News in Review

“Britain looks to be out of recession already”

New UK growth statistics released from the Office for National Statistics (ONS) last week showed that monthly real gross domestic product (GDP) is estimated to have increased by 0.2% in January, following a 0.1% contraction in December.

Main contributors to growth in the month were services output and construction, which grew by 0.2% and 1.1% respectively, while production output was one area of detraction, falling 0.2% in January. At 1.1%, construction output saw its largest monthly rise since June last year, supported by a 2.6% rise in private sector house building, which had previously been subdued by elevated interest rates.

After the recent news that the UK was in a technical recession, following GDP contractions of 0.3% in Q4 of 2023 and 0.1% in Q3, this new data provides a glimmer of hope for a more positive start to the year. Research Director at the Resolution Foundation, James Smith, commented, “Britain looks to be out of recession already, with strong retail sales helping the economy to grow in January and recent PMI data suggesting that momentum has continued into February.”

However, he went on to caution, “Britain is far from ending its period of prolonged stagnation, with the economy yet to return to its pre-pandemic size on a per person basis. Ending stagnation will require sustained productivity improvements, greater investment and a far stronger export performance.”

US inflation ticks higher

Last week, February consumer price index data released from the US Labor Department showed overall prices increased by 3.2% year-on-year, a slight elevation from the 3.1% figure recorded in January. From a monthly perspective, costs increased by 0.4% in February, following a 0.3% gain the previous month. Main contributors to the monthly increase were rising fuel and housing costs, while food prices remained flat. Since the Federal Reserve started increasing borrowing costs in 2022, inflation has slowed considerably. In a key election year, it is anticipated the Fed will start cutting interest rates as the year progresses.

Surge in mortgage arrears

Key points from The Bank of England’s Mortgage Lenders and Administrators Statistics report for Q4 2023 have shown that ‘the value of outstanding mortgage balances with arrears increased by 9.2% from the previous quarter, to £20.3bn.’ This represents a massive 50.3% increase year-on-year, bringing the proportion of total loan values with arrears (relative to all outstanding mortgage balances) to 1.23%, an increase from 1.12% in the previous quarter, and the highest percentage in over 7 years (Q4 2016).

Housing demand returning

The Royal Institution of Chartered Surveyors (RICS) latest survey of the residential property market has highlighted a more positive trend in buyer enquiries and new listings, with sales modestly picking up in the near-term, with expectations that they will gain further momentum over the coming months. Within the survey, the new buyer enquiries indicator registered a net balance of +6% in February, replicating the January uptick. This ‘second successive reading in positive territory… continues to signal an upward trend in buyer demand,’ according to RICS, who add, ‘When disaggregated, most parts of the UK have seen a recovery in buyer enquiries over the past two months.’ The report shows a continuation in the stabilisation of house prices, with one-year projections indicating a return to growth.

Latest labour statistics

ONS data has shown the UK economic inactivity rate for the three months to January 2024 was recorded at 21.8%, increasing in the latest quarter, and marginally higher year-on-year. Looking closely at the data, a total of 9.2 million people aged between 16 and 64 are not currently in work or seeking employment, over 700,000 higher than prior to the pandemic. A prime reason for inactivity is rated as long-term illness, attributed to a third of working-age inactivity. Other groups include those with disabilities, discouraged workers and early retirees.

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 (20 March 2024)

House number 13 – are you superstitious? 

A recent study1 suggests that some Brits are superstitious, as homes numbered 13 are valued lower than the average property. 

Over 10 million houses have been analysed, each with a door number between 1–100. It seems many homeowners would like to be number one, as the first house on the street is worth the most – an average of £393,690. This is nearly £40,000 more than homes that have the ‘unlucky’ number 13 on its door. 

Very superstitious? 

Tim Bannister, Property Expert at Rightmove commented on the findings, “The majority of buyers are unlikely to be put off being the owner of a number 13 home, but it’s interesting to see from such a large data set that there do appear to be pockets of Great Britain that are more on the superstitious side.” 

