Monthly Archives: November 2021

HOW CAN I PROTECT MY MONEY FROM INFLATION?

Posted on November 26, 2021 by - Uncategorised

Five questions to ask before inflation really takes off

‘How can I protect my money from inflation?’ is a question that many people may be asking themselves right now. In the current economic climate, rising inflation is becoming a concern for people with savings and investments.

The effect means you’re potentially earning less money due to your hard-earned cash becoming worth less as time goes by.

The negative impact of inflation upon the real value of an investor’s portfolio will be a concern, particularly for the older generation with not enough investments, who may live mostly or entirely off their savings and pensions. It can be even worse if they have a decrease in income at the same time as a loss of value on their assets.

If you’re middle-aged or young, it’s also important to consider how much inflation will affect you and your investments. Many savers may currently be receiving very low returns on their cash deposits, but with many households sitting on more cash than ever following COVID-19, protecting cash from inflation is becoming vital.

FIVE QUESTIONS TO ASK TO PROTECT YOUR CASH FROM INFLATION

1. IS THE AMOUNT YOU HAVE IN CASH APPROPRIATE FOR YOUR CIRCUMSTANCES?

The first thing we would say here is that the amount of cash you have should be appropriate for your personal circumstances. What we mean by this is that the amount of cash someone else has may not be appropriate for you, because we all have different needs and wants.

The amount of cash savings that a person has should always match their circumstances and income level. Since we don’t know what life will bring next, we need to be able to take care of ourselves and our families – even the unexpected – without having to resort to or depend on credit cards or loans from others. It’s important to build an emergency fund.

This should contain at least three months’ worth of expenses – those are the bare minimum. It could be more, but not less than three months’ worth. But since this will be at the mercy of inflation, some savers may opt to hold the bare minimum amount in cash to avoid incurring losses on the value of their money.

2. SHOULD YOU CONSIDER INVESTING SOME OF YOUR CASH?
As a general rule, the answer to this question will depend on your cash flow needs and investment preferences. But you should consider investing some of your money, even though this may seem counterintuitive.

Ultimately building a diversified investment portfolio rather than putting all your eggs into one basket, so having some cash savings and some investments for growth, is likely to suit most people’s risk profiles.

While past performance is no guarantee of future performance, investing some of your cash savings may be worth considering. If you’re saving for a long-term goal, like retirement, then it’s really important to factor in inflation. If you don’t it could erode the value of your money and jeopardise your plans for the future.

3. HAVE YOU MAXIMISED YOUR PENSION SAVINGS IN RECENT YEARS?

How much money you get in retirement depends on how much you put in, and when. When you retire, the money you have saved up in your pension will provide an income. The bigger that pot is, the more you’ll get each year to help pay for your living expenses. On average, people retiring today may need to replace about half of their pre- retirement income with savings and investments (income from pensions or other savings).

Obtaining professional financial advice is important to make sure you’re putting enough away so your retirement savings last longer. To give yourself the best chance of a comfortable retirement, you need to make sure as much as possible goes into your workplace or personal pensions as early as possible.

It is important to maximise pension contributions to receive tax relief as this helps you save more money for your retirement goals. Pensions are still a very tax-efficient investment for the majority of people, with tax relief on contributions, as well as tax-free growth within the fund.

4. HAVE YOU MADE USE OF YOUR ISA ALLOWANCE THIS YEAR, AND THOSE OF YOUR FAMILY ASSUMING YOU’RE FEELING GENEROUS ?
Do you have an ISA allowance? Have you made use of this year’s allowance and do you plan to make any changes in the future to your ISA savings strategy? Have you made use of your family’s ISA allowance this year?

Everyone aged 18 and over can invest £20,000 per annum into a Stocks & Shares ISA; those under 18 can invest £9,000 each year. Those aged 16 or over can invest £20,000 per annum into a Cash ISA. ISAs grow tax-efficiently, whether invested in cash or other asset classes like stocks and shares, and the long-term effects of this tax- efficient growth can be significant.

5. ARE YOU MAKING THE MOST OF YOUR INCOME ALLOWANCES?
You work hard to make a living, and you should take advantage of how much money you have been able to earn. Personal income allowances give you the ability to control how much or how little tax you pay on money that has been earned over the year.

Often, we find people squander the opportunity to use a spouse’s or partner’s lower Income Tax rate, or even their Personal Savings Allowance (currently £1,000 for 2021/22), by holding investments or cash balances in the higher earner’s name. This could mean, for example, paying tax on interest at 45% when the spouse would pay just 20%, or even no tax at all. There is no limit on the amount of money that can be transferred (the transfer must be of genuine beneficial ownership to apply) between spouses, so you might want to consider whether transferring holdings to or from your partner would benefit your family.

Few savers will be untouched by inflation in the near future. But by asking yourself the questions above, you can mitigate the effect of inflation by making sure your money is working as hard as possible to earn inflation-beating returns.

TIME TO DISCUSS HOW TO PROTECT THE VALUE OF YOUR WEALTH?

If you want to get more out of your personal savings and investments, we can help you manage, organise and preserve the wealth of your portfolio. To discuss how to mitigate the impact of inflation on your financial plans, please contact us – we look forward to hearing from you.

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED. PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.

CHANGE TO THE STATE PENSION TRIPLE LOCK

Posted on November 19, 2021 by - Uncategorised

Pensioners ‘deeply disappointed’, particularly women and self-employed

The earnings benchmark of the State Pension triple lock will be temporarily set aside for next year. The Department for Work and Pensions (DWP) confirmed on 7 September that the State Pension triple lock rule will not be applied for the 2022/23 financial year over concerns of the potential costs involved.

It comes after the Office for Budget Responsibility (OBR) said in July that pensioners could see their payments rise by as much as 8%

due to the guarantee. The triple lock guarantees that pensions grow in line with whichever is highest out of earnings, inflation or 2.5%.

AVERAGE EARNINGS COMPONENT DISREGARDED
Work and Pensions Secretary, Therese Coffey, said the average earnings component would be disregarded in the 2022/23 financial year. ‘I will introduce a Social Security Uprating and Benefits Bill for 2022/23 only,’ she told the Commons.

‘It will ensure the basic and new State Pensions increase by 2.5% or in line with inflation, which is expected to be the higher figure this year, and as happened last year, it will again set aside the earnings element for 2022/23 before being restored for the remainder of this Parliament.’

SKEWED AND DISTORTED STATISTICAL ANOMALY
Ms Coffey said the figures had been ‘skewed and distorted’ by the average earnings rise, which she described as a ‘statistical anomaly’. She said the change meant that pensions would still rise, but less quickly. The triple lock would return the following year, she added.

BEDROCK OF MANY PENSIONERS’ RETIREMENT INCOME
Many pensioners will be deeply disappointed that the triple lock has been scrapped for next year, as the State Pension is still the bedrock of many pensioners’ retirement income. Women and those who are self-employed are among those who will be particularly affected by the temporary scrapping of the triple lock, as they are more likely to rely on the State Pension in retirement.

However, it is encouraging that the government hasn’t abandoned its longer-term commitment. The 2.5% minimum rate has been used on a number of occasions, and is having the effect of slowly increasing what people receive in real terms. The long-term trajectory of the State Pension will also be more important to younger people, more than a one-off hike in line with earnings this year.

ENJOYING MORE FREEDOM AND FLEXIBILITY IN YOUR LATER YEARS

Planning for retirement can be overwhelming. One of the biggest risks you can face is running out of money in retirement. This can happen when you don’t adequately plan for retirement. The earlier in life you recognise this need, the more you can increase your chances of enjoying more freedom and flexibility in your later years. If you have any concerns about your retirement plans, please contact us.

PANDEMIC TRIGGERS SHIFT TO SAVING

Posted on November 11, 2021 by - Financial News, Uncategorised

People thinking more about their spending and financial priorities

The coronavirus (COVID-19) pandemic has lead to more people re- thinking how they spend and manage their money, with more than half (51%) now prioritising saving for an unexpected event or loss of income, research published suggests.

A third (32%) are setting aside money. This reflects Bank of England estimates that more than £200 billion of savings have been built up during lockdown, but only 10% of these are expected to be spent over the next three years.

SPENDING AND FINANCIAL PRIORITIES

The findings show that while just under half (46%) of households are spending less generally on a day-to-day basis, the pandemic is clearly making people think more about their spending and financial priorities.

Nearly two-thirds (65%) said they are now very mindful about their money, with 38% giving more consideration to financial planning, and savings and investments. When asked what they would do with an unexpected £2k windfall, 40% said they’d save it compared to just over a quarter (26%) who said they’d spend it right away.

