Author: richard

While the sense of turmoil that defined Liz Truss’s brief premiership has thankfully subsided, the legacy of the measures she (tried to) implement still remains.

According to the Bank of England, the number of mortgage approvals hit its lowest level since 2009 – excluding Covid lockdowns – during January this year.

That means that the mortgage market has contracted for five months in succession, and many analysts believe this is a consequence of the ill-fated Mini Budget last September, which sent mortgage rates shooting up and products pulled off the market.

At the same time, we’ve seen annual house price growth slipping into negative territory for the first time since June 2020. According to Nationwide Building Society data, prices in February 2023 were down 1.1 per cent on the same month last year – the biggest dip since 2012.

As Robert Gardner, Chief Economist at Nationwide, notes: “While financial market conditions normalised some time ago, housing market activity has remained subdued.”

This, he believes, reflects the “lingering impact on confidence”, as well as continued high inflation and mortgage rates being well up on where they were in 2021.

Higher mortgage rates are having a particularly big impact on young homeowners. New figures from the Financial Conduct Authority (FCA) show that borrowers aged between 18 and 34 are more likely to be financially stretched than other working age adults.

The FCA also reports that 356,000 mortgage borrowers could face payment difficulties by the end of June next year. This includes those who are reaching the end of their fixed rate deal, who estimates suggest could end up paying a monthly average of £340 extra on their mortgage.

As the watchdog notes, being stretched doesn’t necessarily mean borrowers will miss payments, as some will be able to rely on savings, cut spending elsewhere or increase their incomes to cover their mortgage costs.

But while this might help homeowners meet their immediate mortgage commitments, that doesn’t help with their longer-term financial planning, particularly if they are actively working to achieve specific goals.

So if you’re among those who are struggling with mortgage costs right now, or are facing a big hike in the size of your repayments, it’s well worth asking for advice. You could speak to your lender, for instance, or consult free services such as MoneyHelper.

Speaking to a professional, regulated financial adviser can also be a good idea, as they’ll take a holistic look at your finances before offering guidance and support. With this approach, any advice will be given with your long-term financial and lifestyle goals firmly in mind, as you don’t want to be knocked off course as you’re working towards a specific aim.

Making big financial decisions and juggling conflicting interests can be really difficult, as you’re managing strong emotions while trying to make sense of technical jargon and details.

A professional financial planner will take an objective look at your situation, so you can have the peace of mind you need and confidence that you’re making the right decisions at the right time.

Please don’t hesitate to get in touch with us if you have any questions about managing your finances in the current climate. We’ll be happy to speak with you.

Plans by the French government to raise the retirement age by two years to 64 prompted widespread outrage, with protesters taking to the streets of Paris to make their objections heard.

The situation became so serious that police ended up firing tear gas at protesters, King Charles had to cancel his planned state visit to France, and you could have been forgiven for thinking that photos of the protests were actually images of a war zone.

Of course, observers in this country might be wondering what all the fuss is about. After all, the state pension age in the UK is currently 66 and the government is understood to be planning to increase it to 68, so some might argue that the French don’t know how good they have it.

But pensions and politics can be a toxic mix, so could recent events in Paris serve as a warning to politicians on this side of the Channel – not necessarily about civil disobedience necessarily, but about the strength of feeling that comes with making people wait?

The state pension age is due to go up from 66 to 67 by 2028 and then up to 68 from 2044.

Ministers were expected to announce in May that the changes would come much sooner – with a rise in the state pension age to 68 between 2037 and 2039. But the government now plans to wait until after the next general election before making this announcement.

Government insiders told the Financial Times that this is ostensibly because ministers want more time to review falling life expectancy figures, as lengthening life spans had previously been cited as a reason to justify increasing the state pension age.

Work and Pensions Secretary Mel Stride, meanwhile, believes a further review into the issue is needed because previous studies weren’t able to take into account “significant external challenges”, such as Russia’s invasion of Ukraine and the Coronavirus Pandemic.

However, another government source revealed: “They were gung-ho to raise the pension age, but they got cold feet.”

Announcing an increase in the state pension age could potentially alienate middle-aged voters, not necessarily to the point where they take to the streets, but at least enough to make them consider switching their vote.

Not wanting people to do that in the run-up to an election makes political sense, but delaying this announcement still piles uncertainty on people who really know what the deal is when it comes to their retirement.

As Paul Johnson, Director of the Institute for Fiscal Studies, observed: “Things do change – in this case projections of life expectancy – and it’s good to remain flexible in the face of change. On the other hand, this choice will affect those already in their fifties who need to be able to plan for retirement with some degree of confidence.

“Knowing when the roughly £10,000 a year state pension will kick in matters. As for the government, and hence the taxpayer, delaying the rise in pension age will cost north of £60 billion.”

Of course, any good financial adviser will tell you that you can’t rely on the state pension to fund your retirement, as it won’t be enough to cover all your living costs and give you the lifestyle you want and deserve. But it could still be a valuable top-up to your retirement income, so it’s important to know well in advance when you may be eligible to receive it, so you can factor it into your retirement plans.

This whole debate is an important reminder of why it’s so important to take matters into your own hands when it comes to planning for the future, at least as much as you possibly can. It’s in the government’s gift to decide when you can receive the state pension, so if you’re relying heavily on that income, deciding when you can retire is ultimately beyond your control.

By contrast, if you’ve made your own pension provision, you could be in a much stronger position to choose when you retire and take charge of your own destiny.

If you have any questions about planning for your retirement, please get in touch with us and we’ll be happy to speak with you.

Interest rates have been heading in one direction for more than a year now, rising from 0.1 per cent in December 2021 to 4.25 per cent today.

That’s had a very real and tangible impact on households in the form of higher mortgage repayments, and also pushed up the cost of borrowing for businesses too.

And as high inflation continues to bite, stretched businesses are being forced to pass on many of their costs to hard-pressed consumers.

Of course, the UK is by no means alone, as high inflation is affecting major economies all over the world, and forcing central banks to act accordingly.

