Lifetime Allowance removal provides pension boost 

Several months have passed since the Spring Budget, which, although not necessarily packed with good news stories, held one announcement that certainly did bring considerable cheer to higher rate taxpayers. A recent survey has revealed the dramatic impact that Chancellor Jeremy Hunt’s decision to scrap the pension Lifetime Allowance (LTA) is having on people’s retirement planning strategies. 

Purpose of the move 

In his first Spring Budget Statement delivered on 15 March, the Chancellor announced that the LTA charge would be removed from April 2023 and that the LTA would be abolished altogether from April 2024. This decision was essentially designed to remove a disincentive for retirement saving amongst higher earners and dissuade an increasing number of this group from retiring early. 

Boosting pension contributions  

New research1 suggests the change has already had a significant impact on higher earners’ pension saving and retirement planning decisions both in terms of spurring more contributions and encouraging retirement delays. According to the survey, 51% of higher rate taxpayers have restarted, increased or made plans to increase their pension payments since the announcement, with average additional payments amounting to £650 a month. 

Extending working lives 

In addition, 23% of respondents said they had delayed their planned retirement or are likely to delay their retirement due to the fact that they can now save a higher amount in their pension pot without facing a heavy tax charge. Furthermore, around 10% said they had actually come out of retirement as a result of the change, while another 6% were planning to come out of retirement. 

Advice is paramount 

While abolition of the LTA has undoubtedly simplified some decisions in relation to retirement and estate planning, it has also effectively increased the need for clients to seek professional advice on their pension arrangements due to the change in tax treatment. There is also always an element of political risk in financial planning which means clients may need to act quickly if they are to make the most of the opportunity the Chancellor has provided. 

1Investec, July 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

“Our new estimates indicate a stronger performance for professional and scientific businesses”

The UK’s economy has grown faster since the start of the pandemic than had initially been stated, according to new data released last week by the Office for National Statistics (ONS).

Under the updated figures, the UK’s economy is estimated to have grown by 1.8% since the end of 2019, compared to a previous estimate of a 0.2% contraction. This makes the UK’s growth faster than both France and Germany for that period.

The upward change came mostly from a dramatic revision to the GDP figures for 2020 and 2021, with new data showing that the UK experienced a much better recovery from the pandemic than previously thought.

In response to the positive news, the FTSE 100 ended the third quarter with a 1% gain, following a 1.3% fall in the previous quarter. Elsewhere, the new data raised speculation that the Bank of England (BoE) will again hold Bank Rate unchanged at its November meeting.

The revised figures also presented a new picture of which sectors performed well over the past four years. Specifically, science firms were shown to have grown faster than previously thought. ONS Chief Economist Grant Fitzner explained, “Our new estimates indicate a stronger performance for professional and scientific businesses due to improved data sources. Meanwhile, healthcare grew less because of new near real-time information showing the cost of delivering services.”

No tax cut but living wage going up

On Monday, Chancellor Jeremy Hunt confirmed in a speech at the Conservative Party conference that the National Living Wage is set to increase to at least £11 an hour from next April, a move that will benefit two million of the lowest-paid workers. The National Living Wage – the lowest amount workers aged 23 and over can be paid per hour by law – is currently £10.42 per hour. Elsewhere in the speech, Mr Hunt said that the “level of tax is too high,” though the government has already hinted that no tax cuts are expected this year.

Mortgage lending slows

The latest statistics from the BoE on mortgage lending and approvals presented a mixed picture. Net borrowing of mortgage debt by individuals increased for the fourth consecutive month to £1.2bn in August, up from £0.2bn in July. On the other hand, net mortgage approvals for house purchases fell from 49,500 in July to 45,400 in August, the lowest level in six months.

Meanwhile, net approvals for remortgaging dropped from 39,300 to 25,000 during the same period, to reach its lowest point since July 2012. Moreover, net borrowing of consumer credit by individuals amounted to £1.6bn in August, a rise from £1.3bn in the previous month. At the last meeting of the Monetary Policy Committee (MPC), the BoE kept interest rates at a 15-year high of 5.25%.

Rosebank gets go ahead

Last week, the North Sea Transition Authority (NSTA) granted development and production consent for the Rosebank field, situated to the north-west of Shetland, to owners Equinor and Ithaca Energy. Rosebank is the UK’s largest untapped oil field and is estimated to contain up to 300 million barrels of oil.

