Sandwich generation: time to come first for a change

The sandwich generation are certainly used to challenges and putting other people’s needs before their own. However, cost-of-living challenges looks set to heap further pressure on this group which makes it vitally important they seek advice before taking any rash decisions which could sacrifice their financial futures.

Stiff upper lip

Research1 suggests that, although many over-45-year-olds have found themselves facing potential financial vulnerability, they tend to keep this firmly to themselves. In total, seven out of ten respondents had personally experienced such a situation, but few said they had been willing to ask for help.

Double whammy

Other analysis2 shows the potential for such problems is mounting. This is  because people who provide support to adult loved ones will typically be hit twice by the cost-of-living crisis; not only will they find their own household bills rising but also those of the people they are supporting financially. This is particularly true for people in their early 40s who are most likely to be helping family members with the cost of monthly essentials.

Investors ponder contributions

There is also evidence that rising cost pressures are now resulting in people cutting back on their long-term savings commitments, with recent research3 showing one in four investors halting contributions to ISAs and pensions. Depending on your circumstances, for many investors, it may be more important than ever to continue to put long-term savings in the stock market. Over the longer term, investing in equities can be regarded as an effective way to keep pace with inflation.

We can help

Although it can seem unnatural for members of the sandwich generation to consider their own needs, we are here to listen, support and provide advice when you need it. So if you do need to talk, get in touch and we’ll do our best to help keep your finances firmly on track.

1Just Group, 2022

2Legal & General, 2022

3interactive investor, 2022

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.

News in Review

“With the right support in place and with regulator, government, industry and consumers working together, we can find a way through this”

Last Friday, Ofgem, the government regulator for the electricity and downstream natural gas markets in Great Britain, confirmed the energy price cap will increase from £1,971 to £3,549 a year from 1 October.

An Ofgem press release justified the highly anticipated move stating, ‘The increase reflects the continued rise in global wholesale gas prices, which began to surge as the world unlocked from the COVID pandemic and have been driven still higher to record levels by Russia slowly switching off gas supplies to Europe.’

The rise in the cap of just over 80% will come into effect for around 24 million households in England, Scotland and Wales on default energytariffs and will remain in place until 31 December this year. The price cap for Q1 2023 is due to be announced in November 2022.

Warning of the potential hardship that energy prices will inflict this winter and beyond, the energy regulator’s Chief Executive Jonathan Brearley expressed, “We know the massive impact this price cap increase will have on households across Britain and the difficult decisions consumers will now have to make.” He continued, “It’s clear the new Prime Minister will need to act further to tackle the impact of the price rises that are coming in October and next year. We are working with ministers, consumer groups and industry on a set of options for the incoming Prime Minister that will require urgent action. The response will need to match the scale of the crisis we have before us. With the right support in place and with regulator, government, industry and consumers working together, we can find a way through this.”

The hike in energy bills will clearly be an area of priority for the next Prime Minister, who is due to be announced on Monday 5 September.

Positive news for global dividends

During the second quarter of the year, new data shows that global dividends reached a record high, surpassing pre-pandemic levels. The latest Janus Henderson Global Dividend Index highlights Q2 dividends reached $544.8bn, an increase of 11.3% from the previous quarter. Underlying growth was stronger (19.1%) once US dollar strength and other factors are accounted for. Despite pandemic-inflicted upheaval, dividend recovery has strengthened and now resides just 2.3% below the long-term trend level, bolstered by a profitable 2021.

A prime headline statistic reveals that an impressive 94% of companies in the Index increased dividends or chose to hold them steady in Q2. Both the UK and Europe were noted as key regional drivers of dividend growth over the period, with dividends increasing by 29.3% and 28.7% respectively on an underlying basis, particularly supported by the financial sector and German car makers. Notably, oils and financials were primary drivers in Q2 global dividend growth, supported by consumer discretionary sectors. Although US dividend growth lagged the wider world at 8.3%, the increase still led to a new US dividend record.

The report anticipates that total dividend payouts this year will reach $1.56trn. Looking ahead to next year, slower dividend growth is expected, with the report deducing, ‘As we move into 2023, there will be no more impetus from post-COVID-19 catch-up payments. Moreover, slower global economic growth and the likelihood that mining dividends are now close to peaking will add a further headwind, though exchange rates are unlikely to act as a significant drag on headline growth given the currency impact witnessed in recent months. Overall, dividend growth is likely to be slower next year given the current economic outlook.’

