In the news 

Pension Tracing Service swamped 

People who think they could be missing out on thousands of pounds in pension savings have flocked to the phonelines to try and track down their lost money. Through a freedom of information request, it has come to light that The Pension Tracing Service received a total of 251,733 phone calls between July 2018 and August 2023. Figures suggest the average lost pension pot is worth £9,500. 

To save yourself time on the phone, you can access the government’s pension tracing tool at www. pensiontracingservice.com 

If you trace a lost pot, get in touch; we can check whether the underlying investments are suitable for your requirements. 

Milestone moments denied 

Many savers are now choosing to deny themselves milestone moments, such as major holidays, big weddings and home renovations, to keep putting money aside for future essentials. 

A survey1 asked respondents to classify themselves as spenders or savers. More than 80% of people who consider themselves to be ‘spenders’ still put money aside each month, being motivated to build a nest egg for the future. However, the amount savers feel they need to squirrel away varies markedly depending on age, with younger ages more likely to have abandoned plans. 

The importance of advice 

Research2 has found that the odds of selecting the top performing asset class every year for a decade is one in 282 million! In fact, investors are twice as likely to win the EuroMillions jackpot. That is why it’s so important to diversify your investment portfolio. 

1Gatehouse Bank, 2023  

2RBC Brewin Dolphin, 2023 

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. 

Let’s get you sleeping better in 2024

If you’re losing sleep over your finances, you’re not the only one. According to research1, nearly half (45%) of UK adults are lying awake at night because they’re worrying about money. 

The squeeze on people’s finances caused by the cost-of-living crisis is understandably a large part of this wave of insomnia, with those surveyed saying they’re struggling to pay for essentials. 

Enter professional financial advice  

Financial advice has been shown by study after study to lead to better financial outcomes for consumers. However, especially during difficult times such as these, it can also have a beneficial impact on our mental health and wellbeing. Advised consumers tend to exhibit lower levels of anxiety over their household finances and retirement income, and feel more in control of their finances and more prepared to cope with life’s shocks. 

This is backed up by a study2, which found that 42% of people would value extra financial advice or guidance during the cost-of-living crisis, while just under a third are anxious about money matters right now. 

Let’s get you sleeping better 

Life is too short to lose sleep over your finances. Get in touch with us and we’ll help you get your finances in order, to ensure your money is working for you. Let’s take back control and enjoy sweet dreams in 2024. 

1Aviva, 2023 

2Standard Life, 2023 

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

“Things are moving in the right direction”

Last week, during their first meeting of 2024, the Bank of England’s (BoE’s) Monetary Policy Committee (MPC) voted to retain Bank Rate at 5.25% by a majority of six to three. Two members of the committee preferred to increase the rate by 0.25 percentage points, to 5.5%, with one member voting to reduce the rate to 5%.

A Reuters poll of economists had predicted just one policymaker would vote for a rate rise, with a minority expecting another policymaker might vote to cut rates.

BoE Governor Andrew Bailey commented on the outcome, “The level of Bank Rate remains appropriate. Any decision to change Bank Rate will depend on how the evidence evolves… we must get inflation back to the 2% target sustainably and we will do that.” He added,“We’ve had some good news over the past few months. Inflation has fallen a long way from 10% a year ago to 4% now. Things are moving in the right direction.”

From an inflation perspective, the MPC’s February summary outlines that Consumer Prices Index (CPI) inflation is projected to fall temporarily to the 2% target in Q2 before increasing again in Q3 and Q4, with the MPC’s modal projection implying CPI inflation will be ‘around 2.75% by the end of this year.’ Looking further ahead, the report states that, ‘CPI inflation is projected to be 2.3% in two years’ time and 1.9% in three years.’

On the dynamic with rates and inflation, Bailey said, “We have to be more confident that inflation will fall all the way back to the 2% target and stay there, and we’re not yet at a point where we can lower interest rates. Inflation has come down faster than we thought it would and that’s good news. We need to sustain that, but consistent with that good news we have removed the, what you might call bias we had before, which is that we thought the next move might be up more likely than down, and that’s gone.”

The next MPC meeting will conclude on 21 March 2024.

And in the US…

Last week, the US Federal Reserve held its key interest rate steady, with the Federal Open Market Committee voting to retain the benchmark borrowing rate in a targeted range between 5.25% – 5.5%, in line with economists’ expectations. This was the fourth consecutive meeting with no change to borrowing costs. Speculation is rife regarding the extent and timing of potential rate cuts Stateside this year.