For this reason, some new developers skip the number 13 altogether, just like hotels have been doing for years with rooms and even floors! If you don’t struggle with triskaidekaphobia (fear of the number 13), you could snap up a bargain in 2024. 

1Rightmove, 2023 

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

News in Review

“A plan to grow the economy, a plan for better public services, a plan to make work pay”

Chancellor Jeremy Hunt delivered his Spring Budget last week, during which he provided an economic update from the Office for Budget Responsibility (OBR). The latest projections showed the rate of inflation is expected to fall below the Bank of England’s 2% target level in “a few months’ time.”  The OBR expects economic growth of 0.8% this year, with growth of 1.9% in 2025, higher than the 1.4% figure previously predicted.

The Chancellor said his Budget was “A plan to grow the economy, a plan for better public services, a plan to make work pay… Growth up, jobs up and taxes down.”Headline Budget announcements included:

National Insurance Contributions (NICs)

  • A reduction in the main rate of employee NICs by 2p in the pound from 10% to 8%, following the 2p cut that took effect in January
  • A cut to the main rate of self-employed NICs, meaning the main rate of Class 4 NICs will reduce from 9% to 6%.

Child Benefit

  • The threshold for the High Income Child Benefit Charge will be increased to £60,000 in April
  • The rate of the charge will be halved, so that Child Benefit is not lost in full until an individual earns £80,000 per annum
  • By April 2026, the Child Benefit system will be based on household rather than individual incomes.

New savings products

  • A new UK ISA with a £5,000 annual allowance in addition to the existing ISA allowance. It will be a new tax-free savings product for people to invest in UK-focused assets (consultation re implementation to run to 6 June 2024)
  • British Savings Bonds to be delivered through National Savings & Investments (NS&I) in April 2024, offering a guaranteed interest rate, fixed for three years.

Business taxation

  • From April 2024 the threshold at which small businesses must register to pay VAT will be raised from £85,000 to £90,000.

Non-dom tax regime

  • This regime is set to be abolished
  • From April 2025, new arrivals to the UK will not have to pay tax on foreign income and gains for the first four years of their UK residency
  • After that, they will pay the same tax as other UK residents.

Property taxation

  • From 1 June 2024 Stamp Duty Land Tax Multiple Dwellings Relief will be abolished
  • The higher rate of Capital Gains Tax (CGT) on residential properties will be reduced from 28% to 24%.

Public Sector Productivity Plan

The Chancellor announced a new Public Sector Productivity Plan to restart public sector reform and change the Treasury’s traditional approach to public spending. This includes a £2.5bn funding boost for the NHS in 2024/25, allowing the service to continue its focus on reducing waiting times for patients and £3.4bn to modernise NHS IT systems. The plan also includes £800m of additional investment to boost productivity across other public services, including £230m for drones and new technology to free up police officers’ time for frontline work and £75m to roll out the Violence Reduction Unit model across England and Wales.

Budget reaction

Director of the Institute for Fiscal Studies (IFS), Paul Johnson, commented on the Budget, “The OBR marginally increased its forecasts for economic growth, but the overall public finance picture remains largely unchanged from the autumn. The Chancellor is still on track to stabilise debt as a fraction of national income in five years’ time… While his ambition to improve public sector efficiency and productivity is the right one, and his injection of capital funding into the NHS is a sensible way of doing so, delivering on such plans and securing cash savings will be very tough indeed.”

In other news

Last week new data showed that India’s economy grew by 8.4% in the final quarter of 2023, supported by strong construction and manufacturing activity. Retaining its title as the world’s fastest growing major economy, India is forecast to leapfrog Germany and Japan as the world’s third largest economy in the coming years. The Indian government estimate growth of 7.3% for the 2024 fiscal year to 31 March.

In China, Premier Li Qiang outlined a series of measures last week aimed at boosting its flagging economy, whilst revealing an ambitious 5% growth target for 2024.

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 (13 March 2024)

Financial pitfalls primarily impacting women 

Research1 has shone a spotlight on the financial challenges that prevent women from accumulating the same wealth as their male counterparts. 

The report found that having children continues to have a disproportionately large impact on women’s finances, as do other life events such as the menopause. 

