Last minute Christmas money saving tips
Christmas may be the time of joy, but January can be grim if you overspend.
The temptations are vast: from pre-Christmas party wear to Black Friday ‘sales’, presents to food and wine and the Boxing Day sales.
Here’s how to make sure you don’t have a festive hangover in the New Year.
Create a budget and stick to it
Over the course of the Christmas season every retailer is going to be looking for cunning ways to tempt you to buy.
You need firm discipline and an iron will. Set a budget for presents for each person, for Christmas dinner, for sale shopping and anything else that might arise. You’ll probably break it, but at least you’ve set yourself some limits.
It can also help to set parameters around gift giving. If you find that your circle of recipients gets bigger every year, try to manage it down, or agree to give small, token gifts with a specific limit.
You don’t want Secret Santa to become Secret Grinch, but it is worth limiting how many groups you’re in.
Beware the lure of credit
There’s no point in hunting around for the best bargains, only to put it all on a credit card, not pay it off on time and end up paying 20-25% interest.
Credit cards are useful for deferring payment, but you need a clear plan for when it falls due and how you’ll pay it off.
Project ahead to how you might be feeling on ‘Blue Monday’, the third Monday in January – and supposedly the most depressing day on the year – when you have no money, you’ve just broken your New Year’s resolutions and the credit card bill has landed.
Right-size your Christmas dinner
The Waste and Resources Action Programme found that the average person in the UK wastes around 95kgs of food every year, or 341kgs for a family of four[1].
Christmas is a major pinch point. Almost everyone over-orders and the food either goes to waste, or families spend weeks chowing down old bits of turkey, or worse, left-over sprouts.
Shopping online can instil some discipline, with fewer temptations and impulse spending.
Making the most of others’ unwanted gifts
The post-Christmas period can be a great time to bag bargains on recycling sites such as Vinted, or Vestiaire Collective as people offload unwanted gifts.
This may prove even more fruitful than the Boxing Day sales.
Savvy shopping
With Black Friday behind us, it’s easy to think there won’t be any more discounting before 25 December. But Boxing Day sales often start before Christmas.
If you know what you want to buy, you can watch out for the best prices and snap up bargains as they arise. This can also help prevent impulsive spending, the enemy of Christmas spending discipline.
Websites such as Camelcamelcamel are primarily aimed at checking prices on Amazon but provide a really good reference point on historical prices to ensure the ‘deal’ you find really is a bargain.
Alternatives which look at a wide array of online shops include PriceSpy and PriceRunner.
Remember when all is said and done, the most important rules for spending are Do you need it? and Can you afford it?
Without being too much of a Grinch, often the best way to save money is by not spending at all!
[1] https://www.wrap.ngo/resources/report/household-food-and-drink-waste-united-kingdom-2021-22
The best financial gifts you can give this Christmas
A financial gift could be for life, not just for Christmas. While it may not draw the same excited gasps as the latest Nintendo, it may have more longevity.
Here are some of the best financial gifts you could give this Christmas.
JISA or even a pension
Plenty of parents and grandparents will make cash gifts this year, which will probably be spent on, depending on the age of the child, soft toys, clothes, or games console. That’s fine, but other options may be to put some of that cash towards a Junior ISA (JISA) or even a pension.
The recipient may not be thrilled today, but they may thank you later. Currently, the annual JISA allowance is £9,000. Parents can contribute and manage these directly, although grandparents and other family members or friends will need to go via the parent to contribute.
A child’s pension could provide even longer future planning. You can put up to £2,880 into a child’s pension for the 2024/25 tax year (assuming they have no income of their own) – and anyone can contribute, including parents, grandparents, godparents or friends.
You’ll get 20% in tax relief from the Government, adding up to £720 to the annual contribution, but the real power is in the compound growth. For example, if you put in the full amount of £3,600 each year, and that accumulates 5% compound interest, then it could be worth approximately £116,000 by age 18*.
Using the same method as above, their pot could be worth £1.43 million by their 60thbirthday*. It may be too late for a thank you letter, but there is no doubt your child would be extremely grateful!
* Please note: This is not guaranteed and will depend on a variety of factors, such as charges and investment performance. Please contact your Financial Planner to discuss this further.
