When Interest Rate Rises Loom, Remortgages Boom

If you read October’s Efficient Wealth Update, you may remember that we spoke about potential interest rate rises in 2022. In the world of mortgages, these predictions are already spurring borrowers into action, with figures from September already indicating that remortgage instructions have increased by 50%.

With the potential of higher monthly repayments looming on the horizon, it will also come as no surprise that more and more borrowers are also fighting to secure longer-term fixed rates, with over half of all remortgagors opting for 5-year fixed term options and two-fifths of remortgagors fixing for 2 years.

Another trend that emerged in the September findings was that nearly 45% of those looking to remortgage took the opportunity to increase their loans by an average of £21,584 and nearly a quarter of remortgagors sought new deals so that they could release equity (perhaps a reflection on the recent surge in divorce rates).

So, whether borrowers are looking to pay less, secure a lower rate, release money to pay off an ex-spouse, or simply to provide some more financial security following a turbulent and testing 18 months, lenders have been inundated with applications and processing times have been severely impacted.

For our clients, if your fixed-rate term is drawing close, or if you are unsure what the best type of mortgage is for your needs, we strongly encourage you to start your search earlier than perhaps you usually would. Whether you are simply looking for a better deal, or if you need to keep your monthly costs down, the general guidance is that the sooner you begin the remortgage process, the better your chances are of securing a good deal.

If you would like to assess what the best option is for you, we would be delighted to help. Please get in touch for a free consultation with our expert Mortgage Adviser by calling 01572 898060 or emailing [email protected]

Leaving a Legacy through Asset Protection

Why do we want to build wealth? Is it so we can buy plush homes, drive fast, sleek cars or sun ourselves in exotic climes? Or is actually for a far more personal reason: So that we can give our loved ones a comfortable, secure and enriched life?

For some people, filling our lives with exotic holidays, plush homes and sleek cars is a key motivation to make money; however, most of us also want to help those who we love by leaving behind a legacy that will give them the best start in lives, or enable them to continue to live out their lives with confidence and certainty.

But is just making money enough to guarantee this?

To help bring some clarity, clear-cut answers and confidence to this topic, we have teamed up with leading lawyer Jane Cowley who is a partner and family law specialist at Geldards LLP- a national legal practice with offices in Derby, Nottingham , Cardiff and London.

Taking place on Wednesday 24th November at 1000, our free webinar will show you how to:

• Avoid hefty Inheritance Tax Charges.
• Ensure that your house and capital are protected against third-party risks
• How to protect your legacy in the event of relationship breakdown or relationship changes within your family.

If you would like to learn more, or book your place, please click here

Passing on the Pension

The use of a pension pot as a tax-efficient way to pass wealth to family and loved ones without them incurring an Inheritance Tax liability has become fairly commonplace, and although we wish you a long life, should you die under the age of 75, your beneficiaries may not be liable for any Income Tax on future withdrawals from that pot. This is because, under current rules, if you die before the age of 75, you can pass on defined contribution personal or workplace money-purchase pensions to loved ones free of Income Tax or Inheritance Tax, provided payment is made within two years of death.

These make for attractive tax benefits indeed, but ones that Mr Sunak might just be targeting as part of his mission to re-coop government spending on Covid-19 bailouts. Currently, there is no Inheritance Tax liability at any point on pensions, even if the total value of your estate exceeds the nil-rate IHT threshold – making pensions a very tax-efficient way to pass on family wealth - although worth noting people typically cannot pass on defined benefit "final salary" pensions on death, unless schemes have specifically made provisions for spouses and dependents.

Carl Emmerson, deputy director at impartial think tank the Institute for Fiscal Research, has attacked pension tax breaks as "indefensibly generous" and "very, very beneficent", calling for them to be reviewed. In his opinion, he stated, it was "unfair" to allow families to use their pensions to pass on wealth free of IHT, when they are primarily designed to save for retirement.

Earlier in the year, the chancellor froze Inheritance Tax allowances for five years. A move that will boost HMRC revenue as asset prices and estate value increase. Should the chancellor make moves to charge IHT on pensions the response by many will be highly negative, and risks de-incentivising future generations from saving into their pensions in the first place.

Simple Isn’t Always Sufficient

Several Solicitors took part in ‘Free Wills Month’ during October. An initiative providing free drafting or amending of simple Wills. However, whilst a simple Will might be a good option for some (in particular those with very straightforward circumstances or limited assets) for the vast majority of people, their simplicity is simply not appropriate.

In seeking out the simple solution many turn online, where it is estimated that around 5% of all UK Wills are written - about 60,000 Wills per year (although it could as high as 150,000 over the last 18 months as a result of the pandemic focusing minds on the future).

Independent research firm Funeral Solution Expert identified that 65% of UK consumers who believe their affairs are simple, actually have much more complex needs when it comes to their Will and that the prequalification criteria of online Wills might be missing some of these vital needs.

Michael Culver, Chairman of Solicitors for the Elderly commented further on the findings related to some online Will providers, stating:

“It’s shocking that whilst solicitors are required to have professional indemnity insurance covering claims potentially as high as £2m or £3m (and many firms go for optional additional cover that can take this as high as £10m per claim), other professionals offering wills limit their liability to the cost of the will. £200 compensation doesn’t seem sufficient to cover a mistake that could end up costing someone their entire estate or inheritance.”

Your ‘typically family unit’ no longer exists, we live in a time of high divorce rates, long-term co-habiting, step-parenting and remarriage. This diversity builds complexity, and whilst the best case would be every household in the country having a Will in place, the Will must be carefully considered to ensure wishes are carried out as originally intended.

Inheritance Tax boost for HMRC

HMRC figures released on September 21st revealed a £700m annual increase in Inheritance Tax Receipts from April to August 2021, hitting £2.79bn for the period. The increase follows on from Chancellor Rishi Sunak's move to freeze the nil rate band in last year's Spring Budget. Other contributing factors to note might include estate values having risen as a result of strong investment returns, a continual rise in property values, and sadly, an increase in the average number of deaths of those within the 60+ age bracket at the hands of Covid-19.

It was in March, Rishi Sunak announced that both the nil rate band and residence nil rate would remain frozen at existing levels until April 2026, at £325,000 and £175,000 respectively, meaning many families are already receiving increased IHT bills due to rising property and share prices. Having been tasked with forming a plan to recoup massive Covid-19 related government spending, the increase in Inheritance Tax receipts will likely be a very welcome source of additional revenue for Mr Sunak.

For those with a potential tax liability, estate planning options such as making regular gifts, investing tax-efficiently, or considering the use of Trust planning, could potentially eliminate the risk of any tax bill.

No doubt, the Autumn budget will reveal where the Chancellor has bigger fish to fry, but this one is certainly worth watching and planning for, particular at a time when the Prime Minister seems to be leaning towards a range of measures to bring revenue into the treasury, as demonstrated in his recently announced new health and social care levy.

Charlie’s Mini Blog

I recently watched an interview with the founder of Netflix on TED. He talked about how they started as a business shipping DVDs to people’s home, then progressed to streaming other people’s content to where they are now one of the largest creators of original content. This transformation has been astonishing and quick, and when you compare it to Blockbuster video, who used to have a store on every high street, it has been devastating. Kodak is another example that sprung to mind. They invented the digital camera, but it was their refusal to embrace it that ultimately cost them the business.

It got me thinking about financial services. As a small business it has been impossible for us to access the best technology, and this has both hampered our growth, hampered our service quality and increased our costs. The companies with deep pockets, usually backed by private equity, can afford to invest heavily in their technology and systems which puts them at a massive advantage in the market. Having the best technology means you put more power at the fingertips of the consumer, allowing them to create a more tailored service. Whether its watching tv or shopping on Amazon, a technology experience that removes barriers is the future of all industries, and financial services is no different.

Think about how you bank now compared to 20 years ago. I honestly can’t remember the last time I stepped inside a branch, and almost never even have to speak to anyone over the phone as I can do almost everything myself online. Financial advice may not get this far for some time, but a hybrid approach is already here - hence us wanting to partner with the leading provider of technology, True Potential.

Henry Ford once said that if he’d asked his customers what they wanted, they would have said a faster horse and cart. What they needed however, was a car. We believe that partnering with True Potential, the creator of the market’s leading technology, will be a massive step forward for our clients, and they can enjoy a fast track to the future of financial planning; one that will continue to evolve, just like Netflix.