NSTA spokesperson commented, “We have today approved the Rosebank Field Development Plan A which allows the owners to proceed with their project. The FDP is awarded in accordance with our published guidance and taking net zero considerations into account throughout the project’s lifecycle.”

Last month, 50 MPs and peers from all major parties raised concerns that Rosebank could produce 200 million tonnes of carbon dioxide. Mark Ruskell, climate spokesperson for the Scottish Greens, said that granting the licence was the “worst possible choice at the worst possible time.”

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 (4 October 2023)

Older homeowners staying put

First home, family home… then what? Maybe nothing, new research suggests1, with older homeowners standing their ground and not considering downsizing. 

Indeed, seven in 10 respondents said that they are not looking to downsize, in a survey of 1,000 homeowners. Moreover, although 29% do plan to downsize within the next five years, only 13% of over-75s have actually done so. So, what’s stopping them? 

Forever home 

The main reasons cited for not wanting to downsize include not being suited to a smaller house (31%), already living in their ‘forever home’ (25%) and having no desire to move away from their community (23%). 

Moreover, the process of moving was also called into question on the grounds that it would be ‘exhausting’ (22%) and would not bring financial benefit once costs were taken into account (16%). 

Downsizers 

On the other hand, of those who do plan to downsize, 43% cited finding it easier to look after a smaller property, while 38% said that it would be cheaper and 27% noted a desire to have more money to retire with. 

1Key, 2023 

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

FTSE 350 female board representation – a defining moment

Three years ahead of schedule, FTSE 350 companies have met the target of achieving 40% female board representation, according to the latest FTSE Women Leaders Review1. 

The report highlights ‘steady progress’ in getting women leaders to the ‘top table of business in the UK,’ with Nimesh Patel and Penny James, co-chairs of the Review describing the achievement as “a defining moment and testament to the power of the voluntary approach and the collective efforts of many businesses and individuals over the last decade.” 

1FTSE Women Leaders, 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 – September 2023

Rate-hike pause as inflation dips 

Last month, the Bank of England announced a pause in its long run of interest rate rises following an unexpected dip in the UK headline rate of inflation and ‘increasing signs’ that higher rates were starting to hurt the real economy. 

Following its latest meeting, which concluded on 20 September, the BoE’s Monetary Policy Committee (MPC) voted by a narrow margin to leave Bank Rate unchanged at 5.25%. This was the first occasion since December 2021 that an MPC meeting had not resulted in the Bank’s benchmark rate of interest being raised.  

The decision was clearly a very close call with four of the nine-member committee voting to increase rates by a further 0.25 percentage points. The minutes to the meeting also reiterated that the MPC would be prepared to raise rates again if there was ‘evidence of more persistent inflationary pressures.’ They also repeated previous guidance that monetary policy would remain ‘sufficiently restrictive for sufficiently long’ to return inflation back to its target level. 

Commenting on the day the decision was announced, BoE Governor Andrew Bailey said, “Inflation has fallen a lot in recent months and we think it will continue to do so.” The Governor did, however, warn against “complacency” and “premature celebration” and added, “We need to be sure inflation returns to normal and we will continue to take the decisions necessary to do just that.” 

Data published by the Office for National Statistics (ONS) the day before the MPC’s announcement had revealed a surprise fall in inflation. The Consumer Prices Index (CPI) 12-month rate – which compares prices in the current month with the same period a year earlier – fell to 6.7% in August, down from 6.8% in July. Most economists had predicted a slight uptick in August’s CPI rate primarily due to a rise in global fuel prices. 

UK economy contracts in July 

Gross domestic product (GDP) figures released last month showed the UK economy shrank by a greater than expected amount in July, while forward-looking indicators suggest a recession looks ‘increasingly likely.’ 

The latest monthly GDP statistics produced by ONS revealed that the economy shrank by 0.5% in July. This figure was worse than all forecasts submitted to a Reuters poll of economists with the consensus prediction suggesting the economy would suffer a 0.2% contraction. 

ONS said July’s weak figure partly stemmed from a reduction in output within the services sector, with this drop driven by the impact of industrial action by NHS workers and teachers. In addition, heavy rainfall across the month also hit activity in both the construction and retail industries. 

The UK economy has so far avoided recession this year with positive growth numbers recorded across both the first and second quarters. New data released at the end of September confirmed that the UK’s economy grew 0.2% in Q2. 

