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A survey suggests that some retirees could risk running out of money during their lifetime because they haven’t considered how long their assets need to last. Failing to factor longevity into your retirement plan could mean your later years don’t live up to expectations or you may face financial insecurity.

The report published in IFA Magazine found a worrying 68% of Brits have not thought about how many years of retirement they need to fund.

It’s an oversight that could mean you don’t put enough away for retirement during your working life and may not spot the potential gap until it’s too late. Or that you unintentionally withdraw too much from your pension during the start of your retirement.

The average person could spend two decades in retirement

The survey found that most people expect to retire between the ages of 65 and 69. Data from the Office for National Statistics (ONS) suggests the average person could spend at least two decades in retirement.

A 65-year-old man has an average life expectancy of 85. For women of the same age, it’s 87. As life expectancy has increased, younger generations are likely to spend even longer in retirement if they plan to stop working in their late 60s.

However, creating a retirement plan based on the average life expectancy could still leave you facing a significant shortfall.

A quarter of 65-year-old men are expected to celebrate their 92nd birthday, and 1 in 10 will reach 96. If they only planned for a 20-year retirement, they could find they don’t have enough money to maintain their lifestyle in their later years.

Similarly, a quarter of 65-year-old women are expected to live to 94, and 1 in 10 could reach 98.

Retirees today often need to consider how they’d cope financially if they live to become centenarians to create long-term financial security and peace of mind. With retirements that span decades becoming the norm, it’s more important than ever that those nearing the milestone consider longevity.

A retirement plan could help you create a sustainable income

Understanding what income you can take sustainably from your pension or other assets in retirement can be difficult. After all, you don’t know exactly how long you need to create an income for.

Another key challenge is that your income needs might not stay the same throughout retirement.

Indeed, inflation alone is likely to affect your outgoings even if your lifestyle remains the same. Even when inflation is stable, the rising cost of living may compound. The Bank of England’s inflation calculator shows how your income would need to grow to maintain your lifestyle.

Between 2003 and 2023, inflation averaged 2.8% a year. That might seem relatively small, but it can have a huge effect on your essential and discretionary spending. If you retired in 2003 with an income of £30,000, to simply maintain your spending power, it would need to have grown to more than £52,000 a year in 2023.

 There are other reasons why you might want to adjust your income in retirement too, such as:

• Changing your lifestyle
• Paying for care
• Financially supporting loved ones.

Working with a financial planner to create a retirement plan that’s tailored to you is a step that could ensure you’re financially secure throughout retirement and offer peace of mind.

We’ll be able to work with you to explore the different options and assess which ones are appropriate for you. For instance, if you’re worried about running out of money and would prefer a reliable income, we may offer advice about annuities, which could provide a guaranteed income for the rest of your life. Or if you want to take a flexible income that you can adjust to suit your needs, we can work with you to understand how you might manage risks.

A retirement plan may also address concerns you might have, such as how your partner would cope financially if you passed away or what would happen if your investment portfolio experienced volatility. 

Contact us to discuss how you could create financial security in retirement

The thought of running out of money in your later years could make planning your retirement seem like a daunting prospect. Luckily, we’re here to offer you guidance as you near the milestone and then settle into your new life.

As part of your retirement plan, we’ll help you consider how to create long-term financial security using your pension and other assets, as well as other areas, from how you could improve your tax efficiency to setting out your wishes in a will.

Please contact us to arrange a meeting.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts. 

When you give up work, your pension is likely to play a key role in creating an income. So, an essential part of retirement planning is often deciding how you’ll access your retirement savings.

Last month, you read about the importance of setting out your retirement lifestyle goals and how financial planning could help. Your income will play a key role in whether you can turn many of them into a reality. So, read on to discover what your options are when you want to withdraw money from your pension.

If you have a defined contribution (DC) pension, you’ll retire with a pot of money that you can access in several ways.

While the freedom to decide how and when to withdraw money from your pension could help you create an income that suits your needs, it also means you need to understand your options. You’ll be responsible for ensuring your pension creates financial security for the rest of your life.

Your pension options explained

1. Taking a lump sum

You can withdraw lump sums from your pension as and when you choose to. 

This could be a good option if you have one-off expenses. For instance, if you’re taking on a home renovation project or want to lend financial support to a loved one.

However, you should keep in mind that pension withdrawals may be liable for Income Tax. While you can take up to 25% of your pension as a tax-free lump sum, withdrawals above this amount may be added to your income. As a result, taking a large lump sum could unexpectedly push you into a higher tax band.

2. Using flexi-access drawdown

Flexi-access drawdown allows you to take a regular income from your pension that you’re in control of. You could increase or decrease the income to suit your needs.

