Gen up on pension numbers

With so many financial priorities to juggle, it can be hard to put your pension first, especially with spiralling household costs. Starting or maintaining your pension contributions is important.

Whatever type of pension plan you have, you get tax relief at the highest rate of Income Tax you pay on all contributions you make, subject to annual and lifetime allowances. This effectively means that some of your earnings which would have gone to the government as tax are diverted to boost your pension pot instead.

Make the most of your allowances

The Annual Allowance for pensions is £40,000. For those with an income above £240,000 (£200,000 threshold income plus the £40,000 you can save into a pension) the Annual Allowance begins to taper; for every £2 of adjusted income above £240,000, the Annual Allowance for that year reduces by £1. The minimum Annual Allowance is £4,000.

The Lifetime Allowance – the maximum amount you can have in a pension over a lifetime without incurring an extra tax charge is £1,073,100.

Don’t forget your State Pension

From 6 April, the new single-tier State Pension increased to £185.15 per week and the older basic State Pension rose to £141.85 per week. You can get a projection and find out your retirement age here www.gov.uk/ check-state-pension

Treating you as an individual

We offer advice and help with all aspects of pensions and retirement planning, whether you’re just starting out and want help choosing the most appropriate pension products, or you’re approaching the stage of life when you need to utilise your pension pot and want to know the most efficient way to access your funds.

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.

IHT – time for a refresh?

Latest data from HM Revenue & Customs (HMRC) revealed IHT receipts for April 2021 to March 2022 were £6.1bn, 14% (£0.7bn) higher than in the same period 12 months earlier.

Factors at play

Receipts have increased partly due to higher death rates during the pandemic, as well as due to the rise in property prices which has seen more families coming into scope for IHT. With thresholds frozen at current levels – the nil-rate band is £325,000 and the main residence nil-rate band is £175,000 – IHT is effectively a stealth tax.

IHT top tips

Gifts – use your £3,000 annual allowance before the end of each tax year. You can also make gifts of up to £250 per person per tax year

Trusts – for example putting money into a trust to pay for a grandchild’s education or to support another relative

Make a Will – and keep it up to date

Leave money to charity – if you leave at least 10% of your net estate to charity, the IHT rate reduces from 40% to 36%

Take out life assurance – this won’t reduce your estate but instead provides a lump sum to your beneficiaries to pay the IHT bill. The policy should be written under a suitable trust

Take advice – sensible IHT planning can help to reduce the amount of IHT your beneficiaries will have to pay and safeguard your wealth for the future.

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.

Don’t give up your protection policy

With households facing the biggest squeeze on their incomes in many years, it’s understandable that families are looking for ways to cut costs.

When looking to cut back, reviewing subscriptions and direct debits (for example, for streaming services, food subscription boxes or gym memberships) is often a good place to start, but there is one cost that you shouldn’t be so quick to give up.

Protection is vital

As tempting as it is to cancel protection insurance policies, times of financial difficulty are exactly when we need protection the most.

Many policyholders aren’t aware that life insurance cover can be flexible, and there are ways to reduce your cover rather than cancelling it outright.

Get in touch

If you have any questions about your protection policy please do get in touch. We can help you organise your finances and keep your vital protection cover in place.

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

“It’s our job to get inflation back down to 2%, so we have raised interest rates”

After five successive smaller rises, last week saw the Bank of England’s Monetary Policy Committee (MPC) up the ante and increase Bank Rate by 0.5 percentage points, the biggest rate hike since the MPC was established in 1997.

At 1.75%, Bank Rate is now higher than at any point since December 2008. The 0.5% rise will translate into an extra monthly cost for homeowners on a tracker or variable rate mortgage, while those with credit cards, bank loans and car loans will also see higher charges on their debt. In announcing the rise, the Bank of England (BoE) acknowledged the hardships people are facing but reaffirmed its objective, “It’s our job to make sure that inflation returns to our 2% target, and that is what we will do”.

