The pros and cons of choosing a living legacy over leaving an inheritance

Traditionally, people passed on wealth to their loved ones once they passed away through a will. However, you might be considering gifting assets during your lifetime to create a living legacy. Read on to discover the pros and cons you may want to consider before deciding which option is right for you.

The benefits of passing on assets during your lifetime

A living legacy may allow you to help your loved ones when they need it most

One of the key drawbacks of a traditional inheritance is that they’re often received later in life when loved ones may be more financially secure. In contrast, a living legacy could provide you with a way to pass on assets at a time when they’ll benefit more.

Soaring house prices mean getting on the property ladder has become a challenge for many families. As a result, parents and grandparents are increasingly passing on wealth to act as a deposit.

According to the Institute for Fiscal Studies, around half of first-time buyers in their 20s receive financial help to buy their home. On average, they receive a gift of £25,000.

The research found that not only does this wealth transfer support home ownership goals but long-term wealth accumulation too. As those receiving financial help typically put down a larger deposit, the interest they pay on their mortgage could be thousands of pounds lower.

Helping loved ones step onto the property ladder isn’t the only reason you might want to gift assets now. Perhaps you want to fund university or private school, or pay off debt so their day-to-day finances improve.

Passing on assets during your lifetime could give you greater control over how they’re used

If you have a clear idea about how you’d like your beneficiaries to use the assets you’re passing on to them, doing so during your lifetime could provide you with greater control. For instance, if you want to ensure your grandchild goes to a private school, you could pay the fees directly.

It may be worth speaking to your family about their goals and the obstacles they face in reaching them. This could help you provide support in a way that suits both them and you.

Gifting might offer a way to reduce a potential Inheritance Tax bill

If the value of your estate exceeds Inheritance Tax (IHT) thresholds when you pass away, it could result in a large bill and less money going to your beneficiaries.

In 2023/24, the nil-rate band is £325,000 – if the value of your estate is below this threshold, no IHT is due. In addition, if you’re passing on some properties, including your main home, to direct descendants, you may be able to use the residence nil-rate band, which is £175,000 in 2023/24.

You can pass on unused allowances to your spouse or civil partner. So, as a couple, you could pass on up to £1 million before IHT is due.

If your estate could be liable for IHT, there may be steps you could take to reduce a potential bill, including passing on assets during your lifetime. However, not all assets are considered immediately outside of your estate for IHT purposes, and the rules can be complex. If you’re thinking about creating a living legacy to mitigate an IHT bill, we can help.

The drawbacks of a living legacy

Passing on wealth now could affect your long-term financial security

One of the key challenges of passing on wealth during your lifetime is understanding the long-term effect it could have on your financial security – would taking a lump sum out of your estate now potentially mean you need to make compromises later in life?

Making gifts part of your financial plan can help you understand the short- and long-term impact. It can give you confidence when you’re passing on assets that your finances are secure too.

A living legacy could affect the assets you leave behind as an inheritance

While a living legacy can be useful, you might still want to leave an inheritance behind for loved ones. Gifting could mean the amount they’ll receive after you’ve passed away is lower. So, if leaving assets in a will is important to you, assessing how a living legacy will affect your estate during your lifetime could be useful.

It might also be beneficial to have a conversation with your loved ones – do they understand how gifts they receive now could affect their inheritance? It may affect the financial decisions they make.

Gifting assets during your lifetime may make your estate plan more complex

Estate planning can be complex, and gifting during your lifetime could add to this.

You might gift one child a deposit to get on the property ladder, but your other child already owns their home – will you still provide them with a lump sum now or would they receive more through your will?

An estate plan that’s tailored to you could help you manage different goals and set out the best way to provide support for each of your beneficiaries. It can also help you take the steps necessary to ensure your wishes are followed, such as writing a will. 

Arrange a meeting with us to talk about your living legacy

If you’d like to pass on wealth during your lifetime, it’s important you consider how it’ll affect your long-term finances and how to do it tax-efficiently. Making a living legacy part of your long-term financial plan could provide you with peace of mind while you support loved ones.

We could also help you assess other options, such as leaving an inheritance in a will or placing assets in a trust, to create an estate plan that suits you.

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.

The Financial Conduct Authority does not regulate estate planning, tax planning, trusts, or legal services.

Retirement planning: Should you consider a phased retirement?

Retirement can be an exciting milestone, but one that you might feel nervous about too. Setting out how to achieve the retirement lifestyle you want could help put your mind at ease. One of the first things you may have to consider is how you’ll retire – would a phased retirement suit you?

Over the next few months, you can read about key considerations if you’re nearing retirement, from contemplating the emotional side of stepping away from work to how to access your pension. Read on to discover if a gradual retirement transition could be for you.

A retirement transition period could help you create a work-life balance that suits you

Not too long ago, many retirees followed the same path – they’d give up work on a set date.

