When you need to process information, it’s common to take shortcuts and rely on bias. It’s an approach that can be useful in some situations, but it can also lead to decisions that aren’t right for you.

If you’re making financial decisions, you know you should focus on facts, but emotions and other influences can creep into the decision-making process.

Last month, you read about some of the ways bias may affect your financial decisions. From herd mentality to confirmation bias, it can have a larger effect than you may think.

So, what can you do to reduce bias? Here are five effective ways you can focus on what’s important.

1. Learn to recognise when bias could be affecting you

One of the first things you can do to reduce the effect of financial bias is simply be aware that it could happen.

Understanding why bias happens and when it may affect your decisions means you’re more likely to take your time to think things through.

Asking yourself questions can be useful:

• Is this investment appealing just because others are buying shares?
• Am I dismissing information because it doesn’t paint the picture I want?
• Have I researched my other options?

Sometimes just remembering that bias could occur is enough to make you take a closer look at your decisions.

2. Take your time when making financial decisions

While making quick decisions can be useful in some aspects of your life, taking a step back and giving yourself some time is often valuable when making financial ones.

Decisions around investing or your retirement could affect your wealth for years to come. So, it’s worth giving them the attention they deserve and thoroughly researching your options.

You’re more likely to overlook important information if you make a snap decision. To compensate for this, you may instead rely on biases or gut feelings. While it may feel right at the time, it means you could be making decisions that don’t make financial sense for you.

3. Tune out the short-term investment noise

One of the reasons that biases can affect investing is that it can be all too easy to focus on short-term market movements.

A company’s shares soaring or tumbling dramatically in a day makes a great headline or talking point among friends. But rarely is it something you should act on and it’s easy to attach too much importance to these short-term results.

When you first create an investment strategy, you should set out your long-term goals and how you’ll achieve them. Investment decisions should focus on the long term to reflect this. While looking at long-term performance may not be as exciting, as the peaks and troughs often smooth out, it can help you stick to your plan.

While it can be difficult, tuning out the noise and market volatility can help you focus on your investment strategy.

4. Scrutinise the decisions you make

When making financial decisions, playing devil’s advocate can be useful. It can help you question why you’re making certain choices and fully explore alternatives.

If someone else was asking for your advice, what questions would you ask? Would you be satisfied with the way they interpreted the data? Trying to look at your decisions from an outside perspective can be valuable. It allows you to re-evaluate the information and see if you draw the same conclusion.

5. Work with a financial planner

Sometimes, simply having someone to discuss your decisions with can help highlight where bias may be occurring.

As financial planners, we can work with you to create a financial plan that focuses on facts and long-term goals. Having a tailored financial plan can give you confidence and mean you’re less likely to act on bias.

We’re here to answer your questions too. So, next time you see an investment that you’re tempted by, but you aren’t sure if it’s right for you, you can contact us. Having someone to turn to can reduce the chance that you react to news or information quickly, rather than giving yourself time to process it.

If you’d like to arrange a meeting with us to discuss your investments or overall financial plan, please get in touch.

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 has been a tumultuous year in British politics, with three prime ministers and four chancellors holding office.

After the calamitous “mini-Budget” ushered in the demise of Liz Truss and Kwasi Kwarteng, new chancellor Jeremy Hunt has delivered his first autumn statement.

Hunt’s speech came at a tricky time for the UK economy, with inflation at a 41-year high and the Bank of England (BoE) reporting that the economy is expected to be in a recession for a prolonged period. Hunt said his plan was designed to “strengthen our public finances, bring down inflation and protect jobs”.

Here are the key points of the autumn statement, and what they might mean for you.

A reduction in tax-free allowances and exemptions

As part of his plan to raise tax revenue, the chancellor announced reductions to two key tax allowances.

Capital Gains Tax

The Capital Gains Tax (CGT) annual exempt amount will fall from £12,300 to £6,000 in April 2023, and to £3,000 in April 2024.

This means that you will only be able to make profits of £6,000 on non-ISA investments – such as company shares or second homes – in the 2023/24 tax year before CGT becomes due.

