When are you thinking of retiring? With many pre-retirees reassessing their lives and priorities in the wake of the pandemic, there really is a seismic shift for many people towards achieving life balance. People need a plan to flex with their changing aspirations – it’s become more about living life rather than going through the motions of the daily grind.

With earlier retirement a serious consideration for many seeking balance, a quarter of Brits who aspire to retire early feel that age 60 is the optimum time to do so.*

Embracing a new lifestyle

What really makes you happy? If you’re planning to celebrate your 60th birthday by saying ‘goodbye’ to working life, it’s good to know that 68% of people report an increase in overall happiness as a result of retiring early, with 44% of early retirees reporting their family relationships improved and 34% citing improvements in their friendships. From a health perspective, 57% of early retiree respondents report a boost to their mental wellbeing, with 50% believing their physical wellbeing has improved.

Driving force

Nearly a third (32%) of people who retired early or plan to do so are driven by the desire ‘to enjoy more freedom while still being physically fit and well enough to enjoy it.’ Other factors driving people to pursue early retirement include financial security (26%), reassessing priorities and what’s important to them in life (23%), wishing to spend more time with family (20%) and finding they are either ‘tired or bored’ of working (19%). Stress is also a contributing factor that 19% of respondents are keen to eradicate.

Pause for thought

With a sizeable 24% of people returning to work after retiring because they experience financial issues, careful planning is essential. Interestingly, 47% of retirees found that their finances worsened and only 22% felt they benefited financially from their decision to retire early.

Positive steps to financial freedom

People cited steps toward making early retirement achievable like paying off a mortgage (30%), saving little and often (29%), saving extra when they receive a pay rise or bonus (19%) and receiving an inheritance (14%). We’re here to reassure you that happiness doesn’t need to come at a cost when retiring early. Although it’s very important to be realistic, with meticulous planning and careful consideration, we can assess and develop a robust plan to align and fl ex with your changing requirements and priorities.

*Aviva, Dec 2021

As well as being a season of hope and renewal, spring is also viewed as the ideal time to declutter and reorganise. The last couple of years have taught us the importance of achieving balance in our lives – this extends to our finances too, making now an opportune time for investors to review and rebalance their portfolios to ensure investments remain aligned to their long-term financial goals.

Concerns surrounding inflation, rising interest rates and immense global political tensions have all combined to create a potentially disconcerting backdrop for investors during the early part of this year, as markets search for a stable footing. The good news is that many investors with long-term retirement goals tend to have time horizons that extend beyond inflationary cycles and any market volatility experienced is a normal investment phenomenon. History shows that investors who are patient and stick to their plans are more likely to achieve their financial objectives. Diversification is one strategy that withstands the test of time.

What now for the global economy?

A ‘disrupted recovery’

The current mix of uncertainties has led the International Monetary Fund* to downgrade its global growth forecast when its latest economic musings were released in January. While the international soothsayer does expect the global recovery to continue in 2022, it is predicting a ‘disrupted recovery’ with growth forecast to moderate from 5.9% in 2021 to 4.4% this year – this estimate was made prior to the Ukraine invasion, so it’s likely growth expectations will moderate further as a result.

Macro matters

Last year’s gains in growth due to rebounding activity now appear to be behind us. Although the pandemic will continue to impact growth rates, the outlook for macroeconomic policy is likely to become increasingly critical. Indeed, the path of the global economy this year looks set to be largely shaped by central bank policies, specifically, their ability to keep inflation expectations anchored while allowing a supportive environment for growth.

Time to review your portfolio

With the investment landscape undoubtedly changing, now seems an opportune time to spring clean your portfolio to ensure your investments continue to work as hard as possible for you. We can arrange a review to make sure your investment strategy is firmly aligned to your current personal circumstances and that your portfolio is well-balanced, diversified, tax-efficient and inflation-proofed where possible.

*1IMF, 2022

From many people’s perspectives, the Budget may have left a feeling that nothing much had changed in the world of personal financial planning, as there were no major changes announced to Income Tax, Capital Gains Tax, Inheritance Tax or pensions. However, the key consideration is how outside factors such as higher inflation could affect your finances and what steps you should take before the end of the tax year to make the most of any allowances and exemptions.

Inheritance Tax (IHT)

Official figures from HM Revenue and Customs (HMRC) for April to September 2021 show that IHT receipts totalled  3.1bn,  0.7bn higher than the same period in 2020. With the nil rate band and residence nil rate band now frozen until April 2026 at £325,000 and £175,000 respectively, the importance of effective estate planning shouldn’t be overlooked.