Markets

Following Federal Reserve Chairman Jerome Powell’s speech at the Jackson Hole Economic Symposium on Friday, where he cautioned that the US Fed would act “forcefully” to control inflation though it would result in “some pain to households and businesses,” markets moved into the red. Despite the release of better-than-expected US economic data, stocks remained down early in the week.London stocks also underperformed as traders in London were forced to catch-up with selling on global markets over the bank holiday. At close on Tuesday, the FTSE 100 was down 0.88% at 7,361.63 and the FTSE 250 closed down 0.10% at 19,149.65.

Here to help

Financial advice is key, so please do not hesitate to get in contact with any questions or concerns you may have.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

All details are correct at time of writing (31 August 2022)

New build buying considerations

Demand for new builds is on the up due to more people seeking energy efficient homes, but research1 has revealed other factors people wish they had considered before purchasing a new build.

Top of the list (36%) is researching the property manager as well as the developer, closely followed (35%) by checking out the parking arrangements, including the on-street parking situation.

A common problem on developments can be drainage; 19% of respondents recommended checking this out. Other top tips include booking in a snagging survey early on (18%) and visiting the property at different times of day (15%) to check noise, lighting and mobile reception. Ten percent of respondents wished they had checked the terms and conditions more carefully, while 9% wish they had communicated proactively with the developer and ensured they had everything in writing.

Paula Higgins, CEO, HomeOwners Alliance, commented, “Don’t assume anything when you’re buying a new home. There’s a lot more to research than you think. And with a new build in particular, you need to look beyond the glossy marketing brochure.“

1HOA, 2022

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

Divorce and your pension

Research1 suggests that nearly one in five people are, or will be, financially worse off due to their divorce, and that many divorcees struggle to make ends meet after separating from their partner.

The statistics make for worrying reading. A third of divorced respondents said they were forced to take money from their savings to supplement their finances, 20% had to use credit cards for everyday expenses, 18% borrowed from family and friends, while 15% resorted to selling their possessions to make ends meet.

Pensions are an asset

Pensions can be highly valuable assets – 42% (or £6.4tn) of UK wealth is currently held in private pensions – meaning that a pension can be a hugely important part of a divorce settlement. And yet, 15% of divorced people had no idea that their pension could be impacted by getting divorced, while

35% did not make any claim on their former spouse’s pension.

Don’t underestimate your pension

Alistair McQueen, Head of Savings & Retirement at Aviva, commented, “It’s critical that, as part of the separation process, couples take time to think about and discuss one of their single most valuable assets, their pension […] It can often be a very complex issue so, as well as hiring a family lawyer, it would be advisable for couples to contact a financial adviser to walk them through the pension valuation and financial process.”

The impact of ‘no-fault’ divorce

It has yet to be understood how the introduction of so-called ‘no-fault’ divorce in April this year might be starting to impact the way in which pensions and other assets are treated in divorce settlements. We would always recommend speaking with a qualified financial adviser for guidance relating to the financial aspects of your divorce.

We are here to help you make some important decisions with your finances as you navigate the complexities (emotional and financial) of divorce.

1Aviva, 2022

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.

JISA to adult ISA transition period – tune in

Currently a Junior Individual Savings Account (JISA) can be held by a child until the day they turn 18, the annual allowance for which is currently £9,000. On their 18th birthday, the child can open an adult stocks and shares ISA, the annual subscription which is currently £20,000. All pretty straightforward.

Now, for the interesting part – at present a child can open an adult cash ISA when they turn 16, benefiting from the full £20,000 adult allowance – a child can hold an adult cash ISA alongside a JISA whilst they are under 18.

So, with current allowances, a total of £29,000 can be paid into their ISAs in one tax year. Repeatable in the tax years they turn 17 and 18, contributions totalling £87,000 can be made in under three years.

It’s a wrap

For people looking to put money aside for their children or grandchildren, there are interesting tax wrapper opportunities out there. Now, that’s worth considering, isn’t it?

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.

Residential Property Review – August 2022

Slowing market as demand dips again

The UK residential market continues to slow at a steady pace, the latest Royal Institution of Chartered Surveyors (RICS) Residential Survey and Savills’ Housing Market Update both indicate, as demand wanes and supply remains low.