Global trend

Like other central banks around the world, the BoE is raising rates in response to soaring inflation. When announcing the rate rise, the MPC warned that inflation could hit 13% next year, partly due to the rising energy price cap. The UK’s inflationary pressures are also part of a global trend, prompted largely by Russia’s restriction of gas supplies to Europe. Since May, wholesale gas prices have almost doubled, while uncertainty still abounds over the possibility of future Russian curbs.

Oil production

One group with the power to ease some of the price pains is the Organization of the Petroleum Exporting Countries (OPEC). Following pressure applied by US President Joe Biden and other Western leaders, the world’s biggest oil producers agreed to a slight increase in production at a meeting of OPEC+ last Wednesday. The larger grouping of OPEC and its allies, which include Russia, pledged to increase supply by 100,000 barrels a day, equivalent to around 0.1% of global demand, starting from September. OPEC expects global oil demand to rise in 2023 but at a slower pace than in 2022.

Energy price cap change

Ahead of the latest rise to the UK’s energy price cap in October, regulator Ofgem announced new plans that will see household energy costs change every three months. Currently, the price cap updates every six months; moving to quarterly changes should allow price rises and falls to be passed onto customers more quickly. Ofgem claims this will reduce price shocks, while Greg Hands, the Minister for Energy, noted that, “If energy prices were to start to fall people would see those benefits more quickly.”

On Tuesday, however, consultancy Cornwall Insight made an upward revision to its forecast for January 2023 in response to the plans. It now expects energy bills to hit £4,266 a year for a typical household by the start of next year.

Car sales down …

Last Thursday, the Society of Motor Manufacturers and Traders (SMMT) announced that sales of new cars in the UK fell by nearly 9% in July, leading the body to downgrade its outlook for the full year.

As global supply chain issues continue to frustrate order fulfilment, the revised forecast of 1.6 million new car registrations would represent a 2.8% year-on-year decline. The SMMT also pointed to COVID lockdowns in key manufacturing and logistics centres in China, as well as disruption from the war in Ukraine, to explain the falling sales. In the face of all these difficulties, the body noted that the industry was facing its ‘most challenging year for three decades’.

… but retail sales heat up

According to the British Retail Consortium, retail sales in the UK increased by 1.6% on a like-for-like basis in July 2022 from a year ago, rising for the first time in five months. Demand for items such as electric fans, summer clothing and picnic food during the record hot weather helped retailers rebound last month. 

Markets

London stocks were mixed at close on Tuesday with investors awaiting the latest key US inflation data which is due for release on Wednesday. The FTSE 100 ended the session up 0.08% at 7,488.15, while the FTSE 250 was down 1.02% at 19,912.40. Wall Street stocks closed weaker on Tuesday – the Dow Jones finished down 0.18% at 32,774.41 and the Nasdaq Composite lost 1.19% to end the session at 12,493.93.

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 (10 August 2022)

News in Review

“The world’s three largest economies are stalling, with important consequences for the global outlook.”

Last week saw the International Monetary Fund (IMF) release its latest economic assessment andforecast for the global economy. Following the effects of the pandemic and Russia’s invasion of Ukraine, the IMF now expects growth to slow to 3.2% in 2022, a downgrade of 0.4 percentage points from its previous publication in April.

The uncertainty is expected to continue into 2023, with next year’s forecast also downgraded to 2.9% (from 3.6% in April). According to the IMF, ‘this reflects stalling growth in the world’s three largest economies – the United States, China and the euro area’.

Amidst the uncertain global outlook, the IMF is predicting that the UK will have the slowest growth of the G7 economies in 2023, at 0.5%, significantly below April’s figure of 1.2%.

Primary among the faltering economies is the US, which entered a technical recession on Friday after shrinking for a second consecutive quarter.

As for China, the IMF revised its growth forecast down to 3.3% in 2022, the slowest rate in more than four decades, excluding the pandemic. On Tuesday, it was reported that party leaders in China were re-framing this year’s growth target of around 5.5% as guidance rather than a hard target.

