Rishi Sunak’s Autumn Budget: what it means for your money
The Chancellor, Rishi Sunak, has delivered the government’s Autumn Budget.
The measures contained within it set the tone of the UK’s finances for the next 12 months. And while there are some fresh measures in there, it is the distinct lack of action on many issues that may have the biggest effect on household finances.
Here are some of the big changes, and several things that weren’t touched, but will affect your finances.
National Insurance and dividend tax hike
Not announced in the Budget per se, but perhaps the biggest shift in government taxation in many years, National Insurance and dividend taxes face a 1.25% hike to help pay for health and social care.
The hike will add £130 a year to someone on an income of £20,000, while those on a higher income of £50,000 will see an extra £505 come out in taxes.
With the dividend tax hike there’s no tax to pay on the first £2,000 of earnings, but beyond that you’ll pay an extra 1.25% on top of the current rates. That means 8.75% for basic rate payers, 33.75% for higher rate payers and 39.35% for additional rate payers.
There were a raft of other personal finance-related measures including:
- A hike in the living wage to £9.50 per hour
- A cut to the Universal Credit taper rate to 55%
- An alcohol duty reform to simplify the way beer, wine and other drinks are taxed
- Fuel duty being frozen for a 12th year
But perhaps more noticeable was the absence of certain provisions.
What was missing from the Budget?
Sunak avoided making certain changes that are in and of themselves a form of taxation. There was also a distinct lack of help in regard to economic issues that are plaguing households at the moment.
Perhaps the biggest aspect of the tax system that Sunak left untouched was allowances. This has the effect of creating a form of stealth tax. But how does that work?
By leaving an allowance for say, Income Tax, at the same level for multiple years isn’t an out and out tax rise. But as the general earnings of the working population increase over time – be that from becoming more productive or purely to keep pace with inflation – it means progressively more and more people fall into the higher bands for tax purposes.
Take the example of Inheritance Tax (IHT). The banding of IHT has remained static at £325,000 for years. The Office for Budget Responsibility (OBR) predicts 6.5% of estates will be liable to pay the duty by 2026 – up from 3.7% in 2020. By simply ‘doing nothing’ the government is increasing its tax take over time.
The same is true for a raft of other allowances which remain static – from pensions annual allowances to ISA limits, capital gains tax and others. The more they stay the same, the more the government rakes in.
This is all more pressing than ever in the current economic climate, which is accelerating the issue, namely inflation. In order to keep up with inflation, households are having to seek higher earnings or cut their costs. Sunak did nothing to assuage inflation fears, despite hints he might cut the VAT rate on energy bills.
Overall, the impact of squeezing allowances and rising inflation could leave household incomes stretched for the foreseeable future.
NS&I Green Bonds – what are they, and is there a better alternative?
National Savings & Investments (NS&I), the government-backed savings provider, has launched its first ever green bonds.
So, what is the deal with these brand-new ethical savings accounts?
Anyone saving via the bond will receive 0.65% AER, fixed for three years. You can save a maximum of £100,000 but start with as little as £100 if you like. The money is locked away for a three-year minimum. Because it is a bond rather than an ISA, interest on the savings is taxable when the bond matures.
What’s green about them?
The bonds are the first directly offered to the public with a ‘green’ focus. The government, with climate change high on the agenda, has begun issuing green gilts to institutional investors, but saw the opportunity for private citizens to get involved as well.
The money raised for the green bonds will go directly towards investments in government green projects and initiatives. Any money the bonds raise will be matched by HM Treasury too.
At the time of writing, there is no further detail on exactly what projects this includes. But the government says it intends to update on this in due course.
How it compares
Savings rates are poor across the board at the moment. But even by these standards, ethical considerations aside, the NS&I green bond is an awful offer.
For a three-year bond the current top offer comes from JN Bank, which offers 1.81% interest over three years. This is followed by Zenith Bank at 1.78% and United Trust Bank at 1.75%.
Ultimately, then, the only reason why you should consider investing in the green bonds is if you are highly motivated to lend your money to the government to aid green projects.
What you should do instead
In reality, even the aforementioned savings rates are poor. The Bank of England recently warned that inflation is headed to 5% by the Spring, which means that any money growing by these rates is still losing value in real terms.
Instead, money that isn’t needed in the near future should be fully invested in markets. While the returns aren’t guaranteed, generally speaking, it is a better long-term approach to wealth growth.
Ethical considerations in investing are an increasingly popular and sought-after approach. Please do get in touch with your adviser if you’d like to learn more.
Rishi’s rising tax burden makes good wealth management a top priority
With the new Budget delivered by Chancellor Rishi Sunak, the tax burden on ordinary citizens of the UK is now at its highest level in 70 years.
