance of deciding how you’ll retire, why you should set out your goals, and your options for accessing your pension. Now, read on to discover the challenges of bringing together these different strands of retirement planning and why a tailored financial plan could provide a solution.

The challenges of retirement planning you could face

A common concern among those approaching retirement is whether they have enough money to retire. Even after the milestone, you might worry about running out of money too soon.

Understanding what a sustainable income is for your circumstances can be difficult. After all, you don’t know how long you’ll spend in retirement and you might need to factor in a range of influences outside of your control, such as the effect inflation will have on your expenses.

As a result, you might not be confident in your ability to live the lifestyle you want once you give up work.

Uncertainty could mean you spend too much too soon, which could leave you in a financially vulnerable position in your later years. Alternatively, it might lead to you being more frugal than necessary and missing out on retirement experiences.

There could be other challenges too. Perhaps you’re considering taking a lump sum out of your pension or using assets to fund a one-off expense but you’re unsure about the long-term effect it may have. Or you want to ensure you leave an inheritance behind to support loved ones after you’ve passed away.

While pensions are often the main source of income in retirement, retirees will often have other assets at their disposal too. You might be unsure how you could use your savings, property, or investments to support your retirement goals, but financial planning could help.

A financial plan will bring together your aspirations and finances

When you think about what financial planning involves, your mind might turn towards understanding your assets. However, an effective financial plan starts by understanding what you want to achieve.

At retirement, this might be the lifestyle you want to enjoy for the rest of your life. You may have other priorities too, such as lending support to your family or ensuring your partner is also financially secure.

Once you’ve set out your lifestyle goals, you can start to review your assets and how they might make these objectives achievable.

One of the benefits of working with a financial planner is that they may help you bring together these different goals. So, a retirement plan that’s tailored to you may consider what a sustainable income is, but it might also include:

Gifting assets to your loved ones during your lifetime
Putting assets aside for your family to inherit when you pass away
Financial protection that could provide for your partner if the worst happened
A safety net that may give you peace of mind
Provisions in case you need care in the future.

Using a tool called “cashflow modelling”, we could help you visualise how to use your wealth to reach your goals.

By adding details about your assets, cashflow modelling could show how your wealth will change over time depending on the decisions you make. For instance, it could demonstrate how long your pension may last if it was used to provide an annual income of £35,000 or £45,000. Or how using your investments to supplement your income might provide you with greater financial freedom.

Cashflow modelling could also highlight potential risks. You can model different scenarios, including those that are outside of your control, to understand how they might affect your lifestyle and financial security.

For example, could the rising cost of living place pressure on your finances 20 years after you’ve retired? By identifying potential risks at the start of retirement, you may be able to take steps to mitigate them or create a safety net. To manage the effect of inflation on your outgoings, you may plan to increase the income from your pension each year to preserve your spending power.

As a result, working with a financial planner could help you realise your retirement goals and give you financial confidence as you start the next chapter of your life.

Contact us to talk about your retirement plans

If you’re preparing for retirement, whether it’s a milestone you hope to reach this year or it’s a decade away, we could offer you support. Please contact us to talk about your retirement aspirations and how your finances may provide you with security once you give up work.

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 planning.

Past performance is not a reliable indicator of future performance.

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

The Magnificent Seven might conjure up images of the 1960s Western film or its 2016 remake, but there’s a new group in town – seven technology companies that outgained the market in 2023. Read on to find out more about these companies and the effect they’re having.

The S&P 500 is an index that tracks the stock performance of 500 of the largest companies listed on stock exchanges in the US. It’s widely regarded as a gauge for measuring the performance of large-cap US equities as it covers around 80% of the total market capitalisation of US public companies.

In January, the S&P 500 reached a new high. However, far from indicating a strong performance across the index, just a handful of companies, dubbed the “Magnificent Seven”, were largely responsible.

The 7 technology companies that are boosting the S&P 500

The Magnificent Seven has a huge market value. In fact, the seven stocks are the same size as the entire stock markets in the UK, Canada, and Japan combined. Analysis from Deutsche Bank also found the combined profits of the companies exceeded almost every G20 country in 2023.

