What you need to know if you decide to work past the State Pension age
It used to be the case that your employer could force you to retire when you hit 65, whether you wanted to finish working or not.
However, the ‘Default Retirement Age’ was scrapped in April 2011, following a campaign by charity Age UK. Now older workers can, in theory, work for as long as they please.
In fact, a new survey from financial services tech consultancy Dunstan Thomas reveals that nearly 40% of Baby Boomers (those aged 58-75) plan to work beyond the current State Pension age of 66 or 67 by 2028.
Working past the State Pension age might be a wise option if you have outstanding debts to pay or you want to continue topping up your pension.
However, you might equally decide you’re just not ready to leave the workplace just yet.
Whatever the reason, there are certain things you need to know before you decide to delay your retirement.
Can everyone work past their State Pension age?
Most people can work past State Pension age, but there are some exceptions to the rules.
For example, your employer can technically ask you to retire if your job requires you to have certain mental or physical capabilities or if your job has an age limit set by law (e.g., the fire service).
However, the thing to remember is that if your employer asks you to retire, they must give a good reason why. And if you feel you have been treated unfairly, you can take your employer to an employment tribunal.
The State Pension
You can claim State Pension between the age of 66 and 68 depending on your date of birth, regardless of whether you are working or not.
However, many people opt to defer their State Pension payments until they stop work altogether.
One of the benefits of delaying your State Pension is that you get a larger weekly payment when you do eventually start taking it.
Your workplace pension
Many older workers opt to delay retirement in order to boost their pension pots. Even working just a few years extra can make a huge difference.
For example, a 65-year-old worker with a £200,000 workplace pension who adds £200 a month to their pot for five years would be left with more than £334,000, assuming 5% a year growth. (Note that compound interest has been added to this calculation using a compound interest calculator).
However, if you decide to carry on working but on reduced hours, bear in mind it’s likely that the amount you put into your pension will also likely fall.
Before making any decisions, it’s therefore a good idea to check with your employer to see how you might be affected.
Taxes
One of the perks of working beyond State Pension age is that you no longer have to pay National Insurance, unless you’re self-employed and pay Class 4 National Insurance Contributions (NICs).
However, you will have to pay income tax, depending on how much you earn.
Bear in mind also that drawing a salary, your workplace pension and your state pension at the same time can change the amount of tax you have to pay.
If you’re unsure about your options or how you might be impacted, then don’t hesitate to get in touch with your financial adviser.
Is it time to get an electric car?
With fuel prices soaring, and the cost of used cars continuing to rise in the wake of the pandemic, you might be wondering if now is the right moment to take the plunge and buy a new electric car.
In 2021 11.6% of new car sales were electric, according to the Society of Motor Manufacturers and Traders (SMMT). Looking at December alone, this number rises to 16.5%, showing a clear upward trend.
Electric vehicle (EV) technology has come on leaps and bounds from the days of the Corbin Sparrow. The Tesla Model 3 was the second best-selling car model in the UK in 2021, of any car, fossil fuel or electric powered.
The Government has also announced a ban on new fossil-fuel powered cars, which is set to take effect in 2030 – so not all that far off.
But there are still a few things to consider before taking the plunge.
Charging
This is one of the most basic considerations when looking at whether an electric car is viable for you.
The kind of house you live in can have a big impact on how easy it is to charge your EV. If you have a private driveway or garage, the process will be a lot easier than if you have on-street parking, particularly if it’s not always straight forward to park outside your house.
If you’re lucky enough to have private parking, you’ll need to think about whether you want to install an EV charger. It’s possible to charge an EV out of the mains electricity of your house, but it’ll typically take all night to get a full charge.
Bespoke EV units, which can typically be installed on the outside of the house or in a garage, will charge your vehicle much more quickly with much less hassle. You’ll need to decide whether you want a 3kW or 7kW charger – the former is cheaper, between £250-£500, while the latter will set you back up to £800.
Beyond your home, you’ll need to consider what the charging infrastructure is like in your local area, plus any other parts of the country you routinely visit.
Cities such as London have good infrastructure but in rural areas public chargers can be harder to find. Sometimes you’ll arrive at a station to find someone else’s vehicle there, or even a non-functioning spot.
Tools such as Zap Map are really helpful for finding charging points, and you can download the app to your phone too.
Range
Range is still unfortunately a big issue for EVs. While top-of-the-range EVs will come with stated ranged over 300 miles, this is still well short of a top-performing efficient diesel car that can routinely manage up to 600 miles on a tank. Plus, manufacturer claims about range tend to be optimistic at best, so the real range is often a fair bit shorter.