From frozen personal allowances to National Insurance and dividend hikes, at no other time since the 1950s have we paid so much of our livelihoods to the state.
The ethical, political, and moral arguments around this are for a different blog, but there is an important overarching theme to respond to such changes – how to make the most of what we’re left with after the state has taken its levies.
Good wealth management has always been about making the most of your money in any given situation. If that situation changes, so too it is an adviser’s job to help you adapt to those shifts.
Just because the burden is now higher on paper doesn’t mean you can’t continue to benefit from good planning for your wealth.
Tax planning
A critical aspect of this comes down to good tax planning. Tax planning is a catchall term that describes several activities.
First and foremost is ensuring all your personal allowances are properly used. This includes everything from ISA limits to pension contributions and dividend allowances. Maximising your allowances is extremely important. The ISA limit is relatively generous and everything inside this is extremely favourably treated in tax terms.
Likewise, your pension has major contribution benefits in the form of tax relief. The issue for pensions is that tax treatment can become complicated when drawing down from your pot, making advice and rigorous planning essential.
There are longer-term considerations too, such as inheritance tax (IHT) planning. IHT is a booming tax that ensnares more and more households every year. While ultimately not ‘avoidable’, there are a series of allowances such as gifting and seven-year limits that let you give away wealth tax free.
Where planning comes in is through careful forecasting and management of your income and outgoings. Careful projection of how much you’ll need at any given age will be key in ascertaining how much you can give away early.
Investment
The other key aspect of good wealth management, which ultimately feeds from the above tax planning considerations, is how to grow your wealth once it is correctly sheltered.
Inflation, transitory or not, is running away at the moment. And while it may return to more typical levels later in 2022, the long-term 20-year average is still around 2.8% according to the Bank of England.
What that means is that your money has to work harder to grow in value or return an income that stays ahead of rising prices. This is a key area where good wealth management comes in to protect and grow your money via the stock market, bonds, and other financial assets.
The truth is, doing nothing is a disastrous alternative. Be it through taxes or inflation (often called a tax on saving), the forces looking to erode your wealth are too strong to ignore.
Rising bills: here’s what to look out for to keep you on financial track this winter
With the economy roaring back to life as we emerge from the pandemic, household costs are rising fast to meet rising demand for certain goods and services.
Building wealth, while a long-term priority, can be hampered if a family’s budgeting gets off track. With inflation rising - 2.9% according to the most recent Office for National Statistics data – and expected to peak above 4%, now is the time to take stock of your finances and look again at where you can save money.
Inflation isn’t the only current worry. The tax burden, as set out by the Chancellor recently, is set to rise to a 70 year high.
So, what can you do to rein in spending, or cut costs where possible? Here are a few ideas.
Energy bills crisis
The hike in energy bills has perhaps been the highest profile issue for households in recent weeks. Rocketing gas prices has led to the collapse of a slew of energy providers, while surviving firms have pulled any cheap deals available.
The days of energy switching to get a better tariff, are for now at least, over. This makes heating and electricity one of the standout cost rises households now face.
While households are protected by the energy bills cap, currently £1,277 per year, that could also be set to rise to over £1,500 in the Spring. It is essential then instead to look at how to cut the actual costs of those bills.
Basic measures should be taken to ensure your house is as energy efficient as possible. Draft excluders, radiator foils and even just turning the thermostat down a few degrees and wearing woolly socks can make a big difference.
Of course, if you’re older or not in perfect health, it’s not advisable to leave your house cold. If you’re in this position, making sure you have access to the Winter Fuel Payment could be a big help.
Cut unnecessary costs
Now is the time to look at your spending habits and decide if anything can be cut out. Gym memberships you don’t use, streaming services you never watch, delivery subscriptions you don’t maximise, should all go.
While taken individually these costs may seem minor, collectively and annually they can add up to thousands of pounds.
Another area where costs are rising are weekly food shops and dining out. Lowering costs in this area can be challenging, but it’s important to be vigilant with changing costs. Food prices can swerve up and down one week to the next, so having a spending limit and trying to stick within it is key.
Make your savings work harder
The more long-term aspect of the issue of rising costs is ultimately how to maintain wealth growth while keeping your saving levels up. Working hard to keep your costs under control is the starting point for being able to maintain good habits with regards to savings and investing.
Over and above that, ensuring strong wealth growth is essential too. Inflation is eating away at more of our savings’ value, so keeping money in low interest savings accounts is essential. Thankfully with good wealth management in place, this is eminently achievable.
Autumn Budget 2021: With Britain at a critical juncture, here are 16 things to watch out for in Rishi Sunak's budget speech
From pensions and council tax to student loans, there are 16 things to watch for in Rishi Sunak's budget speech.
Scrapping the office permanently? Four ways to grow your business remotely
This article first appeared in Professional Adviser.