Fed Chairman Jerome Powell cautioned, “Inflation is still too high. Ongoing progress in bringing it down is not assured.” He added that rate cuts would be implemented once the Fed was secure that inflation will continue to decline. He confirmed,  “I don’t think it’s likely the committee will reach a level of confidence by the time of the March meeting to lower rates, but that’s to be seen.”

House price news

The recently released Nationwide House Price Index has revealed that UK house prices rose by 0.7% month-on-month in January. The data reveals that the average house price on a non-seasonally adjusted basis was £257,656 last month, up from £257,443 in December. Annually, house prices were down by just -0.2%, an improvement from -1.8% previously and the strongest outturn since January 2023.

Retail sales disappointing

Latest retail sales data from the British Retail Consortium (BRC) shows little joy for the UK’s high streets. Its latest figures, compiled from 31 December to 27 January, show footfall continuing its ‘downward trajectory’. Total national footfall was -2.8% year-on-year in January, up from -5% in December, while the high street saw footfall dip by -2.3% on the year, up from December’s -4.2%. Helen Dickinson, BRC Chief Executive said bargain hunters were active during the January sales in the first half of last month, but “the latter part of January saw fewer shoppers out as stormy weather led to a bigger footfall decline in shopping centres and high streets.”

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 (7 February 2024)

Powering up your pension this year

Paying a lump sum into a pension can be a particularly effective way to save for your future. If you have accumulated extra money from a windfall, work bonus or through saving, now could be the ideal time to power up your pension with a single contribution. 

Above and beyond 

One-off pension payments are permitted at any time, with the government encouraging people to do so through tax incentives. Making a single contribution basically enables people to go above and beyond their regular commitments, and thereby move closer to achieving their ultimate pension saving goals. 

Tax efficiency 

Tax relief is available on contributions up to a maximum of £3,600 a year or 100% of earnings, whichever is greater, with the level of relief dependent on a person’s marginal rate of Income Tax. For instance, a £1,000 lump sum contribution could effectively cost a higher rate taxpayer just £600, after receiving £200 basic rate tax relief from the government and claiming £200 in additional relief from HMRC. 

Allowances 

For 2023/24, the annual contribution limit for tax relief purposes is 100% of a person’s salary or £60,000, whichever is lower, although unused allowance from the previous three tax years can be carried forward. If you want to make the most of your available allowance(s), get in touch and we’ll help you power up your pension. 

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. 

In the news

Who wants to be an (ISA) millionaire? 

The number of ISA millionaires – i.e. people who have built up a tax-free pot of £1m or more by investing in stocks and shares ISAs – has almost quintupled since 2017, with the figure now standing at 2,7601. With the first ISAs introduced in 1999 aimed at encouraging more people to save, the data certainly suggests the objective is being satisfied for an increasing number, with the most recent data suggesting around 11.8 million adults were subscribed to an ISA in 2021/22, making £66.9bn deposits in that tax year. 

More people choose living inheritances 

There has been an increase in the number of people who are choosing to gift significant sums of money to beneficiaries whilst they are still alive – otherwise known as a ‘living inheritance.’ One in 10 respondents to the Great British Retirement Survey 20232 said they had given a living inheritance in the past three years. This increased to 15% amongst over-65s. 

One million more over-65s still at work 

There are now nearly a million more people over the age of 65 in the UK labour market compared with the number still at work in the year 20003. This is according to the Centre for Ageing Better, which has calculated that 976,000 workers over the age of 65 and 3.1 million aged 50-64 have been added to the workforce since the Millennium. It is thought that the UK’s ageing population, in addition to changes in the State Pension age, are mostly responsible for the increasing numbers of older workers in the UK’s labour force over the past few decades. 

1HMRC, 2023 

2Interactive Investor, 2023 

3Centre for Ageing Better, 2023 

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. 

Economic Review – January 2024

UK economy rebounds in November

Official statistics show the economy returned to growth in November, although analysts believe it remains a close call as to whether or not the UK will once again manage to avoid a recession.

Figures released last month by the Office for National Statistics (ONS) showed the UK economy grew by 0.3% in November following a contraction of a similar magnitude during the previous month. ONS said the services sector led the rebound, with Black Friday providing a boost to retailers, warehousing and couriers, while car leasing and computer games firms also enjoyed a buoyant month.