For example, the US Federal Reserve recently raised interest rates by a quarter of a percentage point, taking rates from 4.75 per cent to five per cent. These are the highest rates seen in the US for more than 15 years.

So will the bubble burst or will the cost of borrowing continue to soar?

Well, a new forecast by the International Monetary Fund (IMF) says interest rates in major economies will fall to where they were before the pandemic, due to factors such as ageing populations and low productivity.

Furthermore, it believes recent increases in interest rates are “likely to be temporary”, as the rate of price increases will start to ease.

“When inflation is brought back under control, advanced economies’ central banks are likely to ease monetary policy and bring real interest rates back towards pre-pandemic levels,” the IMF said.

However, the IMF was non-committal on a number of points. For instance, it commented that how close to pre-pandemic levels interest rates will fall depends on “whether alternative scenarios, involving persistently higher government debt and deficits, or financial fragmentation, materialise.”

Significantly, it didn’t state precisely when it expects interest rates to come down – a useful piece of information for countless people, not least those who are due to renew their mortgages in the coming months.

The Bank of England Governor, Andrew Bailey, has been more precise, saying recently that he is “pretty confident” inflation will “fall sharply” from summer onwards.

Whether the IMF is right to play its cards close to its chest rather than make themselves hostages to fortune, as Mr Bailey may have done, remains to be seen, but one thing is certain:

We will be here to keep a close eye on the wider economic situation, monetary policy decisions, and what all this means for you and your finances.

If you have any questions about navigating these unpredictable waters and how you can make sure your money continues to work hard for you, please don’t hesitate to get in touch.

Chancellor of the Exchequer Jeremy Hunt was brought in as a safe pair of hands by Liz Truss amid the fallout from last year’s Mini Budget. Of course, Ms Truss herself did not survive much longer, and after being kept in post by Rishi Sunak, Mr Hunt delivered his Autumn Statement, in which he announced a package of tax rises and spending cuts worth £55bn.

Four months later, Mr Hunt finds himself in the unusual position of becoming just the second of the past five chancellors to hold a full Budget – the last one being Mr Sunak himself. As ever, the Chancellor must juggle different priorities, from managing global economic headwinds and tackling the cost of living crisis, to boosting productivity and encouraging more businesses to invest in the UK.

At the same time, Mr Hunt will be mindful of maintaining the confidence of the markets and assuring the voting public that the Conservatives are the party of fiscal responsibility. And of course, he will be acutely aware of the feelings of many backbench Conservative MPs who are calling for sweeping tax cuts at a time when the UK’s tax burden is at a 70-year high.

The political background

Since replacing Liz Truss as Prime Minister last October, Rishi Sunak has been keen to establish himself as a serious politician who can restore Britain’s financial and international credibility.

He began 2023 by unveiling his five priorities: halving inflation this year, growing the economy, reducing national debt, cutting NHS waiting lists and stopping small boats carrying migrants from crossing the English channel.

Mr Sunak also achieved a Brexit breakthrough last month by agreeing a new deal with the European Union designed to reduce the frictions on Great Britain-to-Northern Ireland trade, known as the Windsor Framework. In addition, the Prime Minister recently visited Paris to meet with French President Emmanuel Macron, where a £500m package to help stop migrants crossing the Channel in small boats was agreed.

Notably, both these announcements were characterised by much warmer relations than we have seen of late, with EU President Ursula von der Leyen addressing Mr Sunak as “dear Rishi” during the Windsor Framework announcement, and many of the newspapers observing an apparent bromance between the Prime Minister and the French President.

But these successes were quickly displaced in the headlines by other matters, such as WhatsApp messages sent by former Health Secretary Matt Hancock being leaked to The Telegraph and Gary Lineker’s criticism of the Government on Twitter triggering a national debate over the BBC’s impartiality.

The Conservatives also consistently lagged behind Labour in the polls over the last few months, and Leader of the Opposition Sir Keir Starmer actively sought to build on this by positioning his party as a government in waiting. For instance, Sir Keir and Shadow Chancellor Rachel Reeves met with policymakers and business leaders at the World Economic Forum in Davos earlier this year, and the Labour leader later visited Ukraine’s President Zelensky to reaffirm Britain’s continued support for the country if his party wins the next general election.

Meanwhile, Chancellor Jeremy Hunt sought to lay the groundwork for the Budget by warning that “significant” tax cuts in the Budget were “unlikely”, arguing instead that halving inflation was “the best tax cut right now”. However, we know from previous Budgets that even in grim economic circumstances, Chancellors often find some money in their back pocket to guarantee positive headlines the next day, and the government did trail some giveaways ahead of the speech, such as expanding free childcare to one-and two-year-olds and extending energy bill support to the end of June.

The economic background

The year started with a cautious hope that the UK may be over the peak of the inflation crisis. According to the Office for National Statistics (ONS), overall UK consumer price inflation fell from 10.5% in December to 10.1% in January – this was the third monthly fall in a row. However, it must be said that inflation remains well above the Bank of England’s target of two per cent, and many of the factors that have pushed up prices over the last year, notably Russia’s invasion of Ukraine, still exist.

There was further grounds for optimism in the latest economic figures, which showed that following a sharp fall of 0.5% in December, GDP grew by 0.3% in January, but looking more broadly, growth was found to be flat in the three months to January, so again, the picture is mixed. Meanwhile, interest rates have risen to their highest level for 14 years, with the Bank of England’s Monetary Policy Committee voting last month to raise the benchmark rate by 0.5% to 4%. This is the tenth interest rate rise in a row.

Clearly, Jeremy Hunt faced a very challenging backdrop as he rose to speak, so let’s take a look at what he announced.

The speech

Opening remarks
Mr Hunt began his statement by insisting that in the face of “enormous challenges”, the British economy is “proving the doubters wrong”.

The Chancellor’s statement was accompanied by forecasts from the Office for Budget Responsibility (OBR), which predicts that while the economy will shrink by 0.2% this year, it will avoid falling into recession.

