TOMD Content Deployment - Page 11 of 77 - Just another Content Deployment Sites site

Navigating a multi-retirement reality

Over the years, a number of notable trends, such as increased longevity and individuals taking on greater responsibility for their pension provision, have clearly altered the retirement landscape significantly. Now, new trends look set to further change the face of retirement, adding complexity to the retirement planning process and making early planning ever more essential.

Multi-retirement households

One of the new trends relates to families with more than one generation retired at the same time. A key impact of this trend will be the extra strain placed on families’ finances leaving many households needing to reassess retirement plans to navigate a multi-retirement reality.

Age gap relationships

Further complications also arise when there is an age gap in a relationship, as this means each partner will generally be looking at a different retirement timescale. Such a situation also heightens the need to plan at a family level, as it will typically mean other surrounding generations are at different life stages too, potentially adding greater complexity to family structures.

Open and honest

Discussing and planning for retirement has always clearly been vital but growth in multi-retirement families and age gap relationships makes this even more important. Open and honest conversations relating to retirement expectations need to take place between partners and with family, and key decisions over expected retirement timings and which family members will require financial support need to be discussed and agreed.

The future can be bright

While these trends will certainly change the face of retirement for many families, one thing that won’t change is our support. If you have any concerns about retirement, get in touch and we’ll help you create a plan to ensure a bright financial future for both you and your family.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

Residential Property Review – October 2024

Improving conditions in the residential market

Activity in the residential property market is picking up as house prices continue to show modest growth, according to Savills.

In August, mortgage approvals were only 3% below pre-pandemic levels. In September, sales agreed and new instructions were 8% and 9% above their respective 2017-2019 averages, highlighting that supply and demand are growing together.

The boost in market activity coincides with a fall in mortgage rates – in August 2023, the average rate for a two-year fixed mortgage with a 75% loan to value (LTV) was 6.2%. In August 2024, this lowered to 4.8%.

Although conditions are improving, house price growth is expected to be limited, due to the increased cost of living over recent years. Plus, general market growth will be dependent on Autumn Budget announcements and any potential reductions to Bank Rate and inflation.

Rental market update

The latest report from Zoopla has highlighted that rental inflation is slowing but tenant demand remains high.

Over the last year, rents have risen by 5.4%; while this is a significant increase, it is the slowest pace of growth in three years. Rental inflation is not slowing at the same pace as household inflation and earnings because tenant demand continues to outweigh the supply of rental properties. In fact, there are currently 25% fewer rental homes available than in 2019. This is partly due to landlords deciding to sell – a trend which could continue depending on what tax changes the Labour government may have in store.

September data shows that the average rent for new UK lets was £1,245 per month but the cost varies significantly from region to region. According to Rightmove, the cheapest UK city for renters is Carlisle, where the average rent is £791 – 41% below the national average. Following closely behind is Hull (£804), Sunderland (£807) and Stoke-on-Trent (£863).

UK Finance’s recommendations for the Autumn Budget

UK Finance has made a series of recommendations to the Labour Party ahead of the Autumn Budget.

To motivate homeowners to upgrade the energy efficiency of their homes, the trade association has suggested that the government should introduce a Stamp Duty rebate scheme. The body also recommended that Stamp Duty bands are raised annually to correlate with increases to the average house price.

The Stamp Duty threshold for first-time buyers is set to be reduced in March 2025, meaning the tax will be payable when purchasing a property worth £300,000 or more. But UK Finance has urged the Labour Party to keep the threshold at the current higher limit of £425,000.

Chief Executive of UK Finance, David Postings, commented, “We have called on the government to not only introduce measures to bolster growth, but also a range of ideas to help support households and businesses up and down the country.”

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. No part of this document may be reproduced in any manner without prior permission.

All details are correct at the time of writing (16 October 2024)

Commercial Property Market Review – October 2024

Commercial market update

UK commercial real estate continues to perform well, according to BNP Paribas Real Estate.

Investor sentiment has improved, with sterling continuing to strengthen, reaching its highest level against the dollar and the euro in over two years. This helps to attract overseas investors and boost UK weightings in global real estate allocations.

Performance is recovering too and total returns were positive across all main sectors over the last three months – the first time this has been the case in over two years. It is important to note, however, that this recovery is expected to be gradual as investors and the market continue to find their feet.

