The upsurge in inflation over the last year or so has again vividly highlighted the devastating impact sharply rising price levels can wreak on people’s finances. Carefully reviewing your financial choices now, though, can ensure you continue making appropriate decisions that will help to stop inflation leaving a lasting impression on your financial future.

A lack of understanding

Official statistics show the headline rate of inflation peaked at a 41-year high of 11.1% last October but, although economists expect it to continue falling for the rest of this year, the rate has so far remained stubbornly high. Research (Aviva, 2022), however,

suggests the impact inflation has on our finances is not widely understood, with over half of UK adults failing to grasp how rising prices eat into the buying power of their savings.

Limiting the damage

Inheritance is another area where high inflation can have a profound effect. When combined with the continuing nil-rate threshold freeze, soaring prices inevitably mean more estates are likely to be dragged into the Inheritance Tax net. Careful planning now, though, can limit any future liability and preserve people’s ability to pass on assets to their heirs.

Pension pressures

Retirement provision is also a concern, with growing evidence that cost-of-living pressures are leading some to cut back contributions as a way to make ends meet, without realising the lasting damage such decisions can make. For instance,

Analysis (Standard Life, 2023) based on various assumptions (about such factors as salary, pension contribution rates and investment growth) shows that if someone opts out of pension contributions for five years in their 20s it could reduce their final retirement pot at age 66 by £114,000.

Here for you

As ever, we’re here to help; so please get in touch if you need to review your finances and, together, we’ll plan to mitigate inflation’s impact on your future financial wellbeing.

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.

Traditionally, people might have assessed their financial health by simply checking the balance on their bank account or totalling their amassed level of wealth. In recent years, however, a different measure has emerged which seeks to balance financial stability with emotional wellbeing.

Financial empowerment

This new concept places greater emphasis on goals and developing a financial plan to achieve life’s aspirations; in other words, it’s about people gaining control over their finances rather than their finances controlling them. Achieving genuine financial empowerment does

not therefore focus simply on someone’s level of wealth, but on handling that money so it has a truly positive impact on their wellbeing.

A state of mind

In many ways, financial empowerment is about understanding the emotional relationship with money by focusing on an individual’s mindset as well as their finances. Taking time to strategise, by aligning spending and savings commitments with long-term goals while being prepared for life’s unexpected financial challenges, can provide a logical, ordered approach that brings satisfaction and pride to our financial lives. In effect, it creates control that affords a sense of financial freedom and thereby puts us on track to a fulfilling, well-lived life and retirement.

Empowerment versus income

Analysis (Morningstar, 2023), which compares people’s emotional experiences with their level of empowerment and earnings, offers further valuable insight. It found that financially empowered people had mostly positive experiences, even those in lower income brackets, while those who felt disempowered were generally less happy with their finances than their peers. This suggests that a sense of personal power rather than someone’s income level is the key to achieving emotional wellbeing in their financial lives.

It’s all in the planning

Financial empowerment effectively derives from equipping ourselves with the

right tools. With the clear, transparent advice and professional support our firm provides, we can construct a well thought-out, long-term but flexible plan that will allow you to live the life you want and thereby achieve true financial empowerment.

*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. Inheritance Tax Planning is not regulated by the Financial Conduct Authority.

Audley Wealth are pleased to announce the launch of a new campaign that focuses on helping people aged 30-60 years old with their finances. The campaign, titled A Letter to My Younger & Older Self, features a series of educational videos in which common financial topics are shared between two different age groups at key stages of their lives.

These videos explore the thought-provoking question: If you could talk to your younger or older self, what would you tell them? The majority of answers were always finance-related; many wished they had helped their ‘future self’ become financially secure. Furthermore, it was found that while many would want to give their younger self advice, it is equally necessary to educate an older audience on current financial trends, noting how the landscape has changed in recent years.

‘We know that financial planning can be daunting, especially in the current digital age where there are so many options,’ said our Founder and Independent Financial Advisor, Alun Webster. ‘Our new campaign is designed to make financial planning more accessible and relatable, by sharing the insights of people who have been through the same financial journey, we hope to help our customers make better financial decisions for themselves and their families.’

The campaign features ten videos, each of which focus on a different financial topic from each stage of life. Some of which include:

Investing: These videos cover both aspects of investment. From warning our older selves of investment FADS, to educating our younger selves on how to start investing early in life and the importance of compound interest.

Retirement Planning: In this video, we cover a number of micro-topics, including how much money you need to save, when to start saving, and what type of investments to choose. We also discuss the importance of having a diversified portfolio and how to protect your retirement savings from market volatility.

Emergency Savings: We look at how an emergency fund can help you cover unexpected expenses, such as a job loss, a medical emergency, or car repairs. In addition, we discuss how much money you should have in your emergency fund and how to save for it.

These are just a few examples of the A Letter to My Younger & Older Self video series. A wide range of financial topics are covered in the videos, making them a valuable resource for anyone looking to improve their financial literacy.

All videos are available on Audley Wealth’s website and YouTube channel. For more information and to view the campaign, please visit our Financial Focus page.

In addition to the videos, Audley Wealth is offering a free financial planning consultation. To schedule a consultation, please click here.