The OBR then expects to see GDP go up by 1.8% in 2024, 2.5% in 2025, 2.1% in 2026 and 1.9% in 2027. Inflation, meanwhile, is tipped to fall from 10.7% in the final quarter of 2022 to 2.9% by the end of 2023.

Personal taxation and allowances

What 30 hours of free childcare for children over the age of 9 months.
When Introduction to be staggered. Working parents of two-year-olds can access 15 hours of free care from April 2024. This will be extended to all children from 9 months to two years from September 2024.

From September 2025, every single eligible working parent of children aged between 9 months and 3 years will be able to access 30 free hours per week.
Comment This provision will apply to eligible households where all adults are working at least 16 hours, from the moment maternity or paternity leave ends, for 38 weeks of the year.

What Government to pay childcare costs upfront for parents on Universal Credit.
When Date not confirmed.
Comment This will apply to parents on Universal Credit who are moving into work or want to increase their hours. They will be able to claim a maximum of £951 for one child and £1,630 for two children.

What 5p reduction to fuel duty to be extended for another 12 months.
When Immediately.
Comment Last year’s 5p cut will be maintained for another 12 months and the planned 11p rise in fuel duty will be cancelled.

What Tax on draught beer in pubs to remain frozen.
When From 1 August.
Comment Draught Relief extended from 5% to 9.2%, so that the duty on draught products in pubs will be up to 11p lower than the duty in supermarkets. Duty has been increased from 20% to 23% for wine, spirits and other fermented draught products.

What Universal Credit sanctions regime to be strengthened.
When Date not confirmed.
Comment Sanctions to be applied more rigorously to people who do not meet strict work-search requirements or choose not to accept a reasonable job offer.

Work coaches will receive additional training to apply sanctions effectively, and parts of the process will be automated to reduce error rates and free up work coach time.

Pensions

What Pensions annual tax-free allowance to go up to £60,000.
When 6 April 2023.
Comment The pensions annual tax-free allowance will be increased by 50% from £40,000 to £60,000. A welcome boost for savers who are able to take advantage of the tax benefits of pension contributions, although the taper applied to high earners could restrict the potential contributions.

What Lifetime allowance charge to be abolished.
When 6 April 2023.
Comment The lifetime allowance charge is to be removed next month, before the allowance is fully abolished in April next year. The Government hopes this will encourage over-50s to extend their working lives.

What Tapered Annual Allowance threshold will be increased.
When 6 April 2023.
Comment The adjusted income threshold for the Tapered Annual Allowance will be increased from £240,000 to £260,000.

What Pension Commencement Lump Sum (PCLS).
When 6 April 2023.
Comment The maximum Pension Commencement Lump Sum for those without protections will be retained at its current level of £268,275 and will be frozen thereafter.

What Money Purchase Annual Allowance to increase to £10,000.
When April 2023.
Comment This measure is designed to encourage working age adults not in employment to return and supplement their income, or boost their retirement savings.

Business investment and taxation

What Corporation Tax to increase to 25%.
When 6 April 2023.
Comment Corporation Tax is to go up from 19% to 25% for companies with over £250,000 in profits.

What Annual Investment Allowance increased to £1m.
When 1 April 2023.
Comment Introduced to incentivise investment, this means 99% of all businesses will be able to deduct the full value of all their qualifying investments from that year’s taxable profits.

What Full capital expensing.
When 1 April 2023.
Comment Every pound a company invests in qualifying IT equipment, plant or machinery can be deducted from taxable profits in full.

This will be in place for the next three years, although the Government wants to make it permanent “as soon as we can responsibly do so”.

What Enhanced R&D tax credits.
When 1 April 2023.
Comment An increased rate of relief for loss-making R&D intensive small and medium- sized enterprises (SMEs). Eligible companies will receive £27 from HMRC for every £100 of R&D investment.

In addition, SME companies for which qualifying R&D expenditure constitutes at least 40% of total expenditure will be able to claim a higher payable credit rate of 14.5% for qualifying R&D expenditure.

The cost of living crisis

What Energy Price Guarantee extended.
When Next three months until June.
Comment The Energy Price Guarantee will remain at £2,500 for the typical household for the next three months.

What Prepayment meter charges to be brought in line with direct debit charges.
When 1 July 2023.
Comment This will apply to over four million households on prepayment meters.

Other measures

What Funding for wraparound care at school.
When 2024-25 and 2025-26 academic years.
Comment Schools and local authorities will receive £289 million in start-up funding to increase the supply of wraparound care, so parents can drop their children off between 8am and 6pm.

What Increased funding for nurseries.
When September 2023.
Comment The funding paid to nurseries for the existing free hours offers will be increased by £204m from September, and then rise to £288m next year.

What Reforms to disability benefits.
When No date confirmed.
Comment The Work Capability Assessment is to be abolished and a new voluntary employment scheme for disabled people called Universal Support will be introduced.

The Government will spend up to £4,000 per person to help them find appropriate jobs and implement the support they need, and fund 50,000 places per year.

What £400m plan to increase the availability of mental health and musculoskeletal resources.
When No date confirmed.
Comment This measure is designed to reduce the number of people being forced to leave work because of a health condition such as back pain or a mental health problem.

What Measures to help children in foster care have a normal working life.
When April 2023.
Comment The Qualifying Care Relief threshold will go up to £18,140, which represents an average tax cut of £450 a year for qualifying carers.

What Increased funding for the Staying Close programme.
When By March 2025.
Comment Funding for the Staying Close programme will increase by £8.1 million in each of the next two years to help more care leavers find work.

What Mid-life MOT offer to be expanded.
When No date confirmed.
Comment The Department for Work and Pensions “Mid-life MOT” strategy will be enhanced to increase the number of people getting high-quality financial, health and career guidance ahead of retirement.

This will include an improved digital tool and up to 40,000 in-person mid-life MOTs for Universal Credit claimants aged 50 or above.

What New apprenticeships for over-50s.
When No date confirmed.
Comment Apprenticeships for over-50s who want to return to work, called Returnerships, will be introduced. These will run alongside sector-based work academies and skills boot camps.

