Green Shoots Of Spring?

As we enter a new decade, the global economy seems to be precariously balanced. Although recent data supports this pessimistic prognosis, forecasters suggest 2020 is set to observe a recovery.

Global growth rates

Gross domestic product (GDP) data for the third quarter of 2019, highlighted a continuing decline in global growth. In the US, GDP grew at an annualised rate of 1.9%, just below the 2.0%  recorded in the second quarter. China’s growth rate of 6.0% was the country’s slowest in over 27 years. While both the UK and German economies experienced growth in the third quarter, neither economy particularly flourished. The UK recorded its slowest annual rate in nearly a decade, while the German economy grew just 0.1% in the third quarter. Both economies were successful in avoiding consecutive quarters of negative growth – the ‘technical’ definition of recession.

Trade traumas weigh

Published in mid-October, the International Monetary Funds (IMF) World Economic Outlook, outlined the global economy is growing at its slowest pace since the financial crisis. They downgraded the 2019 world growth forecast to 3.0%, a 0.3 percentage point reduction from the April estimate. The bi-annual Outlook cautioned that the self-inflicted wounds of the USChina trade war had created a ‘precarious’ economic situation.

Cautiously optimistic

The IMF predict that growth will pick up this year, forecasting that the world economy will expand by 3.4% in 2020. Global trade protectionism and geopolitical tensions remain primary risks to the outlook going forward. The estimated pickup reflects projected improvements in the economic performance in several markets, developed and emerging. Considering the uncertainty surrounding prospects for many of these countries and prominent risks, it is possible that a more subdued pace of global activity could emerge.

Pension Allowance Breaches Surge

HMRC data has revealed a significant increase in the total value of pension contributions exceeding the annual allowance, with more and more people falling foul of the complex rules and  regulations.

The latest personal pension statistics, which cover 2017/18, show a staggering 26,550 people reported contributions exceeding the £40,000 annual allowance in their self-assessment tax return, with combined total contributions amounting to £812m, an average of £30,584 per person. Furthermore, over the past decade, the number of individuals reporting such a breach has risen dramatically, with just 230 people facing similar tax charges in 2007/08 when the annual allowance was £225,000.

Pension complexity

The sharp rise in breaches can largely be blamed on a big reduction in the annual allowance in 2011 and the introduction of the tapered annual allowance in 2016, which added even greater complexity to the pension landscape. Indeed, unless government heeds industry advice and significantly simplifies allowance rules, the next few years are likely to see even more people caught out by the overly complex regime.

Here to help

As many people are discovering, a breach of allowances can be extremely costly. It’s therefore imperative to seek professional advice if you are unsure how pension allowances impact on you. And remember, we are always here to help.

 

Financial Resolutions For A Prosperous New Year

The New Year period is a common time for people to take stock of their finances and make resolutions designed to boost their financial wellbeing. And a new study has found the likelihood of success in this area is heavily linked to receiving professional advice and the establishment of clear financial objectives.

Advice is key to success

The recently released research1 actually provides a quantitative measure of the value attributed to advice when it comes to helping investors achieve their goals. The US study was based on real-life data relating to more than 100,000 advised investors and found that eight out of 10 with a defined retirement goal had at least an 80% greater probability of achieving their financial objectives. In
other words, advised investors typically hit 80% of their financial goals.

Create a financial plan

The research vividly demonstrates how taking expert advice and constructing a Financial resolutions for a prosperous New Year tailored plan can significantly boost an investor’s financial wellbeing. In many ways this is unsurprising, as the benefits associated with financial planning are wellknown and plentiful.

Financial wellbeing

Discussing your financial objectives with us enables you to consider exactly what you want to achieve with your assets and thereby establish clear goals that are both realistic and achievable.  Regular financial reviews provide opportunities to monitor progress and adapt plans where necessary. Good financial planning also ensures all investments are tax-efficient by minimising both current and future tax liabilities.

It’s good to talk

This study once again reiterates the significant value that can be gained from seeking professional financial advice. So, if your circumstances have changed or the New Year has encouraged you to refocus your financial objectives, then get in touch. That way you can be sure your financial goals remain realistic and you give yourself the best chance of turning any New Year financial resolutions into reality.

Source – Vanguard, September 2019

Drawdown retirees unaware of income flexibility

A YouGov survey commissioned by Zurich* has revealed that most retirees in drawdown are unaware they can vary their level of income. And, perhaps unsurprisingly, the research also found those not receiving financial advice were more likely to be in the dark.

