Financial wellbeing: 4 steps to creating a financial wellbeing plan

by Phil Clerkin on March 30, 2023

While growing wealth is often an important part of a financial plan, understanding how you can use your money to reach goals and improve your wellbeing is crucial. It could help you get the most out of your wealth and lead to a more fulfilling life. 

This guide offers practical steps that could help you improve your relationship with money by understanding how it’s related to happiness. It covers four essential steps to creating a financial wellbeing plan that’s tailored to you: 

  1. Understanding the sources of happiness that are true for everyone
  2. Understanding what makes you happy
  3. Creating a clear path to your objectives
  4. Travelling along that path in the most effective and efficient way possible. 

Download your copy of ‘Financial wellbeing: 4 steps to creating a financial wellbeing plan’ now to find out what you could do to boost your long-term wellbeing. 

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Phil ClerkinFinancial wellbeing: 4 steps to creating a financial wellbeing plan
a phone showing an image of the Silicon Valley Bank logo

Investment market update: March 2023

by Phil Clerkin on March 30, 2023

As inflation persists, central banks were forced to announce further rises to interest rates in March.

Coupled with the collapse of Silicon Valley Bank, it has been an uncertain few weeks in the world economy.

As an investor, remember that volatility in the markets is normal. Take a long-term view of your portfolio’s performance and focus on your overall goals rather than short-term market movements. 

Here are some of the factors that affected markets in March 2023.

UK

After hitting a new record high in February 2023, the FTSE 100 fell back in March. Indeed, in mid-March, the index suffered its worst day of trading since the start of the Covid-19 pandemic.

Overshadowing the spring Budget and sparked by fears over the health of the global banking sector, the FTSE 100 closed 292.66 points lower – around 3.8% – on 15 March.

In a Budget the chancellor called “a plan for growth”, the key announcements included:

  • An extension of the Energy Price Guarantee scheme until the end of June 2023
  • The removal of the pensions Lifetime Allowance (LTA) tax charge from 2023/24, with plans to abolish the LTA in a future Finance Bill
  • A year-long extension to the 5p cut to fuel duty on petrol and diesel, due to end in April
  • Rises in various pension allowances to encourage more tax-efficient retirement saving
  • Plans to create a dozen new investment zones that could become “12 potential Canary Wharfs”
  • A policy of “full capital expensing”, initially for the next three years, which will allow firms to write off all investment against their tax bills.

While the UK remains the only country among the G7 major economies that has yet to fully recover its lost output during the Covid-19 pandemic, it is defying predictions of a recession. 

The UK economy grew by 0.3% in January with the largest contributions to growth coming from education, transport and storage, and arts, entertainment and recreation activities, all of which have rebounded after falls in December 2022.

Inflation unexpectedly rose in the year to February 2022, with the Office for National Statistics reporting that rises in restaurant and cafe, food, and clothing costs pushed the annual rate up to 10.4%.

This led to the Bank of England increasing the base interest rate for the 11th consecutive time, to 4.25%.

Europe

Recession fears continue in the eurozone, with GDP growth revised down to 0.0% in the fourth quarter. Household consumption in the fourth quarter of 2022 saw the largest decline since the start of the eurozone in 1999, with the exception of during the Covid-19 pandemic.

Headline inflation in the eurozone remains high – it stood at 8.5% in February – and this led the European Central Bank (ECB) to increase interest rates by 0.5 percentage points in March. This pushes the bank’s main rate up to 3.5%, while the rate paid on eurozone bank deposits left at the ECB increases to 3%.

Christine Lagarde, the president of the ECB, said the central bank would treat the heightened tensions in financial markets separately from its strategy for bringing down inflation.

As with the leading UK and US indices, the STOXX 600 index fell in the aftermath of the SVB crisis, and has remained uncertain due to ongoing economic concerns.

US

The economic headlines in the US in March were dominated by the collapse of Silicon Valley Bank (SVB) – the country’s 16th largest bank.

Since the pandemic began, SVB had been buying lots of what are often considered “safe” assets such as US Treasury bonds and government-backed mortgage bonds. When interest rates started to rise sharply, their fixed interest payments didn’t keep up with rising rates. 

