Using your pension to pass on wealth 

If you thought your pension was just your retirement savings then think again. 

As well as ensuring your financial certainty when you want to stop working, a pension is a great way to support future generations. This is because defined contribution pensions are one of the most tax-efficient ways of passing on your wealth. 

No tax troubles 

Unlike Individual Savings Accounts (ISAs), pensions usually sit outside your estate for Inheritance Tax (IHT) purposes. This means that the money inside your defined contribution pension can be passed onto your loved ones without any IHT going to the taxman. 

Pass it on 

It’s no secret that many of today’s young people are facing financial pressures. Alongside your wisdom, a tax-efficient gift of a pension might be one of the best things you can pass along to the next generation. 

Even better, your loved ones will usually inherit the pension itself rather than the money inside it. This means they can continue to benefit from all the tax advantages, including tax-free investment growth. There is the separate option of starting a pension plan, within limits, for a child, rather than (or in addition to) leaving them yours. 

Of course, passing a pension on might not be the best choice for everyone. We’re here to help you. 

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. The Financial Conduct Authority (FCA) does not regulate Will writing, tax and trust advice and certain forms of estate planning. 

Residential Property Review – September 2024

Recovery in the residential market 

Recent data indicates that the residential property market is continuing to recover.  

According to TwentyCi, in the period from June to August 2024, sales agreed were only 1% lower than pre-pandemic levels. Promisingly, the number of new property listings was up 3%, indicating growing confidence among sellers. Meanwhile, Bank of England data shows that there were 62,000 mortgage approvals in July. While this is only a marginal increase, it is the highest number seen since September 2022.   

Although inflation rose by 2.2% in in the 12 months to August, core inflation continues to moderate and experts expect further cuts to Bank Rate in the coming months, which would make the future a little brighter for borrowers. Affordability is already starting to improve, according to Savills, who stated that the headline quoted cost of a five-year fixed mortgage with Nationwide had decreased to 3.94% at the end of August, having been 4.5% at the end of June. 

Rents starting to fall 

The UK has passed peak rental inflation, according to data from Zoopla.  

For the past three years, rents have been increasing at a faster pace than earnings. Renters will be relieved to learn that, in the last six months, rents increased by only 1.6% – the lowest rise since 2021. It is predicted that, by the end of 2024, rents for new lets will have gone up by 3 to 4%. So, while tenants may still be feeling the pinch, it is a significant improvement on previous years, as 2023 and 2022 saw rents go up by 8% and 11% respectively.  

Demand for rental properties has decreased by 39% over the last 12 months, while supply has risen by 17%. The boost in supply is likely due to corporate landlords buying more properties. Plus, lower mortgage rates are likely to have given first-time buyers more confidence to leave the rental market. Despite this improvement, it is still a challenging market – there are 17 hopeful tenants pursuing every rental property available. 

Landlords concerned about rumoured rise in CGT 

There is speculation that the Chancellor’s Autumn Budget will include an increase in Capital Gains Tax (CGT) which could affect private landlords selling properties and having to pay higher tax on any profits made.  

These rumours have caused a flurry of homes being put up for sale – Knight Frank data indicates that, in August, the number of market valuation appraisals was 25% higher than the five-year average. 

With landlords considering leaving the private rental sector, supply is at risk of reducing. Tim Bannister, Rightmove’s Property Expert, commented, “We’ve seen over the last few years how the supply and demand imbalance can contribute to rising rents, so there is a worry that without encouragement for landlords to stay in rather than leave the rental sector, it is tenants who will pay the price.” 

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 (18 September 2024) 

Commercial Property Market Review – September 2024

Growth expected in commercial property market  

Savills expects to see growth in the UK’s commercial property market in Q4.   

The sector had a good start to 2024, as cross-border investment hit $14bn in H1, with the UK attracting more capital than the USA or any European peers. Investors were given a further boost by the first cut to Bank Rate in over four years in August. As a result, many buyers are reaching an inflection point and more capital is set to be deployed in Q4.  

Joint Head of UK Commercial Investment at Savills, James Gulliford, commented, “We are seeing rising confidence in the UK’s economic fundamentals which should drive tenant demand and feed through into yield hardening from the end of the year.” 

Mat Oakley, Savills’ Head of UK and Europe Commercial Research, added, “The UK’s return to a focus on creating an environment to support economic growth is a solid strategy, although reversing the macro trend of the last eight years or so will be slow and there are risks that could threaten this growth.” 

UK hotels update 

It was a strong Q2 for the regional hotel market, according to recent data from Knight Frank.  

Occupancy across regional UK hotels remained stable in Q2 of this year at 77% – only 3% less than Q2 of 2019.  

