Avoiding the unretirement ‘tax trap’

Research1 suggests a significant minority of over-55s either have or are planning to unretire. Worryingly, though, a majority in this group have not checked the tax implications associated with such a decision, leaving many potentially at risk of falling foul of the unretirement ‘tax trap.’ 

The great unretirement continues 

According to the research, more than a quarter of people aged 55 and over plan to continue with some form of paid work after retiring, with respondents citing a variety of reasons for doing so. For some, a desire to generate additional income to pay for luxuries was a key driving force, while others felt it would keep their brains active or give them a better sense of purpose. 

Unknown tax implications 

However, the survey also revealed that almost two thirds of those that have or are planning to unretire had not checked the potential tax implications of doing so; additionally, six out of ten over 55s who are either working or plan to work in retirement had no plans to seek financial advice. 

Minimising the tax burden 

Clearly, anyone undertaking paid work in retirement needs to fully understand the tax implications, which include a possible increase in tax liability if extra earnings take someone’s income above the personal tax threshold or pushes them into a higher tax bracket. They also need to consider how any potential liabilities could be mitigated, for example by maximising the use of tax reliefs and allowances. 

On an even keel 

If you are currently working in retirement or plan to do so, we can provide you with personalised advice tailored to your unique set of circumstances that will help structure your finances in the most tax-efficient manner and ensure you avoid falling into the unretirement ‘tax trap.’ 

1Wesleyan, 2024 

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.

News in Review

“We know that families across Britain are still struggling with the cost of living” 

UK inflation was 2.3% in October, according to figures released last week by the Office for National Statistics (ONS), the first rise in the UK’s consumer prices index (CPI) for three months. 

As well as faring worse than economists had expected, the figure was a significant increase on the 1.7% recorded a month earlier. It took inflation to a six-month high and was the largest month-on-month rise in CPI since inflation peaked in October 2022. 

Higher energy bills were the main driver behind the rise, ONS noted. Following the latest energy price cap rise last month, the average household gas and electricity bill rose by £149 a year, according to the Office of Gas and Electricity Markets (Ofgem). Ofgem warned that another price rise, scheduled for January 2025, is set to push the typical direct debit up by a further £21 a year. 

Commenting on the figures, Darren Jones, Chief Secretary to the Treasury, said, “We know that families across Britain are still struggling with the cost of living. That is why the Budget last month focused on fixing the foundation of our economy so we can deliver change. But we know there is more to do. That is why the government is focused on economic growth and investment so we can make every part of the country better off.” 

British retail sales fall in October 

Another ONS data set released last Friday added to the sense of stalling momentum in the UK economy, with retail sales falling by 0.7% in October, the sector’s sharpest downturn since June 2024. 

Analysts suggested that shoppers may have held back on some spending ahead of the Budget. Clothing stores performed especially badly, recording the biggest subsector fall of 3.1% over the month to October. ONS tempered, however, that the fall followed strong growth in preceding months. Indeed, total sales volumes were up 0.8% in the August to October period when compared with the previous three months. 

Responding to the release, Kris Hamer, Director of Insight at the British Retail Consortium, commented, “While October produced a positive start to the ‘golden quarter’, with year-on-year growth for the fourth month in a row, there was a monthly decline due to pre-Budget jitters from households. Fashion took the brunt of this hit, especially as the milder weather last month put off winter purchases.” 

Uplift in consumer confidence 

More positively, the latest GfK Consumer Confidence Index, also released on Friday, showed that British consumers have become less pessimistic since the government’s first Budget. 

The long-running survey of British consumer sentiment rose to -18 in November, its highest score since August 2024. This strong showing confounded economists, who had expected confidence to fall. Instead, all five of the survey’s components rose. Notably, in the run-up to Christmas, shoppers’ willingness to make expensive purchases rose five points to -16. 

FTBs delaying homeownership  

Nearly half of prospective first-time buyers (FTBs) have delayed taking their first step onto the property ladder, according to the latest FTB Index released last week by Aldermore. 

Some 48% of FTBs are waiting up to a year longer to own their first home, while 22% have had to push back their plans by at least two years. The data showed, however, that despite the delay, eight out of 10 buyers said that the challenges were worth it in the end. 

COP29 ends with deal – and disappointment 

Following two weeks of tense negotiations, the annual UN climate conference closed in Baku, Azerbaijan, on Sunday morning, with an overall climate financing target to reach ‘at least $1.3trn by 2035’. Dubbed the ‘climate finance COP’, rich nations pledged to contribute at least $300bn annually to the global fight against climate change, alongside efforts to raise additional funds through both public and private sources.  