Despite November’s bounce back, ONS noted that the longer-term picture remains one of little growth over the past year. Indeed, output actually shrank by 0.2% in the three months to the end of November, and the statistics agency said a contraction or even flat data in December could lead to a second successive quarter of falling output, and thereby tip the economy into a shallow technical recession.

Data from the latest S&P Global/CIPS UK Purchasing Managers’ Index (PMI) released towards the end of last month, however, paints a more positive picture with business confidence rising to its highest level since last May. The preliminary headline economic growth indicator also rose, up from 52.1 in December to 52.5 in January, beating analysts’ expectations and pointing to a stronger than expected start to 2024 for the UK economy.

Commenting on the findings, S&P Global Market Intelligence’s Chief Business Economist Chris Williamson said, “UK business activity growth accelerated for a third straight month in January, according to early PMI survey data, marking a promising start to the year. The survey data point to the economy growing at a quarterly rate of 0.2% after a flat fourth quarter, therefore skirting recession and showing signs of renewed momentum.”

Surprise uptick in inflation rate

Last month’s release of consumer price statistics revealed a small increase in the UK headline rate of inflation, bucking analysts’ expectations for a further easing in price pressures.

Data published by ONS showed the Consumer Prices Index (CPI) 12-month rate – which compares prices in the current month with the same period a year earlier – stood at 4.0% in December. This was up from November’s 3.9% figure and was also higher than the 3.8% consensus forecast from a Reuters poll of economists.

ONS said the increase, which represented the first inflation uptick in 10 months, was partly driven by a sharp rise in tobacco prices due to duty increases. There were also material upward contributions from the recreation, airfare and clothing sectors, although these were partially offset by a fall in food inflation with prices in this sector still rising but at a much lower rate than in the comparable period last year.

Analysts typically expect January’s inflation rate to rise as a result of base effects and there are a number of notable risks to the outlook particularly relating to disruption of shipping in the Red Sea. However, most economists are still predicting the downward trajectory will resume with potentially large declines forecast this spring.

Capital Economics, for instance, recently suggested CPI inflation could drop below 2% by April. The independent research firm also said this could result in the UK’s pace of price growth actually breaching the 2% mark before both the US and Eurozone.

While December’s inflation rise did dent market expectations of an early cut in interest rates, analysts do still typically expect the Bank of England to sanction a series of rate reductions this year. Indeed, a recent Reuters poll found that just over half of economists expect the first cut to be sanctioned before mid-2024.

Markets (Data compiled by TOMD)

Major global indices were mixed at the end of January. On the last trading day of the month the FTSE 100 lost ground ahead of imminent interest rate decisions in the UK and US.

In the UK, the FTSE 100 index closed the month on 7,630.57, a loss of 1.33%, while the mid cap orientated FTSE 250 closed January 1.68% lower on 19,357.95. The FTSE AIM closed on 754.75, a loss of 1.12% in the month.

On 31 January, the Federal Reserve decided to retain interest rates for another month, whilst making it clear that it needs to see more progress on inflation before reducing borrowing costs. The Dow closed the month up 1.22% on 38,150.30, while the tech-orientated NASDAQ closed January up just over 1% on 15,164.01. At month end the broader market came under pressure as technology stocks failed to live up to expectations.

Meanwhile, the Euro Stoxx 50 closed the month 2.80% higher, on 4,648.40. The Nikkei 225 ended January on 36,286.71, up 8.43%. During the month, Japan’s benchmark index broke past the 35,000 mark, for the first time since February 1990.

On the foreign exchanges, the euro closed the month at €1.17 against sterling. The US dollar closed at $1.27 against sterling and at $1.08 against the euro.

Gold closed the month trading around $2,053 a troy ounce, a monthly loss of 1.21%. Brent crude closed January trading at around $80 a barrel, a monthly gain of 4.87%. Oil posted its first monthly gain since September.

Government borrowing lower than expected

The latest public sector finance statistics revealed a smaller-than-expected budget deficit providing the Chancellor with more room for manoeuvre as he prepares to deliver his Spring Statement in March.

ONS data showed government borrowing fell to £7.8bn in December, nearly half the level predicted in a Reuters poll of economists. This left the fiscal year-to-date total at £119bn, almost £5bn below the Office for Budget Responsibility’s November forecast produced for the Autumn Statement, principally as a result of lower than anticipated inflation reducing debt interest payments.

