While the direct impact of the Covid-19 pandemic has lessened for many economies, businesses are now struggling with the indirect consequences, such as supply chain issues. From microchips to aluminium cans, firms around the world are facing challenges getting hold of the materials and goods they need.

Markets have largely recovered from the Covid-19 volatility, but global investors expect a market correction, according to a Deutsch Bank survey. Some 58% of investors said they expect a correction between 5% and 10% by the end of the year.

UK

Government announcements could have an impact on both employees and employers. An increase in National Insurance contributions (NICs) from April 2022, which will become a separate health and social care levy from 2023, will increase outgoings for both individuals and businesses. NICs will increase by 1.25 percentage points.

For business owners and investors, the government’s announcement of dividend tax rates increasing by 1.25 percentage points from April 2022 could have an impact too.

Figures suggest that UK businesses are struggling with supply chain issues caused by the pandemic, Brexit, and other factors. The IHS Markit Purchasing Managers Index (PMI) monitoring business activity fell to 55. While the reading indicates growth, it has fallen to a six-month low that has been linked to supply chain challenges.

The challenges have affected a range of industries, including construction. “Sustained and severe” supply chain issues were blamed for the PMI falling from 58.7 in July to 55.2 in August. The British Retail Consortium (BRC) suggests UK shop price increases of 0.4% in August were also related to shortages in microchips and shipping problems. The organisation added that supply chains are on the edge of coping.

Throughout the month, shortages of food, energy, and fuel have also been widely reported. While steps have been taken to reduce the impact, including the military being drafted in to help deliver fuel, the CBI warned that the labour crisis could last up to two years.

This is reflected in the number of businesses struggling to fill vacant roles. According to the Office of National Statistics, 13% of businesses said vacancies have become more difficult to fill when compared to last year in September. This compares to 9% that said the same thing in August. The hospitality industry in particular is facing challenges. Some 30% of accommodation and food service firms highlighted challenges finding workers.

It’s not just imports that are slowing. UK exports to the EU fell by around £900 million in July, a 65% drop. Rising exports outside of the bloc didn’t make up the shortfall.

Demand and challenges facing businesses mean inflation is above the 2% Bank of England target. Michael Saunders, a member of the bank’s Monetary Policy Committee, suggested higher rates of inflation could mean that interest rates will begin to rise next year, affecting both borrowers and savers across the UK.

In other news, Morrisons and Meggitt were both promoted to the FTSE 100. The share prices of both firms surged after attractive takeover bids, meaning they were worth enough to be included in the index. However, it could be short-lived as both firms would be delisted if the takeover bids go ahead.

Europe

Eurozone GDP figures show economies within the bloc are recovering stronger than initially thought. The GDP figure for April-June has been revised upwards from 2% to 2.2%.

Germany is also leading the way with an unexpected surge in factory orders for major goods, like ships. Official data from Destatis shows a 3.4% rise despite expectations of a fall.

US

Supply chain challenges are also having an impact in the US. While the manufacturing sector is still growing, the pace is slowing down. The PMI data from IHS Markit fell from 63.4 in July to 61.1 in August.

Another area that has disappointed, is job growth. Just 235,000 new jobs were created in the US in August, a significant slowdown when compared to a month earlier and a figure that falls short of expectations. The data would suggest the pandemic is continuing to have an impact on the labour market, with no jobs added to the leisure and hospitality sectors as concerns around the spread of the Delta variant remain.

Asia

Data from China shows that the pandemic continues to have an impact on activity and demand. The country’s service sector’s PMI data in August fell to 46.7 from 54.9 in July. The below-50 reading means the sector is contracting. Increased restrictions to curb the spread of the Delta variant have been blamed.

However, export figures suggest the outlook in China isn’t glum. Exports increased by 25.6% in dollar terms in August, according to official data. Exports reached $294.3 billion, which helped to calm the worries of a slowdown.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

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.

It’s that time of the year when the nights are getting darker and spooky films start to appear on the TV. While the sight of ghosts, vampires, and more could frighten you, tackling your finances can be just as scary, especially if you’re making one of these five mistakes.

1. Failing to claim all the pension tax relief you’re entitled to

Tax relief is one of the reasons why saving into a pension makes financial sense for many. It means the government adds some of the tax you’ve paid into your pension pot to provide a welcome boost. But are you getting everything you’re entitled to?

