The World In A Week - Judgement Day
Geopolitical tensions escalated last week following the attack on Saudi Arabia's oil production facilities. It has been estimated that the attack destroyed c.50% of Saudi production, although there were assured statements from the capital that oil exports would be maintained, and lost capacity would be expediently rebuilt. Following a huge initial jump in the oil price, volatility in the commodity subsided towards the end of last week. However, while the volatility in the oil price subsided, new US sanctions against Iran meant that tensions in the Middle East increased markedly with the US also pledging military support to Saudi Arabia to boost their air and missile defences. Iranian-backed Houthi rebels have claimed responsibility for the drone and missile attacks although Iran denies any involvement. We expect tensions to remain elevated.
The Federal Reserve moved in line with consensus last week, cutting interest rates by 25bps; Trump was quick to lambast Chairman Powell for lacking guts. While a twitter outburst from Trump is of little surprise, what is a surprising is how the decision to cut interest rates has caused division with the Federal Open Market Committee; seven members voted to cut, two members voted to maintain, and one member voted to cut further. Powell cited that a second cut was necessary due to slowing political growth and worsening trade tensions however, the dissent within the committee will make it more difficult to decipher the trajectory of interest rate policy, resulting in polls for further rate cuts falling from 100% to 80%.
Several weeks ago, we wrote about the suspension of parliament, titled Prorogue and in the UK, parliament remains suspended as a result of the invocation of prorogation. In the week ahead, we expect a decision from the Supreme Court over whether Boris Johnson acted unlawfully by suspending parliament; to be clear, this is not about Brexit, it is a legal argument. After all, there is no one place where all the rules of government are written down, which means the Supreme Court must decide between the competing legal arguments, providing a stress-test of another kind, that of our unwritten constitution.
Fradulent activity - Recent incident involving Beaufort Financial St Helens
Extreme caution must always be exercised when dealing with incoming client or third-party requests. In a recent incident Blair Williams of Beaufort Financial St Helens found herself the target of a fraudulent attempt to acquire £150,000 from a client's pension funds - however, her vigilance and quick thinking ensured that both the client and the business were protected from any losses.
Following a bona fide withdrawal from the client a few months previously, Blair received an email from his verified email address requesting a change of bank account details for his platform provider and a further withdrawal. The email had an attached letter giving a signed declaration for the platform to change the bank details, which on initial inspection appeared genuine. Blair followed procedure and emailed the client back asking for a wet ink signature to be sent by post confirming the changes. After several email exchanges with the client becoming increasingly demanding, Blair's suspicions were raised, and a phone call was made to the client's contact number on file in order to further authenticate the request. At this stage the genuine client was able to inform Beaufort Financial St Helens that he had made no such requests during the dates in question, and that whilst the emails were from his email account, they were not from him. Further investigation uncovered the fact that the client's home computer had been compromised.
Blair immediately alerted the authorities via the Police Action Fraud website and sought further guidance from Compliance. An ICO personal data breach self-assessment form was completed, with the ICO confirming that the business was not at fault for the incident, as the breach of the client's details had originated from his own computer equipment. All relevant product providers connected to the client and the Operations Team were also notified of the incident so that increased security could be applied to the client's accounts.
Without Blair's cautious approach the outcome of this event could have been very different for all parties involved, with the client and business being unwitting victims of cybercrime, as well as financial losses and reputational damage to the Company.
5 staycation destinations perfect for autumn
With summer over, the nights are already starting to draw in and the colder weather is arriving after months of record-breaking temperatures. That doesn't mean you have to shelve your UK holiday plans until the spring though. Throughout autumn, there is still plenty of places to head without having to step on a plane when you want to enjoy a break.
Whether getting outdoors to take in the stunning autumn views or being cosy inside with a cup of tea is your idea of an excellent autumn break, these five staycation destinations may be just what you're looking for.
