Saving for their future 

With the current generation of graduates typically leaving university with a mountain of debt, it is perhaps unsurprising that so many parents are now looking to ease the burden by investing on their children’s behalf. 

University challenge 

Government statistics show the average debt accumulated by a university student is currently around £45,000. Thankfully, graduates only start repayments when their earnings hit a certain threshold and, at the moment, loans are written off after 30 years however much debt remains. As a result, some students will never pay back their loans in full. 

Increasing debt burden 

Many students, though, do repay all of their debt, and recent reforms to the loans system means many more will do so in the future – government forecasts suggest that, from next year, over half of students will repay their loans in full. This inevitably places an even greater burden on future graduates’ shoulders, both as they enter the world of work and, potentially, throughout their entire careers. 

Giving your children a helping hand  

Most parents are keen to help their children fund university and many do so by investing on their behalf through a stocks and shares Junior ISA (JISA). While there are risks with stock market investments, historically they have performed better than cash-based savings and consistently delivered above-inflation returns. The annual JISA allowance is currently £9,000 per child which, for anyone who starts saving early, can grow to a sizeable tax-free lump sum. Smaller amounts can mount up too, particularly when combined with contributions from other family members. 

Peace of mind 

Investing on a child’s behalf can make a huge difference to their future, whether they decide to go to university or put the money towards something else. It also provides parents with the comfort of knowing they are giving their children the best possible start to adult life. 

The value of investments and income from them may go down. You may not get back the original amount invested. A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation. Inheritance Tax Planning is not regulated by the Financial Conduct Authority. 

Improve your wellbeing 

With financial concerns at the fore for many people, unfortunately it’s no surprise over half of adults have experienced anxiety as a direct result of rising bills, with a quarter suffering with feelings of depression as escalating costs take their toll, according to a new study1. 

Nearly half of adults are staying at home more to save money, in a form of self-imposed financial lockdown, rather than for health reasons. The survey also exposed a deep generational divide, with over three quarters of 25 to 34-year-olds experiencing anxiety over rising bills, compared to 26% of over 65s. 

Older generations lend a hand  

With financial anxieties more acute for younger people, data shows over four million retirees have provided financial support to family and friends (over a six-month period to August 2022), specifically to help with day-to-day costs and bills. On average, those helping their grandchildren gave £15,000; the average amount given overall was £8,4002. 

Lifestyle downsizing 

Under 35s have delayed major financial milestones, including moving house or starting a family, effectively putting life events on hold. Over a quarter of young adults (27%) are deferring major purchases like a car or home renovation, 17% are holding off buying a house and one in eight (12%) are even putting off starting a family3. 

“Take back control” 

President of the Personal Finance Society, Caroline Stuart commented on the findings, “British people are struggling to cope not just financially, but mentally with rising bills. More people are experiencing depression and anxiety whilst eating less healthily and going out less. There is now a risk of turning a cost-of-living crisis into a public health crisis too. At a time when anxieties are running high, professional financial planners can help people manage and organise their finances in a way which can weather the storm, ease the burden, take back control of their money and plan for the future.” 

As ever, we want to reassure you that we are on hand to support you through any challenges, by taking control and adopting a proactive approach to managing your money. Whether you need help planning your finances or you have loved ones you’re in a position to support financially, we can help you. The new year provides the perfect opportunity for us all to stop, step back and take a full review of our long-term financial wellbeing. 

1Personal Finance Society, 2022 

2LV=, 2022 

3Starling Bank, 2022 

The value of investments and income from them may go down. You may not get back the original amount invested. 

Stamp Duty update

Chancellor of the Exchequer Jeremy Hunt delivered his Autumn Statement on 17 November, with a host of announcements on personal taxation and public spending. Housing was largely absent from the key fiscal event, though a significant statement was made on Stamp Duty Land Tax (SDLT). 

In September, then-Chancellor Kwasi Kwarteng had increased the nil-rate threshold of SDLT from £125,000 to £250,000 for all purchasers of residential property in England and Northern Ireland. 

Additionally, the nil-rate threshold paid by first-time buyers climbed to £425,000 from £300,000, while the maximum purchase price for which First Time Buyers’ Relief can be claimed rose to £625,000 from £500,000. 