Tax relief is usually paid at your nominal Income Tax rate. While your pension provider will usually claim tax relief for you, this isn’t always the case. If you’re a higher- or additional-rate taxpayer, you’ll also need to complete a self-assessment tax form to receive your full entitlement. It can seem like an extra chore, but it’s well worth it.

Take some time to review what’s going into your pension. Most workers should have three sums going into their pension each month: their own contribution, their employer’s contribution, and tax relief.

2. Paying tax on your savings when you’ve not used your ISA subscription

The Personal Savings Allowance means most workers don’t have to pay tax on the interest they earn on savings. However, if you have significant sums saved in cash or are an additional- or higher-rate taxpayer, you may pay tax on interest.

The Personal Savings Allowance means basic-rate taxpayers can earn up to £1,000 in interest each tax year before tax is due. This falls to £500 if you’re a higher-rate taxpayer, and additional-rate taxpayers don’t benefit from the allowance at all. If you exceed the allowance, you may need to pay additional Income Tax.

In some cases, paying tax is unavoidable but if you’re not making full use of your ISA annual subscription, you could be paying more than you need to.

For the 2021/22 tax year, you can add up to £20,000 to an ISA. You don’t pay tax on interest earned if you’re money is an ISA, helping it to go further.

3. Missing out on allowances that could reduce your tax bill

Are you making full use of allowances that could cut your tax bill? The rules around allowances can be complex and may depend on your situation so it can be difficult to understand which ones apply to you.

The Marriage Allowance is one example of this. It allows spouses and civil partners to transfer some of their unused Personal Allowance, the amount of income you can earn tax-free, to their partner. For the 2021/22 tax year, the Personal Allowance is £12,570 and you can transfer up to £1,260 to a partner. It can reduce your tax bill by up to £252.

Despite this, it’s thought that many couples are missing out on the tax break. If it’s something you’ve overlooked, the good news is that it can be backdated by up to four years.

If you’d like to discuss what allowances you can make use of to reduce your tax bill, please contact us.

4. Avoiding investment risk by holding your money in cash

As well as ensuring you’re not paying unnecessary tax on interest earned on cash savings, it’s important to ask if cash is the right choice for you.

Holding your money in a savings account, rather than investing, can seem like the “safe” option. In reality, your money is likely to be losing value in real terms. The interest rate you earn on savings is likely to be lower than the rate of inflation. This means your spending power will decrease over time.

While all investments carry some risk, and the value can rise as well as fall, it can help you grow your wealth over the long term. If you’re saving for a goal that is more than five years away, it’s worth considering if investing could be the right option for you.

5. Putting off estate and Inheritance Tax planning

How carefully have you considered what you’d like to happen to your assets when you pass away? It’s something that many people put off. Just half of adults in the UK have written a will, according to Will Aid.

Without an estate plan in place, it can be difficult to understand what you’ll pass on to loved ones and these wishes may not be carried out without a will. An estate plan can also give you confidence. It can, for example, help you understand how you’d pay for care if you need support in the future.

If your estate could be liable for Inheritance Tax (IHT), taking a proactive approach is also important. There are often things you can do to reduce an IHT bill, but you must take these steps before you pass away. If you’re worried about IHT, please contact us.

Even a small financial mistake or missed opportunity could have a significant impact on your finances in the long run. Effective financial planning that considers the long term can help you get the most out of your money. Please contact us to talk to one of our team.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

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 regulation, which are subject to change in the future.

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.

The Financial Conduct Authority does not regulate will writing.

In the 2019/20 tax year, taxpayers paid a record amount of Capital Gains Tax (CGT) to HMRC. If you could face a CGT bill, there are some things you can do to reduce it.

According to Which?, individuals paid £9.9 billion in CGT in 2019/20, up from £9.5 billion in the previous year. CGT is a tax you pay on the profit when you sell an asset that has increased in value; this could include stocks and shares, property, or material goods. The rate of CGT you pay is dependent on your Income Tax band and the asset you’re selling, but it can be as high as 28% when selling residential property that is not your main home. As a result, it can significantly eat into your profits.

If you could be liable for CGT, here are five useful tips that could help you reduce your bill.

1. Make use of your CGT allowance

Each tax year, you have an allowance known as the “annual exempt amount”. This is the amount of profit you can make before any CGT is due.

For the 2021/22 tax year, this allowance is £12,300. Planning the disposal of assets to make full use of this allowance can reduce the amount of tax due. For instance, spreading the sale of assets over several tax years to ensure you don’t exceed the threshold can mean you avoid or reduce how much CGT you need to pay.

