Your retirement – no two are the same

The Class of 2022 retirement report1 provides a riveting insight into the plans and thoughts of those either planning to retire this year or recent retirees, really highlighting the changing face of retirement in the UK.

The last couple of years have impacted people’s plans, with people reassessing what retirement looks like to them. Less people are giving up work entirely, choosing to adopt a more staggered approach to retirement. Two thirds (66%) plan to continue working in some capacity during retirement; of this number some plan to move to part-time hours, others intend to continue working for their own business, start their own new business or volunteer. Therefore, a third of retirees plan to give up work altogether, down from 44% of 2021 retirees.

Financial readiness

Confidence in financial readiness to retire has fallen, with only 25% feeling financially ready to retire, versus 30% in 2021. A key factor in this fall being the rising cost of living, with 28% of respondents unsure how to mitigate the impact of rising inflation on their retirement income – a prime concern for those with large cash holdings.

Pass it on

With over a half (56%) of retirees planning to pass on wealth to their loved ones, just 23% feel confident about how they will pass on any leftover assets to loved ones. Only 9% have started gifting wealth to reduce their IHT liability. Interestingly just 30% have had conversations with their partner about passing on their estate, while just 26% have spoken to their children about it.

No two retirements are the same

Retirement is a thriving new beginning to plan for. Whether you’re thinking about a gradual retirement or full retirement how do you visualise your retirement years? Have you thought about your income requirements or tax implications? Have you started a conversation with family about how you want to use your wealth to help them? Advice can help you seek clarity and provide focus and direction.

Key findings  

  • The Class of ’22 have saved £385,000 on average on their pension pots 
  • 21% have less than £100,000 in their pension pots 
  • £293,000 is the average amount in savings and investments 
  • 28% have less than £100,000 in savings and investments

1abrdn, 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.

Home Finance – In the news

The great bungalow shortage

Demand for bungalows has increased over 60% in 20221, while supply has flattened, meaning prices for single storey properties has risen at double the market rate in some areas. Popular because of their large gardens and potential to extend, families are now keen to make offers, debunking the myth that only older generations favour single storey-living. Downsizers are now becoming embroiled in fierce competition for bungalows with all other demographics.

£24 per day FTB house price rise

Between 2016 and 2021, house prices for first time properties increased by almost £24 per day – a faster rate than the overall housing market2. On average FTBs are spending £223,751 on their first property and need to save £43,623 more than they did in 2016 to secure their first home. This leaves a sizable deficit when you consider the average salary of a thirtysomething (the decade that most people buy their first property) rose by just 10% over the same five-year period.

Dan Simson of Direct Line commented on the findings, “The rate at which FTB prices have been increasing is frankly frightening. However, this generation of property owners are facing the challenge of dramatically increasing property prices in traditionally popular areas such as London and instead are buying in places that are less well-known. We may see an even more dramatic emergence of these ‘young towns & cities’ with the increasing prevalence of remote working that enables people to be far more flexible as to where they live. Given the commitment people need to make to get on the property ladder, it is vital they protect their investment with insurance

should the worst happen.”

1Zoopla, 2022

2Direct Line, 2022

As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments. Equity release may require a lifetime mortgage or a home reversion plan. To understand the features and risks, ask for a personalised illustration.

Residential Property Review – July 2022

Cooling demand slows sales

Demand is cooling in the UK housing market, according to the latest Residential Market Survey published by the Royal Institution of Chartered Surveyors (RICS).

New buyer enquiries slipped to a net balance of -27% in June, a significant drop from the -9% recorded a month earlier. Net buyer enquiries had fallen nationwide for the first time in nine months in May 2022.

Nationally, the volume of sales agreed also dipped in June (-13%), a more pronounced fall than the previous month’s reading (-5%). With new instructions close to flat in June (-1%), twelve-month sales expectations also remain negative (-21%).

In London, buyer enquiries are proving more resilient, bucking the trend to remain in positive territory at +7%. Yet, even in the capital, several respondents to the RICS survey pointed to increasing interest rates and rapid inflation as factors that are likely to slow the sales market in the coming months.

Help to Build applications open

Applications for the government’s Help to Build equity loan scheme are now open, with £150m of government funding committed to helping self-builders achieve their property goals.

