The true value of financial advice today

There are clearly a variety of reasons why people utilise the services of a financial adviser, but among the key motivating factors is undoubtedly the peace of mind professional advice affords to clients. And, in challenging times like these, it is clearly not difficult to understand why that particular benefit is deemed so important. 

Peace of mind 

A recent survey1 sought to ascertain the main reasons why investors seek the expertise of a financial adviser and it found that more than half of those that use one did so for peace of mind. In contrast, just a third said they used an adviser due to their own lack of financial expertise, while less than a fifth did so because of time constraints. 

Soft factors are important 

The research also asked investors which aspects of advice they place most value on, with two-thirds saying investment returns were critical and just over four in ten attributing value to tax management efficiency. Interestingly, however, the study also found that a number of soft factors were equally, if not more, important to investors. For instance, half of respondents said they valued the ability to plan how they will attain their financial goals. 

Support key in difficult times 

The value of support provided by an adviser tends to be accentuated during challenging economic times when clients typically need greater reassurance and the confidence required to maintain a long-term outlook. During such periods, for example, advisers perform a vital role by ensuring clients 

do not fall into the trap of ‘selling low’ or ‘buying high.’ 

Avoiding expensive mistakes 

This latter point perhaps highlights the true value gained from using a financial adviser, which is that it helps clients avoid making costly mistakes. In essence, value therefore seems to stem less from picking the best investments and more from constantly making smart decisions across a range of issues, whether that be: tax, cost or income management, asset allocation, portfolio rebalancing, or withdrawal strategies. 

1Hymans Robertson, 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 – August 2023

UK growth rate exceeds expectations

The latest gross domestic product (GDP) statistics revealed that the UK economy grew more strongly than expected in June, although more recent survey data does suggest a renewed contraction looks ‘inevitable.’

Official data released last month by the Office for National Statistics (ONS) showed the economy grew by 0.5% in June. This figure was higher than any forecast submitted to a Reuters poll of economists, with the consensus prediction suggesting the economy would expand by just 0.2% across the month.

ONS said that June’s growth partly stemmed from the increased number of working days with the economy bouncing back from May’s extra Bank Holiday for the King’s Coronation. In addition, the warm weather provided a notable boost to trade in pubs and restaurants as well as activity in the construction sector.

June’s stronger than anticipated figure also resulted in the economy expanding across the second quarter as a whole. The increase of 0.2% between April and June again beat economists’ expectations with the consensus forecast from the Reuters poll pointing to a flat reading.

Data from a closely watched survey released towards the end of last month, however, suggests a third-quarter downturn looks increasingly likely. The preliminary headline reading from the S&P Global/CIPS UK Purchasing Managers’ Index fell from 50.8 in July to 47.9 in August. This represents the weakest recorded figure for two and a half years and took the index below the 50 threshold that denotes a contraction in private sector output.

Commenting on the survey’s findings, S&P Global Market Intelligence’s Chief Business Economist Chris Williamson said, “The fight against inflation is carrying a heavy cost in terms of heightened recession risks. A renewed contraction of the economy already looks inevitable, as an increasingly severe manufacturing downturn is accompanied by a further faltering of the service sector’s spring revival.”

Interest rates rise again

Early last month, the Bank of England (BoE) announced a further hike in its benchmark interest rate and warned that rates were likely to remain high for some time.

Following its latest meeting which concluded on 2 August, the BoE’s nine-member Monetary Policy Committee (MPC) voted by a 6-3 majority to raise Bank Rate by 0.25 percentage points. This was the 14th consecutive increase sanctioned by the MPC and took rates to a 15-year high of 5.25%.

Two of the committee’s dissenting voices – Catherine Mann and Jonathan Haskel – voted for a more significant hike, preferring a 0.5 percentage point rise in order to “lean more actively against inflation persistence.” The other dissenting member – Swati Dhingra – again voted for no change, warning that the risks of overtightening “had continued to build.”

Although this difference in opinion shows that individual members of the committee are likely to hold differing views on the future path of interest rates, the minutes to the meeting did stress that further monetary tightening may be required. They concluded, ‘The MPC will ensure that Bank Rate is sufficiently restrictive for sufficiently long to return inflation to the 2% target sustainably in the medium term.’

