Monthly Archives: November 2022

PREPARING YOUR FINANCES FOR RETIREMENT

COULD MARKET VOLATILITY AND INFLATION MEAN YOU HAVE TO DELAY RETIREMENT?

It’s never too early to start planning for retirement. But if you’re nearing retirement, it’s especially important to have a plan in place in case market volatility or inflation impacts your desired retirement timeline.

Some people assume that they will be able to retire on time, regardless of what the stock market or inflation rates are doing. However, this is often not the case. Market volatility and inflation as we’ve seen over recent months can have a significant impact on the cost of living in retirement, and they can also affect how long your savings will last.

With a little planning and forethought, you can make sure that you’re prepared for whatever the future may hold so that market volatility and inflation do not derail your retirement plans.

DO YOU UNDERSTAND WHAT YOU HAVE?

It’s important to understand what you have and where your income will come from, so that you can make the most of it in retirement. Your retirement income can come from a variety of sources, not just your pension savings or any income you’ll receive from final salary-type pensions (also known as ‘defined benefit’ pensions).

Other sources of retirement income could include: the State Pension, which will give you a welcome top-up when you’re eligible – currently age 66, although this will rise in the future; annuities (a guaranteed income for life, usually bought with pension savings); drawdown (where you keep your pension invested and take an income from it, while the investment continues to grow); workplace pensions (such as a company or occupational scheme).

You might also have Individual Savings Accounts (ISAs), other savings and investments, or rental income from property you let out.

IS THIS ENOUGH FOR THE FUTURE YOU WANT?

Once you know what you have, think about what you’ll need in the years to come and how long that may have to last. Remember that retirement could be three to four decades. That’s why it’s important to have a plan in place that can cover your costs, no matter how long you live.

You need to consider when thinking about your future needs that, over time, the cost of living tends to go up. In order to keep up with inflation, you’ll need your savings and investments to grow at a similar rate. This way, your money will be able to buy just as much in the future as it does today.

One of the biggest risk factors in retirement is outliving your money. This is especially true if you don’t have a pension to supplement your income. That’s why it’s important to make sure your savings will last as long as you need them to.

EXPLORE ALL YOUR OPTIONS

Even if you’ve seen the value of your pensions and investments fall that doesn’t necessarily mean that you’ll have to delay your retirement altogether. The good news is that there are steps you can take to help ensure that your retirement savings will last as long as you need them to. These include diversifying your investments, staying invested for the long term and being mindful of expenses. You could also consider flexi-retirement, which means staying with your current company with reduced hours, or take a new part-time job, meaning you’re less reliant on your pension for income. You could take less from your pension savings and investments until their value recovers and use other savings instead to bridge the gap. Also, if you have any income from final salary pensions, you’ll receive a guaranteed amount each year. And this will generally increase each year too, as will your State Pension once you start receiving this.

IT’S GOOD TO TALK – WE’LL HELP YOU UNDERSTAND YOUR OPTIONS
If you’re nearing retirement age and are concerned about how market volatility and inflation could impact your retirement, we can help you understand and offer guidance on how to adjust your plans accordingly. For more information, please contact us.

A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS PLAN HAS A PROTECTED PENSION AGE).

THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP 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.

SPOTTING AN INVESTMENT SCAM

HOW SCAMMERS ARE GETTING MORE CONVINCING

Around half of UK adults (51%) have or know someone who has received a suspicious communication in the last 12 months, according to new research. This equates to 27 million people across the UK.

Most of these cases can be described as ‘phishing scams’ (51%), when
a fraudster attempts to imitate a legitimate company or person to secure important information from the victim.

PENSION TRANSFERS

Crypto scams are also becoming worryingly common, with one in five reporting they or someone they know has received one in the last 12 months. Pension transfer scam communications account for almost one in ten (8%) of contacts, while romance scams or dating scams are similar at 11%.

SCAMMER APPROACHES

Around a fifth (21%) of those who have or know someone who has been contacted say they have lost money because of approaches by scammers. However, among 18 to 34-year-olds, this increases to almost half (46%).

The average loss to scams for themselves/ someone they know was around £207, with this amount almost doubling to £361 for those aged 18 to 34 years old, compared to £112 for those aged 55+.

PERFECT OPPORTUNITY

With many families struggling to make ends meet, and as the cost of living squeeze tightens, offering easy access to your pension might seem the perfect opportunity to dig yourself out of trouble. The reality is you can’t access your pension savings before the age of 55, so it’s very likely it will be scammers.

Follow the simple rule of thumb: if it appears too good to be true, it inevitably is. Simply walk away, hang up or delete the email or text to keep your money safe from the scammers.