If you’re making routine long-distance journeys, it therefore might not be practical to have an EV as you’ll find yourself spending a lot of time at motorway charging stations.
As stated above, anecdotally, charging points in public places do often suffer from unreliability. Range anxiety is a real issue, making EVs a more sensible choice for families that tend to make shorter journeys and stay within a relative short distance of a reliable charger.
Cost
Cost is a huge factor for considering an EV. And it’s unfortunately quite complicated. It’s also been made less clear by the recent energy price hikes, as until recently, charging at home would have been an extremely cost-effective way to power up an EV.
That being said, petrol and diesel prices have also soared in 2022, meaning the running costs are still attractive. As an example, charging your car at Tesco Pod Points currently costs 24p/KwH. This equates to around £6-£7 for around 100 miles of charge. This is still much, much cheaper than fossil fuels.
While EVs also tend to be more expensive to buy upfront than a typical fuel car, the maintenance costs tend to be much lower. This is because EVs have considerably less moving parts compared to a combustion engine.
However, battery replacement can be a very costly exercise. Batteries are generally rated to around 100,000 miles use or eight years. At the end of this period, you’ll likely have to spend a significant sum to replace the battery with a new one. A Tesla Model Y costs £6,670 to replace and for a Nissan Leaf it is £4,900. However, these prices will likely rise in the future.
As for taxes and other municipal costs, EVs are currently favourable as they attract no taxes, and in regions such as London, you don’t have to worry about congestion or ULEZ charges. However, this may change in the future.
The Government recognises that as more cars on the road switch to EVs, their tax receipts are already falling due to people buying less fuel and not having to tax their cars annually. There is discussion, although none of it is confirmed for now, that the Government may have to introduce new forms of road taxes that include EVs in future to make up for this shortfall, including ‘pay per mile’ and other new taxes.
EVs also used to benefit from big subsidy incentives, but these have been cut back in recent years. Now when buying an EV you can expect a £1,500 discount on a new EV if it’s worth less than £32,000 new.
Finally, you’ll also need to take lead times into consideration. With global supply chain shortages, customers currently find themselves waiting up to six months for a new car. While this is also true for some fossil fuel new cars too, the used car market still has plenty to offer.
Of course, with such long lead times, the prices of used cars have skyrocketed too, making it an expensive time to buy a car either way, and definitely worth considering whether the car you’ve got right now can be repaired and cared for until prices come back down to earth.
The World In A Week - Weeks Where Decades Happen
Written by Cormac Nevin.
Last Friday marked the end of an extraordinary first quarter, which likely left most policymakers feeling like April fools. Policies centred around everything, ranging from dependence on Russian hydrocarbons to past assertions of the transitory nature of inflation, and began to unwind before our eyes. Vladimir Lenin famously said, “There are decades where nothing happens; and there are weeks where decades happen”, and this quote certainly applies to the first quarter of 2022.
Markets rallied last week as risk appetite appeared to return. The MSCI All Country World Index returned +1.2% in GBP terms. Overall, the first quarter was negative for both Equity and Fixed Income returns with the confluence of the economic impact from the war in Europe, causing higher interest rates as central banks battle stubborn inflation and further COVID restrictions in China causing a broad-based sell off. The MSCI All Country World Index of global equities was down -2.1% for the quarter, however outcomes ranged from -7.3% for Continental European Equities to +0.8% for UK Equities, while the S&P 500 in the US was down -1.4% despite heavy tech selling at the beginning of the quarter.
It was one of the worst quarters on record for Fixed Income, as the Bloomberg Global Aggregate GBP Hedged was down -5.2% in the face of rising interest rates, while Investment Grade Credit was down -7.1%. Similar to the equity markets, there was a wide dispersion of outcomes below the surface. Chinese Government debt was up +0.3% for the quarter while Short Dated Inflation Linked Bonds were down only -0.3%. Periods like this illustrate once again the necessity for diligent and diversified positioning to achieve the best outcomes for clients.
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 4th April 2022.
© 2022 YOU Asset Management. All rights reserved.
The World In A Week - Sunak’s Spring Statement
Written by Millan Chauhan.
Last week saw the UK’s Chancellor of the Exchequer, Rishi Sunak, unveil his spring statement update that, in an attempt to support individuals with the rising costs of living, saw a marginal cut in fuel duty and a rise in the minimum threshold of National insurance. On Wednesday last week, UK inflation hit a 30-year high, reaching 6.2% in the 12 months to February. Inflation was at 5.5% in the 12 months to January, but the Russia-Ukraine conflict saw energy prices move even higher due to supply constraints, which has only added to the spiralling increase in living costs. Inflation increased by 0.8% in the month of February, with transport costs being the major contributor. Transport costs have seen an increase of 11.5% in the 12 months to February, the biggest increase of all categories measured by the Office for National Statistics.
