Are your home contents worth more than you think?

In January this year, a team clearing out the home of a retired antiques dealer and lifelong hoarder found a treasure trove of valuables worth £50,000.

Among the piles of bags and boxes stuffed haphazardly into the Victorian townhouse were eight grandfather clocks worth £1,000, an antique chair worth between £600 and £800, and a 1956 Morris Minor ‘Split Screen’ classic car valued at up to £6,000 in the garage.

Do you know what’s in your home?

Of course, most people don’t have a home crammed with antiques; nevertheless, homeowners have made some incredible discoveries over the years. For example, an ancient Japanese coffer that had been sought after for decades by the Victoria and Albert Museum was found in the owner’s home after his death, where it had served as a TV stand for 16 years. It sold for £6.3m!

If you haven’t been up in your attic for a while, now could be the time. If you have any valuables knocking around that are currently unaccounted for, you might risk being underinsured.

Know your worth

Understanding the true value of your home contents (whether or not you have undiscovered valuables lurking in the attic) is crucial to getting the right home insurance cover. We can help you value your possessions and source the home insurance policy that best suits your needs.

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

Life admin personality types – are you a forward thinker?

When it comes to mundane but crucial organisation tasks – what life admin personality type are you?

Do you tend to have an ‘I’ll do it later’ approach to tasks? If you live in the moment and avoid life admin completely, tend to run late, lack motivation or structure, resulting in poor organisation – you certainly fall in the ‘procrastinator’ trait set. Or perhaps you’re a ‘wishful thinker,’ biting off more than you can chew; well-intended and attempting completion of tasks on your to-do list but often falling short or failing to complete tasks in time.

The ‘forward thinker’ operates by ordering priorities. Possessing strong time management and organisational skills, making use of to-do lists and achieving. The good news is – whatever type of personality trait applies to you, we’re forward thinkers so you’re in capable hands!

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.

Financial freedom in retirement

When are you thinking of retiring? With many pre-retirees reassessing their lives and priorities in the wake of the pandemic, there really is a seismic shift for many people towards achieving life balance. People need a plan to flex with their changing aspirations – it’s become more about living life rather than going through the motions of the daily grind.

With earlier retirement a serious consideration for many seeking balance, a quarter of Brits who aspire to retire early feel that age 60 is the optimum time to do so1.

Positive steps to a new lifestyle

What really makes you happy? If you’re planning to celebrate your 60th birthday by saying ‘goodbye’ to working life, it’s good to know that 68% of people report an increase in overall happiness as a result of retiring early, with 44% of early retirees reporting their family relationships improved and 34% citing improvements in their friendships. From a health perspective, 57% of early retiree respondents report a boost to their mental wellbeing, with 50% believing their physical wellbeing has improved.

In the driving seat

Nearly a third (32%) of people who retired early or plan to do so are driven by the desire ‘to enjoy more freedom while still being physically fit and well enough to enjoy it.’

Other factors driving people to pursue early retirement include financial security (26%), reassessing priorities and what’s important to them in life (23%), wishing to spend more time with family (20%) and finding they are either ‘tired or bored’ of working (19%). Stress is also a contributing factor that 19% of respondents are keen to eradicate.

Time to reflect

With a sizable 24% of people returning to work after retiring because they experience financial issues, careful planning is essential. Interestingly, 47% of retirees found that their finances worsened and only 22% felt they benefited financially from their decision to retire early.

Your plan

People cited steps toward making early retirement achievable like paying off a mortgage (30%), saving little and often (29%), saving extra when they receive a pay rise or bonus (19%) and receiving an inheritance (14%).

We’re here to reassure you that happiness doesn’t need to come at a cost when retiring early. Although it’s very important to be realistic, with meticulous planning and careful consideration, we can assess and develop a robust plan to align and flex with your changing requirements and priorities.

1Aviva, Dec 2021

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.

This is your life – look after it

Only a quarter of Brits have life insurance or critical illness cover policies in place, despite two in five knowing someone who has had a serious accident or been too ill to work, a study1 has found.

Compared to protection for our homes (55%), cars (53%) and travel plans (20%), the take-up of insurance policies relating to our own life is surprisingly low (25%). Life insurance provides crucial peace of mind that those we leave behind won’t suffer financially, while Income Protection and Critical Illness Cover are a vital defence against loss of income and serious illness.

Gender maze

The study revealed that women are less likely to have cover than men, with 24% of female respondents having no protection policies in place. This is despite only 22% of women saying they don’t think an accident or serious illness will ever stop them from working, lower than the 28% of men who think the same.