Some developing countries, however, criticised the amount they will receive. The Chair of the Alliance of Small Island States, Cedric Schuster, said, “Our islands are sinking. How can you expect us to go back to the women, men, and children of our countries with a poor deal?” Similarly, UN Secretary-General António Guterres expressed disappointment, “I had hoped for a more ambitious outcome – on both finance and mitigation – to meet the great challenge we face.” 

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 November 2024) 

Residential Property Review – November 2024

Budget caused uncertainty in the market 

There was some uncertainty within the housing market ahead of the Autumn Budget at the end of October, which was reflected in muted consumer activity.  

House price growth slowed ahead of the first Labour Budget in 14 years according to Savills. Mortgage rates rose slightly at the end of October as lenders repriced their fixed rates around the Chancellor’s announcements. However, Knight Frank do still expect house prices to increase by 3% this year.  

Rachel Reeves confirmed that the lower Stamp Duty thresholds will be reinstated in April 2025, which is likely to cause a flurry of purchases in Q1 of 2025. Meanwhile, the increase in Stamp Duty on additional residential properties could reduce supply into the private rental sector.  

Overall, many experts think that the Budget will cause inflation rates to be higher than initially predicted. This would lead to elevated mortgage rates, with less likelihood of strong house price growth.  

Hope for the rental market? 

Conditions could start improving for renters, with Savills commenting that residential rental prices may have reached an ‘affordability ceiling.’ 

Figures from Zoopla show that UK annual rental growth slowed to 4.3% in September – a further decline from 4.6% in August. 

Plus, it seems that the Renters’ Rights Bill may not have prompted too many landlords to leave the market, with Knight Frank reporting that between January – August this year, there were 6% more new lettings listings in Prime London than the same period in 2023. This is a welcome relief, as limited supply is already an issue across the rental sector.  

Commenting on the Renters’ Right Bill, Gary Hall, Head of Lettings at Knight Frank, said, “The new rules are likely to cause some logistical problems for landlords, but we are not expecting an exodus. Those who were on the fence have already left and those who stayed have benefited from strong rental value growth in recent years.” 

Increase in chain-free homes for sales 

Nearly a third of homes listed on Zoopla are currently chain-free. 

From April 2025, homeowners and investors could be charged up to twice the amount of Council Tax on their second homes, which has prompted many to sell. In turn, there has been a 33% increase in buyer enquiries on chain-free properties. 

Perhaps unsurprisingly, the UK’s second home hotspots have the highest proportion of chain-free homes for sale – the North West (36.5%), Yorkshire and The Humber (35.9%) and the South West (35.9%). 

Senior Property Researcher, Izabella Lubowiecka at Zoopla, commented, “Those looking at buying a home before Stamp Duty rates increase in April 2025 should think about buying a chain-free home as they tend to complete much faster. Now is a great time to look for properties, with more chain-free homes available than in previous months.” 

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. 

All details are correct at the time of writing (20 November 2024) 

Commercial Property Market Review – November 2024

Commercial property market outlook  

Despite anticipation of the Autumn Budget, Savills reported that the commercial property market remained stable in October, with some areas of growth.  

There was no change in pricing across any commercial asset class last month, with the average prime yield remaining at 6%. Eight sectors are now experiencing a downward pressure on yields – up from six in September.  

Retail warehousing has shown signs of significant growth recently. At the start of September, the IPF consensus forecast reported that this sector had an average total return of 9.3% per annum, and was named the top-performing commercial property sector over a five-year period.  

High street and shopping centre rents are slowly increasing as vacancies show signs of stabilising. High street vacancy has stayed at 14.0% for the last four quarters according to LDC. Meanwhile, shopping centre vacancy has only slightly fluctuated since the beginning of last year and is currently 17.6%.  

A welcome increase in investor demand 

During Q3, all commercial property sectors experienced increased investment demand, according to recent data from Rightmove.  

Average demand went up by 11% year-on-year in Q3 – the highest rate since 2021. The industrial sector led the way with a 34% increase in demand, followed by offices (28%). Meanwhile, leisure (14%) and retail (7%) displayed slightly more modest growth. There was also a 3% annual increase in supply due to availability of light industrial units and warehousing.  

The cuts to Bank Rate have improved market conditions and therefore given investors a confidence boost. Head of UK & European Industrial Research at Knight Frank, Claire Williams, commented, “Consumers are starting to loosen the purse strings and spending more on discretionary goods, in turn driving demand for more delivery services. As a result, businesses are feeling more confident in pushing forward with expansion or relocation plans, thereby boosting demand for industrial and logistics facilities.” 

