Coronavirus has affected many aspects of our lives and research shows that savings are one area that may have been affected. Whether you’ve had to dip into savings or have been able to put away, it’s important to look at your financial plan to ensure you’re getting the most out of your money.

According to research from Aegon, six in ten peoples’ savings have been affected by the pandemic in some way. These people are split into two distinct categories:

1. 31% of savers reported they have increased savings during lockdown as other costs, such as commuting to work and entertainment were cut. On average these savers increased the amount they put away by £197 per month.
2. In contrast, 28% of savers said they’d been forced to reduce the amount they were saving each month or stop saving altogether. On average, savings were decreased by £159 per month.

Steven Cameron, Pensions Director at Aegon, said: “While coronavirus is first and foremost a health crisis, it is having a big impact on the nation’s wealth. Our consumer research shows six in ten of the population have changed their savings levels since the start of the crisis with a stark divide between those who have been able to save more because their expenditure in lockdown has reduced and those who have had to cut back or stop regular savings. If this divide in savings patterns continues for any length of time, it will have a big impact on the future financial security of different groups.”

Unsurprisingly, employment status had a big impact on whether savings were cut or boosted. Those needing to cut back are more likely to have been furloughed, potentially meaning taking home just 80% of their normal salary, or self-employed as income may also have been affected. While support is available for self-employed workers, they’ve typically had to wait longer for this to come through.

On the other hand, those that have remained working throughout the lockdown, either as keyworkers or from home, are likely to have maintained their income while seeing other outgoings decrease.

If your saving habits have changed, it’s important to review this in line with your financial plan. What steps you should take will depend on which of the categories you fall into.

Saving more during the pandemic

If you’ve been in a position to save more during lockdown, it’s worth looking at where your savings are going and if it’s the most efficient place.

Interest rates are low at the moment, which can mean your savings are losing value in real terms over the long term. If you already have an emergency fund established, ideally with around three months’ worth of outgoings in a readily accessible account, you should look at the alternatives. This may include a fixed-term savings account, where your money is locked away for a defined period, or investing if appropriate for your goals.

When looking at where to place your increased savings, it’s important to keep your goals and overall financial plan in mind. While investing can be a way to increase value over the long term, it’s not appropriate if you’ve decided to save for a holiday next year, for example.

Saving less or using savings during the pandemic

If your saving habits have been negatively affected by coronavirus, it’s important to understand the impact.

You may have been forced to dip into your emergency fund, for instance, depleting your usual safety net. First, you shouldn’t feel guilty about doing this, after all, you’ve put that money aside to help you weather unexpected events. However, you should keep track of what is being used and how you’ll replenish savings once you’re in a financial position to do so.

Where your regular savings have been reduced or halted, the long-term impact is something that should be considered. In many cases, a few months of lower saving contributions are unlikely to have a huge impact on financial security in the long term. But it’s worth assessing if goals are still within reach to provide peace of mind. You may find that increasing savings once you’re able to or delaying plans for a while is necessary.

While lockdown restrictions have eased, some workers are finding their routine will remain disrupted in some way in the coming months. It’s important to review your financial plan in light of personal changes if needed, it can help keep you on the right track.

It’s not just savings that Covid-19 may have affected in terms of finances either. The pandemic caused short-term volatility in stock markets which may have impacted investment portfolios and pensions, for example. If you have any questions about your financial plan and goals, please get in touch.

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.

When you think about your lifestyle goals and financial plan, how far ahead do you look? It wasn’t so long ago that planning to reach 80 meant you could be sure of financial security throughout your life. But now, it’s becoming increasingly common to celebrate your 100^th birthday, bringing new challenges to planning.

Just a century ago, 1% of babies born were expected to live to 100. As healthcare and a range of other factors improved, life expectancy has increased too. If you’re a female aged 60, there’s a 12.3% chance of turning 100, for 60-year-old men it’s 8.1%. If you’re 40 the chance of reaching 100 are even greater, at 18.7% and 13.3% for women and men respectively.

While improving health conditions are certainly positive, living longer lives means we need to change lifestyle too.

Changing lifestyles

When you think about preparing to live longer, it may be money that springs to mind first. After all, a longer life means you’ll need to establish financial security that will last longer, probably with a longer time spent in retirement. But as with all financial plans, your goals and lifestyle should remain at the centre.

Previously, life was broadly split into three stages of education, working and retirement. We’re already seeing these stages change. It’s now far more common to find people transitioning into retirement, spending time on education in later years, or going back to work in some form after retiring. 