On the day that he announced the decision, BoE Governor Andrew Bailey reiterated that message saying “we might need to raise interest rates again.” The Governor added that it was “far too soon” to speculate about the timing of any cuts and that rates would not fall until there was “solid evidence” that rapid price rises are slowing.

The next MPC meeting is due to conclude on 20 September with the rate announcement scheduled for the following day. A recent Reuters poll found economists now typically expect another quarter-point hike to be sanctioned at that meeting with rates then peaking at 5.5%.

Markets (Data compiled by TOMD)

At the end of August, major global stock markets closed the month in negative territory. European stock markets were mixed on the last trading day of the month, as key central bank policy meetings approached and investors processed regional inflation data.

In the UK, the FTSE 100 closed the month on 7,439.13, a loss of 3.38%. The mid cap focused FTSE 250 closed down 2.81% on 18,605.70, while the FTSE AIM closed August on 741.93, a loss during the month of 2.98%.

Across the pond, investors are awaiting the next batch of US employment data, which will provide a key indicator on the health of the economy and the impact of the Federal Reserve’s rate tightening measures. The Dow Jones Index closed the month down 2.36% on 34,721.91, while the tech-heavy NASDAQ closed the month down 2.17% on 14,034.97.

In Japan, the Nikkei 225 finished the month on 32,619.34, down 1.67%.On the continent, the Euro Stoxx 50 closed August on 4,297.11, a loss of 3.90%.

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.

Tightening physical supplies are supporting oil prices. Brent crude closed August trading at around $86, a gain over the month of 1.04%. Gold closed the month trading at around $1,942 a troy ounce, a monthly loss of around 1.44%.

Headline inflation rate declines

Official consumer price statistics have revealed a further fall in the UK headline rate of inflation, although the latest data also showed fresh signs of stickiness in terms of core inflation.

Figures released last month by ONS showed that the Consumer Prices Index (CPI) 12-month rate – which compares prices in the current month with the same period a year earlier – stood at 6.8% in July. While this was sharply lower than the previous month’s figure of 7.9%, the drop was exactly in line with forecasts.

ONS noted that falling gas and electricity prices had largely driven the decline as a change to the energy price cap came into force. Price rises for some staple food items including milk, butter, bread, eggs, cereal and fish also eased, although these dips were partially offset by a further rise in the cost of eating out, as well as a jump in flight, alcohol and tobacco prices.

Core CPI inflation, which excludes volatile elements such as energy, food, alcohol and tobacco, however, failed to fall. July’s figure of 6.9% was unchanged from the previous month and slightly higher than the consensus prediction from the Reuters poll.

Wage growth hits record high

Earnings statistics published last month showed that nominal wage growth rose at a record rate in the three months to June, although more recent survey data does suggest pay deals may have started to cool.

According to the latest ONS figures, average weekly earnings excluding bonuses rose at an annual rate of 7.8% in the April to June period. This represents the strongest growth rate since comparable records began in 2001 and was significantly higher than the 7.4% rise predicted in a poll of economists.

Commenting on the data, ONS Director of Economic Statistics Darren Morgan noted that wage growth is still not outstripping the pace of price rises. However, Mr Morgan did say that the latest figures show that real pay levels are now “recovering.”

The BoE has been closely monitoring wage growth for inflationary signs and the latest figures will undoubtedly have caused concern. Survey evidence, however, does point to a more recent slowdown – data from Adzuna, for example, shows average advertised salaries fell by 0.15% between June and July, while XpertHR figures show the median basic pay settlement in the three months to July dropped to 5.7% following six consecutive quarters at a record 6%.

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

All details are correct at the time of writing (1 September 2023).

News in Review

“The fight against inflation is carrying a heavy cost in terms of heightened recession risks”

Early S&P Global/CIPS UK Purchasing Managers’ Index (PMI) survey data for August has highlighted that weaker household spending and increasing interest rates contributed towards a decline in demand for both services and goods during the month.