The findings 

Amongst the report’s findings were the following statistics: 

  • A quarter of women continue paying into their pension at the same rate during parental leave, vs 70% of men 
  • Caring responsibilities (outside of childcare) have financially impacted nearly half of women 
  • One in 20 menopausal women have quit work due to their symptoms 
  • Only 55% of women return to work full time after their first child, compared to 90% of men. 

Of course, no two women are the same and each will face different challenges on her journey to financial wellbeing. However, these statistics show that there are common threads here. Women continue to take the lion’s share of caring responsibilities, taking them out of the workplace and reducing their financial security not only in the present, but as they approach retirement as well. 

Let’s do something about it – together  

Despite the financial challenges women face, they remain less likely than men to seek professional financial advice2. As we move into 2024, make a New Year’s resolution – let this be the year that you empower yourself to succeed and get your finances on track for a prosperous future. 

1AJ Bell, 2023 

2Canada Life, 2022 

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 scammers targeting YOU 

According to a study from NatWest1, seven in 10 people have been targeted by scams over the last 12 months. Vulnerabilities brought on by cost-of-living challenges have likely contributed to the high numbers. 

Sadly, 13% of people have fallen prey to such scams, which are growing in both number and sophistication – targeting young and old – no one is immune. 

Avoid, avoid, avoid 

To avoid a scam, you’ve first got to know what you’re looking for. So, here’s a list of the most common scams used over the past year and the proportion of people who were targeted: 

  1. Phishing scams (37%) 

Fake emails or calls from organisations purporting to be from legitimate companies, asking you to provide personal or private data. 

  1. Trusted organisation scams (21%)  

Criminals contact their victims pretending to be trusted organisations such as HMRC, the police or their bank, saying there’s something wrong with their account, they need to pay a fine, or similar. 

  1. Refund scams (13%) 

Similar to the above, but the criminals instead use a potential refund or rebate to tempt victims into sharing personal or banking information. 

Other scams include messages purporting to be from friends/family asking for money (12%), get rich quick scams (12%) and purchase scams (9%). 

Keep yourself (and your money) safe  

Staying vigilant and keeping your guard up around unsolicited calls and messages is key to protecting yourself from scams. Remember: 

• If something seems too good to be true, it probably is 

• Your bank will never ask you to disclose your full PIN or password 

• Don’t respond to unsolicited calls, emails or texts, or open links if you feel suspicious 

• We’re always here to help if you’re ever unsure about something. 

Always be alert to the risk of fraud – double check any details to ensure people or organisations are who you think they are. 

Stay vigilant, protect yourself – knowledge is power. 

1NatWest, 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.  

Home sweet home 

What makes you feel at home? A recent survey1 has highlighted that, for many Brits, it is about more than just bricks and mortar. When asked what was most important, family photos came top of the list, followed by fresh bed sheets and a full fridge. Books, blankets, and a TV were also popular. 

Comes at a cost 

While the feeling of being at home may be priceless, each household spends an average of £593 every year on items that make them feel more relaxed and comfortable. The biggest spenders are those living in Greater London, with an average of £953 coming out of most bank accounts. Interestingly, 25 to 34-year-olds were found to be the age that spent the most, while over-55s splashed the least amount of cash. 

Protect your possessions 

It is perhaps unsurprising that 55% of respondents said they would be disappointed if their beloved belongings were damaged. However, a third admitted that they did not have home contents insurance; renters in particular are unlikely to have the right cover. 

If you want to protect your prized possessions, or you would like mortgage advice to help find your dream home in 2024, get in touch. 

1Aviva, 2023 

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

Spring Budget 2024

On 6 March, Chancellor of the Exchequer Jeremy Hunt delivered his Spring Budget to the House of Commons declaring it was “a Budget for long-term growth.” The fiscal update included a number of new policy measures, such as a widely-anticipated reduction in National Insurance, abolition of the non-dom tax status and new savings products designed to encourage more people to invest in UK assets. The Chancellor said his policies would help build a “high wage, high skill economy” and deliver “more investment, more jobs, better public services and lower taxes.”