Etienne Prongué, CEO of BNP Paribas Real Estate commented, “UK real estate data continues to be reassuring. The trajectory for capital value is now positive across all property types and confirms the UK market is further along in its recovery than the rest of Europe. With the development pipeline remaining constrained and business surveys continuing to point to expansion, our forecast for prime office returns point to continuing UK outperformance over the next five years.”

Modest recovery for retail

The latest data from Colliers indicates that the retail market is showing signs of modest recovery.

In capital markets, retail investment volumes increased to £200m in August. Although this is above the £150m reported in July, it is still significantly lower than the five-year monthly average for August, which stands at £660m. The largest single-asset transaction in August came from JP Morgan, who bought 291 Oxford Street for £70m at a 5.8% yield.

In occupier markets, retails sales volumes increased by 2.5% annually in August but are still below pre-pandemic levels. Meanwhile, annual retail price inflation was at 3.5% in August, having lowered to 2.9% in June. Also, retails rents have risen for 22 consecutive months.

Positive sentiment from Savills

There seems to be a more positive sentiment in the UK commercial market, according to Savills.

All sectors saw yields trending downwards or staying the same in August. Investment research firm, MSCI, reported that total returns were positive across the whole UK commercial market. The only sector displaying a yearly negative return was offices, however Savills expect this sector to pick up and return to positive territory in Q1 2025. Future supply is very limited, which will cause prime rents to keep increasing.

The UK dominated European activity in H1 of this year, with a 29% share of investment volumes – 24% above the five-year average. There has been a notable increase in activity from French SCPI (Société Civile de Placement Immobilier) collective funds, who are investing in UK regional markets.

Very limited supply of Glasgow office space

Savills has reported that demand for office space is significantly exceeding supply in Glasgow.

In the first half of this year, take-up of office space across the city increased annually by 32%, reaching 177,514 sq. ft. There remains demand for up to 750,000 sq. ft of office space, but a limited supply of good quality offices exists, with only about 600,000 sq. ft of prime and Grade A office available. The take-up is therefore expected to stay below the long-term five-year average of 490,900 sq. ft.

Rents are expected to go up to at least £40 per sq. ft due to the lack of new build and refurbishment projects in the pipeline. Commenting on the challenging conditions, the Head of Savills’ Glasgow office, David Cobban, said, “Ultimately, businesses will have to be prepared to pay more to get the type of space that fulfils their requirements.”

All details are correct at the time of writing (16 October 2024)

News in Review

“It’s time to back Britain”

Keir Starmer vowed on Monday to rip up investment-blocking red tape and make regulation “fit for the modern age” as he wooed global business leaders in the hope of attracting companies to invest billions of pounds in Britain.

Addressing the International Investment Summit, the Prime Minister said “It’s time to upgrade the regulatory regime, make it fit for the modern age, harness every opportunity available to Britain. We will rip up the bureaucracy that blocks investment. We will march through the institutions and make sure that every regulator in this country – especially our economic and competition regulators – take growth as seriously as this room does … It’s time to back Britain.”

The government said the Summit had secured a total of £63bn of investment pledges into the British economy.

Employment Rights Bill

Last Thursday, the government unveiled a major reform package to modernise UK employment law, aimed at enhancing workers’ rights. The proposed legislation will introduce 28 policies, including immediate rights for new employees, abolishing ‘fire and rehire’ practices, and overhauling trade union laws. However, many changes will not take effect until 2026, pending consultation on issues like zero-hours contracts, Statutory Sick Pay and trade union updates. The reforms extend probation periods for new hires to nine months. While the package has been welcomed by trade unions, some business groups are reported to be concerned about how the reforms would work in practice and there are fears some may be put off hiring new staff. A new Fair Work Agency will be established to enforce the rules, but its effectiveness is likely to depend on funding levels and resources. Full implementation of the package is expected to take years.

Growth in UK economy

Figures from the Office for National Statistics (ONS) released on Friday showed that the UK economy grew by 0.2% in August following two months of stagnation. The figure was in line with economists’ forecasts and was helped by broad-based expansions in services, manufacturing and construction. This growth came after zero growth in both June and July but marked a slowdown from the start of 2024. Breaking down the figures – services output grew by 0.1% in August, production was up by 0.5% and construction expanded by 0.4%. Ashley Webb, Economist at Capital Economics, said the expansion in August, after the economy had failed to grow in three of the four previous months, “Lends some support to our view that a mild slowdown in GDP growth in the second half of this year is more likely than another recession.”