The key business survey, monitoring economic measures including orders and employment, showed the output index fell more steeply than analysts expected, reducing from 50.8 in July to 47.9 in August, the first reading under 50 (indicating a contraction in output) since January. This contraction brings to a close a six-month period of economic expansion and marks the fastest rate of decline in over two and a half years (since January 2021).

A clear toll has been taken on the manufacturing sector with its PMI index contracting to a 39-month low of 42.5. Meanwhile the services index reduced to a seven-month low of 48.7.

Chief Business Economist at S&P Global Market Intelligence, Chris Williamson, commented that the data suggests inflation “should moderate further in the months ahead, but also indicates that the fight against inflation is carrying a heavy cost in terms of heightened recession risks… A renewed contraction of the economy already looks inevitable, as an increasingly severe manufacturing downturn is accompanied by a further faltering of the service sector’s spring revival. The survey is indicative of GDP declining by 0.2% over the third quarter so far.”

We await further UK GDP data releases in the coming weeks.

Consumer confidence

The latest consumer confidence index from GfK, measuring people’s perception of economic prospects and their personal finances, has shown a rise of confidence during August, aided by the combination of accelerating wage growth and moderating energy prices. Making up most of the ground lost last month and returning to similar levels last seen at the beginning of 2023, the August figure (five point rise to minus 25) was stronger than the small uplift to minus 29 forecast by a poll of economists.

Jackson Hole news

The annual Jackson Hole Economic Symposium took place in Wyoming on 24-26 August, with central bankers, policymakers and economists descending from around the globe. Federal Reserve Chairman Jerome Powell delivered a keynote speech, during which he said the central bank may need to continue raising interest rates to complete the job of lowering inflation on a sustained basis.

Also in attendance, Christine Lagarde, European Central Bank (ECB) President, was talking about how global central banks are operating in an uncertain environment, adding that in order to lower inflation to target in the eurozone, policy makers will have to set interest rates as high as needed and leave them there for as long as necessary.

She commented, “Policymaking in an age of shifts and breaks requires an open mind and a willingness to adjust our analytical frameworks in real time to new developments. At the same time, in this era of uncertainty, it is even more important that central banks provide a nominal anchor for the economy and ensure price stability in line with their respective mandates.” 

Energy bill reductions

Last week, Ofgem the energy regulator, announced a reduction in the energy price cap in Q4, meaning a dual-fuel annual energy bill for a household using a typical amount of electricity and gas is set to temper to £1,923 in October, saving households an average of £151 versus Q3, representing a £577 reduction on last winter. Prices remain high by historical standards, with analysts suggesting that prices could rise again in Q1 2024.

Jonathan Brearley, Chief Executive of Ofgem commented, “We know people are struggling with the wider cost of living challenges and I can’t offer any certainty that things will ease this winter… There are signs that the financial outlook for suppliers is stabilising… this means there should be no excuses for suppliers not to be doing all they can to support their customers this winter.”

By the winter, Ofgem is intending to introduce a consumer code of conduct outlining clear expectations regarding supplier behaviours, particularly targeted at the most vulnerable customers.

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 (30 August 2023)

IHT goes mainstream

Inheritance Tax (IHT) receipts have been consistently rising, with new data from HM Revenue & Customs (HMRC) showing takings for the 2022-23 tax year totalled £7.1bn, up a massive £1bn from the previous tax year (£6.1bn 2021-22). According to HMRC, this huge uplift can be attributed in part to ‘a combination of the recent rises in asset values and the government’s decision to maintain the IHT nil rate band thresholds at their 2020 to 2021 levels up to and including 2025 to 2026.’ 

Reported estimates from the Spring Budget detail that over the next five years, IHT is expected to bring in £38bn for the Treasury, meaning annual receipts will exceed £8bn by 2027-28, with 6.7% of deaths expected to trigger an IHT charge. This compares with 3.76% of UK deaths in 2019-20. 

Record receipts have prompted suggestions that the tax has now become mainstream. Previously dubbed a tax on the wealthy, this is certainly no longer the case, as frozen thresholds and elevated house prices impact. 