1. Aviemore, Scotland
Scotland is known for its breathtaking scenery and Aviemore is beautiful. Surrounded by mountains and the Cairngorms National Park. If you love to be outdoors, it's the perfect place to consider for your staycation. You can try your hand at skiing, canoeing and even dog sledding. There are gentler outdoor pursuits to take in, from trails around its stunning national park to wildlife watching.
When the weather turns or you want to head indoors, there are more than enough options for dining, shopping or stopping to have a drink. You can watch, or even take part in, traditional ceilidh dancing too. There's a chance to step back to the 1700s at the Highland Folk Museum or enjoy a trip on a steam train by taking the Strathspey Railway.
2. Dartmouth, Devon
Dartmouth is situated on the mouth of the River Dart and is one of Devon's most popular towns thanks to its historic streets and scenic location. As it's surrounded by countryside, it's in an excellent location for taking a brisk autumn walk and there are many traditional English pubs to stop at for lunch or dinner to get your energy back too.
Other landmarks to keep an eye out for when you're exploring Dartmouth include the 14th-century castle, which offers views of the estuary and Baynard's Cover Fort, which dates back to the 16th century. If you love the picturesque views of the water, why not head out onto the river? The Dartmouth Paddle Steamer is one of the last coal-fired steamers in the UK. Along the way, you'll be able to take in many iconic Dartmouth landmarks at a leisurely pace too.
3. Whitby, Yorkshire
Why not head to the seaside on your next staycation? Whitby might not offer warm Mediterranean waters this autumn, but it's got plenty more going for it. Strolls along the coast are guaranteed to offer great views and are even better when you have traditional fish and chips at the end too. The harbour is a great place to end up, the atmospheric Abbey towers, which is said to have inspired Dracula author, Bram Stoker, over the cobbled streets as you walk along the beach.
Not too far from the harbour is a whale bond arch that was erected sometime after 1853, paying homage to the history of Whitby. If you're lucky, you may even get a chance to see whales in the wild too. In autumn, vast shoals of herring migrate to the Yorkshire coast, attracting a plethora of other animals. Head out on a boat and you could spot seals, whales, dolphins and much more.
4. Stratford-upon-Avon, Warwickshire
Celebrated for being the birthplace of playwright William Shakespeare, you'll find plenty of history and attractions at Stratford-upon-Avon. The market town is easy to navigate if you want to walk the Shakespeare trail, taking in plenty of sights, including his wife's Anne Hathaway's cottage, the family home, which is now a working museum, and his final resting place in the Holy Trinity Church.
Don't worry though, it's not all about the famous playwright. Amongst the other things to do at Stratford-upon-Avon include the MAD museum, a butterfly farm and the 18th-century mansion of Compton Verney, which is home to an award-winning gallery and museum, is just a 20-minute car journey away and set in 120 acres of parkland.
5. Cambridge, Cambridgeshire
Cambridge is synonymous with the university in the city, but it isn't just students that will love visiting here. The stunning building that seems unchanged for centuries makes it the ideal place for an autumn walk as you take in the view. Walking alongside the River Cam, where you can find many college gardens, are Backs as they're known, is a must. Of course, if you're visiting Cambridge for the first time, you should go punting on the river too; wrap up warm and relax as a guide navigates.
If you're a fan of delving into history, a university tour is a great way to explore the nooks and crannies of the world-famous institution. There are several arts venues to take in too, including the Fitzwilliam Museum, as well as plenty of traditional pubs and shops to browse.
4 reasons ISAs are still worthwhile
Changes to how savings are taxed means ISAs (Individual Savings Accounts) may not be as attractive as they once were. However, there are still plenty of reasons why ISAs should be part of your financial plan.
ISAs were first introduced 20 years ago in a bid to encourage more people to save. An ISA is essentially a tax-efficient wrapper for your savings. You don't pay tax on the interest or returns generated within an ISA. Over the years there have been new ISA products introduced, which may offer additional incentives to save. You can either choose a Cash ISA, which will pay interest, or a Stocks and Shares ISA, where your deposits will be invested.
Since their introduction, the ISA allowance has gradually increased. You can currently place up to £20,000 into ISAs each tax year. This allowance may be used for a single ISA or spread across several accounts. If you don't use your ISA allowance by the end of the tax year, you lose it.