Dividend Tax

The Dividend Allowance – the amount you can earn from dividends before Dividend Tax is paid – will be reduced from £2,000 to £1,000 in April 2023, and then to £500 in April 2024.

If you receive any income from dividends, it’s likely that you will pay more tax on these dividends from April 2023 onwards.

These two combined measures will raise more than £1.2 billion a year from April 2025.

Inheritance Tax thresholds frozen for a further 2 years

The Inheritance Tax (IHT) nil-rate band has been at its current level of £325,000 since April 2009. The additional residence nil-rate band is set at £175,000 and normally applies if you leave your home to a child or grandchild.

These two thresholds had already been frozen until 2026. The chancellor announced an extension to this freeze, meaning that the nil-rate bands will remain at these levels until at least 2028.

Qualifying estates can continue to pass on up to £500,000 and the qualifying estate of a surviving spouse or civil partner can continue to pass on up to £1 million without an IHT liability.

As house prices and asset values rise, it is likely that more and more estates will face an IHT bill over the next five years.

A cut to the level at which you pay additional-rate Income Tax

In a considerable change of direction from the former administration, Hunt reduced the threshold at which individuals pay additional-rate Income Tax.

Unlike his predecessor, Kwasi Kwarteng, who abolished the additional rate of tax (45%) – a move that was swiftly reversed – Hunt’s announcement means higher earners will pay 45% tax on more of their earnings.

The 45% rate will now apply for earnings above £125,140 rather than the previous level of £150,000. It means if you earn £150,000 or more, you will pay just over £1,200 more in Income Tax each year.

Hunt also froze the Income Tax Personal Allowance – the amount an individual can typically earn before paying Income Tax – at the current level of £12,570 until 2028. Additionally, he fixed the higher-rate threshold at £50,270 and the National Insurance thresholds at their current level to 2028.

All these measures are also likely to increase your personal tax burden. As earnings rise, more of your income will be subject to tax than if the allowances had risen in line with inflation.

The State Pension “triple lock” to be honoured

Under the “triple lock”, the State Pension increases each year by the higher of:

After months in which no senior politician would commit to honouring the government’s pledge, Hunt announced that he would increase the State Pension in line with inflation.

This means pensioners can expect a boost of just over 10% to their State Pension from April 2023. For someone on the full, new State Pension, that will represent an additional payment of more than £900 a year.

Pension Credit will also rise by 10.1% in April 2023 and benefits will be uprated by inflation, too.

As a result of uprating both working age and pension benefits, around 19 million families will see their benefit payments increase from April 2023.

An increase in the Energy Price Guarantee

Hunt announced that the government’s Energy Price Guarantee – an initiative of the Truss administration – would continue in its present guise until April 2023.

Under the guarantee, for six months from 1 October 2022, the average household will pay energy bills of around £2,500 a year.

The scheme will then become less generous from April 2023. The guarantee will rise to £3,000 for a further 12 months, meaning your energy bills will likely rise again in the spring.

The government say this equates to an average of £500 support for households in 2023/24.

There will be additional support for more vulnerable households.

Increase to windfall taxes

Jeremy Hunt announced a significant increase in windfall taxes. The oil and gas companies’ tax rate will increase from 25% to 35% of profits on UK operations from January 2023 until March 2028, extended from December 2025.

There will also be a 45% tax on profits of older renewable and nuclear electricity generation.

Together, these measures will raise more than £55 billion from this year until 2027/28.

Stamp Duty reductions to end in 2025

In September’s “mini-Budget”, Kwasi Kwarteng announced some increases in the thresholds at which Stamp Duty would be payable.

The £125,000 threshold increased to £250,000 while he increased the minimum threshold for first-time buyers from £300,000 to £450,000.

Jeremy Hunt announced that while these changes will remain, they will now be time-limited, ending on 31 March 2025. They are designed “to support the housing market and the hundreds of thousands of jobs and businesses which rely on it”.