In his Autumn Statement, Mr Hunt confirmed that the SDLT relaxations would remain in place until March 2025, though most of his further fiscal announcements increased the tax take. 

In total, he announced around £55bn in tax rises and spending cuts, in what he called “a balanced plan for stability, a plan for growth and a plan for public services.” 

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

Retirement reboot? 

Nowadays there are more choices open to you than ever before. This means there are more things you need to consider and have a plan for, like how to manage your finances to provide the income you’ll need to live on, how you’ll transition into full retirement and what lifestyle you want to enjoy in your later years. 

We’re all leading busy lives and with cost-of-living financial pressures intensifying, it’s understandable if retirement plans have been placed on the back burner. If you are keen to revisit your plans and get them back on track so you can relax and fully enjoy your retirement years, the new year is the perfect time to act, so please do get in touch. 

The value of investments and income from them may go down. You may not get back the original amount invested. You may not get back the original amount invested. A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation. Inheritance Tax Planning is not regulated by the Financial Conduct Authority. 

News in Review

“The peak may have started to pass but prices have settled at a much higher level than two years ago”

Last Wednesday, the Office for National Statistics (ONS) released its latest UK inflation figures, which revealed the Consumer Prices Index (CPI) rose by 10.1% in the year to January.

This increase is below the figure of 10.5% recorded in December 2022 and also represents a monthly fall of 0.6% (compared with a fall of 0.1% in January 2022). Although slowing, therefore, CPI remains significantly above the Bank of England’s target of 2%. Before 2022, the last time inflation rose above 10% was in February 1982.

Food inflation is at a 45-year high, up 16.7% on the year to January. Specifically, olive oil, sugar and low-fat milk prices have all soared by more than 40%.

Commenting on the figures, David Bharier, Head of Research at British Chambers of Commerce said, “A further easing in the rate of inflation to 10.1% continues a very slow move out of the peak. The stubbornly high rate means that we are now seeing a compounding effect on what was already a spiking inflation rate this time last year. The peak may have started to pass but prices have settled at a much higher level than two years ago.”

UK shop sales rise

UK retail sales volumes rose by 0.5% in January, according to figures released on Friday by ONS, providing an unexpected boost for the sector.

Despite ongoing inflationary and cost-of-living pressures, shoppers spent more than expected in January, with many taking advantage of post-Christmas discounts. Online shops were also boosted by sales promotions, the figures show.

In the same release, however, it was revealed that December’s retail sales were even weaker than previously estimated. Darren Morgan Director of Economic Statistics at ONS said, “After December’s steep fall, retail sales picked up slightly in January, although the general trend remains one of decline”.

Nicola Sturgeon resigns

The Scottish National Party leader has resigned as Scotland’s first minister after more than eight years in the role, saying that she knew “in my head and in my heart” this was the right time to step down “for me, for my party and for the country”. Ms Sturgeon is the longest serving first minister and the first woman to hold the position. She intends to remain in office until her successor is elected.

Contactless payments take off in 2022

The total value of contactless payments jumped by almost 50% in 2022, with the average user making 220 ‘touch and go’ transactions throughout the year, according to newly released data compiled from billions of Barclays debit and credit card transactions.

The average annual contactless spend was £3,327 per person, with 91.2% of all eligible transactions made using the technology. Contactless payments were given a boost in the past year thanks to the transaction limit rising to £100 and the easing of all coronavirus restrictions.

Northern Ireland and Scotland are the fastest growing regions for contactless usage, Barclays noted, while the hotels, resorts & accommodation category (+101.4%), electronics (+97.5%) and bars, pubs & clubs (+91.9%) were the biggest growth sectors.

UK housing market stays steady

The latest government UK House Price Index for December shows that average UK house prices rose by 9.8% in the year to December 2022, compared to 10.6% in the 12 months to November 2022.

The average house price was £294,329, only slightly below November’s record. In England, average prices increased to £315,000 (+10.3%); in Wales, they reached £222,000 (+10.3%); in Scotland £187,000 (+5.7%) and in Northern Ireland £175,000 (+10.2%).

Markets

After hitting the 8,000 milestone for the first time last week, the FTSE 100 closed lower on Tuesday to finish on 7,977.75. This was despite an announcement from HM Treasury of an unexpected budget surplus of £5.4bn in January, boosted by the highest self-assessment tax receipts since records began in 1999. This was against consensus expectations of a £7.8bn deficit.