Those assets were then no longer worth what SVB paid for them, and the bank was sitting on more than $17 billion in potential losses on those assets as of the end of last year. 

In early March, SVB then faced a wave of $42 billion of deposit withdrawal requests. As it wasn’t able to raise the cash it needed to cover the outflows, regulators were forced to step in and close the bank.

While both the US and UK governments ensured that customers of the stricken bank were protected, it has raised fears of another global banking crisis. Indeed, Credit Suisse, one of the world’s oldest banks, was bought by rival UBS in a Swiss government-backed deal in March after regulators worked frantically to secure a deal for the loss-making bank.

Fears of another banking crisis have led to volatility in US markets, with some economists modestly lowering their forecasts for economic growth this year because of the SVB crisis as smaller banks restrict lending in an already weak environment.

Inflation in the US fell to 6% in February 2023, down from an annual rate of 6.4% in January and significantly lower than the 9.1% peak of inflation seen in June 2022.

Despite the uncertainty in the markets, the Fed raised interest rates by 0.25 percentage points in March, taking the upper limit of US interest rates to 5%, the highest level since 2007.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

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Phil ClerkinInvestment market update: March 2023
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6 helpful ways to keep yourself active during retirement

by Phil Clerkin on March 30, 2023

A strong financial plan will help you to stay on course to meet your long-term goals, as you navigate your way through life towards your eventual retirement. The aim is that when that day arrives, you’ll be in a position to live the kind of lifestyle you desire.

It can be easy to focus on the financial aspects of your retirement and lose track of what that life will actually entail. After possibly spending decades of your life working on your career, you might find yourself a little lost when your days are suddenly filled with free time. 

One of the many lessons we can learn from the world’s “blue zones” – the regions in which people have the longest life expectancies and tend to live healthy, active lives throughout their 80s and 90s – is the concept of “purpose”.

This notion takes many forms. In two of the blue zones, they have words that conceptualise this idea. In Nicoya they call it “plan de vida” and in Okinawa “ikigai”, both roughly translating as “why I wake up in the morning”. 

Having a positive mindset and things to do with your days can benefit your emotional wellbeing during retirement.

Read on to discover six ways you can keep yourself active in both mind and body, and ensure you get the most out of your retirement years.

1. Consider embracing your creative side and taking up an artistic hobby

According to AgeUK, one of the many unexpected outcomes of retirement is the sudden loss of identity. You might find yourself feeling emotionally drained, isolated, and unsure of how to fill your time. 

Picking up a creative hobby could be a potential solution. It might not have been something you considered in the past, but it could benefit your mental health. You could try:

  • Painting
  • Writing poetry
  • Photography 
  • Learning an instrument
  • Acting

The Mental Health Foundation champions arts as a way for people, especially those later in life, to overcome isolation and rebuild social connections.

You don’t have to discover your inner Van Gogh or Brando. Simply taking the time to switch off and pursue something creative can help your mind stay active and healthy.

2. Unleash your “green fingers” and adopt gardening as part of your daily routine

The blue zones teach us many lessons about how to go about later life. In all five of these regions, exercise is built into daily routines, rather than as a dedicated goal. 

People in these zones typically don’t play physical sports or hit the gym on a daily basis. Instead, they allow physical activity to naturally feature throughout their days.

One of the ways they do this is by tending to their land. Gardening not only keeps your body active as you shovel, water, plant, and oversee your grounds, but can also benefit your diet and your mind.

Fresh vegetables, fruit and herbs can do wonders for your health, so why not consider growing them yourself in your garden?

It’s also great for your mental health and could help you unwind.

3. Become a leader in your local community

Taking an active role in your local community can do wonders for your health and emotional wellbeing.

You can not only leave your mark on other people’s lives and build upon your legacy, but also foster new connections and friendships that might open up all sorts of new avenues of interest for you to pursue during your retirement.

Community engagement can take many forms. You might decide to help with programmes for young people, coach a sports team, help with a charity, or support efforts to revitalise your local area. 