Individual Savings Accounts (ISAs)

The annual ISA limit has now been frozen at £20,000 for five years. If the allowance had increased with inflation each year since 2017, it would stand at £21,440 today, sheltering an  additional £1,440 from the taxman. JISAs celebrated their tenth birthday in November – the allowance remains at £9,000.

Dividend Tax
The government revealed in September that it would increase Dividend Tax by 1.25 percentage points from 6 April 2022 to help fund health and social care. This means investors will have to pay more on any income from shares held outside ISAs and above the £2,000 Dividend Allowance.

Pensions
The Lifetime Allowance remains at £1,073,100 and the Annual Allowance remains at £40,000. As these allowances haven’t increased with inflation, it effectively means those saving to the  maximum extent possible with tax concessions can save less in real terms each year.

Variables at play

It’s important to be aware of all the variables at play; inflation, interest rates, taxation and frozen allowances all affect your finances. Talk to us for help with your individual circumstances.

 

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a key consideration is how outside factors such as higher inflation could affect your finances and what steps you should take before the end of the tax year…

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Great expectations for the year ahead

Given the challenges of the past two years we could be forgiven for focusing on life’s trials and tribulations as a new year dawns. However, while concerns about supply chain disruption, new COVID variants and rising inflation may be disconcerting for investors, all the signs are that the coming 12 months will be a time of opportunity as well as risk, as we move towards a postpandemic future.

Recovery continues

In its final 2021 assessment of economic prospects, the International Monetary Fund (IMF) predicted a continuation of the global recovery in 2022, with the world economy forecast to grow by 4.9% this year. The international soothsayer did, however, acknowledge that the degree of uncertainty surrounding future prospects has risen with policy choices becoming more difficult and increasingly complex.

Inflation-proof your wealth

In particular, concerns surrounding global supply chain issues and rising inflation have created a policy dilemma for central banks. These twin concerns have also heightened
the need for investors to employ careful and considered strategic thinking in order to reposition their portfolios to take advantage of new growth opportunities while ensuring
their wealth is inflation proofed.

Beware investment scams

Although the spectre of rising inflation is expected to see central banks tighten monetary policy as the year progresses, deposit-based savings rates are forecast to remain at historically low levels. Such meagre returns have prompted many savers to shift their money into investments, with research* suggesting over half of all adults have done so. This move though has raised concerns that unrealistically high return expectations could leave some investors susceptible to investment scams.

Advice remains key

While the coming year is sure to present ongoing challenges for investors, the key to successful investing will remain the adoption of a carefully considered strategy based on sound financial
planning principles. Attractive investment opportunities are likely to present as 2022 unfolds and, with our help and careful repositioning of your portfolio, you should be able to make the most of these as and when they arise.

*Aegon, 2021

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

It’s easy to feel bombarded by the constant cycle of negative news headlines or ‘noise’, which can add to your anxiety about how your investments are doing and uncertainty as to whether your investment strategy is on the right course. It’s important to try and block out this noise which could influence you to make hasty or erratic investment decisions.

Set and revisit your goals

Keeping a record of your reasons for investing can help temper any inclination to hastily change your plans. Revisiting your initial decisions allows you to assess whether your long-term priorities remain the same.

Avoid continuous monitoring

Our mobile phones allow us to keep completely up to date, which is obviously important for things like keeping in touch with family, but when it comes to investing, it’s best to avoid the temptation to set up alert notifications for funds or companies that you are invested in. Warren Buffett had this advice in 2016 after a period of extreme market volatility saying, “Don’t watch the market closely”; advice that still rings true today.

Time in the market

Shutting out the noise to concentrate on the long term, gives your investments a greater chance of yielding positive returns and benefiting from compounding, although there are obviously no guarantees.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

Grounds For Economic Optimism As We Journey Through The Optimism

Although the strength and speed of the global recovery over the first half of this year exceeded most expectations, the economic outlook inevitably remains uncertain. However, while future growth prospects are likely to stay closely linked to the future path of the virus, as we journey through autumn there do appear to be grounds for optimism.

Stronger recovery predicted

Over the summer months, forecasting agencies took turns to upgrade their growth projections for developed nations as a succession of economic data proved stronger than analysts had predicted. In its latest assessment, for example,the International Monetary Fund (IMF) increased its combined 2021 growth forecast for advanced economies by half a percentage point, primarily due to the success of vaccine rollouts and government stimulus measures supporting recovery.

Risks and uncertainties

The IMF assessment though, did highlight a divergence in fortunes between rich and poor nations due to differing levels of access to vaccines. As a result, an offsetting downgrade across emerging markets and developing economies meant this year’s overall global growth forecast actually remained unchanged.