Most of the financial advice community made a remarkably smooth transition into remote working when the first national lockdown hit last year. I take a look at ways adviser businesses can grow without an office…
We're all aware by now of the huge time and cost savings working from home can bring to IFA businesses, but adopting such arrangements for the longer term means making some fundamental changes to how firms generate leads and keep existing clients feeling happy and valued.
For those thinking of scrapping the office altogether, there are a four learnings to factor into the company's growth strategy.
- Face-to-face client entertaining isn't any less important
It can be tempting to think that remote working means it doesn't matter where you or your clients are located, but that simply isn't the case. Regardless of the adjustments being made to a firm's business model, some clients will still want to be wined and dined by their adviser in person.
There's no one-size-fits-all approach here but, ultimately, if a client has become accustomed to lots of face-to-face contact, then you need to find a way of maintaining that over the long term.
We should challenge the notion that anyone younger than a baby boomer is only interested in an online/digital service. That clearly is not the case, or at least, not yet. Most clients still value human interaction.
- Don't underestimate the importance of client comms
Client communication is still seen as something quite fluffy by many, but will prove absolutely essential for those attempting to engage clients and prospects in a virtual world.
Newsletters and blogs are an age-old and effective means of staying in contact, while highlighting a firm's key areas of expertise, but it's those who think outside the box who will really set themselves apart from the crowd.
We all need to be more imaginative about client engagement outside of a normal meeting. I have seen some great events hosted online with entertainment packs being sent to clients beforehand. Some have been upmarket Champagne and goodies, others have been more ‘home spun'. I would bet that pretty much every firm has a client involved in wine sales or perhaps an artisan food producer. Using them can be a good way to be seen as supporting local business.
The excuse to host something doesn't always have to be directly advice related. For example, some of our own advisers tell us they have achieved particularly strong engagement through events that help people understand how they can strengthen their mental wellbeing.
With a growing number of people in the pre-retirement market engaging with platforms such as Facebook and Twitter, there's also an argument for upping the ante on social media. Of course, every follower isn't going to be a potential lead, but you need to have a presence to engage regularly with those who may need support.
Social channels should be monitored regularly so that you are able to interact if people get in touch, but also offer a great way of directing traffic towards client communications.
- Professional connections are key
Having a strong bank of professional connections has long been a valuable means of building up a business and its client base, but this will become even more important as we move forward.
The pandemic has triggered a real growth in demand for services such as estate and inheritance tax planning, which are both clear examples of where it would be beneficial to have strong partnerships with other professionals.
People rely on lawyers, accountants and IFAs at crucial milestones in their lives, with every decision having overlapping requirements. With this in mind, establishing strategic relationships presents a surefire way of generating a stream of clients you are well-equipped to support.
We have found that professional introducers have been very enthusiastic about joining online workshops and seminars.
- Working remotely makes it ‘easier' for staff to leave
Undoubtedly, the ability to employ someone who is geographically miles away has been a real bonus but it can also make retention more difficult. Working from home provides benefits for staff and the business alike, but it will be much easier for employees to lose their emotional connection with a business. An employee who is largely unrestricted by geography has a much wider range of opportunities and salary scales.
Business owners need to be thinking carefully about how they ensure engagement and productivity remains high. Regular Zoom check-ins cannot replace the feeling of a business's culture you get while sat in the office, just as it's nigh on impossible to remotely train people from scratch to become top-notch advisers.
As soon as is safe, bring your team together - even if it's only once a month or quarter - to sit around a table and generate ideas or go out for a few drinks. It will be a vital means of maintaining connectivity and ensuring that staff remain happy and engaged over the long term.
It's clear that things will never be the same again for a lot of advice businesses but, through careful planning, firms needn't have a conventional office to be able to thrive in their new normal.
Expert advice from a Chartered Financial Planner on what to consider before joining an IFA network
In a recent interview, Douglas Harley, Chartered Financial Planner and MD of Beaufort Financial Forth Valley shared his experience on selecting and joining an IFA network.
What made you decide to join a network?
Regulatory and PI insurance pressures were both major drivers, but the key thing for me was that I needed more support as a business owner. I was regularly working 60-hour weeks and wanted to pass over some of the back-office responsibilities that were holding me back from putting full focus on clients.
I’m also not getting any younger, so wanted something that would offer me an exit strategy when the time comes. I knew I could get this with a network but was determined to find a firm that would support my independence and allow me the autonomy to keep developing the business I had worked so hard to build.
You’ve been with the Beaufort Financial IFA network for just over a year now, what made you choose this firm?
It was clear Beaufort Financial could provide all the above, but what I really valued was that they interviewed me just as much as I was interviewing them during the discussion stages. They weren’t simply trying to get me in the door, and this gave me confidence that it was the right fit for both sides.