Now, you have far more choices, which could enable you to strike a balance that suits you. An increasing number of people are choosing a phased retirement.

Indeed, according to the Great British Retirement Survey 2023, almost half (47%) of people aged between 55 and 65 who have reduced their working hours say it’s due to them winding down. Cutting your working hours could help you create a work-life balance that suits your needs if you’re not ready to give up work completely.

Reducing your hours isn’t the only way to transition into retirement either. You could switch to a less demanding job, work on a freelance basis, or even start your own business.

As well as allowing you to blend work and life in a way that’s right for you, there are other benefits to transitioning into retirement, such as:

  • Continuing to receive an income to help your retirement savings go further
  • Benefiting from the structure work may provide
  • Enjoying the social aspect of being part of a team.

If a phased retirement is an option you think could suit you, there are some key decisions you might need to make.

5 useful questions to consider if you’ll transition into retirement

1. What does your ideal work-life balance look like?

Transitioning into retirement gives you the option to create a work-life balance that matches your goals.

So, it’s worth spending some time setting out what your ideal circumstances would be – would you want to remain in your current role? Do you want the freedom to set your working hours?

2. Will you need to supplement your income?

As you transition into retirement, your income may fall. If you could supplement your income from other sources, such as accessing your pension or depleting savings, factoring this into your financial plan could be useful. It’s an important step in understanding how long your assets will last and how to create long-term financial security.

You might also want to consider how your day-to-day expenses may change too. You might find some areas fall if you reduce how much you’re working, such as the cost of commuting, while other outgoings could rise.

3. Will you continue paying into a pension?

A pension may provide a tax-efficient way to save for your retirement thanks to tax relief. In addition, your employer must contribute on your behalf if you’re between 22 and the State Pension Age, and earn more than £10,000 in 2023/24.

So, even though your income may fall, it might still be worthwhile contributing to your pension when you consider the long-term benefits.

You should note that if you start to take an income from your pension, your Annual Allowance may fall. This is the amount you can tax-efficiently add to your pension each tax year.

In 2023/24, the Annual Allowance is usually £60,000. However, accessing your pension may trigger the Money Purchase Annual Allowance, which would reduce how much you can tax-efficiently contribute to your pension to £10,000.

4. Will you defer the State Pension?

The State Pension Age is 66 in 2023/24, but it is gradually rising. The government’s State Pension forecast could help you understand when you’ll be eligible for the State Pension, as well as how much you could receive.

If you’ll be transitioning into retirement after the State Pension Age, you may want to consider deferring claiming your State Pension.

For every nine weeks you delay taking it, your State Pension will increase by the equivalent of 1% – defer for a year, and the income you’d receive would rise by just under 5.8%.

As well as boosting your future income, deferring your State Pension could reduce your Income Tax liability now.

5. How will a phased retirement affect your long-term finances?

You might not be giving up work completely, but don’t put off thinking about your long-term plans. The decisions you make now could affect your financial security for the rest of your life.

As a result, creating a retirement plan could be valuable and provide peace of mind by helping you understand the long-lasting effect of decisions like:

  • Accessing your pension while you phase into retirement
  • Halting pension contributions sooner than you planned.

Contact us to discuss your retirement aspirations

Whether you want to give up work on a set date or ease into retirement, a tailored plan could help you reach goals and build the life you want. Please contact us to talk about your aspirations for retirement and how you might achieve them.

Next month, read our blog to find out what questions you may want to consider when setting out your retirement lifestyle.

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 results.

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. 

Why the “margin of safety” theory could be a valuable part of your financial plan

A “margin of safety” gives you a cushion to allow for losses or inaccurate assumptions in your financial plan. It could mean your goals remain on track, even if things don’t go exactly as you expect. Read on to find out why it could be a valuable part of your plan.

The margin of safety was popularised by the “father of investing”

British-born American economist and investor Benjamin Graham is often referred to as the “father of investing” after he wrote two founding texts about investing in the 1930s and 1940s. His approach to investment philosophy often focused on investor psychology, such as how emotional and cognitive factors affected the decisions investors made.

His theories earned him many disciples in the investing world, including famous investor Warren Buffett, who, according to Forbes, is the fifth richest man in the world with an estimated fortune of $106 billion (£83.9 billion).

The margin of safety is one of Graham’s key principles, so what does it mean?

In simple terms, it’s the difference between the intrinsic value of a stock and its market price. The idea is that you should only buy stock when it’s worth more than its price on the market. It aims to protect investors from downturns in the market and their poor decisions, which may be influenced by emotions or bias.

While Graham linked the principle to investing, it’s used in other industries too. For instance, engineers will often have a large margin of safety to account for potential mistakes.

Buffett once explained the idea by saying: “When you build a bridge, you insist it can carry 30,000 pounds, but you only drive 10,000-pound trucks across it. And that same principle works in investing.”

