Investor Confidence Returns

A recent survey* suggests investors are becoming more confident despite ongoing challenges on the economic front. While this is certainly encouraging, maintaining a long-term outlook and retaining a strong sense of discipline in investment positioning remains a prerequisite for any successful investor.

An air of optimism
It’s fair to say 2022 was a turbulent year for global markets with the war in Ukraine, soaring inflation and rising interest rates weighing heavily on a difficult 12-month period. Towards the end of the year, however, markets did stage a cautious recovery despite ongoing fears of a looming recession.

Inflation expected to fall
The final quarter of last year also witnessed a rebound in investor sentiment, with the same survey reporting a seven percentage point rise in confidence in the global economy, although this was before the recent woes in the banking sector. This optimism was driven by hopes that inflation has now peaked and is set to continue falling in the months ahead; a view reflected in
the International Monetary Fund’s latest economic musings** which predict global inflation will drop from 8.8% in 2022 to 6.6% this year and 4.3% in 2024.

Young guns
Data from the survey also revealed a majority of investors were either positive or ambivalent about last year’s market volatility and its impact on their investing mindset. This was particularly true for younger investors with three-quarters of 18 to 34-year-olds either positive or indifferent compared to six in ten over-55s. This variation will partly reflect differing retirement time horizons, with younger investors more able to adopt a longer-term view.

Investor discipline is key
This is clearly encouraging as maintaining a long-term philosophy based on prudent risk management principles and avoiding panicked decisions has always been a key element for successful investing, maintaining discipline in investment positioning. In practice, this means achieving an appropriate level of diversification and understanding how to blend investments – that’s what we do.
*1eToro, 2023, **2IMF, 2023

The value of investments can go down as well as up and you may not get back the full amount you invested. The past performance may not necessarily be repeated. The Financial Conduct es not regulate Will writing, tax and trust advice and certain forms of estate planning.

Spring Budget Recap

The Scottish Government detailed its plans for taxation and spending for 2023-24 back in December 2022. This was approved by the Scottish Parliament in February 2023. For the UK, Chancellor Jeremy Hunt delivered the Spring Budget, termed “A Budget for Growth” on 15 March 2023.

This included a range of new measures, starting with the latest economic projections from the Office for Budget Responsibility (OBR):

• The UK economy is expected to contract by 0.2% this year, with growth predicted to hit 1.8% in 2024 and 2.5% in 2025. A technical recession is expected to be avoided in 2023
• Inflation is predicted to fall from an average rate of 10.7% in Q4 2022 to 2.9% by the end of this year. This decline is partly due to the three-month extension to the Energy Price Guarantee (EPG), which the government confirmed on 15 March.

The Chancellor’s strategy for growth focuses on four pillars ‘Everywhere, Enterprise, Employment and Education.’ Key areas of focus within these pillars include:

• Investment for ‘Levelling-Up’ initiatives
• Providing the right conditions for businesses to succeed
• New measures to get people back to work, including childcare support.

Pensions
The spotlight also fell on pensions. To encourage over-50s to extend their working lives, the government is increasing tax relief limits on pension contributions and pots:

• The Annual Allowance will be raised from £40,000 to £60,000 from April 2023; the Lifetime Allowance (LTA) charge will be removed from April 2023, and the LTA will be abolished from April 2024
• The maximum amount that can be accessed tax free (Pension Commencement Lump Sum) will be frozen at its current level of £268,275 (25% of current LTA)
• From April, the minimum Tapered Annual Allowance (TAA) and the Money Purchase Annual Allowance (MPAA) will increase from £4,000 to £10,000. The adjusted income threshold for the TAA will also rise, from £240,000 to £260,000.

In addition, previously announced State Pension increases from April 2023 are as follows:

• Basic State Pension – increase to £156.20 per week
• Full new State Pension – increase to £203.85 per week.

Transferring Wealth, Your Way

With the coming years set to see record flows of assets pass down the generations, the thorny issue of wealth transfer has inevitably become an increasingly important financial topic. Seeking professional advice is a crucial step that can help ease any inheritance planning anxieties and facilitate the transfer of assets in the way that you want.

‘Great wealth transfer’
The next three decades are set to witness the largest ever intergenerational transfer of wealth as baby boomers pass on assets to their heirs. Analysts have dubbed it the ‘great wealth  transfer’, with trillions set to cascade down the generations.

Intergenerational mismatch
A new survey*, however, highlights baby boomer concerns about how their money may ultimately be spent. According to the research, a third of baby boomers are reluctant to pass wealth to someone whose attitude to money differs from their own; additionally, Gen Z were found to be much more likely to adopt a short-term financial outlook than their forebears. Researchers fear this disparity in attitudes could therefore impact older generations’ wealth transfer decisions.

Bridging the divide
While such differences could create intergenerational conflict, we can help alleviate any issues by building cross-generational connections and ensuring any asset transfer is conducted in a way that meets your specific needs. Developing relationships with your beneficiaries to help ensure younger generations will receive financial decision-making support can create invaluable peace of mind for both you and your heirs.

