The pros and cons of getting a smart meter

Smart meters have been a contentious program encouraged by the Government as it looks to make the way households record their energy usage more efficient.

According to the most recent data from the Government, there are now over 30 million smart meters installed in homes and businesses around the country. Over half (54%) of all energy reading meters are now smart. Conversely, energy firms have been accused of pushing too hard on customers to install such meters, and much scepticism remains about their usefulness.

What do smart meters do?

Smart meters replace traditional meters in homes and businesses and allow for two key processes to take place. Firstly, they communicate directly with your energy provider using a mobile network signal and provide them with real-time information on your energy usage. This has the benefit that you won’t ever have to take a reading and update it manually with your provider. It also means that the energy firm you use can bill you as accurately as possible based on your usage. The second benefit is that you will get a portable monitor for your home that will show you a breakdown of your energy consumption. This has the benefit of showing you in real time how much energy you are using. If you turn on high-usage appliances such as tumble dryers or dishwashers, it should show you how much those appliances are using.

The Government also says smart meters have a benefit at a national level as they help it to ascertain an accurate picture of how the country is using energy. The Government has long-term goals relating to climate change that include reducing overall consumption, so this information is useful to it in this process. It also has secondary benefits such as alerting engineers and providers when there is a power cut and how to localise the issue to resolve it quicker. This saves them time and money, which theoretically ultimately leads to lower energy bills for households.

Can they save you money?

Smart meters can only save you money in the sense that they show you exactly how much you are using, and whether certain appliances in your home are using too much. They can also show you how much your base usage is. In other words, without turning on expensive appliances such as tumble dryers, you can get an idea of how much electricity and gas your home is consuming over the course of a typical day. It may be that you’ve got electronics or lighting that are using large amounts of electricity without you knowing. Or perhaps you’ve got the heating on too high, and this is driving up your gas usage.

In essence, all a smart meter can do to help you save on energy bills is to present you with a more accurate live view through the monitor of your consumption. However, it’s up to you to work out how to reduce that consumption if you feel your bills are too high.

The drawbacks of a smart meter

Smart meters present your energy provider with accurate and up to date information on your energy usage. If your usage goes up, this can lead to the provider adjusting your direct debit upwards to anticipate higher usage. Smart meter technology has also been criticised as unreliable. While less of an issue now, it was the case that when switching providers sometimes smart meters would not be able to carry over to the new provider, effectively turning them back into ‘dumb’ meters where you have to take a manual reading. While this is less of an issue with so-called SMETS-2 meters, ensuring a new provider is receiving the right information – if and when you do switch – is really important.

Smart meters can also suffer from technological foibles such as loss of signal, software issues and other problems that prevent them from accurately providing information to your energy supplier. It is important to keep an eye on it and your bills to ensure they’re charging you fairly and correctly.

Energy firms have also been criticised in the past for forcing smart meters on customers, using heavy-handed and pressure tactics to encourage adoption. The installation of smart meters can also be an issue for renters who manage their own energy bills but have a landlord who might not be willing to have one installed.

The energy outlook

Energy prices for households have been at record levels this winter, leading to eye-watering bills despite the Government’s energy price guarantee – which it has spent lots on protecting consumers from the worst rises. The good news is that gas prices – on which overall energy prices are reliant on – have mostly come down from record levels. This doesn’t unfortunately lead to lower energy bills immediately. This is because energy firms buy their energy from wholesalers on a longer-time horizon over many months.

Currently the energy price guarantee (EPG) ensures the average household will only pay a maximum of £2,500 a year for their energy. This figure can however be higher or lower based on a household’s usage as the guarantee relates to a cap on units of energy rather than the overall bill. The EPG is set to expire after March 2023. Energy consultancy Cornwall Insight has good news, however. It says that energy bills should on average come back down to below the EPG this year. Based upon current gas price levels, it believes average household bills should be around £2,200 by July-September 2023. While this is still well above historic levels, it should help to soften any further blows to household bills.

This outcome is still uncertain as Europe continues to suffer from energy market disruption thanks to the conflict in Ukraine. Much still depends on how governments respond to these ongoing geopolitical issues and how this ultimately affects wholesale fossil fuel prices.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 14th March 2023.


Could you soon be working a four-day work week?

Four-day work weeks could soon be the norm after a major study found considerable benefits for workers and businesses.