  • 51% of UK adults – 27million people – have received or know someone who has received a suspicious communication in the last 12 months
  • Younger people are more likely to know someone who has lost money, and are aware of someone losing more than older generations
  • Almost one in ten (8%) communications relate to pension transfers
  • 10 TIPS TO HELP IDENTIFY AND AVOID FINANCIAL SCAMS
  • If you receive an offer to help you access your pension savings before age 55, for example, through ‘pension loans’ and ‘free pension reviews’. It is only possible to access your pension before age 55 in rare situations, for example, if you are very ill.
  • Warnings that the deal is limited and you must act now. This is a pressure tactic and making any financial decisions should not be done under pressure.
  • HM Revenue & Customs (HMRC) will never contact you by email, phone or text informing you of a tax refund, so simply delete or ignore any contact made this way – HMRC will only contact you via post.
  • You are discouraged from seeking professional financial advice or talking to Pension Wise.
  • Sign up for Action Fraud Alert, a free service provided by the National Fraud Intelligence Bureau. The service alerts about new types of crime or those which are increasing in their severity. If you sign up, you will receive those alerts which are relevant to you. https://www.actionfraud.police.uk/sign- up-for-action-fraud-alert Contact by somebody who is not on the Financial Conduct Authority (FCA) Register. The Register is a public record of all the regulated firms and individuals in the financial services industry, including pension providers and investment companies https:// register.fca.org.uk/
  • Be very cautious around any recommendation to take a large amount of money, or your whole pension pot, in a lump sum and invest it elsewhere, for example, in overseas property, forestry, car parking or storage units. And be very wary of unsolicited offers of ‘amazing investment returns’.
  • Seek advice from your professional financial adviser who will be able to explain the rules and tax implications of different options and help you make the best choices for your personal circumstances, so be very suspicious if this is discouraged.
  • There can be significant tax implications if you choose to cash in your pension in one go, so check the tax position before you make any decisions.

Check www.fca.org.uk/scamsmart for known scams and use the tools to help identify a potential scam.

LOOKING FOR FINANCIAL ADVICE?

We know you’ll have different priorities for your wealth at different points in your life. Whatever your financial aims, we have the expertise that can help you achieve them. Please contact us to discuss your plans

BALANCING RISK AND RETURNS

BONDS CAN PLAY A KEY PART IN BUILDING AN INVESTMENT PORTFOLIO

UK government bonds, also known as gilts, are debt securities issued by the UK government. They are used to finance the government’s borrowing requirements and are often seen as a safe haven asset by investors.

Gilts are traded on the London Stock Exchange and the payments on gilts are fixed, meaning that they provide a predictable income stream for investors.

FIXED INCOME PORTFOLIO

Investors who place large portions of their portfolio in fixed income investments are usually looking for a regular, secure income stream. They are often retired and reliant on their investments or pension to provide a monthly income.

Gilts are typically issued with maturities of between one month and 30 years. During that lifetime, they usually pay a set amount of annual income – the ‘coupon’. They can be held to maturity or sold prior to maturity if the investor needs access to the funds.

SIGNIFICANT GROWTH

The UK government bond market is one of the deepest and most liquid markets in the world. It is also one of the most important financial markets. The size of the UK government bond market has grown significantly in recent years.

The main factors affecting the price of bonds are: Interest rate risk – the direction interest rates are moving; Credit risk – the perceived risk associated with the issuer; Duration risk – the amount of time left before the issuer has to repay the bond holder.

HEIGHTENED VOLATILITY

Shorter-dated bonds – those that will redeem within five years – are less price sensitive to interest rate movements than longer-dated bonds. This means prices tend to move up or down less when interest rates rise or fall.

Following the Mini-Budget and the government’s fiscal plan announcements on September 23, the UK government bond market experienced heightened volatility, with the market posting some of its largest daily swings on record.

INTEREST RATE HIKES

As a result, gilt yields rose steeply as investors assimilated the expected £62.4bn increase in gilt sales over 2022/23, and substantially increased their expectations of interest rate hikes from the Bank of England. On the day of the announcement, the ten-year UK government bond yield rose from 3.45% before the Chancellor’s statement to end the day at 3.83%, marking its largest one-day move for more than 30 years.

As a result, gilt indices fell 2.6% on the day. The yield subsequently rose above 4.5% before falling back to around 4% by the morning of Friday 30 September. This followed the Bank of England announcing on Wednesday 28 September a large-scale purchase.