The Help to Build scheme will provide loans of between 5% and 20% of costs (up to 40% in London) to people building their own home. Currently, the average deposit needed for self-builds is around 25% of the total land and building costs, which means many with smaller budgets are excluded.

To be eligible for the scheme, the total build costs cannot exceed £600,000 (£400,000 if the land is already owned), while applicants must plan to live in the property as their primary home.

Andrew Baddeley-Chappell, CEO of the National Custom and Self Build Association, welcomes the initiative. He commented, “Help to Build is important because it opens up custom and self-build as an option to those with smaller budgets and in particular smaller savings. Access to finance is just part of the answer. The key constraint is access to land with permission to build.”

Homebuyers wait longer as conveyancing delays impact

Backlogs in the conveyancing process are forcing more homebuyers to wait longer from the moment of agreeing a sale, new data have revealed.

The pandemic property boom, sparked, in part, by the Stamp Duty holiday introduced in July 2020, put immense pressure on conveyancers. As a result, the average time from an accepted offer to completion is now 60% higher than it was a decade ago, according to Landmark Information Group.

Moreover, over half a million homes are currently sold subject to contract, according to Rightmove, 44% more than in the same time period in 2019. With buyers now facing an average 133-day wait to seal the deal, those wanting to be in their new home by Christmas are fast approaching the cut-off point.

All details are correct at the time of writing (21 July 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 – July 2022

Strong first half for commercial property

Investment and take-up performed strongly in H1 2022, according to Savills’ latest UK Commercial Property update, while vacancy rates remained low.

Overall investment levels in H1 2022 were 20% above the long-term average, even after slowing in the second quarter.The total half-yearly investment of £25.4bn came mostly towards the start of 2022, with just £8.3bn transacted in Q2.

Occupier markets remain strong across the board, with take-up reaching a record-breaking 28.6m sq. ft in the logistics market in H1 2022, 91% above the long-term average. In the City, meanwhile, year-to-date take-up was 2.3m sq. ft, 5% above the 10-year average.

Accordingly, vacancy rates in the logistics market remain ‘structurally low’, Savills noted, at just 3.01%. Likewise, in the regional office market, vacancy has fallen to 9.4%, as occupier demand edges back towards pre-COVID levels. Overall vacancy is likely to remain low going forward, Savills expects.

Another key trend identified in the report is the shift in new occupier requirements towards manufacturing closer to the point of sale. As companies swap ‘just in time’ for ‘just in case’ supply chains, analysts expect demand to strengthen further.

Shopping centre investment up in H1 2022

Investment in UK shopping centres has increased by 169% year-on-year, according to Knight Frank’s H1 2022 Retail Investment Report, as investors prepare for an anticipated return to pre-pandemic shopping habits.

The report reveals that shopping centre investment volumes climbed to £1.24bn in H1 2022, up from £460m a year earlier. Overseas and private equity investors led the way, though institutional investment into the outlet sector also contributed to the rise.

Investor demand was focused mostly on smaller in-town shopping centres, the report highlighted, even as a handful of larger ‘destination’ malls were sold. Notably, Switzerland-based Redical Capital acquired Victoria Gate and Victoria Quarter in Leeds for a combined £120m.

Will Lund, of Knight Frank, commented, “After years of falling valuations we are seeing a shift in investor sentiment and shopping centres starting to come back into fashion […] With pricing and rents now stabilising, investors are beginning to see the long-term appeal and resilience of shopping centres as a key part of modern multichannel retail.”

Quality logistics space still in demand

High demand and an acute lack of available stock have pushed the UK vacancy rate to a new low of 1.18%, according to CBRE’s UK Logistics figures Q2 2022, as quality space continues to dominate the market.

H1 2022 saw record-breaking take-up in the logistics market, with a 9% increase from H1 2021. In Scotland, on the other hand, the vacancy rate is now 6.85%, according to Savills, with take-up of units over 100,000 sq. ft subdued so far this year.

Poor quality available space is holding the Scottish market back, analysts suggest. Currently, all space on the market is classified as Grade B (23%) or Grade C (77%), while the only 100,000 sq. ft transaction in 2022 was for a Grade A built-to-suit space.