The Magnificent Seven are all technology stocks and include:

Alphabet, the parent company of Google
Amazon
Apple
Meta, the parent company of Facebook
Microsoft
Nvidia
Tesla

Individually, the stocks of these companies soared between 50% and 240% in 2023. As a leader in AI, Nvidia saw the biggest gains and it may continue. In less than a year, the chipmaker doubled its market cap to reach $2 trillion (£1.58 trillion) at the start of 2024.

The Magnificent Seven could mask wider market trends

An index rising is usually viewed positively and as a sign that the market is performing well. However, the size of the Magnificent Seven could mask wider trends.

The S&P 500 is weighted by market capitalisation, so the movements of the largest companies affect the overall performance of the index more than smaller businesses. As a result, the stellar performances of the Magnificent Seven had an even larger impact on the index than you might expect.

According to the New York Times, the gains of the Magnificent Seven in the 12 months to January 2024 account for more than 60% of the return in the S&P 500. Indeed, after Tesla’s value increased by more than 64%, it led to an almost 3% rise in the S&P 500.

The impact the Magnificent Seven have on the index might lead you to think they were the best-performing companies. Yet, this isn’t the case. For example, Royal Caribbean experienced a rise of 212% in the last year. However, as the cruise line is a smaller company, it holds less weight in the index.

The weighting could mean that even if most companies included in the index experience a fall, a strong performance from the Magnificent Seven could lead to the S&P 500 rising. As a result, if investors only viewed the headline data, they could form a very different picture of how the market is performing than it is in reality.

The effect of the Magnificent Seven could work the other way too. If they suffered a fall in value, it would have a much larger impact on the S&P 500 than if a smaller business experienced a dip.

2 important takeaways investors may want to keep in mind

1. Look beyond the headline data

The overall performance of the S&P 500 would suggest the market is strong thanks to the Magnificent Seven. Yet, once you look at the performance of the remaining 493 companies, it’s still positive but more subdued.

Headline data without context can be misleading. So, if you’re making investment decisions, it’s often wise to dig a little deeper.

2. Don’t make investment decisions based on hype

With the Magnificent Seven featuring in headlines around the world, you might be tempted to invest in them. However, one year of strong growth doesn’t automatically mean an investment is right for you. It’s important to consider whether it suits your profile and goals, and how it might fit into your wider portfolio.

Contact us to talk about your investment portfolio

If you want to review your investment portfolio, please contact us. We could help you identify investment opportunities that are right for your goals and risk profile. Please get in touch to speak to 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 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.

While many economies are still struggling with high inflation there are signs that the pace is starting to slow, which could pave the way for interest rate cuts later this year.

To reflect this, the OECD has lifted its 2024 global growth forecast by 0.3%, when compared to the end of 2023, to 2.9%. However, the international organisation warned that central banks should ensure underlying price pressures were “fully contained” before they cut interest rates.

Market rallies around the world on 22 February highlighted how interconnected markets are and how difficult it can be to predict movements.

US chipmaker Nvidia beat expectations and reported sales of $22.1 billion (£17.4 billion) in the final quarter of 2023 – a 22% increase when compared to the previous quarter and a huge 265% higher than in the final quarter of 2022. In fact, the company has gone from a market cap of $1 trillion to $2 trillion in a record eight months – less than half the time it took technology giants Apple and Microsoft.

It led to widespread optimism that the AI boom would continue. Tech-heavy US index Nasdaq jumped more than 2%, as Nvidia’s share price soared by 12%. The news led to Japan’s main index, the Nikkei, hitting a record high, Europe’s Stoxx 600 index increasing by 1%, and the FTSE 100 benefiting from a boost to its technology stocks.

Read on to find out what else affected markets in February 2024.

UK

The headline news is that the UK is in a technical recession, defined as two consecutive quarters of economic contraction.

The Office for National Statistics (ONS) figures show GDP fell by 0.3% in the final quarter of 2023, following a drop of 0.1% in the previous quarter. The ONS said the biggest drags on growth were manufacturing, construction, and wholesale.

The news places pressure on prime minister Rishi Sunak, who is expected to call a general election in the coming months.