University fees
Everyone has a £3,000 annual gift allowance (in the 2024/2025 tax year). Putting some of this money towards university fees could be a thoughtful Christmas gift. Not only does it take money out of the inheritance tax net, it saves them potentially expensive repayments.
The maximum tuition fee will increase to £9,535 this year for a standard university course. While most UK students are eligible for tuition fee and maintenance loans, these are repaid at expensive and unpredictable rates.
The headline student loan interest rate increases in line with the Retail Prices Index (RPI), and the temporary ‘Prevailing Market Rate’ cap. As of September 2024, it stands at 7.3% and changes every year.
This is higher than most mortgage rates and most conventional loan rates and the effect of compounding can be painful. The more you can minimise the loans students need to take, the better.
If the child in question is still under 18, this can be done pre-emptively into a JISA, although the child will have access to the money at 18 so it will be their choice what to do with the money.
A good financial book
Financial books may not be everyone’s idea of a page-turner, but the best ones can be entertaining and help people manage their finances better.
‘The Psychology of Money’ by Morgan Housel comprises 19 short stories, each exploring different ways people think about money and helps people make better decisions in managing their wealth.
Other popular options include A Random Walk Down Wall Street: The Best Investment Guide That Money Can Buy’ by Burton G. Malkiel, The World’s Simplest Guide to the Stock Marketby Edward W. Ryan, a crash course on stock market essentials, The Uncomfortable Truth About Money by Paul Podolsky and Rich Dad Poor Dad by Robert T. Kiyosaki.
Should you be able to get your teen to read a book, there are plenty of financial guides out there. The Motley Fool Investment Guide for Teens, by Tom Gardner is a good place to start, as is the Teenager’s Guide to Money, by Jonathan Self
Get them started on an app
If you think a book may be optimistic, consider giving children cash through an app.
Many apps – including Revolut, Go Henry and Starling Bank – now have lessons on basic financial management, with ‘gaming’ features, such as tasks and rewards.
They can be a great way to manage money, and will often allow children to set up designated pots for different expenditure. It may teach them more than handing them a cheque.
*Based on an input of £3,600 per annum x 18 years with a compound interest rate of 5%
Trump wins the US Presidency – what it means for your money
Donald Trump has won an extraordinary victory in the US Presidential election. Here’s how it could affect your finances.
The US Presidential election has reached an extraordinary conclusion with the election of former President Donald Trump, who returns to office in January 2025 after four years away from the White House.
While the election of the leader of a foreign country is not often one to consider for our finances here in the UK, the US economy is so large and influential in global terms that it can have an impact on our daily lives.
So what are the key things to have in mind, and what could a new Trump Presidency mean for your money?
Market reaction
The most tangible impact of the Trump victory has been a noticeable and immediate response from the global bond and currency markets.
The US 10-year treasury yield, for example, moved higher once a Trump victory became clearer. This is a signal from investors that it foresees more debt-fuelled spending from the world’s largest economy, thanks chiefly to Trump’s promise of tax cuts.
Alongside this, the US Dollar surged to its highest level in two years. This is largely for the same reason as the bond yield increase – markets see more state spending on the cards.
The implication here is that more spending will lead to renewed inflation. Renewed inflation will force central banks such as the US Federal Reserve to keep its base rate higher for longer.
This unfortunately does have an impact on the UK economy – principally because so much of the world’s goods (think everything from copper to oil and beyond) are priced in dollar terms.
This would have the effect of ‘importing’ inflation to the UK because the stuff we buy as an economy becomes relatively more expensive.
For those of us who like to holiday stateside (or in any other country where the local currency is pegged to the value of the dollar) this could make trips more expensive too.
Higher interest rates
The net result then is that households in the UK could see higher inflation once again. This in turn will potentially affect the Bank of England’s rate decisions moving forward and could leave households facing higher debt costs for longer.
This is something that is now not unfamiliar to households up and down the UK who have faced a cost-of-living crisis in the past two years.
While many have had to go through the pain of remortgaging at much higher rates, many more are still in line to face rising borrowing costs for their homes, especially now if global inflation becomes more persistent at higher levels.
The one upshot with these plans is that President Elect Trump’s proposals are likely to benefit US corporations, and this in turn will potentially fuel a new stock market rally, something Trump in his previous term was always at pains to point out.