4. Take the time to exercise your mind and body

As part of continuing globalisation, Asian exercise and mindfulness concepts have slowly filtered over to the West.

You will probably be familiar with yoga, meditation, and perhaps even t’ai chi. Once seen as hobbies of the free-spirited fringes of society, they have become increasingly mainstream.

The benefits of these activities aren’t just physical, but also mental.

Stress is well-known to be one of the leading contributors to heart disease and other life-threatening ailments. Staying active in a way that not only keeps your body healthy but also your mind could mean you get the most out of retirement.

5. Reflect on your life and write down your story

The idea of writing your memoirs might be daunting, but it can be an excellent way to acknowledge your achievements and reflect on your favourite memories. 

The exercise helps keep your mind active. It is also an opportunity for you to share your story with your loved ones and descendants. 

You don’t need to write your magnum opus and seek out a publishing deal. You can simply use it as a means for your children, grandchildren, or great-grandchildren to get to know you better.

6. Stay productive with a part-time job

It might seem counterproductive to take on a job when you’ve only just retired. But part-time work can be very beneficial for maintaining a structure in your daily life.

It can also help with giving you purpose and a challenge that will keep you active and feeling productive.

This can take many forms; you might opt to take up consultancy for your old profession or look into a teaching position. Otherwise, you might want to turn a long-gestating idea into reality and start up a new business. 

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Phil Clerkin6 helpful ways to keep yourself active during retirement
Someone walking a dog.

What does the multiverse theory have to do with cashflow modelling? Find out here

by Phil Clerkin on March 30, 2023

Financial planning doesn’t have a lot in common with science fiction. Yet, cashflow modelling could allow you to explore the lives you could lead if you made different decisions. So, it has more in common with the multiverse theory than you might initially think. 

The multiverse theory suggests there is a hypothetical group of multiple universes with many different worlds. It proposes that every time an outcome is observed, there is another “world” in which a different outcome becomes reality. 

So, while here you may have made certain career decisions, or started a family, there are countless other realities where you’ve made different choices. 

Despite some scientists searching for evidence to support the multiverse theory, they haven’t found any yet, and others are sceptical. Yet, it’s continued to be a huge source of inspiration in science fiction. 

Indeed, one of this year’s Oscar nominations Everything Everywhere All at Once suggests that every decision you make creates a parallel universe. You can see the influence of the theory in literature too, from Matt Haig’s Midnight Library to thriller Recursion by Blake Crouch. 

But, what does the multiverse theory have to do with cashflow modelling?

You can “test” your decisions through cashflow modelling 

Cashflow modelling can forecast your future finances in different scenarios. 

You start by inputting information, such as how much you have in savings, the value of your investments, or your income. By making certain assumptions, like expected investment returns or income growth, you can project how your wealth will change over your lifetime. 

Once the information has been added to a cashflow model, you can then model different scenarios and take a peek into what could happen in those other realities. You can see how decisions you make, or things outside of your control will affect your financial future.

Let’s focus on investments. A cashflow model could show what may happen if:

  • You increased how much you invested by 10% each month
  • Investment returns were 5% or 7% a year
  • You used your investment portfolio to boost your retirement income by £5,000 a year. 

Sadly, cashflow modelling doesn’t let you experience other lives like you see in films. But it can help you visualise different scenarios and how the decisions you make could lead to very different outcomes. 

2 compelling reasons to make cashflow modelling part of your financial plan 

1. It can give you confidence in your financial decisions 

As cashflow modelling can help you understand how your decisions could affect your wealth in the short, medium, and long term, it can give you confidence.

If you’ve been deliberating over whether you can afford to give your child a property deposit, or if you have enough to retire early, cashflow modelling could mean you’re able to move ahead with plans with fewer doubts. By understanding the implications of your financial decisions, you can focus on what’s important in your life. 

2. It can help you prepare for different outcomes 

One of the challenges of creating a long-term financial plan is that things outside of your control can affect it. Cashflow modelling can help you answer “what if?” questions like:

  • What if I was forced to retire earlier than expected due to ill health?
  • What if my investments don’t perform as well as hoped?
  • What if I passed away? Would my spouse and children be financially secure? 