To ensure you don’t run out of money in your later years, you might want to consider factors like life expectancy or how inflation could affect your income needs over the long term. If you take too much from your pension, there’s a risk you could run out in the future. So, thinking about how you could create long-term financial security may be important.

3. Purchasing an annuity

You could also use the money held in your pension to purchase an annuity, which would then provide you with a regular income. Retirees often choose an annuity that will pay an income for the rest of their life, but you could also select an annuity that lasts for a defined number of years.

An annuity can be valuable if you’re worried about running out of money or don’t want the responsibility of managing your pension. However, it’s less flexible than other options.

Mixing your 3 pension options

You don’t have to choose a single way to access your pension – you can mix the options.

So, you could take a lump sum from your pension to kickstart your retirement plans. Then you might use a portion of the remaining amount to purchase an annuity to create a reliable income you’ll receive for the rest of your life. The rest of the money you could access flexibly using flexi-access drawdown.  

Leaving your money in a pension could make financial sense

In most cases, you can access your pension when you’re 55, rising to 57 in 2028. However, you don’t have to make withdrawals at any point during your retirement if you don’t want to.

In fact, leaving money that you don’t need in your pension could make financial sense.

A pension is a tax-efficient way to invest. So, leaving your money in your pension to be invested in a way that’s appropriate for you could help it grow further.

Money that’s held in your pension could also be passed on to your loved ones when you die. Usually, pension savings aren’t considered part of your estate for Inheritance Tax (IHT) purposes. Instead, beneficiaries may pay Income Tax on the money, which could be a lower rate depending on their other sources of income. So, holding money in your pension may form part of your long-term estate plan.

You should note that pensions aren’t usually covered by your will. You will need to complete an expression of wishes with your pension provider to state who you’d like to receive your pension if you pass away.

Contact us to talk about your retirement plan

If you have any questions about how to access your pension or other aspects of your retirement plan, please get in touch. As financial planners, we could work with you to create a plan that’s tailored to your goals and assets.

Next month, read our blog to discover how financial planning could help you bring together the different strands of retirement planning so you can enjoy the next chapter of your life.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts. 

While a new year started, many of the key factors affecting economies and markets in January were the same as those in 2023, namely high levels of inflation and recession fears.

The World Bank warned the global economy is set to slow for a third successive year in 2024 and is on course for the weakest half-decade of growth since the early 1990s. It added there was a risk that the 2020s would be a “wasted” decade following a series of setbacks, including the pandemic.

Tensions in the Red Sea are also affecting businesses and economies around the world. The German Economic Institute said global trade fell by 1.3% in December as a result of attacks on merchant ships. The volume of container transport in the Red Sea fell by more than half at the end of 2023 and could have implications for many businesses relying on goods.

Read on to find out what else affected markets at the start of 2024.

UK

There was positive news when the Office for National Statistics (ONS) released the latest GDP figures at the start of the year. November posted growth of 0.3%, after a contraction in October. However, experts warned the UK was still at risk of a technical recession – defined as two consecutive quarters of negative growth.

Yet, EY Item Club said it expects UK economic growth to rebound in late 2024 as both inflation and interest rates are predicted to fall.

Data indicates that inflation in the UK is stabilising, but it’s still above the Bank of England’s (BoE) 2% target. In the 12 months to December, inflation was 4%, a slight increase on the 3.9% recorded in the previous month.

Higher interest rates to tackle inflation have been placing pressure on both households and businesses, but they’ve also presented an opportunity for investors with government bonds becoming more attractive. The sale of £2.25 billion of 20-year bonds attracted bids for 3.62 times the volume on offer.

Chancellor Jeremy Hunt is preparing to deliver the Budget on 6 March 2024. According to reports, government borrowing halved year-on-year in December, which has reportedly given Hunt the scope to make around £20 billion worth of tax cuts if he chooses. With a general election looming, it could be an opportunity to ease the tax burden.

Businesses as well as households may look to the budget to ease some of the pressure they’re facing.

Insolvency experts at Begbies Traynor warned that more than 47,000 UK businesses are on the “brink of collapse” as the number of firms in “critical” financial distress increased by 25% in the final three months of 2023 when compared to the previous quarter.

Some other businesses plan to make cuts in the coming months too. One such firm is Tata Steel, which announced plans to cut up to 2,800 jobs by the end of the year. The news was met with strong words from union Unite, which pledged to use “everything in its armoury” to defend steel workers.

Some businesses are posting positive news though. Retailer Next saw a 10% jump in sales in the two weeks before Christmas, which led to its shares hitting an all-time high of more than £85.30 at the start of January.

Europe

As the European Central Bank (ECB) predicted, inflation across the eurozone increased in January. In the 12 months to December 2023, the rate of inflation was 2.9%, official statistics show. The ECB said it expects inflation to remain between 2.5% and 3% throughout 2024.