But this is ultimately speculative as we don’t know what will happen in the near- or long-term future. Markets are moved by a huge variety of factors.
For those of us considering portfolio positioning in light of these major macroeconomic events, it is essential to speak to an adviser about any concerns or other questions regarding the direction of markets. Don’t hesitate to get in touch.
Autumn Budget 2024: Key measures you need to know for the end of the tax year
Chancellor Rachel Reeves has delivered her first Budget, with a range of tax changes that could affect personal financial portfolios. Here are the key changes and what you need to know for the end of the tax year.
Labour’s first Budget since 2010 has finally arrived. Rachel Reeves spoke for more than an hour announcing major tax changes, investment plans and tweaks to Government borrowing.
The wider implications of the Chancellor’s tax raising measures are mooted to include a 0.4% increase in inflation according to the OBR, and a 0.25% bump up in interest rates.
These are largely modest given the major spending, borrowing and taxation commitments Reeves announced. But what about specific measures that could affect our end of year tax plans?
Key measures
- Capital Gains Tax
The Government has hiked capital gains tax (CGT) rates from 10% to 18% for lower earners and from 20% to 24% for higher earners. The current tax-free allowance of £3,000 remains untouched.
This stops short of proposals to equalise CGT with income tax. Rachel Reeves said in her speech that just 1% of taxpayers face a CGT bill each year, and the new rates leave the UK still competitive compared to our G7 peers.
In terms of the end of the tax year the most important consideration here is to ensure that you maximise your allowances. This goes beyond just the CGT allowance – pensions and ISA allowances remain unchanged. Housing assets within these vehicles, where possible, can mitigate some of the effects of CGT and can provide valuable protection from extra liability.
- Pensions inheritance exemption
Inherited pensions will fall under inheritance tax (IHT) rules from April 2027. From then the total value of pensions will be added to a person’s estate for IHT purposes and could significantly increase net estate values for some with large pension holdings.
Alongside this, Rachel Reeves announced that the main IHT allowances of £325,000 per person, and £175,000 including main residence, will remain unchanged until 2030. This will perpetuate ongoing ‘fiscal drag’ for estates which tip into liability for the tax. The allowances have been unchanged since 2009.
Although this change is potentially an issue for those who have planned to use their pensions to minimise IHT liability, the good news is that the plans are still more than two years away from implementation, and are subject to a consultation to iron out the details of the policy.
Like with CGT, it is important to consider where the best place for assets and other money is in light of these changes, and to ensure annual allowances are maximised.
- Other changes
The changes above are the most directly salient for long-term financial planning, but there have been other changes too that can impact our end of year planning. Those include:
Income tax: The income tax band freeze will end in 2028, returning to inflation-linked increases moving forward. This is positive as income increases will be punished relatively less and could allow for greater saving potential
Stamp Duty: The stamp duty surcharge on second homes or holiday lets was hiked from 3% to 5%, effective immediately from the day after the Budget. unfortunately this means any second home owners looking to sell were more or less immediately exposed to higher tax liabilities.
School fee VAT: The private school VAT implementation was confirmed from January 2025. Although this comes ahead of the new tax year, it is a good idea to consider as soon as possible any adjustments that need to be made to accommodate potential increases in costs if you’re paying a child’s school fees.
End-of-year tax planning
While the measures in the Budget are perhaps not as dramatic as initially feared, it is clear there will be some impact on long-term personal financial plans.
In particular, fresh considerations should be made around CGT and IHT as these are the two tweaks that most directly affect portfolios.
For CGT it is important to ensure the allowance is being maximised each year.
The change to pensions inheritance rules creates new complications and should be considered more carefully in consultation with a financial adviser. Get in touch if you would like to discuss your options.
End of tax year key checklist: get your finances ready now for the new tax year
The end of the tax year is still a few months away, but it pays to think ahead now to ensure you maximise any annual allowances. Here’s your key checklist.
The end of the tax year is still a few months away, but getting started early can help ensure you make the most of the tax reliefs and allowances that are available to you.
Of the major allowances we’re focused on four essentials for the end of the tax year (5th April 2025):
- ISA and pensions
- Capital gains tax
- Gifts (to mitigate inheritance tax)
- Wills and pension beneficiaries
- Use your ISA and pension allowances: Your ISA allowance works on a ‘use it or lose it’ basis. It’s worth squirrelling as much as you can up to the £20,000 limit (2024/25 tax year). If you’ve got the cash, top up. Alternatively, you can sell assets held outside an ISA and buy them back within an ISA - a strategy known as ‘bed and ISA’.