ONS data also showed that UK inflation was unchanged in January at 4%. While positive news, as economists predicted a rise, it’s still double the Bank of England’s (BoE) 2% target.

The BoE’s governor, Andrew Bailey, said the bank needed more confidence that inflation would fall and stay low before it made cuts to interest rates. As a result, the BoE base rate remains at 5.25%. However, Bailey noted that inflation didn’t need to reach 2% before cuts would be considered, signalling that it could happen soon.

Tension in the Red Sea is continuing to affect supply chains around the world. The S&P Purchasing Managers’ Index (PMI) shows the manufacturing sector continued to contract in January, with the need for shipping firms to reroute vessels away from the Suez Canal contributing to challenges and rising costs.

In contrast, the PMI for the service sector showed three consecutive months of growth with the highest reading in eight months. The pace of new orders also increased, which led to firms hiring more staff.

After a pre-Christmas slump, retailers have benefited from sales bouncing back, according to the ONS. In January, retail sales volumes increased by 3.4% – the fastest growth recorded since April 2021.

However, the high street still faces significant challenges as consumers watch their spending during the cost of living crisis. The latest high-street casualty is well-known cosmetic brand The Body Shop, which filed for administration in February.

Europe

The eurozone is moving closer to reaching its inflation target of 2%. In the 12 months to January 2024, inflation was 2.8%. Steep falls of 6.8% in energy prices played a role in bringing down the headline figure.

The eurozone avoided falling into a recession, but the GDP data was far from positive. In the final quarter of 2023, eurozone GDP remained the same as the previous quarter as economies stagnated.

In response, the European Commission (EC) has cut its growth forecasts. The EC now expects the eurozone to grow by just 0.8% in 2024, while the wider EU is anticipated to grow by 0.9%.

There were warnings that Europe’s largest economy, Germany, could slip into a recession.

ING data suggest that German industrial production fell by 1.6% month-on-month in December, and was 3% lower than a year ago. What’s more, Destatis said German exports fell by 4.6% in December when compared to a month earlier as demand continued to affect business operations.

US

In the US, inflation fell to 3.1% in the 12 months to January and moved closer to the Federal Reserve’s 2% target.

Similar to other economies, the base interest rate was maintained in the US. However, speculation that rates would fall later this year led to the S&P 500 index reaching a new high on 7 February. This was driven by energy, consumer discretionary, and material stocks.

With a presidential election due to take place in the US in November, current president Joe Biden took the opportunity to state that the latest job figures show America’s economy is “the strongest in the world”.

Economists predicted that the US would add 180,000 new jobs in January. This forecast was far surpassed when figures showed 353,000 new jobs were created. In addition, average hourly earnings increased by 4.5% when compared to a year earlier and reached $35.55 (£28.10).

Both of these figures indicate that businesses are feeling confident about their prospects.

Asia

Over the last few decades, China has consistently been one of the fastest-growing major economies in the world. However, the International Monetary Fund (IMF) has warned that an economic slowdown is likely.

The IMF predicts China’s GDP will grow by 4.6% in 2024 although this growth will fall to 3.5% by 2028 due to weak productivity and an ageing population. While the figures may seem high compared to other countries, it follows growth of 5.2% in 2023 and is significantly below the medium-term average.

China’s markets have been experiencing volatility. As stock exchanges in Shanghai and Shenzhen fell to their lowest level since 2019 early in February, the government decided to remove the boss of the stock market regulator in a bid to calm the turbulence.

Official statistics from Japan show the country fell into a recession at the end of 2023. In the final quarter of the year, GDP fell by 0.1%, while the figure from the third quarter of 2023 was revised downwards to a fall of 0.8%.

The contraction means Japan is no longer the world’s third-biggest economy as it slipped into the fourth spot. Japan’s GDP fell to $4.2 trillion (£3.31 trillion) and is now lower than Germany’s GDP of $4.5 trillion (£3.55 trillion).

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.

Financial worries can harm the mental wellbeing of employees, and research suggests it could negatively affect the productivity of businesses too. As an employer, offering financial advice to your team could be a win-win.

