5 essential money lessons that could improve your child’s financial independence
by Phil Clerkin on May 12, 2023
Received an inheritance? Here’s why you should consider boosting your pension
by Phil Clerkin on May 12, 2023
4 essential Budget announcements that could boost your pension
by Phil Clerkin on May 12, 2023
Estate planning: 3 crucial steps that could protect your later years
by Phil Clerkin on May 12, 2023
Financial wellbeing: 4 steps to creating a financial wellbeing plan
by Phil Clerkin on March 30, 2023While 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:
- Understanding the sources of happiness that are true for everyone
- Understanding what makes you happy
- Creating a clear path to your objectives
- 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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Investment market update: March 2023
by Phil Clerkin on March 30, 2023As 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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6 helpful ways to keep yourself active during retirement
by Phil Clerkin on March 30, 2023A 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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What does the multiverse theory have to do with cashflow modelling? Find out here
by Phil Clerkin on March 30, 2023Financial 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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51% of adults don’t have a will. Here’s why it should be a priority task
by Phil Clerkin on March 30, 2023The 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.
read moreDisclaimer: 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.
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