Recently published research suggests the long-heralded ‘great wealth transfer’ is now firmly underway, which inevitably heightens the need for carefully considered intergenerational financial planning as assets continue to flow down the generations.

The great transfer
Dubbed by analysts the ‘great wealth transfer,’ the next two decades are set to witness the largest ever intergenerational transfer of wealth as baby boomers and Gen X pass on assets to their heirs.

Gaining momentum
A recent survey (UBS Billionaire Ambitions Report, 2023) shows this transfer starting to gather momentum,with 2023 the first ever year in which billionaires amassed more wealth through inheritance than entrepreneurship. This trend is expected to continue in the coming years, with predictions millennials’ wealth will increase five-fold across the current decade, with significant levels of wealth passing to Gen Z too, according to research (Coldwell Banker, 2019).

Continuing family legacies
As the great wealth transfer progresses, each generation will clearly have their own views on legacy. The research did, however, find strong support for continuing current family legacies, with 60% of heirs planning for future generations to benefit from their wealth.

Careful planning
In addition, heirs were found to be conscious of the need to reshape and reposition their wealth in order to continue the family legacy, while they also appear to be taking a more holistic approach to the role accumulation of wealth plays in their lives. All of this suggests careful planning will be required if families are to successfully transfer wealth in a way that makes fair provision for all generations.

Intergenerational mismatch
A new survey (abrdn, 2023), 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 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.

www.audleywealth.com/contact-us

*The value of investments and income from them may go down. You may not get back the original amount invested. Inheritance Tax Planning is not regulated by the Financial Conduct Authority.

Figures released by HM Revenue & Customs (HMRC) show that IHT receipts have hit record levels while new data shows the taxman is hunting down thousands of families that have not paid the correct liability on inherited estates.

Record sums
In the first ten months of the 2023/24 financial year, HMRC collected £6.3bn in death duty receipts, £0.4bn more than during the same period of the previous fiscal year. This represents a 7% rise and suggests this year’s annual figure will comfortably surpass last year’s record-breaking total of £7.1bn.

Frozen thresholds
The increase continues an upward trajectory that has been evident in recent years, largely as a result of the nil-rate threshold being frozen at £325,000 for over a decade. This, combined with growth in property prices, has effectively dragged more households into the IHT net.

Investigations rising
Recent years have also seen record amounts of underpaid tax clawed back by HMRC through a specialist team targeting the estates of wealthy deceased individuals. Data obtained via a Freedom of Information request shows a total of 2,029 IHT investigations were opened between April and November 2023, with £172m recovered over that period as a result of targeted investigations.

IHT concerns
New research (RBC, 2024) also suggests IHT is the number one financial concern among wealthy individuals. In total, the survey found that more than a third of wealthy Brits are worried about IHT, with notable increases in levels of concern reported across both the 25 to 34 and 55 to 65-year-old categories over the past year.

Complex rules
The rules surrounding IHT are notoriously complex and people therefore often require professional advice in order to find the most efficient solution for their personal circumstances.

If you have any concerns or need advice in this area do get in touch; we’re always here to help – www.audleywealth.com/contact-us

Financial jargon can be confusing and overwhelming. A new study (Aviva, 2022) has revealed that seven in 10 UK adults are puzzled by financial jargon.

Age gap
The research also found that those aged under 25 are least likely to feel puzzled by financial jargon, with around half (52%) of those aged 18 to 24 stating this, compared to 69% across all age groups. However, there may be an explanation as to why this age group are less confused by financial jargon – they simply might not have heard of certain financial products or terms. For example, less than two thirds of UK adults (61%) in this age group report hearing the term ‘pension’ compared to 97% of those aged 55 and above. In contrast, 18 to 24-year-olds are the group most likely to be aware of the term ‘ESG fund’ (Environmental, Social and Governance).

But even if you have heard a term, it doesn’t necessarily show that you understand its meaning. Just 61% of people who are aware of an ‘ESG fund’ feel confident of its meaning.