Average daily rate (ADR) was up 4.3% year-on-year, driven by heightened demand for meetings and events space. Select Service and Upper-Upscale segments displayed particularly strong growth, with their ADR up 5.4% and 4.6% respectively.  

Golf and spa hotels outperformed the rest of the market, with revenue per available room going up by 20% annually. This boost is likely thanks to a 6% increase in occupancy and 10% rise in ADR.  

There was strong growth in departmental income due to a slowdown in rising costs and robust revenue growth, with food and beverage income going up by 9% per available room in Q2. 

Many commercial properties must improve energy efficiency 

In 2027, new regulations are expected to require all commercial properties to have an EPC rating of C or above.  

According to Essential Green Skills, leaders in sustainable building compliance, about 28% of commercial properties currently have an EPC rating of D or below. This means an estimated 130,000 properties could face fines of up to £150,000 if they don’t improve their rating soon.  

Failing to meet the new standards could make properties unlettable, thus reducing their market value. Upgrading EPC ratings should not just be a box-ticking exercise – a property with a higher energy efficiency will be much more appealing to environmentally-conscious tenants. 

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 (18 September 2024) 

News in Review 

“I’ve been really clear that the Budget… will require difficult decisions” 

Last week, Chancellor Rachel Reeves, who faced criticism over the Winter Fuel Payment vote, said the Budget on 30 October is set to involve “difficult decisions,” on key areas such as spending, tax and welfare.  

Her cautionary tone came hot on the heels of the latest monthly UK GDP data estimates from the Office for National Statistics (ONS), which showed no economic growth in July, following flat growth the previous month. A Reuters poll of economists had forecast a 0.2% expansion in July. 

In the three months to July, real GDP is estimated to have grown by 0.5%, supported by widespread growth in the services sector, which increased by 0.6%. The construction sector also recorded growth of 1.2%, while production output decreased by 0.1% over the period. Manufacturing output also fell overall due to ‘a particularly poor month for car and machinery firms,’ according to ONS. 

The Chancellor confirmed, “I’ve been really clear that the Budget on 30 October will require difficult decisions… But the prize – if we can bring stability back to our economy, if we can bring investment back to Britain – is economic growth, good jobs, paying decent wages in all parts of our country, to realise the huge potential that we have.”  

With an apparent £22bn “black hole” in the public finances, speculation is mounting over the taxes the Chancellor may choose to target on 30 October. 

Amazon £8bn UK investment 

In positive news for the economy last week, Amazon.com Inc. announced intentions to spend £8bn in the UK to develop its cloud business (Amazon Web Services, AWS), adding to a series of recent expansion moves on the continent and long-term projects across the globe including in Mexico, Singapore, the US and Saudia Arabia. Providing the government with a welcome investment boost, the five-year investment in data centres is expected to support 14,000 jobs and contribute £14bn to UK GDP. In a Treasury statement, the Chancellor said the investment “marks the start of the economic revival and shows Britain is a place to do business.” 

Housing market sees a positive shift 

On Thursday, the Royal Institution of Chartered Surveyors (RICS) outlined expectations for a continuation of sales growth in the coming months. Their latest Residential Survey, which measures the difference between surveyors seeing falls and rises in house prices, moved into positive territory for the first time in almost two years, since October 2022.  

Despite easing borrowing costs, the survey highlighted that affordability concerns continue, with Simon Rubinsohn, RICS Chief Economist, confirming “Affordability remains an issue in the sales market even with somewhat cheaper finance now available, but the picture appears even more acute in the lettings market where the amount of rental stock continues to diminish.”  

Meanwhile, mortgage data from the Bank of England showed an increase in gross mortgage advances in Q2, up by 16.7% from Q1 2024 to £60.2bn. This was 15.5% up year-on-year and the first increase in almost two years (Q3 2022). 

US inflation falls 

Latest figures from the US Labor Department show a tempering in inflation in August, with consumer prices rising 2.5% in the previous 12 months. Down from 2.9% in July, the August figure is the slowest pace in three and a half years (since February 2021). Although an unexpected rise in housing costs occurred in the month, this was countered by reductions in the price of petrol and used vehicles, amongst other items.  

All eyes now turn to the Federal Reserve’s next policy meeting which concludes on 18 September, as expectations heighten that the central bank will cut interest rates. Analysts are predicting the inflation data has increased the likelihood of a rate reduction, but by a smaller percentage. 