Breaking down inflation further, energy prices were a top contributor with the inflation rate of electricity at 19.2% and gas at 28.3% for the year in the 12 months to February. The average household energy bill in February 2022 reached £1,971, compared to the previous year of £1,138, a staggering 73% increase.
Raising interest rates is one of the key monetary policy methods of tackling inflation, with the intention of reducing consumption and promoting savings. Global Central Banks have started increasing rates, with the Federal Reserve raising rates by 0.25% for the first time in 3 years. The Federal Reserve Chair Jerome Powell announced that rate hikes of greater than 0.25% may occur if necessary. The Federal Reserve expect to raise rates at each of their remaining six meetings this year. The pace at which the Federal Reserve acts to raise rates is going to be crucial as they intend to combat inflation fears without crippling the global economy. The current environment remains challenging as central banks are having to control inflation without causing a recession.
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 28th March 2022.
© 2022 YOU Asset Management. All rights reserved.
The World In A Week - Drawing the path for interest rates
Written by Shane Balkham.
Markets remain focused on the war in Ukraine and, although there were tentative signs of progress and positivity over the peace talks in Turkey, the fighting continues unabated. The Ukrainian Government has refused Russia’s demands that the port of Mariupol be surrendered. Development in talks is welcome, however it seems impossible that Europe can return to how things stood before the invasion. Sanctions against Russia will linger and spending on energy security and defence will likely take on greater importance and significance for many countries.
Before Russia had invaded Ukraine and inflicted a terrible toll on human life, the markets were fully focused on the rotation to an interest rising environment and how quickly rates would be hiked in order to combat the rising levels of inflation. Last week, we had the committee meetings from the central banks of the US and UK to give guidance on how they will enact interest rate policy.
The Federal Reserve raised interest rates by 0.25% and gave a generally buoyant outlook, citing the strong employment numbers in the US. This was arguably expected, and the key element was always going to be the forward guidance for the path of rate rises in 2022. The projections from the Fed showed that six additional rate hikes are now priced in for the remainder of the year, putting year end interest rates at 1.75%.
The Bank of England also raised rates by 0.25%, making it three consecutive meetings of rising interest rates by a quarter percent. However, the accompanying rhetoric was more subdued than its US counterpart, noting the risks to the growth stemming from the war in Ukraine.
The war has undoubtedly made the decision making of the central banks more difficult. The effect on the supply of food and energy has increased the pressures on inflation, where prices have already been rising sharply. This could dent consumer confidence and the policymakers will not want to compound the problem by raising rates too quickly, a sentiment that was echoed in the Bank of England’s minutes.
The backdrop continues to be challenging and uncertain and will be for some time. The markets will remain focused on the central banks, even beyond the hopeful cessation of the conflict. Having appropriately diversified investments during times of stress continues to be a successful strategy.
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 21st March 2022.
© 2022 YOU Asset Management. All rights reserved.
Beaufort Financial Reading Client Survey
Our business has very much been built on recommendation, and this gives us some feedback on how well people regard us. But, like any business, we are always looking to improve.
In February 2022, we sent a survey to all our clients, giving them a chance to assess us in a range of service areas and feedback on how we could improve processes.
Across the replies totalling 93 surveys, the overwhelming response was positive and showed that we are moving in the right direction. These include:
- 96% of our clients rate our services as good or very good.
- 97% of our clients rate our advisors as good or very good.
- 95% of our clients feel they get good value.
- 98% of our clients would recommend us to friends and family.
Constant Improvement
With some questions that were geared towards attracting ways in which we could improve, we also received invaluable feedback about our processes, which was, of course, the primary reason for the survey.
So, we’d like to thank all our clients who took part, including Keith Pitman who won an Apple Watch in a draw of all the entries.
The World In A Week - Commodities & Inflationary conundrum
Written by Richard Warne.
After enduring the COVID-19 pandemic for the last few years and seemingly coming through the other side, I think most would have assumed that the flight path looking forward was going to be a positive one. However, Vladimir Putin’s decision to invade Ukraine certainly has thrown that proposition to the wall. The question is, how long it will last and what will the human cost be. Truly a tragic situation. This has further implications for assessing inflation, growth, and global stability. As geopolitical tensions continue to send shock waves across global markets, many questions about the prospect of stagflation (higher inflation and slowing economic growth) and recession have begun to emerge.