Other measures

National living wage

Hunt announced the largest-ever rise in the UK’s national living wage. For workers aged 23 and over, it will rise by 9.7% to £10.42 an hour from April 2023.

This represents an increase of more than £1,600 to the annual earnings of a full-time worker on the national living wage and is expected to benefit more than 2 million workers.

Electric vehicles

From April 2025, electric cars, vans, and motorcycles will begin to pay Vehicle Excise Duty in the same way as petrol and diesel vehicles. The government says that this will “ensure that all road users begin to pay a fair tax contribution as the take up of electric vehicles continues to accelerate”.

Health and social care

Hunt announced spending of £2.8 billion in 2023/24 and £4.7 billion in 2024/25 for adult social care, to help the most vulnerable.

He also committed an additional £3.3 billion in 2023/24 and a further £3.3 billion in 2024/25 to improve the performance of the NHS.

Furthermore, the chancellor  announced that the lifetime cap on social care costs in England due to come into force in October 2023 will be delayed by two years.

Education

There will be an increase to the education budget of £2.3 billion in 2023/24 and £2.3 billion the year after, taking the core schools budget to a total of £58.8 billion in 2024/25.   

Business rates

There will be a £13.6 billion package of business rates support over the next five years.

The business rates multipliers will be frozen in 2023/24, and upward transitional relief caps will provide support to ratepayers facing large bill increases following the revaluation. Additionally, the relief for retail, hospitality, and leisure sectors will be extended and increased to 75%.

Corporation Tax

As confirmed in October 2022, the main rate of Corporation Tax will increase to 25% from April 2023.

Infrastructure projects

The chancellor confirmed the government’s commitment to High Speed 2 (HS2) to Manchester, the Northern Powerhouse Rail core network, and East West Rail, along with gigabit broadband rollout.

Get in touch

If you have any questions about how the autumn statement will affect you and your finances, please get in touch.

All information is from the autumn statement 2022 document and the government’s autumn statement news bulletin.

The content of this autumn statement 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.  

Much of 2022 has been marked by investment volatility and economic uncertainty, and October was no different.

According to the International Monetary Fund (IMF), there is a rising risk of a global recession.

The organisation downgraded its global growth forecast for 2023 to 2.7%. It said financial instability was linked to shocks caused by the Covid-19 pandemic, the war in Ukraine, and climate disasters. 

While uncertainty can be worrying as an investor, remember to focus on your long-term goals. If you have any questions about what the current circumstances mean for you, please get in touch. 

UK

In the UK, political turmoil continued to influence the markets.

After September’s mini-Budget led to volatility, the now former chancellor Kwasi Kwarteng reversed some of the announcements, including the abolishment of the additional-rate of Income Tax.

It did little to calm the markets, and the Bank of England (BoE) was forced to step in after some pension funds were placed at risk. The BoE pledged to purchase £65 billion of government bonds that had fallen in value. 

The IMF praised the BoE, saying it acted “very appropriately and quickly”. 

The backlash from the mini-Budget led to now former prime minister Liz Truss sacking Kwarteng, with Jeremy Hunt taking his role. The new chancellor cancelled nearly all the mini-Budget announcements, including cuts to Corporation Tax.

Truss followed shortly after, saying she was resigning because she could not deliver the mandate on which the Conservative Party elected her – making her the shortest-serving prime minister in British history. 

Rishi Sunak was appointed as the new prime minister within days after all other candidates dropped out of the race. In his first speech at Downing Street, Sunak said there were “difficult decisions to come” and the UK was facing a “profound” economic challenge. 

Amid this turmoil, it’s not surprising that growth forecasts are being downgraded.

Deutsche Bank now expects GDP to fall by 0.5% in 2023 before growing by 1% in 2024 when the economy would finally return to its pre-pandemic level. 

Data from the Office for National Statistics (ONS) highlights the pressure businesses are facing. Company insolvencies in England and Wales hit the highest levels since 2009 due to high energy prices, supply chain disruptions, and rising material costs. Construction firms were among the hardest hit and made up 20% of all insolvencies. 