The annual exempt amount is frozen at £12,300 until 2026, making efficient tax planning even more important. Inflation means the value of assets is likely to continue rising during this period, so more taxpayers could find they unexpectedly exceed the threshold.

It’s also important to note that the annual exempt amount is £12,300 per individual. So, if you hold assets jointly or transfer assets to your spouse or civil partner, you can effectively double the threshold. However, you cannot carry forward unused annual exemption into a new tax year.

If you’d like to create a strategy that makes use of your CGT annual exempt amount, please get in touch.

2. Maximise your ISA contributions

If you could pay CGT when selling stocks and shares, maximising your ISA allowance makes sense.

Each tax year, you can place up to £20,000 into an ISA. You can hold this money in cash or invest it. If you choose to invest, the money can grow free from Income Tax and CGT, making ISAs an efficient way to invest. Again, the ISA allowance is per individual. So, as a couple, you could add up to £40,000 each tax year to ISAs between you.

You cannot carry forward unused ISA allowance – if you don’t make use of it, you lose it.

3. Take advantage of Enterprise Investment Scheme (EIS) tax reliefs

Gains made in an EIS are free from CGT if you hold the asset for more than three years. However, these investments are not suitable for everyone.

EIS were designed by the government to encourage investors to invest in smaller companies. These are typically higher risk than traditional investments. You should carefully consider your risk profile when investing in an EIS and keep in mind that you will need a long-term investment strategy to make use of the CGT tax relief. If you’d like to discuss if EIS could be right for you, please contact us.

4. Offset your losses

If you’ve made a loss when selling some assets, you can offset these against a CGT bill. Losses that you wish to offset must occur in the same year as the gains. You will also need to register losses with HMRC. Offsetting losses can help you balance your gains and reduce a tax bill. However, it can be complex and it’s important the right procedures are followed.

5. Reduce your Income Tax levels

As the rate of CGT is linked to your Income Tax band, reducing your taxable allowance can mean you pay a reduced amount of CGT overall. There are several ways to do this, including making pre-tax contributions to your pension and making donations to a charity. This could help you save for a more comfortable retirement or have a positive impact on a good cause.

The above list isn’t an exhaustive way to reduce CGT. Depending on your circumstances, there may be other steps you can take too. If you’re worried about a CGT bill and would like to learn more about how you could reduce the cost, please contact us to create a bespoke plan to mitigate your tax liability.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

You may have thought about who you’d like to benefit from your assets when you pass away and written a will to ensure your wishes are carried out. However, you may have overlooked what you’d like to happen to your pension.

As you’ll be paying into your pension over your working life, it may be one of the largest assets you own. Yet, it’s easy to forget about it when planning what you’d like to happen to your estate, especially if you’re not drawing an income from it yet. If you have a defined contribution (DC) pension, it’s essential you complete an expression of wishes to ensure your loved ones benefit from your savings.

What’s your pension worth?

According to the Telegraph, after a lifetime of saving, the average UK pension pot stands at £61,897. That’s a significant sum that could have a positive impact if left to loved ones. Depending on your circumstances, your pension value could be much higher than this figure, particularly when you consider investment returns.

It can be difficult to understand how your pension will change over time. During your working life, you are likely to still be making contributions, as well as benefiting from tax relief and employer contributions. As most pensions are invested, investment performance will also mean the value of your pension will rise and fall.

Once you retire, you may begin withdrawing an income from your pension, and it may still be invested. As a result, valuing your pension can be challenging. But looking at how much it’s worth now and how it could change in the future demonstrates why making your pension part of your estate plan is important.

The introduction of auto-enrolment, which means the majority of workers are automatically enrolled into a pension, means more workers than ever will need to consider how they’d like to pass on their pension.

Completing your expression of wishes

While your pension may be an important part of your wealth, it’s not covered by your will. This is why you need to complete an expression of wishes.

An expression of wishes is simply a statement that tells your pension provider who you’d like to receive your pension savings if you die before accessing the money. It’s something that can be difficult to think about, but it can help you make provisions for those who are most important to you if something did happen.

Without an expression of wishes, the pension trustees will make a decision, but it can make the decision harder, and it may not align with your choice. It’s important to note that pension trustees may take other factors into account when deciding who receives your pension. This may include whether you have any dependents, but the trustees must do their best to accommodate your wishes.