The preliminary headline reading from the S&P Global/CIPS UK Purchasing Managers’ Index (PMI) fell from 48.6 in August to 46.8 in September. This represents the sharpest fall in output since January 2021 and, excluding pandemic lockdown months, the steepest decline since the height of the global financial crisis in March 2009. 

Commenting on the findings, S&P Global Market Intelligence’s Chief Business Economist Chris Williamson said, “The steep fall in output signalled by the flash PMI data is consistent with GDP contracting at a quarterly rate of over 0.4%, with a broad-based downturn gathering momentum to hint at few hopes of any imminent improvement.”  

Markets (Data compiled by TOMD) 

As September drew to a close, many major global stock markets ended the month in negative territory. During the final trading days of Q3, some European markets were boosted as data indicated the UK’s economy grew in Q2 and inflation across the eurozone is cooling. 

In the US, the latest consumer confidence and home sales reports fuelled economic concerns and weighed on markets. The Dow Jones Index closed the month down 3.50% on 33,507.50, while the tech-orientated NASDAQ closed the month down 5.81% on 13,219.32. 

In the UK, the FTSE 100 closed the month on 7,608.08, a gain of 2.27%, while the mid cap focused FTSE 250 closed down 1.75% on 18,279.42. The FTSE AIM closed September on 726.18, a loss during the month of 2.12%. On the continent, the Euro Stoxx 50 closed on 4,174.66, a loss of 2.85%.  

In Asia, ongoing weakness in China’s property sector continues to weigh on the region. The Japanese Nikkei 225 closed the month on 31,857.62 down 2.34%.  

On the foreign exchanges, the euro closed the month at €1.15 against sterling. The US dollar closed at $1.21 against sterling and at $1.05 against the euro.  

Brent crude closed September trading at around $92, a gain over the month of 6.89%. Russia’s announcement of a temporary ban on gasoline and diesel exports to most countries is bringing uncertainty into the market. Gold closed the month trading at around $1,870 a troy ounce, a monthly loss of around 3.70%.  

Retail sector shows signs of recovery 

The latest official retail sales statistics revealed a partial rebound in sales volumes during August while more recent survey evidence highlights ‘elements of optimism’ within the retail sector. 

According to ONS data published last month, total retail sales volumes rose by 0.4% in August. This growth in the quantity of goods bought by consumers follows July’s 1.1% fall when sales were impacted by an unseasonal spell of wet weather which upset normal summer spending patterns. ONS noted that August’s partial recovery was driven by increased food sales and a strong month for clothing. 

Recently-released survey data from GfK also shows consumers remain remarkably resilient with sentiment at its highest level since the start of 2022 as households become increasingly hopeful about the economy. The latest CBI Distributive Trades Survey also suggests the retail sector expects to see modest sales improvements in the coming months with one gauge of retailers’ expectations hitting a three-month high.  

Commenting on the findings, CBI Principal Economist Martin Sartorius said, “There are some elements of optimism in our survey. Lower than expected inflation figures, which in turn will ease pressure on household budgets, will also give retailers some hope going into the crucial autumn and winter trading period.”  

Chancellor downplays tax-cut hopes 

Analysts have warned that the latest public sector finance statistics leave the Chancellor with little room to offer tax cuts when he delivers his Autumn Statement next month. 

ONS data recently revealed that government borrowing totalled £11.6bn in August, the fourth highest amount ever recorded for that month. The figure was also £3.5bn more than the government borrowed in the same month last year and was slightly ahead of analysts’ expectations.  

While inclusion of the latest data does still leave the fiscal year-to-date deficit comfortably below the most recent forecast published by the Office for Budget Responsibility (OBR), analysts typically believe there remains little scope for potential tax cuts in the near future. This reflects the expected economic slowdown, which is likely to hit tax revenues, as well as anticipated upward revisions to OBR projections due to higher debt interest costs. 

Chancellor Jeremy Hunt also recently acknowledged that rising debt interest payments caused by higher long-term interest rates were putting increased pressure on the public finances. He also admitted it would be “virtually impossible” to include tax cuts in his upcoming fiscal update. Earlier in the month, Mr Hunt announced he will deliver this year’s Autumn Statement on 22 November. 