BATTENING DOWN THE HATCHES

Unsurprisingly, people’s savings are being offset in part by increases in grocery and household bills (for 37% and 36% respectively). And with more time at home for many, it seems we’re battening down the hatches and spending more on premium food and take-aways, while 39% are looking to invest in home improvements and DIY as we look to enhance our space.

IMPORTANCE OF OUR LIVELIHOODS

The good news for the advice sector is that nearly one in five (19%) are thinking more about seeking professional financial advice, a quarter of people are giving more thought to Wills and inheritance planning, and nearly one in five
are thinking about protection products such as critical illness cover.

The past 19 months really have brought into sharp focus the importance of our livelihoods and finances, with many concerned about their health and financial security. But despite these tough times, it’s reassuring to see people taking stock and thinking positively about how they can bolster their situations, with one in five people considering professional financial advice.

HOW CAN YOU CREATE A SECURE FINANCIAL FUTURE?

Looking for help to chart your path through life, ensuring you are financially ready for every stage from getting your own place
to funding your children’s education to anticipating a comfortable retirement? Speak to us today and make sure your plans are on track for the future you want.

Preparing for the unexpected

Posted on November 4, 2021 by - Financial News, Uncategorised

Protection should be a core part of your financial plan

When you think of financial planning, pensions and savings will spring to mind. But, whilst often overlooked, protection should be a core part of your financial plan.

If you are worried illness or injury could leave you without enough to pay bills, there are solutions to help protect your income. While some people could rely on state benefits as a safety net if they experienced a sudden loss of income, for many the drop in income would be too severe to maintain their standard of living.

BEING ABLE TO KEEP PAYING THE BILLS

In many situations, families rely on both partners’ income to pay the monthly bills and don’t think about the impact losing one income could have on their standard of living. Even though people recognise the need to take out life insurance to pay o their mortgage if they die, some may not think about how their family could continue to pay their outgoings if they became ill or were injured and unable to work for a long period of time.

If something were to happen to you, would you and your family be able to keep paying the bills? The coronavirus (COVID-19) outbreak has made many of us think more carefully about protecting ourselves and our family from financial diculties. However, this isn’t just about having savings and investments to provide for the long term – it’s also about ensuring you and your loved ones are provided for should the worst happen.

SUFFICIENT SAVINGS TO MANAGE FINANCIALLY

Have you calculated how much you and your family would need if you found yourself unable to work? This should also take account of your savings and any other income you might have. Using a Budget Planner will enable you to work out what you’re spending each month, from household bills to general living costs. Having a good idea of your overall budget will make it easier to make changes.

Not everyone will have sucient savings to manage financially for long periods of illness – particularly if this money is earmarked for other plans like retirement or helping children with their education. That’s where insurance protection comes in, and there are a variety of options that could help to cover specific costs, or replace income, should you find yourself unable to work.

INCOME PROTECTION

Income Protection insurance can provide a regular replacement income if someone is unable to work because of an illness or injury. Typically, a policy pays out after they’ve been o work for six months (often called a ‘deferred’ or ‘waiting period’) and can pay a percentage of their salary until either they return to work, reach State Pension Age or die while claiming.

CRITICAL ILLNESS COVER

Critical Illness Cover is a type of insurance that pays out a tax-free lump sum if someone is diagnosed with, or undergoes surgery for, a critical illness that meets the policy definition during the policy term and they survive a specified number of days. It’s designed to help support you and your family financially while you deal with your diagnosis – so you can focus on your recovery without worrying about how the bills will be paid.

LIFE INSURANCE COVER

Life Insurance Cover pays out a lump sum if someone passes away during the policy term.

If you’re diagnosed with a terminal illness and are not expected to live longer than 12 months, some policies will provide the sum prior to death. It’s there to provide financial support for your loved ones after you’re gone, whether that means helping to pay o the mortgage or maintaining their standard of living.

PRIVATE MEDICAL INSURANCE COVER

Private Medical Insurance Cover is a type of cover that pays your private healthcare costs if someone has a treatable condition. Whether it’s overnight care, outpatient treatment, diagnostic tests, scans or aftercare, you receive the specialist private treatment you need, in comfortable surroundings, when you need it. The cover is available at a range of dierent levels of cover at various premiums designed to meet your specific needs.

TIME TO SAFEGUARD YOUR FINANCIAL FUTURE?

The possibility of passing away prematurely, getting a serious illness or sustaining an injury isn’t something we like to think about, but being prepared can help you to avoid money worries for both you and your family. To find out more, please contact us.