Using your annual pension allowance is just as important. You can get tax relief on contributions of up to £60,000 or 100% of your earnings, whichever is lower, though there is a taper in effect if your income is over £260,000. You can also carry forward allowances from the previous three years.
- Check your capital gains tax position: The worst fears on capital gains tax (CGT) have not been realised, but higher rate taxpayers will still need to pay 24% on any gains made as part of the sale of assets. Investors have two main defences against this.
The first is to use your capital gains tax allowance of £3,000 each year. This means deliberately realising gains up to the limit to ensure they don’t build up. The second is to transfer assets between spouses. Transferring assets between spouses is tax free, therefore it makes sense to equalise your assets so that you both make use of your allowances.
- Give gifts: Getting into the habit of giving gifts is an easy way to take some cash out of your estate for inheritance tax (IHT). You can give away £3,000 per year, every year.
You can also give regular gifts out of income. These can be as high as you like, providing you can show they don’t diminish your standard of living. You can also get tax relief for any gifts you make to charity.
- Check your will and pension beneficiaries: It’s good practice to check your will and the ‘statement of wishes’ on your pension from time to time.
It’s all too easy to shove them to the back of a drawer and never think about them again. Your circumstances will change from time to time, and your preferences may need to change too. Checking once a year is good practice.
The costs of childcare and the help available to young families
Childcare can be one of the biggest outlays for a family with young children. While there is help available from the Government it also pays to be aware of the limits. Here’s what you need to know.
Caring for young children comes with a high cost, but there are ways to mitigate this.
New parents may get used to the lack of sleep and endless demands, but making peace with the cost of childcare is tough.
Bills of £1,200-£1,500 a month to care for small children are commonplace. There is Government support to help, but it is not always available and parents may need to take steps to retain their entitlement.
Child benefit
Your first port of call will be child benefit. Paid every four weeks, you’ll get £25.60 a week for your first child and £16.95 a week for any children after that, for children up to 16 years old - or under 20 years old and still in education or training. This starts when they are born.
It is worth noting that if you save this, with a growth rate of 5%, it would grow to a pot of over £75,000 by the child’s 20thbirthday.
However, there are caveats. If you earn £60,000, you'll have to start paying a 'High Income Child Benefit Charge'. If your income goes above £80,000 the extra tax will cancel out what you receive in benefit.
It might still be worth claiming if one of you isn't working because it can be a means to build up National Insurance contributions, which count towards your state pension.
Subsidised childcare
Parents may also be eligible for subsidised weekly childcare. Currently, parents who work more than 16 hours a week and each earn less than £100,000 are entitled to 30 hours funded childcare a week for children three-to-four-years-old. For children over nine months 15 free hours are available.
Note this is only available in England though. Northern Ireland, Scotland and Wales all have separate and differing schemes.
From September 2025, the full 30 hours will kick in for all parents of nine months and over. There is a calculator here to find out how much you can get: https://www.tax.service.gov.uk/childcare-calc/
Under these schemes, childcare needs to be ‘approved’ to be eligible. In practice, this is registered childminders or nannies, nurseries or childcare agencies. It does not include your child’s compulsory education or private lessons during school time (for example, private music lessons during school hours).
Equally, you can only get tax-free childcare to help pay for childcare provided by a relative (for example, a grandparent) if they’re a registered childminder and care for your child outside your home.
Managing the salary cap
However, here too, parents have a salary limit, with those earning over £100,000 excluded from the initiative.
That being said, there are legitimate ways to adjust your income so that you can still claim childcare and/or child benefit. One way is through pension contributions.
Extra contributions to a workplace or personal pension scheme will reduce your overall net income. This may bring you back down below the threshold for either childcare or child benefit.
A similar effect can be achieved through a salary sacrifice scheme. These are offered by many employers and allow you to reduce your contractual income for an equivalent employer payment to your pension.
This also saves on employee and employer National Insurance contributions, so may become more popular with employers as NI rates rise. Again, this pushes your headline income lower and may put you back below the earnings thresholds.