Importance of advice
The study suggests over half of individuals who have unlocked their savings since the introduction of pension freedoms in 2015 were unaware they could scale back or stop withdrawals from their pension funds despite flexible income being a key feature of drawdown.

A stark difference was also revealed in the knowledge of those who had sought advice and those who hadn’t. Indeed, while only 35% of non-advised retirees knew they could reduce drawdown  income, 77% of respondents receiving ongoing advice were aware of this fact.

‘Pound-cost-ravaging’ trap
There is a danger to this ignorance as it puts investors unwittingly at risk of draining their pension pots if stock markets fall. This is known as ‘pound-cost-ravaging’ (not to be confused with ‘pound cost averaging’) and is where people are forced to sell more investments to achieve unsustainable income levels. Engaging with your drawdown savings is vitally important; we’re here to help you
plan effectively.

“…over half of individuals who have unlocked their savings since the introduction of pension freedoms in 2015 were unaware they could scale back or stop withdrawals from their pension funds…”

*Zurich, June 2019

Tending your portfolio will make it bloom.

All successful gardeners will understand the need to regularly tend their plants, shrubs and lawns in order to ensure a garden can flourish. And, for investors, taking a similar approach with their financial affairs can also bear fruit by ensuring their investment portfolios don’t become neglected and, as a result, underperform.

Weeding, sowing…
As with a garden, your investment portfolio requires regular careful attention in order to ensure it continues to grow. Typical tasks include weeding out any perennially underperforming funds and switching to potentially more profitable ones and, for those with new money to invest, sowing the seeds of your portfolio with carefully selected additional new investments.

…pruning and trimming
Another important task is pruning. This will ensure your investment portfolio stays balanced and continues to fully reflect both your current and long-term financial goals as well as any changes in your appetite for risk.  It may also require taking profits at certain points in time to ensure you are using any potential tax allowances.

However carefully your initial range of investments were selected, your portfolio will also inevitably get out of shape over time. This creates an ongoing need to regularly review the allocation of different asset classes, such as cash, equities, bonds and property. And such a review may result in the trimming back of certain assets in order to restore balance to your portfolio.

Help is at hand
Many people now seek professional help to create and maintain their garden and it’s obviously wise for investors to do the same thing. Indeed, with ongoing political and economic uncertainties causing increased market volatility, there has arguably never been a more important time to seek professional financial advice. Keep in touch, so that we can help you keep your investment portfolio in full bloom.

 

As parents and grandparents, we all hope the values that we hold dear can somehow be passed on to our children and grandchildren. We’d all like them to be able to make the right financial decisions for the future. Here are a few thoughts that might just help

Spend less than you earn
It’s not easy to get ahead if you’re spending as much, or more, than you’re earning. Everyone needs a back-up fund, and one of the easiest ways to ensure you’re putting money by for a rainy day is to pay yourself first. Transferring money into a savings account on pay day can help you manage your budget better and encourage you to maintain the savings habit. If you don’t have any cash reserves, you could find yourself building up debt by putting emergency spending onto your credit card.

Take control, keep on track
Everyone has financial aims and learning to control money from a young age will help them become achievable. Whether it’s saving for a deposit for a home of your own or ensuring you have enough to live on in retirement, starting early, getting good advice and regularly reviewing the progress you’re making towards your goals all make good sense.

If it seems to be too good to be true… Financial scams are now widespread and come in a variety of forms. What they offer may look appealing and be presented by people who seem plausible, but scams have resulted in people being used as money mules and risking criminal prosecution or losing substantial amounts of money to bogus or unsound investments, or even being conned out of their entire pension savings. Don’t let this happen to you.

Taking financial advice about major transactions such as investments, mortgages and pensions aims to ensure that your interests will always be fully protected, and you will be able to make the right decisions for your financial future.

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.

As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments.

Many people are considering reducing the size of their estate to minimise the Inheritance Tax (IHT) that will be payable on their death.

Recent research* estimates that nearly seven million parents have already given their children around £227bn of their wealth early in order to reduce the amount of IHT payable on their estates. A further 6.5m are thought to be considering similar moves.

Using trusts and life policies
Many families are using trusts to ringfence assets, effectively removing their value from their estates. However, anyone considering giving away assets in their lifetime should take professional advice. Inheritance Tax is complex and lifetime gifts can end up being taken into consideration for tax purposes if all the conditions applying to these types of gifts aren’t fulfilled. Also, Chancellor Philip Hammond earlier this year ordered a review of the IHT system, the implications of which we will monitor closely.

The Financial Conduct Authority does not regulate some forms of taxation advice.

*Source – Direct Line Group, Oct 2018