OBR forecasts

During his speech, the Chancellor declared that the economy had “turned the corner on inflation” and “will soon turn the corner on growth” as he unveiled the latest economic projections produced by the Office for Budget Responsibility (OBR). He started by saying that they showed the rate of inflation falling below the Bank of England’s 2% target level in “a few months’ time.” He noted that this was nearly a year earlier than the OBR had forecast in the autumn and said this had not happened “by accident” but was due to “sound money” policies.

The Chancellor also noted that the OBR forecast shows the government is on track to meet both its self-imposed fiscal rules which state that underlying debt must be falling as a percentage of gross domestic product (GDP) by the fifth year of the forecast and that public sector borrowing must be below 3% of GDP over the same time period. Indeed, in relation to the second rule, Mr Hunt pointed out that borrowing looks set to fall below 3% of GDP by 2025/26 and that by the end of the forecast period it represents the lowest level of annual borrowing since 2001.

In terms of growth, Mr Hunt revealed that the updated OBR projections suggest the UK economy will expand by 0.8% this year, marginally higher than the fiscal watchdog’s autumn forecast. Next year’s growth rate was also revised upwards to 1.9% compared to the 1.4% figure previously predicted.

Cost-of-living measures

The Chancellor also announced a series of measures designed to help families deal with cost-of-living pressures. These included: an extension to the Household Support Fund at current levels for a further six months; maintaining the ‘temporary’ 5p cut on fuel duty and freezing it for another 12 months; an extension of the freeze in alcohol duty until February 2025; an extension in the repayment period for new budgeting advance loans from 12 months to 24 months, and abolition of the £90 charge for a debt relief order.

Personal taxation, savings and pensions

Following previous changes to National Insurance Contributions (NICs) from January 2024, the government announced further changes to take effect this April:

  • The main rate of employee NICs will be cut by 2p in the pound from 10% to 8%, which, when combined with the 2p cut that took effect in January, is estimated to save the average salaried worker around £900 a year
  • There will be a further 2p cut from the main rate of self-employed NICs on top of the 1p cut announced at the Autumn Statement
  • This means that from 6 April 2024 the main rate of Class 4 NICs for the self-employed will reduce from 9% to 6%. Combined with the abolition of the requirement to pay Class 2 NICs, this will save an average self-employed person around £650 a year.

To remove unfairness in the system, changes to Child Benefit were announced:

  • The Child Benefit system will be based on household rather than individual incomes by April 2026
  • From April 2024 the threshold for the High Income Child Benefit Charge will be raised to £60,000 from £50,000, taking 170,000 families out of paying this charge
  • The rate of the charge will also be halved, so that Child Benefit is not lost in full until an individual earns £80,000 per annum
  • The government estimates that nearly half a million families will gain an average of £1,260 in 2024/25 as a result.

The government announced two savings products to encourage UK savings – a new UK Individual Savings Account (ISA) and British Savings Bonds:

  • The new ISA will have a £5,000 annual allowance in addition to the existing ISA allowance and will be a new tax-free product for people to invest in UK-focused assets
  • British Savings Bonds will be delivered through National Savings & Investments (NS&I) in April 2024, offering a guaranteed interest rate, fixed for three years.

Expressing concern that, across the pensions industry, investment into UK equities is only around 6%, the Chancellor announced plans to bring forward requirements for Defined Contribution pension funds to publicly disclose the breakdown of their asset allocations, including UK equities, working closely with the Financial Conduct Authority (FCA) to achieve this.

The non-dom tax regime, available to some UK residents with permanent domicile overseas, is to be abolished. From April 2025, new arrivals to the UK will not have to pay tax on foreign income and gains for the first four years of their UK residency. After that, they will pay the same tax as other UK residents. Transition arrangements will be allowed for current non-doms.