Google’s 330-metre vote of confidence in office working

Construction has been completed at Google’s new UK HQ, the first Google-owned and designed building outside the US, in a sign of the company’s commitment to post-pandemic office working.

Based in London, between King’s Cross and St Pancras, the new HQ comes complete with a pool, nap pods and rooftop exercise track. Nicknamed the ‘landscraper’, the building reaches 72 metres at its highest point and stretches to 330 metres – which means it is longer than the Shard is tall. It is expected that 4,000 of Google’s current 6,400 staff will work in the new office building from 2024.

Many companies are still working out the quantity and types of space required in the post-pandemic landscape. Google, for example, seems to have committed to hybrid working. In 2021, Chief Executive Sundar Pichai announced that most of its staff would spend three days in the office and “two days wherever they work best”.

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

“Food sales picked up due to the Jubilee celebrations, but this was the only sector to report an increase”

Retail sales edged lower last month as people reduced their fuel consumption, while households continue to struggle with fast rising prices. According to the most recent Office for National Statistics (ONS) data released last Friday, retail sales volumes fell by a smaller-than-expected 0.1% in June; economists surveyed in a Reuters poll had widely expected a 0.3% monthly decline. This follows a fall of 0.8% in May.

In the 12 months to June, UK inflation leapt to 9.4% from 9.1% in May, with petrol prices soaring by 18.1p per litre in the month, according to ONS. Average petrol prices reached 184p per litre in June, the highest since records began in 1990 and up from 129.7p one year earlier, the largest monthly rise on record. The price of food continues to climb, with eggs, milk and cheese seeing the largest rises in June.

Headline retail statistics for June revealed:

  • Fuel sales volumes reduced by 4.3% with retailers indicating the decline was linked to record-high prices
  • Food sales volumes increased by 3.1% with retailers confirming that the rise was due to the Queen’s Platinum Jubilee celebrations
  • Online retail sales declined to 25.3%, its lowest proportion since March 2020 (22.8%), continuing a downward trend since February 2021 (37.4%) peak.

Deputy Director for Surveys and Economic Indicators at ONS, Heather Bovill, commented on the findings, “After taking account of rising prices, retail sales fell slightly in June and although they remain above their pre-pandemic level, the broader trend is one of decline.” She continued, “After a fall in May, food sales picked up due to the Jubilee celebrations, but this was the only sector to report an increase. Fuel sales fell back considerably with retailers reporting the record high prices at the pump hitting sales.”

Surge in sunscreen and ice cream sales

As the intense heat took hold last week, sales of sunscreen and ice cream soared according to data from Kantar. With the Met Office predicting extreme temperatures across much of the UK, households wisely stocked up on summer essentials to beat the heat. The last time the UK experienced a similar heatwave in July 2019, sales of fans, paddling pools and reusable water bottles shot up, 107%, 169% and 17% respectively, with almost £11m extra being spent during the hottest week on those three items. Fraser McKevitt Head of Retail and Consumer Insight at Kantar commented, “We expect to see similar if not even bigger numbers this time around,” but he did caution that price rises will lead people to be “feeling the pinch during our first restriction-free summer since 2019.”

ECB rate hike – more on the cards

Last week, the European Central Bank (ECB) raised its key interest rate by 50 basis points to 0.0%, with plans for further rises on the cards this year, as worries about inflation surpassed growth concerns. In justifying the decision to increase rates, Christine Lagarde ECB President commented, “Economic activity [in the eurozone] is slowing. Russia’s unjustified aggression towards Ukraine is an ongoing drag on growth. We expect inflation to remain undesirably high for some time owing to continued pressure from energy and food prices and pipeline pressures in the pricing chain.” The ECB has signalled that it will take a “meeting-by-meeting” approach to raising rates, but that further rate hikes “will be appropriate.”

Markets

Markets remained stable at the end of last week after the ECB raised interest rates for the first time since 2011. The FTSE 100 ended the week with its highest Friday close for six weeks. This week, European stock markets have been mixed on the news that Gazprom plans a drastic cut in gas deliveries to the bloc because of a turbine problem – the daily supply will be about 20% of the pipeline’s capacity. Wall Street kicked off the week on a promising note, having hit six-week highs last week. Weakness in the tech sector, was offset by an energy upturn, ahead of a Federal Reserve meeting later this week. After the IMF announced a cut in the UK’s 2022 GDP target, from 3.7% in April to 3.2%, the FTSE 100 ended Tuesday down just 0.02 points at 7,306.28. 