The Intergenerational Planning Boom

In a recent survey conducted by analyst firm AKG (October 2021), 54% of Financial Planners said that the demand for intergenerational financial planning has significantly grown in the past year. To compound this further, nearly 9 in 10 Financial Planners expect demand for inter-generational advice to continue to boom over the next 5 years.

But why is involving your children in your financial planning so important? And why do so many of us now want to make our children understand the impact of our own financial strategies?

When it comes to our hard-earned money, you would have thought that many of us would prefer that our children had little to no input in our financial planning decisions! We are living in the age of ‘The Bank of Mum and Dad’, so shielding the details of your wealth from the ever-demanding, cash-ravenous eyes of you ‘adult-children’ seems like the smartest move. However, the inclusion of your dependents in your planning could not only benefit them but could also be pivotal to your financial success.

It possibly won’t shock you to know that the ‘Baby Boomers’ (the generation who were born between 1946 and 1964) are paying out £44 billion each year to their adult children. Young adults are becoming increasingly financially dependent upon their dear, old parents; with 25- 29 years olds being the biggest culprits, demanding up to £2,599 each year to spend on bills, cars and weddings. The ‘boom’ has fizzled out to be replaced with ‘gloom’ in this generation, so it’s time to rekindle the spark and excitement surrounding your wealth.

Education is the best way to help your children. If they are ever to escape the vicious cycle of debt, poor financial choices and impetuous spending, they need to fully understand the impact this will have on their future. Including your children in your financial planning, both at home and at reviews with your adviser, will put them in a strong position in terms of their knowledge and enable them to see the clear benefits of strategic financial planning. It will also enable them to take ownership of the financial responsibilities they have; for both of your futures.

Involvement in planning and financial awareness are the key components in evolving ‘the Bank of Mum and Dad’ into your child’s own successful, financial strategy. In an ideal world, your children will inherit your wealth, so it is crucial that they know how to maximise this gift and reduce the amount of risk they take. It’s also important for your future; plotting out your retirement strategy will give you a much clearer perspective. You will be able to enjoy your hard-earned money much more and realise your retirement goals. Start encouraging your children to take an interest in financial planning; both of you will benefit.

Leaving a Legacy through Asset Protection

Why do we want to build wealth? Is it so we can buy plush homes, drive fast, sleek cars or sun ourselves in exotic climes? Or is actually for a far more personal reason: So that we can give our loved ones a comfortable, secure and enriched life?

For some people, filling our lives with exotic holidays, plush homes and sleek cars is a key motivation to make money; however, most of us also want to help those who we love by leaving behind a legacy that will give them the best start in lives, or enable them to continue to live out their lives with confidence and certainty.

But is just making money enough to guarantee this?

To help bring some clarity, clear-cut answers and confidence to this topic, we have teamed up with leading lawyer Jane Cowley who is a partner and family law specialist at Geldards LLP- a national legal practice with offices in Derby, Nottingham , Cardiff and London.

Taking place on Wednesday 24th November at 1000, our free webinar will show you how to:

• Avoid hefty Inheritance Tax Charges.
• Ensure that your house and capital are protected against third-party risks
• How to protect your legacy in the event of relationship breakdown or relationship changes within your family.

If you would like to learn more, or book your place, please click here

2022 Interest Rate Rise Predictions

Economically speaking, the onset of Autumn has cast a rather bleak shadow over the UK. With fuel shortages, empty supermarket shelves, the end of the Furlough Scheme and the folding of some energy providers, the last few weeks have undoubtedly been a testing time for us all.

Against this backdrop, Andrew Bailey, the Governor of the Bank of England, has done little to assuage our fears. In a recent statement, Bailey warned that inflationary pressures ‘appeared to be worsening rather than improving’ and that ‘a rise in interest rates next year are more likely’. With inflation rates at 3.2% and rapidly creeping towards the 4% mark, and a record-low base rate of just 0.1%, it would certainly appear that a correction will soon be on its way.

Increasing interest rates will release some of the pressure of inflation, but it will also slow the pace of economic growth. Whilst a boost in interest rates may be the news that savers have been praying for over the last few years, for anyone concerned with mortgages, or indeed the country’s post-Covid recovery, this may feel like a coup de gras. But what does it mean for buyers and borrowers?

During periods of inflation, land and property prices tend to rise. And, whilst interest rates are low, lenders are able to offer more competitive mortgage deals. This would indicate that now really is the time to sell or indeed secure a better rate on your mortgage.

But we can almost hear the clock ticking on this period. Now that the Furlough Scheme has ended, there are growing fears that unemployment will rise once again, putting further strain on the economy, and almost force the Bank of England’s hand to increase interest rates and burst the inflationary bubble.

Many experts believe that the landscape for 2022 will become significantly clearer in December of this year (2021), but until then, if you are thinking of selling your property or re-mortgaging, we encourage you to act quickly to try and secure the best prices.

If you would like to speak to our expert Mortgage Adviser, please get in touch by emailing [email protected] or calling 01572 898060.

Charlie’s Mini Blog

On Sunday 3^rd of October, I finally got the opportunity to run The London Marathon. At the start of the year, I set myself a clear goal to run a marathon in under 3 ½ hours and as the year went on, I ran 26.2 miles on a number of occasions, but never got below 3.48, so I knew London was my last chance to hit the goal. I set off at an 8-minute mile pace, which would deliver me in on my targeted time, but with no real idea as to whether I’d be able to maintain it for the duration of the race. Previously, the longest I’d held that was for 13 miles, so to hit my time was going to be a struggle.

Through the excitement of being allowed out and about in London, the euphoria and enthusiasm of the crowd and the inspiration of some incredible runners, after 13 miles I was feeling good. So good I’d got my pace down to 7.40-minute miles. Was I going too fast?

As the race continued, to my astonishment, I was confident I could maintain that pace, and I might blitz the 3.30 target, and I was feeling good. That is until I started to do the comparison of the distance I had run on my watch compared to the distance I still had left in real life. I was having to weave through the crowds, and it seems that has quite an impact on your distance over a marathon. I was knocking out 7.40-minute miles but was potentially going to miss my 3.30 time.

At 23 miles, the point where the marathon fatigue really starts to bite, I realised I actually needed to up my pace to ensure getting to the line on time. Mentally I was too tired to do accurate maths, so I decided it was better just to run as fast as I could, give it everything I had and let nature take its course; and it worked, just. By the finish line I had run 27.12 miles, nearly a whole mile further than the required, and as I fell across exhausted, I could see a time of 3.28.

Elated and exhausted, I considered the result. Had I not set that goal, would I have hit a sub 3.30? My initial theory and calculations had failed me as due to the extra distance, 8-minute miles were not going to be enough, however despite that, the power of setting a clear goal and having complete focus on it, brought it home. My 26.2-mile time of 3.21 was far faster than I thought possible, and I have no doubt hitting the big goal was what dragged me over the line.

So, as we head towards the end of the year, what goals do you need to hit to consider 2021 a success? And what goals can you start to construct for 2022. The more specific and simple they are, the more chance you have of hitting them.

Whilst I originally ran the marathon for SPARKS (now part of Great Ormond Street Hospital), our charity for this year is CALM to help support people affected by and bring awareness to suicide. If you would like to help us support either charity, just check out our JustGiving pages here.

Sparks: https://www.justgiving.com/fundraising/efficient-ltd

CALM: https://www.justgiving.com/campaign/efficientportfolioxcalm

Setting Your Kids Up for Success

I am a firm believer that schools should be educating children on the real ‘truths’ of life: why it’s important to save money, how to afford your first home and how to reduce the risk you take with your money. But if schools are only just starting to adopt this style of education, should you be setting your kids up for success yourself?

By teaching your kids how to manage their money now, you will be giving them a valuable gift. Learning how to budget, save and ultimately grow their money now, will set them up for future financial security (and could mean that ‘the Bank of Mum of Dad’ could become a concept relegated to the history books!)

Understanding Commitments

In adult life we all understand that we have to pay our mortgages, utility bills, tax bills and various other ‘non-negotiables’; however, it can be a shock for our kids when they first move out and suddenly receive a Council Tax Bill or unexpected charge for water. The key here is to be open and transparent with your children about what bills, and costs come out of your bank every month, so that they can understand, ideally from a young age, how much things cost and why it’s so important to set aside money for essentials.

Settings Goals

Money is important in terms of paying for essentials such as food, shelter and heat, but it can also be fun and rewarding too. Encourage your children to sit down and think about something that they really want- whether that’s a new toy, a trip or even their own freedom in the shape of their first flat. Using a visual chart, that tracks amount saved and time to go until they reach their goal, will help to keep them motivated and excited about the reward they are getting closer to each day.