Ongoing concerns surrounding inflation also persist, despite policymakers’ insistence that the recent upward trend in prices will prove transient. Furthermore, the current mammoth levels of spending by governments and central banks can only be a temporary phenomenon and, when stopped, will impact on growth.

Grounds for optimism

While the outlook is therefore expected to remain relatively uncertain, there are grounds for investor optimism. Market fundamentals, for instance, remain comparatively strong, with earnings
growth still being fuelled by pent-up demand as economies reopen, and companies starting to invest again as the recovery has gathered momentum.

Diversification remains key

There is no question that the world is in a period of immense change, with issues relating to the pandemic, as well as sustainability, fundamentally altering the investment landscape. Some
things however do not change, like the importance of holding a diversified investment portfolio and the need for expert financial advice. That’s where we come in.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. The Financial Conduct Authority (FCA) does not regulate Will writing, tax and trust advice and certain forms of estate planning.

In 2018, Chancellor Philip Hammond asked the Office of Tax Simplification to review Inheritance Tax*. However, subsequent events have meant that the tax regime for transfers of wealth between generations has not been revised, though Mr Hammond’s next-but-one successor Rishi Sunak could yet dust-off two OTS reports**.

A big deficit caused by the pandemic points to unwelcome tax rises. Some economists see tax on transfers of wealth as a way to generate revenue without stifling the economy, whilst also acting to improve social mobility. One influential think- tank recently explored inheritance and inequality.

The Institute for Fiscal Studies’ April 2021 paper, Inheritance and inequality over the life cycle: what will they mean for younger generations? identifies trends that could influence policymakers’ thinking on taxation of wealth transfer, whether during someone’s lifetime or after death. One key finding is that inheritances have formed a rising part of national income for the past five decades.

Inequality of inheritance

The IFS calculates that inheritances for those born in the 1960s will on average equal 9% of their other lifetime income, compared with 16% for those born in the 1980s. If this trend of rising levels of inherited wealth continues, the gap between rich and poor families can only widen; a more stringent version of IHT could mitigate that.

A major impact clearly stems from parental wealth. The IFS projects that people within each of the two age groups having parents in the top one-fifth on the wealth scale will receive average inheritances that deliver a lifetime income boost of 17% or 29%, respectively, but only 2% or 5% if their parents are in the bottom one-fifth on the wealth scale.

So, the younger group will receive a greater boost from inheritance than the older one and within both groups those with wealthier parents will benefit far more, heightening inequality. With social levelling-up prominent on a financially-stretched government’s agenda, IHT changes could prove costly for the better-off. It’s sensible to prepare for all scenarios, taking expert advice on strategy.

*5gov.uk, 2018, **6gov.uk, 2019

As the country emerges from lockdown, an increasing sense of optimism seems to have filled the air with a much more familiar feel returning this summer. And there’s plenty to look forward to over the coming months, with a host of major sporting events including the Olympics to excite and enthral us, audiences returning to theatres and concert halls across the land, and the rearranged Chelsea Flower Show set to extend summer into late September.

Faster recovery predicted

There also appears to be a similar air of optimism in relation to economic matters, with data across the first half of this year proving to be stronger than analysts had expected. As a result, there now seems to be a good chance that major economies on both sides of the Atlantic will have recovered the lost ground caused by the pandemic before the end of 2021.

Global growth forecasts upgraded

This has led to a string of renowned international forecasting agencies upgrading their global growth projections during the past few months. The UN’s mid-2021 World Economic Situation and Prospects Report, for instance, revealed an annual growth forecast of 5.4% for this year, up significantly from January’s 4.7% estimate. This brighter outlook largely reflects the rapid vaccine rollout in a few large economies, principally the US and China, as well as an increase in global trade.

Diverging fortunes

UN economists, however, did warn that inadequate availability of vaccines in many countries was threatening a more broad-based global recovery. The report did strike a note of caution, suggesting that, ‘the economic outlook for the countries in South Asia, sub-Saharan Africa and Latin America and the Caribbean remains fragile and uncertain.’

Advice remains paramount

While the outlook has certainly improved significantly across the first half of this year, the UN forecast reinforces how the pandemic continues to create a relatively uncertain economic backdrop. This inevitably means the provision of expert advice is a vital component of investor success. We can help you make the most of any investment opportunities that do arise.

On 28 January 2021, Scottish Cabinet Secretary for Finance, Kate Forbes, set out the government’s proposed spending and tax plans for 2021/22. Speaking almost a year after Scotland’s first COVID-19 case was identified, she told MSPs that the “pandemic has shaken our society and economy to the core.”

Ms Forbes stated that the Budget would address “three key priorities” for Scotland’s future, these being:

• Creating jobs and supporting a sustainable recovery
• Responding to the health pandemic
• Tackling inequalities.