You might be able to retire at 65, but would you want to spend 35 years in retirement? For some, this sounds ideal, but for others, it’s a long time not to work in some way, whether that’s through traditional employment or starting their own business.

Planning for a 100-year life should start with thinking about how you’d like your life to look.

• What are your goals at 60, 70 and beyond?
• When would you like to retire, and would you prefer to transition into retirement?
• What makes you fulfilled?
• What are your priorities now, do you expect them to change?

Of course, these lifestyle goals aren’t set in stone. In fact, regularly reviewing them and seeing if they still align with your aspirations and circumstances is important. But having an idea of what you’d like to achieve can provide direction and confidence.

Longer lives mean rethinking traditional lifestyle models, it’s a chance to think about what you want.

Managing your finances for 100 years

While goals and lifestyle aspirations are essential, we can’t ignore the fact that finance plays an important role in achieving this. Planning for a 100-year life presents new challenges.

It can be difficult to understand how personal wealth will change over a 10-year period as you need to factor in a range of areas, from investment performance to inflation. When looking at a 100-year life, you may be considering these factors over several decades, making it even harder to gauge how wealth can change and what’s sustainable.

This is where financial planning can help. Using a range of tools, we can help you bring together lifestyle aspirations with your current financial situation. It’s a step that can help you understand how your wealth will change depending on the decisions you make, whether that’s contributing more to your pension for a longer retirement or using a lump sum to tick something off your bucket list.

As we live longer, finances naturally need to stretch further and can become more complicated, and financial planning becomes even more important.

Planning for the next generation

As you consider life expectancy and financial planning, you may be considering what you’ll leave behind for loved ones.

Considering how our finances would hold up during a 100-year life is important for us all as it becomes more common. But it’s even more crucial when helping the next generation plan. One in three children born today will live to see their 100^th birthday. It won’t become a rare milestone, but the norm. As a result, planning for a 100-year life needs to become the norm too.

You may be in a position to help children and grandchildren, whether it’s passing on knowledge or making regular pension contributions on behalf of a child. Small steps taken in the early years can help create a solid foundation that can be built-on, including learning positive money habits.

As you set out your own financial plan, this should include the inheritance you intend to leave behind. It can help you understand how loved ones will benefit and ensure the necessary steps are taken, such as writing a will or reducing Inheritance Tax liability. It’s a step that ensures your wishes are carried out and can help loved ones prepare for longer lives too.

If you’d like to discuss how your wealth will change over time, 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 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.

ISAs are an incredibly important part of many financial plans, whether you’re saving for a short-term goal or investing for a long-term one. In fact, over ten million adults saved into an ISA account in 2017/18.

Whilst ISAs have been around for 20 years, the product range and allowance has changed considerably in that time. As a result, it can be more difficult than you would expect to pick the right ISA for you. So, we’ve put together a guide to help you get to grips with the ISA options open on offer. In the guide you’ll find:

• A brief history of ISAs
• The different types of ISAs available, including the Junior ISA
• And how the Additional Permitted Subscription can let you leave your ISA savings to a loved one

Click here to download your free copy of the guide.

ISAs should form part of your wider financial plan, if you’d like to discuss how they fit into your goals, please get in touch.

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We all know what bias is and it’s something you may consider when making decisions in your day-to-day life but it’s also something that can affect financial decisions and, therefore, your lifestyle goals.

Over the next few months, we’re going to explain what financial bias is and how it could be having an impact without you even realising it. By understanding bias, where it comes from and the different ways it can affect decisions, you’ll be in a better position to focus on the facts and make choices that are right for you.

Bias: What does it mean?

First, let’s start with what ‘bias’ means. According to the Cambridge dictionary, the definition of bias is:

“The action of supporting or opposing a particular person or thing in an unfair way, because of allowing personal opinions to influence your judgement.”

We’re all guilty of making snap decisions about people, items, businesses and more, based on opinions and experiences we’ve had in the past, even if these weren’t directly related to the party in question. Being able to do so is important. It allows us to make quick decisions when necessary, even when we haven’t had to make the same choice before, based on the information we’ve gathered over time. It’s something that’s incredibly important for survival and is still useful today.

However, there is a danger of making decisions based on past experiences and information gathered, this is where bias can have a detrimental effect.

Bias, whether positive or negative, can lead to you making decisions that aren’t based on fact. Perhaps they’re based on out-of-date information or a single perspective that means you’ve missed the bigger picture. We know that we should try and focus on the facts when making decisions, but bias can skew our views.