The study, which involved 61 firms from a range of industries, encompassing around 3,000 workers has been hailed as a major success as the majority were convinced of its practical benefits. Not only did worker turnover decrease, employees reported a lower level of burnout while some firms also experienced unusual increases in revenues – suggesting it made those businesses more productive.

The success of the trial has seen politicians call for its wider implementation while major businesses, such as Sainsburys and Dunelm, are considering adopting the practice. It’s safe to say that the four-day work week trend could soon be coming to your workplace. However, what are the potential financial implications?

How a four-day work week would affect you and your money

The trial was explicitly designed so that workers would enjoy more free time while continuing to earn the same amount of money as if they were working five-day weeks. From an earnings standpoint – no one should lose out.

There is also a potential impact on the success of the business you work for, in the long term, if the findings of the trial bear out more widely. If businesses are able to improve productivity and earn more money, it could lead to better pay rewards for workers too.

Another aspect that could be of benefit is what people do in their extra free day. While some may choose to spend more time on leisure activities, with kids or grandkids, or just relaxing, others may choose to pursue part-time work or even a side hustle business to earn extra money with their new-found time.

There are other important financial perks to consider such as the cost of childcare. The UK has some of the most expensive childcare costs in Europe, so as a parent or grandparent being able to help out with kids an extra day a week could be a financial, as well as familial boon. Since the pandemic, there has also been an increasing shift of older workers abstaining from the workforce. The reasons for this have been debated, with some citing wealthy retirement pots for many who don’t need to work, while others lay the blame on a healthcare crisis for older people. The introduction of more flexible working patterns such as a four-day week could be helpful for older workers looking for a softer reintroduction to the workplace, or flexibility to meet their lifestyles.

Drawbacks of a four-day work week

While there appear to be considerable benefits to a short working week, there are also some drawbacks.

Implementation may vary but some employers could ask workers to fulfil the same number of hours as they would over five. For instance, instead of working 5x eight-hour days employees could do 4x ten-hour days. Not all businesses will find shorter work weeks practical either, particularly those that rely on shift work. This could lead to staffing shortages in key sectors such as healthcare or hospitality.

Ultimately though, in financial terms, no one should be worse off from working less days in the week. Plus, with the freedom of an extra day to yourself, it could be an ideal time to start something new or spend more time on yourself.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 14th March 2023.


The World In A Week - New data needed

Written by Ilaria Massei.

Almost all the major equity benchmarks ended lower in a week which delivered relatively few important economic data releases. The S&P 500 closed at -0.9% in GBP terms, in a week where the Fed Chairman, Jerome Powell, held a speech at the Economic Club of Washington and communicated to markets that the disinflationary process has begun. However, according to the latest jobs report, economic conditions have not deteriorated enough to justify a reversal in the hawkish monetary policy currently applied.

In the UK, the GDP Growth rate was released last Friday and signalled that the economy stalled in the last quarter of 2022, and narrowly escaped a recession despite a sharp economic contraction of 0.5% in December.  A recession is defined as GDP contracting for two consecutive quarters. Although growth for the quarter was 0%, the contraction in December was mostly due to a drop in services output and strikes affecting the country during the Christmas period.

In China, the annual inflation rate rose to 2.1%, from 1.8% in December. This was the highest reading in three months, as easing of lockdowns have increased prices. On a monthly basis, consumer prices increased 0.8% in January, following a flat reading in December 2022 and marking the steepest rise since January 2021.

Japan was the only major equity market to end the week on a positive note, with the MSCI Japan Index closing up +0.8% in GBP terms. It has been a week full of speculation around the new potential nominees to be the next governor of the Bank of Japan (BoJ). Investors are looking for a shift in monetary policy, which could be delivered by Kazuo Ueda who seems to be more cautious about the risks of an ultra-loose monetary policy.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 13th February 2023.
© 2023 YOU Asset Management. All rights reserved.


Get your finances in shape before the end of the tax year 2022/23

A new year has dawned, and there are just a matter of weeks left before the end of the tax year.

As usual, that means you need to familiarise yourself with a range of new rules, limits, and allowances. It’s really essential to be aware of this as now is the time to take advantage of left-over allowances that you have yet to use, or to prepare for new, higher taxes coming down the line. So, what is there to expect? We already know a good deal of what is coming but the Government is set to publish a Spring Budget which will take place on 15 March. While this won’t necessarily contain immediate measures, it could present some last-minute challenges for our finances.