Prior to release of the data, the Chancellor had hinted at potential pre-election tax cuts when he delivers his Spring Budget on 6 March. Speaking during a visit to the World Economic Forum in Davos, Mr Hunt said he wanted to move in the direction of cutting taxes and noted that countries with lower taxes “are more dynamic, more competitive and generate more money for public services.”

Analysis released late last month by the Institute for Fiscal Studies, however, suggests the next government is likely to face the toughest challenge since the 1950s to bring down the country’s high debt burden. The economic think tank also warned that tax cuts now could compound the problem.

Retail sales fall sharply

Data released last month by ONS revealed that the UK retail sector suffered its sharpest decline in sales volumes for almost three years.

Official retail sales statistics showed sales volumes fell by 3.2% in December; this figure was worse than all predictions in a Reuters poll of economists with the consensus forecast pointing to a 0.5% fall. The monthly decline was also the largest since January 2021 when the reintroduction of pandemic restrictions heavily impacted sales. While ONS did say people appeared to have shopped earlier this year in order to take advantage of Black Friday sales, they also noted evidence of consumers spending less on gifts while food sales also notably declined in the run-up to Christmas.

The latest CBI Distributive Trades Survey suggests the retail environment remains extremely challenging with year-on-year sales volumes in January falling at the fastest pace since the pandemic. The survey also found that retailers anticipate a similar rate of contraction in February.

CBI Principal Economist Martin Sartorius said, “Retailers reported a further deterioration in activity at the start of 2024. Looking ahead, demand conditions in the sector will remain challenging as higher interest rates continue to feed through to mortgage payments and household incomes.”

All details are correct at the time of writing (01 February 2024)

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

News in Review

“Consumer confidence has started the year well”

On Friday, the latest UK consumer confidence data from GfK showed that households are more optimistic about their personal finances. The index recorded a three point increase in January, to a reading of -19, the highest level in two years.

This is despite a small untick in the annual rate of consumer price inflation (CPI) in December, rising to 4% from November’s two-year low of 3.9%. The overall trend for inflation has been lower.

GfK’s major purchase index also rose by three points on December’s reading and by 20 points year-on-year, with consumers therefore more likely to make large purchases like appliances, furniture and cars.

By historical standards, confidence is still weak because the reading is below the 10-year average of -15, howeverClient Strategy Director at GfK, Joe Staton, had some positive comments on the recent data set, “Consumer confidence has started the year well with all measures up… Importantly, the view on our personal financial situation for the coming year has gained two points and now stands at zero. This is exciting as it ends 24 consecutive months of negative scores for this measure and this significant change is the best single indicator for how the nation’s households feel about their income and expenditure.”

UK vehicle production tops one million in 2023

Recent statistics from the Society of Motor Manufacturers and Traders (SMMT) has highlighted that last year was the best year for car production since 2019. With 1,025,474 units manufactured, broken down into 905,117 cars and 120,357 commercial vehicles, overall output increased 17% year-on-year. Accounting for 38.3% of total output, production of battery electric, plug-in hybrid and hybrid vehicles increased to 346,451 units, up 48% year-on-year.

Output levels were supported by various factors, including increased electrified model production and receding supply chain challenges. In addition, healthy levels (£23.7bn) of public and private investment commitments were announced during last year, more than the previous seven years combined, including R&D facilities and gigafactories, spanning the country. The SMMT specify that this investment ‘will drive green economic growth, create jobs nationwide and transition the sector to electrified vehicle manufacturing, which has already hit record levels in 2023.’

SMMT Chief Executive, Mike Hawes said that the industry needs to focus on “transitioning the sector at pace to electric and scaling up the supply chain.” He continued, “With global competition as fierce as it has ever been and amid escalating geopolitical tensions, both government and industry must remain singularly focused on competitiveness, with all the jobs and growth this will bring. We are in a much better position than a year ago, but the challenges are unrelenting.”

UK government borrowing
Data published by the Office for National Statistics (ONS) last week showed the UK government borrowed less than expected in December, with public sector borrowing falling to £7.8bn, about half the amount a year previously and the lowest December figure since 2019. Lower interest payments on government debt helped drive the figure down, which was considerably lower than the £14bn prediction from the Office for Budget Responsibility (OBR). The lower borrowing figure has fuelled expectation of tax cuts in the Spring Budget on 6 March.

ECB holds rates

Last Thursday, the European Central Bank (ECB) retained its key interest rates for a third consecutive meeting. With the deposit rate remaining at 4%, and the Governing Council focused on returning inflation to its 2% medium-term target. ECB President Christine Lagarde said it was “premature to discuss rate cuts,” adding that it will continue to be data dependent rather than “fixated on any calendar.”