Mind the gap

Meanwhile, the youngest demographic (18 to 24) is the least insured, with 35% having no policies, compared to only 14% of those aged 55 plus. In this unpredictable life, accident or illness can strike at any time – whatever your age, it’s worth thinking about how you or your loved ones would cope should the worst happen.

1Caspian, Aug 2021

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

“Monetary policy must… navigate a narrow path”

Interest rate rises were big news last week on home shores, across the pond and in Australia, as central banks acted in an effort to curb inflation. The Monetary Policy Committee voted by a 6-3 majority to increase Bank Rate by 0.25 percentage points to 1%, with further tightening expected in the coming months. Interestingly, the three members in the minority favoured increasing Bank Rate by 0.5 percentage points to 1.25%. This is the fourth consecutive increase since December last year; at 1%, the rate has reached its highest level in 13 years.

Bank of England (BoE) Governor Andrew Bailey defended the rate rise at a time when the cost of living is increasing, saying that the risk of letting inflation get out of control was higher. The BoE are expecting the UK economy to contract by nearly 1% in Q4 2022 and stay flat next year.

Mr Bailey spoke about the impact of intensifying global inflationary pressures amid rising supply chain disruption concerns due to the Ukraine invasion and COVID developments in China, “These developments have exacerbated greatly the challenges already facing the UK, and many other economies… monetary policy must, therefore, navigate a narrow path between the increased risks from elevated inflation and a tight labour market on one hand, and the further hit to activity from the reduction in real incomes on the other.”

The MPC’s central projection for CPI inflation is a rise over the remainder of the year. The rate is expected to reach 9% in the coming months, before reaching 10.25% by the end of Q4. The next MPC meeting is scheduled for 16 June.

On Tuesday, Prince Charles delivered the Queen’s Speech in Parliament, setting out the government’s agenda for the coming year. He said the government’s priority “is to grow and strengthen the economy and help ease the cost of living for families.”

Largest US interest rate rise since 2000 – but labour stats hold steady

Last Wednesday, the Federal Reserve moved to raise interest rates by 50 basis points – the largest rate rise in 22 years, with similar moves likely for June and July. US central bank chair Jerome Powell appealed to Americans to be patient while officials take measures to control inflation. During a post-meeting press conference in Washington, Mr Powell justified the move, “Inflation is much too high and we understand the hardship it is causing, and we’re moving expeditiously to bring it back down.”

Despite concerns over price rises, employers added 428,000 jobs in April, marking the 16th month of expansion. After wiping out 22 million jobs in the early months of the pandemic, the US economy has recovered more quickly than expected.

Also last week, Australia’s central bank, the Reserve Bank of Australia, raised the nation’s interest rates for the first time in over a decade.

Travel recovery prompted by pent-up demand

People appear keen to get travelling again, recent insight has indicated. Pent-up demand and the easing of curbs have led to an upswing in both short and medium-haul trips, and hotel bookings. Chief Executive of the Egan-Jones Ratings Company, Sean Egan commented, “The big overlay is that air travel demand is back, and it is back in a massive way.”

Even with rising costs and staff shortages, airlines expect a return to profitability this year. IAG, the owner of British Airways, expects to be profitable from Q2 onwards and for the whole year, despite having to cut capacity in Q1. Luis Gallego, IAG Chief Executive commented, “Premium leisure continues to be the strongest performing segment and business travel is at its highest level since the start of the pandemic.”

IAG, which also owns Iberia, Vueling and Aer Lingus, forecasts passenger capacity to be around 80% of 2019 levels in Q2, rising to 90% by Q4. Lufthansa said they expect to return to an operating profit in Q2, while Air France-KLM has seen a recovery in ticket sales and strong summer bookings.

Positive news for household finances – average cost of car insurance falls 5%

With household finances feeling the squeeze, some good financial news at last! After the Financial Conduct Authority ended loyalty premiums for existing customers at the start of January, according to the ABI’s latest Motor Insurance Premium Tracker, the average price paid by motorists for their motor insurance in Q1 reduced by 5% to its lowest level in almost seven years (since Q3 2015).

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.

Economic Review – April 2022

IMF cuts growth forecast

The International Monetary Fund (IMF) has warned that economic damage from the Ukraine conflict will contribute to a significant slowdown in the global economy with the UK set to be amongst the hardest hit.