When you think of bias having an impact, many scenarios may spring to mind. However, financial decisions are one important area you should consider the impact of.

How does bias influence financial decisions?

When it comes to finances, you have to make a lot of decisions, especially when you’re planning for the long term.

As a result, you naturally draw on experiences and information to make these choices. Perhaps when you’re deciding where to open a savings account, you’ll draw on news articles you’ve read. Or when deciding where to invest you’ll focus on previous gains/losses when coming to a conclusion. However, it can mean decisions aren’t logical once you start looking at the facts. Emotions, missing information, social influences and much more can mean bias has an impact without you realising.

There are a whole host of ways bias can influence financial decisions, which we’ll look at more in-depth in our next financial bias blog, but one example that can help you understand how financial bias works is confirmation bias.

Confirmation bias refers to the impact first impressions can have. Let’s say you see an investment opportunity that you decide is ‘good’ but you still decide to seek out information before investing your money. Whilst a positive step, confirmation bias means you give more weight to the information that supports your existing view, perhaps discarding those that suggest the investment isn’t right for you. As a result, it could lead to higher investment risk than intended or mean you miss an opportunity.

Learning more about financial bias

Understanding what financial bias is can improve the decisions you make. So, over the next few months, we’ll be looking at the topic in more detail including:

• What has an impact on your financial behaviour
• Different types of financial bias and their impact
• What you can do to minimise the effect of financial bias

Keep an eye out for our latest newsletter or blogs for the next financial bias blog, it could help you better understand the decisions and financial concerns you have.

If you have any questions about financial bias or would like to discuss your long-term plan, please get in touch.

Whilst investment markets have settled a little from the severe bouts of volatility seen a few months ago, the impact of Covid-19 continues to weigh on economic and business prospects. The next few months, as restrictions are lifted and government support begins to withdraw will be crucial and give an indication of how economies will fare in the short and medium-term.

UK

The full impact of coronavirus on the economy remains unknown. However, the lockdown and ongoing restrictions will undoubtedly have an impact. The Bank of England predicts the UK economy will shrink by 14% this year. However, it added banks are strong enough to handle this and will be able to continue lending.

During May, the government announced it was easing lockdown restrictions, allowing some businesses, including retailers, to prepare to open in June. The furlough scheme, which figures from the Office for National Statistics indicated two-thirds of firms have taken advantage of, has also been extended until October.

Unsurprisingly, economic activity has slowed considerably over the last couple of months:

• Official figures show UK GDP shrank by 2% between January and March, just as the pandemic was beginning to take hold
• UK private sector output fell to record lows, with data going back to 1998. The composite PMI index fell to 13.8 in April, with a reading below 50 indicating contraction
• CBI’s measure of factory output suggests volumes are down 54% in the last quarter, with 84% of respondents stating they have seen a negative impact on their domestic output.

In a sign that consumer confidence is falling and an economic downturn is weighing on decisions, the Bank of England reported that credit growth and mortgage approvals are at their lowest point since 2013. Credit card lending fell for the first time on record, with records going back to 1987.

Europe

In a similar picture to the UK, Christine Lagarde, President of the European Central Bank, expects the eurozone economy to shrink by 8-12% in 2020. GDP across the currency area fell 3.8% in the first quarter of 2020.

The eurozone PMI did improve in May, rising to 30.5 compared to the record low of 13.6 in April. As the figure is still below 50, it indicates a contraction but could suggest that businesses are getting back on their feet as lockdown restrictions started to lift across Europe.

The EU has also unveiled its recovery fund which is accessible to all EU member states, which could go some way to offer confidence to businesses operating during these uncertain times as well as investors. The fund totals €750 billion and includes a €560 billion recover and resilience facility and a new health programme to prepare for future health crises.

US

Mimicking what we’ve seen in Europe, US GDP fell by 5% in the first quarter and Jerome Powell, Chair of the Federal Reserve, warned the US faced a ‘prolonged recession’.

Data released in May shows that US factory orders have suffered a 10.3% slump, with PMI data for the manufacturing sector falling to 41.5 in March. Even more worrying is the PMI April figure for the US construction sector falling to just 8.2. The lower level of activity has affected unemployment rates. The private sector suffered record job losses, with 20.5 million Americans losing their job in April.

