Wealth Management Update August 2024

In many meetings with clients, people have been asking, why are interest rates still so high? With inflation now back to ‘normal’ levels, why has the Bank of England not reduced Interest Rates?

Interest Rates are how the Bank of England controls the economy. When the economy is doing well, it has the intention to increase inflation. As the Bank of England has an inflationary target, they will increase or decrease rates to slow or speed the economy. Higher Interest Rates slow the economy, lower rates speed the economy.

The problem is that there is a 6–18-month delay in the action taken by the Bank of England and so the Bank is always looking forward. Right now, the biggest thing that is likely to affect the inflation rate is Donald Trump! Yes, Our Tango friend is back again, and if he becomes the next president, which is very likely, then his policies are inflationary. This is because his protectionist approach is expensive because manufacturing in the US is more expensive than in China or South Korea. This would push up prices (cars, commodities etc.) and thus inflation. Therefore, the Bank of England would need to increase Interest Rates to reduce demand and pull inflation back. Therefore, rather than reduce and then increase, the view is to not reduce, or, reduce more slowly… who said Tango would not affect your world!

Rate Cut Could Bring Relief

For mortgage holders, a rate cut could be a welcome relief. If the Bank decides to lower rates, it could lead to cheaper borrowing costs and lower monthly mortgage payments. This is especially good news for those on variable or tracker rate mortgages, as their payments would directly decrease in line with any rate cuts. Fixed-rate mortgage holders might not see immediate changes, but if you’re coming to the end of your fixed term, you could benefit from lower rates when you remortgage.

Of course, it’s important to keep in mind that any rate cut won’t necessarily happen overnight, and the Bank’s decisions will depend on how the economic data evolves. In the meantime, if you’re feeling the strain, it’s worth reviewing your options and staying updated on any Bank of England announcements.

If you need mortgage advice, you should plan at least 6 months before your ‘deal’ is up. Contact us at info@penguinwealth.com or 02920 450 143 and we can get one of our mortgage advisers in touch with you.

What Labour’s Win Means for Your Money

With Labour’s win in the 2024 UK General Election, there’s a lot of chatter about what changes might be coming for Taxes and Pensions. Labour’s manifesto promises a review of the Pensions system to make it better for savers. One idea on the table is Lifetime Pensions, which would let you keep all your Pension contributions in one plan throughout your career. This could help avoid losing track of Pensions and make the industry more competitive.

When it comes to taxes, things are a bit up in the air. The previous Conservative government promised no new Pension taxes, but Labour hasn’t made similar pledges. We could see a flat rate of Pension tax relief, possibly around 33%. Right now, Tax relief matches your Income Tax Rate, which benefits higher earners more. A flat rate might be better for basic-rate Taxpayers, but Higher-rate Taxpayers could see fewer benefits, which might impact how much they contribute.

Labour is also talking about potential changes to Capital Gains Tax (CGT) and Inheritance Tax (IHT). They might align CGT rates more closely with Income Tax rates, meaning higher taxes on Profits from Investments and Property. There could also be tweaks to IHT, like lowering the threshold or changing the rates, which could affect how you plan your estate.

None of these changes are set in stone yet, and we will likely get more details in the Autumn Budget. In the meantime, it’s a good idea to make the most of current allowances and keep reviewing your Financial Plans.

Get in touch with one of the team today on info@penguinwealth.com or 02920 450 143 to see how we can best help you with your Financial review.

When a Glitch Goes Global

CrowdStrike’s recent blunder with a faulty software update really shows how connected our world is and what we can learn from it. Recently, their update caused a huge global IT mess, affecting banks, hospitals, and airlines. Millions of PCs worldwide crashed with the dreaded “blue screens of death” because a bug in CrowdStrike’s system missed a glitchy file.

CrowdStrike has since promised to step up their game. They’re going to improve their testing procedures and make sure developers take a closer look before rolling out updates. The scale of the outage was massive—8.5 million Microsoft Windows computers went down, so it’s clear that even a small slip-up can have big consequences.

Experts weighed in on the situation. Cybersecurity consultant, Daniel Card, said CrowdStrike didn’t have the right safety measures to avoid this kind of mess. Cybersecurity researcher, Kevin Beaumont, agreed, pointing out that rolling out updates all at once instead of in stages was a major mistake.

On the flip side, cybersecurity pro, Sam Kirkman, mentioned that CrowdStrike has a history of taking steps to prevent issues like this. The review showed they’ve learned from this incident and are working to fix their processes.

Overall, this whole debacle highlights how crucial it is to be careful with tech updates and testing. With so many systems intertwined, even a small error can lead to big problems.

Biden Bows Out

With President Joe Biden’s surprise (or not so surprise) resignation, and the shocking attempted assassination of former President, Donald Trump, the US is facing an unprecedented upheaval. As the 2024 election heats up amidst these dramatic events, UK markets are bracing for impact.

Biden stepping down, combined with the high-profile attack on Trump, has thrown the US political scene into chaos. This uncertainty is likely to send ripples across global markets, making UK investors sit up and take notice. With the US election now a high-stakes game, changes in trade deals, tariffs, and economic policies could be on the way, potentially influencing the pound and UK stock markets.

The new US leadership will be closely scrutinised as candidates outline their plans. Since trade with the US is vital for the UK, any shifts could affect British exports and investments. Plus, changes in US economic policy could lead to adjustments in global interest rates, impacting UK investors’ portfolios. It is certainly going to be an interesting few months.