What £11bn increase to defence budget.
When Over the next five years.
Comment No doubt influenced by the war in Ukraine, the government will add a total of £11bn to the UK’s defence budget over the next five years, taking the overall budget to nearly 2.25% of GDP by 2025.

What £33m to support military veterans.
When Over the next 3 years.
Comment An additional £33m is to be invested in increasing the capacity of the Office for Veterans’ Affairs, supporting veterans returning from their service with injuries, and increasing the provision of veteran housing.

What 12 new investment zones.
When Investment Zone proposals to be agreed by the end of the year.
Comment These will be spread across the West Midlands, Greater Manchester, the North East, South Yorkshire, West Yorkshire, East Midlands, Teesside and Liverpool, and there will be at least one in each of Scotland, Wales and Northern Ireland.

Each of these areas will apply to create an investment zone in a chosen location, and if successful, they will be able to access £80m worth of support for areas such as skills and infrastructure, as well as tax reliefs and grant funding.

What Regeneration and levelling up projects.
When Various.
Comment Over £200m is to be invested in high-quality local regeneration projects across England, and a further £161 million for high-value capital
regeneration projects in city regions across England.

More than £400m will be made available for new Levelling Up Partnerships and £8.8bn will be allocated over the next five-year funding period as part of the second round of the City Region Sustainable Transport Settlements.

What Potholes fund increased by £200m.
When 2023-2024.
Comment The increase is expected to enable local authorities to fix the equivalent of up to 4 million additional potholes across the country.

What Increased funding for Carbon Capture Usage and Storage.
When Shortlist of projects to be announced later this month.
Comment Up to £20bn of support is being allocated for the support of Carbon Capture Usage and Storage development.

What Great British Nuclear to be launched.
When This year.
Comment

The Government will launch Great British Nuclear to support new nuclear builds and bring down costs. The initiative is aimed at increasing the UK’s resilience to future energy price shocks

Mr Hunt has also confirmed that, subject to consultation, nuclear power will be classed as “environmentally sustainable”.

What Extra funding for devolved governments.
When 2023-24 and 2024-25.
Comment The Scottish Government will receive an additional £320m, the Welsh Government will get an extra £180m, and the Northern Ireland Executive will receive a further £130m.

Conclusion and reactions

Reaction to the speech
Labour leader Sir Keir Starmer responded to the Budget speech by criticising Mr Hunt for “dressing up stagnation as stability”. He described the Chancellor’s announcements as being “nowhere near the mark”, adding that “the more he pretends everything is fine, the more he shows just how out of touch they are”.

The Guardian newspaper expressed a similar view, saying “Hunt’s Budget shows Britain is doing less badly – that’s not the same as doing well”. The Daily Mail, which had effusively hailed Kwasi Kwarteng’s ill-fated fiscal event as “a true Tory Budget”, adopted a more cautious approach this time round, leading with the view that Hunt was offering a “carrot and stick”.

However, there was praise from some quarters, with the CBI describing the Budget as “a strong second act in the Chancellor’s plan for stability and growth”, and saying that the measures to help households and businesses will “secure the growth we need to boost living standards for all”.

The Institute for Fiscal Studies (IFS) responded by noting the significance of what wasn’t announced. For example, it said Mr Hunt had made a “political choice” by offering no funding to improve pay offers to striking public sector workers, and pointed out that the big personal tax rises planned for next month will still go ahead. The IFS added that while Mr Hunt is optimistic, households are still “in the midst of an enormously difficult period”.

Right-wing think tank Institute for Economic Affairs tentatively praised some aspects of the Budget, such as the abolition of the lifetime pension allowance and steps to encourage business investment. However, it said the Budget “lacks ambition” and is “nowhere near enough to jumpstart the British economy”, as the tax burden and public spending “remain historically high”.

The Resolution Foundation, meanwhile, had a mixed view of the Budget, stating it is likely to be more successful in boosting employment than investment. The organisation was particularly critical of Mr Hunt’s tax changes to discourage early retirement, describing them as “hugely regressive and wasteful”.

Conclusions
While many of the measures announced in the Budget, such as the changes to childcare and pensions, were significant, it was notable that there was no single headline-grabbing, rabbit-out-of-the-hat moment.

This will likely suit Mr Hunt, as he seeks to consolidate his position as a steady, competent pair of hands, following the chaos we saw last autumn.

At the same time, it makes political sense for the Conservatives to tentatively park their tanks on Labour’s lawn on issues such as the cost of living, rather than make a full-on assault, as the general election is still likely to be at least a year away. Given the current stage of the electoral cycle, any eye-catching giveaways may have to wait.

The OBR’s view that the UK will avoid slipping into recession this year is undeniably welcome news, and Mr Hunt was certainly keen to push an optimistic view of the country’s economic prospects.

But whether the Chancellor’s measures will help to kickstart growth, insulate households and businesses from soaring costs and boost productivity remains to be seen. Whatever happens, you can be confident that we will be at your side throughout, helping you work towards your financial goals.

Early retirement – retiring any time before the state pension age of 66 – is the dream for many.

The pandemic focused many people’s minds; making them think about what they want out of life – and for many in a position to make big changes, early retirement was the big one.

The House of Lords Economic Affairs Committee has recently been looking into what’s driven an increase in economic inactivity over the last three years, and found that the key factor is 50- to 64-year-olds choosing to retire early.

In fact, the number of people taking up this option since 2020 is higher than the number of people who’ve left work because of long-term sickness.

But a particularly interesting finding of the report is that many of those choosing to retire early were already self-employed or working part-time, and therefore already winding down their careers.

That suggests that many of these people were confident that they had the financial means to retire before the age of 66.

Early retirees in a strong financial position
The House of Lords committee collated a number of recent studies, including ONS figures showing that two-thirds of 50- to 64-year olds who have left work since the pandemic began, own their homes with no outstanding mortgage.

Peers also looked at data from the Financial Conduct Authority, which showed 92 per cent of 55- to 64-year-olds who had retired, or whose partner had retired, in the year to May 2022, owned their own home. Some 78 per cent of this group owned their property outright and had no outstanding mortgage debt.