By modelling these types of scenarios, you can see what effect they would have on your wealth and lifestyle. That puts you in a position to prepare for them to give you peace of mind. It could include putting more away for your retirement now or taking out life insurance to provide for your family if you pass away. 

As a result, cashflow modelling can mean you and your loved ones are more financially secure and better prepared to overcome unexpected life events. 

Are you ready to consider the multiverse? Get in touch

If you want to better understand how the financial decisions you’re making could affect your life in the future, please contact us. We can help you visualise different outcomes, and then create a financial plan that could turn your aspirations into reality.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

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Phil ClerkinWhat does the multiverse theory have to do with cashflow modelling? Find out here
Family with several generations

51% of adults don’t have a will. Here’s why it should be a priority task

by Phil Clerkin on March 30, 2023

The benefits of having a will in place are well-documented, although if you don’t have a will, or haven’t updated it in some time, you’re not alone. A recent survey from MoneyAge has found that 51% of adults in the UK currently don’t have a will in place.

Of those with a will, 43% haven’t updated it since it was first written. 

A will can be a fantastic way to: 

  • Allocate your assets to loved ones
  • Nominate legal guardians for your children
  • Divide your estate as painlessly as possible
  • Reduce your liability for Inheritance Tax. 

If you don’t have an up-to-date will, there’s a chance your loved ones won’t receive the wealth you intended for them. So, continue reading to discover why having an up-to-date will is vital. 

It ensures your assets pass to the people you want them to 

Perhaps the most obvious benefit of having an up-to-date will in place is knowing your assets will pass to the people you wish. 

If you die without a will in place, or “intestate”, you’ll have no say over how your assets will be distributed. Instead, the laws of intestacy will dictate how your estate is divided. 

This is especially important if you have a partner and you’re not married. While your blood relatives and/or spouse will usually inherit according to the laws of intestacy, a cohabiting partner and any stepchildren you have will likely not.  

Your will is the perfect way to dictate where you want your money to go after you pass away, giving your loved ones more financial security after you die. 

It could mean less hassle for your family

After you die, your family will need to administer your estate. This can be a stressful process, especially while they’re dealing with the grief of your passing. So, having a will in place that clearly outlines your wishes may make it easier for your family to make any necessary arrangements. 

For instance, if you don’t have a will, dividing your estate could be incredibly stressful and time-consuming, and it could take longer for your assets to pass to your loved ones. 

It could help avoid disputes

As mentioned, it’s a common occurrence for families to experience periods of heightened stress and grief after you die. As such, the dividing of an estate can be the perfect storm of stress and emotion, which can, unfortunately, often lead to disputes. 

Indeed, data from IBB Law shows that 75% of people are likely to experience a will or inheritance dispute case at some point in their life.

Disputes can have lasting adverse effects on your family – they could permanently damage relationships or even cause schisms in the family, not to mention costing thousands in legal fees.

With a will in place, these disputes could potentially be avoided, making the process of dividing your estate as simple and painless as possible. 

Even if you already have a will, you’ll need to update it regularly as your circumstances change. For example, if you remarry your existing will is automatically revoked. So, if you don’t write a new one, your estate could pass to the “wrong” people and cause arguments or disputes. 

You can assign guardians for your children

While you may think your will is only used to allocate your estate, it can also be used to express your wishes about what will happen to your children after you die.

If your dependents are below the age of 18, you can use your will to nominate legal guardians. If you don’t nominate a guardian in your will, a family court would need to decide what happens to your children and their care could be left in the hands of a person you wouldn’t have chosen. 

Even if you do have a will, it may be worth updating it regularly to fit your current circumstances – for example, as you have more children. 

You could potentially mitigate an Inheritance Tax bill

When you die, the total value of your estate will dictate the amount of Inheritance Tax (IHT) that will be payable. 