ECB vice president Luis de Guindos went on to warn that the eurozone may have already fallen into a technical recession and prospects remain weak.

Data from Germany’s national statistics office, Destatis, paints a pessimistic outlook. The country is on track for its first two-year recession since the early 2000s as the economy shrank by 0.3% in 2023. The decline was linked to higher energy costs and weaker industrial demand.

Low demand looks set to plague the eurozone’s largest economy into 2024 too. In November, industrial output was weaker than expected and fell by 0.7% month-on-month.

While many economies have battled double-digit inflation over the last couple of years, in many cases, they’ve now started to fall. One outlier is Turkey, which saw an inflation rate of almost 65% in the year to December 2023.

The huge rise is partly attributed to an almost 50% increase in the nation’s minimum wage. Demand from tourists is also having an effect. For example, hotel prices jumped 93% year-on-year.

US

US inflation also increased in the 12 months to December 2023 to 3.4%, compared to 3.1% recorded a month earlier. The rise was linked to higher housing and energy costs.

Similar to economies in Europe, some sectors in the US are struggling due to weak demand. The Institute for Supply Management found that US factories contracted in December for the 14th consecutive month. Yet, job data indicates that businesses are feeling optimistic, as they added 216,000 new jobs at the end of 2023.

On 22 January, the US stock market reached a record high. The S&P 500 index, which tracks the 500 largest companies listed on stock exchanges in the US, increased by 0.5% as technology stocks rallied.

US company Microsoft also started the year strong when it overtook Apple to become the world’s  most valuable company on 11 January. The firm’s share price increased by 1.5% to boost its market valuation to $2,888 trillion (£2,272 trillion).

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested.

Past performance is not a reliable indicator of future performance.

Naming a Lasting Power of Attorney (LPA) is often associated with the elderly. But it could provide vital protection and peace of mind at every life stage.

An LPA gives someone you trust the ability to make decisions on your behalf if you’re unable to do so. When you think about the scenarios that might happen, it may be something you think you don’t need until your later years. However, ill health and accidents can occur at any stage of your life.

Without an LPA in place, it can be difficult for loved ones to act on your behalf. So, whether you’re in your 20s or 80s, naming an attorney could be a valuable way to create protection should something happen.

Your next of kin cannot automatically make decisions on your behalf

It’s a common misconception that your next of kin would be able to make decisions for you if you cannot. However, no one has the automatic right to do so, including your spouse or civil partner.

Without an LPA there may be no one to make health decisions if you’re ill or manage your financial affairs if you cannot.

Overlooking an LPA could also lead to complications if you have joint assets. For example, joint bank accounts could be frozen until your partner gains control through the courts.

If you haven’t completed an LPA, your loved ones would have to apply to the Court of Protection for a Deputyship Order. This process can be time-consuming and more costly than naming an attorney. In addition, the Court of Protection might name someone to act on your behalf that you would not choose.

A Lasting Power of Attorney can be used to cover health and financial affairs

There are two different types of LPA. Ideally, you should have both types in place – you can choose the same person or people to act on your behalf in both cases.

A health and welfare LPA will give someone you trust the ability to make decisions related to your daily routine, medical treatment, or moving into a care home. A property and financial affairs LPA will cover areas like managing your bank account or other assets, and selling your home.

An LPA is often associated with long-term illness in old age. However, they could be used to give someone the ability to make decisions for you temporarily. For example, if you were involved in an accident, your attorney might handle your affairs while you receive treatment until you’ve recovered enough to take back responsibility.

You can name more than one attorney and specify whether they must make decisions together or if they can do so separately.

Deciding who to name as your attorney may be an important decision – who do you trust to act in your best interests, and would they be willing to take on the role of attorney?

Having a conversation with your loved ones about what being an attorney would involve and your wishes could be valuable. It may give you peace of mind and provide some guidance to your attorney should you ever lose mental capacity.

If family or friends cannot fulfil the role of attorney, you could choose a professional attorney, such as a solicitor.

You cannot register an LPA if you’ve already lost mental capacity. So, if it’s a task you’ve been putting off, you may want to make it a priority.

You must register a Lasting Power of Attorney with the Office of Public Guardian

You can download the necessary forms, along with an information pack, from the Office of Public Guardian, or use the online service to start the process of naming an LPA.

Read the forms carefully. A mistake could mean your LPA is rejected and you’ll need to pay a fee to reapply.

You’ll need to sign the forms, along with your attorney, and a “certificate provider” (this is someone who confirms you understand what you’re signing and haven’t been placed under pressure to do so). Your certificate provider must be someone you’ve known well for at least two years or a professional person, like a solicitor or doctor. Some people cannot be your certificate provider, including your partner or family members.

Once you’ve completed the forms, you must register the LPA with the Office of Public Guardian, and the process can take several weeks.