Inflation has led to the cost of living soaring, so it’s not surprising that more households are concerned about their finances. What may be unexpected is the material impact it could have on your business.

A report from Aegon found that 12% of private workers missed work due to financial concerns in 2023. On average, these employees were absent from work for 4.7 days.

Staff taking time off work when they’re financially stressed could be just the tip of the iceberg. The report found that a more prevalent issue was presenteeism – where employees attend work but experience significantly reduced productivity due to personal and health-related factors.

Indeed, almost a quarter of employees surveyed said their work productivity had declined over the last two years due to financial worries.

These lost workdays are estimated to have collectively cost UK employers £10.3 billion over the year.

As younger generations are less likely to have accumulated wealth, it’s unsurprising that workers aged between 16 and 44 are more likely to be affected by financial stress.

Offering financial guidance as a workplace benefit could be valuable to both your employees and the business. Here are three reasons why.

1. You could help employees take control of their finances

Money concerns might affect more of your employees than you think.

According to research from National Debtline, almost half of UK adults started 2024 worrying about money, with 9% stating they felt unable to cope because of their finances. As high inflation continues to place pressure on households, nearly a third expect their finances to be worse by the end of 2024.

For some employees, meeting with a financial planner could identify steps they may take to improve their financial situation, or they might find they’re in a better position than they believe. As well as supporting daily money concerns, a financial plan could also address long-term worries, like whether they’re saving enough for retirement.

You might also want to signpost employees to organisations, such as StepChange, that could offer support if they’re struggling with debt.

If employees are taking time off work or experiencing lower productivity because they’re worried about finances, offering financial advice that’s either delivered to your team or on a one-on-one basis could have a direct effect on your business’s bottom line.

2. You can use financial guidance to highlight the benefits you provide

As an employer, you might offer financial benefits to your employees. Financial guidance offers a great opportunity to draw attention to them.

Taking the time to explain perks like salary sacrifice schemes, additional pension contributions, or group protection could mean more of your team makes use of them. Some of your employees may not know about all your workplace benefits, and others might not understand why they could be valuable to them.

Other perks could support reducing financial stress among your team too. For instance, providing access to a therapist may help them learn better ways to cope when they feel stressed.

Not only could discussing perks ease some of the financial concerns your employees may be facing, but it may benefit your business too. Being aware of workplace benefits could boost job satisfaction and improve employee retention.

We could work with you to review the financial workplace benefits you offer and improve awareness of them among your employees.

3. You could demonstrate you value your employees’ wellbeing

Don’t underestimate the importance of ensuring your employees feel valued – it could play an essential part in their job satisfaction and how long they remain part of your business.

Indeed, a 2023 survey published in People Management found that half of UK workers said they would prefer to have “great relationships” at work than a 10% pay increase. Demonstrating that your employees’ concerns are important to you could help improve relationships and how they view the business.

Contact us to talk about the financial wellbeing of your employees

If you’d like to discuss how we could improve the financial wellbeing of your employees, 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.

Workplace pensions are regulated by The Pension Regulator.

More than 1 million investors will be hit with a Dividend Tax bill for the first time in the 2024/25 tax year, according to an AJ Bell report. Read on to find out if you could be affected and discover some of the steps you could take to mitigate a tax charge.

A dividend is a way of distributing a company’s earnings to shareholders. Usually, dividends are issued quarterly, but some businesses may pay dividends monthly or annually. So, if your money is invested in a dividend-paying company or fund, you could receive regular cash payments from them.

Dividends from investments are not guaranteed. Companies may reduce or cut dividends if profits fall or the business faces risks.

Some business owners also choose to use dividends as a tax-efficient way to extract money from the company.

Dividends may play an important role in your financial plan and could supplement income from other sources. However, changes to the Dividend Allowance could mean your tax bill is higher than expected.

The Dividend Allowance will fall to £500 on 6 April 2024

In the 2022/23 tax year, you could receive up to £2,000 in dividends before Dividend Tax was due.

The Dividend Allowance fell to £1,000 for the 2023/24 tax year. The AJ Bell report suggests this meant an extra 635,000 people paid Dividend Tax. The Dividend Allowance will halve again on 6 April 2024 to just £500 – a move that is forecast to drag a further 1.15 million investors into the tax net for the first time.

The amount of tax you pay on dividends that exceed the Dividend Allowance will depend on which Income Tax band(s) the dividend falls within once your other income is considered. For the 2023/24 tax year, the tax rates on dividends are:

Basic-rate: 8.75%
Higher-rate: 33.75%
Additional-rate: 39.35%.

So, even though the Dividend Allowance is less generous than it once was, the tax rate you pay could still be lower than Income Tax.

5 practical ways you could lower your Dividend Tax bill

1. Review your total income

Managing the income you receive from other sources could help you avoid a Dividend Tax bill or reduce the rate of tax you pay.

If dividends fall within your Personal Allowance, which is £12,570 in 2023/24 and 2024/25, they will not be liable for tax. Similarly, ensuring your total income doesn’t push you into the higher- or additional-rate tax bracket could mean you benefit from a lower tax rate.

2. Plan as a couple to use both of your Dividend Allowances

If you’re planning with your spouse or civil partner, it’s important to note that the Dividend Allowance is per individual.

As a result, passing on some dividend-paying assets to your partner could mean you’re able to utilise both of your Dividend Allowances and collectively receive £1,000 in 2024/25 before tax is due.

3. Hold dividend-paying assets in an ISA

An ISA is a tax-efficient wrapper for your savings and investments.

Dividends that you receive from investments that are in an ISA will not be liable for Dividend Tax and won’t impact your Dividend Allowance. In addition, the profits you make when selling investments in your ISA are free from Capital Gains Tax (CGT).

In the 2023/24 tax year, you can add up to £20,000 to ISAs.

4. Use your pension to invest for your retirement

If you’re investing for your retirement, pensions may provide you with a tax-efficient way to invest. Investments held in a pension are not liable for Dividend Tax or CGT. In addition, you’ll receive tax relief on your pension contributions.

Remember, you cannot usually access your pension before the age of 55, rising to 57 in 2028. As a result, it’s important to consider your investing goals and time frame, as a pension may not be appropriate for you.

In 2023/24, you can usually add up to £60,000 to your pension (or 100% of your earnings, if lower) without incurring an additional tax charge. If you’ve already accessed your pension flexibly or are a high earner, your pension Annual Allowance may be lower.

5. Assess alternative ways to boost your income

Dividends are a popular way to boost your income, but there are other options you might want to explore too.

For example, payouts from bonds may be classed as interest and could supplement your income. Interest may be liable for Income Tax, but the Personal Savings Allowance (PSA), the amount of interest you can earn in a tax year before tax may be due, could mean it’s a useful option for you.

Your PSA depends on the rate of Income Tax you pay. In 2023/24, the PSA is:

£1,000 for basic-rate taxpayers
£500 for higher-rate taxpayers
£0 for additional-rate taxpayers.

Another option is to invest in non-dividend paying stocks or funds with the long-term goal of selling the assets for profit. The money you make selling investments held outside of a tax-efficient wrapper may be liable for CGT. However, the rate you pay could be lower than Dividend Tax and the Annual Exempt Amount could help you avoid a bill.

In 2023/24, the Annual Exempt Amount means you can make up to £6,000 profit before CGT is due. This allowance will halve to £3,000 in the 2024/25 tax year.

If CGT is due, the rate you pay will depend on which tax band(s) the taxable gains fall into when added to your other income. In 2023/24:

If you’re a higher- or additional-rate taxpayer your CGT rate would be 20% (28% on gains from residential property)
If you’re a basic-rate taxpayer, you may benefit from a lower CGT rate of 10% (18% on gains from residential property) if the taxable amount falls within the basic-rate Income Tax band.

Keep in mind that investment returns cannot be guaranteed. The value of investments can fall as well as rise.

Contact us to talk about your tax strategy for 2024/25

Using tax allowances and being aware of different options could reduce your overall tax liability. Please contact us to discuss your tax strategy for the 2024/25 tax year and beyond.

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 tax planning.

As Generation X, often described as those who were born between 1965 and 1981, starts to retire, research has found that many don’t feel confident about their financial future. If you’re worried about how secure your life will be once you stop working, there may be some practical steps you could take.