Worryingly, further ONS data suggests many businesses aren’t in a strong financial position to overcome a downturn. 40% of UK firms have either no cash reserves left or have less than three months’ worth. 

Consumers are also facing challenges.

ONS figures show that once inflation is considered, average pay is falling. Excluding bonuses, pay fell by 2.9% in real terms between June and August 2022. 

This is having a knock-on effect on the housing market. HMRC figures show that residential property transactions fell by 32% in September when compared to a year earlier.

EY ITEM Club warned that falling house prices are a sign of things to come. The forecasting group expects property prices to fall by 5% over the next year. 

Energy supply also continues to be a significant challenge facing the UK. The war in Ukraine has led to soaring prices and disruptions in supply. The National Grid issued a warning that UK households and businesses could face planned power cuts throughout winter if it was unable to import electricity from Europe. 

Europe

There was some good news from the eurozone – industrial output increased by more than expected.

Across the whole area, output increased by 1.5% in August. France and Italy led the way with increases of 2.5% and 2.3% respectively. However, Germany, which is often the economic powerhouse of the bloc, saw its output decline by 0.5%. 

The eurozone also recorded a high trade deficit due to soaring energy prices. According to Eurostat, despite exports increasing by 24%, the deficit is €51 billion due to imports surging by almost 54%.

While many countries are facing inflation, Belarus announced a bold way to control it – President Alexander Lukashenko imposed an immediate ban on consumer price rises. The country has been hit by sanctions due to its support of Russia and consumer prices have increased by around 18%. 

US

Like many other countries, the US is at risk of falling into a recession. Capital Economics says it’s now “more likely than not” that the economy will contract. 

Inflation continued to be an issue for both businesses and consumers. The rate reached a 40-year high of 8.2% in September. 

The White House also commented on the energy challenges that many other economies are facing. After the Opec+ oil cartel and its allies agreed to cut oil production by 2 million barrels a day to push up crude oil prices, the White House said it highlighted the US’s need to become less dependent on foreign producers of oil. 

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.

As interest rates start to rise for the first time in more than a decade, a report suggests that savers are pulling their money out of investments in favour of cash accounts. But while the interest rate may be higher now, inflation can still reduce the value of your savings in real terms. Find out why here.

In response to high inflation, the Bank of England (BoE) has increased its base interest rate several times this year. In November 2022, it increased to 3%.

For savers, that can seem like good news. For the first time since the 2008 financial crisis, the interest you can earn on your savings is rising from historic lows. 

Yet, inflation is also much higher. In the 12 months to October 2022, the rate of inflation was 11.1%. 

As the cost of living rises, the goods and services that you can buy with your savings will gradually fall. So, while the figure in your savings account will grow thanks to interest, in real terms, it’s likely to be falling in value.

Just to maintain the value of your savings, the interest rate would need to match inflation. Unfortunately, despite interest rates rising, there’s still a significant gap.

In fact, the high inflation rate could mean your savings are falling in value faster in real terms than they were previously. 

Investors pulled £115 million out of UK equities during a single week in September

Even though inflation could reduce the value of your savings in real terms, figures suggest that some savers are withdrawing money from investments to place in savings accounts. 

According to a report in iNews, investors pulled £115 million out of UK equities between 23 and 28 September 2022. They also withdrew £453 million from US stocks and £6.5 million from US, UK and EU bonds. 

After recent market volatility due to economic uncertainty, a cash account may seem like the “safe” option. However, if you want to maintain or grow your wealth, investing could make sense.

While all investments are exposed to risk and could fall in value, historically, markets have delivered returns that outpace inflation over the long term. By withdrawing money from investments, you could be missing out on potential growth.

While investing could help you to make the most of your money, it isn’t the right option in every situation. You should consider your goals and financial resilience first. 

3 signs that investing could be the right choice for you

1. You have an emergency fund

Investing should involve a long-term strategy, so you should ensure your finances are in good order before you start. This includes having a financial safety net to fall back on if you need it.