The good news is that through expert planning you can legitimately mitigate this tax, so you can pass on assets to your family as you’d intended. There are various different strategies depending on your unique circumstances, including making gifts during your lifetime, considering placing assets into trust, making use of exemptions, and thinking about leaving something to charity, to name but a few. 

Don’t go it alone 

IHT is a complex tax, with reliefs and exemptions on gifts to consider and the interaction with other taxes. These days, with many more estates likely to be subject to IHT, taking expert advice could save your beneficiaries substantial amounts of tax. Get in touch. 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. The Financial Conduct Authority (FCA) does not regulate Will writing, tax and trust advice and certain forms of estate planning. 

Residential Property Review – August 2023 

Demand down but activity remains robust 

The residential sales market experienced further negative indicators in July, according to the latest UK Residential Survey by the Royal Institution of Chartered Surveyors (RICS), with new buyer enquiries and agreed sales volumes continuing their decline. 

At the national level, new buyer enquiries recorded a net balance of -45% in July, little changed from the previous month’s reading of -46%. This was described in the report as ‘symptomatic of a market losing further ground in the face of higher mortgage rates.’  

The headline new instructions net balance dropped to -13% in July (compared to -3% in June). Agreed sales slipped to a net balance of -44% in July, down from -36% in June. This new figure is the weakest for the agreed sales measure since the early stages of the pandemic. 

Separate data released by HMRC, however, paints a slightly different picture, with the number of completions rising in June to 94,690. At 86% of their 2017-19 average, this figure is up from 77% in May. 

Simon Rubinsohn, RICS Chief Economist, commented, “The recent uptick in mortgage activity looks likely to be reversed over the coming months if the feedback to the latest RICS Residential Survey is anything to go by.” 

Commercial hotspots for conversion 

Almost 28,000 sites across England have the potential to be converted into residential properties, according to new data released from Searchland, with the combined market value estimated to be over £1.5bn. 

London has roughly a third of England’s sites and an estimated market value in the region of £928m. In a speech in July, Housing Secretary Michael Gove referenced some of the commercial hotspots that are easier to convert into residential accommodation, including shops and restaurants. 

Mitchell Fasanya of Searchland commented, “Disused commercial sites are a cornerstone of the government’s approach to solving the UK’s housing problems […] developers already have the opportunity to turn thousands of commercial properties into residential developments and these sites currently hold significant value in the current market.” 

New-build price premium soars 

 The price of an average new-build property is now 52% higher than for existing homes, according to research by Sourced Franchise. 

 In the last year, price premiums for new-build property have increased by 20% to reach this average uplift of 52%. 

The North East (83%) is home to the strongest new-build price premiums, with Scotland (72%), the East Midlands (66%), the North West (65%), West Midlands (63%) and Wales (62%) next in line. At the other end of the scale, London is home to the smallest new-build house price premium – just 17%. 

Residential Property Review - August 2023

All details are correct at the time of writing (21 August 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 – August 2023

Higher interest rates dampen investment 

The results of the Q2 2023 RICS UK Commercial Property Monitor point to a renewed setback for the commercial property market, with an upward shift in interest rate expectations weighing on investor demand and placing downward pressure on capital values.  

The survey shows a clear majority of respondents (68%) are now of the opinion that the commercial market overall is in a downturn phase of the property cycle, with the deteriorating credit environment playing a significant role in this downturn. However, there are pockets of resilience across occupier markets – the industrial sector in particular (alongside some alternative asset classes) continues to show positive rental growth projections for the year ahead. 

Away from mainstream sectors, nationwide rental growth expectations remain comfortably in positive territory across multifamily residential, aged care facilities, life sciences, student housing and data centres. 

In Scotland, both office rents and industrial rents are expected to rise, with a net balance of 21% and 32% of respondents expecting an increase respectively. In retail, a net balance of -4% of respondents expects rents to decline – up from -51% in Q1. 

Alternative future for London offices 

With London office landlords seeing lettings tumble in recent times and the clamour for warehouses in the capital that took place during the pandemic calming, the less traditional sector of life sciences looks to be increasing its presence in London.  

There has been a recent flurry of investors looking to create specialist sites in London for the UK life sciences industry and there are more opportunities to do so as traditional offices are less in demand.  