EMERGENCY INTERVENTION

The Bank launched its emergency intervention after an unprecedented sell-off in long-dated UK government bonds that threatened to collapse multiple liability driven investment (LDI) funds, widely held by UK pension schemes. On the day the Bank of England stepped up its bond-buying support, the International Monetary Fund stated that a ‘change in fiscal policy’ would help calm bond markets.

There are some mitigating factors that provide greater context to the market reaction, such as the fact that the Mini-Budget came at a time when global markets were looking fragile, with US bond yields and the US dollar both moving higher for much of September. Still, the relative moves compared to US and European equivalents suggest that there were clearly UK-specific factors at play following the Mini-Budget.

SECURING THE FUTURE YOU WANT

Whether you want to grow your wealth for a retirement income or a legacy to pass on to future generations, we can help you set goals and try to achieve them. To find out more and to discuss your options, please contact us.

THE VALUE OF YOUR INVESTMENTS CAN GO DOWN AS WELL AS UP AND YOU MAY GET BACK LESS THAN YOU INVESTED.

HOW TO PROTECT YOU AND YOUR FAMILY’S FUTURE

WHAT KIND OF PROTECTION INSURANCE DO YOU NEED?

There are various complex risks in life that we all face, such as serious illness, an accident or death. What would happen if something were to happen to you? Would your family be able to cope financially with the impact an unexpected event might have?

These are not easy questions to ask but it is important to consider what would happen if an unexpected event or accident took place, and how you could protect your family from the financial effects of serious illness or death.

BIG PART IN OUR LIVES

Deciding what your priorities are and understanding what options you have are key parts of the protection planning process. This helps you ensure that you have the financial protection most suitable for your circumstances.

Every family is different, but they often play a big part in our lives. It’s important to think about how we can protect them against the unexpected as best we can.

PROTECTION FOR THE UNEXPECTED

LIFE INSURANCE

Death is an unpredictable event, so it’s important to make sure you have the right level of cover in place. The amount of life insurance you need will depend on your individual circumstances. There are many good reasons to take out a policy. For example, if you have dependents who rely on your income, then life insurance can provide financial security for them if you die.

There are different types of life insurance available, so choosing the right policy for your needs is key. Term life insurance provides cover for a set period of time, while whole of life insurance covers you for your entire life. You can also choose between level term insurance, which pays out a fixed amount if you die during the term of the policy, and decreasing term insurance, which pays out less as the policy progresses.

There is also a variation on the basic term assurance theme that is often worth considering as it can reduce the cost of cover. Family Income Benefit is a policy with a sum assured that reduces uniformly over time but provides regular payments of capital on the death of the breadwinner (the life assured).

If you have any debt, such as a mortgage, then it’s also important to take out life insurance to make sure that this is paid off if you die. This will give your loved ones peace of mind and prevent them from being burdened with debt.

INCOME PROTECTION INSURANCE

There are a number of reasons why income protection insurance should be a part of your protection planning. Firstly, it can help to protect your income if you are unable to work. This could be due to an illness, injury or disability that means you are unable to work. It can help to cover the costs of your everyday living, such as your mortgage or rent, bills and food.

If you do not have sufficient protection in place this may mean you have to rely on your savings, or on the help of family and friends. Income protection insurance is especially important if you are self-employed or have a family to support. If you are unable to work, your income protection policy will provide you with a replacement income so that you can continue to meet your financial obligations.

There are different types of income protection insurance policies available, so you should obtain professional financial advice to ensure you can compare the different options and fully understand the terms and conditions of the policy.

CRITICAL ILLNESS COVER

If you become seriously ill or are diagnosed with a specified critical illness, even if you are still able to work, critical illness cover could provide you with a financial safety net. It can help to pay for treatment, to make adaptations to your home or lifestyle, provide an income for your family if you are unable to work or other costs associated with your illness.

In some cases, it may even pay out a lump sum if you die as a result of your condition. The tax-free money from the policy could be used to help cover the cost of treatment, make adaptations to your home or lifestyle or provide an income for your family.

There is no guarantee that you will not experience a critical illness during your lifetime, so it is important to have this type of cover in place. It will give you the peace of mind of knowing that you and your family are financially protected if the worst were to happen. Critical illness cover is not a substitute for health insurance.

NEED A HELPING HAND FOR YOU AND YOUR LOVED ONES?
Do your children, partner or other relatives depend on your income? Many families would have to cut their living costs in order to survive financially in the event of the main breadwinner falling ill or dying prematurely. If you are unclear on your protection requirements, we are here to explain your options. Please contact us for more information.

INCOME PROTECTION INSURANCE PLANS HAVE NO CASH IN VALUE.

IF PREMIUMS ARE NOT MAINTAINED COVER WILL LAPSE.