If you haven’t completed an expression of wishes, it’s simple to do. If you have an online account for your pension provider, you can usually complete a form within minutes. If you don’t use an online account, you can get in touch with your provider to send you the relevant paperwork.

You will need to complete an expression of wishes for each pension you hold. This could be the same person, or someone different. You can name more than one beneficiary for each pension, allowing you to split the sum between your children, for example.

If you’ve changed jobs frequently, you may have several pensions. It’s important you keep track of each and complete an expression of wishes. In some cases, it may make sense to consolidate your pensions to make them easier to manage. If you’d like to discuss this, please get in touch.

How leaving your pension to a loved one could reduce an Inheritance Tax bill

If your estate could be liable for Inheritance Tax (IHT), leaving your pension to loved ones can make sense.

The amount of tax paid on an inherited pension depends on the age you pass away and how the beneficiary accesses it. However, it’s usually a lower rate than IHT.

For the 2021/22 tax year, the nil-rate band is £325,000. If the value of your estate is below this amount, your estate will not be liable for IHT.

Many people can also take advantage of the residence nil-rate band, which increases the threshold if you’re leaving your main home to children or grandchildren. For the 2021/22 tax year, the residence nil-rate band is £175,000. In effect, this means most people can leave up to £500,000 before their estate is liable for IHT.

However, the standard IHT rate is 40%. So, if you do exceed these thresholds the tax can significantly reduce what your loved ones receive.

In contrast, a beneficiary is likely to face a much lower rate if they inherit your pension. For example, if you passed away before you turned 75 and the beneficiary took your pension as a lump sum, no tax is usually due. If you passed away after the age of 75, the beneficiary is likely to pay Income Tax at their nominal rate, which may be lower than the IHT rate.

The tax due on inherited pensions can seem complex and will depend on personal circumstances. If you’d like to discuss what it could mean for you or your beneficiaries, we’re here to help. However, if your estate could be liable for IHT and you have other assets to create an income in retirement, it can make sense to leave your pension so that it can be passed on.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate estate or tax planning.

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 regulation, which are subject to change in the future.

Your pension might not be something you think about often. Unlike your current account or even ISA, it could be decades before you’ll be able to access it. So, it’s not surprising that keeping track of pensions isn’t a priority for many people. However, it’s important for effective retirement planning and ensuring you’re on track. For some, pension consolidation the task easier.

For many workers, pensions are becoming more difficult to keep track of for two reasons:

1. Under auto-enrolment, most employees will now benefit from a workplace pension. While this means more people are saving for their retirement, it also means more workers now need to keep track of their pension savings.
2. Alongside auto-enrolment, it’s become more common to switch jobs. According to Scottish Widows, the average employee will change jobs 11 times in their working life. That means the average person needs to keep track of multiple pensions.

As it’s not something you’re likely to think about every day, losing touch with a pension can be easier than you think. Not updating your address when you move can mean it’s easy for small pension pots to slip your mind.

In 2020, the Association of British Insurers (ABI), found just 1 in 25 people consider telling their pension provider when they move home. As a result, ABI estimated that there are around 1.6 million “lost” pensions, worth £19.4 billion in total. While small pensions may seem like they’ll have little impact on your retirement, they can help you reach goals, especially when you have several.

If you’re reviewing your pensions, the first thing to do is make sure you have the details for them all. If you’ve “lost” a pension, the government’s tracing service can help you track it down.

Why pension consolidation is worth thinking about

Pension consolidation means combining pensions into one pot. It can make it far easier to keep track of your retirement savings.

Having all your pension savings in one place means it’s easier to manage and see if you’re on track to reach retirement goals. It can also help you understand how to access your pension at retirement and create an income that suits you.

For some people, consolidating pensions could also reduce the total fees paid. It could mean more of your money is invested to deliver a larger sum when retiring.

In most cases, consolidating your pensions is relatively straightforward. However, the Scottish Widows research found that 1 in 10 savers had no idea it was an option, and 12% said it was too much hassle.

So, it’s not surprising that almost three-quarters of Brits (72%) would like to see a new system that automatically consolidates their small pension pots as they move jobs.

While this could make managing pensions simpler for workers, it’s not something that will be introduced any time soon. As a pension saver, you’ll need to take control and consolidate your pensions yourself. To do this you’ll need to contact the pension provider you want to transfer to and check they will accept the transfer and then complete a form.

Before you consolidate your pensions, there are two things you need to think carefully about: which pension provider to move your savings to, and whether it’s the right option for all your pensions.