With that in mind, here’s what we know is coming, and how to be prepared.

Things that are changing from 6 April

Capital gains tax

The Chancellor Jeremy Hunt announced a big change to the Capital Gains Tax (CGT) allowance in his Autumn Statement in November last year. The allowance has been slashed from £12,300 to £6,000 and is set to be slashed again in 2024 to just £3,000. The first cut will take effect from the new tax year, which means maximising what is left of the higher CGT allowance now is essential.

Dividend allowance

The Chancellor has also slashed the dividend allowance from £2,000 to £1,000, which will take effect from the new tax year. It will be slashed again in 2024 to just £500.

Other thresholds

The Treasury is freezing most other thresholds at their current levels for longer, including income tax and inheritance tax (IHT). This means that, while you won’t see a headline tax increase, if you receive a pay rise it will be worth less than it would have, had the thresholds moved up in line with inflation or average earnings. Jeremy Hunt also announced that the 45% additional rate of income tax will have a new lower threshold of £125,140 from 6 April. This means if you’re earning above that level, you’ll pay more in tax than you were before.

Things you can do to prepare

There are a number of straightforward mitigating measures you can take to shield your wealth and income from these changes. Here are some ideas to get you started.

ISAs

ISAs are something of a miracle product, shielding you from any tax liability for things such as dividends or capital gains tax (CGT) that you would normally have to pay if you invested using a standard account. The annual £20,000 ISA limit is extremely valuable for wealth growth and preservation, and so it’s sensible to make as much use of it as you can, be it cash or investment ISAs. ISAs are the single best way to avoid the punishing implications of dividend and capital gains tax (CGT) allowance cuts as the tax wrapper on the account protects you from any tax implications whatsoever.

Pensions

Before you get to your ISA, you’ll want to make sure you’re contributing as much as possible into your pension. The annual allowance is £40,000 and comes with extremely valuable tax relief. This tax relief makes contributing to a pension more attractive than an ISA in the first instance as upfront extra money will help grow your savings pot larger over time. However, pensions do have implications when you begin looking to draw down wealth, including when you can access the money, how much you can get tax free and the size of the pot, making them somewhat of a more complicated vehicle than the ISA.

JISAs

Junior ISAs or JISAs are often overlooked but are also an extremely valuable allowance you can call upon. Ultimately, when we think about building wealth over a lifetime, a big consideration in that is what we leave behind for our children. Before getting into inheritance tax (IHT) considerations, contributing to a JISA for a child under 18 can be a great way to begin passing some of this wealth on as early as possible, while setting up your child for a prosperous future at an early age. The current annual JISA allowance is £9,000 and this will remain unchanged in the new tax year.

Inheritance tax allowances

Inheritance – or so-called ‘Death tax’ – is the most hated of all Government levies. However, there are various allowances and carve-outs available allowing you to limit your potential liability. The main one is the annual gifting allowance. You can gift up to £3,000 tax-free to anyone each tax year, which resets each 6 April. There is also a seven-year rule on giving away wealth, so the earlier you begin to prepare that process, if it’s something you’re considering, the better. As a parent you can also make a £5,000 wedding gift, or £2,500 if you’re a grandparent – although this is contingent on when your child/grandchild gets married rather than the tax year in particular!

Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 12th January 2023.


Inheritance tax at record-breaking levels

The Government earned £4.8 billion in inheritance tax (IHT) receipts between April and November 2022, according to the most recent figuresThis represents a £600 million increase on the same period a year earlier and sets another record in the upward trend for the tax.

Inheritance Tax (IHT) is by no means the biggest earner for the Government – of the £490.8 billion it took in tax between April and November 2022, Income Tax and National Insurance Contributions accounted for £251.4 billion combined. However, the tax has risen steadily for over a decade and is becoming an increasing issue for many middle-class families.

Who pays IHT and why is the Government attracting more money?

Inheritance Tax (IHT) receipts have risen significantly in the past 10 years, chiefly because the Government has frozen the threshold at which families become liable to pay the tax for consecutive years. The current threshold of £325,000 has been in place since April 2009. As asset prices for wealth such as property and investments have grown, more and more estates have been pushed over the line. With the average property price standing at £296,000 in October 2022, it doesn’t take much to reach that threshold if you’re a homeowner. Chancellor Jeremy Hunt committed to keeping this threshold in place until at least 2028, meaning this trend is only set to continue.