Even now, myself and the rest of team feel like we’re part of something rather than just a cog in the machine. I have regular calls to discuss how things are going which isn’t something you get with many networks.
What advice would you give to an adviser who’s currently considering joining a network?
Thorough due diligence is an obvious one, but you really do need to interrogate what you’re paying for – and what you’re getting in return.
The key thing I would suggest is to list out all the jobs you don’t want to keep doing and ask if the network is prepared to take all of them off your desk. Every firm will offer a different level of support, so this a good way to find out if you’ll be genuinely getting value out of a relationship.
Leading on from this, be sure to find out how much direct access – if any – you will get to specialist in-house expertise. One of the things we’ve really come to value is being able to get expert input from Advice and Compliance experts on those cases that are a bit more out of the ordinary.
Aside from COVID-19, what do you see as the biggest challenge facing IFAs right now?
A big area for me is robo-advice. Of course, most people using robo-advisers are younger and don’t have much wealth, but there’ll come a point when this market also needs looking after. Those advisers without some form of online advice offering will find it tough to engage with these individuals owing to a lack of relationships and the different regulatory hurdles in play.
How to start engaging this audience and help them understand the value of advice from a personal adviser is an issue that will become increasingly prevalent as the younger generations begin inheriting money and growing their own wealth over the next few years.
Beaufort Financial Forth Valley is a team of chartered financial planners providing wealth management services to clients in and around Falkirk.
Looking to join an IFA network? Find out more here
How to protect your budget from the energy price crisis
Gas price rises have soared thanks to rocketing demand for the fossil fuel as the global economy gets going again.
It is something of a perfect storm for households as the government’s energy price cap is rising too. It now stands at £1,277 and is predicted to rise again next April to above £1,600, thanks to mounting wholesale prices.
The issue it has created for the UK is that many firms in the energy market rely on low prices to offer better deals to households than the ‘big’ firms.
But this has led to a lot of companies collapsing as energy prices rise. The upshot of this is that consumer choice in the market has been totally wiped out. Price comparison services such as uSwitch have even suspended their energy price comparison services as a result.
So, what can you do to keep a handle on your energy bills with such issues at hand?
Still try and switch
If you weren’t already on a cheap deal, you could still find a provider that will offer you a better price than the energy price cap currently stipulates. Firms such as Octopus Energy, E.On and others still offer lower prices although you may not be able to find them on price comparison sites at the moment. It is worth researching and getting quotes from as many companies as you can.
Improve your home’s efficiency
Improving energy efficiency of your home can range from minor tweaks to big projects, but there are some ways to go about it – especially if you live in an older property. For starters, excluding any kind of draft and keeping doors inside closed will retain more heat in rooms.
Other ideas, which may seem more wacky but are in fact quite effective, include getting radiator foil which reflects heat from your radiators back into the house.
Smart plugs and timers strategically placed in the house can also be a good way to save energy, especially if you forgot to turn the TV off at the socket before bed.
Other higher investment and more long-term efficient solutions include getting brand new roof and wall insulation installed. This can cost thousands but will be recouped as your bills come down over time.
Finally, installing new eco-friendly biomass boilers or solar panels have a high upfront cost, but could in time pay you for putting energy back into the grid. According to Renewable Energy Hub such equipment could save you up to £2,000 a year in energy bills.
Turn down the thermostat
Ultimately the ‘price’ you are quoted is only ever an estimation by the energy company of what they think you will use. If you live in a three-bed house and they estimate you’ll use £1,500 of energy per year, it doesn’t mean you’ll actually use that amount.
The one sure-fire way to pay less for your energy bills is to simply use less energy! This means turning down the thermostat, putting on a jumper and slippers and having a hot water bottle in bed at night. Although it is not advisable to slash your energy usage in mid-winter, especially if you’re older or have any health conditions, finding ways to cut down on overall energy usage can have miraculous effects on your bills.
Minor changes such as turning off electric appliances you’re not using at the wall socket, cutting down on tumble dryer cycles, and switching to energy efficient lightbulbs will have a significant impact on your bills in the end.
Budget 2021: Here’s what to expect from Rishi Sunak’s upcoming tax announcements
The Chancellor, Rishi Sunak, will deliver his latest taxation and spending policies on 27 October.
The Budget will account for the government’s spending plans and how it intends to fund that spending.
While we can only predict what is likely to come up, we already know that the government is adding 1.25% to the annual cost of National Insurance. This will already add hundreds to the tax bills of anyone who earns an income via salaried employment or company dividends.
Other policies we already know are on the horizon:
- Self-employed tax tweak – as part of the government’s ‘Making Tax Digital’ shift, basis periods for self-employed workers are being reformed. While not costing them more upfront, it will net more income for the Treasury as it speeds up the timeline for taking revenue.