Most people will need to pay a fee of £82 for registering one LPA. So, if you need to register both a financial and health LPA, the cost will be £164.

While you don’t need to engage the services of a solicitor to register an LPA, it could prevent delays and issues, particularly if your affairs are complex.

Setting up a Lasting Power of Attorney is just one way to improve your security

An LPA could protect you if you ever become too ill or injured to make decisions for yourself, but it’s just one step you can take to create security in case the unexpected happens. Depending on your life and concerns, you might want to consider taking out income protection, creating a care fund, or building a financial safety net.

A tailored financial plan could help you assess which steps could provide you with peace of mind. Please contact us to arrange a meeting.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

As younger generations face challenges reaching milestones as the cost of living soars, you might be thinking about gifting assets to improve their finances. If your beneficiary is in a relationship, you may want to consider what would happen if they split up with their partner.

A well-timed gift could have a hugely positive effect on the long-term financial security of your loved ones.

In recent years, more people are considering gifts rather than leaving all their assets as an inheritance. There are many reasons for doing so, from reducing a potential Inheritance Tax bill to helping your child get on the property ladder.

Indeed, the Great British Retirement Survey 2023 found that a tenth of Brits aged 40 and over said they’d given what they consider to be a living inheritance in the last three years. A further 16% expect to gift money during the next three years.

Whatever your reason for passing on wealth, you likely want to ensure the assets remain within your family if a relationship breaks down. There may be steps you could take to protect the gift if there is a dispute.

Loans and gifts are treated differently in family courts

First, it’s important to understand how your gift could be treated if your beneficiary divorced. The family courts define gifts and loans differently, which could affect how assets are distributed.

Gifts, where there is no expectation that you will be repaid, are usually treated as joint assets and could be divided between both parties. As a result, it could mean the gift, or a portion of it, goes to your beneficiary’s ex-partner.

A loan may be treated differently as there is an expectation that it’ll be repaid in the future. However, that doesn’t mean it’ll stay within your family. The court is likely to consider needs. For example, if you loaned your child a deposit to buy a home and they have children that will remain with their ex-partner, the court may still award the property as housing for dependent children will often take priority.

If you’ll be giving a loan to your child, it’s often a good idea to use a solicitor to make the agreement formal, rather than relying on a verbal agreement. This could protect you and be useful in the event of a relationship breakdown.

It’s not only gifts to married family members that could be affected by a relationship breakdown either. A gift to an unmarried child to act as a property deposit if they’ll be buying with a partner could also be complicated if they break up.

4 potential options to consider if you’re passing on assets to your family

1. Ask your beneficiary to consider a pre- and post-nuptial agreement

If your beneficiary is married, or planning to get married, a pre- or post-nuptial agreement could be useful. These agreements aim to make it clear what happens to assets if the couple separates.

It’s important to note that pre- or post-nuptial agreements are not automatically enforceable in the UK. However, courts should consider the arrangements, so it can be an influential document.

2. Use a declaration of trust if the gift is being used to purchase a property

When one partner is contributing more when buying a property, a declaration of trust could provide security.

The declaration of trust will make it clear how much each party is to receive if the relationship fails. For example, if you gifted your child a deposit to purchase their home, they could use the declaration of trust to ensure they’d receive a larger portion of the sale proceeds if the house is sold to reflect this.

It’s also possible to use a deed of trust to name yourself as a “tenant in common” and entitled to a share of the property.

3. Attach conditions to the gift

As mentioned above, gifts and loans are treated differently in the courts. So, attaching conditions to a gift may be useful. For instance, you may say the money is a gift but in the event of separation, it will be repaid by one or both parties.

This should be recorded in writing and it may be useful to engage the services of a solicitor.

4. Use a trust to pass on assets

Trusts may be used as a way to protect assets and ensure they stay in the family. Assets held in a trust are managed by a trustee on behalf of the beneficiary rather than simply handing over assets. In some cases, a trust could ensure assets remain with your family.

However, it’s a common misconception that a trust cannot be taken into account when assessing how to divide assets. The court might consider when the trust was set up and its purpose when assessing the couple’s assets.

You might benefit from taking both financial and legal advice if you think a trust could be the right option for you. Doing so could help you to understand the complexities and how they relate to your situation.

It may be impossible to take assets out of a trust once they’ve been transferred. So, it’s important to make sure this is the right decision for you.

Get in touch to talk about passing on assets to your loved ones

If you’re considering passing on assets to loved ones during your lifetime, we can help.

Not only could we assess your options to ensure assets stay within your family, but we could also help calculate the short- and long-term impact passing on wealth now could have on your finances to provide peace of mind.

Please get in touch to arrange a meeting.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate trusts or estate planning.