1. Choose a pension provider to transfer to

If you want to consolidate your pension, you’ll need to choose a pension provider to move your savings to. This could be a provider that already holds some of your savings or a new one.

At first glance, pension providers can seem similar. However, things like fees, fund options, and investment performance, can all have an impact on your savings and, in the long term, your retirement. It’s important to choose a provider that makes sense for you. Remember: your pension is a long-term investment, so you should consider the impact over the time frame you’ll be saving into a pension.

We can help you compare pension providers and answer any questions you may have when deciding where to place your retirement savings.

2. Check if transferring out of a pension is right for you

Pension consolidation can make it easier to manage pensions, but you should review your existing pensions first. In some cases, transferring out of a pension could mean you lose valuable benefits.

Some pensions, for example, will allow you to take a lump sum or income earlier than normal, or provide a pension for your spouse. If you transfer out, you’d lose these benefits, and another provider may not offer them. Assessing your existing pensions to understand what they offer and how the benefits could fit into your retirement plan is a crucial step to take to ensure you make the right decision for you.

If you need help managing your pensions and understanding what they mean for your retirement, please contact us. We can help you understand if consolidating pensions makes sense for you and how to proceed if it does.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

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 regulation, which are subject to change in the future.

Research suggests that millions of workers are being too cautious with their pensions. Taking too little investment risk with retirement savings could mean your pension is much lower than it could have been. It could affect your retirement lifestyle.

Pensions and investment risk

If you pay into a defined contribution (DC) pension, your money will usually be invested. This includes your own contributions, employer contributions, and tax relief. By investing your money, you’re giving it a chance to grow over your working life.

All investments come with some level of risk, and values can rise as well as fall. Your pension provider will usually offer several investment funds for you to choose from, with varying levels of risk. Knowing how much risk you should take can be difficult, but research suggests many pension savers are being too cautious.

According to IFA Magazine, an estimated 4 million workers under 40 are in low-risk pensions. When asked how much risk they thought was appropriate, 39% of under-40s said the most appropriate level of risk for their pension was “medium”. Some 28% said they think “low-risk” investments are appropriate. This compares to just 20% that said “high”.

When assessing the appropriate level of risk for your pension, your age matters.

This is because young workers are still investing with a long-term time frame in mind. When you’re investing for the long term, you have a longer period for investment volatility to smooth out. When you’re 40, you could still have several decades before you’ll start accessing your pension. Taking a higher amount of risk with your pension when you’re younger has the potential to deliver higher returns.

Your pension returns are also reinvested, so you benefit from the effect of compounding. Over decades of paying into a pension, taking more risk in the early years can mean your pension is larger at retirement.

Traditionally, pension savers will take more risk in their early years, before moving into lower-risk options as they near retirement. Your pension provider may automatically do this for you. So, it’s important they have accurate information about when you hope to retire.

Of course, age isn’t the only thing you need to consider when deciding how much risk to take with your pension, but it is an important factor.

What impact could low-risk investments have on your retirement?

It can be difficult to understand how the decisions you make now could affect your retirement.

Pension providers must provide you with a forecast of how your pension will grow. While these are not guarantees, they can provide a useful indicator of how your pension will change over the years.

Each pension fund will be made up of different assets, including equities, which are one of the main assets that will help you grow your pension. An “adventurous” fund with a higher risk level is likely to have a higher mix of equities. Reviews from the Financial Conduct Authority (FCA) highlight the impact this can have.

The FCA conducts a review of investment return assumptions every 4–5 years; the last review was in 2017. According to an Interactive Investor report, the real rate of return, which considers the impact of inflation, is 4% for equities. This compares to 0.3% for corporate bonds and -0.5% for government bonds. Choosing a pension fund with a higher proportion of equities can have a real impact over the long term.

Being too cautious with your pension during your working life can mean the difference between achieving your retirement goals and not.

Should you switch to a different pension fund?

While there are reasons for taking more risks with your pension, you need to consider your personal circumstances.

Set out what your retirement plan is first. When do you plan to retire and how long will you be paying into your pension? As a general rule, the longer you’ll be investing your pension, the more risk you can afford to take. If you’d like to discuss if you should take more or less risk with your pension, please contact us.

If you do decide to switch to a different pension fund, it’s usually easy to do so. If you have an online account, you can typically log in and see the different options available to you. In most cases, you’ll be able to switch with just a few clicks of your mouse.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

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 regulation, which are subject to change in the future.