As of the 2023/24 tax year, the IHT threshold stands at £325,000, though you can also benefit from the additional £175,000 “residence nil-rate band” if you leave your home to a direct descendant, such as a child or grandchild. 

Then, anything left in your estate above this threshold will typically be subject to the standard IHT rate of 40%. 

With a well-written will, you can often reduce your IHT liability. For example, suppose you specify that you want your home left to a direct lineal descendant. In this case, you could make full use of the additional residence nil-rate band, substantially reducing the IHT liability of your estate. 

Wills can help you to make your estate plan as tax-efficient as possible. 

It ensures that nothing is left behind

After you die, there will be plenty of paperwork relating to your finances that your family will need to deal with. 

If you haven’t clearly outlined your assets in your will, your family could miss something they didn’t know existed, such as a previous pension, an old savings account, or even any protection you had. 

When your will is in place, you can clearly identify your assets and distribute them to your beneficiaries. This could ensure that your family doesn’t miss out on any of your hard-earned wealth. 

This is another great reason to update your will regularly. If you have acquired assets later in life and fail to update your will to include them, they could be missed out entirely when your estate is divided. 

It can give you peace of mind

Another beneficial reason to have a will in place is that it gives you the peace of mind that your affairs will be dealt with in the way you desire after you die. You can rest assured that your loved ones’ future is secure, and you can start living in the present. 

For instance, if you die without a will, the intestacy laws will rule on issues ranging from the guardianship of your children to the dividing of your estate. If you write a will now, you can regain control and relax, knowing that the right people will receive your assets after you die. 

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.

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Phil Clerkin51% of adults don’t have a will. Here’s why it should be a priority task
A couple talking to a financial planner.

4 valuable ways a financial planner can help you tackle “overwhelming” pension information

by Phil Clerkin on March 30, 2023

Do you find pension information confusing? You’re not alone; 50% of people in the UK describe the information they receive about their pension as “overwhelming”, according to a Standard Life study.

Fortunately, there are places where you can seek guidance or advice. The survey found 83% of people think financial advisers offer useful support.

If you’re not sure if your pension is on the right track, a financial planner could help put your mind at ease. Here are four reasons why. 

1. A financial planner can cut through jargon

Pension information can be filled with jargon that makes it difficult to understand exactly what it is saying. 

From “annuities” to the “Tapered Annual Allowance”, a financial planner could help you cut through confusing terms and take the time to explain what they mean and, more importantly, whether they’re relevant to you. 

Having someone you can turn to for answers that you know you can rely on is invaluable. 

2. A financial planner can help you make sense of pension statements 

Your pension provider will provide a statement each year; this may come in the post or be online.

It will cover pension contributions, including your own, those made by your employer, and tax relief. These figures can help you understand how much is going into your pension.

As your pension will usually be invested, the statement is likely to include investment performance too. As investments can be volatile, it can be difficult to know whether your investments are performing well or not, and it’s also essential to ensure they match your risk profile and goals. As financial planners, we can help you get to grips with pension investments. 

In addition, your pension statement will include a forecast. This is a projection based on assumptions that the provider makes, including your retirement date and investment performance, so it’s not a guarantee. 

The pension forecast can be incredibly useful when thinking about how your savings will add up to deliver a retirement income. But understanding if it’s “enough” is another challenge. 

3. A financial planner can help you calculate if you’re saving “enough”

Calculating how much you should be saving into your pension can be complex. There’s no one-size-fits-all figure, so you’ll need to consider your circumstances and goals to understand what is “enough”. 

Not only will you need to calculate potential investment returns, but also the income you need to create the retirement lifestyle you want. As a result, setting a pension target often means pulling together different pieces of information, from life expectancy to other assets you’ll use to create an income, like savings. 

A financial plan can help you understand what is “enough” for you to retire on, and, importantly, the steps you can take to reach the goal. With a clear blueprint, you’re more likely to retire with enough savings to live the lifestyle you want. 

4. A financial planner can create a plan that means you can enjoy retirement

A financial plan can help you get the most out of your money, and allow you to really enjoy your retirement. 