As the committee notes: “This evidence supports the view that over-55-year-olds who have retired early during the last year are, on average at least, relatively well resourced.”

It’s an interesting trend, given that Chancellor of the Exchequer Jeremy Hunt recently called for older people who have left the workforce to come back, as this would help to “fix our productivity puzzle”.

In a keynote speech, he said: “To those who retired early after the pandemic or haven’t found the right role after furlough, I say: ‘Britain needs you’ and we will look at the conditions necessary to make work worth your while.”

Whether Mr Hunt’s rallying call succeeds remains to be seen, but he may be wise not to get his hopes up, particularly as the House of Lords report shows that many people who have retired recently have a mixture of funding sources, ranging from savings and private pensions to investments.

Gaining a level of financial freedom, enough for you to finish your working life early, is a very common and understandable goal, so is it realistic for ministers to ask people who’ve accomplished this to go back to the daily grind?

The House of Lords committee isn’t optimistic, saying: “The fact that so many recent retirees express no desire or expectation to work suggests it is unrealistic to base policy solutions on persuading or facilitating these people to re-enter the labour force.”

Will this trend continue?
Although the UK narrowly avoided falling into recession at the end of last year, ONS figures showed there was zero growth in Q4 2022.

This prompted Jeremy Hunt to point out that while the figures showed the “underlying resilience” of the economy, we are “not out of the woods”. Indeed, the Bank of England is still forecasting a recession at some point in 2023.

So if you’re among those exploring the option of taking early retirement, what could this mean for you and your lifestyle choices?

According to forecasts by the National Institute of Economic and Social Research, fewer workers will be able to afford to retire early over the next few years, and more 50- to 64-year-olds will return to the workforce.

This, it believes, is because high inflation is leading to people’s savings “being run down”, and could lead to the participation rate for the working age population soon going back to its pre-pandemic level.

Increasing the size of the labour force might be good news for the Chancellor, but if you dream of retiring early and want to make sure your plans aren’t knocked off course by economic headwinds, now could be the perfect time to get a professional financial planner to look at your finances.

With a regulated specialist in this area offering you guidance and support, you’ll be in a much stronger position to work towards your goals, make the right financial decisions and get the retirement you deserve.

Please don’t hesitate to get in touch if you have any questions.

Have you ever gone to the till to pay for an item, handed over cash from your pocket and had it refused? As cashless payment methods, such as digital payments by smartphone, become increasingly popular, many businesses are no longer accepting cash.

Or at the very least, many are openly asking if their customers can avoid using cash to make a payment.

According to research by LINK, nearly half of UK consumers have been somewhere that cash payments have either not been accepted or actively discouraged.

But are the businesses adopting this practice overestimating the appeal of cashless solutions, and potentially alienating those who prefer the alternative?

The figures certainly suggest so, as 49 per cent of people surveyed by LINK said being unable to pay in cash or being discouraged from doing so was inconvenient.

However, this is causing more than minor grumbles. For example, 13 per cent of those polled said they find it harder to keep track of their finances if they have to make card payments in shops rather than use cash.

An important point given the current economic climate, when households are under huge financial pressure and actively counting the pennies much more, especially when it comes to buying food.

Figures from LINK also showed that nearly three-quarters of shoppers used cash in the two weeks leading up to the survey, while over one in three said their use of cash would stay the same for the next six months.

That’s not a small minority of people, and many will probably use a mix of cash and cashless solutions day to day.

So while alternatives such as contactless and mobile payments are clearly popular with millions of people, and look set to remain so, that doesn’t have to mean that cash is taken off the table as a payment option.

It was interesting to note the specific locations where cash acceptance was found to be particularly limited, with car parks, cafes, restaurants and public transport leading the way.

It’s fair to say that these are places used by people of all ages and from all walks of life, so it could be short-sighted of them to rule out or discourage cash payments.

Many of the older generation, for example, may feel far more comfortable paying for goods and services with coins and notes than with an app on a smartphone.

As a separate study by the Royal Society for the Encouragement of Arts, Manufactures and Commerce revealed, 19 per cent of Britons believe they’d struggle to cope in a cashless society, and while 29 per cent say they would be able to cope, it would still be a major inconvenience to them.

So while consumer behaviour is changing, fuelled by factors such as the pandemic and the ever-growing capabilities of digital technology, cash remains a valuable option for many people.

Perhaps true progress means giving people a genuine choice of payment options, with cash sitting happily alongside contactless and Google Pay, so everyone’s preferences can easily be met and people aren’t excluded.

The end of the tax year is fast approaching and time is running out.

So in the weeks ahead of the April 5th deadline, what steps should you be taking to make the most of your money and reduce your tax bill?

Here are just a few areas you could look at.

Use your ISA allowance
You can save or invest up to £20,000 a year with a cash ISA, a stocks and shares ISA, or a combination of the two, tax-free.

If you haven’t invested this amount by April 5th, you can’t carry your allowance over and you’ll end up missing out.

Top up your pension contributions
You can pay up to £40,000 into your pension in a single tax year before you have to pay tax on it, so if you aren’t particularly near to this limit, diverting some money into your pension could be a good way to mitigate your wider tax bill.

Use Your Capital Gains Tax allowance
If you sell assets or personal possessions that are worth more than £6,000 – apart from your car – you must pay tax if the proceeds exceed £12,300.

Genuine gifts from a civil partner or spouse don’t count towards the allowance, so it’s worth checking where potential tax savings could be made.

Use your dividend allowance
A dividend allowance is an amount of dividends that you don’t have to pay tax on, which is currently £2,000. So if you’re a company director or shareholder, or get dividends through a Stocks and Shares ISA, you can receive up to this amount tax-free.

Use your Personal Savings Allowance
This allowance lets you earn interest on your savings without paying tax on it, but the size of the allowance depends on your income tax rate.