Property giant British Land is looking to boost its presence in this sector, with a major overhaul of the 1970s Euston Tower. The plan is to change the office space into net zero workspace featuring labs for start-ups and scale-ups. 

Another example is Canary Wharf Group, which together with developer Kadans Science Partner, has planning permission for a 823,000 sq. ft tower providing workspace for the likes of genomics, medical tech and biotechnology.  

Sustainable buildings lead the way 

Recent research, polling 250 UK office landlords, reveals the current state of play as well as outlining the challenges and motivating factors facing the commercial property market as it moves toward net zero targets. 

An encouraging 72% of landlords currently have individual sustainability policies in place. However, the minority (30%) lack an overall strategy and say they are struggling to get to grips with sustainability. Notably, 49% of landlords say it is difficult to keep up with regulations on energy efficiency and that the cost of improvements is too high. Even more (53%) say that they are unsure how to effectively go about this. 

Many landlords are turning to experts –- the survey reports that 92% of landlords are already, or are planning to outsource the implementation and development of sustainability policies to a third party. 

All details are correct at the time of writing (21 August 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

“Inflation has fallen rapidly over the past six months”

The latest inflation data from the Office for National Statistics (ONS) has shown that the Consumer Prices Index (CPI) measured 6.8% in the 12 months to July 2023, down from 7.9% in June, the lowest rate since early 2022.

Prime downward contributors during the month derived from the housing and household service division, specifically lower gas and electricity prices. Food and non-alcoholic beverages, including milk, bread and cereals also helped temper the rate; while flight and hotel prices, the cost of eating out, alcohol and tobacco prices continued to rise.

Although considerably lower than its peak last autumn, if you exclude food and energy prices, core inflation increased at an unchanged annual rate of 6.9%; prices in the services sector increased at a faster pace, recording 7.4% in July, from 7.2% in June.

Looking over a six-month period to July 2023, the monthly reduction from 7.9% to 6.8% was the sharpest six-month fall in inflation since September 1992. Research Director at the Resolution Foundation, James Smith commented on the new dataset, “Inflation has fallen rapidly over the past six months, but the UK still has the highest rate in the G7 and the Bank faces a daunting task in further taming price pressures… The UK has experienced the third largest price pressures of any advanced economy since the pandemic. This highlights just how painful this cost-of-living crisis continues to be and how unwise it would be to meddle with policies like benefits uprating that are designed to protect families from price pressures like this that are beyond their control.”

Looking ahead, Suren Thiru, Economics Director at ICAEW thinks that although “another interest rate rise in September looks inescapable, this drop in inflation may drive a more notable voting split in the Monetary Policy Committee next month, particularly as worries over the UK economy grow.”

Weather dampens retail sales in July

The soggy summer weather took its toll on retail sales last month, new statistics from ONS have highlighted. Estimates show that retail sales fell by 1.2% in July, following a rise of 0.6% in the previous month. Economists polled by Reuters had forecast a 0.5% fall in volumes. It was a poor month for supermarket sales, demonstrating the impact of interest rate hikes, combined with wet weather, resulting in reduced footfall. The 2.6% fall in retail sales volumes at food shops can be partly attributed to a reduction in food sales, but a large proportion was due to a tailing off in clothing sales at supermarkets.

However, with people avoiding the weather, choosing to shop from the comfort of home, online promotions meant the proportion of sales made via the internet increased from 26% in June to 27.4% in July, the highest level since February 2022.

Card use on the rise

Newly released card spending data from UK Finance has shown that both credit and debit card transactions have increased year-on-year to May 2023. In addition, outstanding balances on credit card accounts grew by 8.8%. Transactions have been dominated by contactless payments for both debit cards (76%) and credit cards (63%). The report highlighted, ‘The total value of contactless transactions was £24.5bn in May, a 11.5% increase on £22bn in May 2022… the number of contactless credit card transactions was 10.2% higher than May 2022, the number of contactless debit card transactions was 7.1% higher than May 2022.’