There’s strong evidence that taking control of your finances could boost your wellbeing. In fact, 93% of people that planned for retirement with an income of less than £20,000 say they are enjoying life after giving up work. However, only 66% of people that didn’t plan could say the same.

Despite this, 7 in 10 people are doing very little, if anything, to plan for their retirement.

So, arranging a meeting now to create a plan for when you give up work means you’re more likely to enjoy the next stage of your life. It’s never too soon to start retirement planning, and doing so earlier could grant you more freedom in the future. 

Contact us to talk about your pension

If you want to talk about your pension and start thinking about what it means for your retirement, please contact us. We’ll work with you so you can have confidence in your retirement savings and look forward to the milestone. 

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future results. 

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts.  

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Phil Clerkin4 valuable ways a financial planner can help you tackle “overwhelming” pension information
A father with his young daughter sitting on his shoulders.

Estate planning: Do you need to include Inheritance Tax?

by Phil Clerkin on March 30, 2023

Inheritance Tax (IHT) can affect what you leave behind for loved ones. It’s essential you understand if it’s something you need to think about, as there could be steps you can take to reduce a potential bill.

Over the last few months, you’ve read about what estate planning is and how to calculate the value of your estate. Mitigating an IHT bill should be an important part of your estate plan if you could be liable for it. Read on to find out when IHT is due.

The standard rate of Inheritance Tax is 40%

With a standard rate of 40%, IHT could substantially reduce the value of what you leave behind for loved ones. According to HMRC, around 3.76% of estates pay IHT.

IHT is a tax on your estate after you pass away if the total value exceeds certain thresholds. There are two allowances that you could use:

  1. If the value of your estate is below the nil-rate band, your estate will not be liable for IHT. For the 2023/24 tax year, it is £325,000. 
  2. Should you leave your main home to your children or grandchildren, you may also be able to use the residence nil-rate band. For the 2023/24 tax year, it is £175,000. 

As a result, you could leave up to £500,000 before IHT is due.

You can also pass on unused allowances to your spouse or civil partner. So, if you plan as a couple, you could leave an estate valued at up to £1 million before it’s liable for IHT. 

The portion of your estate that exceeds these allowances is usually taxed at 40%.

Let’s say you leave behind assets worth £600,000 to your child, including your main home to take advantage of the residence nil-rate band. The first £500,000 can be passed on without being liable for tax. However, there would be a tax charge of £40,000 on the £100,000 that exceeds the allowances. 

You should note both the nil-rate and the residence nil-rate band are frozen at the current level until April 2028. While the value of your estate is below the threshold now, will this still be the case in five years?

To plan effectively, you should consider how the value of your estate could change. 

A plan is essential if you want to mitigate Inheritance Tax

There are often steps you can take to reduce a potential IHT bill. Creating a plan now could mean your loved ones inherit more of your estate.

There are lots of steps you can take to reduce IHT during your lifetime, including: 

  • Gift assets during your lifetime. You could support your loved ones by gifting assets now or during your lifetime. However, keep in mind that only some gifts will be outside of your estate for IHT purposes immediately. Others may still be included when calculating IHT for up to seven years. Contact us to discuss how to gift to reduce IHT liability now. 
  • Place assets in a trust. Placing assets in a trust could mean they are outside of your estate and, in some cases, you may still be able to benefit from the assets. You will need to name a trustee that will manage the assets on behalf of your beneficiaries. Trusts can be complex, especially if you need to consider IHT, so professional advice can be useful. 
  • Leave some of your assets to charity. This could bring the value of your estate below the IHT threshold. If you leave more than 10% of your entire estate to charity the IHT rate will fall from 40% to 36%, which could lower the bill for some families. 
  • Keep the value of your estate below the IHT threshold by spending. Make the most of your later years by spending more – it could mitigate an IHT bill if it brings the value of your estate below the threshold for paying IHT. 

There may be other things you can do too. Contact us to create a tailored estate and IHT plan.

As well as steps to mitigate IHT, you may also want to create a plan for paying a bill. This could include setting money aside so it’s there when your family need it.

Another option is to take out a life insurance policy. You’d need to pay premiums and the policy proceeds could give your family the cash they need to cover an IHT bill.

You must ensure a life insurance policy that’s intended to cover IHT is written in trust, otherwise, the payout will be considered part of your estate when calculating IHT. 

Contact us to talk about your estate plan and Inheritance Tax 

If you’d like help understanding if your estate could be liable for IHT, or you want to discuss your options to potentially reduce a bill, please get in touch.

While estate planning often focuses on organising your affairs to pass on assets when you die, it can also cover steps to improve your long-term financial security. Next month, read our blog to discover what steps you could take to make your later years more secure. 

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate estate or tax planning. 

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Phil ClerkinEstate planning: Do you need to include Inheritance Tax?
British chancellor of the Exchequer, Jeremy Hunt, arriving for a Cabinet meeting

Your spring Budget update – the key news from the chancellor’s statement

by Phil Clerkin on March 15, 2023

On Wednesday 15 March 2023, chancellor Jeremy Hunt presented his spring Budget.

Focusing on the government’s aims to halve inflation, reduce public debt, and boost economic growth, Hunt delivered his first official Budget alongside the latest economic and fiscal outlook from the Office for Budget Responsibility (OBR).

“Despite continuing global instability, the OBR report today that inflation in the UK will fall from 10.7% in the final quarter of last year to 2.9% by the end of 2023.”

Hunt opened his speech by admitting that, in the autumn, the government “took difficult decisions to deliver stability and sound money”.

Today, he promised “a budget for growth”.

“Not just growth from emerging out of a downturn. But long-term, sustainable, healthy growth that pays for our NHS and schools, finds good jobs for young people, provides a safety net for older people […] all whilst making our country one of the most prosperous in the world.”

Here are the key points of the spring Budget, and what they might mean for you.

Encouraging early retirees back into work

Jeremy Hunt’s primary focus with his spring Budget is to encourage Britain back to work. Around 7 million working aged adults are classed as “economically inactive”. Of these, more than a million people have taken early retirement.

To address this issue and to stop pension limits “from acting as a barrier to remaining in work”, the chancellor announced increases to pension allowances and abolished the Lifetime Allowance.

Pensions Lifetime Allowance abolished

Following conversations with senior doctors in the NHS and other experienced professionals, the pensions Lifetime Allowance (LTA) has been abolished.

The LTA is the maximum amount of tax-efficient pension savings you can accrue in your lifetime and includes the total value of your pensions, including your contributions, your employer’s contributions from your workplace pension, tax relief, and investment returns.

From April 2023, there will be no limit on the amount of tax-efficient pension savings you can accrue.

Pensions Annual Allowance increased

The chancellor announced that the Annual Allowance will increase from £40,000 to £60,000 from 6 April 2023.

The Annual Allowance is the amount that you can save into your pension each tax year (6 April to 5 April) while still being able to benefit from tax relief. In the 2023/24 tax year, this will now be £60,000.

Money Purchase Annual Allowance to increase

Another useful incentive to encourage experienced people to return to work, the chancellor announced an increase to the Money Purchase Annual Allowance (MPAA).

The MPAA limits the amount of money you can save tax-efficiently into your pension after you have started drawing flexibly from your defined contribution pension savings.

The MPAA will increase from £4,000 to £10,000 from April 2023.

Tapered Annual Allowance to increase

From April 2023, the minimum Tapered Annual Allowance will increase from £4,000 to £10,000. The adjusted income threshold for the Tapered Annual Allowance will also be increased from £240,000 to £260,000 from 6 April 2023.

These announcements have increased the amount people can put aside for their pensions

In abolishing the LTA and increasing the Annual Allowance, MPAA, and Tapered Annual Allowance the government has increased the amount people can put aside for their pensions each year and save over their lifetime, all while minimising tax. The hope is that this will also dissuade people from retiring early.

Savers and investors see key subscription limits frozen

The annual subscription limit for adult ISAs will remain at £20,000.

Junior Individual Savings Accounts (JISA) and Child Trust Fund accounts will also remain static at £9,000.

No changes to planned Corporation Tax rises, but a new incentive to invest

From April 2023, Corporation Tax will increase from 19% to 25%. In acknowledgement of this move and to limit the impact of the increase, Hunt will allow businesses to offset 100% of investments in infrastructure and factory and machinery assets against profits for tax purposes.

The full force of this tax rise will hit those businesses with profits exceeding £250,000. Meanwhile, companies with profits of between £50,000 and £250,000 will get marginal relief.

For those with profits of less than £50,000 there is no change. They will continue to pay Corporation Tax at 19%.

Plan for business growth

As part of the Treasury’s plan to stimulate the UK’s sluggish economic growth and to spur regional activity outside London, up to 12 successful investment zones will receive funding of £80 million each over five years. This money can be directed towards tax relief for businesses, training, and infrastructure.

Eight places in England have been shortlisted to host investment zones. These are:

  • East Midlands
  • Greater Manchester
  • Liverpool
  • North East
  • South Yorkshire
  • Tees Valley
  • West Midlands
  • West Yorkshire

A further four zones will sit across Scotland, Wales and Northern Ireland.

Energy price guarantee extended

The energy price guarantee (EPG) that limits the typical annual bill to £2,500 has been extended.

The EPG had been due to change in April, with the ceiling increasing to £3,000 a year, but now the present level will remain for a further three months, until the end of June 2023. Hunt said: “This temporary change will bridge the gap and ease the pressure on families, while also helping to lower inflation too.”

The chancellor added, “This measure will save the average family a further £160 on top of the energy support measures already announced.”

Fuel duty

As petrol and diesel prices continue to be volatile, the chancellor announced continuing support for households and businesses by extending the temporary 5p fuel duty for a further 12 months.

“That saves the average driver £100 next year and around £200 since the 5p cut was introduced,” Jeremy Hunt said.

This one-year extension will cost £6 billion.

Draught Relief

In good news for beer drinkers, Hunt announced that he would “significantly increase the generosity of Draught Relief”. From 1 August, the duty on draught products in pubs will be up to 11p lower than the duty in supermarkets.

As the chancellor said, “British ale may be warm, but the duty on a pint is frozen.”

Get in touch

If you have any questions about how the spring Budget will affect you and your finances, please get in touch.

All information is from the spring Budget document and the government’s spring Budget bulletin.

The content of this spring Budget summary is intended for general information purposes only. The content should not be relied upon in its entirety and shall not be deemed to be or constitute advice.

While we believe this interpretation to be correct, it cannot be guaranteed and we cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained within this summary. Please obtain professional advice before entering into or altering any new arrangement.

 

 

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Phil ClerkinYour spring Budget update – the key news from the chancellor’s statement

Your guide to pension consolidation: The pros and cons you need to know

by Phil Clerkin on March 14, 2023

Do you have multiple pensions? It could make it difficult to manage your pension savings during your working life and when you retire. In some cases, consolidating them could be beneficial.

This guide explains what you need to know about transferring your pension savings, so you have fewer pots to manage. It could help you feel more in control of your retirement and, in some cases, reduce the amount you’re paying in fees.

However, there are reasons why consolidating your pension may not be right for you, including:

  • You have a defined benefit (DB) pension
  • Your pension has additional benefits
  • You may need to pay an exit fee
  • You could benefit from using “small pot” privileges. 

Download “Your guide to pension consolidation: The pros and cons you need to know” now to read more about pension consolidation and understand if it could be the right decision for you.

If you have any questions about your pension or retirement, please get in touch.

read more
Phil ClerkinYour guide to pension consolidation: The pros and cons you need to know

Disclaimer: The information provided in our website blogs is accurate and up-to-date at the time of writing. However, please be aware that legislative changes and updates may occur after the publication date, which could potentially impact the accuracy of the information provided. We encourage readers to verify the current status of laws, regulations, and guidelines relevant to their specific circumstances. We do not assume any responsibility for inaccuracies or omissions that may arise due to changes in legislation or other factors beyond our control.

If you would like any clarification, or have any questions, please get in touch.

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