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.

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

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!

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

---

 

The Class of 2022 retirement report* provides a riveting insight into the plans and thoughts of those either planning to retire this year or recent retirees, really highlighting the changing face of retirement in the UK.

The last couple of years have impacted people’s plans, with people reassessing what retirement looks like to them. Less people are giving up work entirely, choosing to adopt a more  staggered approach to retirement. Two thirds (66%) plan to continue working in some capacity during retirement; of this number some plan to move to part-time hours, others intend to
continue working for their own business, start their own new business or volunteer. Therefore, a third of retirees plan to give up work altogether, down from 44% of 2021 retirees.

Financial readiness

Confidence in financial readiness to retire has fallen, with only 25% feeling financially ready to retire, versus 30% in 2021. A key factor in this fall being the rising cost of living, with 28% of respondents unsure how Your retirement today to mitigate the impact of rising inflation on their retirement income – a prime concern for those with large cash holdings.

Pass it on

With over a half (56%) of retirees planning to pass on wealth to their loved ones, just 23% feel confident about how they will pass on any leftover assets to loved ones. Only 9% have started gifting wealth to reduce their IHT liability. Interestingly just 30% have had conversations with their partner about passing on their estate, while just 26% have spoken to their children about it.

No two retirements are the same

Retirement is a thriving new beginning to plan for. Whether you’re thinking about a gradual retirement or full retirement how do you visualise your retirement years? Have you thought about your income requirements or tax implications? Have you started a conversation with family about how you want to use your wealth to help them? Advice can help you seek clarity and
provide focus and direction.

*abrdn, 2022

Research* suggests that nearly one in five people are, or will be, financially worse off due to their divorce, and that many divorcees struggle to make ends meet after separating from their partner.

The statistics make for worrying reading. A third of divorced respondents said they were forced to take money from their savings to supplement their finances, 20% had to use credit cards
for everyday expenses, 18% borrowed from family and friends, while 15% resorted to selling their possessions to make ends meet.

Pensions are an asset

Pensions can be highly valuable assets – 42% (or £6.4tn) of UK wealth is currently held in private pensions – meaning that a pension can be a hugely important part of a divorce settlement. And yet, 15% of divorced people had no idea that their pension could be impacted by getting divorced, while 35% did not make any claim on their former spouse’s pension.

Don’t underestimate your pension

Alistair McQueen, Head of Savings & Retirement at Aviva, commented, “It’s critical that, as part of the separation process, couples take time to think about and discuss one of their single most valuable assets, their pension […] It can often be a very complex issue so, as well as hiring a family lawyer, it would be advisable for couples to contact a financial adviser to walk them through the pension valuation and financial process.”

The impact of ‘no-fault’ divorce

It has yet to be understood how the introduction of so-called ‘no-fault’ divorce in April this year might be starting to impact the way in which pensions and other assets are treated in divorce
settlements. We would always recommend speaking with a qualified financial adviser for guidance relating to the financial aspects of your divorce.

We are here to help you make some important decisions with your finances as you navigate the complexities (emotional and financial) of divorce.

*Aviva, 2022

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

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

Keeping up to date with tax changes can be challenging and you may have missed this one in relation to the reporting of Inheritance Tax (IHT), especially as it’s not something most of us will deal with very often.

Excepted estates

The changes came in at the start of the year and apply to the estate of anyone who dies on or after 1 January 2022. Now, before you make a report to HM Revenue and Customs (HMRC) you need to check whether the estate is an ‘excepted estate’ to make sure you complete the right forms.

There are several reasons why an estate may now be classified as ‘excepted’:

• The estate has a value below the current IHT threshold (£325,000 for one person)

• Any unused threshold is being transferred from a spouse or civil partner who died first, and the estate is worth £650,000 or less

• The estate is worth less than £3m and the deceased left everything in their estate to their surviving spouse or civil partner who lives in the UK, or to a qualifying registered UK charity

• The estate has UK assets worth less than £150,000 and the deceased had permanently been living outside of the UK when they died.

A step-by-step guide

Further details on how to value an estate for IHT and report its value can be found here www.gov.uk/valuing-estate-of-someonewho-died/check-type-of-estate

Thinking of your own IHT planning

More people are having to pay IHT; HMRC figures show IHT receipts for the period April 2021 to January 2022 to be £5bn, which is a £700m increase on the same period one year earlier.* IHT planning is a complicated subject, but sensible financial planning can help to reduce the amount of IHT payable and safeguard your wealth for the future.

*HMRC, 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.

 

---

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…

---