And in Europe… 

On Friday, the European Central Bank (ECB) Governing Council unanimously decided to reduce interest rates by 25 basis points to 3.5%. The ECB’s inflation forecasts have remained steady, with inflation expected to return to a 2% target during H2 2025. Headline inflation is expected to average 2.5% this year, 2.2% next year and 1.9% in 2026. Christine Lagarde, ECB President, reiterated that the bank will “continue to follow a data dependent and meeting-by-meeting approach… we are not pre-committing to a particular rate path.” 

Here to help 

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

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. 

All details are correct at time of writing (18 September 2024) 

The most affordable cities for FTBs

Jobs permitting, those looking to get on the property ladder may start flocking to Aberdeen, as a report has found it is the most affordable city to be a first-time buyer (FTB)1. 

Under the assumption that a FTB home has two bedrooms or fewer, the average asking price for a property in Aberdeen is £102,601. Bradford and Sunderland are the next cheapest cities to purchase a first home, with average asking prices of £107,929 and £111,263 respectively. The national average price of a FTB home currently stands at £227,110. 

Latest data2 shows that the average FTB in Scotland and Wales has a 20% deposit, while in England it is 25% and that more FTBs are taking on longer mortgage terms which they may well be paying off into retirement. It’s important to remember that while longer mortgage terms might make repayments more affordable in the here and now, you will end up paying off more overall in interest. 

Here to help 

Whether you’re a first-time buyer or moving home, we’re always here to help you with your mortgage – just get in touch for advice. 

1Rightmove, 2024, 2UK Finance, 2024 

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

Advice to your younger self?

A survey1 has found that 51% of people would tell themselves to start saving as soon as they can. Meanwhile, 41% would say to take more care of their health, and a third would advise worrying less about what other people think. 

How old do you feel? 

The same report also asked UK adults when they are likely to start feeling old, with most respondents saying their 50s and 60s. However, with people living longer, you could only be halfway through your life at the age of fifty. That’s why it’s important to have a financial plan in place that will allow you to enjoy a long and happy retirement. 

No regrets 

Regardless of how old you are, it’s never too late to heed the advice and start saving, while having an emergency fund should be an objective, putting money into your pension should be a key priority too. Even a small increase in contributions can have a significant impact on the opportunities you create for yourself in later life. 

Talk it through 

Everyone’s goals for retirement are different. We can help you understand how much you need to save depending on your specific needs. 

1Aegon, 2024 

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. 

News in Review

“While the UK economy will perform better this year, it’s unlikely to be heading into the fast lane any time soon” 

The UK economy will now grow at a faster rate than previously thought in 2024, according to a report by the British Chambers of Commerce (BCC) released last week. 

The upgrade to 1.1% for 2024 came after official figures put second-quarter growth at 0.6%, a sign that the UK is continuing its recovery from a shallow recession in 2023. In its new release, the BCC also revised upwards its prediction for 2026 to 1.1% (previously 1%), while keeping its 2025 forecast unchanged at 1%. 

Despite upgrading the growth forecast, the report cautioned that the UK’s overall growth landscape remains relatively weak. Government spending has been the main driver of GDP growth this year, the BCC noted. Business investment is now predicted to increase by only 0.3% in 2024, a downwards revision from the previous forecast. In 2025, it will grow by 1.4%, according to the BCC, before reaching 2.0% in 2026. The services sector is projected to lead the way, with yearly growth above 1% across the forecasting period. 

Still, the revision from a previous projection of 0.8% for 2024 signals greater optimism for the UK economy. With lower inflation and interest rate cuts expected to take effect in 2025, the body expects a rosier picture for household consumption in the coming years.  

Commenting on the release, Vicky Pryce, Chair of the BCC Economic Advisory Council, said, “The BCC’s latest forecast shows that while the UK economy will perform better this year, it’s unlikely to be heading into the fast lane any time soon. As we head towards the Chancellor’s first Budget at the end of October, businesses will be wanting the government to focus on measures that boost investment, support growth and maintain competitiveness.” 

House prices at two-year high 

House prices in the UK reached a two-year high in August, the latest House Price Index from Halifax revealed. Prices were up 4.3% last month compared to a year earlier, putting the average cost of a UK home at £292,505 in August, not far below the record high of £293,507 recorded in June 2022. After a recent boost from the Bank of England’s first Bank Rate reduction for four years, confidence among buyers has grown considerably, the release noted.  

Halifax’s Head of Mortgages Amanda Bryden, commented, “While this is welcome news for existing homeowners, affordability remains a significant challenge for many potential buyers still adjusting to higher mortgage costs.”   

US jobs data 

Meanwhile in the US, a new report released by the Labor Department last Friday revealed that job growth was weaker than expected last month. In total, employers added 142,000 jobs in August, significantly below the forecasted 160,000. Analysts were quick to raise concerns that higher interest rates are putting a strain on the world’s largest economy. 