Why are ISAs less attractive now?
ISAs remain popular products; official statistics show that around 10.8 million adult ISA accounts were subscribed to in 2017/18. However, this is down from 11.1 million during the previous tax year.
One of the reasons for this is the introduction of the Personal Savings Allowance (PSA). Introduced in 2016, the PSA means individuals can earn up to £1,000 in interest tax-free if they're a basic rate taxpayer or £500 if they're a higher rate taxpayer. For those saving using a cash account, it may mean that using an ISA has lost one of the main benefits.
Complexity around choosing an ISA product may also mean the saving vehicle is falling out of favour. This is an issue that's been highlighted by AJ Bell, with the investment platform calling for the rules around ISAs to be simplified.
In a letter to the new Chancellor Sajid Javid, Andy Bell, Chief Executive of AJ Bell, states: ISAs started life as a very simple, tax-efficient savings products. Over the years, various changes and additions to the products have made them unnecessarily complicated, with at least six variations in existence depending on how you look at it. People now have to choose which ISA suits their specific needs and often they can't decide, which leads to them doing nothing and not saving.
We believe a much simpler system, based around a single ISA product would mean that the only decision people need to make is to open an ISA and start saving.
So, why should you still make an ISA part of your financial plan?
1. Take advantage of tax-free interest and returns
Whilst the PSA means this advantage isn't as appealing as it once was, it'll still be attractive for many people.
First, if you're an additional rate taxpayer, you don't benefit from the PSA. As a result, an ISA can provide you with a tax-efficient place to deposit your cash savings. Even if you're a basic or higher rate taxpayer, depending on your level of savings, you may find you exceed the PSA. An ISA can boost how much you can earn in interest tax-free.
Secondly, the PSA does not cover investments. In contrast, investing through a Stocks and Shares ISA can deliver returns that are free from Capital Gains Tax.
2. Potentially access additional bonuses
As well as offering interest and returns on deposits, some ISAs may offer additional bonuses. These aren't available to everyone and may not match your saving goals. However, if you're saving for your first home or retirement, they are worth considering.
The Help to Buy ISA is available for all aspiring first-time buyers. It offers a government bonus of 25% on deposits. You can open an account with up to £1,200 and can contribute up to £200 each month. You can add up to £12,000 to a Help to Buy ISA, leading to a maximum bonus of £3,000. You apply for the bonus when you're at the point of buying a property. Help to Buy ISAs are a type of Cash ISA, so you receive interest.
A Lifetime ISA (LISA) may be an option if you're saving for a first home or retirement. Each tax year, you can place up to £4,000 into a LISA, receiving a 25% bonus. You must be aged between 18 and 40 to open a LISA, and can continue to pay into it until you turn 50. This means the maximum bonus available is £33,000. The bonus is applied at the end of each month. A LISA can either be a Cash or Stocks and Shares account. However, there are some restrictions to keep in mind. Should you make a withdrawal before the age of 60 for a purpose other than buying your first home, you'll lose the bonus and may get back less than you paid in.
3. Start investing with small amounts
If you want to start investing, a Stocks and Shares ISA can be a good starting point. You won't have to pay tax on the returns generated and there are multiple options to suit how hands-on you want to be. A Stocks and Shares ISA may be right for you if you want to gradually grow your investment portfolio by adding regular, smaller sums over the long term.
For beginner investors and those that want a more hands-off approach, there are platforms that will make investment decisions for you. You'll usually be asked some questions relating to your attitude to risk, investment goals and what you can afford to invest.
If you're confident making investment decisions, you can choose your own investments that will be held within an ISA wrapper. You'll need to take responsibility for researching investments, building a portfolio and keeping track of performance, as well as aligning decisions with your financial plan.
4. Shop around for the best interest rate
For the last decade, interest rates have been low. It may mean that your cash savings are struggling to keep up with inflation, effectively decreasing in value in real terms. Saving into an ISA doesn't automatically mean you'll access better rates, but it's worth including them when you're shopping around. Typically, a fixed rate ISA, where your money is locked away for a defined period of time, will offer the best returns.