Last week the US banned Russian oil imports, temporarily sending Brent crude oil over $128/barrel before settling down around $110/barrel. US inflation hit a whopping 7.9%, the highest level since 1982, and the Fed signalled a 25bps rate hike at its next meeting, while German CPI touched 5.1%. Last Thursday, the European Central Bank announced that it will scale back its bond-buying stimulus programme faster than previously expected, in response to higher inflation risks. In the US, the 10-year Treasury yield rose 15bps to 1.99%, while the UK 10-year Gilt and German 10-year Bund yields rose 22bps and 25bps to 1.52% and 0.27% respectively, over the week.
On a positive note, many European banks disclosed their direct exposure to Russia with management teams reiterating that exposures are manageable, helping bank stocks and subordinated bonds such as AT1s to recover. Equity markets were generally in negative territory last week, with the MSCI All Country World Index -1.3% in Sterling terms, though we did see a relief rally in the UK with the FTSE All Share up +3.0% and the MSCI Europe ex-UK up+4.1%. We maintain a neutral stance on equities across our portfolios, with all the uncertainty that currently exists. Being tactically overweight, UK equities positively contributed to performance.
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 2022.
© 2022 YOU Asset Management. All rights reserved.
Get your finances in shape before the end of the tax year
The end of the tax year is just around the corner. This year’s deadline is 5 April – and there’s no better time to prepare for it than now.
There’s often a rush to get one’s finances in shape in March. For most people, the end of the tax year is nothing to worry about, but it’s still always good to check your allowances – you may be able to find more tax relief on your savings and investments.
With less than a month to go, here is everything you need to do before the deadline.
- Top up your ISA allowance
You have a limit of £20,000 for your savings and investments to be put securely in an ISA account, which is a tax-free wrapper.
Crucially, if you haven’t already used your annual ISA allowance by the end of the tax year, the remaining allowance doesn’t roll over – you lose it forever.
With stocks and shares ISAs and the Lifetime ISA (LISA), there is no tax to pay on income or capital gains from your investments. With a cash ISA, the interest is tax-free.
Also, don’t forget about investing in a Lifetime ISA if you’re looking to invest in a property or in your pension. People aged 18 to 40 can invest money in a Lifetime ISA, which benefits from a 25% government bonus. For example, a maximum saving of £4,000 a year into a LISA will become £5,000 with the bonus.
- Use your pension allowance
It may be useful to consider topping up your pension to increase your savings for retirement.
You can claim income tax relief on pension contributions up to a limit of £40,000 a year according to HMRC, but the exact amount depends on your personal circumstances.
You can also claim unused allowances from three previous years if you were a member of a registered pension scheme during that time.
- Capital gains allowance – for 2021/2022
The Capital Gains Tax (CGT) allowance , or ‘Annual Exempt Amount’, is £12,300 in the 2021/22 tax year. This means you won’t be taxed on profits below £12,300 if you sell your assets such as property or stocks and shares.
It’s worthwhile considering using as much of this allowance as possible each year if you have a large portfolio of shares outside an ISA, for example, by selling assets that have risen in value, or you could be storing up a large exposure to capital gains tax for the future.
- Inheritance tax planning
Don’t leave inheritance tax planning until it’s too late – it’s always good to have your finances in check in preparation for life’s unfortunate events.
Inheritance tax planning is not just for elders. Families should focus on not letting excess income build up in their accounts if they don’t need it.
The money can be gifted to dependents or through a trust. You can give away £3,000 each year or as many gifts of up to £250 per person as you like without being subject to IHT. Parents can also give £5,000 to each of their children as a wedding gift, while grandparents can give £2,500.
- Dividends
If you own investments that pay a dividend, you will be exempt from paying tax on those dividends up to the level of the income tax personal allowance, which is currently £12,570. This could however be eaten up by salaried income if you are still in work.
Beyond this, taxpayers can reduce their dividend allowance by using tax efficient wrappers and tax allowances. For example, basic-rate taxpayers can gain interest of up to £1,000 in their savings allowance while not paying income tax. Taxpayers on a higher rate can earn up to £100 interest tax-free.
Be wary that dividend tax is also set to rise from 6 April. The higher rate of dividend tax will go from 32.5% to 33.75%. This will mean that for every £1,000 dividend received, an extra £12.50 will need to be paid.
- Think about the children
If you have children, a good idea is to start saving money as soon as possible. This way, by the time they turn 18, the children can enjoy a larger pot of money to accomplish their next objectives, whether that be heading off to university or even saving up for a deposit on a property.