Rewards and Penalties

It is important that your children understand that their hard work, or lack of, can result in either a reward or a penalty. You can achieve this by giving your children pocket money for chores that they do around the home, so that the harder they work, the more they can earn. If you really wanted to teach your children a valuable life lesson, you could even ‘dock’ their pocket money for sub-standard work, but equally it’s important not to demotivate them too much! You could also consider giving your children an ‘earnings statement’ each week, so they can see how their help has paid off, instilling a huge sense of achievement.

Digital Resources

The sooner your children actually start using banking apps or accounts, the more they will understand how money works. There are plenty of free online resources, such as games that teach children about money and some banks now run live virtual workshops, geared specifically towards children under the age of 16.

Efficient Portfolio also have our own free resource called ‘SMART Money’. Written for those just starting out in their financial journey the book empowers people to become free enough to stop work and live out their hopes and dreams. You can download your free copy here: https://www.efficientportfolio.co.uk/smart/

Educating your children about money is crucial to their overall financial security and future success, so the sooner you start, the better off they will be.

Stamp Duty

The full stamp duty holiday came to an end in July, but homebuyers can still benefit from reduced rates.

People have been saving money thanks to the temporary scheme that was introduced because of the coronavirus pandemic.1

Homebuyers have saved thousands of pounds in stamp duty.

The saving was designed to boost the property market which almost came to a standstill when the pandemic first hit.

At the beginning of the crisis, property prices fell for the first time in eight years and the housing market stalled.

But house prices rocketed once the tax break was introduced, with buyers scrambling to save thousands of pounds before the deadline.

Even though the full holiday has now ended, the scheme is being phased out and ends on 30^th September 2021. The stamp duty rate will then return to its normal limit at £125,000 from 1^st October 2021.

The Life Legacy Gift

Death: an incredibly delicate topic, but one that will affect us all. So are you prepared? Will you be able to leave a lasting legacy for your loved ones? And, more importantly, will you be able to fully enjoy your final years?

The ultimate eventually of death is something all of us must face, yet few of us feel equipped to talk about. There are many considerations to make, ranging from the practicalities and administration following someone’s passing, through to leaving a legacy, both in a financial and in a more emotional sense. But where should you start?

From my experience, most of us have two key aims in life: firstly, to give ourselves the best life we can; and secondly, to also create a better life for the people we care most about. At Efficient Portfolio, our overriding ethos is that we want to ‘help people create a better future through inspirational financial planning’, and by that we mean for our clients, our team and our industry. I am sure you are no different; you want to create a better future for yourself, your family and perhaps also your community or industry too.

To help you achieve these aims and more, we have recently published our fourth book called ‘The Life Legacy Gift’. In this book we will show you the practical steps you can take to make this time as painless as possible for your loved ones. We will also provide you with the strategies you can implement now, so you can not only leave a lasting legacy, but live a fulfilled and rewarding life.

The Life Legacy Gift is a way of inspiring you, so that you can consider how to give your life the meaning it deserves, as well as ensuring that you live on beyond your death. The end of your life is a delicate and of course upsetting prospect, however understanding how to make that time as painless as possible for you and your loved ones is crucial, whilst achieving the happy balance of enjoying your life in the here and now. This book It is about leaving a legacy: a gift to those people you care most about.

Life only has context and meaning because of death. But this book isn’t just about your demise; it it’s actually about making the most of life, both now and for generations to come.

Charlie’s Mini Blog

If Dr Sinclair (see book recommendation) is correct in the sense that aging is a disease that we can learn to beat like any other, this could have a huge impact on the way we live our life.

If aging can be slowed or even reversed as he suggests, from a health perspective our society could save literally billions of Pounds from no longer needing to treat other diseases, as many are caused by the aging process. The quality of our later lives could be vastly improved, and our professional lives would also likely change; switching careers maybe several times during our lifetimes, with career breaks rather than hard slog followed by retirement.

From a financial point of view, if we start living beyond 100 (and maybe even 150 in the not-too-distant future), the way we manage our money will also need to change; certainly, lifetime cashflow forecasting will become even more important to ensure you don’t have too much life at the end of your money!

When science and society treat aging as a disease, it has the potential to have a massive impact on so many aspects of our lives, so I encourage you to read his book, consider the actions you can take to extend your own life whilst improving the quality of that life too, but also give some thought on how you can live your life differently, if indeed we can extend our years into the 120’s and beyond!

Our Award-Winning Mortgage Adviser

We are delighted to announce that our new Mortgage Adviser is already an award winner!

Having joined Efficient Portfolio in October 2020, Andrea Harrison is already proving what an invaluable addition she is to our team, as she’s just been awarded Top Adviser 2021 status. This award is a reflection of her dedication in providing clients with the highest levels’ of service, her consistently high standards and expert knowledge. Since joining us, Andrea has continued to receive excellent client reviews, which is something she is extremely passionate about.

Andrea has worked within the mortgage industry since 2016 and ran her own mortgage and protection business, before deciding that an employed role would give her a more suitable platform to support clients and deliver a higher level of service. Andrea is CeMap Level 3 qualified in providing Mortgage Advice and Practice and has been approved by our regulator the FCA.

We are delighted to have Andrea on board at Efficient Portfolio, as she brings with her a wealth of knowledge and experience, and we have already seen first-hand that she is able to deliver a first-class level of service to our clients.

Andrea is available to discuss all Mortgage related enquiries from First time Buyers, Home-Movers, Re-Mortgages Buy to Lets through to Portfolio and Business lending.

If you have any mortgage requirements, or know of anyone looking for some mortgage guidance, please feel free to contact Andrea on [email protected] or by calling 01572 898060, and she would be delighted to help.

Well done again Andrea- a fantastic achievement!

Will Your Pension Be Sufficient for Your Future?

It will come as no surprise to hear that if you want to have a comfortable and enjoyable retirement, you need to put money aside now. With the State Pension providing a paltry figure, and it’s future hanging in the balance, reliance on this benefit seems a hopeless and misguided gamble. Sadly, many people in this country still believe that the State will sustain them and shirk the notion of saving money themselves, so are they going to be in for a horrific shock in years to come?

Arguably, the introduction of Auto-Enrolment in October 2012 forced the hand of many ‘anti-savers’, so millions more of us are now building nest-eggs for our futures, but will even these pensions be enough? Will the future costs of living, and economic challenges, outstrip the benefit of having a modest pension pot?

In a study conducted by the Pensions Policy Institute (PPI) and Centre for Ageing Better, a stark warning became apparent. The results indicated that more than nine in ten Defined Contribution (DC) savers, like those in auto-enrolment, are at high risk of not achieving their expected retirement income, which of course also implies that if you don’t save at all, your chances are even more adversely impacted. The potentially worst hit emerged as divorced women and singles mothers, those from BAME groups, disabled people, carers, and the self-employed.

But this isn’t a future problem- it’s happening now. The joint report also warned that over 5 million people in their 50s and 60s are running out of time to save an adequate sum for their futures, forcing many to reconsider their retirement age and work much longer, sacrifice their retirement dreams, and accept that they will lead an impoverished later life.

I’m sure you will agree that it’s a terrifying and heart-breaking picture. So what can you do?

First and foremost, if time is on your side- make the most of it! The longer you save, the more you stand to accrue, not just because you will theoretically put more money into your pension, but also because the effects of compound growth have longer to take hold.

Now, that is easy to say to someone who is in their 20s, 30s or even early 40s, but what about people on the cusp of retirement? Thankfully, there are still options, such as personally contributing more to your pension, especially if you are in a work-place scheme. But that isn’t always possible for everyone, so the second option here is to review your pension’s performance, charges and level of risk, to make sure that you are getting the best returns possible, at a level of risk you are comfortable with, and without paying over the odds for the privilege.

However, those tactics aside, the single most important thing you can do is to calculate how much you are likely to need. Aimlessly saving is a disheartening exercise, especially if it transpires that you didn’t save enough. Whilst none of us can predict the future, we can hypothesise it and make an educated and informed calculation.