New buyer enquiries fell for a third consecutive month in July, the RICS report showed, with a headline rate of -25%. This is comparable to June’s reading (-27%) and means the market has now endured the longest stretch of falling demand since the early pandemic days. New instructions, meanwhile, remain stagnant, with a net balance of -5%.

The Savills report paints a similarly slowing picture; total transactions recorded by HM Revenue and Customs were 96,000 for June, 13% lower than the pre-pandemic average for the month. Mortgage approvals were also slightly below average, according to the Bank of England.

One key trend noted by Savills is the increased representation of first-time buyers (FTBs) in the mortgage market. Almost 31,000 new loans were granted to FTBs in May, according to UK Finance, while new mortgages for home movers fell by 22%.

Crash unlikely despite pressures

A housing crash in 2022 remains unlikely, according to Zoopla, even as house prices come under increased pressure from rising interest rates and living costs.

Despite the pandemic boom, house prices are not as overvalued as they were in previous economic cycles, analysts say. For example, Zoopla’s Richard Donnell points to the tougher rules for getting a mortgage, which “puts the market in a much better position to weather high mortgage rates and the increased cost of living” than in previous downturns.

Furthermore, shifting post-pandemic work patterns can help sustain demand, analysts add. A fifth of people are more likely to move since the pandemic, a Zoopla survey found, while more than half of those expecting to spend more time working from home feel compelled to move. With two-fifths of workers now planning to work mostly from home, according to the Office for National Statistics, that is a sizeable market of potential movers.

Landlords rue new EPC rules

One in five landlords could sell up or stop renting their properties, according to research from Paragon Bank, in response to proposed changes to Energy Performance Certificates (EPCs).

From 2025, all newly rented properties will be required to have an EPC rating of C or above, more stringent than the current requirement of E or higher. Recently, Paragon estimated the average cost of upgrading a rented property to a C rating at £10,560.

Existing tenancies will have until 2028 to comply with the change, after which millions of properties could risk becoming unrentable if landlords don’t make necessary changes.

In the face of these new rules, sustainability is becoming a major selling point, according to Rightmove’s Green Homes Report. The report found that the time it takes to sell a property is faster for homes with the highest EPC ratings.

All details are correct at the time of writing (17 August 2022)

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 Market Review – August 2022

Caution key in Q2 RICS survey

Μacroeconomic pressures are negatively influencing investor sentiment, according to the latest Royal Institution of Chartered Surveyors UK Commercial Property Survey (RICS), which signalled a more cautious tone in the commercial property market.

Rising interest rates remain a burden, with a net balance of -42% of respondents acknowledging worsening credit conditions in Q2. Indeed, +43% of respondents now sense the market is entering the early stages of a downturn, a finding replicated across all regions of the UK.

The survey also revealed a rise in vacant leasable space in both the office (+22%) and retail (+27%) sectors. Meanwhile, an aggregate net balance of +17% of respondents reported an increase in tenant demand during Q2.

Near-term rental growth expectations are still in positive territory (+14%), though eased slightly compared to Q1 (+19%). Twelve-month capital value expectations are almost flat, with the all-property average now at +3%, well below the Q1 reading of +24%.

Scotland sky-high in Q2

Investment in Scottish commercial property reached a four-year high in the first six months of 2022, according to a report by Colliers, which showed investors poured £1.3bn into the country.

Offices were the most popular asset class, taking £330m of investment in the second quarter of the year. This is 80% above the five-year quarterly average and was boosted by a few large transactions, notably the £215m sale of 177 Bothwell Street in Glasgow, believed to be Scotland’s largest ever office transaction.

Another stand-out trend in the second quarter was the dominance of overseas investors. Indeed, cross-border capital accounted for 61% of all activity by value in Q2, one of the largest shares on record.

Responding to the figures, Director at Colliers, Patrick Ford commented, “This year has been hard to predict [but] one thing is certain – there’s a real appetite for large scale capital deployment in Scotland, regardless of sector.”

New skyscraper for London

A new 285m (935ft) skyscraper could be coming to the City of London, with plans underway to build a 60-storey structure at 55 Bishopsgate.

If the plans come to fruition, the new giant will join London’s 34 existing skyscrapers – defined as buildings over 150m tall – and stand only 25m short of the Shard, currently the UK’s tallest building. Costing £600m, the project, which is being led by Schroders Capital, will produce 800,000 sq. ft of office space.

Sustainability is reportedly baked into the proposal. The skyscraper would be the UK’s ‘first all-electric tall building’, according to a report from the Local Democracy Reporting Service (LDRS). The proposals also include plans to fit the building with energy-saving, light-responsive blinds.