In its latest assessment of world economic prospects, the IMF said the war in Ukraine is driving up fuel and food prices and that this will hit future growth prospects. Global growth is now predicted to slow from an estimated 6.1% last year to 3.6% in both 2022 and 2023, 0.8 and 0.2 percentage points lower, respectively, than the organisation’s previous forecast published in January.

For the UK, the international soothsayer now predicts growth of 3.7% this year, down from January’s 4.7% prediction. In 2023, the UK is forecast to have the slowest growth rate among the G7 advanced economies at just 1.2%, almost half the level of the previous forecast. The IMF said this downgrade reflected elevated inflationary pressures and tighter monetary policy, along with the UK’s ongoing labour supply issues.

Meanwhile, the latest growth figures released by the Office for National Statistics (ONS) revealed a larger than expected slowdown in February, with the UK economy expanding by just 0.1%. This was significantly below January’s figure of 0.8% and lower than the consensus forecast in a Reuters poll of economists which predicted growth of 0.3%. ONS said the slowdown partly reflected a decline in manufacturing, with car production sharply down due to component shortages, and falls in computer goods and chemical products.

Survey data also points to a more recent cooling in the pace of UK output. The preliminary headline reading of the S&P Global/CIPS Composite Purchasing Managers’ Index dropped to a three-month low of 57.6 in April, down from 60.9 in March, as high inflation and the Ukraine conflict weighed on service sector sentiment.

Inflation soars to 30-year high

The latest inflation statistics showed that consumer prices in the UK are now rising at their fastest rate in three decades, with further upward pressures in the pipeline.

ONS data released last month revealed that the Consumer Prices Index 12-month rate – which compares prices in the current month with the same period a year earlier – rose to 7% in March. This was above analysts’ expectations and a significant jump compared to the previous month’s rate of 6.2%.

Fuel was the largest single upward contributor to March’s figure, with average petrol prices rising by the biggest monthly amount since records began in 1990. However, ONS also noted that price increases were broad-based with both the food and furniture sectors witnessing notable rises between February and March.

In addition, the latest data does not yet reflect the average consumer’s £700-a-year increase in energy bills following Ofgem’s price cap changes introduced on 1 April. Russia’s invasion of Ukraine is also clearly adding further to current cost pressures, with the price of oil and other commodities continuing to climb higher.

Commenting on the data, CBI Lead Economist Alpesh Paleja said, “The latest rise in inflation will not be the last. We’ll see another jump over April, as the rise in Ofgem’s energy price cap comes into effect. Beyond this, volatility in global commodity prices and ongoing supply chain disruption will continue to stoke price pressures.”

March’s inflation surge has heaped further pressure on Bank of England policymakers, with Bank Governor Andrew Bailey admitting they were walking a “very tight line” between tackling inflation and avoiding recession. The next meeting of the Bank’s Monetary Policy Committee is set to conclude on 5 May, with financial markets expecting it to yield another interest rate hike as policymakers bid to bring inflation back towards their 2% target.

Markets (Data compiled by TOMD)

April was a mixed trading month for global stock markets. Corporate reports were influential with a raft of earnings releases in both Europe and the US. The Dow Jones faltered as earnings from several large tech firms failed to impress.

The tech-focused NASDAQ posted its worst monthly loss since 2008. The Dow closed the month down 4.91%, while the NASDAQ finished down 13.26%. Data released toward month end showed the US economy shrank by 1.4% in Q1, with surging inflation, the war in Ukraine and the impact of the Omicron variant weighing.

In the UK, the FTSE 100 closed April up 0.38% on 7,544.55, while the midcap-focused FTSE 250 registered a loss of 2.13%. Stocks most exposed to Britain’s domestic economy have underperformed year-to-date, while the FTSE 100, whose firms earn three quarters of their revenue abroad, with high exposure to buoyant commodities prices, fared better. The AIM registered a loss of 1.93% in April. Toward month end, London markets were supported by gains among the heavyweight commodity stocks, which were buoyed by oil prices.

Following the release of a Chinese wide-ranging economic stimulus plan, Asian markets were reassured at month end. In Japan, the Nikkei 225 ended April on 26,847.90, down 3.50%, and the Euro Stoxx 50 closed the month down 2.55% on 3,802.86.

On the foreign exchanges, sterling closed the month at $1.25 against the US dollar. The euro closed at €1.19 against sterling and at $1.05 against the US dollar.

Brent Crude closed the month trading at around $108 a barrel, a gain of 0.47%. Gold is currently trading at around $1,915 a troy ounce, a loss of 0.45% on the month.

Wage squeeze continues

While the latest set of labour market statistics did report further growth in nominal wage levels, the data also showed that basic pay has continued to fall behind the spiralling rate of inflation.