At Efficient Portfolio, we utilise Lifetime Cash-Flow Forecasting for this purpose, which is available to our clients; however, we have also created a free online tool called the 2 Minute Retirement Plan, which is  accessible to everyone. This quick and easy tool will give you a rough outline of what your future finances could look like and help identify areas where you could improve your finances to get you on track for a secure future. You can use the tool here: https://www.efficientportfolio.co.uk/tools/the-2-minute-retirement-plan/

Ultimately, you need to take your future in your hands. If you are concerned that your pension, or any other savings, will be insufficient for the future, please get in touch. We would be delighted to review your investments and suggest how they could be improved to give you a far brighter and happier future.

Charlie’s Mini Blog

One of the speakers at our industry’s global conference, MDRT, was the highly acclaimed author and speaker, Simon Sinek.  Renowned for his TED talks and books on the power of knowing and communicating your ‘Why’, it was actually his discussion around his most recent book that really resonated with me.

Entitled ‘The Infinite Game’, the book looks at setting infinite goals, both in life and business. For example, instead of setting a financial goal to reach £1m, you’d be better off setting a goal to be financially free. You could reach your £1m goal but fail on the bigger goals like having enough money for the rest of your life, or being able to live the lifestyle that is important to you. A better goal would be to reach and maintain financial freedom, as that means you’ve set an infinite goal that can stand the test of time and changes like inflation, for example.

In business he talks about this being your ‘just cause’. The one thing you are aiming to achieve, despite everything around you. So, what is our ‘just cause’, our ‘infinite goal’ I hear you ask? To help people become healthier, wealthier and happier.

Have DIY Investments Had Their Day?

In years gone by, investing was the preserve of people over a certain age. The thought of researching markets, picking stocks and imparting with your cash were not trends that featured heavily in ‘pop culture’. That is until now.

If you have followed the financial news over the last couple of months, you may know that there has been somewhat of a phenomenon sweeping through our younger generations, namely in the form of ‘The GameStop/Reddit/Robinhood’ DIY-style Investments. Coupled with this, we’ve seen increased enthusiasm from youngsters who are embracing the cryptocurrency boom of the last few years, meaning that more and more, risk-hungry, ambitious under 40s have been playing the Stock Market. But is this a sensible move? Will everything come crashing down?

Firstly, I do think the very fact that younger investors are taking such a fervent interest in their finances is genuinely a positive step forward. Whether it has been driven by the fear caused by the pandemic, or a cultural shift in mindset, by starting to save for the future at a young age means that they are likely to have more wealth without having to work as hard for it. However, the very risky, restrictive and reactive strategy they are taking may lead to a sharp shock.

When it comes to investing, diversification, education and continual reviews are fundamental to anyone’s success. Markets will always go up and down, but a good strategy should be built so that if one area of your investments fall in value, the rest of your investments effectively help to smooth over this drop. By placing all bets on one company, or one stock, you are taking a huge gamble, which could cost you a lot, if not all, of your money. And making these decisions alone will only compound the impact. Ultimately, you only know what you know, and unless you are a financial expert, there are likely to be many holes in your approach.

An investment strategy is not just about picking stocks and shares. It’s so much more. A solid strategy looks at your life’s goals, your future needs and the means you have to achieve your goals. It should also have a degree of diversification and should ideally sit within your own ideological preferences. Your investment strategy should form part of your overall financial plan, which also considers factors such as potential (and indeed very real) taxes, the need for protection and c your tolerance to risk and capacity for loss. In short, simply ‘jumping on the bandwagon’ of a stock that’s on the rise will neither give you future security, nor provide a long-term plan that covers all bases.

The reality is though that this guidance will fall on deaf ears whilst the markets are high; it’s only when stocks start to tumble, or investment decisions become complex do people question if they need professional help. Sadly, if you wait for markets to crash though, it may be too late.

Financial Planning may be regarded as something that ‘older people’ do, but I believe that it’s something that everyone should do. Working with an expert will help you to understand how markets work, how you can protect yourself from risks, and give insight into long-term planning that can help to give you a secure, and predictable, future.

Our younger generation are our future clients, so we want to help to educate and inspire them. To help with this, in 2017 we wrote SMART Money, which can download for free here. This quick-to-read book provides insight into how investments work, how to manage your money and helps to nurture a savings psychology that will help for years to come.

House Prices: Can They Continue to Rise?

When it comes to buying and selling houses, the times we are living in are record setting! According to the Halifax price index, house prices in the UK rose 8.2 per cent year-on-year to £258,204 in April, surpassing the record high of £254,606 recorded in March. But what factors are impacting these exceptional figures, and will they continue to rise throughout 2021?

Why Are Prices High?

For anyone who lived through lockdown in a cramped, city setting, it will come as no surprise to hear that more and more of us are now seeking sanctuary in new homes that offer greater space and that are more suited to our new working patterns. This has of course led to huge demand in the marketplace, where optimal properties are in short supply, in turn, or course, helping to inflate the price of housing.

The Stamp Duty Holiday has also played its part, encouraging more and more of us to take advantage of the reductions available. The impact that this factor has had will of course fade over the coming months, but low interest rates and continued demand will help to keep prices relatively high.

The loosening of restrictions and the successful vaccination programme will also play their part, and it’s anticipated that more and more of us will see the next few months as an opportunity for new beginnings and a chance to ‘start afresh’, be that in new home or even a new part of the UK. Of course, as we awake from lockdown, the economy as a whole should also start to see a much-needed boost over the coming months.

When Will It End?

There is of course no way of predicting how the housing market will perform as we enter the final two quarters of the year. Some schools of thought are being cautious and considering the impact that further unemployment could have, especially once the furlough scheme ends on the 30th September 2021.

Rates are also exceptional at present, which does indicate that they must, at some point, see a correction; however, with interest rates not looking like they are going to shift for some time, many experts believe that house prices will continue to remain high throughout the rest of 2021.

One thing is certain though- if you are looking to sell, now is the time.

If you are looking to move to a new house or remortgage and would like some professional guidance, please get in touch with our Mortgage Adviser, Andrea Harrison, who would be delighted to help you: [email protected] | 01572 898060

Review Your Financial Planning

As we go through life, many of us ‘collect’ a wide array of financial products. Whilst saving for your future is a pivotal step to help you achieve your goals and the lifestyle you want, it can often be counter-productive if you scatter your seeds too wide or if you neglect the plans you’ve cultivated.

So, what should you be reviewing?

1. Investments

As we all know, market fluctuations, tax and a reduction in interest rates can all damage the return on our investments; however, it’s also important to consider how risk can also make an impact. Keeping money in cash may feel like the solution here, but in reality, cash is not riskless, and its value will also fall over time due to inflation, thus reducing your purchasing power and jeopardising your future goals.

So, how can you make your cash work harder and reduce the amount of risk you are exposing your wealth to?

Diversification is key here. Putting all of your eggs in one basket, for example one asset-class, could mean that all of your hard-earned money can be wiped out in one fell swoop. By electing to employ a diversified strategy you may still experience losses on some of your assets, but you could also see gains in other areas, hence your overall performance will be smoothed over time and the impact of losses is greatly reduced. However, it’s crucial to keep your investments continually under review, so that suitable adjustments can be made as required.

2. Pensions

When it comes to pensions, having numerous pots strewn here and there can actually be damaging to your overall objectives. Time and time again we hear the same concerns about ‘untended’ and scattered pensions: it’s hard to keep track of performance; it’s an arduous task to monitor or review what’s in place; there are a multitude of fees and charges; the administration is a burden; and it’s unclear if there are sufficient funds for retirement.

So, what should you do if you’re considering pension consolidation? The first step is to seek expert independent guidance. Pensions can be quite complex and are governed by various regulations, come with differing benefits, and can sometimes be subject to exit penalties. It’s important to look at the pros and cons before you commit to any type of transfer, to make sure it’s suitable or the best available for your specific needs. Pension consolidation may not be appropriate for everyone, but if you are considering a ‘spring clean’ of your pensions, we strongly recommend seeking the assistance of an independent expert.

3. Review Your Estate Planning

Whether you have a Will or a Trust, your life will change over time and these elements of your planning will need to be updated. Whether you have experienced the joy of the arrival of new children in your family, or whether you have sadly experienced loss or divorce, the circumstances of our lives are constantly evolving, so it is important to ensure that your estate planning reflects those changes. Afterall, the last thing you may want is for your former partner and their family to walk away with your wealth after you’ve gone.

Wills, Trusts, and even documents such as Lasting Powers of Attorney, are the backbone to ensuring that your wishes are carried out, and Trusts especially can help to protect your wealth from factors such as tax, divorce and care fees, but the effectiveness of these devices will depend on how up to date they are. This area of financial planning is also subject to continual changes in legislation, such as tax laws, so it is crucial that your planning reflects what is legal, what is suitable for your situation and your wishes.