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 July 2022)

Money – In the news

Returns trump ESG for two thirds of investors

Despite the growing trend towards Environmental, Social and Governance (ESG) investing, return on investment remains the ultimate priority for the majority of investors. Research1 has revealed that 66% of investors prioritise profit over humanitarian concerns. There are significant differences between the generations, however; just 28% of Baby Boomers said ESG was a factor when choosing investments, against 56% and 57% of younger Millennials and Gen Z investors, respectively.

‘Side hustling’ becomes the norm

Nearly half (46%) of people are supplementing their income with a ‘side hustle’, according to recent research2. The phrase, which originated in the United States, means taking on a part-time job in addition to one’s regular job in order to make more money. Of those who have a side hustle, over half (56%) first started it during the pandemic.

More Baby Boomers work past retirement age and provide financial support to family

Nearly 40% of Baby Boomers (i.e. the generation aged between 57 and 75) are set to continue working past the current State Pension age of 663. On average, this group plan to work for a further 4.3 years past their 66th birthday. The same study highlighted that just under a quarter (23%) of Boomers are financially supporting their children, with this intergenerational subsidisation also cascading to a second generation; 16% of Boomers are providing financial support to their grandchildren.

1Charles Schwab, 2022

2Airtasker, 2022

3Dunstan Thomas, 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.

Wealth – In the news

Numbers of those exceeding pension Annual Allowance on the rise

In the past five years, the number of individuals whose yearly pension contributions breached the Annual Allowance (£40,000) has soared by more than 675%1. In the 2015-16 tax year, 5,460 people reported pension contributions exceeding the Annual Allowance in their self-assessment forms. For the 2019-20 tax year, the figure stood at 42,350. Meanwhile, the value of pension contributions breaching the Annual Allowance rose by 564% during the same period.

‘Screen sharing’ scams – beware

The Financial Conduct Authority’s2 (FCA’s) ScamSmart scheme has turned its attention to so-called ‘screen sharing’ scams, whereby fraudsters take over their victims’ computers using remote desktop software. Since July 2020, the FCA has seen well over 2,000 such cases, with victims losing a combined total of £25m between January 2021 and March 2022. One 59-year-old woman lost nearly £50,000 when a scammer posing as a financial adviser convinced her to download screen sharing software on the pretext of helping her complete a Bitcoin investment. Instead, they took advantage to access her banking details and other private information.

1House of Commons, 2022

2FCA, 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.

News in Review

“The economy rebounded in May with growth across all main sectors”

Data released from the Office for National Statistics (ONS) last week shows how the UK economy returned to growth in May, recording expansion of 0.5% during the month. After shrinking in April and March, the growth experienced in May was higher than the flat growth widely anticipated by economists polled by Reuters.

Encouragingly, ONS Director of Economic Statistics Darren Morgan said that “the economy rebounded in May with growth across all main sectors” including manufacturing, construction and travel, while health was a prime driver. The all-important service sector grew by 0.4% and human health and social work activities increased by 2.1%. Travel agencies fared well with demand for summer holidays really taking off and output in tour operation and travel agency industry surging by 11%.

Mr Morgan commented on the good news for manufacturing and construction, “There was widespread growth across manufacturing after several tough months, while construction also fared well with housebuilding and office refurbishment driving growth.” The UK’s monthly construction output rose by 1.5% on the month in volume terms in May 2022, the seventh consecutive month of growth.

Despite the economy’s more positive performance, wider expectations are for inflationary pressures to impact growth, especially with household incomes to be squeezed further heading into the autumn as energy prices continue their ascent.

Current Chancellor Nadhim Zahawi commented on the findings, “It’s always great to see the economy growing but I’m not complacent. I know people are concerned, so we are continuing to support families and economic growth.” He continued, “We’re working alongside the Bank of England to bear down on inflation and I am confident we can create a stronger economy for everyone across the UK.”


