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Category: Guides

Powering up your pension this year

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 ÂĢ3,600 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 ÂĢ1,000 lump sum contribution could effectively cost a higher rate taxpayer just ÂĢ600, after receiving ÂĢ200 basic rate tax relief from the government and claiming ÂĢ200 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 ÂĢ60,000, 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.

What’s your retirement dream?

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.

Autumn Statement Housing update

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 ÂĢ600,000. 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 ÂĢ32m 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. 

 

Planning to secure your financial future

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.

Financial pitfalls primarily impacting women

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:
â€Ē A quarter of women continue paying into their pension at the same rate during parental leave, vs 70% of men
â€Ē Caring responsibilities (outside of childcare) have financially impacted nearly half of women â€Ē One in 20 menopausal women have quit work due to their symptoms
â€Ē 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

 

Looking ahead – the housing and mortgage markets in 2024

Falling house prices and turbulent mortgage rates made 2023 an unpredictable year for homeowners and movers. As the bells ring out for the start of 2024, is a calmer year on the cards? 

 

Three key questions dominate analysts’ minds it seems. First, do house prices have further to fall? Second, will mortgage rates go lower? And third, how will affordability change throughout the year?

 

House prices not bottomed out yet

After recording significant drops in 2023, even the more optimistic analysts expect house prices to keep falling in 2024. According to one such prediction (Zoopla, 2023) , prices will slip a further 2% across the year. Others (finder.com, 2023) expect a more radical drop of as much as 10% by Autumn 2024. 

 

As the number of homes for sale has steadily risen, sellers are facing pressures to keep pricing competitively, further reinforcing the picture of a buyers’ market. Despite robust supply, property prices may bottom out in 2024, separate analysis (JLL, 2023,) suggests.

 

Mortgage rates to fall?

Mortgage rates look set to remain higher for longer into 2024, some analysts (Zoopla, 2023) predict, with an expectation that they will not fall back to 4.5% until the second half of 2024. In this context of higher rates, it is expected that cash buyers will be the biggest group of buyers in 2024. There are positive signs, however, that mortgage rates are falling and will continue to do so.

 

Steady increase in housing affordability? After a shaky year, mortgage affordability improved towards the end of 2023. Indeed, the average monthly repayment for those purchasing in September was ÂĢ64 per month lower than in July5 . Expected rising incomes in 2024 may have a positive effect on housing affordability. Richard Donnell of Zoopla commented, “The housing market is adjusting to higher borrowing costs through lower sales rather than a big decline in house prices.”

 

He continued, “Assuming mortgage rates remain in the 4 to 5% range, we see UK house price growth remaining in the low single digits for the next 1 to 2 years, below the projections for growth in household incomes.” 

 

Here for you

Whether or not these expectations come to pass, we’ll be here to guide you through all your property decisions in 2024. 

 

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

‘110 measures’ to grow the economy

With the Office for Budget Responsibility (OBR) predicting modest UK economic growth of 0.7% this year and 1.4% in 2025, during the Autumn Statement Chancellor Jeremy Hunt outlined 110 growth measures intended to get more people into work, cut business taxes and raise business investment, to get the economy “back on track.” 

 

Contrary to speculation before the fiscal event, reforms to Inheritance Tax (IHT) or Individual Savings Accounts (ISAs) allowances were not announced, although some changes are proposed, including the ability for people to pay into multiple ISAs of the same type each tax year and permitting partial transfers of ISA funds between providers, from April 2024.

 

As a reminder:

  • Inheritance Tax bands remain at ÂĢ325,000 nil-rate band, ÂĢ175,000 residence nil-rate band, with taper starting at ÂĢ2m – fixed at these levels until April 2028 
  • The 2024/25 tax year ISA allowance remains at ÂĢ20,000 and the JISA (Junior Individual Savings Account) allowance remains at ÂĢ9,000. 

 

Key business and personal taxation measures

A key business-related measure was making the full expensing tax break for businesses permanent, while the headline personal taxation measure was the reduction in the main rate of Class 1 employee National Insurance contributions (NICs) from 12% to 10%. Providing a tax cut for 27 million working people, instead of taking effect on 6 April 2024, this took effect from 6 January 2024. The self-employed also benefited with Class 2 NICs paid by those earning more than ÂĢ12,570 being abolished from April and Class 4 NICs paid on profits between ÂĢ12,570 and ÂĢ50,270, to be cut by one percentage point to 8% from April 2024.

 

Triple Lock honoured

The government’s commitment to the pensions Triple Lock was honoured, meaning that the basic State Pension, new State Pension and Pension Credit standard minimum guarantee will be uprated in April 2024 in line with average earnings growth of 8.5% (September 2023). The value of the new State Pension will increase in April 2024 from ÂĢ203.85 per week to ÂĢ221.20 per week, while the basic State Pension will rise from ÂĢ156.20 to ÂĢ169.50 per week. Also on the pension front, the latest steps to deliver the Mansion House Reforms include a call for evidence on allowing individuals to consolidate pensions by having one pension pot for life. 