- Corporation tax hike – a range of coronavirus relief measures are due to expire, meaning that overall corporation tax burdens will rise significantly in the new tax year.
- Minimum wage hike – announced by Boris Johnson at the Conservative Party conference, the so-called living wage is set to be raised to £9.42 an hour.
- Student loan repayment threshold – this is likely to be lowered from the current £27,295 salary threshold, meaning more graduates will have to start paying the 9% levy on their incomes.
It is possible that further tax rises or changes to personal allowances may be limited. The government will be (politically) aware that more tax hikes will not be welcomed by the public. But Boris Johnson’s Government still has a lot of time before the next election. With restraint and paying down the debt of the coronavirus heavy on Sunak’s mind, what else could be coming up?
Here are some potential policies the Chancellor could unveil.
Capital gains tax
Recently touted and often referred to, a capital gains tax hike might hit the Conservative’s wealthier voters hardest but would be the easiest to square with the so-called ‘Red Wall’. Capital gains are taxed at a lower level than income, with many critics saying the rates should be equivalent as it effectively gives a tax break to those able to earn a living via capital gains – i.e. people who already have capital.
Inheritance tax
This is another one that has been on the cards for some time, but hasn’t yet materialised. Inheritance tax (IHT) is a much-loathed duty for families to pay after the death of a loved one. But it is also the target of the Office for Tax Simplification (OTS) because it is a very complicated levy to pay and is riddled with rules, exemptions and differing allowances.
Chances are that if Sunak does anything, he’ll work to simplify rather than raise or lower IHT rates. This would likely have the effect of not directly seeming like a hike – but will most likely raise more revenue for the Treasury as people will lose ways to avoid paying.
Pensions tax relief
Almost always on the chopping block but never actually cut (yet) – the rate of pensions tax relief for higher rate payers has been a low-hanging fruit for a long time. Doing away with higher rate tax relief on pensions could net the Chancellor an immediate multi-billion-pound windfall and would only affect higher earners.
If you would like to discuss your portfolio or any of the potential changes mentioned in this article, don’t hesitate to get in touch with your adviser.
Inflation is causing chaos, but good wealth management can bullet-proof your finances
Inflation is rising quickly, and with it the cost of living for everyone. But canny wealth management can be the best safeguard against the rising tide of costs.
Inflation – or the pace at which the price of goods and services rises – is at its highest level since March 2021. The current rate of inflation, as of 15 September, is at 3%, based on the Office for National Statistics (ONS) CPIH which includes housing costs and is considered the most accurate measure. Areas such as petrol costs, energy bills prices, food shops and all manner of other expenses are soaring in price as the country adapts to demand after the worst of the pandemic.
But day-to-day personal finance pressures of rising bills aside, one of the most pernicious impacts of high inflation is the erosion it causes to wealth.
Inflation is the very reason why good wealth management matters. The current top-rated easy access cash ISA offers a rate of just 0.6%, according to Savers Friend. Inflation is still expected to increase this year, but relatively speaking the average rate on inflation over the last 30 years has been 2.9%.
Using this calculator from Candid Money, we can see the impact inflation has on savings. At a rate of 3%, £100,000 of savings today will only have the purchasing power equivalent to £54,379 in 20 years’ time. That is an extraordinary erosion of wealth. Were this pot of cash to sit in the best-buy cash ISA mentioned above, it would grow to £112,746 and have today’s equivalent purchasing power of just £62,425.
Instead, if you were to invest that £100,000 with an average return of 5%*, after inflation averaging 3% over 20 years, you’d be left with a pot worth £271,264 – which would have the equivalent purchasing power today of £150,192. And this is without added future contributions.
The importance of tax
The other greatest factor that will have an impact on the value of your wealth, ultimately, is tax. While it is unknown what the government will do with its latest measures, we have a taster of what is to come in the form of the National Insurance hike.
There’s no guarantee on what measures will be changed, but it is likely as the government looks to pay down coronavirus debt it will at the very least attempt to close some loopholes and end some tax perks.
The issue here is it is extremely difficult to keep ahead of these kinds of tax changes. While it’s a reasonable bet that ISAs will be protected, other tax wrappers such as pensions are under constant scrutiny for what is called ‘salami slicing’ or the whittling down of allowances and closing of other benefits.
Combined with the harsh realities of inflation, smart wealth management, undertaken in conjunction with a qualified financial adviser, is a no-brainer that will save your hard-earned nest egg from crumbling.
*Investment returns are never guaranteed, this is taken as a representative example.
National Insurance hike: From dividends to salaries - what it means for your money
The government has announced that it intends to hike National Insurance payments by 1.25% from April next year.