Remember, if you don't use your ISA allowance, you will lose it. If you'd like to discuss why it should be part of your financial plan and how it fits in with other options, please contact us.
Please note: The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
What to do if you think you'll never retire
More people are paying into a pension than ever before. Yet, millions are still worried they'll never be able to retire. If you have concerns about the retirement lifestyle you will be able to afford, there are often steps you can take to improve this.
First, the good news: the number of people saving enough for retirement has hit its highest ever level, according to Scottish Widows. Almost three in five Brits are deemed to be putting enough aside for retirement, calculated at 12% of an individual's income. However, a worrying number expect they'll never be able to afford to give up work. Around a fifth of people believe they won't be financially secure enough to retire, equating to eight million individuals.
With fewer Defined Benefit (DB) schemes available, which offer a guaranteed income for life, individuals need to take more responsibility for their retirement finances. But the research indicates a large portion of the population don't have confidence in the steps they're taking.
Peter Glancy, Head of Policy at Scottish Widows, said: While the past 15 years alone have proved that things have been changed for the better, auto-enrolment alone won't avert a pension crisis in the UK. Government and industry need to take the next step together and also stop pretending the long-term savings challenge can be solved in isolation.
6 things to do if you're worried about pension savings
In recent years, the responsibility for creating a retirement income has shifted to individuals. The number of Defined Benefit (DB) pensions schemes has been falling. Also, Pension Freedoms mean retirees are now often responsible for how and when they access pension savings. As a result, it's natural to have some concerns about how your retirement provisions will provide for you.
If you're worried you won't be able to afford retirement or are unsure of the lifestyle you'll be able to enjoy, these six steps may help.
1. Assess your current savings
Whilst the Sottish Widows research highlights millions are worried about retirement, it doesn't state how much these people have put away. It may be that some are in a better position than they believe, particularly when looking at the long term.
The first thing to do is look at the amount you have already saved. The majority of workers will have several pensions due to switching jobs; getting a current value for them all is important. This will give you a figure to assess whether or not you're on track. Remember, most pensions are invested, and the value will hopefully grow between now and when you hope to retire. Providers will give you a projected value at traditional retirement age, however, this cannot be guaranteed.
2. Check contributions
Next, how much are you contributing to your pension? If you've been auto-enrolled into a pension by your employer, the minimum you contribute is currently 5% of qualifying earnings. However, you can choose to increase this. The end goal for pension savings can seem daunting, but it's worth remembering your employer will also be contributing at least 3% and you'll benefit from tax relief. These two incentives can significantly boost the amount you're putting away.
With a baseline for how much you're already putting away, you may want to consider increasing contributions. Even a small rise in how much you put away each month can have a big impact. When saving for life after work, a pension is often the most efficient way to save. Some employers will also increase their contributions in line with yours.
3. Don't forget the State Pension
It's not just your Personal and Workplace Pensions that will provide an income in retirement. For many, the State Pension will be the foundation. Once you've factored in how much you can expect to receive from the State Pension, the amount you need to take responsibility for can seem far less challenging.
The State Pension alone won't usually provide you with enough to secure the retirement lifestyle you want. But it does provide a level of security and maybe enough to cover essential outgoings. How much you'll receive will depend on your National Insurance record. To qualify for the full amount, paying out £8,767.20 annually in 2019/20, you'd need to have 35 qualifying years on your National Insurance record. You can check how much your State Pension is likely to be here.
4. Calculate other sources of income
Whilst pensions are the most common way to create an income in retirement, they're not the only option. Other assets you've built up throughout your working life can also be used and may be important to your personal financial plan. Yet, when initially looking at how affordable retirement is, you may have missed these out.
Among the assets to consider are savings, investments and property. How these assets can be used in retirement will depend on your situation and goals, but it's important they're not overlooked. Even if you don't intend to use them in retirement, knowing you have assets to fall back on if necessary, can give you the confidence needed to approach this important milestone.
