Wealth Management Update November 2022

IS YOUR HEAD SPINNING?

We tried to write something about the absolute chaos that has ensued in our government over the past few weeks. Then we gave up, as everything will likely be different again by the time this reaches you.

Once everything has settled down and we have some clarity over what the heck is going on, we’ll put together a summary of things you may need to know.

In the meantime, just to add some context, a child that is only 4 months old will have lived through four chancellors, three home secretaries, two prime ministers and two monarchs.

To say the last 4 months has been a rollercoaster of change would be putting it mildly.

BANK OF ENGLAND TO SELL GILTS AGAIN

You will have probably seen in the news that the Bank of England is to sell gilts from the 1st of November. But what does this mean to us in the real world?

For quite a while now the Bank of England has been buying gilts. A gilt is a loan to the government for a fixed period of time at a fixed rate of return. When the Bank of England buys these gilts, it’s buying old gilts that were issued in the past. When the bank buys gilts, it puts money back into the economy. This was done, for example, during the pandemic, to give the economy a boost.

Now we have the issue that there is too much money in the economy, and this drives up inflation. For example, imagine the economy consisted of just two apples, and there was just £2 in the economy. This would mean that each apple would be worth £1. If you increased to money in the economy to £3, but there were still just two apples, then each apple would be worth £1.50. It really is as simple as that.

One of the reasons for the high levels of inflation we are experiencing is that there is too much money. By selling gilts, the Bank of England takes money out of the economy because companies and people need to give the Bank of England real money to buy the gilt.

The result of this is that the money supply falls and so, all else being equal, inflation is reduced.

If this makes sense to you, perhaps send a copy to our government, we are not sure they understand how it works!

BEWARE THE SCAMMERS

Last week we received an email, telling us how to claim the £400 energy rebate. The email looked genuine, came from Ofcom, and told us to click the link attached.

BUT it was all false!

The scam encourages people to hand over personal details and set up a direct debit. From here they are able to reverse engineer details to access your bank account by impersonating you.

Ofgem said it was “alarming that vulnerable customers are being preyed upon” and if consumers were in any doubt they should contact their energy provider, using details on their official website.

You need do nothing to receive the energy refund as this will be handled by your energy supplier.

Our advice is to NEVER click on to a link in an email unless you know who it’s from, and you were expecting it.
Please check with those people that you know who are vulnerable to make sure they are not being taken advantage of. And if you are ever unsure, please call us to check things out for you. We’re always here to help

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 is for your information only.

Source: Moneysavingexpert.com 26.10.2022.