Ideally, you should have between three to six months of expenses in an easily accessible cash account. This can provide you with security if you need to pay unexpected costs or your income stops. Having this safety net in place means you won’t need to withdraw investments to cover short-term costs.

2. You’re saving for the long term

Volatility is part of investing and it’s likely the value of your investments will fall at times. However, when you view returns across a long-term time frame, the peaks and troughs have historically smoothed out.

This is why a long-term goal is important when investing – it’s often recommended that you remain invested for at least five years.

So, if you’re saving for goals like retirement, helping children eventually buy their own home, or to leave a legacy, investing could help your money go further.

3. You understand investment risk and your risk profile

All investments have some risk, and it’s important you understand what an appropriate level for you is.

Understanding your risk profile can help you build a portfolio that reflects your goals, circumstances, and general attitude to risk. Taking too much or too little risk could harm your financial security or mean you don’t reach your goals. If you have any questions about risk and what investment opportunities are appropriate for you, please contact us.

Do you have questions about investing?

If you already have an investment portfolio and have questions about whether it’s still suitable for your goals, please contact us. We can work with you to create a long-term investment strategy that reflects your aspirations.

We can also provide support if you think investing could be right for you but aren’t sure where to start. We can help you understand the different options and how to get the most out of your money. Please get in touch to arrange a meeting. 

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.

Scammers are taking advantage of financial worries as the cost of living rises. It’s more important than ever that you remain alert to potential fraud. 

According to Citizens Advice, scammers have targeted more than three-quarters of adults this year – a 14% increase when compared to this time last year.

The Financial Conduct Authority (FCA) also warned that financial crime is to become “even more prolific” due to rising costs, MoneyAge reports. 

Fraudsters are adept at using circumstances to make you more likely to overlook red flags.

From offering “guaranteed high-return investments” when investors are worried about getting the most out of their money, to taking advantage of Covid concerns to charge for fake tests during the pandemic, scams evolve to prey on vulnerabilities.

Now, some criminals are using cost of living concerns to scam more people.

At the Financial Crime Summit in London, the FCA’s executive director Sarah Pritchard said: “Financial crime is a bit like Covid. Like the virus, which mutates to evade destruction, criminals seeking to cash out and carry out financial crime are ever-changing – they will adapt to exploit new weaknesses in the financial system and will constantly vary their tactics when targeting the vulnerable for fraud.”

Here are three new cost of living scams you should watch out for.

1. Claims of debt support

As budgets are stretched and the cost of borrowing rises, people are increasingly worried about managing their debt levels.

If you have debt concerns, reaching out is an important step to take control. However, the FCA has issued a scam warning after signs that some criminals are offering unauthorised claims management services to people in the UK.

These firms are offering debt support, mainly related to mortgages, and claim that, for a fee, they can get debts “written off”. Some also claim borrowers could receive compensation from their lender, including reclaiming previously paid interest. 

If you receive contact out of the blue, be cautious. Any firm that you deal with for debt management services should be authorised by the FCA.

You can use the FCA register to check if a firm is authorised, the permissions they have, and obtain contact details. 

Charities, including StepChange, may also be able to offer support if you have concerns about debt and can signpost you to appropriate firms if you need to take further steps. 

2. Energy bill rebates

Soaring energy bills during 2022 have been a cause for concern for many households. Since winter 2021, the price cap per unit on electricity and gas has increased by more than 100%.

To take advantage of this, scammers are claiming to offer energy rebates. During just two weeks in August, people targeted reported more than 1,500 energy rebate scams to the Suspicious Email Reporting Service, according to an Action Fraud report. 

The government is giving every household £400 off their energy bill this winter, spread over several months. You don’t need to do anything to get the money or have to pay it back. Your energy supplier will either reduce your direct debit, refund the difference, or credit your prepayment meter. 

If you’re eligible for additional support, payments are also automatic.

3. Friend in need 

A convincing WhatsApp scam has cost victims more than £1.5 million this year, according to an ActionFraud report. 

The “friend in need” scam involves a fraudster contacting you and pretending to be a family member or friend. They will ask you for money, often claiming they need to pay a bill urgently.