5. Consider the costs of retirement
If you think you can't afford to retire, what are you basing this on? If you're looking at your current expenditure, you may be overestimating how much you need. Most people find their necessary income falls in retirement as some significant costs decrease. You may, for instance, no longer have a mortgage to pay or save each month on travel costs once you're not commuting.
The cost of retirement is individual and is linked to your plans. Taking some time to figure out how much you need can help you identify if there is a shortfall or where adjustments can be made if needed. According to Which? research, the average retired household spends around £27,000 a year. This is made up of basic areas of expenditure (£17,800 annually) and some luxuries.
6. Speak to a financial adviser
We often find that people are in a better position than they think when they consider the above five factors. We're here to help you pull together the different sources of income that can be used in retirement and understand how they'll provide for you. Using cashflow modelling, we'll be able to demonstrate how your current provisions will last throughout retirement and how changes to your saving habits will have an effect in the short, medium and long term. If you're worried about financial security in retirement, please get in touch.
Please note: A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulations which are subject to change in the future.
Equity Release will reduce the value of your estate and can affect your eligibility for means-tested benefits.
The World In A Week - Beneath The Surface
On the surface, last week appeared quite sedate in markets as global equities, measured by MSCI ACWI rose +0.16% in GBP terms. This was led by UK and Japanese Equities, while the US markets sold off slightly.
Beneath the surface however, there have been important movements in other parts of financial markets. Global and Sterling-denominated Fixed Income sold off quite significantly, in what has been described as a Bund Tantrum. US and German yield curves steepened over the course of the last week, as the German 25 and 30 year Bund moved out of negative territory. These moves were driven by a combination of decreased anxiety over the ongoing trade war between the US and China, and the statements by Mario Draghi that the European Central Bank is running out of tools to combat economic malaise and fiscal policy needs to do more to stimulate growth.
On the back of this increase in global rates, equity markets witnessed tectonic shifts of their own. Stocks that exhibit high momentum, or in other words the tendency for stocks that have recently done well to continue doing well, sold off heavily. Conversely, value (or cheap) stocks outperformed their peers.
The weekend brought additional market-moving headlines, in the form of a large-scale attack on Saudi Arabia's oil production facilities which cut the country's output in half. This sent the price of oil rocketing by +20%, which was the largest jump since the 1990 invasion of Kuwait.
The World In A Week - Back To School
While the country waved the next generation off to start a new school year, the same old issues still loitered in the global playground.
The tedious game of moans between the US and China continues unabated. The trade stalemate was highlighted with mirrored tariffs, showing a much harder stance from China. This was highlighted with their refusal to acknowledge that talks were progressing, despite Trump's tweet of having deep and meaningful telephone conversations.
When the deal is not going your way, the art is to find someone else to attack. So, Trump continued his open criticism of the Federal Reserve on Twitter, with their tremendous lack of vision and asked: who is our bigger enemy? Jay Powell or President Xi?
It is this political pressure that casts many doubts over the world's most important central bank, which finds itself in detention for not having reduced interest rates quickly enough. The Federal Reserve meet next week, which will be monitored closely for their rhetoric as well as their actions.
However, the biggest playground skirmish was around Brexit. Reacting to the controversial plan to suspend Parliament, the rebel alliance forced through a bill requiring an extension of Article 50 until 31st January 2020 if a deal to exit the EU is not in place by 19th October 2019, ruling out the possibility of a 'no deal' Brexit.
As a result of voting against the government, 21 Conservative MPs have effectively made themselves 'independent' in the House of Commons. Such a weak government would normally result in an election, however there is no demand for an election before the bill to rule out a 'no deal' is enshrined in law.
All we know for sure, is that the process has much longer to run and a general election looks all but certain in the near term. All of which is having an adverse effect on the UK economy, which continues to weaken with uncertainty continuing to linger on the horizon.
So, we have all been given a new timetable to learn.