Inheritance options
A range of options are available for people looking to transfer wealth, with lifetime gifting amongst the popular methods of passing on money. Complexities with Inheritance Tax and rules in establishing trusts, though, mean sound advice is critical in order to adopt the most efficient approach.

Here to support you
All the evidence suggests developing strong relationships is key to the success of intergenerational financial planning. So get in touch and, with our support, you and your family can work
towards determining and achieving your inheritance planning objectives.
*abrdn, 2023

Tax Year End Reminder

As the end of the tax year approaches, a prime consideration should be how external factors such as reduced or frozen allowances, together with high inflation, could impact your finances
and what action you need to take before 5 April 2023.

If you are affected by the impending changes to Dividend Tax or Capital Gains Tax (CGT) announced inthe Autumn Statement, have you considered investing up to £20,000 this tax year in a stocks and shares Individual Savings Account (ISA)? From April 2023, the Dividend Allowance will be cut from £2,000 to £1,000 and then fall further to £500 from April 2024. In addition, the annual CGT exemption will fall from £12,300 to £6,000 next tax year and then to £3,000 the following tax year. Dividends received on shares within an ISA are tax free and won’t impact your Dividend Allowance. Also, any profit you make when selling investments in your stocks and shares ISA is free of CGT.

And don’t forget your pension Both the Annual Allowance and Lifetime Allowance are frozen, at £40,000 and £1,073,100 respectively. 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.

Take Control Now To Beat The Tax Chill

Following his controversial ‘stealth tax’ Statement in November, the Chancellor made a raft of key personal taxation and pension announcements.

The government pledged its commitment to the pensions Triple Lock, which will increase the State Pension in line with September’s Consumer Prices Index (CPI) rate of 10.1%. This means that the value of the basic State Pension will increase in April 2023 from £141.85 per week to £156.20 per week, while the full new State Pension will rise from £185.15 to £203.85 per week.

Then came some ‘stealth’ announcements set to pull people into paying higher rates of tax, more people paying IHT, a cut to tax-free earnings from dividends and a reduction in CGT  allowances.

In addition to the Dividend Allowance and CGT allowance reductions (as per ‘Tax year end reminder’ article) and IHT freeze (see page 4), other key personal tax announcements from the Scottish Budget included:
• The Top Rate Income Tax threshold is reduced from £150,000 to £125,140 from 6 April 2023
• The Higher Rate and Top Rate of Income Tax are increased to 42% and 47% respectively
• The UK Government confirmed in the 2022 Autumn Statement that the UKwide Personal Allowance will remain frozen at £12,570
• The Scottish Fiscal Commission have forecast that Income Tax will raise £15,810m in 2023-24 in Scotland.

With an increasing number of people likely to be impacted by these changes, we can’t stress enough the importance of tax year end planning. Although some of these changes don’t come  in with immediate effect, it is vital to ensure you are in the best place possible to take advantage of any allowances, exemptions and reliefs available this year and to prepare for the changes that come in over the next few years. With plenty to consider and factor into your financial plan, valuable financial advice remains central to achieving your goals and aspirations.

Investment Focus For The New Year

By any comparison, the past 12 months have been tough for investors with a series of shocks impacting markets and,as 2023 dawns, uncertainties remain. One constant on the investment horizon, though, is the requirement to be strategic with your portfolio. A sound strategy based on careful planning; making purposeful decisions, based on thorough research and reliable processes, will stand you in good stead.

Last year saw markets struggle with bouts of volatility as a combination of high inflation, rising interest rates and the war in Ukraine brought about challenging headwinds and markets sought a stable footing. As a result, fund inflows slowed while cash as a percentage of investors’ portfolios rose, prompting warnings that investors need to be aware of limitations to the Financial Services Compensation Scheme (FSCS) for cash balances.

Identifying opportunities

With large amounts of money on the sidelines, using our knowledge, we aim to identify opportunities and position portfolios to benefit from recession-resistant companies in which we have conviction. Those who still have the capacity to invest should consider adding back to their portfolios in order to take advantage of any potential low valuations.

Battling inflation

Investors also need to be aware of the erosive impact of inflation on cash-based savings. In the current economic climate, anyone holding a significant proportion of their assets in cash, even with savings rates improving, will inevitably see the value of their wealth decline in real terms. In essence, equities offer a better potential defence in the battle with inflation.

Trust in our process

Experienced investor or not, staying calm during periods of market turmoil is never easy but adapting your mindset and focusing on investment strategy rather than market sentiment is vital. Investing in the stock market does clearly involve a level of risk but the adoption of a carefully considered strategy based on sound financial planning principles undoubtedly offers investors the best chance of success.

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.