4. Review Your Protection

Very much like estate planning, your protection needs will change over time. Whether you change your career, health complications transpire, or your overall expenditure increases, or indeed decreases, it is important that the protection you have in place covers your unique situation.

You certainly don’t want to find out that the policy won’t pay out when you need it most, or it doesn’t cover the elements you need it to. Equally, you don’t want to be overpaying for a product that is no longer relevant.

Through continually reviewing your protection, you can gain some peace of mind that you have the most suitable cover for your situation, so that if the worst does happen, you and your loved ones can continue to live with security and comfort.

Charlie’s Mini Blog

Who’d have thought we could become so grateful for the simple things. A couple of weeks ago we were able to host The Efficient Portfolio golf day at Luffenham Heath. Whilst it wasn’t quite in the format we’d have preferred and eating outdoors certainly had a few of us shivering by the time to depart, it was a wonderful thing to be able to return to.

Seeing so many clients on the day, being able to chat over a pint afterwards and sing the virtues of a lovely golf course are all things we took for granted for so long; and hopefully we will again in the future. For now, it is a time to appreciate the little things.

For example, we always start our Monday team meeting with ‘The Best Things’ that have happened personally and professionally in the last week. To hear stories this week of people meeting up with family, drinks with friends in the pub and even a trip to the cinema is fantastic. So, lets revel in the simple things for as long as we can; after all, many of them are also the most important things!

Take a Look Past the Fog

November has been a changeable month to say the least. Take the weather for example; gone are the clear and crisp October mornings, to be replaced with ever-present Autumnal drizzle and fog. But the weather is not the only thing that is unclear: the news, especially surrounding COVID and the economy, have seemed to erred on the side of dismal and obscure.

When it comes to the media’s reporting of current events, recent studies show just 10% of daily news stories focus on ‘good news’, leaving 90% of the reporting we consume taking on a very negative tone. But what has this got to do with your money?

Many investors are using the news as a barometer to gauge when to invest. This does make sense to a degree, but the issue is that it means they are not looking forward and are instead focussing on the here and now. In order to create an investment strategy that enables you to meet your goals, you need to look through the current ‘fog’ and media negativity and focus on the ultimate destination. There will be many bumps along the way, but a good, diversified strategy will help to minimise your losses and smooth over any short-term falls.

To put this into context, Gavekal, a research firm, asked their readers what the most important financial event of 2007 was.  Most of the respondents said the ‘Global Financial Crisis’; however, the most important event was Steve Jobs launching the iPhone, which completely changed the way we interact with the world around us.

Despite the initial boom in Apple shares, they too were hit in 2009, when they fell by 50%, along with the rest of the market. However, since the world has moved on, Apple shares are up 36 times there 2009 low. This just demonstrates that long-term trends will generally supersede short-term losses.

As another example, in 1989, the world was obsessed with the fall of the Berlin Wall, but Tim Berners-Lee had just created the World Wide Web; looking back, which was more important?

Whilst the murky ‘pea-souper’ of COVID-19, Brexit and the US Presidential Election combined have created a feeling of market unrest and turbulence, we must try to see past these temporary blips and look forward to the future.

I doubt many of you are losing sleep over the fall of the Berlin Wall, the Greek Debt Crisis or any other major event over the last 50 years at this point? Whilst it can be scary when you can’t see too far in front of you, temporary, short-term losses now will be a distant memory in the near future.

If you are concerned about your current investment strategy, and would like to assess how better diversification may help to smooth over your temporary losses, we’d be delighted to help.

Our Second Opinion Service

There is an increasing feeling of anger and unrest amongst 60-somethings at the moment, who feel that their lack of planning will cost them their ability to retire. Believing that they would be able to rely on the State, pre-retirees are now faced with 10 more years’ hard labour, and face even more uncertainty in relation to COVID-19. Even those who did put money aside are being faced with complex legislation, disjointed planning and excessive charges that threaten to erode their wealth.  It’s a ‘Baby-Boomer’ crisis!

But it is never too late, as long as you take action. If you don’t want to have a future uncertainty, the prospect of never retiring, or not having sufficient wealth to enjoy your later years, it’s time to detox your finances.

Get on the Right Track with a Financially Fit Plan

If you don’t know where you’re going, how will you ever get there? By deciding on your future goals now, you will be able to assess how much you will need in the future, how much you need to save now, and what actions you could take to safeguard your wealth. If you’ve not got a plan, make one now!

 Utilise a Fitness-Tracker for Your Money

Having a financial plan is crucial to your future success, but you need to continually review how it’s performing. Monitoring your money’s heart rate will mean that you identify the shortfalls and highlight any prospects you can maximise. We would always recommend using a professional to review your finances, as they will be able to use their expertise to identify any issues or opportunities that you may have overlooked or are not even aware of.

Ditch the Calorific Charges

Sadly, many old pensions and investments, especially those spread across a plethora of platforms and managed by advisers who you no-longer work with, come laden with excessive charges and penalties. To counter-act these potentially damaging fees, it is important to review what you currently have and compare your portfolio with alternative options. It may not be suitable for everyone, but it can be beneficial to look at consolidating your investments into a more flexible and diverse strategy, which could help to give you more transparent administration, lower costs and more control.

Flex Your Financial Muscles by Maximising Your Allowances

Tax is a necessary evil in some cases, but make sure you’re not overpaying. Each year, investments such as ISAs and pensions offer investors an annual allowance, which will enable you to save tax-efficiently and make the most of your money. Make sure you understand what is available for you and your personal situation and, if suitable, take full advantage of the allowances available.

We want to help people to clearly see if what they have really is the best solution available. To achieve this, we would like to remind you about our Second Opinion Service, whereby we will offer any potential client you refer to us a FREE Portfolio Review, where we can ‘health check’ their finances to see if there are any omissions, missed opportunities or room for improvement.

If you have any friends or family who are dissatisfied with their current adviser, or indeed feel that they need expert guidance, please email [email protected] or call 01572 898060 and we’d be delighted to shed some light on their financial situation and get their money fighting fit.

A Time to Reflect and a Time to Review

Health has become our most important concern over the last year, but so has our future wellbeing.

For many of us, achieving security and certainty over the future means saving into personal pensions and investments, but how will the threat of a new wave of COVID-19 impact the markets and what could this mean for your future financial security? Will the health of your investments deteriorate? Is there anything you can do to keep them safe?

2020 saw the sharpest fall in stock markets is any of our lifetimes, and whilst this may strike fear into even the hardiest of investor, it actually provides us all with a golden opportunity.

When markets are low, it is the perfect time to review your investments. This may sound counter-productive, but low returns enable us to assess past performance and give us a comparison barometer. Whilst past performance cannot guarantee future returns, it does give us an opportunity to look at what could bolster our portfolios, or what needs to be reviewed.

But what should you be reviewing?

Investments

As we all know, market fluctuations, tax and a reduction in interest rates can all damage the return on our savings; however, it’s also important to consider how risk can also make an impact. Keeping money in cash may feel like the solution here, but in reality, cash is not riskless, and its value will also fall over time due to inflation, thus reducing your purchasing power and jeopardising your future goals.

So, how can you make your cash work harder and reduce the amount of risk you are exposing your wealth to?

Diversification is key here. Putting all of your eggs in one basket, for example one asset-class like UK shares, could mean that all of your hard-earned money can be wiped out in one fell swoop. By electing to employ a diversified strategy you may still experience losses on some of your assets, but you could also see gains in other areas, hence your overall performance will be smoothed over time and the impact of losses is greatly reduced. However, it’s crucial to keep your investments continually under review, so that suitable adjustments can be made as required.

Pensions

When it comes to pensions, having numerous pots strewn here and there can actually be damaging to your overall objectives. Time and time again we hear the same concerns about ‘untended’ and scattered pensions: it’s hard to keep track of performance; it’s an arduous task to monitor or review what’s in place; there are a multitude of fees and charges; the administration is a burden; and it’s unclear if there are sufficient funds for retirement.

Pensions can be quite complex and are governed by various regulations, come with differing benefits, and can sometimes be subject to underhand tactics like exit penalties. It’s important to look at the pros and cons before you commit to any type of consolidation, to make sure it’s suitable for your specific needs. Pension consolidation may not be appropriate for everyone, but if you are considering a ‘spring clean’ of your pensions in the new year, we strongly recommend seeking the assistance of an independent expert.

Times of crisis are a stark reminder that financial planning should be on everyone’s agenda. Money can be the root of worry, but it can also be your ticket to security. Whilst reviewing your pensions and investments after a market shock can feel counter-intuitive, it is often the best time because you can see how resilient your current arrangement were, you could incur fewer charges and tax to move, and you can ensure it is positioned well for a market upturn.

If you would like help reviewing your portfolio, we would be delighted to help.

To book in for a free initial consultation with one of our expert Financial Planners, please call 01572 898 060 or email [email protected]

Charlie’s Mini Blog

In this month’s book recommendation, I talk about the importance of actually thinking about death as part of your Estate Planning. When you head blindly into anything, it usually ends badly, and death is no different. Whilst I wasn’t sure there is a good way to die, David Jarrett’s book definitely changed my view on that.

Estate Planning isn’t just about making sure what you want to happen to your money on the day you die actually does. It is about so much more. It is about making sure that in the event of an illness or an accident, the people that you trust can make the best decisions for you; the decisions that you would have wanted them to make. It’s about making sure that the greatest legacy possible is passed onto the next generation, without being eroded by tax. It is about making sure no one inherits too much money too early in life, and to avoid the son or daughter in-law from hell wandering off with your hard-earned cash. It’s about preserving some of your estate should you end up in a care home, but also making sure there is enough money so that care home can be somewhere you’d actually be willing to see out your last days, week or even years in.

There is so much to think about from a health and finance point of view when it comes to an Estate Plan, but there is much more than that. There are the practicalities of the situation too, like who has spare keys, are key documents locked in a safe no one knows about and where do you keep your passwords for your digital world? How would you pass on your own life lessons and memories so they are not lost forever, and how can you ensure your future generations benefit from the aspects of life that you love the most?

There is a lot to consider when it comes to death. Clearly, it is always going to be a difficult time for the people around us, but creating a Plan can ensure that the experience is less stressful for everyone concerned, as well as ensuring that you can create a legacy that lives on long after you are gone.

Monte Carlo or Bust?

Monte Carlo conjures up images of sunshine, casinos, super yachts and fast cars.  An exciting pocket of wealth in the south of France, where the rich flock in the summer months to flaunt their wealth, drink rose and swim in the crystal-clear Mediterranean Sea.

However, there is another Monte Carlo, an analysis, that we use in financial planning, which one online resource describes as a ‘computerized mathematical technique that allows people to account for risk in quantitative analysis and decision making’.  I think you’ll agree this sounds far less sexy!

For many in retirement, knowing just how much they can draw from their pension every year and still know that the funds will last a lifetime is a hard decision to make.  Draw too much, too early and you risk running out of money.  Spend too little and you risk unwittingly missing out on the dreams you hold dear, which are potentially affordable.  The likelihood of the success of your plan will depend upon the returns generated by the portfolio, your individual spending habits and assumptions around inflation.  It’s here that the Monte Carlo Analysis can really help; it will run a series of simulations over your financial plan, using random market movements, to provide you with a percentage chance of your financial plan’s likely success.

This will help inform your plan: a low probability will signal that you should possibly try to save more now, or spend less to elevate your chance of success.  Or perhaps your chances of success are already high, in which case maybe you can start planning your next holiday alongside the high-rollers in The Provence.

Make Your Money Work For You!

Whilst there have been many side effects of the pandemic in recent months, one of the upsides has been that it has caused the savings rate in the UK to significantly increase.

Between April and June, the percentage of disposable income saved by households in the UK rose to an all-time high of 29.1%. Since the millennium this has fluctuated around 5-10% a year with the previous record of 14.4% set 27 years ago.

This is both an inability to spend money, creating a nation of accidental savers but also and increasing caution given the pandemic.

Whilst it’s important to keep enough cash for emergencies, too many people will be hoarding cash and focusing on the short term. With increased government spending this should lead to higher inflation moving forward, but even if it remains at the usual circa 2% level it will have a negative effect on your money.

Interest rates have fallen even lower and many institutions have cut their rates from historically low levels to even lower. There is even talk of the Bank of England moving to negative rates.

With all that cash sat on the side-lines there is likely to be increased expenditure as and when we leave the limbo state we now find ourselves in. Given we can’t time the market it’s better to put our excess money to work now to make sure we are not too late to the party once the spending taps come back on.

If you’ve found you have more cash in the bank than you expected now is a good time to talk to your adviser about how to enter the market in a safe way, and perhaps benefit from the volatility that lies ahead by investing on regular basis over the coming weeks or months.

Are your finances ready for the second wave?

As we try to avoid a second round of Covid-19 and another potential lockdown, are we prepared for the potential financial effects if it happens?

One of the most important things we learned from the first round of Covid-19 was the necessity of having an emergency fund. As we were all affected so unexpectedly, and to an extent we may never before have experienced, the requirement for accessible and 'safe' funds on deposit became essential, especially at a time when markets across the world fell.

It is recommended to keep 6-9 months expenditure on deposit in an easy- access account. If you do not currently have this in place, it is time to think about how it could be achieved.

There have been reports that parents have had to dip into savings they have put aside for their children's future just to see them through these tough times, most likely because they did not hold a sufficient buffer of emergency funds. On average each family needed to reclaim £700 from children's savings accounts, which amounts to £17m for every day we were in lockdown - all of which was used for day-to-day necessities.

By structuring your finances correctly and ensuring you have a robust emergency fund, these situations can be avoided. The pandemic has been a reminder that the worst-case scenario can become a reality and we should plan accordingly. If you need help or advice rearranging your finances, let us know and we can help put a plan together to give you peace of mind in this time of turmoil.

Client Education Webinar: Protection Planning

At Efficient Portfolio, we believe that protection is one of the most important, yet neglected, areas of financial planning and it’s something we are passionate about improving.

We will be hosting a free educational webinar for our clients on Thursday 12th November at 6.00pm.

During this online event we will help to clarify the solutions and identify the best types of protection for your specific needs, whether you are a business owner, retiree or have a young family.

To book your free place, please contact us on 01572 898060 or send an email to [email protected].

Charlie’s Mini Blog

I should currently be in Scottsdale Arizona at the Top of the Table conference for the top financial planners from around the world. Instead of sunshine, swimming pools and golf courses to enjoy in between inspiring talks from some of the world’s best speakers, I get to make my own tea, run with the Nala (our dog) in the dark and drizzle, and accept Amazon deliveries at the door. Life in 2020 isn’t quite as much fun, but then it is all about where your focus goes. I could wallow in the loss of an amazing and inspiring trip, or I could be grateful for what it has given me.

Instead of flying to the US for my business development fix, I have got to access these incredible speakers and to interact with my colleagues far more efficiently. Thanks to rapid advances in the technology, in some ways I am gaining more from the conference than I do when I am on site. There is no jet lag, no lost days travelling and no hangovers either, although I can’t decide whether that’s good or bad! Furthermore, I’d have been arriving home halfway through Ffion’s 14th birthday and missing the start of our family Cornwall holiday; all of which can now be enjoyed to the max. So, as long as we focus on what we do have, we can function effectively even under semi-lockdown.

The same applies to getting your finances sorted. There is no reason to hold off if we use the technology effectively to interact. It isn’t as good as being face to face, but it is pretty close if used well, and we are getting a lot of practice as to what that looks like. This could be the new normal for quite some time to come, so don’t let it stop you getting on and doing what’s important.

The US looks to be a similar picture. The below shows the S&P500, the US’ largest companies’ stock prices.

Given COVID-19 has reared its ugly head once more, and we are just entering another round of COVID combatant procedures, one could take the reasonable view the economy will be subdued for some time.

That said, I think we have seen just about as many theories as there are letters in the alphabet and, as the saying goes, economists have predicted 16 of the last 2 recessions, so one must always remember no one has a crystal ball and people view the market in different ways.

So, what can we do about it, irrespective of what the future holds? The answer is diversification. As we can see from the charts above, there can, have been, and will be significant swings in the value of any one market, particularly over the coming years as the world gets to grip with what arguably could be a new version of society. As a result therefore, one must not overexpose themselves to any one particular market, but spread the load as it were, to benefit from the ebbs and flows of each, ultimately providing a smoother outcome and better protection from those sharper downturns in one area.  It should also never be forgotten that in the world of investing the focus should be on the long term, rather than the short term; the secret to long term growth is withstanding short term losses.

