Wealth Management Update June 2022

INFLATION HITS 9% … SO WHAT! 

The news in all the media is that inflation is at a record high of 9%. The world is again coming to an end, and we won’t be able to afford a slice of toast because it’s going to get worse!

What nonsense this type of reporting is, and here’s why:

-The national inflation rate is NOT what you experience

-What goes up does come down

Inflation calculation is based on the price increase of a basket of goods. These ‘goods’ are chosen by the Office for National Statistics (ONS) to represent the normal spending of the average person in the UK. The average salary in the UK is £31,772 based on the last government released figures. This means that someone on this salary would experience 9% inflation, as they buy the ‘basket if goods’.

In that basket of goods were frozen Yorkshire puddings – this means that if you don’t buy frozen Yorkshire puddings then you don’t experience 9% inflation – you will experience something higher or lower.

The biggest price rises have been in the food sector because of the impact of the Ukrainian war. However, if you earn say £50,000 per year, or have an annual income of £50,000 from your Investments or Pensions, then you will spend a lower percentage of your income on food (we can all only eat so many Yorkshires after all) therefore your will experience a much lower personal inflation rate than the headline rate.

The second point is that inflation has been predicted since last year, and its doing what was expected, with the exception that the war has added about an extra 2.5% to the figure.

The inflation that we experience is as a result of the increase in GDP following the pandemic and the additional money in circulation caused by the government spending during the pandemic. We are now out of the pandemic and into a place where GDP will start to slow (in fact we saw this in the figures from last month) and so inflation will inevitably fall. It may be with us for the next 12m or so, but then it will fall to pre-pandemic levels.

It would just be nice idea for the media to share this information too, but then it’s not very newsworthy saying that the headline inflation rate is nothing to do with you.

WHEN IS GREEN NOT GREEN? ANSWER:  WHEN IT’S GREEN WASHING!

Most of you will know about our revolutionary Attenborough Scale. The Attenborough Scale was designed to allow you to mix ‘sustainable’ Investments into your portfolios.

The best way of thinking about this is, would you be happy telling David Attenborough about the Investments that you hold if you happened to sit next to him at a charity dinner?

With these Investments, Trust DFM rigorously looks into all to see how close they come to ‘article 9’ level Investments, which means they do no significant harm to the planet.

However, some companies are looking to badge Investments as though they are ‘green’ or ‘sustainable’ just to get the band wagon, but are not actually doing the real work.

Last month BNY Mellon’s Investment management arm was fined $1.5m for doing just this. When you try to make things look green and they are not, it’s become know as ‘green washing’ and BNY’s Mellon’s fine, is the first in the sector, and something that we praise the regulator for.

After all, David Attenborough would probably not be very happy with them!

To find out more information on the Attenborough Scale, watch our webinar.

HMRC HAS ITS SIGHTS ON THE COLD CALLER

Rogue tax payment agents have led HMRC to issue a warning over activity that could leave homeowners with a large tax bill. The agents who target homeowners via the Land Registry and property search websites have been cold-calling homeowners advising them to make ‘speculative’ stamp duty land tax refund claims, promising them they will receive money back on their ‘unknowingly overpaid’ stamp duty.

In 2019 to 2022 alone over £11.6bn was collected in stamp duty by the government. HMRC’s analysis found that up to a third of such claims made were incorrect, furthermore, in many cases the agent had already taken a fee from the homeowner, leaving the homeowner to make up the difference and potentially risk interest charges and fines from the revenue.

HMRC commented on the cold-calling agents, saying:

“…we are warning new homeowners not to get caught out by tax repayment agents promising easy money on a ‘no win, no fee’ basis. If it sounds too good to be true, it probably is. We want to help people get it right and avoid unnecessary tax bills, so treat promises of easy money with real caution.”

Understandably, there are now calls for the FCA to cut down on the use of cold calling in the Financial services industry. Best to avoid cold-callers all together and instead get your Tax mitigation planning in advance from our team.

You can watch our Tax Webinar here.

TOP THREE CASH ISAs

Please check the terms and conditions before opening any account. If in doubt consult with your financial adviser directly as the above are for information only.

Source: Moneysavingexpert.com 10.06.2022.