Sustained uplift in housing market

The latest Royal Institution of Chartered Surveyors (RICS) housing market statistics have returned positive readings for demand, sales and new listings. In relation to demand, a headline net balance of +14% of respondents recorded an increase in new buyer enquiries. Meanwhile, for sales volumes, the aggregate net balance reading was +5%. Looking ahead, a net balance of +23% expected sales volumes to rise over the next three months. Together with the uplift in demand, there was an increase in new listings coming to the sales market, with a net balance of +22% of contributors reporting a rise in new instructions to sell. The average number of properties available per branch rose to 44.6 in September, which is the highest level recorded by the survey since December 2020. Additionally, the number of market appraisals undertaken over September was above levels seen 12 months ago.

Slowing wage growth

ONS data released on Tuesday showed that pay grew at its slowest rate (4.9%) for more than two years between June and August, leading to speculation that there may be a cut to Bank Rate when the Bank of England’s Monetary Policy Committee next meets in November. The figures also showed the unemployment rate fell to 4% (down from 4.1% in the previous three-month period) and the rate of people considered to be ‘economically inactive’ – which is defined as those aged between 16 to 64 years old who are not in work or looking for a job – dropped to 21.8%.

Here to help

Financial advice is key, so please do not hesitate to get in contact with any questions or concerns you may have.

All details are correct at time of writing (16 October 2024)

Women take the lead opening JISAs

Have you opened a Junior Individual Savings Account (JISA) for your child? If so, it’s a great financial priority to support long-term savings goals for the children in your family. Research has highlighted that women have led the way on opening JISAs every year since 2019, when the data was first analysed.

Despite the gender pay gap, women have surpassed their male counterparts by over 9% when opening these products. Analysis¹ of investment trends in the last five years shows the number of JISAs women have opened is up 128%, compared with an uptick of 101% by men. One fifth of UK women said their highest priority future financial goal is saving for their child or grandchild, with 15% of men ranking this a priority for them.

The analysis also shows ‘new JISA sales were up in every region of the UK, since 2019, with northern regions of the UK largely leading the charge.’ It was Scotland that led the way, with an increase of 225% in the last five years, followed by the East Midlands and North West, seeing increases of 153% and 117% respectively. However, the amount being saved has reduced over the period, likely due to the pandemic and cost-of-living pressures more recently.

Commenting on the data, Scottish Friendly’s, Jill Mackay, said “It’s positive to see that parents and guardians are prioritising saving for children as part of their long-term financial goals… Being able to set aside a lot of money may not be an option with day-to-day financial demands as they are. But starting as soon as possible and just putting a little away into a stocks and shares JISA could build to be a substantial amount over time.”

¹Scottish Friendly, 2024

Proportion of cash homebuyers reaches 10-year high

The proportion of homebuyers choosing to pay in cash has hit a 10-year high¹, analysis has found.

In 2023, cash buyers were responsible for a third (34.5%) of all property transactions – the highest percentage seen since data became available in 2013. This trend carried on into this year, as 32.8% of market activity was attributed to cash buyers in the first two months of 2024. This is a higher proportion than we have seen in recent years, with cash buyers accounting for less than 29% of market activity during 2019–2022. The increase is likely to be due to the higher cost of borrowing, which continues to put a strain on affordability for those purchasing a home with a mortgage.

Verona Frankish, CEO of online estate agents Yopa, commented, “Not only is it far tougher for those looking to purchase with the aid of a mortgage, but as a result, cash buyers are in a far stronger position within the market making them the first choice for many sellers.”

It is likely that the balance of cash and mortgage buyers will be redressed when mortgage affordability improves.

¹Yopa, 2024

As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments.

Steady growth in an uncertain world

Reassuringly for investors, the latest batch of projections from economic soothsayers continues to predict a period of steady, if unspectacular, global growth. The forecasts also highlight a number of economic concerns including ‘sticky’ inflation, large budget deficits and geopolitical uncertainties, which could inevitably create some investment challenges.

Growth rates beat expectations

Economic growth figures released over the summer generally proved stronger than analysts had expected, particularly in relation to Europe and the US (in Q2). And while economic momentum is expected to soften across the second half of this year, forecasters are still predicting steady rates of growth. The latest figures from the International Monetary Fund (IMF), for instance, forecast global growth of 3.2% for the whole of 2024 with the rate rising slightly to 3.3% next year.