Charitable gifts made under gift aid are another way to reduce your taxable income. Your income is reduced by the full market value of the gift. You can contribute up to 4x what you have paid in tax in that tax year.
A final option is to equalise any income-paying assets with your spouse. Transfers between spouses are free of tax. This can also bring you below the threshold on income. It is also a useful tool for making the best possible use of tax allowances more widely.
These contributions and deductions need to be made ahead of the tax year end (5 April 2025), so it is worth starting to think about them today.
Childcare costs can be a nasty shock when parents go back to work and the support from the Government can be a valuable boost. It is worth taking steps to adjust your income to retain these benefits where possible.
Your Autumn Budget update - the key news from the chancellor’s statement
Almost four months after Labour won the general election, chancellor Rachel Reeves has delivered her 2024 Autumn Budget, outlining the government’s plans for this tax year and beyond.
Arguing that the July general election had given Labour a “mandate to restore stability and start a decade of renewal”, Reeves described it as “a Budget to fix the foundations and deliver change”.
Against a backdrop of a manifesto pledge not to increase Income Tax, employee National Insurance, or VAT, Reeves also announced that her Budget would raise taxes by £40 billion, stating that any other chancellor would “face the same reality”.
Read on for a summary of some of the key measures and announcements from this year’s Autumn Budget –and what they might mean for you.
Confirmation of the 4.1% increase to the State Pension under the triple lock
The basic and new State Pension will increase by 4.1% in 2025/26, in line with earnings growth, meaning over 12 million pensioners will receive up to £470 a year more.
Changes to some Inheritance Tax reliefs
As expected, the chancellor made key announcements that could affect estate planning.
Nil-rate bands
The freeze on IHT thresholds will be extended by an additional two years, to 2030. The nil-rate band will remain at £325,000, with residence nil-rate band at £175,000.
Pensions
Reeves announced she was closing the “loophole” that gives pensions preferable IHT treatment. She will bring unused pension funds and death benefits payable from a pension into a person’s estate for IHT purposes from 6 April 2027.
The government estimates this measure will affect around 8% of estates each year.
Agricultural Property Relief
Currently, individuals can claim up to 100% relief on agricultural property (land or pasture that is used to grow crops or rear animals).
From 6 April 2026, the first £1 million of combined business and agricultural assets will continue to attract no IHT at all. However, for assets above this threshold, IHT will apply with 50% relief.
Business Property Relief
From 6 April 2026, the government will also reduce the rate of Business Property Relief from 100% to 50% in all circumstances for shares designated as “not listed” on the markets of a recognised stock exchange, such as the AIM (Alternative Investment Market).
Capital Gains Tax reforms
The chancellor announced several changes to the Capital Gains Tax (CGT) regime.
As of 30 October, Capital Gains Tax (CGT) rates have increased immediately, with the basic rate rising from 10% to 18% and the higher rate from 20% to 24%.
The lifetime limit for Business Asset Disposal Relief (BADR), previously known as Entrepreneurs' Relief, remains at £1 million, while the Investors' Relief (IR) lifetime limit has been cut from £10 million to £1 million. The CGT rate for BADR and IR will stay at 10% for now but is scheduled to increase to 14% on 6 April 2025 and 18% on 6 April 2026. These changes are projected to raise £2.5 billion annually by the end of the forecast period.
Furthermore, CGT on carried interest – paid by private equity managers – will rise from 18% (basic rate) and 28% (higher rate) to 32% from 6 April 2025. There will be further reforms from April 2026 to bring carried interest within the Income Tax framework, under bespoke rules.
ISA subscription limits frozen until 2030
The Budget confirmed that annual subscription limits will remain at £20,000 for ISAs, £4,000 for Lifetime ISAs and £9,000 for Junior ISAs and Child Trust Funds until 5 April 2030.
Additionally, in the 2025/26 tax year, individuals with employment or pension income below £17,570 can earn up to £5,000 in savings interest tax-free, thanks to the retained starting rate for savings.
An end to the freeze on Income Tax thresholds from 2028
Back in 2021, the then-chancellor, Rishi Sunak, raised the Personal Allowance to £12,570 and the higher-rate Income Tax threshold to £50,270, with increases of £70 and £270, respectively.