Eurozone forecast

The outlook for the eurozone was also downgraded, with growth now forecast at 2.6% this year and 1.2% next year. The day after the Women’s Euro Championships Football Final, the release of Germany’s monthly retail sales statistics will have done little to lift the nation; in June, German retail sales volumes fell by 8.8%, the largest annual drop since records began. Official figures released on Friday had already revealed stagnant growth between the first and second quarters in the eurozone’s biggest economy.

Inflation data released on Friday revealed a eurozone-wide 8.9% spike in July, the highest rate since the creation of the euro in 1999. Globally too, the IMF revised its inflation estimates upwards, forecasting 6.6% in advanced economies (up 0.9%) and 9.5% in emerging economies (up 0.8%) this year.

‘Inflation at current levels represents a clear risk for current and future macroeconomic stability’ according to Pierre-Olivier Gourinchas of the IMF, who stated that ‘bringing it back to central bank targets should be the top priority for policymakers.’

UK’s electric vehicle plans

UK car production figures released last week, however, provided a much-needed bright spot, increasing by 5.6% year-on-year in June. Optimism in the industry was further bolstered by news that Britishvolt will receive government funding to build a ‘gigafactory’ in Cambois, near Blyth, which will allow for the mass production of electric car batteries and create 3,000 jobs.

Announcing the development, Business Secretary Kwasi Kwarteng said, “The Blyth gigafactory will turbocharge our plans to embed a globally competitive electric vehicle supply chain in the UK and it is fantastic to see how the project is progressing.”

Energy help

Last Friday welcome news came for many as the government announced that households in England, Scotland and Wales will receive £400 fuel bill support payments in six monthly instalments starting in October. Households will see a discount of £66 applied to their energy bills in October and November, and £67 a month from December to March 2023.

Apple and Amazon sales up 

Better than expected sales have been posted by both Apple and Amazon, reassuring investors that the tech giants will be able to weather slowdowns in global economies. The quarterly updates from Apple and Amazon are closely watched as indicators of how customers are reacting to the economic climate. The updates sent the companies’ shares soaring.

House prices still climbing

According to Nationwide, house prices climbed 11% in the last 12 months, although the rise over the last month was just 0.1%. “The housing market has retained a surprising degree of momentum” said Robert Gardner, Nationwide’s Chief Economist, adding that there were “tentative signs of a slowdown in activity”.

The July figure was marginally ahead of June’s annual rise of 10.7% and left the average house price at £271,209. The Bank of England is expected to increase interest rates on Thursday.

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 (3 August 2022)

Trust Registration Service update

The Trust Registration Service (TRS) opened in 2017 with the aim of digitalising the trust registration process. Following the UK’s adoption of the EU’s Fifth Anti-Money Laundering Directive (5MLD) in 2020, changes to the TRS were required in order for HMRC to fulfil its obligations under the new regulations.

The new rules require all UK express trusts and some non-UK trusts (including most non-taxable trusts) to register with HMRC. The TRS began accepting registrations from non-taxable trusts in September 2021, with an initial deadline of 10 March 2022. Due to delays in getting the TRS prepared, this deadline was later amended to 1 September 2022.

Rules relating to non-taxable trusts

The September 2022 deadline applies to all trusts that existed on or after 6 October 2020 – even if they are now closed. Following this deadline, all new trusts (and any changes to the details of existing trusts) must be registered within 90 days. In order to not penalise trusts set up close to the September 2022 deadline, however, the 90-day rule will also apply to trusts set up on or after 2 June 2022.

Which non-taxable trusts are exempt?

There are some trusts that are exempt from registration unless they pay UK tax. Some examples include trusts used to hold money or assets of a UK-registered pension scheme, trusts holding life insurance and other policies that pay out upon a person’s death, charitable trusts and will trusts.

We understand that the rules relating to trusts are complex, so please don’t hesitate to contact us if you are unsure.

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.

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.