The change will take effect from the new tax year, 6 April 2022. It will have an impact on anyone in employment, self-employment and those over state pension age but still in work. Workers’ wages, investment incomes and anyone who takes an income via dividends will be affected. The government says it is raising the tax in order to help fund the cost of social care, while also using some of the cash in the short term to clear the backlog of NHS patients caused by the pandemic.
How much will I pay?
When it comes to extra tax on salaried income – a basic rate payer who earns £24,100 a year would be £180 worse off after the NI hike in 2022-23. A higher rate payer on a wage of £67,100 would contribute £715 more in the same period.
What about dividends?
The government says it will also increase the tax paid on dividends to help fund the cost of social care. The current tax-free allowance for dividend income is £2,000 per tax year. Above this, basic-rate taxpayers have to pay 7.5% tax on dividend income. This will rise to 8.75%. Higher rate and additional rate payers will see dividend taxes rise to 33.75% and 39.35% respectively.
Are limited company owners affected?
The move will also affect anyone who owns a limited company. Many adopt this structure as a way to pay themselves an income via dividends, as the rates are generally speaking around 5% lower than income taxation.
Anyone who takes a salary from their company and dividends too faces a double hit of extra taxation.
If you would like to discuss the National Insurance rise and what it might mean for your portfolio or income, don’t hesitate to get in touch with your adviser.
Five tips for recruiting advisers in a remote-working world
This article first appeared in Professional Adviser.
Working habits have changed over the past 18 months during the coronavirus pandemic. This blog explores five ways advisers can better recruit in a world with more remote working.
IFA firms across the UK rose to the challenge of home-working last year, with many now planning to let staff work remotely more frequently, and others choosing to scrap the office altogether.
While the pros and cons of such arrangements have been widely debated, the fact remains that the people delivering the advice and doing the administration are essential to a company's success.
Now and in the future many firms will have to overhaul their approach to recruitment to ensure it suits their ‘new normal'.
This presents many potential challenges, but there are also clear pointers that can make a firm successful. Here are some examples.
1. Make sure your HR policy hangs together
Sadly, it's not as simple as telling people they can work from home and leaving it at that. Your HR policy needs to be absolutely watertight, which can be a huge project in and of itself.
Are you giving people the opportunity to work from home as a right or a privilege? There's a big difference.
Ultimately, you need to ensure that everyone is clear on the parameters. For example, will staff still be expected to travel in on specific days of the week, and is there any flexibility on this? And will everyone have the same rights and privileges, or will senior advisers have more autonomy than paraplanners?
You may also need to reconsider your health and safety procedures. Today, this means so much more than making sure that people plug things in safely. Even if you're not seeing staff every day, you still have a duty to ensure that all employees are well looked after both physically and mentally in the home workspace.
The legalities of where your responsibilities start and end can be a bit of a minefield, so you might want to consult a professional who can pinpoint any gaps in your policies and procedures. You'll find there are plenty of online HR agencies who will be willing to help, but make sure that you vet them thoroughly to be certain that you're opting for a credible provider.
2. Contract considerations
Standard employment contracts don't typically allow for home working, meaning that as with your HR policy you need to be completely clear on where you want people - and when.
You should also consider how confident you are that your business and clients will suit having advisers working remotely long-term. It's almost impossible to backtrack once something is written into a contract.
As a rule of thumb, putting new starters on an office-working contract - making clear that there is some flexibility for them to work from home - will provide the business with room for manoeuvre if circumstances change.
3. Don't lose focus on quality
For many firms, adapting their traditional working arrangements has created the opportunity to level up new staff hires. Some have discovered that they can source the same high-quality talent in areas outside of the UK's commuter belts.
However, tempting though it may be to streamline costs by targeting candidates in regions with traditionally lower salary ranges, you should always stay focused on how qualified someone is and how suited they are to your business.
The most successful firms will be those that take a candidate-driven approach, deciding how much an individual is worth to their particular business before bringing anything else into consideration.
4. Insist on at least one face-to-face meeting with prospective staff members
Wherever possible, you should always meet people face-to-face before making an offer - even if it's only once. We've all experienced misunderstandings on Zoom calls that might not have happened if we were in the same room; the same thing applies to interviews.
Meeting a person face-to-face enables you to gain a much better sense of who they are as a person and how well equipped they are to deal with clients. It's also extremely difficult to help people understand - and buy into - your cultural values online.
5. Embrace flexibility to access an even broader pool of talent
An increasing number of advisers are concluding that if they're not spending time and money on travel, then a three- or four-day week will suit them just fine. Not having to fork out for commuting costs means that they're prepared to take a salary cut.
By being flexible on when and where employees work, you're likely to attract a much broader and diverse pool of talent.
For an IFA business to really thrive in a remote-working environment, taking the time to ensure that your recruitment processes are up to scratch will be vital to your long-term success.