Importantly, he also fixed these thresholds until 2026. Then, in the 2022 Autumn Statement, Jeremy Hunt extended this freeze until 2028.
Unexpectedly, Reeves decided against extending the freeze beyond 2028. From 2028/29, personal tax thresholds will be uprated in line with inflation once again.
A rise in employer National Insurance contributions
Reeves increased employer National Insurance (NI) rates by 1.2% from 13.8% to 15%, effective 6 April 2025. Currently, employers pay NI only above a threshold of £9,100 a year. The chancellor reduced this threshold to £5,000 a year, effective 6 April 2025.
From 2025, the Employment Allowance will rise from £5,000 to £10,500 and the £100,000 eligibility threshold will be removed so that all eligible employers now benefit.
A change to business rates relief
The chancellor announced that, from 2026/27, permanently lower tax rates will be introduced for retail, hospitality and leisure properties, and some will receive 40% relief on their bills, up to a cash cap of £110,000 per business.
Corporation Tax capped at 25%
The government plans to support businesses to invest by publishing a Corporate Tax Roadmap. This confirms that the government will cap Corporation Tax at 25% for the duration of the parliament.
A rise in the national living wage
Reeves announced a 6.7% rise in the national living wage for workers aged 21 and over, from £11.44 to £12.21 an hour, effective April 2025, and from £8.60 to £10 an hour for workers aged 18 to 20. Apprentices will receive the biggest pay increase, with hourly pay rising from £6.40 to £7.55 an hour.
A freeze in fuel duty
Fuel duty has been frozen since 2011, and the 5p cut brought in by the Conservatives in 2022 has been extended at every subsequent Budget. Reeves confirmed the freeze for another year and extended the 5p cut, saving the average motorist £59 in 2025/26.
Second home Stamp Duty surcharge increasing
With effect from 31 October 2024, the Stamp Duty surcharge on the purchases of second homes, buy-to-let residential properties, and companies purchasing residential property in England and Northern Ireland will increase from 3% to 5%. This surcharge is also paid by non-UK residents purchasing additional property.
VAT on private school fees from January 2025
From 1 January 2025, VAT will apply to all education, training, and boarding services provided by private schools. Additionally, the chancellor announced that she was removing business rates relief from private schools from April 2025.
In closing, we understand that the recent budget changes may raise concerns, and we urge you to remain calm and thoughtful in your decisions. If you have any questions or need guidance, please don't hesitate to reach out to your financial planner. We're here to support you through these changes.
Please note
All information is from the Autumn Budget documents on this page.
The content of this Autumn Budget summary is intended for general information purposes only. The content should not be relied upon in its entirety and shall not be deemed to be or constitute advice.
While we believe this interpretation to be correct, it cannot be guaranteed and we cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained within this summary. Please obtain professional advice before entering into or altering any new arrangement.
The World In A Week - Markets shrug off cold winds from the East
Written by Chris Ayton
Last week was a positive one for global equities with the MSCI All Country World Index retracing most of its losses suffered earlier in the month, and ending the week up +3.3% in Sterling terms. Large cap US growth stocks bounced back sharply with the NASDAQ 100 index up +6.2% over the week, boosted by Nvidia’s CEO citing at a Goldman Sachs technology conference that there continues to be a frenzy of demand for its products from its large and “emotional” AI focused customers with “everyone wanting to be first and everyone wants to be most”.
In the UK, July’s GDP growth number unexpectedly came in flat for the second month in a row. The economy grew by +0.7% in the first three months of the year and +0.6% in the second quarter but the flat numbers for June and July raised fears that the economy is stalling. This data also slightly raised expectations that the Bank of England could cut interest rates again when they meet on 19th September, although the odds are still in favour of the base rate being left unchanged at 5%.
The FTSE All Share Index ended the week up +1.3%. Takeover activity continued to be prominent in the UK market with the latest bid being by Rupert Murdoch owned REA’s £5.6bn bid for online property portal, Rightmove. The company swiftly rejected the bid, which was at a price 26% above where it started the month, saying it fundamentally undervalued the company’s future prospects.
In the US, away from the headlines from the Presidential debate, the latest inflation data showed inflation falling to 2.5% in August, although core inflation, which excludes food and energy, held steady at 3.2%. This tempered expectations of a 0.5% interest rate cut at the upcoming Federal Reserve meeting, although the markets are still pricing that as the most likely outcome.