Causing concern among investors is also the risk of a trade war igniting between the US and China again. In January, a preliminary trade deal was signed suggesting an agreement could be reached between the two nations. However, President Donald Trump has since called for tariffs as the ‘ultimate punishment’ for the handling of the coronavirus pandemic, dashing investors’ hopes.

Asia

Data from Hong Kong has highlighted the impact of coronavirus in the region. The economy shrank by 5.3% in 2020, however, last year’s pro-democracy protests and the US-China trade war will also of had an impact.

As always, it’s important to consider your long-term financial plans and goals when investing. Whilst the market may be experiencing some volatility and economic downturn, focusing on the bigger picture is crucial.

If you have any questions at all about your investments, please get in touch.

The housing market has been severely affected by the coronavirus lockdown, as viewings were halted and sales that were in progress faced delays. Now there are fears that the economy will dip as a result and house prices will fall. For those hoping to sell in the coming months, it can be a concern.

According to Zoopla’s UK Cities House Price Index, the lockdown led to 373,000 property transactions being delayed, with an estimated value of £82 billion. Demand for homes fell by 70% in March and even levels of browsing property online fell.

The good news though is that many potential buyers are still keen to press ahead with plans. Some 60% of would-be home movers said they intend to still purchase a property, compared to the 40% who are putting plans on hold due to the uncertain outlook. As restrictions are being lifted, activity in the market is increasing but, unsurprisingly remains subdued.

What does Covid-19 mean for property prices?

As the property market starts to open back up, homeowners and prospective buyers are wondering what it means for property prices in the coming months. Whilst there are lots of forecasts and predictions out there, it’s impossible to say with certainty what will happen.

What we do know is that the economy has been affected by the lockdown, as has consumer confidence. It could mean in the short term, demand for property decreases as potential buyers take a ‘wait and see’ approach and hold off making major decisions. If a recession is on the cards, as some forecasts suggest, this too could lead to house prices falling.

According to Nationwide, house prices fell 1.7% in May when compared to the previous month. It’s the largest monthly fall for 11 years, which would have occurred during the financial crisis.

Robert Gardner, Nationwide’s Chief Economist, said: “We have already seen a sharp economic contraction as a result of the necessary measures adopted to suppress the spread of the virus.”

However, he added that the measures implemented to support businesses and individuals should help create an economic rebound. This, in turn, may limit the impact on the housing market.

What does a fall in property prices mean for you?

If you plan to stay in your home

No one wants to see the value of an asset fall. For many of us, our homes are the largest asset owned so when property prices fall it can be a worry. However, just like when investing, it’s important to look at the long term.

If you don’t plan to sell, the fall in value is a paper loss only. Until you sell your home at a lower price, you’ve not lost anything in real terms. Property prices have increased significantly in recent years, more than making up the fall they suffered following the 2008 financial crisis. Over the long term, house prices have recovered from short-term dips. If you’ve owned your home for a while, it’s likely the value is higher than when you bought it, even accounting for a potential fall in the coming months.

So, if you’re not planning to sell your home, you shouldn’t be worried about property prices.

If you’re hoping to sell

If you’re hoping to sell in the coming months, the fall in property prices can be frustrating. However, whilst some predictions suggest a fall in prices, others indicate there will be strong demand from buyers that were forced to put plans on hold.

Ultimately, you need to decide what you’d be willing to sell your home for and be prepared to negotiate with potential buyers. Getting your home valued and speaking to real estate agencies, as well as keeping an eye on sales in your area, can help give you an idea of whether your goal is realistic.

If your property value does fall in the coming months, and you’re not happy to sell at a lower price, delaying the sale may be an option. Historically, property prices have recovered and when you look at the long term, have risen considerably.

If you’ll be buying another property, it’s worth noting that you’d also benefit from a fall in price during the purchase, helping to balance out a potential fall in value for your current home.

If you’re a first-time buyer

A fall in property prices does ultimately benefit first-time buyers. You may be able to get more for your money and stretch that deposit further. If you already had plans to buy, now could be a great time to look at what’s available.

As always though, the value of a property is linked to what you’re willing to pay for it; do you think the asking price is worth it?

Whilst lower property prices as a whole can make stepping on to the property ladder seem attractive, it doesn’t always mean you’re getting a bargain and you need to consider if the property is right for you and whether mortgage repayments would be affordable. During times of recession, it’s normal for banks to stress-test mortgage applicants more carefully. As a result, a mortgage offer may be lower than expected.

If you’re worried about the property market and would like some advice, please contact us.