Through the margin of safety, Graham sought to take an investment approach that focused on assessing risks before looking at potential returns. So, rather than asking “How much could the price of the share increase by?” you seek to understand “Could the value of the share fall?” first.

The margin of safety allows for some investment losses

The key benefit of the margin of safety is that it allows for some losses to occur without having a huge negative effect on your portfolio.

It could also help offset some forms of bias. For instance, overconfident investors might lead to a stock price that is higher than the intrinsic value.

The margin of safety doesn’t guarantee a successful investment. Determining intrinsic value can be difficult and investment values can be volatile and unpredictable. Even Graham got it wrong at times. Indeed, his margin of safety principle came after he lost most of his money, like many other investors, during the stock market crash of 1929 and the subsequent Great Depression.

Remember, all investments carry some risk, and you should understand what level of risk is appropriate for you.

The margin of safety could be applied to other areas of financial planning too

The idea of creating a cushion to account for mistakes or provide you with a buffer in case the unexpected happens isn’t only useful when you’re investing.

Think about when you’re creating a household budget. You might round up certain repayments, like your utilities, in case your bill is higher than anticipated. Or you may ensure you have money that’s not allocated to anything specific to cover the unexpected.

A margin of safety could be useful when you’re making long-term plans too.

Let’s say you’re a woman retiring at age 60. The Office for National Statistics estimate that, on average, you’d spend 27 years in retirement. But if you divided your pension up into 27 segments to create an income, what would happen if you were one of the 1 in 4 women who live to be 94? You could face financial hardship in your later years.

You might also plan for the cost of living to rise by 2% a year throughout retirement and reflect this in the income you take – 2% is the Bank of England’s inflation target after all. However, as the last two years have demonstrated, inflation can rise significantly above that target.

So, while we make assumptions when creating a financial plan, a margin of safety might provide you with security even if things don’t go exactly as you expect.

Contact us to talk about your financial plan

If you’d like to discuss how we could work with you to create a financial plan that considers your long-term financial security, even when the unexpected happens, please get in touch.

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. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

5 useful gifting allowances that could help you pass on wealth tax-efficiently this Christmas

It’s the season for giving. This Christmas, you might be thinking about how you could improve the security of your loved ones by gifting them money or assets. Read on to discover five potentially useful allowances that you might want to consider if your estate could be liable for Inheritance Tax (IHT).

Some gifts are considered immediately outside of your estate for IHT purposes, and are known as “potentially exempt transfers”. They may be included in your estate when calculating IHT for up to seven years after they are given.

So, if reducing IHT liability is one of the motivators for gifting assets, considering tax-efficient allowances could be valuable.

In 2023/24, the nil-rate band is £325,000. If the entire value of all your assets is below this threshold, no IHT is due on your estate when you pass away. In addition, many people can use the residence nil-rate band if they pass on their main property to direct descendants. For the 2023/24 tax year, the residence nil-rate band is £175,000.

As a result, an individual could leave up to £500,000 to loved ones before IHT is due. You can also pass on unused allowances to your spouse or civil partner.

The nil-rate band and residence nil-rate band are frozen until April 2028.

If the value of your estate exceeds these thresholds when you pass away and you’ve gifted assets within seven years, they may be included when calculating how much IHT is due.

Here are five allowances that could help you gift assets to your family tax-efficiently.

1. The annual exemption of £3,000

Each tax year, you have an “annual exemption”. This stands at £3,000 in 2023/24. You can use this allowance to pass on assets without the value being added to your estate for IHT purposes.

So, if the value of your estate exceeds IHT thresholds, using the annual exemption could reduce a potential bill and provide you with a way to tax-efficiently pass on wealth now.

If you do not use the annual exemption during the tax year, you can carry it forward for one tax year. You may want to make using the annual exemption each year part of your wider financial plan if a possible IHT bill is something you’re worried about.

2. Small gifts worth up to £250

You can also gift up to £250 to as many individuals as you like, as long as they have not already received the whole of your annual exemption in the current tax year. These small gifts will not be subject to IHT.

3. Wedding gifts of up to £5,000 for your child

If you’re celebrating a wedding, you might want to hand over a gift to the happy couple to help them set up a new home or enjoy their honeymoon. The good news is that you can gift £1,000 to newlyweds without the money potentially being added to your estate when calculating IHT.

The tax-efficient allowance rises to £2,500 if it’s your grandchild or great-grandchild getting married, or £5,000 for your child.

So, if you know a couple who will be exchanging vows soon, it could be a good opportunity to reduce your estate’s IHT liability.

4. Gifts that support someone’s living costs

Financial support  to help with a loved one’s living costs may also be given without worrying about IHT. For example, you might pay for:

  • Your grandchild’s school fees
  • Care home accommodation costs of an elderly relative
  • Living expenses of an ex-spouse.