20 Stars in the South East
We are pleased to be included in the NMA's Top 20 Stars in the South East.
Is bank account switching back? Here’s what to consider before diving in
Current account switching was until recently a lucrative pursuit which could reward dedicated switchers with hundreds of pounds a year.
But in recent times, and especially during the pandemic, the offers available have collapsed.
That now seems to be changing though as high street banks up the stakes to attract new customers. But anyone thinking about switching their current account should consider a few things first. Some of the best deals, we will caveat, come from providers with the biggest customer loss rates. For example, according to data from the Current Account Switching Service (CASS) owner pay.uk, between April and June this year HSBC lost 26,743 customers.
In August HSBC also had the best current account switch deal on the market, with £140 to move your banking to it. That deal has now unfortunately closed, but will most likely be back when executives at the bank feel they need to 'up' customer numbers again.
The lesson here before making the switch based on a monetary reward, is to ask yourself why so many customers are leaving the bank. HSBC’s net losses were only -2,851 as the provider used switching incentives to gain new customers too. But the biggest net losers were Santander (-10,965), NatWest (-10,605) and TSB (-8,502).
HSBC’s switching offer is masking a bigger picture where many dissatisfied customers are leaving the bank for greener pastures. Before you dive into a new current account then, it is worth keeping these stats in mind – you might be getting a freebie, but you may soon tire of the service from your new provider.
Deals come and go frequently, as mentioned with the above HSBC deal which didn’t last long, so it is worth keeping an eye out if you are keen to get a switching reward.
At the time of writing there are two switching deals on the market.
- Nationwide
Nationwide currently has the only cash offer on the market, with £100 to switch if you’re not a customer. If you are a customer, for instance with a mortgage or a savings product with the Building Society, then you can get £125 for switching your current account.
To qualify for the reward you must complete a switch via the Current Account Switching Service (CASS) and pay out at least two direct debits from the new account.
The account also comes with 2% fixed interest on deposits up to £1,500 for the first 12 months you hold it.
- Virgin Money
Virgin Money isn’t offering a direct cash reward, but it is offering a £150 voucher for Virgin Experience Days. It is however a little complicated to obtain the reward.
You must apply for the account online then switch from your current provider within 45 days including at least two direct debits. Once this is done you’ll need to download and register the mobile banking app for Virgin Money and add £1,000 to the linked savings account.
You’ll need to keep the deposit there until your voucher arrives. The account pays 2.02% interest on balances up to £1,000.
Daniel Craig’s kids won’t see any of his money, but there are ways to bequeath responsibly
With the release of ‘No Time To Die’, James Bond star Daniel Craig says he’d prefer to spend or give his money away than leave it to his kids.
Actor Daniel Craig announced in an interview that he intends to give away most of his wealth when he dies, rather than leave it to his kids.
The James Bond actor went as far as to call inheritance ‘distasteful’. In his interview with The Telegraph, he did however demure slightly saying he does not intend to leave “great sums.”
Craig explained he intended to give away his money to charitable causes, and to otherwise spend his wealth before he dies rather than bequeath it to his children.
The James Bond actor’s approach could be seen as a noble one – his wealth will go to good causes and his kids won’t have the poison chalice of unearned wealth thrust upon them.
But there needn’t be such a gulf between approaches. There are several, arguably more responsible, ways to see that loved ones are looked after outside of the ‘traditional’ inheritance.
Gifts
Regular gifting is a great tax efficient way to use some of your wealth to help out loved ones. The rules are pretty straightforward, and the allowances not so high that you’ll need to worry about spending splurges.
The annual limit for gifting is £3,000, known as your ‘annual exemption.’ You can gift up to £3,000 to one person, or split this amount between as many people as you want.
It is also possible to carry forward the allowance for one year if you don’t use it in the previous tax year – meaning you could give £6,000 away.
You can also give up to £250 to anyone with no limit on how many £250 gifts you give – as long as you don’t use any other allowance to give to that person.
Finally, if your child is getting married you can gift them up to £5,000, separate from the above allowances. For a grandchild the marriage gift can be up to £2,500. Anyone else and you can write off a gift of up to £1,000 for a wedding.
JISAs
If you would like to share wealth with a child over time but they’re still too young to take responsibility for the cash, a Junior Isa (JISA) could be a fantastic option to help grow a nest egg for them.
The allowance for JISAs is now very generous - £9,000 per year per child. If you contribute regularly to a JISA it is classed as ‘excess income’. As long as it is not materially affecting your lifestyle, it is therefore inheritance tax exempt.
Pensions
The ultimate in responsible inheritance – setting up a pension for your child can be both tax efficient, and will ensure they can’t access in until pension freedom age (currently 55 but set to rise to 57 in 2028).