In addition:

  • As previously announced in the Autumn Statement, the government is working to bring forward legislation by the end of the summer to allow people to invest in a diverse range of investment types through their ISAs
  • The existing ISA allowance remains at £20,000 and the JISA (Junior ISA) allowance and Child Trust Fund annual subscription limits remain at £9,000
  • The Dividend Allowance reduces to £500 from April 2024
  • The annual Capital Gains Tax (CGT) exemption reduces to £3,000 from April 2024
  • The standard nil rate Stamp Duty Land Tax threshold for England and Northern Ireland is £250,000 and £425,000 for first-time buyers, remaining in place until 31 March 2025
  • The Income Tax Personal Allowance and higher rate threshold remain at £12,570 and £50,270 respectively until April 2028 (rates and thresholds may differ for taxpayers in parts of the UK where Income Tax is devolved)
  • There will be a consultation on moving to a residence-based regime for Inheritance Tax (IHT). No changes to IHT will take effect before 6 April 2025 – £325,000 nil-rate band, £175,000 main residence nil-rate band, with taper starting at £2m estate value
  • From 1 April 2024, personal representatives of estates will no longer need to take out commercial loans to pay IHT before applying to obtain a grant on credit from HMRC
  • The State Pension, as previously announced, will go up by 8.5% in April, which means £221.20 a week for the full, new flat-rate State Pension (for those who reached State Pension age after April 2016) and £169.50 a week for the full, old basic State Pension (for those who reached State Pension age before April 2016)
  • The removal of the Lifetime Allowance (LTA) from pensions tax legislation from April
  • As previously announced, the National Living Wage for over-23s – paid by employers – will rise from £10.42 an hour to £11.44 an hour in April.

Business measures

Various business measures announced included the raising of the threshold at which small businesses must register to pay VAT from £85,000 to £90,000 from April 2024. In addition, the Recovery Loan Scheme for small businesses will be extended until March 2026.

Property taxation

The Chancellor also announced the government’s plans to make the property tax system fairer, by:

  • Abolishing the Furnished Holiday Lettings tax regime
  • Abolishing Stamp Duty Land Tax Multiple Dwellings Relief from 1 June 2024
  • Reducing the higher rate of CGT on residential properties from 28% to 24%.

Public services

“Good public services need a strong economy to pay for them, but a strong economy also needs good public services.” This is how the Chancellor introduced the government’s “landmark” Public Sector Productivity Plan which, it says, will restart public sector reform and change the Treasury’s traditional approach to public spending.

Our National Health Service is, said Mr Hunt, “rightly the biggest reason most of us are proud to be British.” He announced £3.4bn to modernise NHS IT systems, which is forecast to unlock £35bn of savings by 2030 and boost NHS productivity by almost 2% per year between 2025/26 and 2029/30. 

This includes:

  • Modernising NHS IT systems
  • Improvements to the NHS app to allow patients to confirm and modify appointments
  • Piloting the use of AI to automate back-office functions
  • Moving all NHS Trusts to electronic patient records
  • Over 100 upgraded AI-fitted MRI scanners to speed up results for potentially 130,000 patients per year.

The Chancellor announced a £2.5bn funding boost for the NHS in 2024/25, allowing the service to continue its focus on reducing waiting times for patients.

Mr Hunt also announced £800m of additional investment to boost productivity across other public services, including:

  • £230m for drones and new technology to free up police officers’ time for frontline work
  • £75m to roll out the Violence Reduction Unit model across England and Wales
  • £170m for the justice system, including £55m for family courts, £100m for prisons and £15m to reduce administrative burdens in the courts
  • £165m to fund additional children’s social care placements
  • An initial commitment of £105m to build new special free schools.

Other key points

  • New duty on vaping products to be introduced from October 2026
  • Tobacco duty will be increased from October 2026
  • Air Passenger Duty adjustments to non-economy class rates from 2025/26
  • Energy Profits Levy one year extension from 1 April 2028 to 2029
  • Boosting local growth through a continuation of the Investment Zones programme
  • £1bn in additional tax relief over the next five years for creative industries
  • Housing investment including £124m at Barking Riverside and £118m to accelerate delivery of the Canary Wharf scheme (including up to 750 homes)
  • £120m for the Green Industries Growth Accelerator (GIGA)
  • £7.4m upskilling fund pilot to help SMEs develop AI skills of the future
  • Extension to Freeport tax reliefs to September 2031
  • Extension to and deepening of devolution in England, including the North East Trailblazer Devolution Deal
  • HMRC to establish an advisory panel to support the administration of the R&D tax reliefs.