Inflation persistency

The IMF’s musings were contained in a report entitled ‘The Global Economy in a Sticky Spot,’ which highlighted two prominent near-term risks currently undermining growth prospects. Firstly, the IMF warned that ‘services inflation is holding up progress on disinflation’ which could result in interest rates remaining ‘higher for even longer.’ Secondly, a deterioration in public finances has left many countries in a position of fiscal vulnerability and this is ‘magnifying economic policy uncertainty.’

Geopolitical uncertainties

In what was dubbed ‘the year of the election’, geopolitical uncertainties unsurprisingly continue to be a key concern as well. Indeed, their impact on global growth prospects can only be expected to rise in the near-term as the US presidential election looms ever closer. Continuing geopolitical conflicts and the rise in geoeconomic competition is also creating ongoing challenges for the global economy.

Elements at play

Economic resilience has flowed through to central bank monetary policy as global institutions have largely adopted a cautious approach. Slower but still positive growth, lower inflation and interest rate reductions are a positive combination for investors.

Whatever uncertainties do lie ahead, one investment fundamental remains constant: long-term investors are best served by holding a well-diversified, multi-asset portfolio based on sound financial planning principles and thorough research. We’ll help ensure your portfolio remains well-balanced and with the right mix of assets; we’re always focused on finding investment opportunities.

News in Review

“Geopolitical concerns are very serious”

Last Thursday, Bank of England (BoE) Governor Andrew Bailey spoke in an interview about the pace at which interest rates are being cut. With two more Monetary Policy Committee (MPC) meetings this year, the Governor said the Bank could afford to be “a bit more aggressive” with its rate reduction approach, while acknowledging inflation as a key factor in the equation.

With inflation just above the BoE’s target of 2%, although Mr Bailey was optimistic borrowing costs will continue on a downward trajectory, he did caution that inflation remaining low is “vital” to support this.

Paying close attention to developments in the Middle East, the Governor spoke about the potential impact on oil prices, which could fuel inflation if supply becomes disrupted. After acknowledging the tragedy of the unfolding situation in the region, he said, “Geopolitical concerns are very serious… There are obviously stresses and the real issue then is how they might interact with some still quite stretched markets in places.” He added that, following interactions with counterparts in the region, at present there appears to be a “strong commitment to keep the market stable.”

As the weeks tick down to the widely anticipated Autumn Budget on 30 October, Mr Bailey spoke about the key structural issues impacting the UK (specifically an ageing population, climate change and defence spending), and that the focus of the government on capital investment is the right approach, “There is a clear need for it in terms of infrastructure.”

Manufacturing boost but business confidence slumps

Production volumes in the UK’s manufacturing sector experienced a ‘solid increase’ in September, according to the latest S&P Global UK Manufacturing Purchasing Managers’ Index (PMI) released last week.

With a headline reading of 51.5 putting volumes above the neutral 50.0 mark for the fifth successive month, the UK manufacturing sector is continuing its solid performance in 2024, managers concurred. Figures for output, new orders and suppliers’ delivery times all rose in September, along with consumer and intermediate goods sectors.

Two other sub-components performed less well, however, with small drops for levels of employment and stocks of purchases. Perhaps more significantly, the survey also showed that business optimism had fallen to a nine-month low in September, as companies saw the biggest decline in sentiment about the year ahead since March 2020.

Commenting on the data, Rob Dobson, Director at S&P Global Market Intelligence, said, “Uncertainty about the direction of government policy ahead of the coming Autumn Budget was a clear cause of the loss of confidence, especially given recent gloomy messaging, though firms are also worried about wider global geopolitical issues and economic growth risks.”

Mixed signals from business barometer

Broader business confidence also took a downwards turn in September, the release of the latest Lloyds Bank Business Barometer revealed last week. Confidence dipped to a three-month low in September, falling three points to settle at 47%.

Analysts noted, however, that despite dipping, this latest reading is considerably higher than the long-term average of 29%. Furthermore, some 63% of businesses now anticipate stronger output. “Although overall confidence fell this month, that fall was from a nine-year high and businesses remain positive about their own trading prospects,” commented Hann-Ju Ho, Senior Economist at Lloyds Bank Commercial Banking.