All details are correct at the time of writing (02 October 2023 ) 

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

“Our job is to get inflation down”

At its meeting last week, the Bank of England’s Monetary Policy Committee (MPC) narrowly voted to maintain Bank Rate at 5.25%, ending a run of 14 consecutive increases.

Five members voted to keep the rate at 5.25%, while the four dissenting voices all favoured another 0.25% increase to 5.5%. The tight decision mirrored the views of forecasters, who had themselves been divided over whether Bank Rate would increase again.

With the MPC’s decision, the rate remained unchanged for the first time since December 2021. Although Bank Rate remains at its highest level for 15 years, the change of tactic will likely bring some relief to homeowners, especially those on tracker, discounted or variable rate mortgages.

The day before the MPC’s decision, official figures from the Office for National Statistics (ONS) had revealed that inflation dropped to 6.7% in the year to August, down from 6.8% a month earlier. This was the third successive month in which inflation had fallen, with a slowdown in rising food prices, as well as a drop in air fares and accommodation costs all contributing to the lower rate.

Despite falling last month, UK inflation remains higher than in most other developed countries. Recent data in Germany (6.4%), France (5.7%), Italy (5.5%) and the US (2.5%) have all come in lower.

In response to the UK’s September data, Chancellor Jeremy Hunt said, “Today’s news shows the plan to deal with inflation is working – plain and simple.” Andrew Bailey, Governor of the Bank of England, struck a more cautious tone, however. He commented, “I can tell you that we have not had any discussion… about reducing rates, because that would be very, very premature. Our job is to get inflation down.”

OECD puts Germany at the bottom

Last week, the Organisation for Economic Co-operation and Development (OECD) released new forecasts that reiterated the expectation of a slowdown in the world economy. The release stated that higher interest rates and weaker global trade were the leading causes, and that Germany is braced to experience the worst effects.

Indeed, along with Argentina, Germany is expected to be the only G20 economy to shrink in 2023. Meanwhile, the UK’s predicted growth of 0.3% will be the third weakest in the G20. In 2024, moreover, the OECD cut the UK’s expected growth rate from 1% to 0.8%, which would make it the G20’s second worst performer. On inflation, the UK is predicted to have a higher rate than anywhere else in the G20 except Turkey and Argentina, with an estimated average rate of 7.2% this year.

UK consumer confidence nudges higher

In more positive news, consumer confidence increased in the UK in September, according to the latest iteration of GfK’s Consumer Confidence Index, which was released on Friday. With a rise of four points, overall confidence reached -21 in September, the highest level since January 2022. Additionally, all five measures – Personal Financial Situation (past and future), General Economic Situation (past and future) and Major Purchase Index – had risen compared to the previous month.

Sunak slams brakes on green transition

Last Wednesday, Prime Minister Rishi Sunak confirmed that a ban on new petrol and diesel car sales, originally scheduled to come into effect in 2030, was being pushed back to 2035 as part of a wider rethink about the country’s journey towards net zero.

Phasing out petrol and diesel sales by 2023 was part of a plan to accelerate the transition to electric vehicles, a move that experts say will be crucial to achieving net zero emissions by 2050. In response to the announcement, the Society of Motor Manufactures and Traders (SMMT) raised concerns that the delay could dissuade drivers from switching to electric vehicles.

Among car makers, there was a mixed response. Ford was vocal in its condemnation of the change, while Stellantis, which owns Vauxhall, Peugeot, Citroen and Fiat, confirmed that it is still ‘committed to achiev[ing] 100% zero emission new car and van sales in the UK and Europe by 2030.’  In contrast, Jaguar Land Rover praised the government’s decision as ‘pragmatic’, commenting that it ‘brings the UK in line with other nations, which we welcome.’

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 (27 September 2023)

Residential Property Review – September 2023 

Economic uncertainty weighs on the residential market 

The most recent UK Housing Market Update from Savills has highlighted that buyers’ budgets continue to be impacted by higher mortgage rates, and although inflation has begun to move lower, core inflation remains ‘unexpectedly sticky.’  

During July, with completed sales reducing by 18% on the 2017-19 average, market activity was notably subdued, according to HM Revenue & Customs (HMRC) data. Accordingly, during the three-month period to July, mortgage approvals were 23% below 2017-19 levels and sales agreed were 12% below the average (2017-19 levels). 