Challenging Waters Ahead

Even experienced investors are likely to find the current investment environment a challenge, particularly when one considers the array of uncertainties in the post-COVID economy which are so fundamentally different to those faced during the last two years. Opportunities, however, are still available to investors who can steer a safe course through choppy waters.

Uncertainty abounds
One look at the latest economic forecasts released by the International Monetary Fund (IMF) gives a strong hint of the challenges that lie ahead. The international soothsayer described the current outlook as ‘gloomy and more uncertain’ as it reduced its global growth forecast to 3.2% this year and 2.9% in 2023, downgrades of 0.4 and 0.7 percentage points from April’s predictions.

Risks skewed downwards
The IMF noted several shocks that have hit a world economy already weakened by the pandemic. These include higher than expected inflation worldwide which is triggering tighter financial conditions; a worse-than-anticipated slowdown in China, and further fallout from the war in Ukraine. It also stressed that risks are ‘overwhelmingly tilted to the downside.’

But opportunities remain
This economic sea-change clearly presents a serious challenge to investors. However, while managing portfolios in a high-inflation environment may require some change in course, there are still opportunities out there.

Help at hand
And of course, we’re always here to help. So, if you want to take stock of your investments, get in touch and we’ll be happy to help steer you through any troubled waters.

The Growing Need For Intergenerational Planning

With the next 30 years set to witness the largest ever intergenerational passing of wealth, the need for inheritance advice has never been greater. Intergenerational planning, however, can also help with more immediate financial needs, particularly when generations work collaboratively to find solutions that support the whole family both now and in the future.

Inflation concerns
Currently, financial pressures are proving a key challenge across all generations, especially the impact of soaring energy bills as we move towards the winter period. The cost-of-living squeeze, though, is not only impacting people’s current spending power but also their future decision-making capabilities with regard to key issues such as housing, private education or university.

Balancing current and future needs
This has resulted in families increasingly adopting integrated strategies, especially in relation to gifting, in order to address imminent financial challenges. While reducing future Inheritance Tax liabilities inevitably remains at the heart of intergenerational planning decisions, the growing necessity to balance today’s and tomorrow’s needs is resulting in the focus shifting to support for children and grandchildren now.

Involving the generations
Intergenerational planning tends to be most effective when the process is not just focused on those who currently hold wealth. While funding a comfortable retirement and quality of care for the ‘caretaker’ generations remain fundamental elements of intergenerational planning, delivery of support for the coming generations and ensuring wealth passes efficiently to the right individuals at the right time have become increasingly important dimensions.

More families share an adviser
Greater involvement across multiple generations has also seen sharing a financial adviser become increasingly commonplace. This trend offers significant benefits, particularly when it comes to joining up a whole family’s needs with inheritance and gifting strategies, while treating all family members fairly.

Encouraging conversations
If your family needs help with any aspect of intergenerational planning, then please get in touch. We’ll be happy to assist by encouraging more open financial conversations across the generations.

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

Announcement Of Chartered Status

We are delighted to announce that Cara has successfully completed her final Financial Planning exam and has since been awarded the title of Chartered Financial Planner.
Cara achieved a fantastic result for her final exam, which is a tribute to both the effort she has put into her studies over the years, and the extent of her understanding of the financial planning profession.
There will soon be three Chartered certificates hanging proudly on our boardroom wall, alongside Bonum’s own Chartered badge. A great achievement for Bonum Wealth.
Well done Cara!

Spotlight on investor sentiment and super trends

A new investor sentiment survey* shows that, while investors are concerned about both the economic impact of the war in Ukraine and rising inflation, they remain confident about the stock market outlook and are not adjusting their portfolios just yet.

Two thirds of investors surveyed said they expect the ongoing conflict to result in higher energy prices, while 64% expect more global instability and 60% are In addition, 92% expect the war to increase inflation and more than half believe abnormally high inflation will last longer than 12 months.

Investors remain optimistic

The survey did, however, find that investors were not at the time looking to adjust their portfolios, although they are poised to do so should the market decline further. Commenting on the findings, Co-President of UBS Global Wealth Management Iqbal Khan said, “The long-term economic implications of the war in Ukraine are difficult to assess, but most investors remain optimistic on their outlook for the stock market and are confident in their well-diversified investment portfolios.”

Super trends – all change

Analysis** by Credit Suisse has identified growing concerns over the economy as a key super trend, with economic anxieties now replacing the pandemic as the top worry for investors. The Swiss bank’s latest review of global themes driving investment over the long term suggests that, although COVID-19 ‘remains a worry for many people’, it now ranks below concerns about ‘poverty, social inequality and unemployment.’ Other super trends identified within the analysis include an infrastructure boom driven by government spending, technology with new catalysts like the metaverse providing impetus to this trend, the silver economy and climate change.

*UBS, 2022, **Credit Suisse, 2022


Super trends identified within the analysis include an infrastructure boom driven by government spending, technology with new catalysts like the metaverse providing impetus to this trend, the silver economy and climate change