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 (22 February 2023)

Home Finance – In the news 

Green mortgages 

A recent survey1 has revealed that four out of five (83%) people have no understanding of green mortgages. Each lender’s criteria will differ, but typically they may offer a discounted rate, or cashback, if a property has an Energy Performance Certificate (EPC) rating of A or B. The government has passed legislation requiring the UK to be a net zero emitter by 2050 and as housing currently makes up 20% of emissions and around two thirds of owner-occupied homes have an EPC rating below C, it is a significant area that needs improvement. 

Accidental landlords – on the rise 

Recent uncertainty in the property market has seen many London homeowners become ‘accidental’ landlords has vendors decide to move their properties to the rental market, either after failing to sell or deciding they want to hold out for a better price. One estate agent2 has reported that there are around 35% more rental properties on the market compared to the same time last year. 

1MAB, 2022 

1Chestertons, 2022 

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

Money – In the news 

On your radar – CTFs 

His Majesty’s Revenue & Customs (HMRC) has reminded teenagers and people in their twenties to claim their matured Child Trust Fund (CTF) savings. CTFs are long-term savings accounts set up for every child born between 1 September 2002 and 2 January 2011. The government provided an initial deposit of at least £250 to open the account and encourage future saving. An estimated 6.3 million CTF accounts were set up throughout the duration of the scheme, containing about £9bn. 

You can continue to add up to £9,000 a year to an existing CTF until age 18. The last CTFs will mature in 2029. To trace a CTF visit www.gov.uk/child-trust-funds/find-a-child-trust-fund 

Women still financially less secure 

According to a recent government research paper1 women are far less positive about their financial future than men. Just one in five (20%) women feel positive, compared to more than a third (35%) of men, while only 13% of women are confident that they have enough saved towards retirement, compared to 27% of men. Former Pensions Minister Baroness Ros Altmann said, “It’s alarming that… the gender savings and pension gap remains, and women are still not confident that they have saved enough for retirement.” 

1Cushon, 2022 

The value of investments and income from them may go down. You may not get back the original amount invested. 

Wealth – In the news 

Hold your nerve 

Recent research1 reveals women are more likely to hold their nerve and avoid crystallising a loss when the market dips. Almost half of men (48%) have sold investments at a loss when they’ve dropped in value, in an attempt to stem their losses, while just 38% of women have done the same. Such impatience could prove to be costly. The research estimates (based on £10,000 invested in 1992, adding 10% of average salary and reinvesting dividends until 2022) that the real cost of ‘impatient’ investing over 30 years could amount to nearly £200,000! 

And the best place to retire is… 

Retiring abroad is a much-desired goal for many, particularly for an improved lifestyle. Croatia currently tops the list of the best countries to retire in, due to a better cost of living when compared with the UK – rent costs and the price of day-to-day living is nearly half that versus the UK2. Croatia also scores highly due to the ease of getting there from the UK, with relatively cheap average flight costs meaning that friends and family can visit and flying back to the UK is also convenient. (Relocation to some countries may mean forgoing future annual increases to State Pension.) 

1Alliance Trust, 2022 

2Penfold, 2022 

The value of investments and income from them may go down. You may not get back the original amount invested. 

News in Review

“Our economy is more resilient than many feared… However, we are not out the woods yet”

The UK has narrowly avoided entering a recession by the slimmest of margins, as figures from the Office for National Statistics (ONS) show the economy had zero growth in the last three months of 2022. The official figures for December alone indicate that the economy fell by 0.5%, with strike action totalling 843,000 working days contributing to the squeeze. 

The decline in gross domestic product (GDP) in December was offset by increases in the two previous months. On Friday, ONS also revised up its figures for the July to September quarter, to show that the economy shrank by 0.2% instead of the previous estimate of a 0.3% fall. For the whole of 2022, GDP increased by an estimated 4.0% following a 7.6% increase in 2021.

Negative growth in the fourth quarter of 2022 would have signalled recession – which is generally defined as two consecutive quarters of negative growth.