Further compounding the pessimism, the release revised downwards two previous estimates for job gains. More positively, the unemployment rate fell marginally from 4.3% in July to 4.2% in August. The Federal Reserve is still widely expected to cut interest rates this month; having raised its key lending rate to 5.3% in 2022, it is now in the process of unwinding this 20-year high. 

UK earnings 

Office for National Statistics (ONS) data, released on Tuesday, showed that annual growth in employees’ average regular earnings (excluding bonuses) was 5.1% in May to July 2024 and annual growth in total earnings (including bonuses) was 4.0%. Taking into account inflation, growth for regular pay was 2.2% in May to July 2024 and 1.1% for total pay. 

The Oasis effect 

The announcement that Oasis is reuniting for a tour in 2025 provoked excitement among music fans and those nostalgic for the 1990s. The biggest cheer, however, may have come from the UK economy.  

Analysis from the Centre for Economic Business Research (CEBR), a think tank, estimates that fans will spend hundreds of pounds on costs (excluding tickets) such as hotels, travel, merchandise and drinks. Initial estimates show that in total, the tour will (definitely maybe) boost the UK’s economy by £487m, with each fan set to spend an average of £406. 

Here to help 

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

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. 

All details are correct at time of writing (11 September 2024) 

Guidance for first-time buyers

Getting a foot onto the property ladder has always presented challenges. Research suggests FTBs could currently be experiencing the most expensive conditions in 70 years1. 

Who is most affected? 

In the current property market, a successful first purchase often requires two high incomes plus financial support from family members. Therefore, those who are buying alone, have lower incomes or cannot access help from the Bank of Mum and Dad, are most likely to lose out. 

How old? 

Hopeful FTBs are forced to stay at home or in the private rented sector for longer. The average age of a first time buyer is now 36, having risen from 32 in 20042. 

Delaying proceedings 

Ongoing market uncertainty has caused hopeful homeowners to put their dreams on hold; over the last year, 49% of prospective FTBs have postponed their plans3. Just over half (53%) said high house prices were the main reason for delaying, while 41% cited rising mortgage costs. 

Making a compromise 

FTBs will likely need to consider different options if they want to get on the property ladder; 38% of those who have become homeowners in the last five years said they had to compromise. For example, 40% purchased a home that needed some renovation and 34% moved to a different location. 

Decline in homeowners 

Overall, home ownership has fallen in the last 20 years, and the number of residential owner-occupier mortgages has decreased by more than two million since the rate peaked in 20024. The UK has not seen such a low level of outstanding mortgages since the end of the 1980s. 

Advice is key 

We understand the difficulties that first-time buyers may face. You can make your home-owning dreams a reality with the right advice. 

1BSA, 2024, 2ONS, 2024 , 3Nationwide, 2024, 4BSA, 2024 

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

keep up mortgage repayments. Think carefully before securing other debts against your home. 

Equity released from your home will be secured against it. 

Don’t overlook a mid-life protection review 

Research1 has found that people in their 30s and 40s could be slipping through the net when it comes to protection cover. The data highlights that those in this age bracket are more likely to have inadequate protection cover for their mortgage, should the worst happen.  

Has your protection caught up?  

Many people experience significant life changes in their 30s and 40s, so it can be easy to forget to update your life insurance accordingly. With each ‘trigger’ event like getting married, becoming a parent or buying a house, comes a potential extra layer of cover that is needed to safeguard the future for you and your loved ones.  

Protection provides a lifeline  

So, it is vital to review your protection cover at regular intervals to make sure you have enough cover that is suitable for your unique circumstances.  

1HL, 2024  

Landlords taking steps to up their EPC game 

Research has found that some landlords are improving the energy performance of their properties even though it is no longer a potential legal requirement.   

Keen landlords   

Last year proposed regulations for all private rental properties to have a minimum EPC rating of C were shelved. However, 37% of portfolio landlords are still upgrading their properties to meet that standard1. In fact, nearly a third (32%) only own properties with a minimum rating of C.   

What’s the timescale?   

About 28% of landlords going ahead with work expect all their properties to have an EPC rating of C within one to two years. On the other hand, 17% think it could take them at least five years.   

Not all enthusiasts   

Some landlords were not so keen on making improvements, with 16% postponing work until legislation is potentially introduced. One in 10 said that the proposed regulations had no effect on their portfolio strategy.   

The advantages   

Regardless of whether it’s a legal requirement, there are many benefits to upgrading the EPC rating of a property.  By improving the energy efficiency, the running costs of the property are reduced and the property’s value is likely to increase.   

1Paragon Bank, 2024  

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