Deposits rise as rate cuts expected

With rate cuts on the horizon, data from the BoE’s latest Money and Credit report showed that households increased their deposits into banks and building societies by £7.3bn in August, well above the £5.9bn recorded a month earlier. An additional £4.4bn was placed into instant access accounts paying interest, while ISAs received deposits worth £4.2bn. Interest rates for savers have been falling since August when the MPC cut Bank Rate for the first time since 2020; the effective interest rate paid on individuals’ new deposits fell to 4.37% in August.

Eurozone inflation falls below 2%

Meanwhile in Europe, consumer price inflation fell below 2% for the first time since July 2021, official figures revealed last week. Eurozone inflation dropped to 1.8% in September, piling pressure on the European Central Bank (ECB) to make its third interest rate cut in four months.

Here to help

Financial advice is key, so please do not hesitate to get in contact with any questions or concerns you may have.

All details are correct at time of writing (9 October 2024)

Autumn housing market outlook

The summer was largely positive for the housing market due to a boost in confidence following the General Election and the reduction to Bank Rate. So, where are we now and what does the autumn have in store?

Lenders and buyers alike were already showing signs of confidence before the election, as mortgage approvals steadily improved.

Post-election boom

After the election, there was a noticeable uptick in buyer and seller confidence. In July, new instructions were 7% higher than the 2017-2019 average for the month, sales agreed were up 10%¹, while buyer enquiries were up 11% year-on-year². Overall, this boost in activity had a positive impact on house prices, which continued to grow modestly. The post-election buzz was boosted further in August by the first reduction to Bank Rate since 2020.

Rental inflation slowing

Data suggests that we have moved past peak rental inflation, with rents rising at the slowest rate since 2021³. If rents continue to increase at the rate they are now, they will have gone up by 3-4% in 2024 – an improvement on the 8% and 11% seen in 2023 and 2022 respectively.

What does the autumn hold?

Rightmove’s property expert, Tim Bannister, observed, “the conditions are there for a more active autumn market.” They predict that, by the end of 2024, house prices will be 1% higher than they were the previous year. Meanwhile, Zoopla expects mortgage rates to stay around 4-4.5% for the rest of 2024. It is thought that wages will keep rising while house prices remain consistent, thus improving buyer affordability.

2025 and beyond

Looking ahead, experts predict the market to continue a slow but steady recovery. Zoopla’s Executive Director of Research, Richard Donnell, commented, “Economists currently expect base rates to fall to 3.5% by the end of 2025, which would imply mortgage rates remaining in and around the 4%+ range.”

In terms of broader trends, it is expected that energy efficient homes and houses located in close proximity to public transport will continue to be highly sought after, and a focus on employment flexibility widens the net in terms of where people are looking to move and achieve the quality of life they want.

¹TwentyCI, 2024

²Rightmove, 2024

³Zoopla, 2024

As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments.

Autumn retirement round-up

Several retirement reports have hit the headlines recently with a consistent message: if you want a comfortable retirement, you should plan early and be flexible.

Could a phased retirement approach work for you?

Research from Standard Life¹ suggests a ‘gradual transition’ into retirement could be one of the best ways to boost your pension pot. It suggests that continuing to work part-time or taking on freelance projects can help to maintain a steady income stream as your pension continues to grow. In fact, the company’s analysis demonstrates that working three days a week from age 66 to 70 could add an extra £97,000 to a pension pot. This approach also means the opportunity to explore new interests or volunteer work before fully committing to retirement.

More Britons facing a retirement shortfall

Unfortunately, the retirement picture isn’t entirely rosy. According to Scottish Widows’ annual retirement report², a significant portion of the population (38%, up from 35% last year) are not saving enough for a comfortable retirement.

The report also found 54% of UK retirees expect to work an extra seven years on average, while 27% who have made retirement plans don’t feel they will ever be able to afford them. This shortfall is being worsened by rising living costs and stagnant wage growth.

Flexibility is key

One recurring theme in most retirement research is the need for flexibility. Having options in how you access and manage your pension can be crucial. Whether it’s phasing your retirement or adjusting your income based on the prevailing market conditions, being flexible in your approach and income needs could help you adapt to life’s uncertainties.

Don’t leave retirement planning too late

While it’s concerning to hear of people having retirement regrets, it’s important not to ignore the issue and instead do something about it when you can. As we enter autumn, now might be the ideal time to refresh your retirement plan and make sure you feel on track and well-prepared for the years ahead. Retirement is a time to thrive, not count the pennies.

¹Standard Life, 2024

²Scottish Widows, 2024