Closing comments

Jeremy Hunt signed off his Budget saying he was delivering, “A plan to grow the economy, a plan for better public services, a plan to make work pay… Growth up, jobs up and taxes down. I commend this Statement to the House.”

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 of the Budget taxation and HMRC rules and can be subject to change in future. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK; please ask for details. 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.

All details are believed to be correct at the time of writing (6 March 2024)

News in Review

“The housing market has proved very resilient to higher mortgage rates and cost of living pressures”

House price data released last week from Zoopla highlighted that the number of homes on the market has increased by 21% year-on-year, as pent-up demand provides a boost. Buyer demand has also picked up, with an 11% increase on the year, while sales agreed are 15% higher than this time last year.

The average house price across the UK was noted at £263,600, a reduction of 0.5% year-on-year. The average price in London is now £534,600, more than double the national average. Five English regions are registering annual price falls of up to -2.1%, with the East of England leading the way with the most negative change.

Higher sales in February, with an uptick in buyers and sellers evident, indicates a rebound, despite ongoing cost pressures and elevated rates. Executive Director at Zoopla, Richard Donnell, commented on the findings, “The housing market has proved very resilient to higher mortgage rates and cost of living pressures. More sales and more sellers show growing confidence amongst households and evidence that 4-5% mortgage rates are not a barrier to improving market conditions.”

He continued, “The momentum in new sales being agreed has been building for the last five months and the sales market is on track for 1.1 million sales over 2024 supported by new sellers coming to the market.”

The latest Bank of England (BoE) Money and Credit report has outlined that UK mortgage approvals have reached their highest level in over a year, with 55,227 mortgages in January, up from 51,506 in December. This is the highest reading since October 2022.

Spring Budget speculation

Chancellor Jeremy Hunt presents his Spring Budget on 6 March. He will stand up in the House of Commons following Prime Minister’s Questions and alongside the latest economic forecasts from the Office for Budget Responsibility (OBR) to announce key tax measures and outline the government’s spending commitments for health, schools, police and other public services, for the year ahead. Prime areas of speculation in advance of the day have included a further National Insurance reduction and possible changes to Inheritance Tax.

The case for tax cuts has been described by the Institute for Fiscal Studies (IFS) as ‘weak,’ with the think tank adding that any tax cuts ‘should wait’ until the Chancellor is able to do a detailed spending review. Carl Emmerson, Deputy Director at IFS commented, “We don’t think we should be implementing certain tax cuts now, essentially that are paid for by uncertain spending cuts that might never be delivered.”

The International Monetary Fund (IMF) have also advised the government about making further tax cuts, suggesting the Treasury’s pencilled-in spending cuts were unrealistic.

New FCA campaign

Last week, the Financial Conduct Authority (FCA) launched a new campaign focused on the benefits of switching savings accounts, encouraging consumers to shop around for a better savings rate and how fast and easy this can be. Running across radio, digital audio and social media, Sheldon Mills, FCA Executive Director of Consumers and Competition commented, “We know that people can be put off switching for a variety of reasons, but they could be making their money work harder. There are some great rates out there and it could take as little as five minutes to find a better deal.”

Rainy day funds raided in 2023

Data released last week showed that a record £100bn was withdrawn from easy access accounts last year, as people struggled with their finances as cost-of-living issues intensified. This resulted in the most substantial fall in total balances since the global financial crisis in 2008. The stats from Coventry Building Society, based on analysis of BoE data showed that year-on-year, household savings increased by just 2% (£36bn), the lowest level in annual growth in 15 years.

Head of Strategy at Coventry Building Society, Jeremy Cox, commented on the findings, “The UK lost its savings habit in 2023 after building up a substantial safety net during the pandemic. Money in easy access accounts took a drastic downturn as households drew on their day-to-day funds to support spending and higher price rises.”