ONS figures released last month showed that average weekly earnings, excluding bonuses, rose at an annual rate of 4.0% across the December – February period. However, although this does represent an increase from 3.8% in the previous three-month period, it also means that regular pay packets actually shrank once adjusted for inflation.

Indeed, the latest data shows that, in real terms, regular earnings fell by 1.0% compared to year earlier levels. This led ONS spokesperson Darren Morgan to conclude that, “basic pay is now falling noticeably in real terms” as the cost-of-living crunch deepens.

There was better news in terms of unemployment, with the jobless rate dropping further below its pre-pandemic level – in the three months to February, the rate fell by 0.2 percentage points to 3.8%, its joint lowest level in almost 50 years. ONS did, however, say that the fall largely reflected a rise in the number of people who are now no longer working or looking for work and thereby “disengaging from the labour market.”

Retail sales fall sharply

Official retail sales figures have revealed a sharp decline in sales volumes during March as the cost-of-living crisis pushes UK consumer confidence to a near all-time low.

According to ONS data, total retail sales volumes fell by a greater than expected 1.4% in March while February’s figure was revised down to a 0.5% fall. ONS said both food and petrol sales declined sharply during March, citing the impact of rising prices as a possible explanation, while online sales were hit hard as consumers cut back on non-essential spending.

Survey data released last month also shows that the cost-of-living impact has knocked households’ confidence in the economy and their personal finances. GfK said its headline consumer confidence index fell to -38 in April; this reading was within a whisker of the 50-year-old index’s all-time low, hit during the depths of the global financial crisis in July 2008.

Responding to the latest data, British Retail Consortium Chief Executive Helen Dickinson said, “March sales were impacted by rising concerns around inflation as consumer confidence tumbled. The cost-of-living squeeze has many consumers thinking twice about major purchases, while their expectations of future financial situation plummeted to lows not seen since the financial crisis.”

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.

Get your ducks in a row for the 2022/23 tax year

Effective tax planning strategies can help shield you from the chill this spring.

While there’s minimal change in the operation and structure of the taxation of UK individuals in the 2022/23 tax year, the ‘no change’ element is significant. Excluding the 1.25 percentage point increase to National Insurance and Dividend Tax rates from April 2022, and an increase in the National Insurance threshold to £12,570 from July, the big tax freeze is on.

Stemming from the Spring 2021 Budget when most major tax rates, bands and allowances were frozen until 2025/26, freezing is often regarded as a stealth tax.

Estimates from the Institute for Fiscal Studies suggest by 2025 there could be five million higher rate taxpayers, a 900,000 increase1; they summarise, ‘Freezing things for a long period makes a big difference.’ By way of example, frozen allowances, growth in assets and accumulation of unspent income could see more people falling into the Inheritance Tax (IHT) net.

1IFS, March 2021

The value of investments and income from them may go down. You may not get back the original amount invested. Inheritance Tax Planning is not regulated by the Financial Conduct Authority.

Second-best year on record for fund inflows

Despite the pandemic, new stats from The Investment Association (IA)1 show investors added over £43bn to funds last year, the second highest recorded. The IA details a key finding ‘inflows to responsible investment funds totalled a record £16bn, up £4.3bn on 2020.’

In December, net retail sales reached £2.3bn. Equity funds were the most popular asset class with £1bn of inflows, with ‘global’ remaining the best-selling sector for the seventh consecutive month.

Chief Executive of the IA Chris Cummings commented on the findings, “Investors put their lockdown savings to work in 2021, with near record inflows to retail funds in 2021 helping investors take part in the global COVID-19 market bounce. This was particularly so in the first half of the year, when monthly inflows into funds peaked at £6.2bn at the end of the 2021 ISA season in April. While new variants of COVID-19 appeared throughout the year, every month of 2021 saw net inflows – against a backdrop of rising prices eroding the value of saving in cash.”

He continued, “The return of significant inflation in the second half of 2021 indeed left its mark, with falling flows into bond funds, but overall investor confidence remained resilient. Growing focus on climate change in the year Glasgow hosted COP26 also helped take flows into responsible investment funds to new heights.”

1The Investment Association, 2022

The value of investments and income from them may go down. You may not get back the original amount invested. Inheritance Tax Planning is not regulated by the Financial Conduct Authority.