Parents and guardians can open a Junior ISA (JISA) on behalf of their children, and they can only access the money after they turn 18.
The returns on money made within a Junior ISA are free of UK tax. However, there’s a limit to how much you can put into a JISA of only £9000 per year in 2021/22.
Does ‘Isa season’ still matter?
ISA season is the period just before the end of each tax year when time is running out to use up tax-free allowances.
Each year, much is made of the final few weeks before the deadline, which this year is 5 April. But how do the various benefits stack up in the current high-inflation climate, and which allowances are most effective?
Allowances
ISA allowances have changed in the past, but in the last few years they have been set at one level both for normal cash and for stocks and shares ISAs.
Unlike other types of account such as the Lifetime ISA (discussed below), the limit is pretty generous, relative to the average working income.
Anyone looking to save into one of these accounts has an annual allowance of £20,000. Prior to this, the limit was £11,800 before it rose to £15,000 in July 2014. It was then boosted to the £20,000 level three years later.
This means that the level hasn’t changed since 2017, which some critics describe as a form of stealth tax. As with income tax rates, if the bands don’t rise with inflation, then effectively the Government is benefitting at the top end from any money an individual can’t put into the allowance.
And with inflation currently above 5%, this effect will be stronger now than at any time under the current allowance.
Achievable?
That being said, the major criticism levelled at ‘ISA season’ is that actually, although the allowance hasn’t moved for a few years, realistically it isn’t relevant because most people won’t be able to fill it each year anyway.
Were you to meet your allowance each year by making monthly contributions, you’d have to put away around £1,667 a month. This is indeed unlikely to be met by most people, when average wages are still around £31,000 a year before tax, according to the Office for National Statistics.
Nevertheless, it remains relevant for anyone dealing with larger sums, which may occur through work bonuses, inheritances, or other such windfalls.
Rates
There is also evidence that cash ISA rates do increase in the run up to the end of the tax year, according to Moneyfacts.
This means that if you’re looking to take advantage of a cash account then it could be the best time to start shopping around.
Even so, cash ISA rates are extremely low at the moment – much below levels of inflation. This means that generally speaking, unless you’re looking to put money in an easy-access account for rainy-day reserves, then it is generally better off invested for the long term in stocks, bonds and other investments.
Lifetime ISA
There is, however, one account where ISA season really does matter. That is in the Lifetime ISA (LISA).
Unlike typical ISAs, the LISA has a limit of just £4,000 per year for you to contribute. Anyone between the ages of 18 and 39 can open one and it comes with an extremely generous 25% bonus from the Government.
This means that if you put the maximum of £4,000 in, you’ll get a bonus of £1,000. That is on top of any interest you accrue through a cash LISA or a stocks and shares LISA.
There is an important caveat with the LISA, though: you have to use the money for a deposit on a house, strictly as a first-time buyer; otherwise, the money must stay in the account until you turn 60 – on pain of a hefty withdrawal penalty, similar to a pension.
If you’re considering which accounts might be best, or whether you should try to top up your ISAs before the end of the tax year, don’t hesitate to get in touch with your financial adviser.
The World In A Week - Confusion & uncertainty
Written by Richard Warne.
Equity and bond markets were generally in negative territory last week, with most bond indices declining around -1.0% and the global equity market, MSCI All Country World Index retracted -0.7% in Sterling terms. The shining light for the week was the performance of UK equities with the FTSE All Share Index +1.5%, a positive for us with an overweight to the UK equity market. The return of the UK market is indicative of the variation we have seen this year between value and growth, with the UK market being “old economy”, a beneficiary of the shift in expectations of rising rates and inflation, with its high exposure to mining, energy, and financials.
The shift in market sentiment emphasised the old economy and new economy deviation. While the UK market enjoyed a positive week, the Nasdaq 100 in the US, which has a significant allocation to technology, declined -2.8% in Sterling terms. The first quarter earnings season will soon be upon us, which may provide a guide to where markets are going. It will be important in helping to answer the question everyone wants to know – “are the global economy and markets strong enough to endure a monetary tightening cycle”?
The environment continues to remain confusing. Many of the macro-overhangs continue to weigh on markets, while the war in Ukraine sadly drags on with little visibility of a resolution. China is balancing how it contains recent COVID-19 outbreaks without damaging an already sluggish economy, while in the US the Fed is signalling an accelerated timeline for quantitative easing. In France, the resurgence of the far right could signal further political uncertainty in Europe. All good reasons why, as investors, it is important to stick to your investment journey and not be swayed by the uncertainty.
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 11th April 2022.
© 2022 YOU Asset Management. All rights reserved.