Lost in translation
One of the biggest challenges when it comes to financial jargon is that it often feels like a language unto itself. Even if you’re a skilled communicator in other areas, financial terminology may use specialist jargon that can leave you feeling lost.

Ultimately, it’s important to remember that financial jargon is a tool for communicating complex concepts and ideas. We can explain everything you need to know in plain English. Get in touch – whatever your age! (OUR A-Z HERE)

The value of investments and income from them may go down. You may not get back the original amount invested. A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation.

To enjoy a financially secure retirement, it’s important to spend time doing some in-depth thinking well in advance to determine your goals and requirements in order to achieve the lifestyle you dream of. You need a robust financial plan.

When thinking about the income you’ll need in retirement, many people find it helpful to think in terms of Maslow’s renowned Hierarchy of Needs. His pyramid has various levels of need that human motivations move through, starting with the physical requirements for human survival, and ending with mankind’s highest aspirations, reaching ‘self-actualisation’ at the apex of the pyramid. Adapting this approach to personal finance was pioneered in the US. Using this hierarchical approach in a personal finance context can be a useful tool in deciding how to plan your income in retirement.

Survival income

This is the base of the pyramid and consists of the income you need to pay all your basic household expenses, your regular bills and running costs.

Safety income

The next layer up, this is the amount you might need to meet life’s unexpected events, such as health and later-life care costs, loss of income and any emergency financial help you might want to give your family.

Freedom income

This layer is all about assessing the likely cost of doing all those things that you never had time to do before you retired, including travel expenses, major purchases or indulging yourself in other ways.

Self-actualisation

Many people add a gift layer representing money they want to pass on to children and grandchildren during their lifetime, and some add a dream layer, their ultimate ‘bucket list,’ to the very top. The apex of ‘self-actualisation’ represents the ultimate in reaching your full potential, being self-fulfilled and enjoying peak experiences.

Maslow described this level as the desire to accomplish everything that one can, and “to become everything one is capable of becoming.”

By viewing your retirement finances in this way, you can gain a clear picture of how much money you’ll need to help you enjoy the retirement you’ve always wanted. We can build a clear and comprehensive strategy.

*Content is for informational purposes only.

With the Office for Budget Responsibility (OBR) predicting the UK economy will expand by 0.8% this year, and by 1.9% in 2025, Jeremy Hunt delivered his last Spring Budget ahead of the General Election, highlighting reforms aimed to ensure the tax system is simple, fair, keeps pace with economic developments, and supports public finances.

Expectations are that the rate of inflation will fall below the Bank of England’s 2% target level in “a few months’ time,” with the OBR forecast showing the government is on track to meet its fiscal rules to grow the economy, reduce debt and halve inflation.

Changes to National Insurance (NICs)

In line with speculation, following reductions to NICs announced during the Autumn Statement, the Chancellor announced further changes, specifically a reduction in the main rate of employee NICs by 2p in the pound from 10% to 8%, and a further 2p cut from the main rate of self-employed NICs, meaning the main rate of Class 4 NICs for the self-employed will reduce from 9% to 6%.

UK savings in focus

In order to promote more investment in UK assets, the government announced the introduction of a UK Individual Savings Account (ISA) with a £5,000 annual allowance in addition to the existing ISA allowance of £20,000. It will be a new tax-free savings product for people to invest in UK-focused assets (a consultation regarding implementation will be running to 6 June 2024). And a British Savings Bond will be delivered through National Savings & Investments (NS&I) in April 2024, offering a guaranteed interest rate, fixed for three years.

The 2024/25 tax year JISA allowance remains at £9,000.

IHT consultation

It was announced that there will be a consultation on moving to a residence- based regime for Inheritance Tax (IHT).

No changes to IHT will take effect before 6 April 2025, nil-rate band remains at £325,000 and the main residence nil-rate band at £175,000, with taper starting at £2m (estate value). From 1 April 2024, personal representatives of estates will no longer need to take out commercial loans to pay IHT before applying to obtain a grant on credit from HMRC.