Commenting on the figures Chancellor Jeremy Hunt said, “The fact the UK was the fastest growing economy in the G7 last year, as well as avoiding a recession, shows our economy is more resilient than many feared. However, we are not out the woods yet, particularly when it comes to inflation.”

Strong wage growth  

The latest employment and earnings figures from ONS, released on Tuesday, show that regular pay has grown at the fastest rate in more than 20 years, but is still failing to keep up with rising prices.

Growth in pay, excluding bonuses, rose to 6.7% in the final three months of 2022, compared to the same period in 2021. That was the strongest regular pay growth outside the pandemic period and exceeded a 6.5% forecast by economists polled by Reuters. However, when adjusted for inflation, regular pay fell by 2.5%.

The gap between private and public sector pay continues, with private regular pay up by 7.3% year-on-year compared with a 4.2% rise in the public sector. Darren Morgan, ONS Director of Economic Statistics said, “Although there is still a large gap between earnings growth in the public and private sectors, this narrowed slightly in the latest period. Overall, pay, though, continues to be outstripped by rising prices.”

The UK’s unemployment rate remained unchanged at 3.7%, the ONS figures showed.

Record high for services exports

During a trip to Mexico to renegotiate the Free Trade Agreement, first agreed 20 years ago, Business and Trade Secretary Kemi Badenoch welcomed latest figures showing UK services exports have reached record high levels, saying that they “cement the UK’s position as a global services superpower’ and adding “Services are the lifeblood of our economy, employing over eight in ten of our workforce. To see services trade reaching these heights is a firm reminder of the resilience of our strong services economy and shows significant progress in our race to export over a trillion pounds of British goods and services a year by 2030.”

The ONS trade data shows that UK services exports reached record highs in 2022, totalling £397bn. In current prices, it means an increase of 20% compared to 2021, and 23% up in exports compared to 2018. The UK is the second biggest services exporter in the world – behind only the US, and the services sector contributes around 80% of the UK’s GDP. 

On her trip, Badenoch has also been discussing the UK’s accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) – the Indo-Pacific trade bloc made up of some of the world’s biggest current and future economies, which could give UK businesses tariff-free access on over 99% of goods to a market of around 500 million customers. 

Markets

After several days of setting new record highs, the FTSE 100 edged even closer to the 8,000 mark for the first time on Tuesday, as investors mulled the latest UK jobs numbers and looked to the imminent release of US inflation figures.  The index closed up 0.08% on 7,953.86, while the domestically-focused FTSE 250, which is more sensitive to shifts in the UK economy, dropped 0.53% to finish on 20,018.23.

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 (15 February 2023)

Beat the tax chill 

Following his controversial ‘stealth tax’ Statement in November, the Chancellor made a raft of key personal taxation and pension announcements. 

The government pledged its commitment to the pensions Triple Lock, which will increase the State Pension in line with September’s Consumer Prices Index (CPI) rate of 10.1%. This means that the value of the basic State Pension will increase in April 2023 from £141.85 per week to £156.20 per week, while the full new State Pension will rise from £185.15 to £203.85 per week. 

Then came some ‘stealth’ announcements set to pull people into paying higher rates of tax, more people paying IHT, a cut to tax-free earnings from dividends and a reduction in CGT allowances. 

In addition to the Dividend Allowance and CGT Allowance reductions and IHT freeze, other key personal tax announcements included:

  • The Income Tax additional rate threshold (ART) at which 45p becomes payable will be lowered from £150,000 to £125,140 from 6 April 2023. The ART for non-savings and non-dividend income will apply to taxpayers in England, Wales and Northern Ireland. The ART for savings and divided income will apply UK-wide. This move is set to push 250,000 more people into this band 
  • The Income Tax Personal Allowance and higher rate threshold are to remain at current levels – £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). 

With an increasing number of people likely to be impacted by these changes, we can’t stress enough the importance of tax year end planning. Although some of these changes don’t come in with immediate effect, it is vital to ensure you are in the best place possible to take advantage of any allowances, exemptions and reliefs available this year and to prepare for the changes that come in over the next few years. With plenty to consider and factor into your financial plan, valuable financial advice remains central to achieving your goals and aspirations. 

The value of investments and income from them may go down. You may not get back the original amount invested. A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation. Inheritance Tax Planning is not regulated by the Financial Conduct Authority.