The World In A Week - Prorogue
You may think that the title of this week's 'World in a Week' relates to the protagonist of a play, disappointingly this is not the case. Prorogue is the technical terminology for the discontinuation of a parliamentary session without formerly dissolving parliament. This is what Boris did next, when he announced that parliament would be suspended from mid-September to mid-October, in order to push through Brexit. In a move which received approval from the Queen, Remainers will now have significantly less time to prevent a disorderly Brexit. While it has been cited that Boris will have much greater leverage and credibility in the EU renegotiation of a Brexit deal, he is also at risk of facing a vote of no-confidence, which could trigger a possible election. The Pound came under pressure against the US Dollar on Boris' announcement, be sure to stay tuned for the next act...
Staying in Europe, equity markets rose steadily last week. The reasons for this were two-fold; firstly, the US/China trade discussions showed signs of improvement, which was positive for Germany whose economic data demonstrated that they had managed to stave off a recession, for now at least. Secondly, Italian markets received a significant fillip when populist party 5-Star Movement and the centre-left democratic party agreed to formalise their plans to build a coalition government. The Italian stock exchange, the FTSE MIB, rose nearly 4% on the back of this news. This positive news was marred by the fact that the coalition will face immediate and tough challenges such as the country's mounting debt, a stagnating economy, and the expectation that they are likely to breach their target budget deficit in 2020. Italy have already come under scrutiny by the EU in May of this year. It is broadly expected that the coalition will go ahead but with political views that are poles apart, it is questionable whether the coalition will be sustainable over the longer-term.
The World In A Week - The G7, and other Sticky Wickets
Market volatility continued for the week ending 23rd August 2019, with global equities down -1.6% in GBP terms as measured by MSCI ACWI - this was primarily driven by ongoing concerns regarding the US economy as well as a weakening Dollar. Global bonds fell -0.1% over the week, while Sterling bonds fell -0.3%. Sterling rose against all major currencies, having weakened significantly for the year to date.
While England simultaneously basked in a sweltering bank holiday weekend and victory over Australia in the cricket & Ireland in the rugby; the leaders of the major western democracies gathered in Biarritz for the annual G7 summit. In spite of some rather superficial gestures regarding advancing the Iranian nuclear talks and the establishment of a fund to combat Amazonian forest fires, the summit was broadly as dysfunctional as it has been over the Trump era. President Macron attempted a charm offensive with Mr Trump, hoping to appear statesmanlike. Prime Minister Johnson spent the weekend portraying the UK as open, outward looking and ready for new international trade deals in a post-Brexit world.
We can expect market volatility to continue into this week as the London markets re-open (with the air-conditioning up full blast no doubt). Worries over the US-China trade war persist, Italian political drama drags on and the depth of the economic slowdown in Germany is a serious cause for concern. The upside for equity markets is now potentially more limited than that of England's prospects in The Ashes.
The World In A Week - Rebel Without A Cause
The US and China are both playing hardball, with neither wishing to lose face, but so far, there is no winning, only losing. On a topic that we have written extensively about in the past, trade wars continue to fluctuate between resolution and escalation. Following Trump's announcement of further tariffs on Chinese goods last week, which initially, were planned to be implemented on 1st September 2019, China allowed its currency to devalue, falling through 7 Yen to 1 US Dollar. The tit for tat continued, with the US proclaiming China a currency manipulator. Trump later announced that he would defer some of his new tariffs, those specifically linked to consumer goods. China agreed to further talks within the next two weeks, in a move likely focussed at calming some of their tensions, as protests in Hong Kong escalated.
While stock markets responded positively to the softening stance of China, the same cannot be said of bond markets. Last week, we witnessed an event that has not been seen in over a decade; the event in question is the inversion of the US Treasury market's yield curve. It has been over 10-years since the yield curve inverted; this means that the yield on 10-year notes fell below that of 2-year notes. The last time we witnessed this move was in 2007 and the Great Recession duly followed in December 2008. Despite the inversion being rather brief, historically, this has been a reliable precursor of a recession. But, bond markets, like equity markets, can get it wrong. However, we must be cognisant that the chances of recession have now greatly increased.