In its report, Savills referred to the most recent Royal Institution of Chartered Surveyors (RICS) survey, in which most surveyors reported decreasing demand and supply, which is likely to continue suppressing activity and house prices over the coming months.  

Looking at UK annual rental growth, Hamptons Lettings index has shown that the cost of renting a new property was 12% higher in August compared to the previous year. The biggest increase was in Greater London, rising by 17.1% year-on-year to bring the average to £2,332 per month. After that comes Scotland, with an increase of 13.4%. 

Improved EPC ratings see green price premium 

Research by Rightmove has found that 78% of homeowners would be motivated to make changes if their energy bills reduced. The higher a home’s energy performance certificate (EPC) rating is, the lower the property’s energy bills are likely to be. 

The analysis of 300,000 properties that have sold twice in the last 15 years, and have had a new EPC certificate issued, shows there is an additional green premium on top of local house price growth over time. 

A home with an EPC rating improving from D to C could see an average increase in value of 3%, or £11,157. While moving from an F to a C rating could increase the property’s value by an average of 15%, or almost £56,000, when looking at the current national average asking price. 

The highest yielding areas for buy-to-let property 

The average gross rental yield in the UK is currently 5.03%, based on an average buy-to-let property costing £263,000 and an average rental of £1,163 per month, according to Zoopla’s September Rental Market Report. 

The region with the highest rental yields is the North East, where the average gross yield is 7.2%. The North East’s yield appeal is largely thanks to the investment triangle of Hartlepool, Sunderland, and Middlesborough where gross yields sit between 8.01% and 8.39%. Following the North East is Scotland (7.1%) and the North West (6.3%).  

The highest yielding cities in the UK are Sunderland, Dundee and Burnley, which offer a gross yield of between 7.7% and 8.4%. London has the lowest gross yield (4.7%) in the UK owing to the cost of buying a property there. This is despite average rents in London reaching £2,053 this month. 

All details are correct at the time of writing (20 September 2023) 

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. 

Commercial Property Review – September 2023

Private investors acquire £1.3bn of London office assets over 12 months 

Knight Frank’s latest research report on the capital’s office market has highlighted that over the last year, family offices and ultra-high-net-worth individuals have purchased £1.3bn worth of London office assets.  

Such high transaction volumes by wealthy private investors have been a by-product partly of the volatility caused by rising interest rates, combined with weak sterling, less competitors and subdued capital values, providing plentiful purchasing opportunities.  

The £1.3bn spend represents a 44% share of central London office investments, an increase from the long-term average (36%). 

With fewer prime assets listed, wealthy buyers spent £690m over the last year on secondary stock. Also referred to as ‘brown’ buildings, these properties need capital expenditure in order to satisfy contemporary sustainability and workplace standards. The value of deals in the secondary stock market averaged £62m over the last 12 months as buyers targeted smaller lots to minimise debt. 

RAAC concrete issues impact on commercial property owners  

Following the recent RAAC (Reinforced Autoclaved Aerated Concrete) controversy, The Institution of Structural Engineers, has urged owners of older commercial property buildings to get their properties surveyed in order to identify or eliminate the possibility of the presence of the concrete, which is prone to collapse. 

The advice urged, ‘If a building owner or manager has a building from this period and is unsure of the form of construction, they should carry out an inspection and a risk assessment. If RAAC planks are present, their structural condition will need to be determined by a Chartered or Incorporated Structural Engineer.’ 

The lightweight concrete, used primarily for flat roofs, was used in construction during the 1950s to mid-1990s. Although most widely used in the public sector, it was also used in commercial office buildings, factories, warehouses and shops. 

Commercial buildings with RAAC are less common due to the redevelopment cycle, with commercial developers more likely to have addressed its presence during ongoing repairs, maintenance or during building upgrades.  

Life science, laboratory and tech sector shows ‘exceptional rental growth’ 

The latest UK Commercial Market in Minutes from Savills has detailed a positive occupational story from the life science, laboratory and technology sector, with investors and developers who were ahead of the curve in terms of renewed interest in the sector, benefiting from solid letting activity and ‘exceptional rental growth.’ 

Investment from overseas, combined with M&A activity has driven some key deals, one prime example being Moderna’s signing of a significant pre-let at Harwell Campus, Oxfordshire, within the so-called ‘golden triangle’ of Oxford, Cambridge and London. 

It seems that a critical factor in driving future growth will be the decision regarding whether the UK will remain a partner of the European Horizon funding programme for scientific research.  

All details are correct at the time of writing (20 September 2023) 

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

“The broader picture looks more positive, with the economy growing across the services, production and construction sectors in the last three months”

Latest official figures from the Office for National Statistics (ONS) estimate that the UK economy contracted by 0.5% in July. The reduction was higher than the 0.2% decline which had been forecast by a poll of economists and follows a 0.5% increase in June.

The biggest monthly contraction since December 2023, the data released last week showed that contributing factors to this reduction in monthly real gross domestic product (GDP) were strike action by teachers and NHS workers, with the wet weather during the month also impacting the retail and construction industries. Manufacturing also suffered in the month, following a rebound from the effect of the extra bank holiday in May.

Although a monthly decline was registered, Darren Morgan, ONS Director of Economic Statistics, did highlight, “The broader picture looks more positive, with the economy growing across the services, production and construction sectors in the last three months.”

Following the data release, Chancellor Jeremy Hunt commented, “There are many reasons to be confident about the future. We were among the fastest in the G7 to recover from the pandemic and the IMF (International Monetary Fund) have said we will grow faster than Germany, France and Italy in the long term.”

Triple lock uncertainty

As things stand, the full basic State Pension rises every year in line with the highest of three factors – September’s wage growth, inflation or 2.5% (the triple lock). With new ONS data for the three months to July showing pay including bonuses increased by 8.5%, if earnings growth remains this high and outpaces inflation in September, it could push up the new State Pension to over £11,000 a year in 2024. The new flat rate State Pension would be £221.20 per week, while the old basic State Pension would be £169.50 per week according to preliminary calculations.

However, last week, Mel Stride, Work and Pensions Secretary said that although the government remains “committed” to the triple lock, it is understood that officials are considering applying a lower earnings figure, by stripping out the effect of bonuses to public sector workers. If this were implemented it would bring the figure used closer to 7.8%, the overall rate excluding bonuses. It has been reported that Treasury officials are considering this ‘one-off break.’

Eurozone interest rate hits record high

On the continent last week, the macro focus rested on the September European Central Bank (ECB) meeting, during which a decision was made to increase the Bank’s deposit rate by 0.25 percentage points to 4%, as the struggle to control inflation continues. The tenth consecutive increase in 14 months, rates have now reached their highest level in 24 years, since the single currency was launched in 1999.

The ECB did signal that this could be the last hike for a while, citing in a press release last Thursday that, ‘The Governing Council considers that the key ECB interest rates have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to the target. The Governing Council’s future decisions will ensure that the key ECB interest rates will be set at sufficiently restrictive levels for as long as necessary.’

Average inflation in the 20-nation bloc is projected to be 5.6% this year, before falling to 3.2% in 2024 and 2.1% in 2025. The ECB’s medium-term target is 2%.

Bank Rate expectations

The Bank of England’s Monetary Policy Committee (MPC) publishes the summary of its next meeting on 21 September and faces a similar decision regarding the direction of Bank Rate. A poll of economists is predicting a hike of 25 basis points to 5.5%, which would take the rate to its highest point in over 15 years.

The US Federal Reserve are also meeting this week to discuss monetary policy. With three scheduled meetings for the rest of the year, it will be interesting to see what moves they make to fulfil their targets of controlling inflation and maintaining full employment.

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 September 2023)

The impact of age on life insurance?

Age is a key factor in determining cost when you take out life insurance. Generally, the younger you are when you purchase a policy, the less expensive your regular premiums will be, because younger people are statistically less likely to die than older people, so the risk to the insurer is lower. 

Assessing the risks 

Insurers consider how likely it is that they will have to pay out a claim if you were to die during the term of the policy. As you age, the cost of new life insurance cover generally increases because the likelihood of death increases. This is especially true for people who have developed health issues or who engage in risky behaviours such as extreme sports or smoking. 

For example, a 25-year-old non-smoker in good health is likely to pay significantly less for the same level and duration of cover than a 65-year-old smoker with a history of health problems. Insurers will also consider your age when determining the length of the policy term, with longer terms generally being available to younger people. Many insurance companies offer a maximum term of around 40 years, but maximum age limits can vary. 

It’s not all about age 

Your age is just one factor that will affect the cost. The insurance company will also consider your overall health, lifestyle, occupation, family medical history and the length of policy you require. 

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.