Regional office market update 

Colliers have released their Regional Offices Snapshot for Q3.  

In Birmingham, take-up was 348,690 sq. ft – the region’s highest quarterly total since Q4 2017.  It was a strong quarter for Manchester too, which recorded a take-up of 432,619 sq. ft – the highest in over five years.  

In Bristol, Grade A vacancy has fallen, as demand for it remains high. As a result, schemes such as EQ and Halo have secured multiple tenants despite their premium pricing. Meanwhile, prime rents in Bristol remain at the record level of £48 per sq. ft, although Colliers expect this to go up by the end of the year.  

In Leeds, 33 deals were signed in Q3 – up 43% on the previous quarter. In Q2 of this year, take-up in the Northern city fell to the lowest level seen since the start of the pandemic, however transactions bounced back in Q3 with a 40% quarterly rise.    

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. 

All details are correct at the time of writing (20 November 2024) 

News in Review

“Harnessing the power of this multi-billion-pound industry is a win-win, benefiting future pensioners, and our wider economy” 

Last Thursday, Chancellor Rachel Reeves used her first Mansion House speech to outline her new plan for pension funds, intended to shake up UK pension saving and unlock £80bn of investment. 

Ahead of the speech, the Chancellor revealed that the government is backing a ‘megafund’ model to revolutionise UK pension saving. Based partly on similar schemes in Canada and Australia, this will involve merging the UK’s existing 86 Local Government Pension Schemes and Defined Contribution Schemes. The result, according to Ms Reeves, could be about £80bn of investment in new businesses and critical infrastructure, with larger funds better placed to invest in assets that have higher growth potential.  

The UK already has one of the largest pension systems in the world but the present system spreads assets between many different funds. The new plan seeks to make the most of another finding: that funds holding more than £50bn in assets can reap the greatest rewards, for example the ability to invest directly in large scale projects at lower cost.  

Commenting before her Mansion House speech, Ms Reeves said, “Last month’s Budget fixed the foundations to restore economic stability and put our public services on a firmer footing. Now we’re going for growth. That starts with the biggest set of reforms to the pensions market in decades to unlock tens of billions of pounds of investment in business and infrastructure, boost people’s savings in retirement and drive economic growth so we can make every part of Britain better off.” 

Pensions Minister Emma Reynolds added, “Harnessing the power of this multi-billion-pound industry is a win-win, benefiting future pensioners, and our wider economy.” 

UK growth disappoints 

Data released on Friday by the Office for National Statistics (ONS) showed that the UK economy stalled between July and September, growing by just 0.1% in the three-month period. The figures were weaker than analysts had expected and represented a sharp slowdown from the 0.5% growth recorded between April and June.  

Analysts pointed to uncertainty about the Budget, as a major reason for the weak growth. The release covers the first three months of the new Labour government, which has made boosting economic growth its number one priority. 

Commenting on the figures, Rachel Reeves said, “Improving economic growth is at the heart of everything I am seeking to achieve, which is why I am not satisfied with these numbers.” 

Climate finance tops COP29 agenda 

The annual UN Climate Change Conference (COP29) got underway last week in Baku, Azerbaijan, as leaders from across the globe came together to discuss progress on climate change. 

Key focuses at this year’s event include setting a new goal for financing emissions reductions, as well as individual countries submitting updated Nationally Determined Contributions ahead of COP30. Over the first week, major differences were already apparent between countries, especially with regards to the New Collective Quantified Goal (NCQG), which will set a financial target to support climate action in developing countries. 

Last Tuesday, UK Prime Minister Keir Starmer used his first public address at COP29 to announce a new climate target for the UK. Mr Starmer pledged to reduce the UK’s emissions by 81% by 2035 against 1990 levels. He stressed that doing so was possible through investment in clean technology and transport. 

New research shows the extent of the gender pay gap 

Women approaching retirement will receive annual incomes a third less than their male counterparts, according to a report by pension firm Scottish Widows released last week. On average, a woman will retire with an income of £12,000 a year after paying Income Tax and housing costs, compared with £17,000 on average for men. Although the gender pensions gap has fallen in recent years for those aged between 50 and 64, much remains to be done. If the gap continues to close at its current rate, it will take another 20 years for women and men to retire on the same annual income. 

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 November 2024) 

Equity release update

Data suggests that confidence is growing among new and existing equity release customers. 

Equity release customers rose by 12% in Q2 of this year, with total lending increasing by 15% to £578m1. There was also a quarterly and annual increase in the average loan size, which indicates that customer confidence is being restored. 

More taking control of their loans  

Data indicates that lifetime mortgage holders are proactively managing their equity release loans, with over 360,000 equity release customers making voluntary penalty-free partial repayments in 2022 and 2023. This will save them almost £300m in borrowing costs over the next 20 years. 

Larger repayments 

The total value of voluntary repayments increased by 18% between 2022 and 2023 from £102m to £120m. Plus, the average repayment size grew by 30% – going up from £538 to £697, indicating that customers are making an effort to reduce their loan sizes and cut borrowing costs. 

Market turning a corner? 

Chair of the Equity Release Council, David Burrowes, commented, “The pick-up in activity between the first and second quarters is a welcome reversal of the downward trend seen one year ago. There is a long way to go to unlock the market’s full potential, but there are reassuring signs in these figures that we are turning the corner and acclimatising to this unfamiliar interest-rate environment after years of rock-bottom rates.” 

Talk to us 

Equity release is not right for everyone – it is essential that you seek professional advice before taking out a lifetime mortgage. We can talk you through the advantages and potential drawbacks. 

1ERC, 2024 

Think carefully before securing other debts against your home. Equity released from your home will be secured against it.

In the news

Equity fund inflows on the up 

Statistics1 show that, during the first half of 2024, net inflows to equity funds were over £11.3bn, the best six-month recording for equity funds according to global fund network Calastone’s ten-year record. Of the most positive inflows, North America and global funds recorded £7.8bn and £7.2bn respectively, with emerging market and European funds also recording inflows, offset by outflows for income funds and UK-focused funds. Head of Global Markets at Calastone, Edward Glyn, commented, “Hopes for cheaper money after the painful rate squeeze of the last two-and-a-half years are the clear driver of record flows into equity funds so far this year.” 

Dividends – most sectors deliver growth 

During Q2, UK dividends reached new highs, primarily supported by one-off special dividends and banking sector payouts2. Totalling £36.7bn in the quarter, dividends increased by 11.2% on a headline basis. With 16 out of 21 sectors experiencing higher payouts, growth was ‘broad based,’ and the median dividend increase was 5.4% year-on-year. 

Numbers paying Dividend Tax doubles 

The number of people paying Dividend Tax is expected to double from 1.8 million in 2021/22 to nearly 3.6 million in the current 2024/25 tax year, boosting Treasury coffers by an estimated £18bn3. The data indicates one fifth of all higher rate taxpayers will pay the tax, the average bill being £5,379, increasing to £32,578 for additional rate taxpayers. 

1Calastone, 2024 

2Computershare Dividend Monitor, 2024 

3FOI AJ Bell, 2024 

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. 

News in Review

“This is a magnificent victory for the American people”

Last week, after intense months of campaigning, Donald Trump made a triumphant comeback to be voted 47th President of the United States. The Republicans secured a decisive victory, winning crucial swing states, also regaining control of the US Senate.

Trump’s victory was surprisingly conclusive after opinion polls in the run-up to election day had shown the race for the White House was neck-and-neck. He comfortably secured more than the 270 Electoral College votes needed to win the presidency, with his victory in the swing state of Wisconsin pushing him over the threshold on Wednesday morning. The final result, with all states declared showed Trump had won 312 electoral votes to Harris’ 226.

During his victory speech at the Palm Beach County Convention Center, in the early hours of Wednesday morning Trump said, “I want to thank the American people… I will fight for you, for your family, and your future… I will not rest until we have delivered the strong, safe, and prosperous America that our children deserve, and that you deserve… This is a magnificent victory for the American people that will allow us to make America great again.”

Democrat candidate and current Vice President Kamala Harris delivered a concession speech, telling her downbeat supporters that she would ensure a peaceful transfer of power, promising to aid Trump’s transition before his inauguration on 20 January 2025. Harris added, “I know many people feel like we are entering a dark time… I hope that is not the case.”

Trump now has a couple of months to appoint his key personnel. Elon Musk, a prominent Trump donor, is likely to form part of his administration, so too is former presidential candidate Robert F. Kennedy Jr, in addition to close family members.

Global leaders extended their congratulations to Donald Trump on his victory. Keir Starmer spoke with the President-elect to offer his “hearty congratulations.” During the call they agreed the relationship between the UK and the US is “incredibly strong” and will “continue to thrive,” according to a Downing Street spokesperson.

With trade and tariff concerns front and centre, in a congratulatory message to Trump, Chinese leader Xi Jinping called for the US and China to manage their differences and get along in a new era. European Commission President Ursula von der Leyen stressed that the EU and the US “are bound by a true partnership between our people, uniting 800 million citizens. Let us work together on a transatlantic partnership that continues to deliver for our citizens.”

Major global stock markets were robust following the news, with a record rise for US shares on Wall Street, the FTSE 100 also saw gains. As investors processed the impact of a second Trump term, commentators started to analyse the potential implications. Key focuses for his administration will include trade and climate change policies, the war in Ukraine, the Middle East conflict, tax and immigration, on which Trump has pledged to launch a mass deportation campaign targeting immigrants residing in the country illegally.

Concerns are likely to heighten that his potential tariff proposals could ignite a fiercer trade war with China and US allies, while his plans to reduce corporate taxes and implement a variety of other tax cuts could balloon US debt, according to economists. Last Thursday, the Federal Reserve cut interest rates by 25 basis points, following a 50-basis-point cut in September.

UK Bank Rate reduction

In their latest meeting, the Monetary Policy Committee (MPC) voted by an 8 to 1 majority to cut Bank Rate by 0.25 percentage points to 4.75%, in a widely expected move. The one dissenting voice wished to retain the 5% rate. Andrew Bailey, Bank of England Governor, said rates were likely to “continue to fall gradually,” adding they could not be cut “too quickly or by too much.” The MPC expect CPI inflation, currently 1.7%, to increase by year end to around 2.5% and 2.7% by the end of 2025 before falling below its 2% target in mid-2027.

The next MPC meeting is scheduled for 19 December.

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 (13 November 2024)

Which pension personality are you?

A recent study1 has identified several distinct pension personality types, each with its own strengths and challenges. Which one resonates with you? 

Procrastination Pete and Paula are the most common type, often overwhelmed by the complexities of pensions. This group is likely to make poor decisions, such as hastily withdrawing a 25% tax-free lump sum without a clear plan – potentially costing them thousands in future income. 

Buy-to-Let Brian and Barbara prefer the perceived security of property, though they often underestimate the costs and risks involved. Meanwhile, Spend-It Simon and Sally focus on enjoying life now, potentially jeopardising their long-term financial security by dipping into their pensions early. 

Winding-Down William and Wendy are easing into retirement, supplementing reduced work hours with pension withdrawals, while Help-Me Harry and Helen are determined to get it right by seeking financial advice. 

Whatever pension personality you relate to, everyone prepares for retirement differently, with attitudes ranging from denial to detailed planning. The great news is that we’re the strategic planning type, ever responsive and flexible to your changing circumstances and market conditions. So, however you’re approaching retirement, you know that you can count on us. 

1People’s Partnership, 2024 

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. 

HNWIs on the rise – and their needs are changing

A new report1 suggests the wealth of ‘high-net-worth-individuals’ (HNWIs) – grew by 4.7% in 2023, with the HNWI population increasing by 5.1% to 22.8 million globally. 

What’s behind the increase? 

Global economic uncertainty, higher interest rates and rising political tensions led to significant declines in HNWI wealth (3.6%) and population (3.3%) in 2022. However, the economic picture improved in 2023, as global equity markets recovered and investors focused on the prospect of interest rate cuts. 

CapGemini confirmed, ‘Despite ongoing interest rate uncertainty and rising bond yields, equities surged along with the tech market, fuelled by enthusiasm for generative artificial intelligence (Al) and its potential impact on the economy.’ North America led the recovery, with significant HNWI wealth and population increases. Asia-Pacific also saw growth, while Europe experienced more modest gains. 

What are their priorities? 

As the HNWI population becomes younger, investment priorities have also shifted from defensive investing towards generating longer-term wealth. Value-added services, such as tax planning and intergenerational transfer are increasingly sought after. 

What influences their decisions?  

Over 64% of HNWIs polled said emotional or cogitative biases influenced their decision making. This includes seeking information from sources that aligned with their views, seizing opportunities without due consideration, holding onto underperforming investments for too long, and playing safe, missing out on potential opportunities. 

These biases are particularly impactful during personal life events such as marriage, divorce or retirement, as well as times of broader economic turbulence, such as volatile market conditions and geopolitical uncertainty. 

The findings confirm HNWIs need access to good quality, highly personalised financial advice now more than ever. Not only can we help to create bespoke strategies to suit individual and family needs, we can also overcome biases in favour of longer-term financial plans. 

1CapGemini, 2024 

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.