Managing your finances effectively as a couple could provide you with peace of mind and mean you’re more likely to reach your goals. Yet, it can be difficult as you could have very different financial priorities to your partner. Read on to discover five handy tips that could help you build a financial plan that suits both of you.

1. Set shared goals you can work towards

Having shared goals you’re working towards as a couple can help ensure you’re both on the same page and understand why you’re making certain financial decisions.

For example, if you both want to retire early, you might decide to increase pension contributions. Without a reason, potentially reducing your disposable income now could be difficult to stick to.

However, with a long-term view of how cutting back now could mean you have more freedom in the future, you may find you’re in a better position to be successful.

2. Understand your partner’s attitude to money

One of the biggest challenges of managing finances with a partner is that you could have very different views about money.

Perhaps you’re a saver who feels more comfortable when you add to your emergency fund, while your partner is more likely to splurge on a treat. Or, when it comes to investing, one of you is more risk averse than the other.

Understanding your partner’s approach to managing assets and their long-term financial outlook could help you strike a balance that means you both feel confident about your finances.

3. Make your financial plan part of your conversations

Finances play a crucial role in day-to-day life and your long-term security, from managing household bills to preparing for retirement. Yet, it’s a topic many couples avoid talking about and, for some, when they do, it can cause conflict.

According to a survey from Aviva, a quarter of couples argue about money at least once a week, and 5% said they bickered about finances every day.

Making money part of your conversations could improve communication as you have more opportunities to address small disagreements before they possibly become larger issues.

4. Be clear about how you’ll manage assets together and individually  

You don’t need to inform your partner of every purchase you make or share all your assets to create an effective financial plan as a couple. However, understanding and talking about how you’ll share assets and financial responsibility is often important.

Worryingly, a survey from Starling Bank found that almost a quarter of married couples and 30% of people in a committed relationship said they keep financial secrets from their partner.

Some secrets may be harmless, such as having a nest egg in case of emergency, but others could potentially negatively affect your financial security. For example, a fifth of those with a financial secret said they are hiding debt from their partner, and 16% are concealing loss of money, such as through gambling or poor investments.

Being open about money and setting out how you’ll manage assets together or individually could ensure you’re both on the same page and avoid potential conflicts related to financial secrets.

What’s important is that you find a way to manage assets in a way that suits you and your partner.

5. Arrange a meeting with a financial planner

Working with a financial planner could benefit you and your partner in many ways, from identifying potential tax breaks to setting out a plan to save for retirement. Yet, one perk you might overlook is how it could help you better manage your finances together.

Ongoing financial reviews as a couple mean that time is regularly set aside to talk about money, your goals, and financial concerns. It may mean you’re more likely to stick to your plan and provide an opportunity to update it if your circumstances change.

A financial planner may also act as a useful third party who might help you unify different objectives. By working together with a financial planner, you may create a plan that gives both of you confidence about your financial future. 

If you’d like to create a financial plan with your partner, please get in touch to discuss how we could help you and arrange a meeting.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts. 

This year the FTSE 100 index turns 40. Over the last four decades, it’s become a way to measure the health of the UK stock market. During that time there have been highs that investors no doubt celebrated, and lows that serve as a reminder that there’s some truth in the saying: it’s time in the market, not timing the market.

In 1984, Margaret Thatcher was serving as prime minister and, similar to today, interest rates were increasing in a bid to reduce inflation – the base interest rate exceeded 12.8% in July 1984. The country was also grappling with miners’ strikes and high levels of unemployment. Yet, it was also a time of technological advancement and scientific discoveries.

Against this backdrop, the FTSE 100 index launched.

The FTSE 100 is made up of the biggest 100 companies that are listed on the London Stock Exchange. The market capitalisation of each company is reviewed every quarter, and the index is adjusted accordingly. 

More than 20 companies that were listed when the FTSE 100 launched are still on it today, including NatWest, Unilever, and Shell.

While you might think 100 companies were selected for being a round number, it was chosen because it was the maximum number of stock symbols that could be displayed on a single page of the electronic information terminals at the time. The technology’s improved, but the 100 figure has stuck.

As an investor, you might hold individual stocks in some of the companies included in the FTSE 100. You might also be invested in FTSE 100 firms through a fund, which would pool your money with that of other investors to invest in a range of companies.

The FTSE 100 has experienced volatility in the last 40 years

One of the first substantial falls the FTSE 100 recorded was in 1987 during the “Black Monday crash”.

The global stock market crash was unexpected and severe. Some analysts have suggested it was due to significantly overvalued stocks, rising interest rates, or persistent trade and budget deficits in the US.

On 19 October 1987, the FTSE 100 fell by 10.8% and then a further 12.2% the following day. While it took several years, the index recovered and was reaching new highs in the 1990s.

More recently, the FTSE 100 experienced a fall following the 2008 financial crisis, the Brexit referendum, and the Covid-19 pandemic. There have been many smaller dips and corrections too. 

Yet, historically, the FTSE 100 has recovered from downturns.

The FTSE 100 hit 8,000 points in February 2023

On the first day, the FTSE 100 launched at 1,000 points. Over four decades, the overall trend has been an upward one, despite periods of volatility.

Indeed, on 16 February 2023, the index hit an all-time high when it exceeded 8,000 points even though the UK economy was expected to fall into a recession at the time. According to the Guardian, the boost was partly attributed to energy firms making significant gains in light of the war in Ukraine.

Over 40 years, the annualised rate of returns from the FTSE 100 is just above 8%. That’s far above the average rate of inflation of around 3% over the same period.

So, if investors had been spooked during the 1987 crash and withdrew their money from the stock market, they could have missed out on future gains. The ups and downs of the FTSE 100 highlight why a long-term view is often important when you’re investing.

Short-term volatility is part of investing and is impossible to consistently predict. So, rather than trying to time the market, holding assets over a long time frame makes sense for many investors.

Get in touch to talk about your investments

The FTSE 100 has become a useful tool for investors over the last 40 years and it’s often used to provide a snapshot of the investing market. However, there are other opportunities to weigh up too.

We could help you build an investment portfolio that suits you and aligns with your risk profile. Please get in touch to arrange a meeting.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

If you haven’t used your ISA allowance for the 2023/24 tax year, it could be wise to review your options over the next few weeks before the 2024/25 tax year starts. Read on to discover some of the reasons why an ISA could make sense for you.

Government statistics show that ISAs are a popular way to save and invest. Indeed, the latest data shows 11.8 million adult ISAs benefited from a deposit during the 2021/22 tax year. Collectively, ISA holders added around £66.9 billion to their accounts throughout the year.

The media often dubs February and March “ISA season” as savers and investors are encouraged to deposit money into their ISAs before a new tax year starts on 6 April. Some ISA providers might also offer more attractive terms during this time, such as a higher interest rate, to entice potential customers.

In the 2023/24 tax year, you can add up to £20,000 to an ISA. If you haven’t already used this allowance, here are four excellent reasons you might want to do so.

1. A Cash ISA could be a tax-efficient way to save

One of the reasons Cash ISAs make up an important part of many financial plans is that they’re tax-efficient – the interest paid on savings held in a Cash ISA is not liable for Income Tax.

Many savers have welcomed rising interest rates over the last year. Yet, it could also mean you face an unexpected tax bill.

According to the Telegraph, 2.7 million savers will pay tax on their savings in 2023/24 as a result of frozen thresholds and higher interest rates. The findings suggest that almost 1 million additional savers could face a tax bill on their savings when compared to just a year earlier.

Around 1.4 million basic-rate taxpayers are expected to pay tax on their savings this year, a figure that has quadrupled in the last four years.

If the interest your savings earn exceeds the Personal Savings Allowance (PSA), you might be liable for tax on the portion above the threshold. Your annual PSA depends on the rate of Income Tax you pay:

• Basic-rate taxpayers: £1,000
• Higher-rate taxpayers: £500
• Additional-rate taxpayers: £0

As additional-rate taxpayers don’t benefit from a PSA, an ISA could be a useful way to manage your tax bill.

Even if you’re not an additional-rate taxpayer, the amount you can hold in your savings account before you could face a tax bill might be lower than you expect.

According to MoneySavingExpert, if your savings account had an interest rate of 5.22%, assuming the account balance was constant, you might need to pay tax if your savings exceed:

• £19,158 if you are a basic-rate taxpayer
• £17,242 if you are a higher-rate taxpayer.

So, placing your savings into a Cash ISA could reduce your potential tax liability.

2. A Stocks and Shares ISA could help you invest efficiently

Similarly, Stocks and Shares ISAs could also be tax-efficient if you want to invest. The returns your investments deliver when they’re held in a Stocks and Shares ISA are free from Capital Gains Tax (CGT).

Investments held outside of a Stocks and Shares ISA could be liable for CGT if they exceed the Annual Exempt Amount, which is £6,000 in the 2023/24 tax year for individuals. You should note the Annual Exempt Amount will halve to £3,000 for the 2024/25 tax year.

The rate of CGT you pay depends on which tax band the gains fall into when added to your other income. In 2023/24:

• Higher- or additional-rate taxpayers have a CGT rate of 20% (28% for residential property)
• Basic-rate taxpayers may benefit from a lower CGT rate of 10% (18% for residential property) if the gains fall within the basic-rate Income Tax band.

According to the Financial Times, the latest HMRC figures show that a record £16.7 billion was collected through CGT in 2021/22. As the Annual Exempt Amount has fallen since then and will be cut again in 2024/25, it’s likely the amount collected through CGT will rise further.

As a result, if you’re investing, doing so through a Stocks and Shares ISA could be efficient from a tax perspective.

3. You’ll lose your ISA allowance if you don’t use it before the start of a new tax year 

An ISA could reduce your potential tax liability whether you want to save or invest. So, why should you review your ISA over the coming weeks? Simply, the allowance will reset when a new tax year starts.

If you don’t use the current tax year’s allowance before 6 April 2024, you’ll lose it.

Not reviewing whether to use your ISA allowance could mean you overlook an opportunity to reduce your tax bill.

4. You could receive a government bonus with a Lifetime ISA

For some people, a Lifetime ISA (LISA) could prove a valuable way to save or invest thanks to a government bonus.

You must be aged between 18 and 39 to open a LISA, although you can continue to contribute to a LISA until you’re 50. You can deposit a maximum of £4,000 each tax year into a LISA, and can choose between a Cash LISA and a Stocks and Shares LISA.

Where a LISA is different to traditional ISAs is that deposits benefit from a 25% government bonus. So, if you deposit the annual maximum of £4,000 into a LISA, you’d receive £1,000 as a bonus.

However, if you take money out of a LISA before you’re 60 for a purpose other than buying your first home, you’ll be charged 25% of the amount withdrawn. This means you’d lose the bonus and a portion of your own deposit, equivalent to a loss of just over 6%.

Get in touch to talk about your ISA and long-term plans

If you have any questions about how to use the ISA annual allowance to support your financial plan, we’re here to help. Please contact us to arrange a meeting.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested.

Past performance is not a reliable indicator of future performance.

The start of the new year is the perfect time to reflect on what has happened over the past 12 months. Although the news often focuses on disheartening events, there are plenty of heartwarming stories out there that can restore your faith in humanity.

From science breakthroughs to exciting projects, here are seven stories you might have missed.

1. Researchers discovered a new treatment for Alzheimer’s

Scientists found that two 20-minute electrical stimulation sessions per day can improve the memory and cognitive performance of elderly people suffering from Alzheimer’s disease.

The technology stimulates neural networks in the brain, which improved patients’ brain plasticity and led to the participants of the study having increased speech and recollection skills.

The incredible treatment – known as “transcranial direct current stimulation” (tDCS) – is currently being tested in several different areas of medicine. Researchers are also investigating how it could help treat conditions such as depression and paralysis.

2. Golden mole tracked down for the first time in 100 years

Scientists last recorded a sighting of De Winton’s golden mole in South Africa in 1936. After years of searching, a group of relentless environmentalists and their adorable sniffer dog, Jessie, found tracks and DNA proving that the tiny creatures are still out there.

The discovery marks the 12th species crossed off Re:Wild’s “Top Most Wanted Lost Species List”. The Guinness World Record-setting quest aims to find and protect the world’s most endangered species and has led to them rediscovering species such as Attenborough’s Long-beaked Echidna and Pernambuco Holly, as well as the rare golden mole.

3. Painting stolen 30 years ago returned to Scottish museum

In 1989, thieves stole over a dozen paintings and artefacts from Haggs Castle Museum of Childhood. When an investigation failed to find the missing artworks, the local community assumed they would never be seen again – until one of the paintings resurfaced at an auction in Yorkshire.

Children Wading by Robert Gemmell Hutchison was caught thanks to the hard work of the Art Loss Register, a non-profit databasing company that compiles details on over 700,000 missing artworks and antiquities.

The painting’s owners had no idea their prized possession was stolen and chose to hand it over for free so that everyone could enjoy the beautiful artwork. Although the Museum of Childhood closed down many years ago, you can see Children Wading in the Glasgow Museums Resource Centre.

4. The Wildlife Trust found two sites to redevelop ancient rainforests in the UK

British rainforests used to cover most of our land, but thanks to industrialisation and deforestation, they now take up less than 1% of our country. The Wildlife Trust and Aviva partnered to invest £38 million to transform two carefully selected sites back into thriving rainforests.

The two locations – Creg y Cowin on the Isle Of Man and Bryn Ifan in North Wales – will be restored to their former glory, benefitting both the environment and the local communities. Not only will the new rainforests help us combat global warming, but they will also restore habitats for some of the UK’s most endangered species.

5. Women band together to keep Newcastle safe

Shocked by the murders of Sarah Everard and Sabina Nessa, charity worker Beth Dunn started the Women’s Street Watch Newcastle (WSWN) with her girlfriend to ensure women can enjoy a night out without worrying about getting home safely.

Now they’ve amassed an army of over 50 pink-jacket-wearing volunteers to protect the women of Newcastle and raised £10,000 for a van that provides a safe space to call a taxi or charge phones so people can contact their loved ones.

The brilliant organisation has already inspired a similar scheme in Middlesborough, and the WSWN are helping other cities across the UK – including Edinburgh and Manchester – set up similar programmes to help women across the country.

6. Endangered rhino species protected from poachers

For the first time since 1977, no great one-horned rhinoceroses were poached in the world’s largest reserve.

The Kaziranga National Park in India is home to two-thirds of the endangered species’ population, with over 2,200 rhinos as well as a variety of other amazing animals. The local authorities arrested 58 poachers last year, stopping the beautiful creatures from being killed for their horns.

Thanks to new protections being put in place for the one-horned rhinos, their numbers have risen from only 200 in 2000 to over 3,700 in 2023.

7. Rise in the number of children reading

The 2023 What Kids Are Reading Report discovered that children in the UK and Ireland read 24% more in the 2021/22 academic year than they did the previous year, devouring over 27 million books.

The researchers found that social media communities such as BookTok encouraged children to read popular books like Jeff Kinney’s Diary of a Wimpy Kid series and Heartstopper, Alice Oseman’s series of graphic novels.

This fantastic upsurge in young readers gives us hope for the new generation, as regularly reading doesn’t just help children academically. It also develops empathy, helps people gain a deeper understanding of the world, and can be a brilliant way for you to build stronger relationships with your loved ones if you read as a family.

Taking out a mortgage can be an exciting time if you’re moving home. However, it can also be daunting, as you may be significantly increasing your borrowing. Life insurance could provide you with peace of mind that, if you passed away, your family would still be financially secure and able to remain in their home.

Life insurance pays out a lump sum if the policyholder passes away

Life insurance is a type of financial protection that would pay out a lump sum to your beneficiaries if you passed away during the term.

It could help your family to pay off the mortgage, so they’re able to remain in their home even if your income is used to make the repayments. They could also use it to cover other costs, from taking time off work to grieve to school fees for your children.

Taking out a mortgage is a large financial commitment, and life insurance could ease your concerns about how your family would cope financially if something were to happen to you.

You can choose term life insurance, which would run for a defined period, such as the length of your mortgage, or whole of life insurance.

To maintain your cover, you’ll usually need to pay regular premiums. The cost of the premiums will depend on several factors, including the level of cover you want, your age, and your health.

Almost half of adults aged between 18 and 40 don’t have life insurance

Despite the peace of mind it could offer, figures suggest the number of people taking out life insurance is falling.

According to a report in IFA Magazine, following three years of consecutive growth spurred on by the pandemic, the estimated size of the life insurance sector fell by 8.5% – that represents a decrease of around £6 billion.

Similarly, according to FTAdviser, many families could be leaving themselves vulnerable to a financial shock. 48% of adults aged between 18 and 40 don’t have life insurance. The survey also found that the rising cost of living is the main reason people have cancelled their life insurance.

While it can be tempting to cancel financial protection if your budget is squeezed, you could end up facing even greater financial challenges if the unexpected does happen.

How to calculate how much life insurance you could benefit from

You can choose the level of cover when you take out life insurance, so you can tailor it to suit your needs.

Calculating your family’s current income and reviewing where it comes from is a good place to start – how would this change if you passed away? You might also want to consider how their lifestyle may differ too. For example, if your partner would need to reduce their working hours to care for children, it could affect their income.

Consider what you’d like the potential life insurance payout to be used for. Would having a lump sum to pay off the mortgage be enough? Or would you want it to provide a replacement income for several years, for instance, until your children reach adulthood?

Reviewing life insurance can be a difficult task. However, this step could give your family financial security when they’re grieving and support their long-term wellbeing.

Income protection and critical illness cover could be valuable too

Life insurance can act as an invaluable safety net for your loved ones if you pass away. Other forms of financial protection could also be useful if you face an unexpected financial shock. For example:

• Income protection could provide you with a regular income if you’re too ill to work. It would usually pay a proportion of your regular salary and could help you keep up with your financial commitments, including your mortgage, if your income stops. Income protection will typically pay you an income until you return to work, retire, or the term ends.
• Critical illness cover would pay out a lump sum if you’re diagnosed with a covered illness. You can use the lump sum however you’d like. You might choose to pay off your mortgage, use it for day-to-day living costs, or adapt your home if you need to. How comprehensive critical illness cover is varies between providers, so you should ensure you understand what conditions are covered.

As with life insurance, you can choose the level of cover when taking out income protection or critical illness cover. So, considering your expenses, both now and in the future, may be useful.

Contact us to talk about how to create financial security when taking out a mortgage

If you’d like help searching for financial protection that could put your mind at ease after taking out a mortgage, please contact us.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Note that financial protection plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse. Cover is subject to terms and conditions and may have exclusions.