Should you have investments that you are worried about, feel free to get in touch with us to have a discussion with one of our Chartered Financial Planners. In the words of Warren Buffet, ‘diversification really is the only free lunch’.

Tax free cash-less?

For as many years as I can remember, pension legislation has been strapped to the dart board before any upcoming Budget speech, with its tax reliefs and efficiencies up for grabs by the Chancellor of the Exchequer.

To very briefly summarise, investors benefit from proportionate tax relief by paying into pensions, tax free growth within them, and 25% of the pot available free from tax upon retirement which has been commonly referred to as the ‘tax free cash’ portion of the pot. Pension assets are also free of inheritance tax upon death too, making them a very formidable way in which to hold your money.

Each year, the Chancellor delivers their primary Budget in October, where the government’s fiscal plans are laid out to keep the economy and financial system balanced. However, to add another twist to 2020, Mr. Sunak has recently announced such a Budget shall not be delivered this year owing to the extraordinary position the UK economy has been placed in by COVID-19.

To take you on a short journey through pension history, on the 6^th April 2006 there was a major overhaul of pension legislation, so much so that it was even stamped with its very own name, ‘A Day’. We have seen the pension freedoms changes brought about in 2015 however nothing similarly significant since then. As a result, it has been expected some form of change was around the corner.

Given the UK’s level of borrowing has been pumped to the highest it ever has been this year to help keep the country on its feet, it could be  reasonably considered that a more widespread change to taxation is more than likely, at which point, the pension landscape may well be moulded once more; at such a time, perhaps Mr. Sunak will be stripped of his title ‘Dishi Rishi’…

Nevertheless, for now, pensions will continue in their current format as being one of the most tax efficient ways to invest one’s money for their future. By making maximum use of tax breaks offered by pensions you can get to financial freedom much more quickly, so maximise them while you can!

Stuff it under the mattress?

As many savers have known for a long time now, finding a deposit account that pays a decent rate of interest is nigh on impossible.  Since March, the Bank of England base rate has fallen from 0.75% to an all-time low of 0.1%, and murmurings in the press suggest that the Old Lady of Threadneedle Street, might consider cutting them further.  The next move down would be to create a negative interest rate, where you pay the bank interest for them to hold on to your money.  The thinking behind this is that rather than saving your money, you go out and invest (or spend) it, thus giving a boost to the economy.

One immediate effect of this is the lowering of savings rates with the high street banks.  At the start of the year the Marcus Account was offering 1.85% with their easy access account.  As the rates came down, savers flocked to the account and the opening of new accounts has now been suspended because they were unable to keep up with demand.

Another platform that has seen dramatic influxes has been National Savings & Investments.  Most of their accounts have now been reduced to paying just 0.1% interest. Premium Bonds, the lottery style savings account, which allow you to save up to £50,000 with the potential of winning £1 million tax free.  However, the average return for Premium Bonds is being cut in November from 1.4% to 1%, and as it’s a lottery, many will see returns even poorer than this.

Sadly, for savers the outlook is bleak, and there’s no suggestion that keeping your money in cash-based deposits is going to be profitable any time soon.  The only long-term strategy for beating inflation is to invest in the markets through a well-managed diversified portfolio.

Minimum Pension Age Rises

The regulatory and financial landscape is ever changing and so one has to keep on top of their financial plan to ensure that it evolves with them.

Whilst it has been largely acknowledged previously, although the government had failed to confirm it until recently, the minimum age at which you will be able to start to drawing benefits from your personal pension is set to rise.  For those turning 55 after 2028, the soonest you will be able to draw money down in any way from your pension will be when you turn 57, which is two years later than you can currently draw benefits.

Of course this has some benefits; it forces people to contribute for longer towards their pension and provides the pension a little extra time to grow, which will hopefully bolster your pot so you can enjoy a long and prosperous old age.  While we all tend to live for longer, this would seem to be a sensible strategy.

However, for some this will be frustrating as they will have plans already made for retiring as soon as possible and have a financial plan in place to allow them to do just that.  For them, the financial plan will now need to be revisited to make sure they can still achieve their goals and aspirations.  For example, it might mean for some that their pension contributions are reduced, so that they can maximise their ISA contributions.  ISA funds can be drawn on at any stage, and so by building that pot up now, may mean that retirement at 55 might still be possible.

Independent Mortgage Advice

Purchasing a new home, remortaging, or buying a commercial property, can incur many unforeseen costs. For this reason, many people opt to cut out the middleman, in a bid to save some money. But, in most cases, this approach is not as cost or time efficient as you may think we disagree with this approach. So, why should you consider using a mortgage expert over securing your mortgage yourself?

The truth is that using an expert can be invaluable. Mortgages can be far more complicated than you may first think and there are many layers to mortgage planning, which can be overlooked if you go it alone.

Efficient Portfolio are holistic, truly independent, Financial Planners, which means that we look at all areas of your finances to create a complimentary strategy across the board. It is our belief that mortgage advice, whilst being dealt with by a specialist, should closely tie in with your financial planning. This is how we differ from traditional Mortgage Brokers.

Like all aspects of financial planning, it is important to look at the bigger picture, and ensure that all of your ‘cogs’ are working together to help you achieve your goals, which is exactly what our independent experts will provide. Typically, a Mortgage Broker will just advise you about your mortgage; in contrast, our mortgage solution integrates all elements of your plan. For example, we’ve seen people come to us having arranged a 30-year mortgage to keep the costs low, but not realising that they will need to restructure their protection for longer, which significantly increases their costs. We can factor this into their planning, to ensure they are receiving the best solution for their specific needs. They will also look at any related life insurance, payment protection and even buildings and contents insurance you have to make sure that you have the most suitable protection in place. Having a safety net should be the cornerstone of your financial planning, so why risk your most valuable asset?

Over the last few years, the rules governing mortgages have also significantly tightened.  The Mortgage Market Review, in particular, has been designed to ensure that affordability is scrutinised, background checks are far more in-depth and rate increases are reviewed. Understanding these changes, and how they work in practice, means that a mortgage adviser can ensure that you are getting the best possible deal for your circumstances, in the quickest and most-cost effective way.

Very much like using us as your Financial Planner, employing the services of a registered mortgage specialist means that you will be protected, as they have a duty of care to you.  If the recommendations are not suitable for your needs, you will be covered by the FSCS, so you can complain and be compensated. By arranging the mortgage, yourself, this legal recourse is reduced.

An independent mortgage adviser will look for the best mortgage for you from the whole of the market. They aren’t on the lender’s side, they’re on yours, and are able to offer a far wider range of opportunities and choice than if you went direct. A good mortgage adviser will also review what mortgage you have in place, ensuring that your mortgage needs evolve with you over time. They will also ensure that you don’t get stung by the banks’ traditionally high fees, which are especially painful for first-time buyers.

Leaving a Legacy and Dream Retirement Webinars

Join me for 2 exclusive webinars on 8th October - at 10am I will be talking about how you can build a secure and long-lasting future for you and your loved ones in the Leaving a Legacy presentation and at 4pm I will be hosting a Dream Retirement webinar to help you build a secure and fulfilling future.

If you, or someone you know, would like to join either of these free live webinars, let us know which one you'd like to attend by contacting [email protected]

The TRIBEathlon Podcast

I am really excited to be able to introduce you to my new Podcast, TRIBEathlon. In line with an App that we will be soon launching, the TRIBEathlon podcasts aim to get to the heart of how people achieve incredible things in the running, cycling, swimming and triathlon worlds.

During lockdown I have done some amazing interviews with professional athletes, world leading coaches and world record holders, and we are now in a position to start rolling them out. In the first edition, entitled ‘Marathon Improvements’, I interviewed world famous running coach and Olympian, Jeff Galloway, to understand how we can run faster, best utilise the run/walk/run technique (affectionately known as ‘Jeffing’, as this is the man that invented it) and the mental strategies behind getting through the dark moments. Still running a marathon every month in his 70’s, what Jeff doesn’t know about running isn’t worth knowing.

If you like it, please review and share it. There will be many more to come. It should be live in Apple podcasts and the other usual places soon, but for now, this is the best link. All feedback is appreciated.

Charlie’s Mini Blog

At Efficient Portfolio we strongly believe in the power of the team-based approach, so each year we organise an annual team building day.

In previous years this has been everything from learning to make pasta, wakeboarding, hostage rescues and even eating insects as part of the Bear Grylls adventure. Clearly none of these were possible with the current restrictions but not wanting to let that stop us, earlier this month we had our team building day anyway, albeit socially distanced.