At a time when many families are struggling, it’s natural to want to offer help if you’re able to do so.

If the contact is out of the blue or not from someone who usually asks for financial support, this should be a red flag. Look at the way the message is written too, does it sound like the apparent sender? 

Scammers try to exploit good nature and assume that people will want to help those they love. So, even if you’re certain the request is genuine, taking just two minutes to call the supposed friend in need can ensure you’re not scammed and put your mind at ease. 

Who to contact if you’re worried about scams

If you think you’ve fallen for a scam, contact your bank immediately – they may be able to prevent the funds from leaving your account or offer compensation depending on the circumstances. You should also contact ActionFraud to report the crime.

If you have any questions about whether an opportunity is too good to be true or how it could fit into your financial plan, please contact us. Sometimes an outside perspective can help you spot the red flags you have previously overlooked. 

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

The State Pension is set to increase by a record amount under the triple lock due to high levels of inflation. If you’re claiming your State Pension, read on to find out what it means for your income. 

While there had been speculation that the triple lock would be suspended this year, the Conservative Party under Liz Truss committed to maintaining it. For pensioners, it’s an important way to maintain spending power as the cost of living rises. 

The State Pension increase will be based on September’s inflation rate

The State Pension triple lock guarantees that it will increase each tax year. 

As the cost of living generally rises gradually, this can help pensioners to maintain their standards of living throughout retirement. The Bank of England (BoE) has a target to keep inflation around 2%. While this may seem small, it can have a significant effect on how far your income will stretch during retirement.

Let’s say you retired in 2011 and needed an income of £35,000 to achieve the retirement lifestyle you wanted. According to the BoE, your income would need to have increased to more than £41,700 in 2021 to deliver the same lifestyle as average inflation was 1.8% a year. 

Over a retirement that could span several more decades, the effect of inflation can really reduce your spending power.

The current high inflation environment – the rate was 10.1% in the 12 months to September 2022 – means that pensioners’ income may be stretched more than they expect. 

As a result, knowing that your State Pension will increase each tax year can provide some peace of mind. While the State Pension often isn’t enough to reach lifestyle goals alone, it does provide an important foundation for many people. 

So, what is the triple lock? It means that the State Pension will increase by one of three measures, whichever is higher. These measures are:

• Average wage increase
• Rate of inflation 
• 2.5%

The inflation rate was the highest measure at 10.1%, and pensioners are set to receive the largest rise in income since the triple lock was introduced.

The full State Pension will increase by £972 a year in April 2023

Pensioners that receive the full State Pension will see the income it provides rise from £185.15 a week to £203.85. The annual income it will deliver will be £10,600 in 2023/24 – an extra £972 a year. 

Under current rules, you must have at least 35 years on your National Insurance record to be entitled to the full State Pension.

If you have between 10 and 35 years, you will be entitled to a proportion of the full amount. If you don’t receive the full State Pension, the amount your income will increase for the 2023/24 tax year will be lower. 

State Pension rules have changed over the years, including significant reforms in 2016, and they can be complex. If you have any questions about what you’re entitled to and how the triple lock will affect your income, please contact us. 

Do you need to update your retirement plan as inflation rises?

The triple lock means the State Pension you receive will increase next year. However, as it’s likely to be just a portion of your income in retirement, it’s a good idea to reassess how your expenses and income needs may have changed. 

Inflation may mean that your regular expenses have increased over the last year. Your disposable income that helps you reach retirement goals may also not stretch as far.  

In some cases, you may want to take a higher income from your pension or other assets, like your savings and investments. It’s important you consider the long-term effects of taking a higher income now – could it mean that you run out of money in the future?

Taking the time to review the effect of inflation on your retirement plan can help balance short- and long-term needs. 

Contact us to talk about your finances in retirement 

Whether you have questions about how rising inflation will affect your pension or other parts of your retirement plan, we’re here to help. Please contact us to discuss what you want to get out of retirement and how to achieve it. 

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 not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future results. 

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts.