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Retirement

Your Readiness for Retirement

Evaluating your Readiness for Retirement

Are you sure your target retirement age aligns with your financial status?

In today’s fast-paced world, the concept of retirement often takesa back seat. For many, it remains a distant reality, mired by uncertainties and apprehensions. However, planning for retirement is an essential aspect of financial planning, which warrants attention from an early age.

Retirement is a phase many of us eagerly anticipate, dreaming of the day when we can step away from the grind and immerse ourselves in activities that bring us joy. Yet, the reality of retiring often hinges on financial preparedness.

Let’s delve into four critical considerations to help you evaluate your readiness for retirement.

Envisioning Your Ideal Retirement
The first crucial step towards planning for retirement is identifying what you want yourpost-retirement life to look like. Remember, there’s no universal blueprint for retirement – everyone’s aspirations differ. Some might fancy the idea of relocatingabroad, embarking on globetrotting adventures or pursuing new hobbies. Others might prefer spending more time with their loved ones. A growing trend is the ‘phased’ or gradual transition to retirement, which involves reducing work hours or shifting to part-time roles or consultancy.

The Cost of Retiring
Once you have a clear vision of your retirement lifestyle, it’s time to estimate the associated costs. Broadly, your expenses will fall into two categories: essentials and non-essentials.

Essentials encompass mortgage payments, rent, utility bills, insurance, groceries and gifts for occasions like birthdays and Christmas.
Non-essential expenses revolve around entertainment, leisure activities and holidays – the extras that add zest to life.

Financial advice can assist you in calculating these expenses and estimating the retirement income required to cover them. We can also help you understand how your income needs may fluctuate over time, starting high during the early retirement years, gradually decreasing and possibly increasing again later due to care related costs.

Determining Your Pension Size
Once you have a clear understanding of your post-retirement income requirements, the next step is to calculate the size of the pension that can generate that income. This involves considering factors like life expectancy, investment growth, tax and inflation.

We can help you with these calculations and demonstrate the impact of various scenarios or choices, such as adjusting your retirement income, weighing the advantages and pitfalls of taking your tax-free cash lump sum or changing your retirement age.

Evaluating Your Current Savings
Finally, compare your retirement needs with your current savings. If your savings are on track to meet your goals, it’s time to strategise how to access your money during retirement. If there’s a shortfall in your savings, don’t panic. There are several strategies to boost your pension. You could consider increasing your pension contributions, extending your working years or leveraging other savings and investments.

Combining additional pension contributions, tax relief and investment growth can bolster your pension pot significantly. Additionally, don’t overlook other sources of retirement income, such as Individual Savings Accounts (ISAs) and the State Pension. We can provide a comprehensive view of your assets and potential income sources, helping you make informed decisions.

Preserving Wealth for Future Generations

Starting estate planning early and Implementing it in stages is desirable.

The UK Treasury has been receiving record-breaking Inheritance Tax (IHT) receipts. IHT receipts amounted to approximately £7.09 billion British pounds in 2022/23, compared with £6.05 billion in the previous financial year[1]. For individuals and families who have to pay it, IHT can be emotionally challenging, often requiring the sale of cherished family assets to settle the tax bill. That’s why starting estate planning early and implementing it in stages is essential. Also, having an open conversation about estate planning with family members is very beneficial but depends on family dynamics and wealth levels.

MINIMISE TAX LIABILITIES
However, families should take proactive measures to minimise the possibility of facing a substantial IHT bill. By planning ahead and seeking professional advice, individuals can ensure their assets are managed to minimise tax liabilities. Creating a comprehensive wealth strategy involves considering various factors.

Here are some key points to keep in mind:

LIFETIME CASH FLOW
We can help you assess your assets and income to ensure we support your desired lifestyle throughout your lifetime. By understanding your cash flow needs, we can assist in structuring investments and creating a sustainable financial plan.

LIFETIME GIFTING
Gifting can be a valuable tool in wealth planning, allowing you to reduce a potential IHT tax burden. We can guide you on the various gifting allowances and exemptions available, such as the annual gifting allowance, wedding gifts and gifts from normal expenditure out of income.

TRUSTS
Most trusts offer flexibility and control over how your assets are distributed. They can also help reduce taxes on inheritance. This excludes Absolute Trusts, where control over assets is discretionary. Working closely with us, you can explore different trust options and understand how they can be incorporated into your wealth planning strategy.

PENSIONS
Pensions are important in wealth planning, offering tax advantages and the potential for long-term financial security. We can help you navigate the complexities of pensions, including risk assessment, accessing pension funds and maximising tax benefits.

PROTECTION COVER
Protecting your loved ones in the event of death or illness is crucial. We can advise on selecting the right protection products to provide liquidity for IHT and other associated costs.

BUSINESS RELIEF
Incorporating business relief into your wealth planning strategy can be advantageous if you own a business or have qualifying assets. We’ll help you understand the eligibility criteria and how to leverage this relief effectively.

FINANCIAL CONTROL AND ESTATE PLANNING
Creating a Will ensures that your assets are distributed according to your wishes. Additionally, appointing a Lasting Power of Attorney provides someone with financial control over your assets and peace of mind if you cannot manage your affairs.

Estate planning is not a one-size-fits-all approach. Although there is no requirement to address IHT, proactive planning can minimise the tax burden on families. Seeking professional advice and taking steps early can help reduce the risk of leaving loved ones with a larger tax bill than necessary.

Source data:

[1] https://www.statista.com/statistics/284325/unitedkingdom-hmrc-tax-receipts-inheritance-tax/

Guide to the Principles of Growing your Money

Investing can be an intimidating and complex topic, but it doesn’t have to be with professional financial advice. Understanding the basic truths of investing will help you make better decisions, regardless of how much money you may or may not have.

By understanding these principles, you’ll be one step closer to achieving your long-term goals.

Start investing early
Investing early is one essential way to build wealth. Instead of waiting till you have a large amount of savings or cash flow to invest, the earlier you start investing, the better. This is because of the power of compounding. Compounding is the magical snowball effect that occurs when the pounds you earn through investing generate even more earnings. Essentially, not only does the original amount you invest grow, but also any interest, dividends and capital gains that you accumulate.

And the best part? The longer you are invested, the more time there is for your investment returns to compound. So don’t wait until you have a large sum of money – start investing early and take advantage of the powerful force of compounding. It can help you reach your financial goals more quickly and achieve the financial freedom you’ve been dreaming of.

Investing often is just as important as starting early
Investing regularly is a key strategy that can help you build more wealth over time and achieve this goal. By making investing a priority throughout the year – not just around certain deadlines – you can give yourself the best chance to succeed.

A disciplined approach to investing can help you weather all types of market conditions. Whether the market is rising, falling or staying flat, investing regularly can help you stay on track. With a fixed pound amount invested on a regular basis, you can buy more investment units when prices are low and fewer units when prices are high. This approach can potentially reduce the average cost of your investment over the long term.

Investing small amounts of money on a regular basis can also help you smooth out returns over time and reduce the overall volatility of your portfolio. By avoiding big market swings and focusing on the long term, you can build a sustainable investing plan that supports your financial goals.

So, are you ready to make investing a priority? Start investing regularly today and enjoy the benefits of a more disciplined and fulfilling approach to growing your wealth.


Diversification is a key element of your investment strategy
When it comes to investing, diversification is key to managing risk and generating consistent returns. By spreading your investments across different asset classes, sectors and markets, you reduce the impact of any one investment on your overall portfolio. Historically, diversification has proven to be one of the most effective strategies for reducing volatility and achieving long-term investment success. By constructing a well diversified portfolio that includes stocks, bonds, property and other assets, you can help ensure that your returns are more stable and less subject to market ups and downs.

Even in times of market turmoil, a diversified portfolio can help you weather the storm and stay committed to your longterm investment plan. Rather than reacting emotionally to short-term market fluctuations, a diversified portfolio allows you to stay focused on your goals and the bigger picture.

So if you’re looking for a solid investment strategy that can help you achieve your financial goals, diversification should be at the top of your list. With the help of professional financial advice, you can construct a well diversified portfolio that’s tailored to your unique needs and risk tolerance.


It’s time in the market that matters, not timing the market
When it comes to investing, being patient and consistent is key. The idea of ‘timing the market’ – or trying to predict when prices will go up or down, so you can buy at a low price and sell at a high one – is enticing.

But in reality, this strategy rarely works out successfully for investors and even if you manage to get out of the market at the right time, you are likely to miss out on significant gains when it rebounds.

Missing just a few of the market’s strongest days can have a significant impact on your overall investment returns, so it’s essential to stay invested and ride out the market’s ups and downs. By consistently investing over long periods of time, you are able to benefit from compounding returns and give your investments more chance to grow.

It also makes sense psychologically; since stock markets tend to fluctuate wildly in short periods but trend upwards over longer ones, staying invested for the long run can be less stressful. The longer you stay in the market, the more able you will be to ride out economic downturns without having to make desperate decisions that may not pan out. So, as an investor, it’s essential to remember – time in the market is more important than timing the market.

Markets go through up and down cycles, but they have trended higher over the long term
It’s no secret that markets are subject to cycles of ups and downs. While it can be stressful to see your investments drop in value, it’s essential to keep a long-term perspective.

Even when markets experience significant dips, such as during times of economic uncertainty or global crises, history has shown that markets have always recovered and continued to trend higher over time. Rather than panicking over short-term fluctuations, it’s wise to focus on your longterm investment goals and have confidence that the markets will eventually rebound.

Markets are unpredictable, so focus on what you can control
It’s easy to get caught up in the daily fluctuations of the market and allow fear or greed to influence your investment decisions. However, keeping emotions in check is crucial if you want to achieve long-term investing success. One way to do this is by creating a well-diversified portfolio that aligns with your risk tolerance and financial goals. This can help to mitigate risk and reduce the impact of market volatility on your portfolio.

Staying invested is also important during market downturns. While it may be tempting to sell off your investments and avoid potential losses, timing the market is a difficult game. You may end up missing out on market gains if you try to time the market, and you’ll need to be right twice – when to sell and when to buy back in. By staying invested, you give yourself the opportunity to benefit from the market’s eventual recovery.

Keep your focus on your financial goals, rather than on short-term market movements. This can help you avoid making knee-jerk reactions to market volatility and stay on track with your investing plan. By having a clear understanding of your financial goals and your time horizon, you can make investment decisions that are aligned with your long-term objectives. Remember, investing is a journey, not a destination. Stay focused, stay disciplined, and the results will come over time.

Volatility decreases the longer you’re invested
Investing is a dynamic process, and it’s essential to understand the relationship between risk and return. While all investments carry some degree of risk, if you’re looking to earn a higher return, you must be willing to take on more risk or volatility. On the other hand, if you have a low tolerance for risk, you may have to forego some returns to ensure your investments are more secure.

It’s important to note that the volatility in your portfolio tends to decrease over time, particularly if you’ve invested in a well diversified portfolio. As you remain invested for longer periods, your portfolio becomes less susceptible to market fluctuations, and this reduces the risk of potential losses. Therefore, it’s necessary to be patient and stay invested for the long term, even when things get rough.

Ultimately, understanding the relationship between risk and return is critical to successful investing. While there are no guarantees, the key to success is to embrace the right amount of risk while building a well-diversified portfolio.

The more frequently you check your portfolio, the more volatile it will feel
It’s natural to want to keep an eye on your investments, but checking it too often could lead you to unnecessary stress. As tempting as it may be to obsessively track the dips and spikes, it’s important to remember that investing is a long-term game.

The more often you check, the more you’re exposing yourself to the daily volatility of the market. Even if your investments have the potential to grow, they may experience temporary losses in the short term, causing you to panic and make rash decisions.

Instead, focus on your long-term investing goals and review your portfolio less frequently. This approach can help you stay on track and avoid reactions that could jeopardise your chances of achieving your financial objectives. Remember, investing is a marathon, not a sprint. So set it, and forget it – at least until it’s time for your next portfolio review. Be patient and have faith in your investments. Over time, they have the potential to grow and provide you with the returns you desire.

Headlines often focus on the sensational, short-term and negative – none of which should matter to investors. It’s important to not get caught up in the sensationalism of the news covering economic, financial or political events that can give you a reason to not invest. Instead, focus on your long-term investment goals.

This means ignoring the short-term noise and maintaining a diversified investment strategy that can weather various market conditions. When unforeseen events do occur, it’s important to remember that investing is for the long term. Don’t make any sudden changes to your portfolio or investment strategy based on a single event or headline – this can lead to ultimately harming your investments.

By staying focused on your long-term financial goals and maintaining a disciplined approach to investing, you can navigate markets in good times and bad, and ultimately achieve greater success in your overall financial strategy.

Planning your Retirement, and How to Get There

Retirement planning shouldn’t be something you only consider when you’re older. Starting to plan your retirement early gives you a greater chance to build the funds you need for a comfortable lifestyle when the time comes. Acting now will ensure that your long-term goals become a reality.

At every stage of our life it can be difficult to take time to think about our future when there are so many other things competing for our attention, but it’s important to be prepared and make sure that you’re planning ahead for the retirement you deserve.

By taking a personalised approach, you can develop a retirement plan that will work for you throughout your life.

Planning for retirement in your 20s

It’s never too early to start planning for retirement. Though retirement may seem a long way off, the earlier you start saving and investing, the more time the compounding effect on your money has to work. Putting money away now can make a huge difference to your retirement funds when the time comes.

Here’s why you should start planning for retirement in your 20s:

• It enables you to benefit from the power of compounding: Regularly investing amounts of money can grow into a large sum over time thanks to compounding.

• You can afford higher-risk investments: As retirement may be years away, making higher-risk investments such as stocks and shares in your 20s can help boost returns without putting too much at risk.

• It encourages good financial habits: Taking steps to plan for retirement now will highlight how to manage your finances better and make smart decisions about investments and pensions.

• You could get help from employers: Many workplace pension schemes offer employer contributions, which is free money that goes straight into your pension pot.


Planning for retirement in your 30s

It can be more difficult to save for retirement in your 30s, when you may have greater financial commitments such as a family or a mortgage. But it’s important to stay focused on your retirement goals, because the decisions you make now could have an impact on your later years.

Here are some tips for saving for retirement in your 30s:

• Minimise debt: Pay down any outstanding debts as soon as possible. This will free up more money for retirement savings.

• Optimise asset allocation: As you still have plenty of time until retirement, consider investing in growth assets such as equities.

• Save regularly and often: Try to make regular contributions into a pension account or tax-efficient investment vehicle such as a Stocks & Shares ISA.

• Take advantage of employer contribution schemes: Many employers offer generous contribution schemes which can boost your savings pot significantly over time.


Planning for retirement in your 40s

Your 40s are an ideal time to reassess your retirement plans and make sure that you’re on track.

Here are some tips to help get your retirement plan on track:

• Calculate how much you need to retire comfortably: Seek professional financial advice to determine how much money you need for retirement.

• Consolidate pension accounts: If you have multiple pension accounts across different employers, if appropriate, consolidating them could make it easier to manage them and provide more clarity about your pension savings.

It’s never too early to start planning for retirement. Though retirement may seem a long way off, the earlier you start saving and investing, the more time the compounding effect on your money has to work.

• Increase contributions: Consider increasing your contributions where possible as the higher salary typically seen in the 40s may afford this opportunity.

• Explore other options: Consider other tax-efficient methods of saving, such as transferring part of your salary into an ISA or investing in property, depending on what is available to you.

Planning for retirement in your 50s

Your 50s are a time to increase your pension contributions, review your retirement plans and make sure that you’re on track.

Here are some tips on how to do this:

• Make additional contributions: Consider making additional lump sum pension contributions, remembering to stay within the annual or lifetime allowance limits, with any excess liable for further tax charges.

• Review asset allocation: The closer you get to retirement, the more risk-averse your investment approach should be, so consider reducing exposure to higher risk assets such as equities and seek professional financial advice for tailored advice.

• Take advantage of tax allowances: Familiarise yourself with current pension allowances and explore any carry forward rules available if applicable.

• Speak to a financial professional: Consult a financial professional who can provide you with personalised advice tailored to your individual needs and requirements.


Planning for retirement in your 60s

In your 60s it’s time to prepare for the decumulation phase, an important time when it comes to your retirement planning.

Here are some tips to help get your retirement plan on track:

• Prepare a budget: Calculate your expenditure levels to help plan for the long term.

• Consider pension decumulation options: Explore the various ways you can convert your pension savings into retirement income and seek professional financial advice.

• Review asset allocation: As retirement is approaching, reduce exposure to higher risk assets such as equities.

• Review your plan regularly: Regularly reviewing your progress will help you prepare for retirement and make the necessary adjustments if needed.

How to Maximise the Value of Pension Savings

Mistakes to avoid when you’re aiming to build your pension pot

Many people are feeling the pressure on their finances at the moment due to the backdrop of rising inflation and the cost of living soaring. In these circumstances, it can be difficult to think about your long-term finances or even contemplate saving for the future. Even in the current climate there are ways to maximise the value of any pension savings you do have. By sidestepping seven common mistakes, you could take your pension planning to another level and reduce the risk of falling short of money later.

Don’t turn down money from your employer

When offered the opportunity to join a workplace pension, it’s nearly always a good idea to do so. For most people, your employer must automatically enrol you in a workplace pension scheme, and you may even be offered a pension plan if you don’t meet the criteria. Workplace pension schemes are made up of your own payments (5% or more of earnings), which are deducted from your salary, in some cases before you pay tax, making it easier to save, and your employer’s contribution, which at the very least, must be equivalent to 3% of your qualifying earnings. Many employers offer more than this or match any extra payments you make, so it’s worth checking if you’re getting the most out of this valuable benefit.

Don’t say ‘no’ to extra money from the government

Anyone who decides against investing in a workplace or personal pension also turns down help from the government. That’s because in order to encourage people to save for retirement, the government provides a top-up called ‘tax relief’ to pension payments. How you receive this tax relief depends on the type of plan you have and the rate of income tax you pay. But as an example, if you’re a basic rate taxpayer saving into a personal pension in the current tax year, you receive 20% tax relief on your payments. So, if you pay £200 a month into your pension plan, the £40 of tax relief you receive on that payment means it will only cost you £160. Higher rate or additional rate taxpayers could claim back even more.

Some workplace pension schemes offer tax relief in a different way, such as through salary sacrifice or exchange schemes, so check with your employer if you’re not sure how this works for you. And in Scotland, the tax relief details differ slightly. But in all these cases, the general point is the same: each time you defer paying into a pension plan, you miss out on an extra boost.

Don’t expect the state pension to cover everything

Another common mistake is to assume that the State Pension will meet your retirement needs. However, it’s important to know that the State Pension won’t be available until your late 60s and may not cover all of your outgoings. Currently, pensioners who are entitled to the full new single-tier State Pension receive £185.15 a week in 2022/23, worth £9,627.80 for the year. But remember that what you get depends on your National Insurance record, so you could get less.

Pensioners that reached State Pension age before April 2016 and receive the basic State Pension get £141.85 a week, or £7,376.20 a year.

Don’t lose track of your pension plans

It has never been more important to keep track of all your old pension plans. You are at most risk of having lost track of a pension if you have changed jobs multiple times, moved home often and not updated your pension providers or opted out of SERPS (the State Earnings-Related Pension Scheme) in 1980s or 1990s.

Don’t assume that the minimum is enough

Auto-enrolment has boosted the pension savings of millions of people but the 8% minimum payment may not get you the retirement lifestyle you want. It’s important to therefore have a retirement lifestyle in mind. We can discuss with you how much money you could have in your pension pot in the future, so you can ensure that you don’t !ind yourself in a situation whereby you have an income shortfall.

Don’t leave your pension pot unloved or neglected

You might not want to talk about your pension plan every day, but dismissing pensions as boring is a mistake, and one that becomes increasingly serious over time. While this might be difficult at the moment, steps such as topping up your payments, especially in your 20s, 30s or early 40s, can make a large difference, thanks to the snowball effect of compounding.

Knowing whether it’s workplace or private, understanding how to get more ‘free’ payments from your employer or the government, or using it to pay less tax (such as through bonus sacrifice) could make a major difference to your long-term finances.

Don’t assume that one pension plan is the same as another

A related mistake is not knowing where your pension pot is invested, whether that matches your life-stage and priorities or how to choose the right investment options. For example, if your retirement is still some years ahead, you could potentially afford to take a little more risk. Conversely, you may want to dial down the risk as you get nearer to retirement..

Getting Ready To Retire?

Bolstering your retirement lifestyle as you approach retirement

Have you ever wondered what you need to consider as you approach retirement? Whatever your concept of what is a good pension pot, one certainty is that relying on the State Pension alone will not give you a good enough pension to live on comfortably through your retirement.

‘Will I be able to retire when I want to?’ ‘Will I run out of money?’ ‘How can I guarantee the kind of retirement I want?’ These are hard questions to answer unless you obtain professional financial advice and why you need to start by reviewing your finances sooner rather than later to ensure your future income will allow you to enjoy the lifestyle you want.

After decades of working and saving, you can finally see retirement on the horizon. If you plan to retire within the next five years or so, consider taking these steps today to help ensure that you have what you need to enjoy a comfortable retirement lifestyle. Taking these actions now could help bolster your retirement lifestyle as you approach your planned retirement date.

8 Things to Consider as your Retirement Approaches

1. Track down your pensions
It’s important to track down all the different pension schemes you’ve previously paid into, so you can be sure you’re claiming everything you’re entitled to in retirement. If you’re unsure where to start, the UK government offers a pension tracking service to help you find lost pensions.

2. When can you access your pensions?
Since April 2015, pension freedoms have given savers in defined contribution (DC) schemes greater access to their cash, allowing flexible withdrawals from the age of 55.

3. What is your Pension’s Value?
The easiest way to find out how much your pension is worth is to check your pension statements. Whatever type of pensions you have, you’ll receive an annual pension statement from your provider. In it they’ll tell you how much your pension is currently worth and what it’s expected to pay out at your retirement date.

4. Get a State Pension Forecast
You can call the Future Pension Centre and ask for a State Pension statement. Your statement will tell you how much State Pension you have built up so far based on the National Insurance contributions and credits that are on your National Insurance record at the time your statement is produced. Contact the Future Pension Centre for questions about the State Pension or to ask for a statement. Telephone: 0800 731 0175, or from outside the UK: +44 (0)191 218 3600. Or obtain a forecast online at https://www.gov.uk/ check-state-pension

5. Get Investment Advice
If you are close to, or at retirement, you may want to reevaluate your plans. If you have access to other savings and investments, you might want to consider using these before accessing your pension. If you have other investments or savings, such as Individual Savings Accounts, stocks and shares, bonds, funds, property, etc, it’s worth checking their value as you approach retirement age asthey can support you in addition to your pension.

6. How Will you Access your Pension?
When it comes to deciding how to use your pension pot, there’s no one ‘right answer’. There are more pension options than ever thanks to the pension freedoms that allow savers access to every penny of their retirement savings. Your options may include taking a regular income or lump sums and keep investing the remainder in the stock market, or cashing in the entire amount. You can also choose to swap the money for a guaranteed income via an annuity.

7. How is your Pension Invested?
Pensions may be for the long term, but it’s important regularly to review where your money is being invested. You need to keep a close eye on which funds your retirement savings are in so that you can check you’re comfortable with the risks involved. You should also keep a close eye on how much you’re being charged, as fees can have a big impact on the amount you end up with at retirement.

8. The Benefits of Advice
Pension advice is important because pension products can be complicated, and life can be unpredictable. Professional financial advice will help you make the right decisions about your money and your future. Retirement planning is important because it can help you avoid running out of money in retirement. You need to know how much you’ve got, how to access it and when you can afford toretire comfortably.

The good news is that whatever your situation, and however you want to enjoy retirement, we can help set up bespoke arrangements that are right for your needs.

Invest your way out of Inflation

Why now is the time to make sure you protect your wealth

The word ‘inflation’ had barely featured in the market’s vocabulary in the last three decades until it suddenly started to come back with a vengeance in 2021. As higher inflation looks set to persist in 2022, finding ways to generate a return on investments greater than inflation will be a key investment theme – otherwise your wealth falls in real terms.

Spending Spree

There are two basic reasons why inflation has been increasing: supply and demand. Starting with the latter, consumers have been on a spending spree after having spent a large proportion of time during 2020 and 2021 at home bingeing on Netflix. The main reason for the current rise is due to the global price of energy. This has meant higher energy and transport bills for businesses, many of whom pass on the extra costs to their customers. Supply problems and higher shipping costs are also continuing to have an impact on businesses.

Healthy Economy

Central banks kept saying that inflation was ‘transitory’, but this now seems to have been replaced by the word ‘persistent’. The result is that inflation will remain high on the economic agenda in 2022. Inflation is a measure of how much prices have gone up over time. It’s the rate at which cash becomes less valuable – £1 this year will get you further than £1 next year. It tends to be a good sign in a healthy economy, but too much of it can be hard to reel in and control.

Boe Forecast

The Bank of England (BoE)[1] expects inflation to reach over 7% by spring 2022 and then start to come down after that. That’s because most of the causes of the current high rate of inflation won’t last. It’s unlikely that the prices of energy and imported goods will continue to rise as rapidly as they have done recently. And this means that inflation will eventually decline.

The BoE forecasts the rate to be much closer to their 2% target in two years’ time. But even though the rate of inflation will slow down, the prices of some things may stay at a high level compared with the past.

Purchasing Power

Beating inflation means earning higher returns from an investment than the inflation rate in the economy. If your return on investment is less than the inflation rate, this could basically nullify the returns you have earned. Due to various reasons, the purchasing power of money decreases significantly every year. Investing with inflation in mind is essential for protecting your current and future wealth and involves choosing assets that naturally keep pace with rising prices. These mostly include either real, tangible assets, or investments that pay a variable rate and appreciate or increase over time.

Looking for a better chance of beating Inflation Over the Long Term?

If you’ve already got an emergency fund, or have excess cash in the bank, it may be time to consider investing some of it to protect your wealth from inflation. Investing some of your money may give you a better chance of beating inflation over the long term. To discuss your options, please contact us.

Source: [1] https://www.bankofengland.co.uk/ knowledgebank/will-inflation-in-the-ukkeep-rising

Setting Financial & Lifestyle Goals

Plan for tomorrow, live for today

Financial success doesn’t happen by accident. It’s a process starting with having a goal, planning carefully and being confident of making the right decisions at the right time. It is easy to stray from basic, solid principles of finance. These remain true no matter what your age or circumstances. It’s those same principles that need to be applied to your financial affairs.

The start of the new year is the perfect time to obtain professional financial advice and in doing so help secure your future – and that of your family – for years to come. Whether it’s advice on significant lifestyle changes, such preparing for your retirement, helping your children buy their first home or investing to beat inflation, we can help.

Life goals

Part of the process should also include articulating and writing down your financial and life goals. Doing this can actually have an impact on achieving them, by helping you to maintain focus in the face of distractions, setbacks or challenges. You might write down, ‘I want to be mortgage-free by the age of 50’ or ‘I want to retire by the age of 55.’ Think of each goal as a financial milestone. This will enable you to check that you’re on course, without worrying too much about how much longer you’ve got to reach your destination.

Reach milestones

Developing effective money habits, having a lifestyle you can afford and thinking carefully about your family priorities will help you identify and reach these goals or milestones – the key to having money serve you well over your whole lifetime.

Whatever stage you are at, a new year offers the chance to rethink your earning, spending, saving, investing and giving behaviours and habits to ensure they are aligned with what really matters. It’s also a good time to make sure that your financial life is well organised so you feel in control.

Clear objectives

Any goal (let alone financial) without a clear objective is nothing more than a pipe dream, and this couldn’t be more true when setting financial goals. It is often said that saving and investing is nothing more than deferred consumption. Therefore, you need to be crystal clear about why you are doing what you’re doing. This could be planning for your children’s education, your retirement, that dream holiday or a property purchase. Once the objective is clear, it’s important to put a monetary value to that goal and the time frame within which you want to achieve it by. The important point is to list all of your goal objectives, however small they may be, that you foresee in the future and put a value to them.

Realistic

Just setting goals doesn’t guarantee success—setting goals is only one part of a process that can lead you to success. Setting goals is key to planning, executing a plan, staying motivated and ultimately evaluating your success. Set realistic goals. It’s important to set goals that you can achieve. It’s good to be an optimistic person, but being a Pollyanna is not desirable. Similarly, while it might be a good thing to keep your financial goals a bit aggressive, being overly unrealistic can definitely impact on your chances of achieving them. A realistic goal is one that you can reach given your current mindset, motivation level, time frame, skills and abilities. Realistic goals help you identify not only what you want but also what you can achieve, and help you stay the course by keeping you motivated throughout your journey until you get to your destination.

Divide goals

Now you need to plan for where you want to get to, which will likely involve looking at how much you need to save and invest to achieve your goals. The approach towards achieving every financial goal will not be the same, which is why you need to divide your goals into short, medium and long-term time horizons. As a rule of thumb, any financial goal that is due within a five-year period should be considered short-term. Medium-term goals are typically based on a five-year to ten-year time horizon, and over ten years, these goals are classed as long-term. This division of goals into short, medium and long-term will help in choosing the right savings and investments approach to help you achieve them, and it will also make them crystal clear. This will involve looking at what large purchases you expect to make, such as purchasing property or renovating your home, as well as considering the later stages of your life and when you’ll eventually retire.

Inflation matters

It’s often said that inflation is taxation without legislation. Therefore, you need to account for inflation whenever you are putting a monetary value to a financial goal that is far away in the future. It’s important to know the inflation rate when you’re thinking about saving and investing, since it will make a big difference to whether or not you make a profit in real terms (after inflation). You could use the ‘Rule of 72’ to determine, at a given inflation rate, how long it will take for your money to buy half of what it can by today. The Rule of 72 is a method used in finance to quickly estimate the doubling or halving time through compound interest or inflation respectively. Simply divide 72 by the number of years to get the approximate interest rate you’d need to earn for your money to double during that time.

Risk protection

There’s much to be said for ‘protecting before investing’. If loved ones are relying on you financially, your priority should be ensuring their security rather than taking on investment uncertainty. Discuss your goals with those you’re closest to and make plans together so that you are well aligned. An evaluation of your assets, liabilities, incomings and outgoings will provide you with a starting point. You’ll be able to see clearly how you’re doing and may find areas you can improve on. Risk protection plays a vital role in any financial plan as it helps protect you and your family from unexpected events. Make sure you have put in place a Will to protect your family, and think about how your family would manage without your income should you fall ill or die prematurely.

Tax liability

With tax rules subject to constant change, it’s essential that you regularly review your own and your family’s tax affairs and plan accordingly. Tax planning affects all facets of your financial affairs. You may be worried about the impact that rises in property values are having on gifts or Inheritance Tax, how best to dispose of shares in a business, or the most efficient way to pass on your estate. Utilising your tax allowances and reliefs is an effective way of reducing your tax liability and making considerable savings over a lifetime. When it comes to taxes, there’s one certainty – you’ll pay more tax than you need to unless you plan. The UK tax system is complex, and its legislation often changes. So it’s more important than ever to be tax-efficient – particularly if you are in the top tax bracket – making sure you don’t pay any more tax than necessary.

Take control

Developing a comprehensive financial plan allows us to take control of our money, assess our current financial situation, set goals and prepare a strategy to achieve those goals. By better understanding your finances, setting goals and creating a strategy, you will live more comfortably and with greater confidence. This will help you develop a clear picture of your current financial situation to see the big picture and set long and short-term life goals, which is a crucial step in mapping out your financial future. When you have a comprehensive financial plan, it’s easier to make financial decisions and stay on track to meet your goals.

Retirement decisions

Retirement planning goal setting is important because it can help you avoid running out of money in retirement. It enables you to calculate the rate of return you need on your investments, how much risk you should take, and how much income you can safely withdraw from your portfolio. The number of options available at retirement have increased with changes to legislation, which have brought about pension freedoms over the years. The decisions you make regarding how you take your benefits may include tax-free cash, buying an annuity, drawing an income from your savings rather than pension fund, or a combination of these. Beginning your retirement planning goal setting early gives you the best chance of making sure you have adequate funds to support your lifestyle.

Life changes

There is little point in setting goals and never returning to them. You should expect to make alterations as life changes. Set a formal yearly review at the very least to check you are on track to meeting your goals. Monitoring your financial performance in this way creates more certainty and confidence in making both short and long-term decisions. We will help you to monitor your plan, making adjustments as your goals, time frames or circumstances change. Discussing your financial and lifestyle goals with us is highly beneficial as we can provide an objective third-party view, as well as the expertise to help advise you with financial planning issues.

Finally, get SMART

To make sure your financial and lifestyle goals are clear and reachable, each one should be:
Specific (simple, sensible, significant); Measurable (meaningful, motivating);
Achievable (agreed, attainable); Relevant (reasonable, realistic and resourced, results based);
Time bound (time based, time limited, time/cost limited, timely, time sensitive).


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