According to a survey from Just Group, 52% of Generation X say they are not confident that they will have enough saved for a good standard of living after work.

It’s not surprising that Generation X isn’t feeling confident about retirement – many are supporting other generations. 3 in 10 are providing financial support to adult children, while around 1 in 10 are helping elderly relatives.

So, you might not only be worrying about your circumstances but those of your loved ones. Supporting others financially could mean you’re neglecting your long-term financial wellbeing too.

If you’re nearing retirement, here are seven practical tips that could help you feel more confident about the future.

1. Understand what your income needs in retirement will be

There isn’t a one-size-fits-all answer when calculating how much you need to save for retirement. If you haven’t already taken a closer look at your income needs, doing so now could help you feel more confident. Sometimes the uncertainty can be more worrisome than the answer.

You might find you’ve put enough away to secure the retirement you want. On the other hand, if you find there’s a shortfall, you’re now in a better position to adjust your retirement plan or take steps to bridge the gap.

It can be difficult to take your annual income needs and understand how this relates to your pension or other assets. Working with a financial planner could be useful if you’re struggling to see how you could use a lump sum to create a regular income.

2. Review all your sources of retirement income

While your pension is likely to be your main source of income in retirement, it probably won’t be your only one.

You may receive a State Pension in your later years. For the 2024/25 tax year, the full new State Pension is more than £11,500 a year. This may not be enough to fund the retirement lifestyle you want alone, but it could provide a useful foundation to build on.

In addition, you might have other assets that you could use to create an income, such as savings, investments, or property.

So, if you’re worried you aren’t saving enough for retirement when reviewing your pension, a comprehensive financial plan could put your mind at ease.

3. Take steps to reduce debt

Taking steps to reduce outgoings by paying off debt ahead of your retirement could be useful.

Not only does it mean you may be financially secure with a lower income in retirement, but making overpayments could reduce the amount of interest you pay to service the debt.

With mortgage or rental repayments often being one of the largest bills households face, paying off a mortgage before you retire could be beneficial. Indeed, the Just Group survey found that homeowners are significantly more confident that they will achieve a good standard of living in retirement.

4. Check how your pension is invested

Usually, the money you pay into a pension is invested. Over the long term, potential investment returns may help your pension grow. As a result, checking your pension is invested in a way that’s appropriate for you could be valuable.

Typically, you’ll be able to choose from several different funds when deciding how your pension is invested. These funds will have different risk profiles and criteria, so you could choose one that’s right for your needs. If you haven’t selected a fund, your money will often be invested through the default option, which might not be right for you.

Keep in mind that investment returns cannot be guaranteed and investing carries risk. It’s important you choose a level of risk you’re comfortable with and that reflects your financial circumstances, as well as your retirement plans.

5. Make sure you’re claiming all the pension tax relief you’re entitled to

To encourage people to save for retirement, the government provides pension tax relief. This means some of the money you’ve paid in tax is added to your pension. As a result, a pension is a tax-efficient way to save for retirement.

Pension providers will usually claim tax relief at the basic rate on your behalf. However, if you’re a higher- or additional-rate taxpayer, you’ll need to fill in a self-assessment tax return to claim the full amount you’re entitled to.

6. Increase your pension contributions

If you find there is a gap between the value of your pension and the amount you need to live the retirement lifestyle you want, one of the most obvious options is to increase your pension contributions if you’re able to.

Even a small, regular boost can really add up. Your contributions will usually benefit from tax relief and, as the money is invested, it has the potential to grow during your working life. As investment returns will then be invested themselves, you could benefit from the effect of compounding.

In some cases, your employer may also increase the pension contributions they make on your behalf.

7. Book a meeting with a financial planner

It’s never too soon, or too late, to start working with a financial planner to create a tailored retirement plan. Whether you’re hoping to retire in the coming year or it’s still more than a decade away, a comprehensive financial plan could help you step into retirement feeling more secure and confident.

We could work with you to create a retirement plan that considers your goals and circumstances. Please contact us to arrange a meeting.

Please note:

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

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