Emerging Market equities were the laggards over the week, rising +1%, once again dragged down by Chinese equities which fell back -0.2% as China’s producer prices declined 1.8% year-on-year and raised more concerns that deflationary forces are entrenched in the economy. Data was also released showing that the value of new home sales by the top 100 developers fell 26.8% year-on-year. Although this lacklustre backdrop is far from ideal for equities, it continues to be positive for our funds’ exposure to China government bonds, with the Bloomberg China Aggregate Bond Index up +0.4% for the week and +8.2% for the year-to-date, both in GBP hedged terms.
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 16th September 2024.
© 2024 YOU Asset Management. All rights reserved.
The key life events which you need to ensure careful financial planning for
Preparing for key life events can make a critical difference to the long-term success of your financial plans. Here are the most important to keep in mind, and what to consider around them.
Ensuring a happy retirement and the financial security to help those you love while looking after your needs is a whole life pursuit.
But it is also true to say there are key life events that require special consideration when it comes to financial planning.
Now, reading this article you might well wonder how relevant some of this is to you, especially if you own your home, or have a well-established career and savings pots.
However, aside from some of the later life considerations, if you have close family such as a spouse, children, grandchildren or other close relatives or people who you might want to factor into your future financial considerations, then this will still matter to you!
Likewise, if you’re just getting started with these aspects of your long-term plans, then starting as early as possible is critical.
Here are some key life events we should all keep in mind to ensure successful financial planning.
Starting work
Starting work might seem like an obvious, or even a relatively inconsequential one in the greater scheme of things, but it is perhaps the most important opportunity in a young person’s life to set themselves up for the best financial outcomes possible in the long-term.
A young person getting started with work should try to consider their long-term goals as a starting point. Common goals include paying off student debt (from tuition fees and/or an overdraft!), buying a house, or even saving to go on a trip of a lifetime. All of these are perfectly reasonable goals.
However, very overlooked in the context of the beginning of a young person’s career is just how big an opportunity that person has to start saving for their long-term financial security.
What is critical here is to make sure when you start your first job that you’re contributing to your workplace pension, and ensure that it is invested in a way which maximises its potential for future growth. Aside from anything else, your pension has lucrative tax incentives that will make the sums look even better over a long period of time, thanks to valuable tax reliefs.
For parents or grandparents looking to help their children or grandchildren in this position, it can be a good idea to help with certain costs as they get started in their careers, but this mustn’t come at the expense of their own financial plans. There are some necessary tax considerations to have in mind before gifting.
Buying your first home
Buying a first home is seen as an increasingly difficult feat to achieve. But this belies the numerous avenues for someone seeking to get on the property ladder to get help.
But thinking in terms of what we can do with our own financial planning to make home ownership a reality, it comes back to saving into the right kind of product to maximise opportunities, and crucially doing so as early as possible.
The Lifetime ISA (LISA) is a flawed but generally under-used product which could be extremely helpful to someone looking to get on the property ladder, which gives up to £1,000 a year in Government-funded bonuses toward a deposit.
Although buying a home is not necessarily right for everyone, it is a solid foundation on which to build long-term financial freedom. It is also important here for parents or grandparents to consider their own financial plans if they wish to contribute toward a child or grandchild’s deposit as there are potential tax and other implications for their own finances.
Becoming a parent or a grandparent
Generally considered one of the most expensive times in a family’s life, children are one of life’s greatest joys, but they come with all manner of financial considerations.
A parent who is about to become a grandparent for the first time will almost certainly want to help in any way they can at this point, which is laudable. But depending on your own stage of life it is important to consider how much you can realistically afford to sacrifice to help your children raise their own kids.
The implications for this, around rules such as inheritance tax (IHT) gifting allowances and other calculations which include the long-term viability of your own financial plan, make it important to consider seeking professional advice. This can be done with your whole family in mind and the needs of your own future, as well as your children and grandchildren.
Peak earning years
Perhaps less discussed than other life events, but potentially no less important, are your ‘peak earning years’. Peak earning years are the period of your life, typically beginning in your 40s before tapering as you get into your 50, when your income level is the highest it is likely to be in your whole career.
It is critically important to be aware that you might be in your peak earning years, as this is the time when you have to ensure your long-term financial plan is working as hard as possible for your future.