Q2 savers confidence on the up

An uptick in savers confidence was noted during Q2 in a survey by Paragon Bank, which showed almost two thirds of savers (62% of 1,750 surveyed) felt confident in their financial position, an increase from 44% recorded in Q1 2023. Almost one fifth (18%) of respondents lacked confidence in the quarter, versus 25% in Q1. Levels of confidence varied by age groups, with 69% of those aged 65 to 74 declaring confidence in their financial position, versus 61% of those aged 55 to 64 and 56% of 45 to 54 year olds. Although there is an improvement in confidence, savers are continuing to adjust their spending by cutting back on food shopping, dining out, holidays and home energy usage, to cope with inflationary pressures, according to the survey.

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 (23 August 2023)

Home insurance for home renovations 

Home renovations are a popular way to give your property a new lease of life. When undertaking large-scale projects, there is a lot to think about – and the impact on your home insurance should be part of this planning.  

In the loop  

As well as producing detailed plans, seeking planning permission and choosing your contractors, a priority at an early stage should be getting in touch with your home insurer. This is because, if you don’t tell your insurance provider about your building work and your plans for adding an extension, you could accidentally invalidate your policy.  

Risks and rewards   

There are two main types of risk associated with renovation projects that your insurer will need to consider:    

  1. Structural risks   

Knocking down walls could cause unexpected accidents or damage. Furthermore, structural work could expose your home to the elements for long periods of time, potentially at risk of causing damage to your property.     

  1. Security risks   

During building work, your home may be less secure. You might temporarily move out and scaffolding can make intruder access easier.  With a lot of tradespeople coming and going, there is a risk that windows and doors could be left open.  

By contacting your insurer, you can check if your home will be covered and find out whether you’ll need additional or specialist cover for it to be fully protected.   

Rebuild costs   

Remember too that having an extension added will likely increase how much it would cost to rebuild your home, which  could mean you need a higher amount of  home insurance cover. 

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

How up to date are you with your pension? 

Here are a few things to consider. 

How much is in your pension pot? 

According to research1, three quarters of UK adults don’t know how much is in their pension pot. This figure rises to 79% of 55 to 64-year-olds who say they can’t put a figure on the value of their pension – especially worrying as this is a crucial stage for retirement planning. The research highlighted that women (81%) are more likely than men (68%) not to know how much they have accumulated in pensions saving. 

Consider the gender gap 

Research2 has again found a widening of the gender pension gap from the age of 35. The gap between women’s and men’s contributions for 35 to 39-year-olds is 21%, up from 18% in the previous year. Other research3 has highlighted how pension inequality is exacerbated for minority women, with over half (54%) of Black women saying they don’t have any retirement savings, compared to 40% of South Asian women and 35% of White women. 

State Pension passes £10,000, but watch the tax 

There was a welcome boost to pensioners’ incomes in April. The single-tier State Pension is now £203.85 a week or £10,600.20 a year. Those in receipt of the basic State Pension now get £156.20 a week, which may be topped up further by the Additional State Pension. 

However, the freezing of the Income Tax personal allowance since 2021-22 means that the State Pension takes up 84% of the allowance, meaning pensioners will only need to earn £1,969.80 before they start paying Income Tax. 

1Standard Life 

2Aviva 

3Scottish Widows 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.  

Wealth planning – striking a balance 

While recent financial challenges have taken their toll on everyone’s pockets, it comes as no surprise that parents are putting concerns about their children’s finances above their own, as highlighted in a recent survey of advisers1. 

Over half (55%) of the advisers surveyed noted that adult children were taking priority in clients’ wealth planning at present, with many taking action to assist with their children’s financial struggles amid the cost-of-living crisis. 

The main requests by parents wanting to lend a financial hand include releasing funds (25%) for their adult children, while over half (55%) of the advisers have clients choosing to access their pension savings in order to enhance their disposable income to support family members, with 18% of those clients taking an additional lump sum specifically to help their offspring. Reportedly 53% of advisers have clients keen to adjust their finances, with 40% requesting advice on ensuring investments stayed ahead of inflation. 

Although people are understandably concerned about their children’s financial circumstances and are keen to help, it’s important to be mindful about striking the right balance and not to lose focus on your financial objectives for your own future. For help in striking that balance, get in touch. 

1Royal London, 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.