Reviewing non-dom status and Child Benefit

In addition, it was announced that the non-dom status will be replaced by a new residence-based system from 6 April 2025. The government also announced an intention to move to a residence-based regime for IHT, with plans to publish a policy consultation on these changes, followed by draft legislation for a technical legislation, later in the year.

Changes to the Child Benefit system included an increase to the threshold for the High Income Child Benefit Charge to £60,000 in April. The rate of the charge will be halved, so that Child Benefit is not lost in full until an individual earns £80,000 per annum, and by April 2026, the Child Benefit system will be based on household rather than individual incomes.

And pensions…

The government remain committed to the pensions Triple Lock. The value of the new State Pension will increase to £221.20 per week in April, while the basic State Pension increased to £169.50 per week.

*Content is for informational purposes only.

Paying a lump sum into a pension can be a particularly effective way to save for your future. If you have accumulated extra money from a windfall, work bonus or through saving, now could be the ideal time to power up your pension with a single contribution.

Above and beyond

One-off pension payments are permitted at any time, with the government encouraging people to do so through tax incentives. Making a single contribution basically enables people to go above and beyond their regular commitments, and thereby move closer to achieving their ultimate pension saving goals.

Tax efficiency 

Tax relief is available on contributions up to a maximum of £3,600 a year or 100% of earnings, whichever is greater, with the level of relief dependent on a person’s marginal rate of Income Tax. For instance, a £1,000 lump sum contribution could effectively cost a higher rate taxpayer just £600, after receiving £200 basic rate tax relief from the government and claiming £200 in additional relief from HMRC.

Allowances

For 2023/24, the annual contribution limit for tax relief purposes is 100% of a person’s salary or £60,000, whichever is lower, although unused allowance from the previous three tax years can be carried forward. If you want to make the most of your available allowance(s), get in touch and we’ll help you power up your pension – www.audleywealth.com/contact-us

*The value of investments and income from them may go down. You may not get back the original amount invested. A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation.

Research has revealed that the ultimate retirement dream is actually very simple – financial security for the rest of your life. This is according to a survey by Legal & General (2023) , which questioned 2,000 respondents aged 50 and over on their aspirations for later life.

Hopes and dreams

Nearly all the respondents to the survey (94%) said that financial security was one of their biggest retirement wishes. Other retirement aspirations included: 

• Being able to maintain one’s desired lifestyle (94%) 
• Spending time with family (90%) 
• Being able to afford care if required (81%) 
• Being able to afford big family events, such as weddings (73%) 
• Travelling (72%)
• Being able to support family financially (69%).

However, 41% of retired respondents admitted that they’ve ended up needing more money than anticipated.

Avoiding the shortfall 

Due to rising life expectancies, many people can expect to spend several decades in retirement. We therefore need to give careful consideration to the below:

• How much do you need? – What level of income will you need for your preferred lifestyle? 

• What do you have? – Let’s take stock of your pension(s), savings and investments, and any other assets you currently have. 

• When do you want to retire? – This will give you an idea of how long you have to save before entering retirement. 

• Think about tax – There are serious benefits to properly utilising the tax allowances available to you.

• Take advice – Research by Standard Life (2023) has revealed that people who take financial advice can expect to retire three years earlier on average. Advised consumers also believe they can fund their desired lifestyle for six years longer than their non-advised counterparts. 

Achieve the dream in 2024 

Make 2024 the year you make your retirement dreams come true. We can help you work towards enjoying the retirement you’ve always dreamed of.

*The value of investments and income from them may go down. You may not get back the original amount invested. A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation.

Chancellor of the Exchequer Jeremy Hunt delivered his Autumn Statement on 22 November, with a host of announcements on personal taxation and measures for business. Housing was largely absent from the key fiscal event, but there are a couple of points to be aware of. 