The Junior Sipp allowance is more restricted at £3,600 a year, but like the JISA is exempt from Inheritance Tax (IHT) as long as you can prove it doesn’t affect your day-to-day finances.
The ultimate benefit of a pension for your child is that they can’t access it until retirement. Plus with so many potential years of gains and compounding to be had, the sum you leave in their account could become extremely valuable over time (performance permitting).
If you would like to discuss any of the above options for inheritance planning, don’t hesitate to get in touch with your adviser.
Savings rates are rising – is it time to lock in a deal?
Savings rates have been in the doldrums for some time but are beginning to move upwards across the board for the first time in years.
Unfortunately, though, rates are still historically low, despite the reversal in fortune.
Why do savings rates matter?
The interest rate you get on your cash savings matters principally because of inflation. Inflation is of special concern at the moment as it is rising quickly. This means that any money you have saved that isn’t growing in value at the same as the rate of inflation will essentially be losing its purchasing power.
The Bank of England has an excellent historic inflation calculator to demonstrate this. For instance, £100 in 2010 would have to have grown to £131.13 to match the equivalent purchasing power in 2020.
All this is to say that if your wealth isn’t beating the long-term inflation average (in the case of the example above, 2.7% over 10 years) then your money is ultimately losing value.
What are the current top deals?
The top cash savings deals, while growing in value, are still very low. Data from the Bank Of England shows that rates are only really rising on long-fixed term accounts too.
The average rate on a three-year fixed savings bond, for example, has risen from 0.57% in March to 0.71% in July. But these are just averages and do not represent the best possible deals.
The current top rate easy access savings account is from Tandem Bank and will earn you 0.65% on your savings.*
When it comes to easy access Cash ISAs, the best rate on the market is even worse at 0.6% from Cynergy Bank.
At the other end of the market, if you lock your money away for five years, Atom Bank will pay you 1.84% interest on your cash. The best Cash ISA over five years is with Furness Building Society, returning just 1.25%.
What should I do with my money instead?
The reality is that cash savings rates are still extremely poor. For your day-to-day money you can get an interest-bearing account with providers such as Nationwide, who will pay 2% on deposits up to £1,500 per month. That rate drops to just 0.25% after 12 months unfortunately.
A rainy-day fund should be in an easy-access savings account. Although this won’t keep up with inflation, it should only be a limited pot of cash anyway. The general rule of thumb is to keep 3-6 months’ worth of expenses in cash.
Over and above this, any money you have set aside could be working harder elsewhere. Think investing in the stock market, either through a stocks and shares ISA or a pension.
If you would like to discuss your options, don’t hesitate to get in touch with your adviser.
*Please note all rates quoted in the article were correct at the time of writing but are subject to change.
Wages are rising: here’s how to get yourself a pay rise without leaving your job
Wages are rising at a rapid pace across the economy, latest figures from the Office for National Statistics suggest.
As per the most recent wage growth data, workers are due to get a bumper 8.8% increase in their pay packets. This number has been called into question however, amongst concerns that base effects of falls in wages in 2020 have skewed the comparative data.
That being said, there is no doubt that salaries are increasing across the UK. Worker shortages are biting businesses that are looking to expand after the various lockdowns, while changes to employment visas post Brexit have left many firms with less access to pools of talent from abroad.
But unless your boss offers you a pay rise, or you quit your job for a better paying one – it can be hard to get in on these bumper rises.
The best way to get a pay rise then is to sit down with your manager and explain to them why you are worth it.
There are a few ways to broach the topic though. Here are some ideas.
- Do your research
It can be difficult to find average rates for the type of work you do but do try doing some research. That way you’ll know whether you’re being remunerated fairly or not.
- Don’t use personal issues to bargain
When appealing to your manager for a pay rise, don’t use personal circumstances as a reason to request an increase. As true as it may be, it is not reflecting to them why you are worth more money each month than you currently get.
- Don’t make ultimatums
Threatening to leave your job if you don’t get a pay rise only works if you are prepared to carry it out. Avoid making such ultimatums unless you have a plan to make it happen.
- Don’t use colleagues’ pay rises as an excuse
Although you may have a colleague doing the same job as you, unfortunately the nature of salaries is such that often people earn different amounts for the same work. But if you find this out, using it as a reason to ask for a raise will not necessarily convince your boss you are worth it too.
- Make a positive case
If you feel you deserve a raise for the work you do, be ready to prove it. List the tasks you do and responsibilities you have that you feel go above and beyond your basic job description. Make the case for the value you add to the company and what makes you worth more money to them.
- Make yourself indispensable
If you feel like you could take on more that would lead to your pay packet increasing, dive in. An employer will take no signal better than a sign you’re going above and beyond to deliver for them.