As the intended purpose of the gift is important for whether it’ll be considered outside of your estate when calculating IHT, it may be wise to keep records of the assets given and how they’ll be used.

5. Regular gifts made from your surplus income

Do you have enough money left from your income after your outgoings to make regular gifts? If the answer is “yes”, it could prove a tax-efficient way to pass on wealth. You may want to make regular deposits into your child’s savings account or support their finances by paying some of their bills.

However, you must:

  • Be able to maintain your standard of living after the assets have been given
  • Make regular gifts.

So, it’s important to understand how the gifts could affect your finances and be committed to regular gifting if you’re to do this. The rules can be complex, and you might want to seek financial advice to understand whether it’s the right option for you. Please contact us if you have any questions.

Again, keeping clear records may be useful.

Contact us to talk about how you could mitigate an Inheritance Tax bill

Using gifting allowances is just one way to reduce or mitigate a potential IHT bill. Depending on your circumstances, there may be other steps you could take. Please contact us to talk about your estate plan and how to pass on your wealth to loved ones.

Please note:

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

This article is for information 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 Financial Conduct Authority does not regulate tax or estate planning.

The families of 6 in 10 over-75s could face challenges if they lose mental capacity

A survey suggests more than half of people aged over 75 haven’t arranged a Lasting Power of Attorney (LPA). It’s an oversight that could mean their families may not be able to make decisions on their behalf if they lost mental capacity.

MoneyAge report that research from Just Group revealed that around 3.4 million over-75s had no LPA in place. If you or your relatives may be among them, read on to find out what an LPA is and why having one may bring invaluable peace of mind to you and your family.

An LPA allows you to choose someone you trust to take care of your affairs

An LPA is a legal document that allows you to nominate one or more people you know and trust to take care of your affairs in the event that you can no longer look after them yourself.

There are two types of LPA:

1. A health and welfare LPA that covers your day-to-day life and any medical decisions or care you need.

2. A property and financial affairs LPA that covers the management of your savings and assets, paying bills, and claiming benefits.

If you don’t have a health and welfare LPA, your loved ones could be prevented from ensuring you receive medical care according to your wishes.

Lack of a property and financial affairs LPA will likely mean that your family will be unable to manage things like paying your bills or bank accounts.

Without an appropriate LPA in place, even your partner or spouse may not automatically be able to gain access to your investments, insurance, or your bank accounts.

Once registered, an LPA remains in place for life, bringing immeasurable peace of mind to both you and your loved ones.

It’s also possible to make an LPA temporary. A temporary LPA allows you to resume control of your affairs if your capacity improves. This can be particularly useful if you are briefly hospitalised due to an accident or illness.

If you begin to lose your mental capacity, it may be too late to set up an LPA

If you become incapacitated without an LPA in place, you could leave your family with the burden of applying for permission to take care of your affairs. At an already difficult time, they will have to apply to the Court of Protection to become a deputy.

Doing this can be time-consuming and expensive. Plus, the judge will decide who is most suitable to make decisions for you, meaning it may not be the person you would choose.

With a registered LPA in place, your attorney can begin managing your affairs immediately after you become incapacitated. This should mean that there’s no delay in your attorney being able to access financial resources or make critical decisions relating to your health.

Remember, if you lose mental capacity, it would be too late to put an LPA in place. With this in mind, it’s something that you should consider organising sooner rather than later.

The 2023 Power of Attorney act will make it easier to put an LPA in place

On 18 September 2023, the Powers of Attorney Bill received Royal Assent and became an Act of Parliament. This means that the existing paper-based system will move online.

It is hoped that the move to an online system will create a simpler process, making it quicker and easier to register.

The new service will change the way LPAs are made but, for the time being, the current LPA service will continue to be available as usual.

Get in touch to discuss how we can help you set up a Lasting Power of Attorney

Putting an LPA in place could provide you with security if you lose the ability to make decisions yourself. If you want to know more about looking after yourself and your loved ones in the future, speak to us.

Please contact us to talk about your concerns and priorities. We’ll work with you to create an estate plan that suits your needs.

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 estate planning.

How a contribution to your child’s pension could boost their financial security

As a parent, you might worry about your child’s long-term financial wellbeing. While you might consider supporting them through university, helping out with day-to-day costs, or handing over a home deposit, have you thought about contributing to their pension? It could go further than you think.

Younger generations face some key challenges when saving for their retirement. As people are living for longer, it’s likely workers today will need a retirement plan that will provide an income for several decades.

In addition, financial pressures on household budgets may mean employees are more likely to reduce or pause pension contributions.

Indeed, a Royal London survey found the cost of living crisis has led to a third of workers investigating whether to cut pension contributions. Among employees aged between 18 and 34, the figure rises to a worrying 49%.