Mortgage guarantee scheme extended 

This scheme, introduced in March 2021 with the aim of helping more buyers get on the property ladder, was due to end in December this year, but it will be extended by 18 months, until the end of June 2025.

The scheme aims to help borrowers with smaller deposits to take out a mortgage with a 5% deposit on a home worth up to £600,000. The government gives a partial guarantee to the mortgage lender of up to 15% if the borrower defaults on their repayments, giving lenders the confidence to offer higher loan-to-value mortgages. 

The scheme is available to those buying a home they plan to live in using a repayment mortgage. It does not apply to buy-to-let investments, or to those purchasing a second home or holiday home. Only loans set at a maximum of 4.5 times income qualify for the scheme.

New permitted development rights 

The Chancellor announced plans to scrap planning permission for property owners wanting to convert one house into two flats. It will only be allowed in cases where the appearance of the home on the outside does not change. This could be good news for property investors and helping to meet ongoing demand for rental accommodation.

Housing and planning investment
During the Statement, an additional £32m was pledged to unlock development of thousands of homes across the country, including funding to tackle planning backlogs in Local Planning Authorities (LPA).

*Content is for informational purposes only. As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments. 

Over the past 12 months, the cost-of-living crisis has put significant pressure on household budgets and knocked many people’s confidence in their future financial prospects. Research, however, shows that planning is a key driver of positivity about our financial futures; so, now seems the perfect time to take stock of your finances and formulate a plan to help you achieve your retirement goals.

Plan, plan, plan

Although decisions around retirement are arguably the most critical people have to make during their whole lives, research (Nucleus Financial Platforms, 2023) suggests only half of over-50s with pension entitlements other than the State Pension have actually formulated a detailed plan. Perhaps unsurprisingly, it also found that those with a plan were much more confident about securing a comfortable retirement than those who do not have one. 

Gender gap

The research found clear evidence of a gender gap with men generally more confident about their prospects for a comfortable retirement than their female counterparts. It also found that the cost-of-living crisis has been a key driver of low confidence, with half of the sample stating that it has either slightly or significantly worsened their chances of a comfortable retirement.

Triple default trap

People without a plan are also more likely to get stuck with their default pension settings. Recent years are thought to have seen a sharp rise in the number of triple defaulters who ‘set and forget’ their pension choices, with millions of auto-enrolled 32-40 year olds failing to update their contributions, investment choices or target retirement age. Even relatively small tweaks to one or more of these default choices could potentially boost a pension pot by thousands of pounds. 

Here to support you

The evidence clearly shows that formulating a plan is the key to boosting confidence in your financial future. So, let’s kick off 2024 on a positive footing – get in touch and we’ll help you develop a plan capable of securing the rewarding retirement you deserve. 

*The value of investments and income from them may go down. You may not get back the original amount invested. A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation.

Research by AJ Bell has shone a spotlight on the financial challenges that prevent women from accumulating the same wealth as their male counterparts.

The report found that having children continues to have a disproportionately large impact on women’s finances, as do other life events such as the menopause.

The findings
Amongst the report’s findings were the following statistics:
• A quarter of women continue paying into their pension at the same rate during parental leave, vs 70% of men
• Caring responsibilities (outside of childcare) have financially impacted nearly half of women • One in 20 menopausal women have quit work due to their symptoms
• Only 55% of women return to work full time after their first child, compared to 90% of men.

Of course, no two women are the same and each will face different challenges on her journey to financial wellbeing. However, these statistics show that there are common threads here. Women continue to take the lion’s share of caring responsibilities, taking them out of the workplace and reducing their financial security not only in the present, but as they approach retirement as well.

Let’s do something about it – together
Despite the financial challenges women face, they remain less likely than men to seek professional financial advice (Canada Life, 2022). As we move into 2024, make a New Year’s resolution – let this be the year that you empower yourself to succeed and get your finances on track for a prosperous future.

Get in touch with our team today and start your financial journey – www.audleywealth.com/contact-us/

*Content is for informational purposes only