She added that certain assumptions had been made when drawing up the Budget, due to the fact that the UK Budget was not taking place until March.

The economy and business

To support businesses and economic recovery from the coronavirus crisis, the Finance Secretary announced measures including:

• Total investment of £1.1bn in jobs and skills support
• The launch of a five year £100m Green Jobs Fund and commitment to establish a Green Jobs Workforce Academy
• Doubling of the Local Authority Discretionary Fund to £60m

Personal taxation

The Finance Secretary told MSPs that now was the time for “stability, certainty and targeted support” so there would be no changes to Income Tax rates. The thresholds for each tax band would, however, increase in line with inflation, as follows:

• Starter rate of 19% payable on earnings over £12,570, up to £14,667
• Basic rate of 20% to be charged on earnings over £14,667, up to £25,296
• Intermediate rate of 21% to be paid on earnings from £25,296, up to £43,662
• Higher rate of 41% on earnings over £43,662, up to £150,000
• Top rate of 46% on earnings over £150,000.

Meanwhile, the cut to Land and Buildings Transaction Tax (LBTT) for homebuyers, which was announced during the first lockdown, is due to end on 1 April. The Scottish Government has been under
pressure to extend the tax ‘holiday’ after Chancellor Rishi Sunak announced that the equivalent scheme in England is to be extended until the end of June, but at the time of writing, this has not occurred.

COVID-19 and healthcare

Ms Forbes expressed gratitude for the dedication of Scotland’s health workers throughout the pandemic, saying “When the history of this pandemic is written, our NHS and social care staff will be recognised as the undisputed heroes they are. I’m sure I speak for everyone in this chamber – everyone in this country in fact – when I offer them our heartfelt thanks.”

In recognition of the ongoing severity of the pandemic, Ms Forbes announced:

• £869m to support Scotland’s response to COVID-19
• £1.9bn for primary care
• £143.5m in funding to tackle alcohol and drugs issues – a £50m increase
• £1.1bn spending on mental health services – a £139m increase

Tackling inequality

Education, the Finance Secretary stated, is the best way of addressing inequality and she announced:

• £2.7bn across education and skills, including £1.9bn for universities and colleges
• Support for Gaelic education to remain steady at £25.2m
• £39.8m for the early learning and childcare (ELC) programme.

Transport, infrastructure and connectivity Aiming to reduce Scotland’s reliance on cars and to offer a more environmentally sustainable form of mass transport, a £1.6bn investment
in the country’s bus and rail services was announced, in addition to the following:

• Increase in spending on motorway and trunk roads from £748.9m to £825.9m
• £10.5m for the National Islands Plan, which is designed to tackle depopulation and improve transport links
• £102.7m for digital connectivity, up from £63.4m.

Closing Comments

In closing her Budget speech, Ms Forbes said, “Now, with large-scale vaccination, focused firstly on the most vulnerable, there is some light at the end of the tunnel. This Budget seeks to
build on that hope, and by focusing on how we continue to protect, recover, rebuild and renew our country, it seeks to make that light at the end of the tunnel shine that bit brighter.”

The arrival of spring is generally a time of great optimism and this year more than ever we are all certainly in need of a fresh bout of positivity. Thankfully for investors, there do seem to be increasingly hopeful signs on the horizon, with a growing belief we are now at least starting on the road to economic recovery.

Reasons to be cheerful

The successful development and rapid rollout of COVID-19 vaccines has provided hope that we will soon be able to live with the virus. As well as protecting vaccinated individuals, there are encouraging signs the immunisation programme will slow transmission in the community. This has raised hopes of a significant, vaccine-powered revival in economic activity later this year.

Global growth rebound

This vaccine-fuelled optimism is reflected in recent economic forecasts with the International Monetary Fund’s latest projections suggesting the global economy is set to expand by 5.5% in 2021. This represents an upward revision of 0.3% compared to the organisation’s previous forecast made last October.

Vaccine-induced euphoria also saw equity funds enjoy a strong quarterly inflow during the final three months of last year.

Negative rates?

A further boost to equity investments could stem from negative interest rates. Although it remains unclear whether or not such a policy will be introduced, in early February the Bank of England gave banks and building societies six months to prepare for such a possibility. If enacted, sub-zero rates would reduce the incentive to save in cash deposits and thereby potentially increase demand for shares, placing even greater emphasis on investment portfolios.

Time for a spring clean

While the economic outlook remains uncertain there are positive signs for investors and this means ensuring your investment portfolio is working hard for you is more important than ever. It could therefore be the perfect opportunity to review your portfolio and rebalance the allocation of asset classes, if necessary, in order to ensure your investments are well-diversified and performing in line with your long-term requirements and objectives.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.