While altering pension contributions may boost household budgets in the short term, it can have a significant effect on financial security later in life. As pensions are invested over the long term and benefit from compounding, even a temporary pause could affect their standard of living in retirement.

So, if you’re thinking about how you could lend financial support to your child, reviewing their pension could be valuable.

The power of compounding can transform regular pension contributions into a sizeable pot

Thanks to tax relief and long-term investment growth, the money you deposit in your child’s pension has an opportunity to grow to several times the value of the original deposits.

According to PensionBee, a parent placing £200 a month in their 18-year-old child’s pension for 20 years would contribute £48,000 in total.

Once tax relief, investment returns of 5% a year, and an annual management fee of 0.5% are factored in, it’s calculated the value of the pension would rise to almost £330,000 by the time the child is 64.

Even smaller deposits can add up. Under the same circumstances as the above scenario, depositing £50 a month in your child’s pension over 20 years could lead to a pot of more than £80,000 even though you’d have deposited just £12,000.

You don’t even have to wait until your child reaches adulthood to start paying into a pension on their behalf. Those not earning an income, including children, can deposit up to £2,880 into a pension in 2023/24 and still benefit from tax relief. By investing sooner, the effect of compounding could be even greater.

Of course, investment returns cannot be guaranteed, and all investments carry some risk. However, the above examples demonstrate why you might want to consider pensions if you’re weighing up ways to support your children financially.

A key downside of contributing to a pension is that they’re usually not accessible until the pension holder reaches pension age. This is currently 55, rising to 57 in 2028 and it could change in the future.

3 reasons you may want to consider using your child’s pension to pass on wealth

1. Pension contributions could support long-term financial security

If you’re concerned about your child’s long-term financial security, a pension could be useful. As a pension cannot usually be accessed until retirement age, you can rest assured the deposits won’t be spent on short-term outgoings.

However, it could also mean your gift couldn’t support your child in reaching other milestones or if they faced financial difficulties. As a result, you may want to consider how to balance the support you offer as part of your overall financial plan.

2. Pension contributions benefit from tax relief

One of the key reasons why pensions are efficient when saving for retirement is that contributions usually benefit from tax relief. So, the money you gift to your child through a pension may receive an instant boost that could mean they have more flexibility in retirement. Tax relief will be paid at your child’s marginal rate of Income Tax, rather than yours.

3. Pension contributions could be invested for decades

The earlier example demonstrates the power of compounding – making contributions to your child’s pension early in their career could lead to a pot with a value far beyond your initial deposits. While investment returns cannot be guaranteed, the money you place in a pension could be invested for decades, which provides an opportunity for significant growth.

Keeping the pension Annual Allowance in mind could help your child avoid an unexpected tax bill

If you’re thinking about boosting your child’s pension, it may be a good idea to talk about their income and other contributions to avoid a potential tax charge.

The Annual Allowance limits how much you can place into a pension each tax year while retaining tax relief. In 2023/24, the Annual Allowance is £60,000 for most people, up to 100% of the pension holder’s annual earnings. However, the Annual Allowance may be lower if the pension holder is a high-earner or has already taken an income from their pension.

Exceeding the Annual Allowance could lead to an unexpected tax charge to reclaim the tax relief paid. So, talking to your child about the money that goes into their pension might be important.

Contact us to discuss how to improve your children’s financial security

Contributing to a pension is just one way you could improve your child’s financial security. You might want to set aside assets for them to inherit or gift a property deposit too. Making your family’s long-term finances part of your plan could give you confidence and help you achieve your goals.

Please contact us to arrange a meeting to discuss your options.

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 results.

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. 

The Financial Conduct Authority does not regulate estate planning.

2 Autumn Statement announcements you may have missed that could simplify your finances

Jeremy Hunt delivered his second Autumn Statement as chancellor on 22 November 2023. While the headline news was cuts to National Insurance rates for employees and self-employed workers, there may have been less attention-grabbing changes that could make your finances easier to manage.

Read on to discover how ISA and pension changes might be useful to you.

1. ISAs are set to become simpler

ISAs were launched in 1999 to promote saving and investing in a tax-efficient way. Statistics suggest they’ve achieved that goal – according to the government, in 2021/22, 11.8 million ISAs were subscribed to, with around £66.9 billion added to accounts.

Yet, over the years, ISAs have become more complicated. New ISAs have been launched, including the Lifetime ISA, aimed at aspiring first-time buyers, and the Innovative Finance ISA, which allows you to invest in peer-to-peer loans that are typically higher-risk than traditional investments.

There are also rules around contributing to multiple ISAs during the same tax year and transferring between different providers. Key changes from April 2024 could help you manage your savings and investments in a way that suits you.

  • Under current rules, you cannot usually contribute to two ISAs of the same type during the same tax year. For example, if you held two Cash ISAs, you’d only be able to contribute to one each year. From April 2024, you will have more flexibility and will be able to pay into multiple ISAs of the same type. This could mean you’re able to secure a more competitive interest rate or pay into both an easy access and fixed-term account.
  • It is possible to transfer your ISA savings or investments to another provider. However, you must transfer all the money in the account. In the new tax year, partial transfers will be allowed. This step could provide you with more flexibility and the option to move your savings or investments to suit your needs.

Despite hopes that the annual ISA allowance would be increased, it wasn’t announced in the Autumn Statement. In 2023/24, the ISA allowance is £20,000, and £9,000 for Junior ISAs.

However, the changes could help you get more out of your money by allowing you to select a provider that’s right for you.

2. There are plans to reduce the number of pensions workers hold

Auto-enrolment means the majority of employees must be automatically enrolled into a pension by their employer, who must also contribute on their behalf.

It’s successfully encouraged more people to save for their retirement. Yet, it’s also created a retirement planning issue that you might face – managing multiple pension pots.

According to Zippia, the average employee stays with their employer for just 4.3 years. So, over your working life, you could end up accumulating multiple pensions.

This could cause issues for several reasons:

  • It can make your retirement savings difficult to keep track of. Indeed, a report in FTAdviser, estimates there are almost 3 million “lost pensions” totalling £26.6 billion. Managing several pensions could mean you overlook some essential savings.
  • Usually, your pension will be subject to an annual management fee. In some cases, paying fees on several small pensions could add up to more than the fee of a single, larger pension. So, holding several pensions may mean you get less out of your savings.
  • Similarly, your pension will typically be invested. Again, a single, large pension that’s invested in a range of assets may deliver greater returns over the long term, particularly when investment fees are considered, compared to several small pots. However, keep in mind that investment returns cannot be guaranteed.
  • As well as difficulty managing multiple pots during your working life, it can be challenging when you retire too. You might be unsure about which pot you should access first or how long each will last.

Changes to address this haven’t been implemented yet. However, Hunt announced a consultation with the aim of allowing workers to set up a “pot for life”. Under the plans, employees would be able to choose which pot their pension contributions are paid into. It could mean employees can retain the same pot throughout their careers, even when they change jobs.

The move could make it easier to manage your retirement finances.

If multiple small pensions are something you’re concerned about, there may be steps you can take now. Pension consolidation could mean you have fewer pensions to manage, but there are potential drawbacks too. For example, if your pension provides additional benefits, you’d lose these if you transferred the money to another provider.

We can provide tailored pension advice if you’d like to better understand how to make managing your retirement finances simpler. 

Contact us to discuss what the Autumn Statement means for your financial plan

The chancellor made key announcements during the Autumn Statement that might affect your finances now or in the future. If you’d like to discuss what they mean for you, please contact us.

Please note:

This article is for information 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 investment 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.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

10 festive markets to visit in Europe this year

It’s not too late to book a last-minute Christmas getaway. These fantastic destinations all boast traditional festive markets that are perfect for getting into the Christmas spirit, enjoying a mulled wine, or picking up some gifts.

1. Tallinn, Estonia

Dates: 1 December 2023 to 7 January 2024

If you’ve yet to visit Estonia, adding Tallinn at Christmas time to your bucket list is a must. There are the usual stalls and food to try here, but it’s the entertainment that really sets it apart. There are dance troupes, bell ringers, bands, and even a reindeer sleigh in Santa’s grotto that are great when you want a break from shopping.

2. Budapest, Hungary

Dates: 18 November 2023 to 1 January 2024

There are two main Christmas markets in Budapest in Vorosmarty Square and the Basilica. Both offer free concerts and plenty of stalls to browse. But the Basilica also hosts an ice-skating rink and laser projections to make it even more magical. The market is a great chance to taste traditional Hungarian food, including halászlé, a fish soup that is often eaten as part of the Christmas feast.  

3. Bohemia, Czech Republic

Dates: 24 November 2023 to 1 January 2024

If you want to see some of the Czech Republic beyond Prague, why not take in some of the Christmas traditions of the Bohemia region? As well as stunning classic and gothic architecture to take in, many cities host Christmas markets that attract fewer tourists than others. Ceske Budejovice and Cesky Krumlov are just two of the options to consider.

4. Seville, Spain

Dates: 1 December 2023 to 5 January 2024

Seville is a great destination to head to if you want to mix Christmas markets with art and culture. You can pick up plenty of handmade gifts from the stalls – with the Feria de Artesania Creativa being particularly packed with handcrafted goods. The main tourist area is filled with impressive lights, and you can often spot holiday dancing or choirs singing Christmas carols too.

5. Merano, Italy

Dates: 24 November 2023 to January 6 2024

What better backdrop to a Christmas market than the stunning Italian Alps? Merano is a picturesque spa town that’s perfect for a mini break during the winter season. As well as the usual stalls selling handmade goods, you can often find choirs and bands playing festive tunes – the sudtirol cakes are a must-try when you’re here.

6. Cologne, Germany

Dates: 23 November to 23 December 2023

Cologne is a favourite destination for people who love to visit Christmas markets, which take over large areas of the city, including beneath the towering cathedral. There’s a whole area dedicated to children, so if you’re planning a winter trip with little ones, Cologne could be the perfect place to book.

7. Zagreb, Croatia

Dates: 2 December 2023 to 7 January 2024

Croatia might be more commonly associated with summer holidays, but the capital hosts dozens of small Christmas markets around the city during the festive season. The Upper Town medieval settlement is a great place to start before heading to the Lower Town to find markets in the parks. You can sample some unusual festive treats, including sarma, a stuffed cabbage roll, and plum brandy.

8. Copenhagen, Denmark

Dates: 17 November to 31 December 2023

Have a glimpse of how the Danish celebrate Christmas by sampling Glögg (it’s similar to mulled wine) as you visit the market in Tivoli Gardens – the world’s second oldest amusement park where you can enjoy thrill rides too. As well as the extravagant market in Tivoli Gardens, you can find smaller markets dotted throughout the city with a cosier atmosphere.

9. Bratislava, Slovakia

Dates: 23 November to 23 December 2023

Every year, the most beautiful part of Bratislava is turned into a Christmas fairy tale when the markets open up. The Old Town is impressive at any time of the year, but with twinkling lights added and delicious delicacies, it’s sure to bring you good cheer. The main square also holds a stage, so be sure to check the programme for performances.

10. Gdansk, Poland

Dates: 2 December to 23 December 2023

If you’re thinking about a trip to Poland, it’s probably Kraków that comes to mind. Yet, you could be missing out on a gem if you overlook Gdansk. The historic city centre is wonderful to explore at any time of the year, but it’s really magical when the Christmas market is on. If you have young children, elf parades and the Snow Queen are sure to keep them entertained.

How to make your Christmas more sustainable

Did you know the amount of waste generated in the UK increases by around 30% over the festive period? While it’s the season for joy and giving, being more mindful about how you celebrate Christmas this year could help you enjoy a more sustainable celebration.

If you want to reduce the environmental impact your family has this year, without compromising on fun, here are five practical tips you could implement.

1. Switch to digital or sustainable cards

The government estimates more than 1 billion Christmas cards are sent every year, only to be thrown away – it takes the equivalent of 33 million trees to make this amount of cards. So, not only is sending cards creating more waste, but it could lead to far fewer trees too.

Sending out digital cards could be a simple way to reduce your environmental impact this year. There are plenty of different options online, many of which you can add a personal touch to so they remain thoughtful.

Plus, you don’t have to worry about it not arriving in time due to postal delays.

If you enjoy sending cards and displaying them, there are ways to make them more sustainable. Choosing a Forest Stewardship Council (FSC) card means the product comes from a well-managed and sustainable forest and is recyclable.

2. Be conscious of the gifts you’re giving

A YouGov poll found that the average Brit spent more than £600 on Christmas in 2022. The biggest expense was presents and gifts, totalling £300 each.

Handing over a present you know the recipient will love is part of what makes Christmas so special, but it can lead to waste, especially if you’re unsure what to buy someone. 

According to the Guardian, half a billion cheap electrical items go to UK landfills every year. So, this year, before you buy a gift, spend some time considering if it’s something the recipient will really value or use.

If they don’t want specific items, gifting an experience could be a great way to make their day without adding more waste. Whether you buy them a spa day to relax or an adrenaline-fuelled adventure, it’s a great way to help them create memories too.

3. Choose a real Christmas tree

If you already have an artificial Christmas tree that’s in good condition, don’t throw it away to buy a more sustainable option. But, if you’re looking to refresh your home’s decorations this year, selecting a real Christmas tree could support the environment.

Check the farm you’re buying from grows the trees responsibly and plants for future generations to maximise your positive impact. Better yet, some farms will take your tree back at the end of the festive period and replant it so you can pick it up for next year’s celebrations.

Don’t forget about your other festive decorations either. Simple switches, like opting for LED lights, could shrink your environmental footprint this year.

4. Be mindful of food waste

Indulging in festive treats might be one Christmas tradition you’re looking forward to. Whether the thought of a turkey dinner has your mouth watering or you want to dig into a box of chocolates, you don’t have to give it up.

Yet, being conscious of the food you might end up throwing away over the festive season could be useful.

Last year, the Waste and Resources Action Programme (WRAP) estimated that more than 70% of the UK’s total food waste comes from homes, collectively costing families an eye-watering £14 billion a year.

The amount of poultry thrown away in one year could be enough to make 800 million Boxing Day curries, while enough potatoes are binned to make enough roasties for Christmas Day for the whole country for 48 years.

So, when you’re doing your Christmas grocery shop (and your regular shopping), consider what you’ll use and how to make the most out of what you’re buying.

As well as cutting waste, you might also want to purchase local produce. It could be a great way to support local farmers and reduce the carbon footprint of your Christmas dinner as it won’t have to travel as far.

5. Give back to your local community

It’s the season for giving, so what better time to support your local community? There are plenty of ways you can help organisations, from giving your time to a financial donation.

You could also make material donations, such as furniture that you’re replacing or unwanted clothing, rather than throwing them away. It could help you clean up your home ready for the new year while benefiting others. The items could go to charity shops to raise much-needed funds for good causes or families that are struggling.

Business owners, don’t take Willy Wonka’s chance approach to succession planning

Eccentric Willy Wonka boasts a lot of enviable skills as a businessman – he’s innovative, understands his target audience, and inspires loyalty from his employees. But his skills at succession planning left a lot to be desired.

Over the years many actors have taken up the role of Roald Dahl’s iconic chocolatier Willy Wonka. The character is getting a new lease of life in December when Wonka releases in cinemas.  

While the new movie looks at how Wonka became the owner of a successful business selling fantastical sweets, the original novel, Charlie and the Chocolate Factory, focuses on his succession plan.

With no children to leave his business to, Wonka hides five golden tickets in chocolate bars to win a tour of his world-famous chocolate factory. He plans to pass on his company to one of the lucky winners.

Despite the risky approach, the competition pays off when Charlie Bucket secures one of the golden tickets.

While Wonka’s method might be perilous, research suggests some business owners could also be taking a risk when it comes to their firm’s future.

According to a report in FTAdviser, more than a third of businesses have no succession plan in place, and a further 10% haven’t thought about it.

Yet, what will happen to their business is a concern for many business owners. 21% said they were most worried about seeing their business fail and 18% were concerned about their employees’ prospects.

Without an effective succession plan, there’s a chance your business’s legacy doesn’t live up to your expectations or pass to the person you want to hand the reins to.

Creating a succession plan can seem daunting and involve a lot of work. However, if it’s something you’ve been putting off, here are seven reasons to make it a priority.

1. It provides a chance to think about your different options

There’s more than one way to step away from your business when you’re ready. You might plan to pass it on to your children, or you may want to sell it to fund your retirement.

Going through your preferences now provides an opportunity to explore the different options and consider which would be right for you.

2. The process could help you identify potential leaders and skill gaps

Handing over his business to someone with no experience might work well for Wonka, but it’s not advised.

As part of your succession plan, you may review the skills and expertise of your current team to identify where there could be gaps in the future. You might then create a training development programme to upskill existing employees or seek to hire someone who fits your needs.

It’s a step that may improve the long-term security of your business and give you peace of mind.

3. Preparing your business may be a lengthy process 

Depending on your plans, preparing your business to hand over could be a process that takes years. Perhaps you need to dedicate time to training existing employees to take over some of your tasks, or you might want to sell the business with an established customer base that you need to build.

Setting out your succession plan now could mean you have more options, reduce stress, and give you a chance to overcome potential obstacles.

4. It could improve processes in your business now

When creating a succession plan, you’ll often want to consider how the business would operate if you weren’t there and how to make processes as efficient as possible.

So, even if passing on your business is years away, a succession plan can be a useful exercise. You might find ways to increase productivity, cut costs, or help your team work more efficiently. It could improve your business now and mean it’s in a better position in the long term too.

5. A succession plan could boost confidence in your business

When Wonka announced he’d be handing over his business to an 11-year-old boy, we’re sure not everyone was thrilled about the decision or optimistic about the firm’s prospects.

A lack of a succession plan could harm confidence in your business. For instance, customers might worry about whether you’ll be able to fulfil orders over the long term. A succession plan could also give your employees more confidence in their security.

6. A succession plan may be useful if the unexpected happens

A succession plan isn’t just useful if everything goes according to plan, it might also be valuable if the unexpected happens.

If you fall ill, having processes and a leadership team in place that you can trust could make the difference between your business continuing to run smoothly or facing challenges. Knowing that your business is in safe hands might mean you’re able to focus on your recovery.

A robust succession plan could also make it easier to step back from your business sooner than initially planned if you decide to.

7. Your decision may influence your long-term plan

As a business owner, your firm is likely to affect your lifestyle and finances.

Your business plans and when you hope to move on might influence areas like your pension or investments. So, understanding how and when you want to move on from your business could mean you’re able to make informed decisions about your personal life and assets.

Contact us to talk about your succession plan and what it means for your future

If you’d like help with your succession plan, we may be able to offer support and could make your decisions part of your personal financial plan too.

Please contact us to arrange a meeting to talk about your aspirations.

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