What next for the housing and mortgage markets?

Activity in the housing and mortgage markets is hotting up – and cooling down. According to the latest Residential Market Survey from the Royal Institution of Chartered Surveyors, a run of thirteen successive negative monthly readings for new instructions ended in May, marking the strongest reading for new listings since March 2021 (RICS, 2023). Yet house prices are still predicted to fall in the second half of the year.

What next for house prices?

House price growth dipped in May and notably the annual rate of growth fell to -1.0%, marking the first time since 2012 that house prices have fallen year-on-year. (Halifax, 2023) It remains to be seen which way the market will veer in the second half of 2023.

If, as many are predicting, a flurry of mortgaged homeowners are forced to sell up when their current fixed-term deals end, the market could see a boost to supply that might reinforce the downward price movement. Analysts suggest too that first-time buyers (FTBs) could be delaying their homebuying plans in the hope that mortgage rates or house prices are about to fall sharply.

Bank Rate

Meanwhile, the Bank of England’s (BoE’s) Monetary Policy Committee (MPC) increased Bank Rate in June, taking it to 5%. Borrowing costs are now at their highest level since 2008. Those with tracker or variable rates have seen immediate higher repayments.

Return of the 100% LTV mortgage

The mortgage market is kicking back into action too, with one especially noteworthy development, the launch of a new mortgage product that allows FTBs to take out a loan on the full value of their home. The 100% loan-to-value (LTV) mortgage is exclusively for current renters and depends on their being able to prove a track record of timely rent payments.

Don’t second guess

Whatever happens in the months ahead, we’re here to help you make the right decisions for your unique circumstances.

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

The true value of financial advice today

There are clearly a variety of reasons why people utilise the services of a financial adviser, but among the key motivating factors is undoubtedly the peace of mind professional advice affords to clients. And, in challenging times like these, it is clearly not difficult to understand why that particular benefit is deemed so important.

Peace of mind

A recent survey (Hymans Robertson, 2023) sought to ascertain the main reasons why investors seek the expertise of a financial adviser and it found that more than half of those that use one did so for peace of mind. In contrast, just a third said they used an adviser due to their own lack of financial expertise, while less than a fifth did so because of time constraints.

Soft factors are important

The research also asked investors which aspects of advice they place most value on, with two-thirds saying investment returns were critical and just over four in ten attributing value to tax management efficiency. Interestingly, however, the study also found that a number of soft factors were equally, if not more, important to investors. For instance, half of respondents said they valued the ability to plan how they will attain their financial goals.

Support key in difficult times

The value of support provided by an adviser tends to be accentuated during challenging economic times when clients typically need greater reassurance and the confidence required to maintain a long-term outlook. During such periods, for example, advisers perform a vital role by ensuring clients do not fall into the trap of ‘selling low’ or ‘buying high.’

Avoiding expensive mistakes

This latter point perhaps highlights the true value gained from using a financial adviser, which is that it helps clients avoid making costly mistakes. In essence, value therefore seems to stem less from picking the best investments and more from constantly making smart decisions across a range of issues, whether that be: tax, cost or income management, asset allocation, portfolio rebalancing, or withdrawal strategies.

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.

Investment myths

To many, the world of investing is shrouded in mystery; the realm of financial whizz-kids and the super-rich. In reality, however, this is not the case and, once myth is separated from reality, it should be clear that investing is actually accessible to all.

Can’t invest, won’t invest!
Research (HSBC, 2022) has highlighted several reasons why people are sometimes reluctant to invest. The main one, cited by 45% of respondents, is because they don’t have sufficient money, while 23% feel they are not knowledgeable enough about investing and 21% are worried about losing money.

Only for the rich?
These findings mirror a number of common misconceptions surrounding investing, one of which is that only wealthy people invest. However, while this may have been the case in the past, it is certainly not true nowadays, with investment options available for people with relatively small sums to invest.

Expertise and devotion required?
Other common investment myths include the idea that you have to be a stock market genius and monitor your investments on a daily basis. Both of these are untrue: advice is readily available to guide novice investors throughout their investment journey, while taking a long-
term approach is always advisable.

Too risky by far?
While it is true that all investing involves risk, not all investments are similarly risky. So, anyone who is worried about losing money can take a more cautious approach by holding a greater proportion of less-risky assets in their portfolio.

Help at hand
If you’re new to investing then get in touch and we can help get you started. We’ll show you that investing is not just for the very wealthy; but it does give everyone a chance to potentially secure a higher return on their hard-earned cash.

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.

Residential Property Review

House Price Index (April 2023) – 150.3

Average House Price –  £286,489

Monthly Change – 0.50%

Annual Change – 3.50%

* (Jan 2015 = 100)

Average house prices in the UK increased by 3.5% in the year to April 2023

• On a non-seasonally adjusted basis, average UK house prices increasedby 0.5% between March 2023 and April 2023
• The average price in London was £533,687.

Source: The Land Registry Release date: 21/06/23 Next data release: 19/07/23

House prices Price change by region

Average monthly price by property type – April 2023

Housing market outlook

“The combination of high interest rates and inflation continues to be a heady mix, prompting buyers to remain hesitant. However, professional investors and landlords may find this an optimal time to add to their property portfolio, making the most of deals within the market. Despite all of these headwinds for landlords, demand for letting residential property remains high with tenants competing for limited stock.” – Emma Cox, Managing Director, Shawbrook

Source: property industry eye, June 2023

*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.

Pension News – Summer 2023

How up to date are you with your pension? Here are a few things to consider.

How much is in your pension pot?

According to research (Standard Life, 2023), three quarters of UK adults don’t know how much is in their pension pot. This figure rises to 79% of 55 to 64-year-olds who say they can’t put a figure on the value of their pension – especially worrying as this is a crucial stage for retirement planning. The research highlighted that women (81%) are more likely than men (68%) not to know how much they have accumulated in pensions saving.

Consider the gender gap

Research (Aviva, 2023), has again found a widening of the gender pension gap from the age of thirty-five. The gap between women’s and men’s contributions for 35 to 39-year-olds is 21%, up from 18% in the previous year. Other research (Scottish Widows, 2023) has highlighted how pension inequality is exacerbated for minority women, with over half (54%) of Black women saying they don’t have any retirement savings, compared to 40% of South Asian women and 35% of White women.

State Pension passes £10,000, but watch the tax

There was a welcome boost to pensioners’ incomes in April. The single-tier State Pension is now £203.85 a week or £10,600.20 a year. Those in receipt of the basic State Pension now get £156.20 a week, which may be topped up further by the Additional State Pension.

However, the freezing of the Income Tax personal allowance since 2021/22 means that the State Pension takes up 84% of the allowance, meaning pensioners will only need to earn £1,969.80 before they start paying Income Tax.

If would like to know more about how the latest news affects you, get in touch with our team. www.audleywealth.com/contact-us

*Content is for informational purposes only

Summer retirement lowdown

The last few years have created an increasingly complex backdrop for retirement planning. Not only has the post-pandemic era seen attitudes to work alter significantly, but macro-economic headwinds from Russia’s invasion of Ukraine and the cost-of-living crisis have created significant unhelpful market volatility. In combination, this has inevitably heightened the need for everyone to engage in retirement conversations at the earliest opportunity. Some recent research sets the backdrop for your summer retirement round-up, spotlighting key trends.

Changing face of retirement

A recent study (Aviva, 2023) of UK employees has shown how people are re-evaluating plans for work and later life, with evidence that partial retirement may become the new norm. In total, over half of all workers said they like the idea of continuing to work through retirement. The research also highlighted a strong sense of semi-retirement positivity, with nine out of ten saying they were ‘much happier’ after reducing their working hours.

Low levels of confidence

Another study (The Wisdom Council, 2023), however, has highlighted a distinct lack of confidence among 55 to 75-year-olds when it comes to financing retirement. Indeed, nearly a third said they were either not at all confident or not very confident they would enjoy a comfortable lifestyle in retirement, compared to less than one in five who felt very or extremely confident.

Mind the gap

The research also highlighted a sense of unpreparedness, with a notable divergence in anticipated levels of retirement income and expenditure. For instance, while average expected spending five years into retirement was predicted to be 92% of pre-retirement levels, average income was only expected to hit 78%; other evidence suggests this latter figure is an aspiration few pensioners are likely to achieve.

Planning is essential

These findings suggest many from the next generation of retirees will need support if their finances are to see them through retirement, and this vividly highlights the need to develop a sound strategy tailored to an individual’s unique circumstances long before retirement looms. Planning ahead can address potential income requirements and offer solutions that build resilience to ensure you enjoy the 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.

Inheritance Tax (IHT) receipts have been consistently rising, with new data from HM Revenue & Customs (HMRC) showing takings for the 2022–23 tax year totalled £7.1bn, up

a massive £1bn from the previous tax year (£6.1bn 2021–22). According to HMRC, this huge uplift can be attributed in part to ‘a combination of the recent rises in asset values and the government’s decision to maintain the IHT nil rate band thresholds at their

2020 to 2021 levels up to and including 2025 to 2026.’

Reported estimates from the Spring Budget detail that over the next five years, IHT is expected to bring in £38bn for the Treasury, meaning annual receipts will exceed £8bn by 2027–28, with 6.7% of deaths expected to trigger an IHT charge. This compares with 3.76% of UK deaths in 2019–20.

Record receipts have prompted suggestions that the tax has now become mainstream. Previously dubbed a tax on the wealthy, this is certainly no longer the case, as frozen thresholds and elevated house prices impact.

The good news is that through expert planning you can legitimately mitigate this tax, so you can pass on assets to your family as you’d intended. There are various different strategies depending on your unique circumstances, including making gifts during your lifetime, considering placing assets into trust, making use of exemptions, and thinking about leaving something to charity, to name but a few.

Don’t go it alone

IHT is a complex tax, with reliefs and exemptions on gifts to consider and the interaction with other taxes. These days, with many more estates likely to be subject to IHT, taking expert advice could save your beneficiaries substantial amounts of tax. Get in touch.

*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. Inheritance Tax Planning is not regulated by the Financial Conduct Authority.