If you’re a basic rate taxpayer (20 per cent), you can earn £1,000 in savings interest per year tax-free, while higher rate taxpayers (40 per cent) can earn £500 in savings interest per year with no tax. Additional rate taxpayers (45 per cent) don’t get an allowance.

This is by no means an exhaustive list, and many of these options may not even apply to you.

That’s why it’s definitely worth speaking with a professional, regulated financial adviser with experience in this field. They can talk through the choices open to you to help you make the right decisions.

April 5th isn’t far away, so don’t delay!

As 2022 drew to a close, there was a mixed picture worldwide as major economies sought to respond to soaring energy prices, rising living costs and the continuing impact of Russia’s invasion of Ukraine.

In our first round-up of the year, we look at where we left off in 2022 all across the world…

UK
The year ended with more downbeat economic news for the UK, with the Office for National Statistics reporting that the economy shrank by 0.3% in the three months to September. This was worse than its previous estimate of 0.2%, and Chancellor of the Exchequer Jeremy Hunt subsequently conceded that the “very challenging” economic situation would “get worse before it gets better”.

Poor growth was driven largely by soaring inflation, with official figures showing that prices increased by 10.7% in the year to November. Although this is down on the 11.1% figure recorded in October, this is still well above the Bank of England’s 2% target.

The Bank has sought to tackle rising prices by increasing interest rates, and in December, the base rate was raised by 0.5% to 3.5% – its highest level in 14 years.

The prospect of further interest rate rises appears to be putting many people off buying property, with Halifax reporting the biggest drop in UK house prices in 14 years during November. In addition, Nationwide said it saw the largest month-on-month fall in house prices in more than two years, as well as a “sharp slowdown” in annual house price growth.

According to forecasts from the Bank of England, the pressure on existing homeowners is also set to grow, with approximately 4m households facing higher mortgage payments in 2023, with the average monthly mortgage bill going up from £750 to £1,000.

High inflation also had an impact on government borrowing, which hit £22bn in November 2022, up from £13.9bn a year earlier. This was the highest November level of borrowing on record, and was fuelled by the government’s support for households struggling with rising energy bills.

Meanwhile, the Chancellor has confirmed that he will deliver his next Budget on March 15th, in which he will outline the government’s upcoming tax and spending plans. This will be accompanied by a forecast from the Office for Budget Responsibility.

A key priority for Mr Hunt will almost certainly be providing reassurances to UK investors, as a poll by City broker HYCM found that 78% of investors believe the measures announced in the recent Autumn Statement won’t have a positive impact on their portfolios. Only 27% of investors said they had faith in the Conservative Party’s economic policies, while 30% said that they don’t think Jeremy Hunt is the right person to be Chancellor.

There is also considerable pressure on the government to act in the face of widespread industrial action. Nurses, Border Force staff, Royal Mail workers and rail staff were among those to walk out during December as they called for better working conditions and pay increases to keep up with rising prices. Prime Minister Rishi Sunak, however, has described union leaders as “unreasonable” and said he is working on “new tough laws” to limit the disruption caused by strikes. Significantly, he refused to rule out banning emergency services workers from taking strike action.

The run-up to Christmas is a crucial time for many sectors of the economy, notably retail, but pressure on household budgets led to sales volumes dropping by 0.4% in November. However, the ONS did note a surge in food sales throughout the month, which suggests many people were buying food early to try to spread out the cost of Christmas.

The World Cup also had a big impact on people’s spending in December, with many turning to pubs to watch England in action. The British Beer and Pub Association stated that while the tournament won’t “make up for an extremely difficult trading environment”, it may “at least provide some short-term uplift to the industry”.

UK businesses are also facing ongoing uncertainty over energy costs, as an announcement on extending support for struggling firms due before Christmas was postponed until the new year. Kate Nicholls, Head of UK Hospitality, said the delay was “disappointing”, as “businesses are facing daily changing rates and contract decisions in Jan, so certainty was really needed”.

The government has, however, confirmed it plans to address rising energy prices by doubling imports of US gas over the next year and approved the UK’s first new deep coal mine for 30 years.

Clothing chain Joules was among those to struggle amid the cost of living crisis, as it fell into administration in November. However, it was rescued in December by retailer Next, which means about 100 Joules stores will remain open. Next will own a 74% share of the business, with the remaining stake being owned by founder Tom Joule.

In the financial services sector, businesses are facing some of the biggest regulatory reforms in more than 30 years, as the government has unveiled plans to “cut red tape” and “turbocharge growth” in the industry. According to the Chancellor, the proposed changes will secure the UK’s status as “one of the most open, dynamic and competitive financial services hubs in the world”, and enable the country to “seize on our Brexit freedoms”.

Although Mr Hunt is keen to talk up the opportunities offered by the UK’s departure from the European Union, his optimism is not universally shared. According to the London School of Economics, the rising cost of importing food from Europe post-Brexit pushed food prices up by nearly £6bn in the two years to the end of 2021, and added £210 to the average household food bill during this period.

Meanwhile, a survey of businesses by the British Chambers of Commerce found that 77% of firms, for which the Brexit trade deal with the EU applies, don’t believe it is helping them to increase sales or grow their business. In addition, more than half of those polled said they are struggling to adapt to new trading rules.

On the financial markets, the FTSE-100 Index ended the month at 7.451 points. While the index rose by 0.91% over the year, it fell by 1.38% during December. The pound ended 2022 up 0.41% against the dollar.

Ukraine
2022 ended on a grim note as Ukraine was struck by a wave of Russian missiles on New Year’s Eve.

This came shortly after Ukraine’s President Volodymyr Zelensky, who was named Person of the Year by Time Magazine, travelled to Washington for his first overseas trip since Russia invaded in February.

In a significant demonstration of western solidarity, Zelensky met with his US counterpart Joe Biden and gave a speech to Congress, while the US committed to supplying Ukraine with a Patriot missile system.

The UK, meanwhile, has confirmed it will send hundreds of thousands of rounds of artillery ammunition to Ukraine, and Prime Minister Rishi Sunak called on other European nations to either maintain or increase military support for the country during 2023.