How to mitigate IHT liability

Inheritance Tax (IHT) comes with a series of rules and extra thresholds that makes liability for paying the tax more complicated than the simple £325,000 level, however. Married couples benefit from a transferable nil rate band. This means the combined wealth of a married couple can reach £650,000 before becoming liable.

Estates which contain a main residence property also enjoy a residence nil rate band. This means the primary family home enjoys a residence nil rate band of £175,000. If a married couple combines this, the total estate can be valued up to £1 million before incurring IHT liabilities, assuming they own a home.

Pensions are also free from IHT liability, but this only applies to lump sums that are a discretionary payment from the pension provider.  This does not apply for specific products such as annuities where the estate is entitled to a guaranteed payment.

Inheritance Tax (IHT) also contains exemptions when it comes to gifting. The seven-year rule stipulates that any wealth given away to others is tax free, assuming the person who is giving away money survives for seven years after it is given. There are also annual gifts that can be given tax free. Gifts of up to £3,000 can be made each tax year without incurring any liability, while a wedding gift allowance of £5,000 is also applicable for parents. Grandparents or great grandparents can gift £2,500 towards a wedding.

The exemptions don’t end there – business owner exemptions, putting assets into a trust, and certain investments also carry tax breaks with regards to IHT. However, such methods are best discussed with a financial adviser in order to ensure that IHT liability mitigation is being done in the right way.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 12th January 2023.


Top tips for saving money on holidays in 2023

For many a holiday might seem like something of an expensive luxury at the moment. But there are still ways to save on holidays in 2023.

A falling pound, rising costs and hotspot congestion – these are just some of the factors which might make you think a holiday abroad is out of reach this year. By following a few simple money tips and tricks, jetting away on a well-deserved holiday is absolutely possible for most people.

Here are some ideas to get you started in 2023.

Go where the pound is strong

The pound had a miserable year in 2022. This was compounded by a series of calamitous policy decisions taken by the Government towards the end of the year which sent the value of the currency sliding. While the value of sterling has recovered somewhat from nearly reaching parity with the dollar, it is still much weaker than it was at the start of last year, meaning some destinations remain pricey for British holidaymakers. This is particularly true in locations where the US dollar is king – mainly the US, but lots of other countries use dollars as their main currency, such as Puerto Rico and Panama, too.

However, there are still some top global holiday destinations where the pound has maintained its relative value, or even become stronger. For instance, the South African rand has remained at broadly the same level over two years compared to sterling, while Egyptian pounds have in fact become weaker versus the UK pound. Other countries such as Argentina, Hungary, India, Israel, Japan, Norway and Sweden have all seen their currencies weaken versus GBP, making the relative cost of travelling there cheaper.

If you want to see where the best rates are for your foreign exchange, then XE.com’s currency charts are a really good place to start. Of course, some of these destinations are on the more adventurous side, and others require big long-haul travel, so savings are only really worth it if you can still get a good deal on flights and other aspects.

Use price comparison

This is where making good use of price comparison comes in. We’re all reasonably accustomed to using price comparison websites to get deals for our insurance, broadband and other home services. However, travel comparison is no different, with a big selection of services that will find you the best deals out there. Price comparison isn’t just for flights – you can get quotes for hotels, car rentals and even package deals too.

Good websites to get started include Kayak, Google Flights, Momondo and SkyscannerOne thing to watch out for with price comparison though – and this is particularly the case for flights – is added extras that aren’t in the headline price. This is a common tactic used by airlines to mask the “true” cost of the flight in order to make it look attractive. Airlines will offer cheap fares, but then pile on costs from adding baggage, picking seats, and other amenities that once upon a time were inclusive of the price, but these days rarely are.

Get a good deal on foreign currency

Exchanging your pounds for the local currency can be one of the most deceptively expensive aspects of travelling abroad. We all know that buying foreign currency at the airport is expensive, as you’ll pay fees and won’t get the true exchange rate, leaving you with significantly less for your money. Even well-established high street institutions such as the Post Office don’t offer the best rates. The trick to see where this is the case is if the exchange offers ‘fee free’ currency. If you don’t pay headline fees, you’re most likely paying through a worse exchange rate.