In the afternoon we were competing over zoom in Who Dares Wins and having a few drinks.

The morning was taken up with a motivational talk by former professional footballer turned endurance athlete & coach, Luke Tyburski.

One thing that Luke talked about was the power of being grateful- something I talk about in Entrepreneurial Happiness too - but it occurred to me at the time that we are so lucky that we have such a great team at Efficient Portfolio given the current challenges.

Only yesterday I was chatting to someone in the financial services sector that tried to set up their own business just over a year ago, and the COVID headwind has stopped her dead in her tracks.

It has taken 14 years to craft a team of some amazing financial planners, technically minded paraplanners, empathetic client relationship managers and a dedicated team that support them, and so we have been largely unaffected by the COVID fallout. The team has pulled together in adversity, worked effectively and collaboratively from home and perhaps most importantly, supported the clients that depend on us for their financial future.

I am incredibly grateful for the team we have at Efficient Portfolio, and for the processes we have in place that have allowed us to thrive despite the challenges. What are you grateful for that COVID has brought more clearly into focus?

Public-sector pay rise

An above-inflation pay rise of up to 3.1% is to be given to 900,000 public- sector workers, including doctors and teachers. Whilst this is good news in itself, many claim it is not a sufficient reward for what front-line workers have had to endure during this pandemic, nor is it enough to make up for the lack of adequate pay rises in the past.

This pay rise does not apply to nurses or junior doctors as they have negotiated their own separate deals in the past couple of years. It will also not be applied to social care workers as the government has not announced increases to local authority funding.

Underlying what looks to be a somewhat generous offering from the government is the fact that the level of pay for frontline workers is still below the level it was in 2010, after inflation is taken into account. Government departments will also not get any extra funding for these pay rises and so the cost will need to be absorbed by each entity. This will likely result in trade-offs and tough decisions for those departments whose income streams have been the most affected by Covid.

The Chancellor has been forthright about the need to exercise restraint in regard to future public-sector pay awards and has confirmed that tougher decisions will need to be made about the allocation of public funds in the aftermath of the Covid pandemic.

Opinions are divided; whilst nearly everyone is pleased to see an above- inflation pay rise for those workers who saw us through such tough times, there are many who will see this pay rise announcement as an appeasement of public-sector workers. Whichever side you are on, balancing the books in the years to come is going to be one heck of a job, and one I am certainly glad I won't be in charge of!

CGT to be reviewed ... again?

Last month we reminded you about some changes to Capital Gains Tax (CGT) regarding property that were announced back in April.

A new review has now been launched to ensure the system remains fit for purpose in its entirety. It will focus on CGT for individuals and smaller businesses and will cover allowances, exemptions, reliefs, losses, as well as admin and technical issues. There will also be a review of how gains are taxed in comparison with other sources of income - a real belt-and-braces review by the sounds of things!

The cynics amongst us will be smelling a tax rat, as the review aligns perfectly with the need to generate more income for the Chancellor to use in the aftermath of Covid. Meanwhile, the Treasury is adamant that it is standard practice to keep taxes under constant review.

I suppose the money to pay back the big debt the government has been left with (borrowing is set to hit its highest level in peace time!) has to come from somewhere and CGT is likely the main focus, as presently the rate of tax is much lower on gains than on many other sources of income. A potential increase in CGT may be a starting point for further tax reviews and so, in the longer term, may not be the only increase under consideration.

The Treasury has asked for all information to be with them by October 2020, so although we may hear mention of it in the Autumn Budget we may not see any changes. But keep an eye out for what are likely to be big changes in the Spring Budget 2021!

Are LPAs going digital?

 I am sure you all know what a Lasting Power of Attorney (LPA) is so I won't bore you by going over the details again. If you don't know what one is then get in touch with us because it's more than likely you need to get one!

The Office of the Public Guardian (OPG) who registers LPAs has unveiled a new digital service for existing attorneys to enable them to prove their status and their right to act on the donor's behalf to institutions such as banks and healthcare providers. Once an LPA is registered with the OPG, the attorneys and donor will be sent an activation key to allow them to create an online account and add their newly registered LPA. They are then able to generate an access code that can be given to organisations to allow them to view the LPA online and verify the attorney's status. This new system aims to avoid long delays whilst still protecting the donor against any misuse of the LPA.

The OPG will offer the service for any new LPAs registered from 17^th July 2020 but there are plans to backdate this to those registered in 2019. Whilst there are no current plans to backdate it earlier than 2019, if all goes well it is quite possible this will change in the future.

It all sounds fantastic ... if it works! I am sure there will be challenges along the way, with lots of tweaking and head-scratching lessons to be learned, but fingers crossed it will come to fruition and make the lives of those acting as attorneys that little bit simpler.

Stamp Duty takes a holiday

The Chancellor announced a Stamp Duty holiday for house purchases completed as of 8^th July 2020 or later, ending on 31^st March 2021. It will apply to the first £500,000 of main residence property purchases.

Stamp Duty is one of the biggest costs incurred when buying a new house and so the savings could be huge. On a property of £500,000 the savings could be as much as £15,000! The Chancellor has said that an average Stamp Duty bill will fall by £4,500 and nine out of ten property purchases will pay no stamp duty at all!

This incentive is an attempt to give those who were planning to buy, but who may have been financially hit by Covid, the opportunity to go ahead with purchase of a new property. It is also an effort to boost the property market post-lockdown. If you, your children, friends or other family were thinking of moving soon it is worth considering acting now to take advantage of this time-restricted incentive. The Stamp Duty holiday may even make moving home possible when it was not possible before.

Although the markets have picked up since the end of lockdown and in light of Sunak's announcement, they are still down by about a third on last year - this is not unexpected considering the year so far! Hopefully, the combination of this rather generous incentive and the lengthy reflections people may have had about their living situation during lockdown will be enough to get the property market moving and back to the highs of previous years.

HMRC tax gap reduced ... but is it enough?

What HMRC expect to get in tax is never the same as the money they actually receive, but recently HMRC reduced the 'gap' between the two to a record low of £31 billion! To put this in perspective, this is the same amount as the budget for the Department of Transport and Department for Business, Energy & Industrial Strategy combined in the 2018/2019 tax year.

This very substantial gap arises for several reasons including human error, tax evasion, insolvency and criminal attacks. Human error alone accounts for £3.1 billion of missing tax receipts, with income tax, national insurance contributions and CGT the biggest culprits for tax discrepancies.

Whilst HMRC may see this record low as an improvement, it is still a huge amount of missing revenue that could be recycled back into the public sector. In reality, HMRC are likely to come under increasing pressure to reduce this figure further, considering the effects of Covid on the economy. Whether this is achieved by bringing in tougher regulation, simplifying the rules or modernising their systems to reduce errors, I wouldn't be surprised if we hear more about this soon.

Charlie’s Mini Blog

Last week I attended a conference that should have taken place in Scottsdale, Arizona. Watching it from the comfort of my own home did bring a level convenience, but compared to last years event in Miami Beach, I found I definitely learned less. Partly because of the lack of atmosphere/environment, and partly because you can’t interact with people and discuss the content with them as you can in person.

That said, there were some fantastic speakers. On Thursday morning, James Clear was talking to us about the virtues of creating habits. He said “Excellence is not about huge achievements, but about lots of small gains.” It is about getting 1% better every day, not trying to make massive strides in one go.

Habits are the compound interest of self-improvement. If you have good habits, all you then need is time for amazing things to happen. If they are bad habits, time is your enemy because the problem will grow. If you are struggling to improve something, the problem isn’t you, the problem is your system. It is how you are going about the process.

I couldn’t agree with this advice more. It is certainly the secret for me going from not running or swimming since school, to completing an Ironman. Getting up at 5.30 every day to train was the single biggest factor in achieving this. When I look at Strava to see whether my running has improved from last week or last month, it is easy to get disheartened by not seeing progress - sometimes it even looks like I am getting slower! From 1 year to the next however, the gains can be enormous.

It is the reason I have written 3 books, because I created the habit of writing at certain times of the week. It is like trying to eat an elephant; you eat by taking one bite at a time.

The same applies to your finances. If you have good habits (i.e. you have the right type of portfolio, saving a sensible percentage of what you earn or have the right tax saving strategies in place), the plan will be achieved. You may not make a big stride from one year to the next, and some years it might even feel like you are going backwards, but by having the right habits, continually improving them and having a little patience - all of which is much easier with the guidance of an expert - you can create an amazing future!