Europe
December saw European Union members agree to cap soaring wholesale gas prices for households. From February 15th, the cap will be triggered if prices exceed €180 per megawatt hour for three consecutive days. Germany had previously opposed the move, but agreed after securing stronger safeguards in case the cap had a negative impact.

Individual member states are pressing ahead with their domestic support packages too, with Spanish Prime Minister Pedro Sánchez confirming that another €10bn will be put towards measures such as helping low-income households and cutting VAT.

EU leaders have also agreed to implement the minimum taxation component of the OECD’s reform of international taxation. This means the profits of large multinational and domestic groups or businesses with a combined annual turnover of at least €750m will be taxed at a minimum rate of 15%.

In another significant move, EU interior ministers agreed to accept Croatia into the Schengen zone ahead of it adopting the euro in the new year. However, Austria and the Netherlands voted against admitting Romania and Bulgaria to the Schengen zone as well, due to concerns over their management of illegal migration.

Meanwhile, the EU agreed to introduce a law that blocks products linked to deforestation from being sold in the single market. The bloc believes this will help to reduce international carbon emissions, although some critics have argued it could damage worldwide trade.

In addition, phone manufacturers have been given until the end of 2024 to adopt a common charging cable. This means major tech brands such as Apple will be unable to sell new devices in EU member states unless they switch to a universal cable. This came shortly after the European Commission ruled that airlines can offer 5G technology on board planes, which could potentially mean passengers will not have to put their phone on aeroplane mode when they fly.

Notably, the aviation sector is enjoying a resurgence following the end of Covid-related restrictions, with the Tui Group reporting that its revenue almost quadrupled in the last year. Whereas the company saw a €2bn loss in 2021, its adjusted EBIT rose to €409m in 2022. Hungarian carrier Wizz Air also reported positive figures, with passenger numbers rising by 70% in November 2022 year-on-year to 3.6m.

Nevertheless, the tough economic climate in Europe was reflected on the financial markets, with Germany’s DAX index falling by 4.17% in December to end the month at 13,923 points. Meanwhile, the French CAC 40 index fell by 3.98% in the month to end at 6,473 points.

US
The US continued to confound analysts warning of recession, as its gross domestic product went up by 2.9% between July and September 2022, which is higher than many observers had expected. Year-on-year inflation has also come down slightly, falling from 7.7% in October to 7.1% in November, which was again better than had been widely forecast.

Nevertheless, inflation remains uncomfortably high, which prompted the Federal Reserve to lift its key interest rate by 0.5%. This takes the US benchmark rate to 4.25% – 4.5% – the highest rate in 15 years. But significantly, the size of the rate hike was smaller than the 0.75% increases seen in recent months.

The employment market also performed strongly in the face of strong economic headwinds. Although the unemployment rate remained at 3.7% in November, employers added 263,000 jobs throughout the month and average hourly pay went up by 5.1%.

Despite this apparent good news, several prominent names saw staff walkouts, with Starbucks employees at 100 stores going on strike for three days due to a dispute over joining unions. Meanwhile, staff at The New York Times downed tools for the first time in five decades for 24 hours as they demanded better pay and benefits.

December also saw the US government seek to boost trade opportunities and strengthen relations with African nations at the US-Africa Leaders Summit. US Secretary of State Anthony Blinken believes that by engaging with “one of the world’s fastest-growing economic regions”, there is the potential to build “one of the 21st century’s most successful economic partnerships”.

As ever, President Biden’s predecessor Donald Trump wasn’t far from the headlines, as he started offering digital trading cards depicting him as, among other things, an astronaut and a superhero. However, his bid to be re-elected as President could be in jeopardy, as the committee investigating the 2021 riot at the US Capitol has recommended four criminal charges against him, including inciting or assisting an insurrection. The Department of Justice is not legally obliged to accept its recommendations and will now have to decide whether criminal charges will be filed against Mr Trump.

December also saw the latest chapter of the continuing drama at social media giant Twitter. Chief Executive Elon Musk asked users of the platform if he should stand down and pledged to abide by the result. More than half of those who responded voted yes, and he has promised to resign when someone “foolish enough” to replace him has been found.

Twitter also drew heavy criticism after the suspension of several journalists from the platform, with Melissa Fleming, the UN’s Under Secretary General for Global Communications, stating that “media freedom is not a toy” and is “the cornerstone of democratic societies”.

The difficult global economic climate weighed heavily on the financial markets during December, with the Dow Jones falling by 3.73% to end at 33,147, and the more broadly-based S&P 500 index falling by 5.7% to end at 3,839.

Far East
China’s decision to relax its zero-Covid policy has led to brighter economic forecasts for the country, with US bank JP Morgan predicting its GDP will rise to 4.3% in 2023. However, it also expects China will go through a “transitional pain period” before seeing a “strong recovery”.

Inevitably, the relaxation of Covid restrictions has led to a surge in cases across the country, which has raised concerns in other parts of the world. For example, the UK’s Department of Health and Social Care has asked people travelling from China on direct flights from January 5th to take a pre-departure Covid test. China’s borders will be fully reopened on January 8th.

Coronavirus restrictions were a big factor behind a slump in the performance of electronics manufacturer Foxconn, which supplies Apple. The company’s revenue fell by 11% in November, when compared with the same period of the previous year.

This came as the Chinese government sought to tackle US trading curbs that mean chips made using American tools cannot be exported to China. The government is reportedly drawing up a support package worth £116.5bn to keep its semiconductor industry afloat and establish itself as a rival to the US in this field.

Meanwhile, Japan is to double its military spending over the next five years, which will include purchasing long-range missiles from the US. The country is also collaborating with Italy and the UK to develop a new fighter jet that makes use of artificial intelligence technology.

On the financial markets, Hong Kong’s Hang Seng index rose by 5.92% to end December at 19,781, while Japan’s Nikkei Dow index fell by more than 6% to end the month at 26,094. China’s Shanghai Composite index rose slightly by 0.02% to end at 3,971, while the market in South Korea fell by 1.93% to 2,236.