 

The Lifetime Allowance (LTA) is still scheduled to be abolished from April 2024.

 

More good newsâ€Ķ

A further growth measure addressed the future of Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EISs). The measure extended the operation of the EIS and VCT schemes from April 2025 to April 2035, continuing the availability of Income Tax and Capital Gains Tax reliefs for investors in qualifying companies and VCTs.

 

*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.

Preparing your portfolio for resilience in 2024

The past few years have been challenging for investors with a series of unforeseen events and rising geopolitical tensions weighing heavily on global markets and, as a new year dawns, many issues remain unresolved. However, while such times are disconcerting for investors, the best way to achieve financial empowerment is by sticking to a sound strategic plan that optimises investment decisions and thereby tackles any potential issues head on. 

 

Geopolitical risk 

Although it may sometimes feel like we are living through unprecedented times, geopolitical risk is not a new phenomenon – it has always been a feature of the investment landscape. Russia’s invasion of Ukraine and, more recently, the Middle East conflict, however, are both clearly major events most people did not foresee. And, when such events do occur, even the most well-informed investors find it difficult to accurately predict their impact on markets and investment portfolios.

Economic prospects 

The global economy is currently in a relatively precarious position with the long-term consequences of the pandemic, war in Ukraine and the Middle East, and increasing geoeconomic fragmentation hindering prospects. The International Monetary Fund’s assessment, for example, produced just before October’s Middle East conflict erupted, points to an easing of growth across advanced economies this year, while China looks set to experience its slowest growth rate for years.

 

Investment pragmatism 

While geopolitical events need to be closely monitored, investors must also be disciplined with any changes to investment strategy based on hard facts rather than knee-jerk reactions to the latest news headlines. The key to successful investing is undoubtedly to focus on long-term objectives and mitigate any potential risks by maintaining a well-diversified portfolio spread across different asset classes, industries and geographical regions. 

 

New year, new opportunities 

While geopolitical tensions are expected to present ongoing challenges, as 2024 unfolds new investment opportunities will inevitably become available. We’ll be on hand throughout the year to help you make the most of any opportunities, by carefully repositioning your portfolio and ensuring it remains firmly aligned with your financial objectives. 

 

Get in touch with the team today – 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. 

‘Dog’ funds

According to the latest data (Bestinvest, 2023), the number of ‘dog’ funds have increased 27% since February this year, that represents 56 equity investment funds versus 44 earlier in the year, but a reduction on the 86 dog funds identified in January 2022.

A ‘dog’ fund is defined as one which has failed to beat its benchmark over three consecutive 12-month periods and has underperformed by 5% or more over that entire three-year period.

Almost three-quarters of the dog funds’ total asset value (ÂĢ32.14bn, up from ÂĢ4.49bn) can be attributed to the global sector, where the number of dog funds rose from 11 to 24 during the period.

A sense of perspective
We all know that investment performance can be impacted by many factors and as the risk warning says – past performance is no guide to the future. If a fund has found itself in the doghouse it doesn’t necessarily mean it should be disposed of immediately.

The fund managers are likely to be taking action to improve the performance, perhaps changing managers or redesigning the fund’s investment strategy. Sometimes it can be worth retaining a fund while it’s undergoing this process.

Importantly, knowing why a fund is underperforming will inform the right course of action. That’s what we can determine.

Review review review
Trust us to identify any poor performers and advise you whether it’s worth sticking with those funds for the time being, or whether it’s time to look for other opportunities.

There are many factors to consider in addition to fund performance before taking any action, such as your risk attitude, tax position and overall asset allocation, so rely on us to advise the appropriate course of action.

If you would like support from our team, get in touch today – 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.

A financial and wellbeing safety net

Life has a funny way of turning out differently to how we expect it. When faced with the unpredictable twists and turns of fate, it is comforting to have the support of the right protection cover for your needs.

Rising bills reinforce need for protection
Increased household bills, mortgage and rent costs, mean that protection is more important than ever right now. Have you considered how you would be able to afford your monthly outgoings if your family were to lose the income of the primary earner through death or illness?

Longer-term mindset
In response to these challenging conditions, some households are considering reducing their level of protection – and are therefore at risk of leaving themselves vulnerable to financial shocks. It may seem tempting to save a few pounds a month by cancelling or postponing taking out cover. But there is a risk that, should the worst-case scenario strike, you and/or your family will be left in a difficult financial position.

Support for your well-being as well
Did you know – mental health issues are one of the top reasons for claiming under income protection? One leading provider (Zurich, 2023) paid ÂĢ6m in income protection claims last year of which a third (ÂĢ1.91m) related to mental health claims. Many life and critical illness policies also include support services for mental health issues.

Essential
Protection is an essential part of long-term financial planning for everybody. Having the right insurance cover for your unique needs is an indispensable financial and well-being safety net for you and your loved ones.

Get in touch with our team for more details – 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.

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