These are the years when you’ll feel most able to take advantage of important allowances such as ISAs and pensions, and you’ve still got lots of time to ensure more growth potential.
Retirement
This is obviously a big moment and a huge life event, where we transition away from a long career to stepping back from paid work or stopping work entirely.
Increasingly retirement is no longer seen as a ‘cliff edge’ where one day you just down tools and stop, and more likely a glidepath where you decrease the hours you do as other priorities (such as grandkids!) take shape.
While the old way of thinking of retirement as one ‘moment’ in time may be on its way out, at the point which you think you are ready to begin drawing on your pension and other assets you’ve accrued, it is essential to seek professional advice.
Doing so will stop mistakes such as triggering the money purchase annual allowance (MPAA) too quickly. An adviser can work with you to model which assets it is best to draw upon at what times, to ensure your portfolio is sustainable over the long term.
Later life preparation
Another less-discussed part of retirement, later life preparation is no less important. When it comes to our costs in retirement, we tend to think of it as a “U shaped” graph.
At the beginning of retirement, our spending is higher as we cash in on some of the benefits of access to our pension pots. It could be buying a dream retirement home, a nice car, a world cruise, or anything else – and this is no bad thing!
Once we settle into the regular pace of retirement, then our costs tend to reduce. The mortgage is paid, we have a comfortable home and other aspects are well settled.
But in later life, costs unfortunately start to rise again. This is because the older we get, the more help we tend to need – whether it be gardening, cleaning round the house, or more extensive care for those whose health or mental capacity begin to deteriorate.
This is a difficult stage for many people to face, but is unfortunately essential to consider in our overall planning. Having enough to pay for these needs is critical, while also being able to mitigate any potential tax implications and ensure we can sustain a legacy for our loved ones after we’re gone.
As with all the other life stages mentioned above, an adviser can help you and your family at every step to ensure everyone is on the right path to sustainable financial freedom.
The World In A Week - The time has come
Written by Ilaria Massei
Last week, the Federal Reserve (Fed) implemented a 0.5 percentage point rate cut, effectively settling the debate over whether a 0.25 or 0.5 percentage point reduction was more appropriate. The decision, supported by 11 of the 12 voting members, boosted US and Global equities last week, with the S&P 500 rising by +0.4% and the MSCI All Country World Index rising by +0.3%, both in GBP terms. Concerns that the magnitude of the cut could fuel future inflation have put pressure on fixed income markets, leading the Bloomberg Global Aggregate Index to fall by -0.2% in GBP hedged terms. However, a closer look at consumer data reveals that nearly all excess savings accumulated during the pandemic have been spent. This raises concerns about US consumers' ability to sustain economic growth.
Meanwhile, on this side of the Atlantic, the Bank of England (BoE) decided to keep interest rates steady at its Monetary Policy Committee meeting. This decision comes as the core Consumer Price Index (CPI), which excludes volatile food and energy prices, rose to 3.6%. This increase was largely driven by a rise in services inflation, particularly in airfares, which increased to 5.6%, contributing to the BoE’s decision to leave rates unchanged. On the consumer front, sentiment in the UK took a hit in September, with the GfK Consumer Confidence Index, which measures expectations on the general economic outlook and households’ finances, dropping by 7 points to -20, back to January’s level. The move comes after warnings from the UK’s fiscal watchdog about the urgent need to address rising debt and the upcoming Autumn budget, which tempered optimism around the economic recovery.
Far in the East, China’s August data highlighted a continuing slowdown in economic momentum, with the country seemingly caught in a deflationary spiral similar to Japan’s experience in the late 1980s and 1990s. Nonetheless, Chinese equities were the best performing asset class last week, with the MSCI China index up +3.6% in GBP terms, supported by looser monetary conditions in the US. However, despite the benefits of US rate cuts, there is growing pressure on Beijing to take further action, as both households and businesses remain in need of additional support.
The Bank of Japan left its key short-term interest rate unchanged at 0.25%, as widely anticipated, maintaining a significant rate differential with other developed central banks. The MSCI Japan posted a strong +2.9% in local terms last week, however, the index gave back all of the gains due to currency weakness, resulting in a -0.8% return in GBP terms.
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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 23rd September 2024.
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