Healthy US growth figures

During the final quarter of 2023, the US economy grew at a much faster pace than anticipated, according to data estimates from the Bureau of Economic Analysis and the Commerce Department. The US economy expanded at an annual rate of 3.3% during Q4, down from 4.9% recorded in Q3 but much faster than the 2% analysts expected. The uptick was driven by factors including robust household and government spending.

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 (31 January 2024)

A year of portfolio expansion for BTL landlords?

2024 is set to be a promising year for landlords, with 32% of buy-to-let landlords intending to buy more property according to a survey1. Driven by a desire to build their portfolio, nearly half of those with purchasing plans this year already own at least 11 properties. 

Driven by increased demand  

Some landlords who aim to buy are responding to current demand; 38% said their plans are driven by the increase in the number of potential tenants, while 34% are influenced by a reduction in house prices. 

Location, location, location 

Attitudes towards portfolio expansion are largely dependent on the landlord’s location. Rob Stanton from Landbay commented, “While it is true that higher interest rates are putting off some landlords, for others there are opportunities out there. This is more noticeable in the Midlands and the North of England, with the South, typically more expensive, proving less popular for property purchase.” 

Landlords holding back 

Higher interest rates are not the only reason some landlords are not wanting to expand their portfolio; some are holding off buying because of insufficient funds, or due to the much anticipated (and delayed) Renters (Reform) Bill which will overhaul the private rented sector. 

Looking to build your property portfolio in 2024? If so, get in touch for mortgage advice – we can find the most suitable mortgage for your unique needs. 

1Landbay, 2023 

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 

Global dividend update

A new study1 analysing global dividend trends has highlighted that, in the third quarter of last year, 89% of companies chose to maintain their dividend levels or raise them. Despite this, it was noted that during the quarter, global dividends reduced by 0.9% (on a headline basis) to total $421.9bn. 

The underlying growth of dividends, paid by the world’s 1,200 largest firms measured by market capitalisation, was recorded at 0.3% in Q3 2023; this follows adjustments for the strengthening US dollar and for special dividends. Interestingly, the overall growth rate was ‘significantly impacted’ by a diminutive number of large dividend cuts; the report noted that this ‘masked encouraging growth across the wider market.’ If you exclude the two largest dividend reductions, for example, underlying growth was 5.3%. 

From a year-on-year perspective, the 2023 headline forecast has been reduced from $1.64trn to $1.63trn, also reflective of reduced special dividends and a stronger US dollar, and ‘not a cause for concern,’ according to the report. Head of Global Equity Income at Janus Henderson, Ben Lofthouse, signalled that, “dividend growth from companies generally remains strong across a wide range of sectors and regions,” adding that the data highlights “a globally diversified income portfolio has natural stabilisers,” as sectors in ascendance are “able to counteract those with declining dividends,” before concluding, “Dividends are typically much less volatile than earnings over time, providing comfort in times of economic uncertainty.” 

1Janus Henderson, 2023 

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. 

Prospects of stronger economic growth

As we enter a new year, the global economy sits in a relatively precarious position, with the long-term consequences of the pandemic, as well as ongoing conflicts and geopolitical tensions all hindering growth prospects. While such times can appear daunting for investors, the key to successful investing actually remains the same: focus on long-term goals and mitigate potential risks by maintaining a well-diversified portfolio. 

Global recovery remains slow 

In its latest assessment of economic prospects, produced just before the Middle East conflict began, the International Monetary Fund (IMF) dampened its baseline global growth forecast for the coming year. The international soothsayer is now predicting growth will slow from 3.5% in 2022 to 3.0% in 2023 and 2.9% in 2024; all three figures are below the long-term average global growth rate of 3.8%. 

Challenges ahead but growth prospects 

The IMF noted that the current weak growth outlook allied with heightened uncertainty, still-elevated global inflation and limited fiscal space, do pose a series of challenges for policymakers. However, the report also highlighted some more upbeat aspects including disinflation, rebuilt buffers to help manage future shocks and the prospect of stronger, more balanced growth. 

Diversification is key 

In the current economic climate, strong research capabilities are clearly vital and that is our strength. It enables us to formulate and develop an effective investment plan tailored specifically to your needs, and helps us ensure you continue to hold a well-diversified, balanced portfolio firmly aligned to your long-term financial objectives. 

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.