Emerging Markets
The United Nations has predicted that India will overtake China as the most populous country in the world by the middle of April. This comes as the two nations continue to purchase Russian oil, despite western nations imposing sanctions on Russia following its invasion of Ukraine. India and China are now the largest buyers of Russian oil, which is being offered at a discounted price to Asian nations.

Russia, meanwhile, is understood to be strengthening its defence relationship with Iran, with the US stating that it believes they are considering jointly producing lethal drones.

As the conflict in Ukraine continues, the prospect of it escalating into a global nuclear conflict remains a very real possibility. However, Russia’s President Vladimir Putin has insisted it will not use its nuclear weapons first and argued the country has not “gone mad”.

In Brazil, December saw the death of one of its greatest heroes – football icon Pele, and the country’s president declared three days of national mourning.

On the financial markets, India’s BSE Sensex index fell by 0.48% to end the month at 60,840, while Russia’s MOEX index saw an upturn of 0.33% to end at 2,154. Brazil’s Bovespa index, meanwhile, fell by 0.46% to end the month at 109,735.

And Finally…
Whether England football fans truly believed that 2022 was going to be their year is open to debate, but at least one supporter really felt that the Three Lions would return from Qatar victorious. Keri Baxter, managing director of Poole-based Wholesale Clearance UK, was so confident that he arranged for his firm to print 18,000 t-shirts, bearing the words “England”, “Cup Winners 2022” and “It’s Finally Home”.

Although he admits to being “gutted” by England’s quarter-final defeat to France, he has the added inconvenience of struggling to sell this strictly limited edition merchandise.

Across the border in Scotland, another man was indulging in another popular national pastime – spotting famous faces in food. Myles Campbell from North Ayrshire was enjoying a packet of Revels when he spotted one chocolate that he believed looked like a “wee baby Jesus”. Coming as it did in the run-up to Christmas, Mr Campbell couldn’t bring himself to eat it and the chocolate is also off limits to his children.

If you don’t have a will in place, it could be because you’ve just not got round to it yet.

But you’d be surprised at how many people actively choose not to write a will, often for quite flimsy and questionable reasons.

So we wanted to highlight some of the most common excuses for not writing a will and debunk them one by one.

I’m too young
Many people see a will as something they’ll only need in later life, perhaps when they’re thinking about how much money they want to leave to their children and grandchildren.

Of course, many of us will hope we’ll live to a ripe old age, but none of us can be 100 per cent sure of that, so it certainly pays to have your affairs in order, and have control over where your money goes if the worst happens.

There’s also no age limit on having a will, so there’s nothing stopping you getting one as soon as you turn 18, when you might be in work, earning money, accruing wealth and starting a family.

I’m not wealthy enough
The amount of money you have doesn’t matter, as there is no minimum or maximum threshold you must meet to be able to write a will.

It might also be the case that you have more than you think. For example, given the scale of house price increases in recent years, your property might be worth a good deal more than you think, as could its contents.

It’s too complex
Working out what to do with your inheritance can be complicated, particularly if you’re worried about the tax implications, and we understand that.

However, there is plenty of support out there. A professional, regulated financial adviser can offer guidance and talk you through all the options open to you.

With the right help and support, you can be confident that your estate will be set up in a way that you understand and that maximises the amount available to leave behind to your loved ones.

Everything will automatically go to my partner
That’s not the case if you’re not married. If you die without a will, the Rules of Intestacy state that your inheritance must go to your closest living blood relatives.

So even if you’ve been cohabiting with a partner for many years and have children together, the children would be first in line to receive your inheritance. Your partner, meanwhile, wouldn’t have any automatic right to inherit anything at all, which could be quite distressing for them.

I don’t like thinking about dying
Confronting our mortality can be difficult, and death has always been something of a taboo subject.

With that in mind, it’s perhaps no surprise that people don’t want to make plans for when the worst happens, or at the very least, decide to put it off.

But we are all mortal, so if we have people who love us and depend on us, we can do them a huge favour by getting our affairs in order. Not only does it make the process of dealing with your estate much easier after your death, it also reduces the chances of any family disputes arising, at a time when emotions will already be running high.

If you have any questions about estate management and writing a will, please feel free to get in touch with us, and we’ll be happy to help.

The Chancellor’s decision to protect the state pension triple lock was one of the most headline-grabbing aspects of the recent Budget.

But what exactly is the triple lock and what does it mean?

In short, it’s a mechanism designed to make sure the state pension doesn’t lose value, so it will go up by whichever is highest of the following measures:

Average earnings
The rate of inflation (as per the Consumer Price Index)
2.5 per cent
So if, for example, average earnings went up by three per cent, the state pension would go up this amount, provided the rate of inflation was also lower than this amount.

Or if average earnings went up by two per cent and inflation increased by three per cent in the same year, the state pension would go up by the latter amount.

The Chancellor’s pledge to protect the state pension triple lock was therefore very significant in light of the current cost of living crisis and inflation being at a 40-year high.

With this guarantee in place, pensioners are in a stronger position to withstand the tough economic climate and make ends meet at a time when so many people are really feeling the pinch.

However, it should be noted that Jeremy Hunt didn’t commit to saying how long the measure would remain in place.

This is a costly policy for the government at a time when it wants to spend public money more efficiently and bring down public debt. So there’s every chance we could again be asking about the future of the triple lock before the end of the next financial year.

We should also stress that the full state pension is currently £185.15 per week, which works out to less than £10,000 a year.

So even though it’s due to rise by £870 in April 2023, that’s still far from being enough money to live off, let alone enjoy the quality of life that you aspire to during your retirement.

That’s why you should make sure you have plans in place to supplement the state pension, such as workplace pensions, private pensions and other investments, and ensure that these represent the bulk of your income.

Then you can set yourself up to enjoy a much more comfortable lifestyle during your retirement, having the means to live the kind of life that you want and deserve.

If you have any questions about saving for retirement and making the most of your pensions, we’re here to help and will be happy to speak with you.

Get in touch and take charge of your retirement planning today.