It is much better these days to just use a bank card abroad that offers no fees and the Mastercard real exchange rate. Far and away the best for this is Starling Bank, where you’ll get the live exchange rate for your currency and there are no limits on spending.

Get a local sim card

Since the UK left the EU, roaming charges have bounced back into our lives when travelling to Europe. Some UK providers do still offer decent terms when travelling, but this is usually only the case within the EU. At the time of writing those include Asda Mobile, BT Mobile, iD Mobile, Lebara, O2, Plusnet, Sainsbury’s, Smarty and Virgin. If you use EE, Three or Vodafone then charges now apply when you use your minutes or data abroad. However, there is another way to secure a cheaper deal when you travel and that is to get a local sim card. Many modern phones will allow you to pop in a second physical or digital sim card, meaning you don’t have to use your UK minutes and data abroad.

The best thing to do when you arrive at the airport of your destination is go straight to one of the local providers’ shops to ask for a sim data deal – the airport arrivals is usually packed with them offering deals to tourists. Do your research on the destination before arriving though to ensure you pick a reputable carrier.

Come to the airport prepared

It can be really easy to find yourself spending large sums unwittingly in the airport before you’ve even left the UK. From expensive sandwiches to extortionate water bottles – the products on offer are usually very expensive compared to normal. It pays then to come prepared. Bring an empty water bottle to fill up once you’ve passed security and pack sandwiches if you think you’ll get hungry.

This also extends to other things like buying a neck pillow for your flight – you’ll get ripped off if you can’t live without one on the plane but forget it at home. This is also a salient point if you think you’ll struggle to stay within the baggage limit. Leave behind basic items like shower gel and toothpaste – ubiquitous products you can buy locally at your destination when you arrive.

Make sure you’re insured

While this isn’t a direct saving per se – failing to get good travel insurance can be extremely costly for you and your family. It’s easy to pick up good value travel insurance these days using price comparison sites to find the deal that suits you. The cost of healthcare in countries such as the US can be extraordinarily high and will be crippling if you don’t have insurance to protect you if you get injured or fall ill abroad.

With the UK leaving the EU, the old European Health Insurance Card (EHIC) is now expiring too, so make sure you apply for the new GHIC. But also remember this won’t preclude you from paying any costs, it just gives you right of access to state healthcare in EU countries and Switzerland and is not a replacement for insurance. It is also a really good way to save on rental insurance costs. Instead of paying over the odds for the premium insurance direct from the car hire firm, get car hire excess insurance instead, which will cover the premium you have to pay if you have an accident abroad with a hire car.

Be flexible

Ultimately, the deciding factor on how much your holiday is going to cost will be the destination you pick. If prices in popular destinations such as Spain, France or Italy are looking high, consider alternative up and coming destinations such as Albania, Hungary, Morocco, or even at home in the UK. You can often find staying closer to home or venturing further afield can reward you with the same top-quality experiences at much more competitive prices.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 12th January 2023.


The World In A Week - Winter is (still) coming

Written by Cormac Nevin.

Last week was another challenging one for markets, as the MSCI All Country World Index fell -1.5% in GBP terms.  In local terms, the Equity Index was down -2.9%, illustrating the strong fall in GBP vs other major currencies over the week.  Sustained rises in interest rates also resulted in a negative week for Fixed Income, with the Bloomberg Global Aggregate Index down -0.9% in GBP Hedged terms.

Markets continue to fret about the energy crisis, particularly in Europe, as we approach the winter. These worries were compounded by Russia’s decision to indefinitely suspend flows of natural gas through the Nord Stream 1 pipeline to Germany, which prompted a renewed surge in wholesale gas prices. The reasons given were spurious concerns about very minor leaks, but European leaders are not in any doubt that this move is in retaliation for sanctions over the ongoing war on Ukraine.

OPEC has also floated the idea of supply cuts to oil production, citing concerns over global demand given the ongoing COVID-19 lockdowns in China.  Political changes in the UK, Italy, and mid-term elections in the US will give the markets plenty to focus on towards the end of the year, but we remain convinced that the diversification of our portfolios will allow us to react to events as they arise with our typical long-term approach.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 5th September 2022.
© 2022 YOU Asset Management. All rights reserved.