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 (6 March 2024)

What’s your retirement dream?

Research1 has revealed that the ultimate retirement dream is actually very simple – financial security for the rest of your life. 

This is according to a survey1, which questioned 2,000 respondents aged 50 and over on their aspirations for later life. 

Hopes and dreams 

Nearly all the respondents to the survey (94%) said that financial security was one of their biggest retirement wishes. Other retirement aspirations included: 

  • Being able to maintain one’s desired lifestyle (94%) 
  • Spending time with family (90%) 
  • Being able to afford care if required (81%) 
  • Being able to afford big family events, such as weddings (73%) 
  • Travelling (72%) 
  • Being able to support family financially (69%). 

However, 41% of retired respondents admitted that they’ve ended up needing more money than anticipated. 

Avoiding the shortfall 

Due to rising life expectancies, many people can expect to spend several decades in retirement. You therefore need to give careful consideration to the below: 

How much do you need? – what level of income will you need for your preferred lifestyle? 

What do you have? – let’s take stock of your pension(s), savings and investments, and any other assets you currently have. 

When do you want to retire? – this will give you an idea of how long you have to save before entering retirement. 

Think about tax – there are serious benefits to properly utilising the tax allowances available to you. 

Take advice – research2 has revealed that people who take financial advice can expect to retire three years earlier on average. Advised consumers also believe they can fund their desired lifestyle for six years longer than their non-advised counterparts. 

Achieve the dream in 2024 

Make 2024 the year you make your retirement dreams come true. We can help you work towards enjoying the retirement you’ve always dreamed of. 

1Legal & General, 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. 

Economic Review – February 2024

Survey suggests recession already over

Official statistics released last month showed the UK economy fell into recession during the second half of last year, although more recent survey data does suggest the recession could already be over.

The latest gross domestic product (GDP) figures published by the Office for National Statistics (ONS) showed the economy shrank by a larger than expected 0.3% during the final quarter of last year. This follows a 0.1% contraction between July and September, thereby pushing the UK into a technical recession – defined as two consecutive quarterly falls in GDP.

ONS data also revealed the economy experienced little growth across the whole of last year. In total, it grew by just 0.1% over the course of 2023 which, excluding the pandemic years, represents the weakest annual rate of growth since 2009.

The start of this year, however, has seen clear signs of a rebound in growth prompting suggestions that the recession may prove short-lived. Bank of England (BoE) Governor Andrew Bailey, for instance, recently told MPs on the Treasury Committee that the economy is showing “distinct signs of an upturn” and that the recession looks like being the weakest of modern times “by a long way.”

Data from the latest S&P Global/CIPS UK Purchasing Managers’ Index (PMI) also paints a more positive picture reporting strong service sector growth and business optimism at a two-year high. The preliminary headline growth indicator also rose, up from 52.9 in January to 53.3 in February, beating analysts’ expectations and pointing to an upturn in economic growth.

S&P Global Market Intelligence’s Chief Business Economist Chris Williamson said, “The survey data points to the economy growing at a quarterly rate of 0.2-0.3% in the first quarter of 2024, allaying fears that last year’s downturn will have spilled over into 2024 and suggesting that the UK’s ‘recession’ is already over.”

High interest rates ‘under review’

Last month, the Bank of England (BoE) once again kept interest rates at a 16-year high, although policymakers did signal they were open to the possibility of lowering rates for the first time since the pandemic. 

On 1 February, the BoE’s Monetary Policy Committee (MPC) announced it had voted to maintain Bank Rate at 5.25% following its latest deliberations. This decision, however, was not unanimous, with a three-way split emerging on the nine-member panel, two voting to raise rates by 0.25%, one preferring a similar-sized reduction and six opting to leave rates unchanged.

This meant the meeting was the first since 2020 when any policymaker had voted to reduce borrowing costs and the minutes also signalled a potential change of course – previous guidance stating that rates could rise again was withdrawn while a concluding sentence stated the MPC ‘will keep under review for how long Bank Rate should be maintained at its current level.’

Last month’s release of inflation data also raised hopes that the Bank may begin cutting rates soon. The headline annual CPI rate unexpectedly held firm at 4.0% in January, defying economists’ predictions that it would rise to 4.2%. Indeed, after release of the consumer prices data, investors put a 72% chance of a first interest rate reduction in June, with a 0.25% cut fully priced in for August.

While the past few weeks have seen several MPC members suggest there needs to be more evidence of weaker price pressures before rates can be cut, the BoE’s Governor did recently describe market expectations that the Bank would start reducing rates this year as “not unreasonable.” The latest poll conducted by Reuters suggests economists now expect the BoE to begin cutting rates in the third quarter, with a slim majority predicting the first cut will be delivered in August.

Markets (Data compiled by TOMD)

At the end of February, markets closed in mixed territory as investors processed a raft of data including US inflation, jobless claims and UK earnings. 

Across the pond, data released at month end showed US prices increased at the slowest rate in nearly three years, keeping a June interest rate cut from the Federal Reserve on the table, while jobless claims rose. The Dow closed February up 2.22% on 38,996.39, with the tech-orientated NASDAQ closing the month up 6.12% on 16,091.92.

On home shores, the blue chip FTSE 100 index closed February on 7,630.02, a small loss of 0.01%, meanwhile the FTSE 250 ended the month 1.57% lower on 19,054.87. The FTSE AIM closed on 736.50, a loss of 2.42% in the month.

On the continent, the Euro Stoxx 50 ended February on 4,877.77, 4.93% higher. In Japan, the Nikkei 225 continued its bull run, concluding the month on 39,166.19, a gain of 7.94%. The index ended lower on the last trading day of the month ahead of the release of key US inflation data.

On the foreign exchanges, the euro closed the month at €1.16 against sterling. The US dollar closed at $1.26 against sterling and at $1.08 against the euro.

Brent crude ended the month trading at around $82 a barrel, a gain of 1.61%. The price per barrel has remained relatively stable within a narrow range over the last few weeks. Gold closed February trading around $2,048 a troy ounce, a small loss in the month of 0.25%. The price was supported by a softening in the US core price index at month end.

Wage growth slows again

Earnings statistics published last month showed that nominal pay is now rising at the weakest pace for more than a year with survey data suggesting this decline looks set to continue.

According to the latest ONS figures, average weekly earnings excluding bonuses rose at an annual rate of 6.2% across the final three months of 2023. Although this figure was slightly ahead of analysts’ expectations, it was notably lower than the 6.7% figure recorded in the three months to November 2023 and represents the slowest rate of increase since the August to October 2022 period.

Survey evidence also points to an expected further slowdown in levels of pay growth. Data recently released by XpertHR, for instance, showed that the median basic pay settlement fell to 5.1% in the three months to the end of January; this represents a significant drop from the 6.0% rate recorded during the previous three-month period.

In addition, research from the Chartered Institute of Personnel and Development (CIPD) suggests employers expect to raise basic pay by an average of 4% over the coming year. This is well below the 5% figure reported across 2023 and signals the first drop in this measure for nearly four years.

Retail sales rebound in January

The latest batch of retail sales statistics suggest consumers have recovered some of their appetite for spending, with much stronger than expected growth in sales volumes recorded at the start of the new year.

According to ONS figures published last month, total retail sales volumes rose by 3.4% in January compared to the previous month. ONS said this growth, which was significantly above the 1.5% consensus forecast predicted in a Reuters poll of economists, was driven by strong supermarket sales and shoppers taking advantage of new year bargains.

Commenting on the day the figures were released, British Retail Consortium Director of Insight Kris Hamer called the news “promising.” He also suggested the growth reflected “rising levels of consumer confidence, as well as a boost from the January sales.”

The latest CBI Distributive Trades Survey also painted a more positive picture of the retail sector, with its headline measure of sales volumes in the year to February rising to -7% from -50% in January. This marked the slowest rate of decline in year-on-year sales for ten months. Looking further ahead, however, the survey did strike a note of caution with retailers expecting sales to contract at a slightly faster pace in March.

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

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