Home Finance – In the news

New government initiative ‘The Older People’s Housing Taskforce’

With demand for homes for older people four times higher than supply, the government has been urged to investigate1. The UK’s largest retirement housebuilder is requesting the introduction of rules to ensure 10% of new housing is designed for pensioners. A new government initiative ‘The Older People’s Housing Taskforce’ is set to examine barriers to supply of housing for older people, to look at how homes can be adapted to make them more suitable for older inhabitants and to examine the limited choice of properties available to pensioners, revealed in the Levelling Up White Paper.

Equity release – bumper Q4

The Equity Release Council says record amounts of property wealth were accessed through equity release products in the last quarter of 2021, taking total lending for the year to £4.8bn, representing a 24% rise from the 2020 figure of £3.86bn2. Average loan sizes also increased, which the Council says is partly influenced by a rise in property prices as well as an increase in wealthier customers using equity release as part of their financial planning.

1McCarthy Stone, 2022

2Equity Release Council, 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.

News in Review

“The American economy – powered by working families – continues to be resilient in the face of historic challenges”

The US economy contracted in Q1 as surging inflation and supply disruptions weighed on output. A slower pace of inventory investment by businesses also weighed on the growth of the world’s largest economy, as did fading government stimulus. The 1.4% decline in gross domestic product in the first quarter marked a sharp turnaround from the 6.9% annual growth rate recorded in the final quarter of last year and is considerably lower than the 1% growth widely estimated by economists.

The figure was the first contraction since the height of the pandemic in 2020. One of the US economy’s main drivers in Q1 was consumer spending, increasing by 2.7%, a slight acceleration from the end of 2020. However, high inflation is eroding household purchasing power, as consumer prices rose by 8.5% in March, a forty-year high.

Following the unexpected negative data, President Biden insisted the US economy remained strong, “The American economy – powered by working families – continues to be resilient in the face of historic challenges. Last quarter, consumer spending, business investment, and residential investment increased at strong rates. The number of Americans on unemployment insurance remains at the lowest level since 1970.”

When the Federal Reserve next meet on 4 May, there are expectations that the decision will be made to raise policy rate by fifty basis points as the tight labour market and surging inflation weigh heavily on the economy.

Eurozone inflation edges higher

Meanwhile, closer to home, data released last week showed eurozone inflation reached a new record high in April. For the nineteen countries in the eurozone, inflation surged to 7.5%, adding pressure on the European Central Bank (ECB) to tighten policy. Escalating fuel prices weighed on the region’s economic recovery. The April figure tops the old record of 7.4% recorded in the previous month. ECB President Christine Lagarde reiterated that the eurozone would adopt a more “gradual” approach than the Federal Reserve to stamping out inflation. Despite this, there are expectations that the ECB may raise rates for the first time in a decade as soon as July.

UK government borrowing halves

Data from the Office for National Statistics (ONS) shows that during the last financial year government borrowing more than halved versus the same period a year earlier, when the UK was in the middle of pandemic restrictions. The £151.8bn borrowed in the financial year ending March 2022, was under half the £317.6bn borrowed in 2020-21. Since pandemic schemes, including the Job Retention Scheme ended, the government has clearly borrowed less. In addition, the government received stronger than expected revenues from taxes, with receipts at £619.9bn for the fiscal year, an increase of £94.3bn. In March, borrowing totalled £18.1bn, well above pre-pandemic levels and the second-highest amount for the month since records began in 1993, but still £8.8bn less than the amount borrowed in March 2021.

MPC – rates on the rise?

With the next Monetary Policy Committee (MPC) meeting taking place on 5 May, the decision on Base Rate, voted by the nine-member committee, is imminent. The rate has been rising incrementally over the last few months and following three consecutive hikes, its current level is 0.75%. As the Bank of England takes action against soaring inflation, a vote to increase the rate again by 0.25% would see it reach levels not seen since 2009.

House prices continue their ascent

The latest Nationwide House Price Index has revealed that average house price growth has slowed in the year to April to 12.1%, from 14.3% recorded in March. Despite the reduction in growth, it’s still the eleventh time in the last twelve months that the rate of annual growth has been in double digits, putting the average value of a UK property at £267,620. Nationwide’s Chief Economist Robert Gardner commented on the data, “Housing market activity has remained solid with mortgage approvals continuing to run above pre-COVID levels. Demand is being supported by robust labour market conditions, where employment growth has remained strong, and the unemployment rate has fallen back to pre-pandemic lows. With the stock of homes on the market still low, this has translated into continued upward pressure on house prices.”

He continued, “Nevertheless, it is surprising that conditions have remained so buoyant, given mounting pressure on household budgets which has severely dented consumer confidence.”

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.