The LDRS report notes that ‘the slender tapering design seeks to make a positive contribution to the skyline by balancing the composition of existing and proposed nearby tall buildings.’ In any case, the project remains in its early stages, with obstacles such as the City’s planning committee still to navigate.

All details are correct at the time of writing (17 August 2022)

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

“Own-label ranges are at record levels of popularity”

UK retail sales improved in July, according to data released on Friday from the Office for National Statistics (ONS). Sales volumes rose by 0.3% in the month, outperforming predictions of a 0.2% decline.

According to ONS, sales volumes were 2.3% above their pre-COVID (February 2020) levels, but down over the past year and for the three months to July 2022 sales volumes were 1.2% lower.  A variety of promotions in July contributed towards a boost in online sales, with volumes picking up by 4.8%, while food store volumes registered a 0.1% uptick in the month. As UK inflation rose to 10.1% in July, the ONS revealed last week that rising food prices made the largest upward contribution to price increases over the month, with cheese, eggs, bread, cereals and milk contributing the largest price rises.

Fraser McKevitt, Head of Retail and Consumer Insight at global market researcher Kantar, commented on grocery price inflation, “As predicted, we’ve now hit a new peak in grocery price inflation… It’s not surprising that we’re seeing shoppers make lifestyle changes to deal with the extra demands on their household budgets.” He continued, “Own-label ranges are at record levels of popularity, with sales rising by 7.3% and holding 51.6% of the market compared with branded products, the biggest share we’ve ever recorded.”

As cost-conscious customers contemplate their weekly grocery shop, Aldi is poised to become one of the ‘Big Four’ UK supermarkets, overtaking Morrisons. Aldi held a 9.1% share of the grocery market in the three months to 7 August, up from 8.2% last year. Tesco, Sainsbury’s and Asda currently reside in the top three slots by market share.

ONS report that housing and transport, along with food prices, make up the majority of price rises over the last year, with fuel prices up by 43.7% in the year to July.

Last week the UK became the third developed country to record double digit inflation in July, along with the Netherlands and Spain.

Reduction in cash use eases off

A recent UK Finance report analysing payment methods has highlighted that the speedy decline in the use of cash has eased. Although the use of cash is still expected to tail off, accounting for just 6% of payments by 2031, the report points out that, ‘Rather than the UK becoming a cash-free society over the next decade, the UK will transition to an economy where cash is less important than it once was but remains valued and preferred by many.’ Natalie Ceeney CBE Chair of the Access to Cash Review has indicated that those favouring cash “tend to be older, poorer or more vulnerable, many of whom simply can’t go digital.”  Card use, particularly contactless payments, looks set to continue; in 2021, debit or credit cards were used in 57% of all UK payments.

Markets

Towards the end of last week, the FTSE 100 proved to be surprisingly resilient following the news that consumer confidence has hit a record low. London stocks finished in the red on Tuesday, after a fresh batch of data from the Purchasing Managers’ Index (PMI) showed manufacturing activity unexpectedly contracting, with the FTSE 100 closing down 0.61% at 7,488.11 and the FTSE 250 closed down 0.99% at 19,306.89.

On a lighter note

Last week it was announced that the first flight of NASA’s Orion spacecraft carrying an array of culturally significant mementos will be heading on a mission to the moon. Launching from the Kennedy Space Center in Florida on 29 August the unmanned flight will commence the Artemis program, a mission which will eventually return astronauts to the surface of the moon. Great excitement was created when it was revealed that a toy of UK TV character Shaun the Sheep will be on board. Director for Human and Robotic Exploration at the European Space Agency’s (ESA) Dr David Parker, commented on the collaboration, “It is an exciting time for Shaun and ESA. We’re very happy he’s been selected for the mission and we understand, although it might be a small step for a human, it’s a giant leap for lambkind.”

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 (24 August 2022)

News in Review

“These are challenging times”

In a week where droughts were officially declared across England, the Office for National Statistics’ (ONS) latest assessment of the UK economy revealed tough economic conditions. In the second quarter, the UK’s gross domestic product (GDP) fell by 0.1%, largely the result of a 0.6% monthly dip in June. According to ONS, June’s poor reading was partly attributable to falling retail sales and the Queen’s Platinum Jubilee Bank Holiday, which resulted in two fewer working days.

