Wealth Management Update August 2022
RECESSION OR NO RECESSION
High levels of inflation, together with central bankers expressing their willingness to raise interest rates aggressively to get inflation under control, has managed to convince an increasing number of investors that a meaningful global recession is both imminent and inevitable. Got to love those bankers!
Whilst we agree that the economic growth outlook has worsened and therefore this has affected the equity markets, we believe economic weakness or recession in the near term is by no means a certainty.
As we moved into the third quarter of 2022, we witnessed some quite extraordinary events in Westminster. Triggered by the resignations of prominent cabinet ministers, Boris Johnson finally surrendered and resigned as PM. This government, under Johnson, arguably spent more time putting out self-inflicted fires than it did looking forward, which exhausted everyone concerned, especially the UK stock market!
The volatility within political circles is often unhelpful and recent events give us a degree of hope that the circus that surrounded Boris Johnson’s leadership is coming to an end! There is nothing that stock markets like less than uncertainty, and if recent events stop the recent bout of political and economic insecurity, it could (and we hope it will) be received positively by markets.
NS&I SAVINGS BOOST
Keeping an ‘emergency fund’ of accessible cash is a vital part of Financial Planning, something that became even more apparent during the extreme market events caused by the pandemic.
Without a cash buffer to see you through turbulent times, you could be forced to withdraw funds from your investments when the markets are at a low point, realising any losses on your portfolio. To avoid this, it’s recommended that you hold at least 3-6 months of your current expenditure as cash.
Deciding where to deposit your cash and finding the right balance between security, instant access and a decent level of interest can be challenging. One of the most popular deposit providers is NS&I because it is government-backed and therefore one of the most secure deposits available. NS&I have recently increased the interest rates on their products to combat soaring inflation, having previously slashed their rates to nominal levels during the pandemic.
Whilst NS&I may be competitive, they aren’t currently offering the highest rates available as they must strike a balance between the needs of savers and taxpayers. However, their longevity, trustworthiness and unlimited compensation limits mean they should be a consideration in a search for a cash-deposit provider.
More information is available at the NS&I website: https://www.nsandi.com/interest-rates
PLANNING FOR CARE
Great news, you’re probably going to live longer. Bad news, it’s going to cost you.
It’s a fact that we are all set to live longer, but with this reality comes the challenge of making sure you have enough to live out the rest of your days in the comfort that you are accustomed.
Care costs are estimated to be between £600 and £800 per week but can be as much as double this, depending on your desired standard of living and the level of care required.
The rules surrounding care caps and funding are, in true government style, very complex and so it is not surprising that many people don’t understand what level of provision they will need to make for their later life care.
There’s a popular proverb that says:
“The best time to plant a tree was 20 years ago. The second-best time is now.”
If you haven’t already considered how to fund your future care or that of your loved ones, then you should start. Having to pay for care is now a crucial part of Financial Planning and should form part of your overall Retirement arrangements.
As advisers, it is our job to help you navigate all available options to create peace of mind for your future care. So, if you, or someone you know, needs help to start this planning, just give us a call.
WHEN IS A TRUST NOT A TRUST?
In September the rules for having a Trust change…and will change a lot. The problem is that most people are not aware of the changes and how they will affect them or a Trust that they have. Indeed, many people have Trusts but don’t know that they have them!
So what’s changing?
Well, it all revolves around…well…trust!
It is astonishing to believe, but there has never been any mandatory form of Trust registration in the UK up until this year. This has meant that thousands of Trusts have been set up, and unless the Trustees registered them with the HMRC, for which there was no formal process, no one knew that those Trusts existed.
From September, everything changes and Trust Registration in the UK will be compulsory for those that need to be. The worst bit is that regulations are retrospective, meaning that thousands of Trusts set up in the past may now need to be registered. This, as you can imagine, is a massive job.
We like to think that we look after both our clients and customers well, which is why we have already written to everyone where registration is required. We’ve done this despite having no legal responsibility to do so, because we believed it was the right thing to do for both clients and customers alike.
Now think, how many Solicitors, Accountants or Financial Advisers will have done this? We think the number is very little, which means that there are many Trustees out there that will be breaching new regulations and will therefore be liable for a fine.
Luckily, the nature of Trusts will not be changing, and they will remain a valuable tool for many families within their estate plans. For clarity on the registration of Trusts you have with us, you can watch our webinar and/or you contact us directly. Trust Webinar
REUNITING WITH LOST MONEY
Finding lost assets is a straightforward process but you have to put a bit of legwork into it, especially as the Unclaimed Assets Register closed at the end of August. One option is to look into using an alternative service called Gretel, the others are covered below, but we would always recommend contacting a Financial Adviser to act on your behalf.
Pension – The Government provides a free pension tracing service at gov.uk/find-pension-contact-details. You will need your employment history and/or the original Pension provider information to be able to trace the up to date contact details for the company who now manage the Pension. You then need to make direct contact to enquire if they hold a Pension under your name. This is the perfect opportunity to also update your contact details with each company you contact.
Savings – You can use a service called My Lost Account to track down forgotten Savings accounts. This service is operated by UK Finance, the Building Societies Association and NS&I and can search most banks and building societies to check if they have any accounts in your name. You will need to provide your current and previous personal information, if applicable.
Investments – You can use the Investments Association’s Unclaimed Assets Portal to find lost Investments and the Association of Investment Companies to help find Investment Trusts. Again, you will need to provide your current and previous personal information, if applicable.
We would recommend using a Financial Adviser to act on your behalf though, as a simple signature on an authority form along with your personal information and any company information you have, means an Advice Firm can do all the research/contact companies for you. We are always happy to help.
TOP THREE CASH ISA’s
Please check the terms and conditions before opening any account. If in doubt, consult with your financial adviser directly, as the above is for your information only.
Source: Moneysavingexpert.com 15.08.2022.