Next PM needs an economic plan

With the competition for the next Prime Minister really hotting up and the two final candidates to be announced today, business leaders have been airing their views on the requirement for the development of an economic plan to elevate the country from a low-growth environment. Representing 190,000 businesses, the Confederation of British Industry (CBI) wrote an open letter to candidates for the leadership of the Conservative Party, citing that they must develop ‘serious, credible and bold plans for growth’ in the face of some major challenges including ‘eye-watering’ inflation, supply chain disruptions and skills shortages. The letter outlined, ‘Sustainable economic growth must be at the heart of your manifestos. Without it, leadership ambitions cannot be met nor those of the British people and businesses.’

Inflation will normalise – “no ifs or buts”

In a speech last week, Bank of England (BoE) Governor Andrew Bailey said that “Bringing inflation back down to the 2% target sustainably is our job, no ifs or buts.” Although Bank Rate is on the rise, with further increases likely,it is expected thatlower interest rates will return once the effects of the pandemic and the war in Ukraine fade. Bailey added, “Cyclical adjustments in short-term nominal interest rates – like those we are currently witnessing in the United Kingdom and abroad – will for the foreseeable future continue to be played out against the backdrop of low global equilibrium real interest rates.” The BoE Governor told MPs last week that he still holds the view that inflation will fall sharply next year.

Markets

As the country grappled with the heatwave and sweltered in the hottest temperatures ever recorded, London stocks closed above the waterline on Tuesday as concerns over potential interest rate rises and inflation cooled, with the FTSE 100 ending the session up 1.01% at 7,296.28. The FTSE 250 ended up 1.41% at 19,282.59. European shares pushed higher on Tuesday following a Reuters report that Moscow would resume natural gas exports to Europe through the Nordstream 1 pipeline later this week, after having been halted for ten days of annual maintenance. Wall Street stocks also closed in positive territory on Tuesday, supported by updates from some of the nation’s biggest banks and suggestions from Federal Reserve officials that they were contemplating tempering their rate rising intentions.

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 July 2022)

Investor sentiment and super trends

A new investor sentiment survey1 shows that, while investors are concerned about both the economic impact of the war in Ukraine and rising inflation, they remain confident about the stock market outlook and are not adjusting their portfolios just yet.

Two thirds of investors surveyed said they expect the ongoing conflict to result in higher energy prices, while 64% expect more global instability and 60% are concerned about increased cyber-attacks. In addition, 92% expect the war to increase inflation and more than half believe abnormally high inflation will last longer than 12 months.

Investors remain optimistic

The survey did, however, find that investors were not at the time looking to adjust their portfolios, although they are poised to do so should the market decline further. Commenting on the findings, Co-President of UBS Global Wealth Management Iqbal Khan said, “The long-term economic implications of the war in Ukraine are difficult to assess, but most investors remain optimistic on their outlook for the stock market and are confident in their well-diversified investment portfolios.”

Super trends – all change

Analysis2 by Credit Suisse has identified growing concerns over the economy as a key super trend, with economic anxieties now replacing the pandemic as the top worry for investors. The Swiss bank’s latest review of global themes driving investment over the long term suggests that, although COVID-19 ‘remains a worry for many people’, it now ranks below concerns about ‘poverty, social inequality and unemployment.’ Other super trends identified within the analysis include an infrastructure boom driven by government spending, technology with new catalysts like the metaverse providing impetus to this trend, the silver economy and climate change.

1UBS, 2022

2Credit Suisse, 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.

Equity release product standard update

All equity release plans sold to new customers from 28 March 2022 must feature penalty-free partial loan repayments, enabling customers to reduce their loan size and save money on interest.

The new standard introduced by the Equity Release Council (ERC) could save customers millions of pounds. While ERC standards aren’t legally binding, almost 700 firms selling equity release products have promised to abide by them.

Other standards include the obligation to either offer fixed interest rates or capped variable rates, the right to remain in the property for life, and a ‘no negative equity guarantee.’

Chairman of the Equity Release Council David Burrowes spoke about the recent changes, “Updating our standards to lock down the ability to make partial repayments on lifetime mortgages – an innovative feature that has become increasingly common in recent years – provides flexibility for consumers and ensures the sector continues to evolve to meet changing demographic needs.”

As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments. Equity release may require a lifetime mortgage or a home reversion plan. To understand the features and risks, ask for a personalised illustration.