Despite the headline negativity, however, there were positive contributions from consumer-facing services, including tourism and the arts. Responding to the data, Chancellor Nadhim Zahawi ventured that “the contraction is partly because of some of the COVID activities reducing but also real resilience in the private sector which actually in many ways bodes well.” “Nevertheless”, he admitted, “these are challenging times.”

Employment resilience

On Tuesday, the release of ONS employment data indicated a small quarterly drop in the Q2 employment rate, the first time this figure has fallen since 2020. Correspondingly, there was a small increase in unemployment, with the official rate now estimated at 3.8%.

Despite the quarterly rise, unemployment remains below pre-pandemic levels. Moreover, the number of payrolled employees increased across all regions, with the largest rises seen in London and Northern Ireland. Separately, a productivity flash estimate from ONS showed output per hour worked remained unchanged in the second quarter.

Meanwhile, the Recruitment & Employment Confederation (REC)’s latest Labour Market Tracker revealed that the number of active job adverts across the UK hit a new high for 2022 in the final week of July. New postings have been steady throughout the past two months and reached a record 1.85 million in the week of 25-31 July. Kate Shoesmith, the Confederation’s Deputy CEO, commented, “This new data shows the continued strength of the jobs market, despite any wider economic uncertainty.”

Fall in real pay

While average pay rose by 4.7% between April and June, according to ONS data released on Tuesday, the cost of living is outpacing wage growth, meaning that the real value of pay fell by 3%. Private sector wages grew by 5.9% while those working in the public sector saw pay growth of 1.8% which according to Darren Morgan, Director of Economic Statistics at the ONS is the “largest difference we have seen for 20 years.”

Positive US news

Positive news came from the US last Wednesday, with the announcement that the annual inflation rate had eased to 8.5% in July. Although still high, the rate is comfortably below the 9.1% recorded a month earlier. The easing was largely the result of falling petrol prices, which recorded a monthly drop of 7.7%.

Manufacturing output in the US rebounded by 0.7% last month after declining by 0.4% in June, the Federal Reserve said on Tuesday. A Reuters poll of economists had forecast factory production would rise by 0.2%.

Drought announced

The Environment Agency last week declared drought conditions in eight regions across the south and east of England, with experts now warning the drought could carry on into next year. The Environment Agency confirmed that Yorkshire was added to the drought list. Last month, England experienced its driest July since 1935, causing worries for the natural environment and farming. Indeed, a survey released this week by the National Farmers’ Union found that dry weather, as well as worker shortages, has already resulted in £22m of fruit and vegetables going to waste in 2022.

Markets

London’s FTSE 100 hit its highest level in more than two months on Tuesday, with a good performance in the mining sector and a mixed response to UK employment data. The top share index ended the session up 0.36% at 7,536.06.

Brent crude oil prices remained under pressure following Monday’s weak economic numbers from China, which is one of the biggest buyers of natural resources. The price dropped to around $92 a barrel on Tuesday.

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 (17 August 2022)

Mortgage myths – fact versus fiction

  1. MYTH: You need a perfect credit rating

A bad credit history can have a negative impact on your mortgage application, but it doesn’t make getting a mortgage impossible. Indeed, there are specialist lenders who offer mortgages to people with less favourable credit histories.

  • MYTH: You can’t get a mortgage if you’re self-employed

It’s also a myth that being self-employed means you can’t get a mortgage. You might have to jump through a few extra hoops to prove your income, but with the rise of freelance and flexible work, many lenders are now better suited to assess different employment situations.

  • MYTH: You should choose a home before thinking about mortgages

The opposite is true! It’s a good idea to meet with us before finding your dream home. Securing an Agreement in Principle will speed things up once you have an offer accepted.

  • MYTH: You should always pick the lowest interest rate

Although it’s natural to focus on the headline figure, a low initial rate does not necessarily mean a cheaper mortgage. If you’re on a tracker mortgage, for example, the rate can rise at any time. So, a higher fixed rate might end up cheaper in the long term. Different fees can also come into play; we can weigh up your options.

  • MYTH: You need to get a mortgage from your current bank

There’s no obligation to get a mortgage from your current bank. In fact, it’s a good idea to compare multiple providers to find the best deal for your needs – that’s where we come in!

Get in touch

We can help dispel myths at every stage of your mortgage journey. Our clear and transparent approach will help you find the most suitable mortgage for your circumstances.

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